In the fall of 2016, 16 individuals, including several doctors, were charged with racketeering, money laundering, and mail and wire fraud, among other crimes, in a compounded medication scheme that netted the conspirators over $175 million over the course of two years. On October 30, 2017, the last of the conspirators was sentenced for his role in the scheme. Defendant Kyle O’Brien received 30 months in jail, 3 years of probation and was also ordered to pay over $2.5 million in restitution. The ringleader in the scheme was sentenced earlier this year to 15 years in prison.
According to the U.S. Attorneys Office for the Southern District of Florida, the defendants participated in a conspiracy that used various shell companies, including NuMed Care, LLC, ClinicalCorp, LLC, RX of Boca, and Texas Compounding Pharmacy, to further a complex fraud on numerous health care insurance providers, including TRICARE and a number of private insurance companies. The defendants allegedly prepared compounded medications in bulk quantities that were alleged to be for specific individualized patient needs. As with other cases, the government alleges the conspirators falsely represented to the health insurance providers that these medications were prepared in limited quantities for individual patients and were exempted from FDA inspection. The government always claims as a result of misrepresentations, the insurance providers then paid the defendants for the ingredient costs of the compounded creams, some of which sold for over $31,000 for a single tube.
The government also alleges the conspirators paid illegal kickbacks to a number of physicians who prescribed the compounded creams. The government always claims that the physicians had been provided with pre-printed prescription pads by the conspirators for that purpose even though state boards of pharmacy allow for pre-printed prescription pads. O’Brien, a former NuMed sales representative, and his coconspirators also utilized mass marketing and fake call centers in order to solicit customers for the compounded creams.
All in all, sentences for the 16 have ranged from 2 to 15 years in prison, along with varying amounts of restitution ordered by the federal court judge. Millions of dollars in assets acquired by the defendants with money generated by the scheme have also been seized.