Steven M. Butcher, 39, owner of MedMax LLC, which provided marketing services for compounded medications, pleaded guilty before U.S. District Judge John Michael Vazquez in Newark federal Court for conspiracy to commit healthcare fraud and violate the Anti-Kickback Statute.
Butcher used his company, MedMax, to convince people to obtain unneeded compound medications and then bill the costs to various private and federal healthcare insurance plans. MedMax was a marketing company for compound medications. Butcher also paid several kickbacks from 2014 to 2015 for many individuals to fraudulently bill a health care benefit program that primarily serviced military families, called TRICARE, for unnecessary compound medications.
Compounded pharmacies prepare personalized medications based on specific prescriptions that include instructions for exact strength and dosage.
Butcher was the mastermind behind a scheme that defrauded health insurance companies by submitting claims for totally unneeded compound medications, which included everything from scar creams to metabolic supplements. The scam ran for about two years from 2014 to 2016. Butcher’s company, MedMax, marketed all the fraudulent medication for various compounding pharmacies.
Butcher would either send prescriptions directly to a compounding pharmacy or to a billing distribution company. The claim would then be billed to the healthcare insurance company and in return, Butcher received about half of the reimbursement for each paid claim. Personalized compounding medication could be quite expensive and health insurance plans were reimbursing compounding pharmacies anywhere between $3,000 and $43,000 for each compounded prescription filled.
Butcher’s methods also included recruiting several people as “sale representatives” for his company, MedMax. These false salespeople were paid to obtain unneeded compound medication for themselves or their families and then bill it to their health insurance plans. These individuals also recruited other people into the scam. Among Butcher’s list of phony sales people were Peter Pappas, who in turn later recruited Jason Cerge, and Julie Andresen. Pappas, Cerge, and Andresen were former pharmaceutical sales representatives from the Pennsylvania and New Jersey areas.
Butcher and his phony salespeople were able to obtain these false prescriptions by building relationships with physicians and physician assistants.
As part of his plea agreement, $4,584,597.92 must be forfeited in criminal proceeds and Butcher must pay a restitution of at least $45 million. He could also face a statutory maximum of 10 years in prison for healthcare fraud and a maximum of five years in prison for violation of the Anti-Kickback statute. Butcher’s sentencing is scheduled for May 18, 2018.
His associates Pappas, Andresen, and Cerge have pleaded guilty for their part in the scheme. Cerge and Pappas are still awaiting sentencing and Andresen was scheduled to 15 months in prison on February 7, 2018.
The U.S. Attorney’s Office was assisted by the FBI and the U.S. Department of Defense, Office of the Inspector General, and Defense Criminal Investigative Service with the investigation that lead to the discovery of Butcher’s multi million dollar compounding pharmacy scheme.
It has been estimated that compounding pharmacy schemes in New Jersey has cost a total loss of $70 million to the healthcare industry, which has affected many types of healthcare benefit programs.
The New Jersey U.S. Attorney’s Office has created a stand-alone Healthcare and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of healthcare fraud offenses.
To learn more about healthcare fraud or for help reporting suspected fraud, contact Newman & Shapiro today.