Compounding Pharmacy Mogul Pleads Guilty to Conspiracy to Commit Health Care Fraud and Conspiracy to Commit Money Laundering
A Mississippi businessman pleaded guilty Thursday for his role in a multi-million dollar scheme to defraud TRICARE, the health care benefit program serving U.S. military, veterans, and their respective family members, as well as private health care benefit programs, by paying kickbacks to practitioners and distributors for the prescribing and referring of fraudulent prescriptions for not medically necessary compounded medications that were ultimately dispensed by his pharmacies, as well as for his role in a scheme to launder the proceeds of the fraud scheme.
Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division, U.S. Attorney Mike Hurst of the Southern District of Mississippi, Special Agent in Charge Michelle Sutphin of the FBI’s Jackson Field Office, Acting Special Agent in Charge Andrew M. Thornton of IRS Criminal Investigation’s (IRS-CI) New Orleans Field Office, Special Agent in Charge Cynthia Bruce of the Defense Criminal Investigative Service’s (DCIS) Southeast Field Office, and Interim Director Steven Maxwell of the Mississippi Bureau of Narcotics (MBN), made the announcement.
Wade Ashley Walters, 53, of Hattiesburg, Mississippi, a co-owner of numerous compounding pharmacies and pharmaceutical distributors, pleaded guilty to one count of conspiracy to commit health care fraud and conspiracy to commit money laundering before U.S. District Judge Keith Starrett of the Southern District of Mississippi. Defendant was remanded into custody following the plea hearing. Sentencing has been scheduled for Oct. 28, 2020, before Judge Starrett.
As part of his guilty plea, Walters admitted that, between 2012 and 2016, he orchestrated a scheme to defraud TRICARE and other health care benefit programs by distributing compounded medications that were not medically necessary. As part of the scheme, Walters among other things, adjusted prescription formulas to ensure the highest reimbursement without regard to efficacy; solicited recruiters to procure prescriptions for high-margin compounded medications and paid those recruiters commissions based on the percentage of the reimbursements paid by pharmacy benefit managers and health care benefit programs, including commissions on claims reimbursed by TRICARE; solicited (and at times paying kickbacks to) practitioners to authorize prescriptions for high-margin compounded medications; routinely and systematically waived and/or reduced copayments to be paid by beneficiaries and members, including utilizing a purported copayment assistance program to falsely make it appears as if the pharmacies were collecting copayments. Walters and his numerous co-conspirators effectuated a scheme to defraud health care benefit programs, including the TRICARE program, in the amount of $287,659,569, with losses to a government health care program exceeding $20,000,000. Walters obtained over $40,000,000 in proceeds derived directly or indirectly from the fraud.
Walters also admitted that he and others laundered the proceeds by engaging in monetary transactions in amounts of over $10,000 in proceeds from the fraud scheme, including transactions relating to his participation in a sham intellectual property scheme.
The FBI, IRS-CI, DCIS, FBI, and MBN investigated the case with assistance from the U.S. Postal Service Office of Inspector General (OIG), Office of Personnel Management OIG and the Mississippi Attorney General's Office. Trial Attorneys Dustin M. Davis, Sara E. Porter, and Katherine E. Payerle of the Criminal Division’s Fraud Section, Trial Attorney Stephanie Williamson of the Criminal Division’s Money Laundering and Asset Recovery Section, and Assistant United States Attorney Kathlyn R. Van Buskirk of the Southern District of Mississippi are prosecuting the case.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.