Department of Justice
Compounding Pharmacy and Owner Plead Guilty to Health Care Fraud and Kickback Scheme that Led to $14 Million in Payments
LOS ANGELES – A West Los Angeles pharmacy and its owner pleaded guilty today to federal criminal charges stemming from a scheme in which millions of dollars in reimbursements for compounded drugs were generated through the payment of illegal kickbacks for patient referrals and by fraudulently paying patients’ copayments.
Navid Vahedi, 41, of Brentwood, pleaded guilty to one count of conspiracy to commit health care fraud and payment of illegal remunerations. Vahedi today also entered a guilty plea to the felony offense on behalf of his business, Fusion Rx Compounding Pharmacy.
Fusion Rx was a provider of compounded drugs, which are tailor-made products doctors may prescribe when the FDA-approved alternative does not meet the health needs of a patient. In their plea agreements, Vahedi and Fusion Rx admitted routing 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.
Vahedi and Fusion Rx pleaded guilty before United States District Judge Christina A. Snyder, who scheduled a sentencing hearing on June 28, at which time Vahedi will face a statutory maximum sentence of five years in federal prison. Both defendants have agreed to pay restitution related to the copayment reimbursement part of the scheme, which is estimated to be $4,405,926. In addition to his obligation under the plea agreement to pay restitution, Vahedi also agreed to forfeit $1,338,511.
Under the terms of the plea agreements, Fusion Rx has also agreed to pay a fine sufficient to divest itself of all its remaining assets, Vahedi has agreed to have his pharmacist license revoked, and both Vahedi and Fusion Rx will be excluded from federal health care programs such as Medicare and Medicaid going forward.
The two marketers involved in the scheme – Joshua Pearson, 41, of St. George, Utah, and Joseph Kieffer, 40, of West Los Angeles – previously pleaded guilty in this case and are scheduled to be sentenced by Judge Snyder, respectively, on May 24 and June 28.
This matter was investigated by 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.
This case is being prosecuted by Assistant United States Attorneys Alexander B. Schwab of the Major Frauds Section and Jonathan S. Galatzan of the Asset Forfeiture Section.