Department of Justice

U.S. Attorney’s Office

Central District of California

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FOR IMMEDIATE RELEASE

Monday, February 7, 2022

West L.A. Compounding Pharmacy Owner Sentenced to 2½ Years in Federal Prison for Running $14 Million Health Care Fraud Scheme

          LOS ANGELES – A West Los Angeles pharmacist was sentenced today to 30 months in federal prison for orchestrating a scheme that fraudulently obtained millions of dollars for compounded drugs in a scheme that paid illegal kickbacks for patient referrals and fraudulently paid patients’ copayments.

          Navid Vahedi, 42, of Brentwood, was sentenced by United States District Judge Christina A. Snyder. Vahedi and his West Los Angeles-based company, Fusion Rx Compounding Pharmacy, pleaded guilty in February 2021 to one count of conspiracy to commit health care fraud and payment of illegal remunerations.

          On January 18, Judge Snyder sentenced Fusion Rx Compounding Pharmacy to five years of probation. She has ordered Vahedi and his company to jointly pay $4,400,525 in restitution.

          Fusion Rx was a provider of compounded drugs, which are tailor-made products doctors may prescribe when FDA-approved alternatives do not meet the health needs of patients. Vahedi, a licensed pharmacist, and Fusion Rx routed millions of dollars in kickback payments through the businesses of two marketers to steer prescriptions for compounded drugs to Fusion Rx.

          As part of the scheme, Vahedi and the two marketers provided physicians with preprinted prescription script pads that offered “check-the-box” options on the form to maximize the amount of insurance reimbursement for the compounded drugs. From May 2014 to at least February 2016, Fusion Rx received approximately $14 million in reimbursements on its claims for compounded drug prescriptions.

          As part of its contracts with various insurance networks, Fusion Rx was obligated to collect copayments from patients. Because the copayments might discourage patients from requesting expensive and potentially unnecessary compounded drug prescriptions, Fusion Rx did not collect copayments with any regularity and, in other instances, it provided gift cards to patients to offset the amount of the copayments, according to court documents.

          After an audit raised concerns that Fusion Rx’s failure to collect copayments would be discovered, Vahedi directed Fusion Rx funds to be used to purchase American Express gift cards, which were then used to make copayments for certain prescriptions without the patients’ knowledge. Fusion Rx then submitted claims on these prescriptions to various insurance providers, falsely representing that patients had paid the required copayments.

          “As a pharmacist offering compounded medications, [Vahedi] had a real opportunity to use his skills to help patients in need, individuals whose unique health challenges made it impossible for them to depend on the FDA-approved medications others rely on,” prosecutors wrote in a sentencing memorandum. “Instead, defendant converted his pharmacy into an assembly line for his own enrichment.”

          The two marketers involved in the scheme – Joshua Pearson, 42, of St. George, Utah, and Joseph Kieffer, 41, of West Los Angeles – previously pleaded guilty in this case. Judge Snyder sentenced Kieffer to six months in federal prison and ordered him to pay $1.25 million in restitution. Pearson was sentenced to three years of probation.

          The Defense Criminal Investigative Service, the FBI, the Amtrak Office of Inspector General, the Office of Personnel Management’s Office of Inspector General, and the Office of Inspector General for the United States Department of Health and Human Services investigated this matter.

          Assistant United States Attorneys Alexander B. Schwab of the Major Frauds Section and Jonathan S. Galatzan of the Asset Forfeiture Section prosecuted this case.

Topic(s): 

Health Care Fraud

Component(s): 

USAO - California, Central

Contact: 

Ciaran McEvoy Public Information Officer United States Attorney’s Office Central District of California (Los Angeles) ciaran.mcevoy@usdoj.gov (213) 894-4465

Press Release Number: 

22-019