My co-defendant Katherine Peterson (Katie) was acquitted of all charges related to our case on July 2, 2024 after a little more than a week long trial in Trenton, NJ. Five of us were indicted in September 2019 for conspiracy to commit healthcare fraud and wire fraud, up to a twenty year sentence for each of us. (According to a BOP bulletin I received earlier this year on our computers at camp, 99.7% of those indicted plead guilty or lose at trial. That leaves Katie in the .3% of those who defy the odds!) At the time of the indictment we couldn’t believe the government dragged someone like Katie in, who was only a supervisor and hourly employee in our operations team, oversaw the shipments of Durable Medical Equipment (DME) and Diabetic Testing Supplies (DTS) and assisted in the reconciliation of pharmacy shipments. I felt horrible she was dragged into this. She was always such a kind and quiet person, sharp, hard working, detail oriented and a very dedicated employee. It was common for her to stay late to ensure the job got done, even when she was a single mom with a young daughter. A key role for her was to discover issues and help to enhance the MANY processes we had in place to assist in the business success and compliance. She was loosely related to our family – my wife’s sister’s, daughter’s, husband’s, sister. After the indictment, things were extremely hectic (summarized in a previous journal) but Katie stayed on our staff to assist in the winding down of the business for about six extra months. I owed it to her and did what I could to continue to pay her and keep her on our health insurance for as long as our little bit of inflowing cash from collections supported this.
The government seized almost all of the available funds in our business bank accounts, but luckily we had a directors and officers (D&O) insurance policy which provided defendants like Katie access to funds to help us defend ourselves. Our attorneys formed a joint defense team where we had regular conference calls with the other defendants and their attorneys. My attorneys lead the defense for a while and then defendants started making deals – first our pharmacist, then Katie’s manager. Then I was offered a deal and after almost a month of discussion and back and forth, I took it to ensure a more predictable outcome for my wife and family. This was an extreme blow to Katie and our compliance officer. I felt like I was betraying them and I was. My reason, was my family. So as time passed and both never made deals, Katie’s attorney did an excellent job of getting her case severed and moved from Detroit to Trenton. I believe this was a big factor in the acquittal. The request was based on her being a single mom with a low income, living at her parents house with the financial and family hardship of having to travel to Detroit and pay expenses for likely a two week trial. So two trials were scheduled and delayed several times. Finally in June of 2023 I had to testify against my compliance officer, which was an extremely difficult time in my life. We worked together daily. He was very sharp and dedicated often working 10-12 hour days and was basically our general manager for our headquarters in Miramar, FL where over 100 employees worked. His trial ended with a conviction and the prosecution asked for 18-20 years. Luckily I believe the judge understood his role and all the complex factors and sentenced him to 54 months, one year less than me. The two other defendants who did deals, received a year and a day sentence each, which typically results in no more than seven months in prison camp. We all also share a HUGE restitution amount (negotiated down 75% from their initial findings – still much larger than the actual abuse that took place) and will need to make quarterly/monthly payments based on our income for the next twenty years. The government also likes to seize any bank accounts in our names, which really messes up our current financial situation when in prison and our families need the money the most!
So all three of us who did deals were subpoenaed to testify at Katie’s trial. Apparently the prosecution was not happy with my testimony. I elaborated beyond the simple yes’s and no’s and got emotional during parts of the cross examination (cross.) Quite a few areas of the governments investigation came up where I don’t consider our actions non-compliant. One example was a complaint from a customers son, who said his father never wanted our prescription products and we refused to take the products back. The government used this complaint in their warrant back in May of 2017. I personally reviewed our documentation and call recordings from this complaint and shared these during my testimony. The patient was an existing happy diabetic testing supply (DTS) customer. During our routine refill confirmation call our rep offered the customer a pharmacy medication and he was interested. So we faxed the Rx to his doctors office. The office faxed back the Rx and we then shipped the medication out. Then the son calls us to complain that his dad never wanted this and told us to take it back. Our rep explains he confirmed his dad did want this medication but we will make an exception and take the medication back and credit his insurance if he ships it back to us. We never received the medication back and so we never credited his insurance. The son then files a complaint with the Medicare Fraud Hotline. I spent three winters obtaining tons of evidence like this and I’m glad this came up during Katie’s trial. Every call between our reps and our patients and doctors was recorded. This was not a Medicare requirement; however, we used these recordings as evidence to appeal audits and complaints. We had hundreds of thousands (likely over a million) recordings. The government seized our recording server in May of 2017 and it took them over a month to give it back to us, likely because it contained so many recordings.
