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South Jersey prescription fraud ring follows national playbook

Conspirators in a South Jersey health insurance fraud ring targeting state employees, which federal prosecutors say led to $50 million in illegal claims for compounded medications, followed the playbook of many of the similar schemes happening around the country.

“Right now there is absolutely a crisis of it,” said attorney David Lieberman, an attorney at the Whistleblower Law Collaborative in Boston, who represents clients under the False Claims Act. The Act allows the federal government to prosecute fraud against its entities.

Of the nearly $4 trillion spent annually on health care in the United States, the National Health Care Anti-Fraud Association estimates anywhere from 3 to 10% — tens of billions of dollars — is a result of fraud.

Last month, Haley Taff, the chief executive officer of Central Rexall, a century-old Louisiana compounding pharmacy that shuttered in 2016, became the 31st person to plead guilty in the South Jersey fraud case pending in U.S. District Court in Camden. In all, 41 people have been charged. The first sentence was handed down in June.

The defendants have included area teachers, firefighters, pharmaceutical sales representatives and doctors.

While the methods of defrauding health care programs are common across the nation, New Jersey’s case has its own unique twist.

“This is actually one of the first ones that I’ve seen that exclusively targets state employee benefits,” Lieberman said, noting that a primary target is usually TRICARE, the government’s health insurance for the military.

In South Jersey’s case, the fraud allegedly involved recruiters, more than a dozen of their subordinates and at least two out-of-state pharmacies that conspired to defraud the New Jersey state health benefit plan by having public employees submit claims with their health insurance provider for specially made, or “compounded” medications, which they didn’t really need.

Compounded medications, which are unregulated by the FDA, are specially formulated by pharmacists for patients with allergies to specific ingredients.

According to the bevy of plea agreements in this case, the conspirators had capitalized on the fact that New Jersey’s State Health Benefits Plan and School Employee Health Benefit Plans both generously reimbursed pharmacies for these medications. Prosecutors say the ring collected the reimbursements, using some of the profit to pay kickbacks to doctors and employees who’d submitted the prescription.

Data from the U.S. Attorney’s Office shows that last year there were 485 health care fraud cases filed in federal court.

What makes prescription fraud, particularly related to compounded medications, so appealing is the way they are reimbursed by insurers and the flexibility pharmacies have to set the price.

According to a U.S. Government Accountability Office report on TriCare’s reimbursement practice, the agency said that non-FDA-approved “bulk” drugs — typically raw powders — drove a significant rise in prescription costs between 2004 and 2013, from $5 million to $259 million during those years.

The Defense Health Agency attributed the high cost to “several factors,” including the significant artificial inflation of the price by the manufacturers.

This led to an industry of pharmacists building drugs designed specifically around reimbursement costs and not if they actually help people, similar to what Taff pleaded guilty to in August, according to court documents. Taff’s attorney J. Garrison Jordan of Hammond, Louisiana, did not respond to a request for comment.

Central Rexall was suspended by the Defense Health Agency in April 2015 for having filled faulty prescriptions for compounded drugs to patients with TRICARE, the military health insurance company, an accusation the pharmacy denies, court documents show. The pharmacy sued the DHA to have its TRICARE claims paid. The litigation was settled out of court in 2019, according to federal court records.

Central Rexall was also named in a June 2017 affidavit for a search warrant used to raid Linwood endocrinologist James Kauffman’s medical office in relation to a health benefits fraud and murder investigation.

According to the Kauffman affidavit, Atlantic County Prosecutor’s Office subpoenaed records from pharmacy benefit manager Express Scripts and found that between January 2015 and June 2016, Kauffman prescribed 750 compounded medications; more than 650 were from Central Rexall Drugs. Each charge was for more than $5,000, and there were multiple instances of a script being prescribed to multiple patients on the same day, the affidavit states. Kauffman was never charged in the prescription fraud ring, but was charged in the murder of his wife before dying by suicide in Hudson County Jail.

The Hammond, Louisana, pharmacy, owned by Don Fellows and his daughter, Taff, closed Dec. 30, 2016, after compounding medications for more than 120 years, filling prescriptions for patients all over the U.S., according to its website.

Lieberman’s colleague at the Whistleblower Law Collaborative, Bruce Judge, a former federal prosecutor with more than two decades’ experience in fraud cases, said the inclusion of an out-of-state pharmacy shows the depth of the fraud happening in South Jersey.

“What that indicates is that the federal law enforcement has been investigating this in a way that’s expanded significantly the scope of the criminal activity,” Judge said. “And it also highlights the scale, the dollar amounts that were being generated through this compounding pharmacy scheme that, in this case, was victimizing the public employee plan for the state of New Jersey.”

Although the South Jersey fraud ring made a lot of money, Lieberman characterized the conspirators as a “fly-by-night, borderline criminal network” that probably has little means to pay it back other than from property seizures. He and Judge agreed that recouping all of the money in this case would be nearly impossible.

Combating this type of fraud is also difficult.

