12 individuals indicted in scheme that defrauded the US military.
An Indian American pharmacy owner from Irving, Texas, Ravi Morisetty, is among a dozen individuals who have been indicted in a massive illegal kickback scheme involving pharmacies that allegedly scammed the military’s health-insurance program out of $100 million.
Nine of the defendants were arrested this week and the 10th turned himself in, the U.S. attorney’s office said. Two others were charged in February, reported The Dallas Morning News.
The defendants include doctors, pharmacy owners and marketers. They are charged in an updated 35-count indictment issued in Dallas and unsealed earlier this month. They are accused of conspiring to sell to soldiers expensive compounded products like pain and scar creams that were not needed.
The indictment, which was issued in February and updated this month, is the first federal indictment in North Texas in connection with the government’s nationwide criminal investigation into compounding pharmacies and their marketing operations that have received federal money. And it is believed to be the largest such case in Texas to date.
The alleged scam ran from May 2014 to mid-February 2016. The defendants paid kickbacks to prescribing physicians, while pharmacy owners paid kickbacks to their marketers, authorities said. Tricare, the military health care system, picked up the tab for the medications.
The following individuals were indicted this month: Walter Neil Simmons, 47, an Arizona physician; William F. Elder-Quintana, 50, an El Paso physician; Jeffrey Eugene Fuller, 51, of Dallas; Andrew Joseph Baumiller, 37, of Dallas; Jeffry Dobbs Cockerell, 61, of Houston; Steven Bernard Kuper, 43, of Burleson; Ravi Morisetty, 42, of Irving; Joe Larry Straw, 46, of Frisco; Luis Rafael Rios, 50, of Killeen; and Michael John Kiselak, 49, of Southlake.
Two others — Richard Robert Cesario, 49, of Plano and John Paul Cooper, 47, of Southlake — were arrested in February and remain behind bars.
Fuller is the owner of Trilogy Pharmacy in Dallas. Baumiller is president of the company. Cesario and Cooper marketed the pain and scar creams for North Texas drug compounding pharmacies, including Trilogy Pharmacy, the U.S. attorney’s office said.
Cesario and Cooper paid kickbacks to physicians — $60 for each compounded pain or scar cream prescription they wrote and $30 for each compounded vitamin prescription they wrote, the indictment said. They also paid kickbacks to Tricare beneficiaries, authorities said, reported the Dallas Morning News.
Tricare provides health coverage for active-duty and retired members of the military and their families. The federal insurance program covers certain prescription drugs, including compounded drugs prescribed by physicians.
Cesario and Cooper ran CMG RX LLC, a Dallas company that primarily marketed compounded pain and scar creams to current and former U.S. military members and their families on behalf of various compounding pharmacies, officials said. They formed the company in 2014. Neither man had any education or licensing in the medical, nursing or pharmaceutical fields, authorities said.
The company stopped operating in 2015, shortly after Tricare stopped paying for compounded pain creams due to high costs and questions about the effectiveness of the medications.
CMG RX’s top marketing tool was a “sham medical study” in which soldiers were paid for getting compounded drugs, including migraine creams and vitamins, through their Tricare prescription benefits, the indictment said.
Straw and Kiselak led marketing groups for CMG RX that recruited military members and their families for the alleged study, authorities said. Rios, a marketer and patient recruiter for Straw’s group, recruited hundreds of soldiers at and near Fort Hood in Killeen, according to the indictment.
Here’s how the scheme, as alleged in the indictment, worked:
The men called their payments to soldiers “grants” for their participation in a medical study that they said was a Tricare-approved “Patient Safety Initiative” or “PSI Study.” The study supposedly was done to evaluate the safety and efficacy of compounded drugs. But the “study” was in fact bogus and the payments were illegal kickbacks, authorities say.
The real purpose was to compile a list of Tricare beneficiaries with prescriptions so that the defendants could calculate how much to pay them.
Kiselak introduced Cesario and Cooper to someone who helped them create the “Freedom From Pain Foundation.” They registered it as a charitable foundation to disguise the source of the kickbacks, authorities say.
They funded the foundation with payments totaling $2.8 million, which was primarily used to pay kickbacks, the indictment said. The suspects had the foundation write checks to the Tricare beneficiaries in amounts they had written in “payout lists.”
The prescribing physicians who received kickbacks typically did not have a doctor-patient relationship with the Tricare beneficiaries.
Cesario and Cooper also used the Freedom From Pain Foundation to disguise the doctor kickbacks, “under the false premise that the physicians were participating in the PSI Study,” according to the indictment. Cesario and Cooper signed marketing agreements with the compounding pharmacies in which the pharmacies agreed to pay them a percentage of their revenue from Tricare claims.
Simmons served as CMG RX’s chief medical officer, and he helped Cesario and Cooper create the PSI Study. Elder-Quintana worked as a CMB RX contract physician. Cesario and Cooper paid him to prescribe compounded drugs to soldiers and their families. Elder-Quintana wrote thousands of prescriptions for compounded drugs to people he never met. He conducted “only a cursory consultation” with them by phone.
Trilogy Pharmacy, a compounding pharmacy in the Tricare network, paid Cesario, Cooper, Straw, Rios, Kiselak and other CMG RX employees kickbacks for sending prescriptions to the pharmacy, according to the indictment. The kickbacks were disguised as employee wages.
The indictment says three other compounding pharmacies in the Tricare network also paid kickbacks for prescriptions: 360 Pharmacy Services, a compounding pharmacy in Webster owned by Cockerell; FW Medical Supplies LLC, a compounding pharmacy in Burleson owned by Kuper that did business under the name Dandy Drug; Dena Group, LLC, a compounding pharmacy in Irving owned by Morisetty that did business under the name Alpha Pharmacy.
Each defendant is charged with one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years in prison. Cesario and Cooper also are charged with 14 counts of payment and/or receipt of illegal remuneration.
Each of the remaining defendants, except Simmons, is charged with at least one count of payment and/or receipt of illegal remuneration. Each of those counts carries a maximum sentence of five years in prison.
The defendants also stand to forfeit property such as real estate in Plano, Frisco, Southlake, Dallas and New Braunfels, as well as boats, recreational vehicles, firearms, jewelry and artwork. More than 20 vehicles also could be forfeited including a Jaguar, a Maserati, a Ferrari, a Porsche, an Aston Martin and three Mercedes-Benzes.