On Wednesday, former pharmaceutical sales representative Steven Butcher admitted to running a $45 million scheme to swindle both federally-funded and private health care benefit programs. Butcher was charged with one count of conspiracy to commit health care fraud and one count of conspiracy to violate the Anti-Kickback Statute, a law designed to remove financial incentives from patient health care decisions.
According to prosecutors, Butcher owned and operated MedMax LLC, a New York-based compounded medication sales and marketing company. Compounded medications are expensive drugs prepared specifically for a single patient by mixing various ingredients. Butcher, along with several co-conspirators, allegedly recruited patients who had insurance plans covering compounded drugs and encouraged them to obtain prescriptions for such drugs regardless of whether they were medically necessary. Once the prescriptions had been filled by compounding pharmacies, the pharmacies sent a cut of their reimbursement from insurers to Butcher and MedMax. Some prescriptions cost as much as $43,000 a piece, and Butcher received between 40 and 53 percent of the reimbursement rate.
Butcher’s plea agreement requires him to pay restitution of at least $45 million and to forfeit the $4.5 million he personally earned over the course of the two-year scheme. Three of his co-conspirators have also entered guilty pleas. Butcher was prosecuted by the New Jersey U.S. Attorney’s Office, which has pursued more than nineteen individuals across the state for their involvement in compounding pharmacy schemes.
Compounding pharmacy fraud has risen dramatically over the past decade. In 2015 alone, TRICARE, the federal government payor for military health insurance, paid $1.75 billion in claims for compounded drugs. The Department of Justice and the Department of Defense suspect that the majority of those claims were fraudulent.
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