Seven Indicted in $50 Million Compound Cream Scheme

Tuesday, March 19, 2019 | 0

Seven people could face up to 20 years in prison for their alleged role in an elaborate compound medication scheme that defrauded New Jersey health insurers out of $50 million, federal prosecutors said.

The U.S. Attorney for New Jersey announced Friday that a grand jury had returned the indictments after an investigation showed that the seven were involved in a plan to recruit patients who had insurance that covered the expensive compound creams and other medications. The scheme then found physicians to prescribe the compounds without seeing the patients and without determining medical necessity, the prosecutor's office said in a bulletin.

A Louisiana-based pharmacy filled the prescriptions, and a pharmacy benefits manager billed the insurance carriers, which included a health plan for New Jersey state employees, prosecutors said.

“The defendants paid individuals to agree to receive prescription medications from the compounding pharmacy,” reads the bulletin from U.S. Attorney Craig Carpenito. “The defendants completed prescriptions for these individuals and selected the most expensive medications with the highest number of refills to obtain the highest possible insurance reimbursement.”

Those charged were: William Hickman, 42, Sara Hickman, 42, Thomas Schallus, 42 and Thomas Sher, 46, all of Northfield, New Jersey; Brian Pugh, 41, of Absecon, New Jersey; John Sher, 37, of Margate City, New Jersey; and Christopher Broccoli, 47, of West Deptford, New Jersey.

They were all charged with conspiracy to commit health care fraud and wire fraud. The Hickmans and Pugh also were charged with conspiracy to commit money laundering. The defendants are expected to appear later today before a U.S. magistrate, the prosecutor's office said.

William Hickman allegedly paid Dr. John Gaffney as a reward for signing prescriptions. Gaffney has pleaded guilty to conspiracy to commit health care fraud in the case, Carpenito said.

Carpenito credited the U.S. Department of Labor's Office of Inspector General and other law enforcement agencies for assisting in the investigation.