Thus far, five men, including an Atlantic City firefighter and four pharmaceutical sales representatives, have admitted to defrauding two New Jersey state health benefits programs of over $25 million by submitting fraudulent claims for compounded medications. More indictments may follow as the government continues its investigation into the conspiracy.

The alleged ringleader of the group, pharmaceutical sales representative Matthew Tedesco, recruited a number of others, including other pharmaceutical sales representatives, state and local government employees, and doctors, in a scheme to submit fraudulent prescriptions to an as yet unnamed out-of-state compounding pharmacy (or pharmacies) for a number of expensive compounded medications. The claims were submitted through the New Jersey State Health Benefits Program and the New Jersey School Employees’ Health Benefits Program.

The fraud took place between January 2015 and April 2016. During that time, Tedesco and his “recruiters” are alleged to have persuaded a number of teachers, firefighters, municipal police officers, State police and other public employees to obtain unnecessary prescriptions in exchange for kickbacks from the conspirators. Tedesco and others persuaded doctors who never saw nor evaluated the “patients” to submit prescriptions for up to a 12-month supply of medications (usually pain, scar, antifungal, and libido creams) to a compounding pharmacy or pharmacies. The conspirators received a kickback from the compounding pharmacy or pharmacies for each prescription filled. Tedesco and his co-conspirators then gave money and other benefits to doctors who signed the prescriptions and the public employees and other individuals who agreed to provide their health insurance information and receive the mail-order drugs. 

For a scheme that lasted for a mere 15 months, the kickbacks were impressive. The compounding pharmacy or pharmacies filled over $50 million in prescriptions mailed to persons in New Jersey. Over $25 million of that sum was for prescriptions arranged by Tedesco and his co-conspirators. Tedesco admitted receiving over $11 million for submitting false claims, some of which was paid out to those who had agreed to join the conspiracy. As a part of their plea agreements, the five known conspirators will forfeit the amount of proceeds each received from the conspiracy and pay restitution. All are scheduled for sentencing in December and face up to 10 years in prison, along with additional fines.