“There are two ways they get caught. One is what we do. We have people of conscience come to us and say this is wrong I know it’s wrong what do we do about?” Lieberman said of his own work. “The other is increasingly the government is running analytics on its own claims.”

Lieberman said regulations that prohibit the reimbursement of non-FDA-approved drugs helps to stem this kind of fraud.

“There are reimbursement changes that can be made to minimize this, but the other driver of this is the kickback piece. That is illegal and that’s solved by cracking down on these really egregious kickback examples,” Lieberman said.

Atlantic County Prosecutor Damon G. Tyner said his office continues to investigate this same fraud on a local level.

“We continue to work with our federal law enforcement partners. Upon the conclusion of the matter on the federal level, we will pursue those individuals who have violated state law,” Tyner said.

Contact: 609-272-7251 Twitter @clairelowe.

Who has been charged in the prescription fraud case?

Who's been charged in prescription fraud case?

Shore towns, businesses may see more people year round as COVID-19 drives real estate market

MARGATE — Allen and Linda Shubin just purchased a newly-constructed house in the city. They bought it as a secondary home, but in May decided to move to the shore permanently.

“Allen had said to me, ‘What do you think about going to Margate full time?’” Linda said. “We thought, ‘Wow, what a great opportunity to have one home.’ It gives us the flexibility in the winter season to travel or go to warmer spots.”

Real estate agents in the area are seeing more and more clients like the Shubins, clients who are escaping larger cities to move down the shore amid the COVID-19 pandemic. There’s more space here, and more and more people are now working from home.

“Everything went kind of mad house, and everybody wanted to run and come down the shore,” said Todd Gordon, a real estate agent with the Hartman Home Team, an agency covering shore towns and the surrounding area in Atlantic County.

Gordon’s original prediction was that it would become a buyer’s market. He thought, as most shore towns are a second-home market, that homeowners would get nervous about finances during the pandemic and sell their second homes. But Gordon didn’t see many homes come on the market.

“We saw people start to say, ‘I want to get out of where I’m living,’ whether it be Cherry Hill, North Jersey, Philadelphia, anywhere in the tri-state area,” he said. “They wanted to get out of a major city and get down the shore where things are a little more open. Then they saw that interest rates were low.”

And with demand so high, it’s a perfect recipe for a seller’s market.

On Aug. 20, Gordon said there were about 65 houses ror sale in Margate and Ventnor, each, when there are typically 250 to 300 houses in each city.

“We’ve had some bidding wars on houses, which is crazy,” he said.

He also saw homeowners, like the Shubins, trade up. The Philadelphia-based couple had a shore home in Margate they sold last September, intending to buy a larger home on the island. Allen, a CPA, will mostly be working from home.

“It’s great to see, but you just never think it’s going to happen where people say, ‘I love my house, but now I want more space,’” Gordon said.

“I’ve seen people rent for $20,000 in August and now they found out they’re going to work from home and say, ‘Well now I’m just going to buy a house.’”

Michelle Rosen, from Long Island, New York, was looking to purchase a shore condo on the beach and plans on coming down most weekends throughout the year. But when she retires, she hopes to move to the shore permanently.

Originally from Philadelphia, she said her mother always had a shore home but just recently passed away, so she decided to purchase a place herself.

“This is my home really,” she said. “This is where I meet my friends from Philly.”

Real estate agents off the island are seeing similar buying habits as well.

“Lately, if the house is well priced it is selling quickly and with a strong offer,” said Lisa Alper-Russo, a real estate agent with Platinum Real Estate in Linwood. “We’re seeing multiple offers again. That’s not uncommon, but it’s more prevalent now.”

She is hearing more and more that clients want a dedicated room for an office. Inventory is also low on the mainland.

Last week, Alper-Russo listed a house at noon and had a showing at 6:30 p.m. with a full-price offer. She’s had similar situations with other homes as well.

On the island, people who are buying are mostly purchasing second homes, but Gordon is seeing a slight uptick in buyers who plan to stay in the area year round.

Over the last few years he’s noticed a decrease in primary home buyers. The uptick is reversing a decline and that’s a good thing, he thinks.

“We are seeing people say, ‘You know what, I want to relocate,’” he said. “I’m hopeful to see more families come into Margate, Ventnor and Longport. Our area can use more people down here in the winter time. Having more people is only going to benefit everybody.”

Local officials agree.

“For the business community, we need all we can get,” said Leonard Desiderio, mayor of Sea Isle.

With more people in the city throughout the fall, he’s hoping that businesses can make up for what they lost in the spring.

“I’ve talked to a number of people that said, ‘I’m a teacher and my school is doing virtual until November, so I’m going to be doing my teaching from here. We’re going to spend September, October and into November in Sea Isle,’” he said.

Angela Reynolds, president of the Brigantine Chamber of Commerce and a real estate agent with Weichert Brigantine Realty, is also seeing more summer residents turning into part-time winter residents.

