$175M South Florida drug compounding fraud scheme alleged

Sixteen individuals have been charged by the U.S. Attorney’s Office for the Southern District of Florida in a two-year $175 million insurance fraud conspiracy involving the manufacture and distribution of compounded cream medications for the treatment of pain, wounds, scars, eczema, and other medical conditions. The conspiracy allegedly used various business entities, including Numed Care, LLC, ClinicalCorp, LLC, RX of Boca, LLC, and a failing compounding pharmacy located in Dallas, Texas, to perpetrate a complex fraud on numerous health care insurance providers.

According to the complaint, the charged individuals prepared medications in bulk quantities that were purported to be compounded for specific patients and falsely represented to the health insurance providers that these medications were prepared in limited quantities for individual patients, making them exempt from inspection by the FDA. The health insurers then compensated the charged individuals for the alleged costs of the ingredients for such medications.

The complaint further alleges that the charged individuals:

  • concealed from the health insurance providers that they made illegal kickbacks to physicians for the issuance of the compounded medications;
  • unlawfully provided physicians with pre-printed prescription pads;
  • used mass marketing techniques and call centers, which made material misrepresentations in order to solicit potential patients; and
  • induced owners of failing pharmacies throughout the United States to take part in the fraud.

The conspiracy charges against the individuals include conspiracy to commit racketeering, money laundering, and mail and wire fraud. Additional charges include making a materially false statement to federal law enforcement and subscribing to a false federal income tax return.

The charged individuals face a range of penalties, from five years and a $250,000 fine, to 23 years and a $500,000 fine. The complaint is an accusation only and the charged individuals are deemed innocent until proven guilty.