Two Charged in $31 Million Florida Compounding Pharmacy Scheme

On November 3, 2016, two South Florida men were charged with health care fraud, payment of kickbacks, money laundering and obstruction of justice stemming from a scheme to fraudulently bill government health care programs for compounded medications.  According to the Indictment, defendants Serge Francois and Patrick Tonge, both of Southwest Ranches, Florida engaged in a conspiracy to submit false and fraudulent claims to TRICARE, the health insurance program for military personnel and their dependents and the Federal Employees Health Benefit Program (FEHBP), a health insurance program for employees of the Federal government.  The defendants allegedly perpetrated the fraud through two corporate entities. Francois was the owner of Vital RX, doing business as Atlantic Pharmacy, a pharmacy which purportedly provided compounded medication for TRICARE and other commercial beneficiaries.  Tonge was an employee of Atlantic and CEO of El & More Consulting LLC,  a company that received funds from Atlantic.

The Indictment alleges that Francois fraudulently obtained the right to submit claims to TRICARE by making a number of false statements in provider certification and re-certification documents.  For example, Francois allegedly falsely stated that none of the Atlantic pharmacists had been disciplined by the U.S. Drug Enforcement Administration in order to receive a certification when actually Francois had owned a pharmacy that the DEA suspended in 2004.

Francois and Tonge also engaged in a conspiracy to pay kickbacks to patient recruiters in exchange for referral of TRICARE beneficiaries to Atlantic.  Then, after fraudulently obtaining the ability to submit claims to TRICARE and illegally procuring beneficiaries, Francois and Tonge submitted a huge quantity of prescription claims to TRICARE and FEHBP for compounded medications which were not medically necessary and not properly prescribed by a licensed medical professional.  These prescriptions were then compounded and mailed to the beneficiaries.

This scheme was allegedly perpetrated from April 2010 to May 2015, primarily in Miami-Dade and Broward counties, but also throughout South Florida.  Over this time period Francois and Tonge submitted over $37 million in false and fraudulent claims to TRICARE and FEHBP.   The government health care programs paid Atlantic over $31 million as a result of the false claims.

The Indictment also includes allegations seeking criminal forfeiture of a number of assets including real estate, various bank accounts, and numerous luxury vehicles, including a Rolls Royce, a Ferrari, a Land Rover, a Lamborghini, a Cadillac Escalade and a Mercedes Benz van.

Compounding Pharmacy Fraud on the Rise

This case is another example of the outbreak of compound pharmacy fraud, primarily involving the TRICARE program.  Florida has been the epicenter of this fraud, however schemes defrauding TRICARE of over $100 million have recently been uncovered in Texas.  From 2013 to mid-2015, the government estimates over $2 billion in fraudulent billings for compounded drugs were submitted.  Then, in June 2015, TRICARE changed its compound medication reimbursement policy due to the rampant fraud.  However, the False Claims Act has a six-year statute of limitations, which would allow prosecution of compound pharmacy fraud schemes in operation prior to TRICARE’s 2015 policy change.

With compounding fraud cases on the rise, whistleblowers coming forward with information regarding these types of fraudulent schemes are necessary to stamp out this dangerous and wasteful fraud.  Under the qui tam provisions of the False Claims Act, whistleblowers with information about compounding fraud against the government may bring a civil case on behalf of the United States. If successful, the government can recover three times the amount the defendants fraudulently billed the government.  The whistleblower, who originally filed the case, is entitled to 15-30% of the government’s recovery as well as their attorney’s fees.