NEWARK, N.J. – The former co-owner of a New Jersey marketing company today admitted her role in a scheme to defraud public and private health benefits programs of at least $8.8 million for the billing of medically unnecessary compounded prescriptions, U.S. Attorney Craig Carpenito announced.
Christine Myers, 38, of Phillipsburg, New Jersey, pleaded guilty by videoconference before U.S. District Judge John Michael Vazquez to an information charging her with conspiracy to commit health care fraud.
“In an era when many Americans worry about securing health insurance for their families, we’ve seen far too many instances where both private and publicly funded insurance providers are being raided for millions in phony reimbursements on compounded medications,” U.S. Attorney Carpenito said. “Myers admitted that she and others sought to defraud insurers by recruiting the very people who enjoy that coverage, offering them cash bribes to get medications they didn’t need. Her conviction should serve as a warning to those who would exploit their health coverage for financial gain.”
FBI Newark Acting Special Agent in Charge Joe Denahan said, “Christine Myers treated health insurance plans as a vehicle to line her own pockets when she engaged in an elaborate scheme that resulted in defrauding insurers out of at least $8.8 million. The FBI, in conjunction with our law enforcement partners, will continue to investigate and bring to justice criminals who defraud the system and cheat the American taxpayer.”
According to documents filed in this case and statements made in court:
Compounded medications are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. Although compounded drugs are not approved by the Food and Drug Administration (FDA), they are properly prescribed when a physician determines that an FDA-approved medication does not meet the health needs of a particular patient, such as if a patient is allergic to a dye or other ingredients in the prescription.
Between February 2015 and February 2017, Myers participated in a conspiracy that involved the submission of fraudulent prescriptions for compounded medications to public and private insurance plans. The scheme centered on the discovery that certain insurance plans paid for prescription compounded medications – including scar creams, wound creams, and metabolic supplements/vitamins – at exorbitant reimbursement rates.
Myers exploited this opportunity through creating a New Jersey marketing company (Marketing Company-1) and hiring sales representatives to work on the company’s behalf. At Myers’ direction, the sales representatives targeted individuals who had insurance plans that covered compounded medications. The sales representatives then convinced those individuals to obtain prescriptions for compounded medications, regardless of medical necessity, often by providing them with cash payments. The individuals were then directed to certain telemedicine companies, which Marketing Company-1 or its affiliates paid, to receive the prescriptions.
Once the prescriptions were written, they were filled by certain compounding pharmacies with which Marketing Company-1 conspired. The compounding pharmacies would then receive reimbursement from the insurance plans, and would pay Marketing Company-1 a percentage of the reimbursement amount. As one of the owners of Marketing Company-1, Myers retained a portion of the payment and provided a “commission” payment to the relevant sales representative.
Two sales representatives that worked for Marketing Company-1, Christopher Frusci and Enver Kalaba, were former Metropolitan Transportation Authority (MTA) employees. Since the MTA’s health insurance plan covered compounded medications, Frusci and Kalaba targeted co-workers at the MTA and paid them cash bribes for every compounded prescription they submitted. Frusci and Kalaba have both previously pleaded guilty to conspiracy to commit health care fraud charges based on their respective roles in the scheme. On Feb. 7, 2019, Kalaba was sentenced in Newark federal court to 20 months in prison and one year of supervised release, and must forfeit $138,630 in criminal proceeds he received for his role in the scheme and pay restitution of $2.9 million. Frusci is awaiting sentencing.
“The global pandemic brings into stark relief how critical it is to have access to affordable healthcare,” MTA Inspector General Carolyn Pokorny said. “That this individual recruited former MTA employees to help steal millions of dollars from taxpayers, riders and other transportation stakeholders is especially despicable. We will continue to work with our law enforcement partners in this ongoing investigation to ensure that anyone else involved with the scheme is brought to justice.”
“Protecting TRICARE, the healthcare system for U.S. military members and their dependents, is a top priority for the Defense Criminal Investigative Service (DCIS),” Special Agent in Charge Leigh-Alistair Barzey, DCIS Northeast Field Office, said. “Schemes to defraud TRICARE, such as those alleged in the information announced today, waste precious resources and ultimately threaten the quality of health care that our Service members and their families deserve. Myers’ guilty plea is the result of a joint effort by the U.S. Attorney’s Office, the DCIS, the FBI and MTA-OIG, and it demonstrates the ongoing commitment of the DCIS to work with its law enforcement partners to investigate and prosecute those who engage in health care fraud.”
The count of conspiracy to commit health care fraud is punishable by a maximum of 10 years in prison and a fine of $250,000 fine, or twice the gross gain or loss from the offense. As part of her plea agreement, Myers must forfeit $1.475 million in criminal proceeds she received for her role in the scheme and pay restitution of at least $8.8 million. Sentencing is scheduled for Dec. 1, 2020.
U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Acting Special Agent in Charge Denahan; the U.S. Department of Defense, Defense Criminal Investigative Service, under the direction of Special Agent in Charge Leigh-Alistair Barzey; and the Office of the Inspector General, Metropolitan Transportation Authority, under the direction of Inspector General Pokorny, with the ongoing investigation leading to today’s guilty plea.
The government is represented by Assistant U.S. Attorney Adam Baker of the U.S. Attorney’s Office, Opioid Abuse Prevention and Enforcement Unit in Newark.
Defense counsel: Marc A. Agnifilo Esq., New York