US man sentenced to nearly 3 years in prison for $ 62 million compounded medication scam

On August 26, James Chen of Monterey Park in the San Gabriel Valley in the United States was sentenced to 34 months in federal prison for fraudulent claims of more than $ 62 million to the military’s TRICARE health care benefit program for bogus compounded medications prescriptions.

The United States District Court also ordered Chen to pay $ 28 million in restitution.

Chen owned Clevis Management, Inc., a Commerce-based company that did business under the name Haeoyou Pharmacy (HY), according to the US Department of Justice.

HY hired marketers to obtain bogus compounded medications prescriptions that were billed to TRICARE, a health care benefit program for military members and their families. HY also operated the website through which people could get medications prescriptions without being examined by a doctor.

Under Chen’s direction, HY has paid referral fees to third-party companies including Trestles RX LLC and Trestles Pain Management Specialists LLC, as well as to his own marketers for combination drug prescriptions. Referral fees accounted for over 50 percent of the net refunds received by HY from TRICARE.

Compounding medication is the practice in which a doctor or pharmacists alters the ingredients of a drug or several drugs to create a medication tailored to a particular patient, in case the patient is allergic to a specific ingredient in a medication approved by the Food and Drug Administration.

All the medications were for generic pain, scarring, stretch marks, erectile dysfunction, or “metabolic general wellness” (vitamins).

In December 2014, his company submitted 31 such claims to TRICARE for $81,401. During the first five months of 2015, HY submitted 2,798 such claims to TRICARE seeking a total of $62,654,938.

The claims HY submitted to TRICARE for each compounded medication prescription were astronomical compared to previous claims that HY typically submitted for reimbursement. For example, HY’s claim against TRICARE for a single compounded medication prescription forced the insurance company to pay $ 194,707.

Chen and his associates chose TRICARE because few insurance companies in the United States at the time satisfied claims for reimbursement using similar prescriptions.

In June 2017, Chen pleaded guilty to health care fraud charges.