Federal Civil and Criminal Investigations Result in Six Convictions and Recovery of More Than $8.7 Million Related to Compound Drugs Formulated by DelCo Pharmacy | USAO-EDPA
PHILADELPHIA – U.S. Attorney Jennifer Arbittier Williams announced the criminal and civil resolutions of multi-year investigations into various health care fraud schemes involving compound drug prescriptions formulated by Heritage Therapeutics, LLC, a Delaware County pharmacy . The investigations resulted in six criminal convictions and recovered more than $8.7 million in criminal forfeitures, criminal restitution and civil settlement payments.
From 2013 to 2015, Heritage formulated expensive compound medicines such as pain creams, scar creams and vitamins. These compound drugs were prescribed, among others, to beneficiaries of TRICARE, a federally funded health care program for military personnel, retirees and their families. Investigations revealed that Heritage was paying commissions to some of its sales representatives for referring Heritage compound drugs to medical providers who prescribed them to TRICARE beneficiaries. Some of these sales representatives, in turn, bribed medical providers to induce them to dispense these prescriptions.
Michael Bemis was one of Heritage’s top sales representatives. Bemis paid bribes to a Philadelphia-area physician, Dr. Scott Kurzrok, in exchange for issuing prescriptions to TRICARE recipients whom Kurzrok would never have seen or treated. In addition, Bemis recruited other sales representatives and encouraged them to also pay bribes to medical providers to induce them to prescribe compound drugs to TRICARE beneficiaries through Heritage. Bemis has also paid and encouraged other sales representatives to pay TRICARE beneficiaries to allow medically unnecessary prescriptions to be filled on their behalf. Additionally, Bemis encouraged sales representatives to push TRICARE recipients to accept medically unnecessary drug refills. Heritage submitted claims for these drugs to TRICARE and paid commissions on these prescriptions to Bemis and other sales representatives. For his involvement in the scheme, Bemis pleaded guilty to conspiracy to commit health care fraud, was sentenced to more than two and a half years in prison, and was ordered to pay criminal restitution of more than $3.3 million and give up more than $930,000. Bemis and Dr. Kurzrok each entered into settlement agreements to resolve civil claims under the False Claims Act.
Charles Hollister, a Heritage sales representative in North Carolina, was one of Bemis’ recruits. Hollister bribed Tanya Dyer, a licensed nurse practitioner in Hickory, North Carolina, in exchange for Dyer prescribing Heritage compound drugs to TRICARE recipients. These TRICARE recipients included people Dyer would never have seen or examined. Hollister pleaded guilty to conspiracy to commit health care fraud, was sentenced to more than a year in prison, and was ordered to pay more than $1 million in criminal restitution jointly and severally with Bemis. Dyer entered into a settlement agreement to resolve civil claims under the False Claims Act.
Andrew Balick, Heritage Sales Representative in Georgia, was another Bemis recruit. Balick convinced a purported physician assistant to write medically unnecessary prescriptions for compound drugs that were filled by Heritage. Balick provided information about TRICARE recipients to the Physician Assistant for use in writing prescriptions, then shared a portion of his Heritage sales commissions with recipients, including a man named Dr. ‘Andrew Dykstra. In addition to providing its own beneficiary information to Balick, Dykstra became a sales representative for Heritage and allegedly recruited other purported sales representatives to provide their TRICARE beneficiary information for use in the program. Balick pleaded guilty to conspiracy to commit health care fraud, was sentenced to more than a year in prison, and was ordered to pay criminal restitution of more than $1.8 million jointly and jointly with Bemis. Dykstra has entered into a settlement agreement to resolve civil claims under the False Claims Act.
Separately, Benjamin Tewes, the brother of Heritage sales rep Kristine Sewell, bribed Thomas Hersch, a medical assistant in Georgia, to induce him to write prescriptions for Heritage compound drugs to recipients of TRICARE. Sewell reportedly received sales commissions from Heritage on these prescriptions and shared a portion of his commissions with Tewes. Tewes pleaded guilty to one count of paying bribes under a federal health care program, was sentenced to 3 years probation and was ordered to forfeit more than $276,000 and pay a fine of $15,000. Hersch pleaded guilty to one count of receiving bribes under a federal health care program. Sewell entered into a monetary settlement agreement to resolve civil claims under the False Claims Act.
Additionally, Joseph Fidelie, who was both a Heritage sales representative and a physician assistant at an orthopedic practice in Oklahoma, bribed a physician assistant at the same practice to induce the physician assistant to prescribe Heritage Compound Medicines to TRICARE recipients. Fidelie received commissions from Heritage for claims paid by TRICARE. Fidelie pleaded guilty to one count of bribery under a federal health care program.
In addition to the resolutions mentioned above, Heritage, together with its president, David Raffaele; directors Kevin O’Brien and Stephen Seiner; former head pharmacist Gary Umland; and sales assistant Michael D’Antonio; entered into a settlement agreement to resolve civil claims against the entity and associated persons under the False Claims Act. The civil actions resolved through this settlement relate to alleged bribe payments by Heritage sales representatives to medical providers, as described above, as well as Heritage’s compensation of its sales representatives based on of a commission in the absence of authentic employee relations, all in violation of anti-bribery law. In addition, this settlement resolved allegations that, in order to prevent TRICARE from recovering amounts previously paid to Heritage for compound drugs prescribed to TRICARE beneficiaries in the absence of any legitimate provider-patient relationship, as described above , Heritage itself made false claims in its responses to a TRICARE audit.
“With the conclusion of these investigations, we signal that medical providers and pharmaceutical manufacturers who prey on the men and women who bravely serve in our armed forces, and their families, in order to fulfill their own pockets, will be prosecuted relentlessly with the full resources of the United States Attorney’s Office,” said U.S. Attorney Williams. “Through the combined efforts of our Criminal Division, Civil Division, and partner agencies, the acts fraudulent activity of the company and the persons who acted through it were held responsible.”
“Investigating corruption schemes that undermine the integrity of TRICARE, the healthcare system for service members and their families, is a top priority for the Department of Defense Office of Inspector General Criminal Investigative Service of Defense (DCIS),” said Special Agent in Charge Patrick J. Hegarty, DCIS Northeast Field Office. “Today’s announcement demonstrates our commitment to working with the Department of Justice to relentlessly pursue individuals and companies that target our service members and put TRICARE beneficiaries at risk.”
Investigations were conducted by officers from DCIS, Office of Personnel Management, Office of the Inspector General; Department of Labor, Office of the Inspector General; United States Postal Service, Office of Inspector General; and the US Army Criminal Investigation Division.
Assistant United States Attorney Mary Kay Costello and former Assistant United States Attorney John Crutchlow prosecuted the criminal cases. Assistant United States Attorneys Bryan C. Hughes and Rebecca S. Melley handled the civil investigation and settlements, assisted by prosecutor George Niedzwicki.
Except for the facts admitted in the guilty pleas, the claims resolved by the civil settlements are allegations only and there has been no determination of liability.