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Insurers out $500,000 in New Jersey benefits fraud scheme

Pharmaceutical sales rep recruited patients to obtain expensive and medically unnecessary compounded medications.

Susan Morse, Senior Editor

A pharmaceutical sales representative has admitted to defrauding the New Jersey state health benefits program and other insurers out of nearly $500,000 by submitting fraudulent claims for medically unnecessary prescriptions, according to Acting U.S. Attorney William E. Fitzpatrick and New Jersey Attorney General Christopher S. Porrino.

Andrew Gerstel, 39, of Galloway, New Jersey, pleaded guilty in U.S. District Court to conspiracy to commit healthcare fraud, according to a release from the U.S. Attorney's Office on Monday.

[Also: Running list of notable 2017 healthcare frauds]

From January 2015 through April 2016, Gerstel recruited individuals in New Jersey to obtain very expensive and medically unnecessary compounded medications from an out-of-state pharmacy, according to the U.S. Attorney's Office, citing court documents.

Gerstel is one of a group of conspirators who worked with an unnamed pharmacy benefits administrator employed by the state benefits program. The PBM has not been named.

[Also: Alleged co-conspirator charged in $2.8 million Cleveland Clinic fraud]

Gerstel and conspirators recruited individuals they knew would be covered through their insurance, to order expensive compounded medications such as pain, scar, antifungal and libido creams, as well as vitamin combinations. These would be reimbursed for thousands of dollars for a one-month supply, according to the U.S. Attorney's Office.

They targeted for recruitment New Jersey state and local government and education employees, including teachers, firefighters, municipal police officers, and state troopers, who had insurance coverage for the compounds.
The prescriptions were faxed to the compounding pharmacy, which filled the prescriptions and then billed the pharmacy benefits administrator with the state.

The PBM paid the compounding pharmacy $50 million for medications mailed to individuals in New Jersey, according to the U.S. Attorney's Office. Roughly half of that was for prescriptions the conspirators arranged, according to a report in

The pharmacy used the PBM funds to pay one conspirator a percentage of each prescription filled. The money was then distributed to Gerstel and other members involved in the fraud.

As part of his plea agreement, Gerstel must forfeit $184,389 in criminal proceeds he received and pay restitution of at least $483,946.

He faces a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for Feb. 26, 2018.

Ten other conspirators – Matthew Tedesco, Robert Bessey, Michael Pepper, Thomas Hodnett, Steven Urbanski, John Gaffney, Judd Holt, George Gavras, Richard Zappala, and Michael Neopolitan – have pleaded guilty to their roles in the scheme and await sentencing, according to the U.S. Attorney's Office.

Twitter: @SusanJMorse
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