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Press Release

Two Individuals Admit Role In Multimillion-Dollar Compounded Prescription Drug Scheme

For Immediate Release
U.S. Attorney's Office, District of New Jersey

NEWARK, N.J. – Two individuals today admitted their roles in a multimillion-dollar scheme that defrauded health benefits programs through the submission of medically unnecessary prescriptions for compounded medications, U.S. Attorney Craig Carpenito announced.  

David M. Fulkerson, 48, of Indiana, and Nathaniel Stewart III, 38, of South Carolina, pleaded guilty to separate informations charging them with conspiracy to commit health care fraud. Fulkerson also admitted to his role in a conspiracy to violate the Anti-Kickback statute. Both individuals entered their guilty pleas by videoconference before U.S. District Judge Madeline Cox Arleo.

According to documents filed in this case and statements made in court:

Compounded medications are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. Although compounded drugs are not approved by the Food and Drug Administration (FDA), they are properly prescribed when a physician determines that an FDA-approved medication does not meet the health needs of a particular patient because, for example, the patient is allergic to a dye or other ingredient or requires the medication in a different form.

From July 2014 to November 2016, Fulkerson and Stewart conspired to defraud health care benefits programs with others, including Kent Courtheyn, a/k/a “Troy Taylor,” who has been separately charged by indictment. Courtheyn recruited Fulkerson and Stewart to market compounded medications, such as scar creams, pain creams, and vitamins, that were medically unnecessary. In order to obtain medically unnecessary prescriptions for compounded drugs, Fulkerson and Stewart, at Courtheyn’s direction, recruited individuals who had prescription drug coverage under certain health benefits programs. In Fulkerson’s case, that included TRICARE, the health care program for the United States military. The conspirators selected medications based on their high insurance reimbursement amount rather than the patients’ medical needs.  For instance, Fulkerson coached a patient on how to convince the doctor to write prescriptions for compounded medication that the patient did not need. Courtheyn, Fulkerson, Stewart, and others steered these prescriptions to certain compounding pharmacies, and in exchange, those compounding pharmacies paid Courtheyn, through his marketing company, a percentage of the reimbursement amount that they received from health benefits programs for each prescription that Fulkerson and Stewart referred. Courtheyn, in turn, paid Fulkerson and Stewart based on the compounded prescriptions that they helped generate.

Fulkerson and Stewart each face a maximum penalty of 10 years in prison on the health care fraud conspiracy charge; Fulkerson faces a maximum penalty of five years in prison on the Anti-Kickback statute conspiracy charge. They also face a $250,000 fine, or twice the gain or loss from the offense, whichever is greater, on each count. Stewart’s sentencing is scheduled for May 5, 2021.  Fulkerson’s sentencing is scheduled for April 21, 2021.

As part of his plea agreement, Fulkerson must forfeit $759,710 in criminal proceeds and pay restitution of at least $2.3 million. Stewart must forfeit $756,293 in criminal proceeds and pay restitution of at least $4 million. 

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge George M. Crouch Jr. in Newark, and Defense Criminal Investigative Service, under the direction of Special Agent in Charge Patrick J. Hegarty, with the investigation leading to today’s guilty pleas.

The government is represented by Assistant U.S. Attorneys José R. Almonte and Osmar J. Benvenuto of the Health Care Fraud Unit in Newark.

The charges and allegations in the indictment against Courtheyn are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Defense counsel:

Fulkerson: Peter Carter Esq., Newark

Stewart: Henry M. Coxe III Esq., and Brian Coughlin Esq., Jacksonville, Florida

Updated April 18, 2023

Health Care Fraud
Press Release Number: 20-468