Former CEO of Nebraska Pharmaceutical Benefits Manager Guilty in Kickback Scheme
TYLER, Texas – The former CEO of a Nebraska pharmaceutical benefits manager has pleaded guilty to engaging in illegal kickbacks in the Eastern District of Texas, announced Acting United States Attorney Brit Featherston today.
Douglas M. Pick, 57, of Omaha, Nebraska, pleaded guilty to making unlawful kickback payments today before United States Magistrate Judge John D. Love. At sentencing, Pick faces up to three years in federal prison. A sentencing date has not been set.
According to information presented in court, Pick was the founder and long-time President and CEO of Pharmaceutical Technologies, Inc. (PTI). The company, which operates as a pharmacy benefits manager (PBM), provides for the administration and delivery of pharmacy products and services. PTI uses a network of pharmacies to service employee welfare benefit plans and health care benefit programs across the United States. During Pick’s tenure, PTI contracted with certain individuals, known as “Producers,” who had close business relationships with benefit plans. These benefit plans require administrative services in connection with the delivery of pharmacy products and services to their members. Agreements between PTI and certain Producers were used to facilitate the payment of illegal kickbacks. These Producers unlawfully used their positions to steer the benefit plans to PTI in exchange for kickback payments. The payments by Pick and PTI were based on the volume of business the Producers steered to PTI. Such agreements and the related payments violate the Employee Retirement Income Security Act of 1974 (ERISA). Pick, as PTI’s President and CEO, was primarily responsible for the negotiations with Producers.
Between 2001 and 2013, Pick, acting on PTI’s behalf, entered into agreements with several Producers who unlawfully used their positions to refer benefit plan business to PTI in exchange for illegal kickback payments. These Producers collectively received illegal payments in excess of $3.5 million.
One such Producer was Tom Slack of Tyler, Texas. From 1998-2011, Slack served as the CEO of Tyler-based HealthFirst and its subsidiaries, including HealthFirst RX Solutions (HFRX). HealthFirst, a subsidiary of East Texas Medical Center, provides administrative services to employee benefit plans in East Texas. The plans include health care benefits, such as pharmacy products. HFRX, a private label PBM located in Tyler, provides pharmacy benefit services to HealthFirst’s client plans. In early 2004, Pick and Slack executed a contract in which PTI agreed to administer the pharmacy benefits of HealthFirst’s client plans through HFRX. The agreement specified that HealthFirst would pay PTI an administrative fee for every claim made for the filling of prescriptions. During April and May of 2004, Slack expressed to Pick that he wanted to personally receive money on the pharmacy business from HealthFirst in exchange for directing more business to PTI and automatic renewal of the PTI-HealthFirst agreement each year. Pick agreed that PTI would pay Slack in exchange for this commitment. To do so, Pick and Slack agreed that Slack would approve an increase of the PTI administrative fee imposed on HealthFirst’s clients for each prescription filled. PTI would then pay the increase to a shell company that Slack had established. Slack, who was fired by HealthFirst in July 2011 and later passed away in 2012, received more than $1.5 million in illegal payments/kickbacks from Pick and PTI.
Gary Gustafson, a Producer from Eden Prairie, Minnesota, received close to $750,000 in illegal payments/kickbacks from Pick and PTI. He pleaded guilty to federal health care fraud charges in the District of Minnesota in May 2016 and is awaiting sentencing.
To resolve the matter, PTI entered into a non-prosecution agreement with the United States and agreed to pay over $8.5 million. As part of the agreement, PTI agreed to cooperate with the government in the investigation and prosecution of individuals involved in the illegal kickback arrangements and to maintain internal controls, including compliance with ERISA, the Anti-Kickback Statute, and all other applicable statutes.
The case was investigated by the U.S. Department of Health and Human Services, the U.S. Department of Labor - Employee Benefits Security Administration, and the Texas Attorney General’s Medicaid Fraud Control Unit. Assistant U.S. Attorneys Nathaniel Kummerfeld and Frank Coan and Special Assistant U.S. Attorney Kenneth McGurk prosecuted the case.