Another item that came up was if Katie received a bonus for being listed as the manager of a pharmacy. In meetings I had with the prosecution prior to the trial, I told them I thought she received a bonus, but to be certain they should check the payroll records I provided to them. So during the trial the prosecution asked me this and I answered with a similar response. Then on cross the defense had actually gone through all of the payroll records and confirmed I had not given her this type of bonus. Then on redirect the government tried me to second guess this work, pointing out numbers that did not match during a specific month. It turns out I quickly identified their flaw and explained one month of bonuses were paid in the following month, which is standard for any business. It turns out the bonus payments matched to the previous months bonuses.
The next item was the dosage of certain medications. We recommended the same dosage on the Rx for all diabetic patients with an option for the doctor to change the dosage. I personally read the medication instructions for our most popular medication (5% Lidocaine Topical Ointment) and our dosage we recommended on the Rx was less than half the maximum recommended dosage. Our pharmacists and a doctor that was paid as a consultant also confirmed the dosages on our medications were clinically in line.
Another item is the way we implemented our automated IVR refill dialers. The patient could confirm the refill by pressing 1. The other option was 2 and they would be transferred to a live rep. If a rep was not available, we would call the patient the following morning. There was no IVR option to cancel. They had to speak with a rep. The government highlighted this as being terrible. We had several systems in place to confirm refills – return post cards, outbound dialer calls with live reps and automated IVR dialer calls. Between all our businesses we had to call 5,000-10,000 pharmacy patients every month and approximately 40,000 DME patients every three months. If I wanted to cancel my Comcast cable account during this time period in 2014-2018 I couldn’t cancel my account without speaking with a rep and having them try to sell me some deal to save me as their customer. That is what smart businesses do and that is what we did; however, we didn’t offer special deals. We would walk the patient through how to apply the medication per the doctor orders and if they still had enough we would not ship the refill and ensure they are called again in 30 days before the next refill was due. Obviously if they want to cancel altogether, we would cancel the account and try to have a supervisor speak with them to discuss why the canceled.
The final item I will share at this time was us listing our pharmacies as retail instead of mail-order. The pharmacy benefit managers (PBMs) are essentially the insurance company for your medications. For Medicare sponsored health plans the PBMs are supposed to follow Medicare guidelines. A key guideline is the Any Willing Provider rule. This rule is meant to allow companies like ours to be able to service Medicare patients whether the patient walked in or we delivered the product or medication to them via mail-order. The standard non-Medicare PBM contracts at this time prohibited mail-order, because the PBMs owned their own gigantic mailorder pharmacies and obviously did not want competition. During this period of time in 2014 to 2018 most large PBMs ignored the Any Willing Provider rule and if we identified our pharmacy as mail-order, they would simply never get back to us or deny the contract. We had several large PBMs cancel contracts due to our mail-order service and we took them to federal court and eventually were offered a mail-order contract for some of them, but the cost was north of $300,000 per lawsuit. This cost was not financially sustainable for us. The PBMs would play games and require expensive specialty pharmacy accreditations which would cost around $100,000 per pharmacy for the accreditation and consulting involved. There was nothing special about the medications we offered, but they did this to keep smaller pharmacies like ours from competing with them. Eventually in 2018 Express Scripts (ESI) finally offered pharmacies they noticed were doing mail-order a mail-order contract (requiring the accreditation) instead of just terminating the contract. Caremark which is owned by CVS never offered us a mail-order contract. Instead they canceled contracts after audits based on other items like co-pay collections. (That’s a whole other subject I’ll skip for now.) As of 2019 when I was forced to close the businesses, I was not aware of Caremark ever offering a mail-order contract with any small independent pharmacies, which is why my wife and I will likely never purchase anything at a CVS.
Two of us (me and our pharmacist) were in BOP custody during the trial and have had a rather overwhelming travel experience thus far. We ended our testimony on June 28th and as I write this on July 18th, we are currently locked in our cell at a federal high security prison, Metropolitan Detention Center (MDC) in Brooklyn, NY. An inmate was killed the afternoon of our arrival on July 17th and we were locked in starting at 3pm that day and we are not sure when we will be able to get out of our cell again or when we will travel again. I’ve been away from my camp since June 12th and our pharmacist left his camp just after Memorial Day. See my next journal relating to our travel.
I asked to not be involved with Katie’s trial. I had no interest in a further reduced sentence, but looking back I’m glad I was dragged in and had a chance to share my knowledge. While this has been an incredibly hard trip in BOP custody for me and our pharmacist, it is the least I can do to repay Katie and her family for all the stress and financial burden I have caused her. I hope she, her brother George and the rest of her friends and family can forgive me and put this behind us.
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