Steven M. Butcher pleaded guilty last week in a New Jersey federal court to conspiracy to commit health care fraud and violate the Anti-Kickback Statute. Butcher, a former pharmaceutical sales rep, formed MedMax, LLC, a marketing company for compounded medications, and used the company as a vehicle to perpetrate a fraudulent scheme to bilk private and federally-funded health care plans of more than $45 million for medically unnecessary prescriptions.

Butcher signed-off on a plea agreement in which he admitted that from July 2014 through April 2016, he, together with several co-conspirators, submitted phony claims for medically unnecessary compounded medications (particularly scar creams, pain creams, and metabolic supplements).

The scheme is a familiar one. Butcher and his fellow conspirators sought out persons with insurance coverage, either private or federally funded, that would pay for compounded medications. The group then convinced these persons to obtain unnecessary prescriptions. Kickbacks were utilized to persuade some to participate in the scheme. The prescriptions were then sent on to a compounding pharmacy that ultimately filled the prescription and submitted the fraudulent claim, forwarding Butcher and his co-conspirators a percentage of the insurance reimbursement – an amount that sometimes soared to $20,000 per prescription.

Butcher’s co-conspirators, all of whom operated as “sales representatives” for MedMax, included Peter Pappas, Jason Cerge, and Julie Andresen.  The three sometimes submitted prescriptions for themselves or other family members, and also recruited additional “sales representatives” and health care providers willing to write the fraudulent prescriptions. Pappas, Andresen and Cerge have all pleaded guilty to their roles in the scheme. Pappas and Cerge await sentencing. Andresen was sentenced on February 7, 2018, to 15 months in prison.

By the terms of his plea agreement, Butcher has agreed to forfeit $4,584,597.92 in criminal proceeds and pay restitution of at least $45 million. His sentencing is scheduled for May 2018, at which time Butcher faces a maximum of 10 years in prison on the charge of conspiracy to commit health care fraud and up to 5 years in prison on the Anti-Kickback Statute charge.  He is also subject to the imposition of additional fines for each of the offenses.

In a press release regarding the Butcher guilty plea, the New Jersey U.S. Attorney’s Office noted that since the creation of its “stand-alone” Health Care and Government Fraud Unit in 2010, the office has recovered “more than $1.38 billion in health care fraud and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act and other statutes.”

The FisherBroyles Pharmacy and Health Care Law team will continue to track issues of importance, along with notable accounts of fraud and wrongdoing, in the pharmaceutical and health care industries. We welcome your questions. Please contact any of the following attorneys:

Brian Dickerson, FisherBroyles Partner
Brian E. Dickerson

Anthony Calamunci, FisherBroyles Partner
Anthony Calamunci

Nicole Waid, FisherBroyles Partner
Nicole Hughes Waid

Amy Butler, FisherBroyles Partner
Amy Butler

Katy Wane, FisherBroyles Partner
Katy Wane