A guidance counselor with the Pleasantville public school district today admitted defrauding New Jersey state health benefits programs and other insurers out of over $3 million by submitting fraudulent claims for medically unnecessary prescriptions, U.S. Attorney Craig Carpenito and New Jersey Attorney General Gurbir S. Grewal announced.
According to authorities, Michael Pilate, 39, of Williamstown, pleaded guilty before U.S. District Judge Robert B. Kugler in Camden federal court to an information charging him with conspiracy to commit health care fraud.
“Pilate was part of a network of recruiters, doctors, and state and local government employees who abused their access to state benefits plans to rack up millions in reimbursements for medically unnecessary prescriptions, all while profiting off the backs of New Jersey tax payers,” U.S. Attorney Carpenito said.
According to documents filed in this case and statements made in court:
From January 2015 through April 2016, Pilate and others recruited individuals in New Jersey to obtain very expensive and medically unnecessary compounded medications from an out-of-state pharmacy, identified in the informations as the “Compounding Pharmacy.”
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. The conspirators knew 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.
Officials said Pilate agreed to personally receive compounded prescription creams that he did not need without being examined by a doctor and helped recruit other public employees and individuals covered by the Pharmacy Benefits Administrator to fraudulently obtain medically unnecessary medications from the Compounding Pharmacy. Pilate secured insurance information from the individuals and passed it along to another conspirator, who had a doctor sign the prescriptions without examining the individuals. The prescriptions were faxed to the Compounding Pharmacy, which filled the prescriptions and billed the Pharmacy Benefits Administrator.
The pharmacy then paid one of Pilate’s conspirators a percentage of each prescription filled and paid by the Pharmacy Benefits Administrator, which was then distributed to Pilate and other members of the conspiracy. Pilate paid individuals with the insurance coverage $500 to reward them for obtaining the prescriptions.
According to the information, the Pharmacy Benefits Administrator paid Compounding Pharmacy over $50 million for compounded medications mailed to individuals in New Jersey.
As part of the plea agreement, Pilate must forfeit $392,684.20 in criminal proceeds he received for his role in the scheme and pay restitution of at least $3,493,170.18.
Pilate 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 May 11, 2018.
Twelve other conspirators – Matthew Tedesco, Robert Bessey, Michael Pepper, Thomas Hodnett, Steven Urbanski, John Gaffney, Judd Holt, George Gavras, Richard Zappala, Michael Neopolitan, Andrew Gerstel, and Timothy Frazier – have pleaded guilty to their roles in the scheme and await sentencing.