Doctor Admits $25 Million In Fraud Through False Prescriptions, Authorities Say

An Atlantic County doctor admitted signing prescriptions for patients he never saw, thus defrauding New Jersey state health benefits programs and other insurers out of about $25 million, Acting U.S. Attorney William E. Fitzpatrick and New Jersey Attorney General Christopher S. Porrino announced on Friday.

John Gaffney, 55, of Linwood, pleaded guilty to an information charging him with conspiracy to commit health care fraud on Friday, according to authorities. Gaffney has a medical practice in Margate.

He must forfeit $25,000 in criminal proceeds and pay restitution of at least $24,956,435.08. He faces a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gain or loss caused by the offense. Sentencing is scheduled for Jan. 5, 2018.

Matthew Tedesco, Robert Bessey, Michael Pepper, Thomas Hodnett, and Steven Urbanski 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, Gaffney’s conspirators 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. Once they had recruited an employee covered by the Pharmacy Benefits Administrator, Gaffney’s conspirators obtained that employee’s insurance information and filled out a Compounding Pharmacy prescription form, authorities said.

They then had Gaffney sign prescriptions for compounded medications for numerous patients, even though Gaffney never saw the individuals or evaluated whether they had a medical necessity for the compounded medication. Gaffney also signed a blank prescription form, which other conspirators copied and used to submit additional fraudulent prescriptions to the Compounding Pharmacy.

Other conspirators submitted fraudulent prescriptions bearing Gaffney’s signature for over 200 individuals, and the Pharmacy Benefits Administrator paid just under $25 million for those prescriptions. Gaffney received payments of thousands of dollars in cash and other benefits to reward him for his role in the scheme, authorities said.

Patch file photo