A federal grand jury has returned a 16-count indictment charging a physician and pharmaceutical sales representative with defrauding New Jersey state health benefits programs and other insurers out of more than $2.5 million by submitting fraudulent claims for medically unnecessary prescriptions, as well as unlawfully obtaining and disclosing individually identifiable patient health information protected by HIPAA, U.S. Attorney Craig Carpenito announced.
Keith Ritson, 40, of Bayville, New Jersey, and Frank Alario, M.D., 63, of Delray Beach, Florida, are charged with conspiracy to commit health care fraud and wire fraud, as well as individual acts of health care fraud and wire fraud. Both men are charged with a second conspiracy to wrongfully obtain and disclose patients’ individually identifiable health information. Alario is additionally charged with making false statements in a health care matter, and Ritson faces additional charges of conspiring to commit money laundering and substantive counts of money laundering.
The cases are assigned to U.S. District Judge Robert B. Kugler in Camden. The indicted defendants are expected to make their initial appearances before U.S. Magistrate Judge Ann Marie Donio in Camden federal court via videoconference on Sept. 10, 2020.
According to the indictment:
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, such as if a patient is allergic to a dye or other ingredient.
The conspirators recruited individuals to obtain very expensive and medically unnecessary compounded medications from a Louisiana pharmacy, Central Rexall Drugs Inc. (Central Rexall). The conspirators learned that certain compound medication prescriptions – including pain, scar, antifungal, and libido creams, and vitamin combinations – would be reimbursed by insurance providers in amounts in the thousands of dollars for a one-month supply.
The conspirators also learned that some New Jersey state and local government and education employees, including teachers, police officers, and state troopers, had insurance coverage for these particular compound medications. An entity referred to in the indictment 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, the School Employees’ Health Benefits Program, which covers qualified local education employees, retirees, and eligible dependents, and other insurance plans. The Pharmacy Benefits Administrator would pay prescription drug claims and then bill the State of New Jersey or the other insurance plans for the amounts paid.
In the first charged conspiracy, Ritson recruited individuals with prescription drug benefits administered by the Pharmacy Benefits Administrator to receive unnecessary compound medication prescriptions, which Alario signed without examining, speaking with, or establishing a physician-patient relationship with the patient. Alario sent a form to Central Rexall’s compliance program in which he falsely attested that he saw and spoke with patients in person and established a physician-patient relationship prior to prescribing Central Rexall medications. Ritson and Alario earmarked established patients of Alario’s medical practices who had insurance that covered the expensive compound medications. Alario prescribed the medications not for the patient’s need or request, but for the benefits he and Ritson stood to gain. The scheme caused the Pharmacy Benefits Administrator to pay over $2.5 million for the fraudulent prescriptions. For his role in the scheme, Ritson received a percentage of the amount that Central Rexall received from the Pharmacy Benefits Administrator for the medications, and Alario benefitted by receiving free meals, entertainment, travel, and other remuneration from Ritson.
The indictment also charges Ritson and Alario with a separate scheme to wrongfully obtain and disclose individually identifiable patient health information for their own personal gain and commercial advantage. As a sales representative not affiliated with Alario’s medical practices, Ritson should not have had access to patients’ confidential information. However, since only certain insurances covered the compound medications promoted by Ritson, the defendants accessed patient files and other identifying information to ascertain patients’ insurance coverage. On at least one occasion, Ritson and Alario jointly accessed patient information on an office computer for the purpose of determining insurance coverage for the medications. Ritson also had access to parts of Alario’s office where patient information was stored or could be heard and observed, including employee-restricted areas with medical files, fax machines, and computers. Ritson was also frequently present in exam rooms during patient appointments with Alario for the purpose of promoting the compound medications, at which time Alario commonly introduced Ritson to his patients as his “nephew” or gave the impression that Ritson was affiliated with the medical practice. By being present during the patient exams, Ritson had access to patients’ medical files and protected health information.
The health care fraud and wire fraud conspiracy count carries a maximum potential penalty of 20 years in prison; each wire fraud count carries a maximum potential penalty of 20 years in prison; each health care fraud count carries a maximum penalty of 10 years in prison; the false statement count and the conspiracy to wrongfully obtain or disclose individually identifiable patient health information count each carry a maximum penalty of five years in prison; and the money laundering charges carry a maximum penalty of 10 years in prison. All of the offenses are also each punishable by a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greater.
U.S. Attorney Carpenito credited agents of the FBI’s Atlantic City Resident Agency, under the direction of Special Agent in Charge George M. Crouch Jr. in Newark; IRS – Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez in Newark; and the U.S. Department of Labor, Office of Inspector General, New York Region, under the direction of Special Agent in Charge Michael C. Mikulka, with the investigation leading to the indictment. He also thanked the Division of Pensions and Financial Transactions in the State Attorney General’s Office, under the direction of Attorney General Gurbir S. Grewal and Division Chief Aimee Nason, for its assistance in the investigation.
The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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