“This has a positive impact on our entire local economy,” she said. “Many of our new homeowners have expanded their stays…which gives an extra boost to our year-round businesses.”

Margate Mayor Mike Becker claimed there are more people and traffic in the city than previous summers.

“It’s great. More people here will help the business community,” he said. “There’s no downside. We certainly have enough infrastructure and services to take care of people year round. It’s uncanny, but in a good way. Except for the fact that it’s coming from a disease, it’s a good effect.”

And while it may not be their forever home, the Shubins are happy to be living by the beach and enjoying life.

“We’re very happy to be here,” Allen said. “This is where we’re going to make our home for the foreseeable future.”

for sale

breaking featured
Boards of elections adjust as early vote counting allowed

A new state law allows Boards of Election to start counting vote-by-mail ballots 10 days before Election Day, increasing the chance of getting earlier results but also creating a challenge to election security.

The counting is done electronically, using a scanner that reads the filled-in ovals on paper ballots.

“One of the things (the new law) brought up is, how can you safeguard ... so that no one can get into that machine?” Atlantic County Board of Elections Democratic member John Mooney said during the board’s Tuesday night special meeting.

Access to early results could be misused by parties or individuals trying to influence races by focusing last-minute efforts where their candidates are losing, Mooney said.

Gov. Phil Murphy signed three bills into law a week ago Friday, one of which allows early counting as a way of giving election boards more time to count the unprecedented number of paper mail-in ballots they will see in the general election. He previously released two executive orders requiring the election to be conducted mostly through vote-by-mail ballots, as a way of preventing the spread of the coronavirus.

Atlantic County Board of Elections Chair Lynn Caterson, a Republican, said the new law specified that any release of results before close of polls on Election Day will be a third-degree criminal offense.

At Tuesday’s meeting, the board voted to purchase a second scanner for counting ballots at a cost of $55,000, much or all of which it hopes will be reimbursed by federal funding for COVID-19 related expenses.

The wording of the new law makes it clear it is the responsibility of boards of elections to secure results.

“If a county board of elections begins opening the inner envelopes and canvassing (counting) the mail-in ballots from the inner envelopes prior to the day of the election, the county board shall implement the measures necessary to ensure the security and secrecy of the mail-in ballots,” the law states. “The contents of the mail-in ballots and the results of the ballot canvassing shall remain confidential and ... in no circumstances disclosed prior to the close of polls on the day of the election.”

Allowing early counting of vote-by-mail ballots will get results to voters faster in a high-interest election where turnout is expected to be extremely high.

“Timely results are definitely in the public interest,” said John Froonjian, executive director of the William J. Hughes Center for Public Policy at Stockton University. “If they are delayed a long time, people question whether the election was rigged. Nobody wins if voters lose faith in the electoral system.”

Atlantic County anticipates receiving 120,000 to 140,000 ballots, and Cape May County anticipates handling 60,000.

“We can run ballots through the scanner, and we just don’t print results,” Cape May County Democratic Registrar Michael Kennedy said of that county’s approach to keeping results secret. “Nobody at the Board of Elections would know what the outcomes are, because we are not gong to print them.”

But Kennedy said there isn’t a foolproof way to prevent someone from doing so.

“Unfortunately, I don’t know if there is a way to 100% stop that from happening. I can tell you it will not happen here at Cape May County Board of Elections. I’m the last guard of defense, and those reports will not be printed or shown until election night,” he said.

Murphy ready to rumble over Trump campaign election lawsuit

TRENTON — “Bring it on,” Gov. Phil Murphy said Wednesday of a lawsuit filed by the reelection campaign of President Donald J. Trump, challenging Murphy’s right to unilaterally order that the Nov. 3 general election will be mostly vote-by-mail.

Kennedy acknowledged it “comes down to individuals.”

The Cape May County Board of Elections purchased two new scanners in April for the July 7 primary, Kennedy said. That office now has three scanners.

The 10-day lead time will make it likely his office will have all ballots it has received through the mail or ballot drop boxes counted by the close of polls on election night, Kennedy said. His office will post the preliminary results online after polls close.

Mooney said he’s hopeful there is some way to guarantee no one can access results in the scanner before 8 p.m. Nov. 3.

“I want to make sure no one in our office knows anything about the codes (to run results),” Mooney said.

A technician from an outside firm runs the scanner that counts votes, Mooney said. He is asking the company to guarantee in writing that no staff members from either party can get into the machine.

New Jersey is not alone in allowing early vote-counting, Froonjian said.

According to data from the National Conference of State Legislators, about a dozen states allow mail-in-ballots to be counted before Election Day, he said.

Another dozen or so allow you to start counting on Election Day before the polls close, he said, which is what New Jersey had done historically.

The changes will help election officials provide an accurate and timely vote, Froonjian said.

But he said election officials must protect election security.

“It’s extremely important that elections are fair, secure and beyond reproach,” Froonjian said.

Who is running for office in Atlantic County?

Who is running for office in Atlantic County during the November elections?