Doctor, nurse indicted for fraudulent schemes involving unnecessary compounded medications

Separate indictments brought against a nurse practitioner and doctor by the Department of Justice (DOJ) alleged that the two individuals participated in separate but similar schemes to defraud TRICARE. Under the schemes, the nurse practitioner and doctor prescribed medically unnecessary compounded medications to individuals they had not examined, had a compounding pharmacy dispense the medications, and seek reimbursement from TRICARE.

The indictment against the nurse practitioner

According to the indictment, TRICARE reimbursed the compounding pharmacy more than $3.3 million for compounded medications prescribed by the nurse practitioner between February 2013 and October 2016, In addition, the nurse practitioner allegedly received more than $50,000 in kickback payments from a marketer for the compounding pharmacy in return for prescribing the compounded medications and making false statements to the FBI. The nurse practitioner was charged with conspiracy to commit health care fraud and wire fraud; wire fraud; conspiracy to distribute and dispense a controlled substance; distributing and dispensing of a controlled substance; conspiracy to solicit and receive health care kickbacks; soliciting and receiving health care kickbacks; and making false statements.

The indictment against the doctor

The indictment against the doctor stated that TRICARE reimbursed the compounding pharmacy more than $2.3 million for compounded medications prescribed by the doctor between October 2014 and December 2015. In response to an audit conducted by TRICARE, the doctor allegedly submitted falsified patient records to make it appear as though he had examined patients before prescribing the compounding medications. He was charged with conspiracy to commit health care fraud and wire fraud, wire fraud, conspiracy to distribute and dispense a controlled substance, distributing and dispensing a controlled substance, conspiracy to falsify records in a federal investigation and falsification of records in a federal investigation.

Fraudulent claims submitted to TRICARE for unnecessary medications ends in guilty pleas

In related cases, a pharmacist and pharmacy marketeer, both of Mississippi, pled guilty to conspiracy to commit health care fraud in a scheme that defrauded TRICARE, according to a July 25, 2017, announcement by the Department of Justice (DOJ). The pharmacist and his co-conspirators received at least $192 million in payments for medically unnecessary medications from TRICARE and private insurance companies. In the case of the pharmacy marketeer, TRICARE made payments of approximately $2.3 million for false and fraudulent claims submitted by the pharmacy. Sentencing hearings are scheduled for October 17, 2017.

The pharmacist’s role

The pharmacist pleaded guilty to one count of conspiracy to commit health care fraud and money laundering for dispensing medically unnecessary compounded medications and causing fraudulent claims to be submitted to TRICARE. Plea documents revealed that the pharmacist admitted that he (1) conspired with others to select compounded medication formulas based on profitability rather than on effectiveness or patient need, and (2) conspired with the pharmacy co-owners to avoid fraud prevention measures, such as collecting copayments, to incentivize patients to receive medically unnecessary medications.

The marketeer’s role

The pharmacy marketeer pleaded guilty to one count of conspiracy to commit health care fraud for his role in the scheme to defraud TRICARE. Plea documents indicated that the marketeer admitted to (1) soliciting physicians and other medical professionals to write prescriptions without seeing patients for medically unnecessary compounded medications dispensed by the pharmacy; and (2) conspiring with others to falsify patient records to make it appear as though medical professionals had seen patients prior to the date prescriptions were written.

Compounding the problem of drug safety and efficacy

Half a billion dollars in fraud claims surrounding the sale of compounded creams, used to treat pain and other ailments are being investigated by the Department of Justice (DOJ). Federal investigators are examining allegations that certain compounded products lack efficacy and that certain pharmacies overbilled for the drug products. Some compounded cream companies, allegedly, charged more than $10,000 for a single prescription of cream. The fraud, which has most significantly impacted the federal military health care program, TRICARE, is similar to other instances of fraud, like one, which led to the arrests on February 23, 2016 of the co-owners of a Dallas company that marketed pain and scar creams for North Texas drug compounding pharmacies.

The Products

The specialty creams at issue are promoted as a safe and effective way to heal quickly and alleviate pain or cramping. Such products have gained notoriety from professional athlete pitches, including one promoted by retired NFL quarterback Brett Favre. The creams are often promoted on the internet or by telemarketers. Brett Favre promoted a pain cream called RX Pro made by World Health Industries Inc. of Jackson, Mississippi. According to a Wall Street Journal source, RX Pro is one of the companies under investigation by the Federal Bureau of Investigation (FBI). The problems surrounding the products’ efficacy stems from the fact that the FDA does not test or approve the safety and effectiveness of all compounded drug products. The lack of testing arises because, typically, compounding is a process where a pharmacist combines, mixes, or alters ingredients of a drug to create a medication tailored to the needs of an individual patient. It is not feasible for the FDA to evaluate the efficacy of every compounded product.


In fiscal year (FY) 2015, TRICARE spent $1.75 billion on compounded drugs. That figure was 18 times higher than the amount paid in 2012. The defense department believed the spending rise was the result of fraud. As a result, TRICARE introduced a screening process into its compound drug policy, to curb abuse and limit military spending on the sometimes controversial compounded drug products.

Texas Fraud

The men associated with the Texas fraud co-owned and co-operated CMG RX LLC., which primarily marketed compounded pain and scar creams to current and former U.S. military members and their families. Neither of the men had any medical, nursing, or pharmaceutical licensing or education. CMGRX was formed in 2014 but ceased operations in 2015 when TRICARE announced the changes to its coverage of compounded drugs.  According to the DOJ, the co-owners scheme to defraud TRICARE caused the military health care program to suffer an actual loss of more than $65 million. The scheme involved CMGRX paying TRICARE beneficiaries $250 per month for each prescription and disguised those payments as grants for participating in a TRICARE-approved “Patient Safety Initiative” or “PSI Study” to evaluate the safety of the drugs. In reality, the study was not approved or overseen by a medical professional of any kind. The true purpose was to compile a list of beneficiaries who had filled prescriptions.


The co-owners paid kickbacks to physicians for every prescription they wrote. The co-owners also entered into marketing service agreements with various compounding pharmacies. Under those agreements, the compounding pharmacies agreed to pay a percentage of their gross revenue received for CMGRX-generated claims. The conspirators allegedly purchased various homes and luxury vehicles with the proceeds of their scheme.  They could now face fines and prison time.


The compounded creams have been the subject of several past and ongoing investigations. As compounding pharmacies have transitioned from entities that tailored drugs in small batches for individual patients to large-scale entities operating on the order of pharmaceutical manufacturers, a new kind of compounded drug product has emerged—compounded pain creams are a prime example. Due to a limited enforcement mechanism to ensure the safety and effectiveness of those drugs, in some cases, fraud and contamination have brought harm to patients and the industry. More careful prescribing and purchasing mechanisms, like the one implemented by TRICARE, have made some impact to slow the harm of fraudulent marketing for these products. However, the drugs are still for sale, and, if the ongoing investigations are any indication, consumers are still buying.