The U.S. Attorney’s Office in New Jersey announced the criminal sentencing of four people who recruited New Jersey state employees to obtain medically unnecessary pharmaceuticals through the State Health Benefits Program. For conspiracy to commit healthcare fraud, the three pharmaceutical sales representatives and a public-school guidance counselor face over four years in prison, collectively. For inducing the state Pharmacy Benefits Administrator to pay a compounding pharmacy for over $50 million in medications, these fraudsters will pay the state almost $871,000 in criminal proceeds and approximately $5.2 million in restitution.

According to court records, the pharmaceutical representatives and guidance counselor recruited New Jersey state employees in state and local government—including first responders, teachers, and other education employees—“to obtain very expensive and medically unnecessary compounded medications from an out-of-state pharmacy.” As previously discussed on this blog, compounded medications seem to attract unscrupulous actors.

These particular fraudsters figured out which medications garnered the highest reimbursement—“thousands of dollars for a one-month supply” of various compounded creams and vitamin combinations. They would recruit state employees with state benefits coverage and use those employees’ information to obtain prescriptions without regard for medical necessity. Physicians and providers in on the scheme would approve the prescriptions without evaluating patients. The out-of-state compounding pharmacy would then fill the prescriptions and bill the NJ Pharmacy Benefits Administrator. For each prescription successfully billed to the Pharmacy Benefits Administrator, the pharmacy would pay the patient recruiters a percentage.

Fraudulent manipulation of state health benefits programs threatens a state’s economy. Encouraging state employees to defraud their own healthcare program—thereby driving up their own premiums and healthcare costs—is especially corrupt.

A state employee who caught wind of this scheme could have blown the whistle and reported this pharmaceutical fraud scheme, as New Jersey has a state False Claims Act. Whistleblowers under the NJ False Claims Act may receive compensation for attorney’s fees, expenses, and costs.