Baltimore, Maryland – U.S. District Judge Ellen L. Hollander today sentenced Matthew Edward Blair, 48, of Timonium, Maryland, to one year and one day in federal prison, followed by 18 months of supervised release, for payment of Illegal compensation to encourage independent marketers to refer federal healthcare-related businesses to Blair’s Pharmacy. Judge Hollander also ordered Blair to pay restitution of $3,176,470.83.
The sentence was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; Special Agent in Charge Christopher Dillard of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service – Mid-Atlantic Field Office; and Special Agent in Charge Darrell J. Waldon of the Internal Revenue Service – Criminal Investigation, Washington, DC Field Office.
According to his guilty plea, from November 2014 until May 2015, Blair, owner and operator of a compounding pharmacy called Blair Pharmacy, paid illegal fees to independent traders to induce them to take business to Blair Pharmacy.
Members of the U.S. military and their families receive health care benefits through TRICARE, a federal health care benefits program. Like many other healthcare benefit programs, TRICARE uses a Pharmacy Benefit Manager (“PBM”), specifically Express Scripts (“ESI”) to administer all pharmacy-related benefits for the TRICARE program. ESI receives, processes and adjudicates all drug benefit claims submitted electronically on behalf of TRICARE beneficiaries in New Jersey.
Blair has submitted applications to several PBMs, including ESI, requesting that Blair Pharmacy be accepted into PBM’s participating pharmacy networks. ESI approved Blair’s application and Blair was authorized to bill TRICARE and receive payment for prescriptions from TRICARE recipients. Blair set up a process by which prescriptions for beneficiaries were electronically submitted directly to his pharmacy. Blair also implemented a process by which prescription and benefit plan data was uploaded electronically via the Internet. The uploaded electronic data was processed instantly by PBMs, providing Blair with immediate information as to whether a claim he had submitted had been approved for payment by the benefits plan or not. Blair has linked successful claim reimbursements to a bank account in the name of Blair Pharmacy so that Blair Pharmacy can receive all monies paid by healthcare benefit companies to its bank account.
Blair actively sought out several independent salespeople to work for him in his pharmacy. In order to increase prescription referrals to his pharmacy, maximize reimbursement amounts and thereby increase profits, Blair asked these independent marketers to solicit and refer prescriptions to his pharmacy. Blair has entered into independent contractor agreements with several selling distributors and has arranged to pay independent distributors a percentage of any reimbursements he has received from health care benefit programs, including TRICARE.
For example, in November 2014, Blair agreed to pay an independent marketer working for Blair as follows: “the commission will be 50% of the gross refund to [Blair Pharmacy] paid every two weeks. The agreement required the Independent Marketer to use Blair Pharmacy exclusively and refer all business within its established territory to Blair Pharmacy. Blair induced these referrals to his pharmacy by offering the distributor a payout percentage of 50% of any money Blair received from health care benefit programs, which was the distributor’s only compensation under the agreement. The independent marketer was not paid unless Blair successfully obtained reimbursement from a health care benefit program for a prescription the marketer referred to him. Only then did the marketer pay a percentage of the successful refund. Blair knew it was a violation of anti-kickback law to pay an independent contractor a commission based on volume and value for business referrals from the federal health care program to his pharmacy.
Blair provided the Independent Distributor with pre-printed prescription forms that listed the specific ingredients of Blair’s formulations. Blair knew the amount of money he would receive from TRICARE for every gram of every ingredient he lists in his formulas. Blair has changed the ingredients and ingredient amounts of its formulations based on the ingredient’s reimbursement value.
Blair Pharmacy received reimbursement from TRICARE for the individual ingredients in its formulas as follows: $4,348.25 for a one-month supply of its vitamin formulation ingredients; $8,741.26 for a month’s supply of her pain cream ingredients; $14,365.39 for a month’s supply of his migraine cream ingredients; and $17,336.30 for a month’s supply of her scar cream ingredients. After receiving payment from TRICARE for the prescriptions the independent distributor directed to Blair Pharmacy, Blair paid 50% of the reimbursement amount to the distributor.
The independent distributor solicited prescriptions for the cream from numerous physicians, including Walter Reed military surgeons, with whom it had direct contact. Blair knew that the distributor was in a position to influence which pharmacy the prescriptions were sent to and that the distributor would return the prescriptions directly to Blair’s pharmacy. By paying the distributor 50% of each successfully reimbursed TRICARE claim, Blair incentivized the distributor to refer as many cream prescriptions as possible to Blair’s pharmacy.
As detailed in the plea agreement, the distributor actively sought out and solicited cream prescriptions for Blair from a military doctor, who had no idea how much money the creams reimbursed. The marketer took advantage of the military doctor’s grueling work schedule, often waiting, with a stack of Blair’s pre-printed prescription forms in hand, for the doctor outside the operating room after a long day of consecutive operations. The distributor directed, mailed, and returned all pain and scar cream prescriptions directly to Blair’s pharmacy. Neither the physician, nor the TRICARE recipients for whom the creams were licensed, had the ability to choose which pharmacy they wanted to have the prescription filled at because prescriptions were submitted directly to Blair.
Many TRICARE recipients were unaware that a prescription had been written for them until they received a box from Blair Pharmacy on their doorstep. Some of the TRICARE recipients either had no idea of the cost to TRICARE of these creams and vitamins they received in the mail, or they only learned of the high cost of the creams and vitamins after reviewing their letter of receipt. explanation of TRICARE benefits a month or more. two later. Some of the TRICARE grantees have filed formal complaints and reported instances of fraud to TRICARE and ESI. When the military doctor learned of the cost of the creams he had prescribed, he was outraged and immediately stopped authorizing any additional cream prescriptions. The doctor reported the problem to his management and advised TRICARE patients who complained about the creams to return the creams to the pharmacy.
From November 2014 to May 2015, TRICARE reimbursed Blair a total of $6,352,941.66 based on claims Blair submitted to TRICARE which were tainted by compensation payments Blair made to independent sales contractors . Blair admits that TRICARE would not have approved or reimbursed any claims for compound ingredients made by Blair Pharmacy, if TRICARE had known that Blair had agreed to pay an independent contractor 1099 based on volume and commission based on the value of referrals. prescription at Blair Pharmacy.
In addition to the restitution that Blair will pay for the financial loss caused to TRICARE, Blair has agreed to be excluded from the TRICARE health benefits program as an authorized provider for a term of 25 years.
United States Attorney Erek L. Barron commended the FBI, the Department of Defense’s Office of Inspector General and the IRS-CI for their work in the investigation. Mr Barron thanked Assistant US Attorneys Christine Duey and Paul Riley, who are prosecuting the case.
For more information about the Maryland U.S. Attorney’s Office, its priorities, and the resources available to report fraud, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md /report-fraud.
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