Candy Company Director Admits Role In Drug Fraud: Authorities

A retail director for a local candy company has admitted to defrauding New Jersey state health benefits programs and other insurers out of over $2 million by submitting fraudulent claims for medically unnecessary prescriptions, U.S. Attorney Craig Carpenito and New Jersey Attorney General Gurbir S. Grewal announced.

Nicholas Tedesco, 44, of Linwood, pleaded guilty to an information charging him with conspiracy to commit health care fraud. His brother and a leader in the conspiracy, Matthew Tedesco, pleaded guilty to his role in the scheme on Aug. 17, 2017.

Nicholas Tedesco must forfeit $782,766.56 in criminal proceeds and pay restitution of at least $2,069,847.42. He faces a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for June 1.

He is the 15th person to plead guilty in connection with this scheme. Others who have pleaded guilty include Middle Township school teacher Shawn Sypherd, 46, of Marmora; sales representatives Andrew Gerstel, 32, of Galloway; 36-year-old George Gavras, of Moorestown, and 42-year-old Judd Holt, of Marlton.
John Gaffney, Robert Bessey, Michael Pepper, Thomas Hodnett, Steven Urbanski, Judd Holt, Richard Zappala, Timothy Frazier and Michael Neopolitan have already pleaded guilty to their roles in this conspiracy and await sentencing. The conspiracy revolved around the unnecessary prescriptions of compounded medications.

Compounded medications are supposed to be specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient, according to documents filed in the case and statements made in court. They aren't approved by the Federal Drug Administration (FDA), but when an FDA-approved medication don't meet the health needs of a patient, the doctor is permitted to prescribe a compounded medication.

From January of 2015 through April of 2016, the Tedesco brothers were among a group of conspirators who persuaded patients to obtain very expensive and medically unnecessary compounded medications from an out-of-state pharmacy, identified in the information as the "Compounding Pharmacy," according to authorities.

The conspirators learned that certain compound medication prescriptions – including pain, scar, antifungal, and libido creams, as well as vitamin combinations – were reimbursed for thousands of dollars for a one-month supply, authorities said. They also discovered that some New Jersey state and local government and education employees, including teachers, firefighters, municipal police officers, and state troopers, had insurance coverage for these particular compound medications.

An entity referred to in the information as the "Pharmacy Benefits Administrator" provided pharmacy benefit management services for the State Health Benefits Program, which covers qualified state and local government employees, retirees, and eligible dependents, and the School Employees' Health Benefits Program, which covers qualified local education employees, retirees, and eligible dependents.

The Pharmacy Benefits Administrator would pay prescription drug claims and then bill the State of New Jersey for the amounts paid. The Tedesco brothers and others recruited public employees and other individuals covered by the Pharmacy Benefits Administrator to fraudulently obtain compounded medications from the Compounding Pharmacy which were not medically necessary. The prescriptions were faxed to the Compounding Pharmacy, which filled the prescriptions and billed the Pharmacy Benefits Administrator.

The pharmacy then paid one of the conspirators a percentage of each prescription filled and paid by the Pharmacy Benefits Administrator, which was then distributed to Sypherd and other members of the conspiracy. Nicholas Tedesco paid individuals with insurance coverage in cash to reward them for obtaining prescriptions.

According to the information, the Pharmacy Benefits Administrator paid Compounding Pharmacy over $50 million for compounded medications mailed to individuals in New Jersey.

Patch file photo