Ohio Man Arrested For Orchestrating $10 Million Dollar Scheme To Defraud Health Care Benefit Programs

NEWARK, N.J. – An Ohio man was arrested today for his role in a large-scale, multi-level marketing scheme to defraud private and federally funded health care benefit programs of at least $10 million through the submission of claims for medically unnecessary prescriptions for compounded medications, U.S. Attorney Craig Carpenito announced.

Kent Courtheyn, 35, of Kent, Ohio, owner and operator of two companies involved in the sales and marketing of compounded medications, IntegriMed Solutions LLC (IntegriMed) and KA Compounding LLC (KA Compounding), was charged by a federal grand jury in a two-count indictment with conspiring to commit health care fraud and conspiring to violate the Anti-Kickback Statute. He is scheduled to have his initial court appearance today in federal court in Ohio.

According to documents filed in this case and statements made in court:

From as early as July 2014 through July 2016, Courtheyn, a former medical device sales representative, ran a scheme to defraud federally funded health care benefit programs, such as TRICARE, as well as privately funded health care benefit programs. TRICARE is a health care entitlement program of the U.S. Department of Defense (DoD) Military Health System that provides coverage for DoD beneficiaries worldwide, including active duty service members, National Guard and Reserve members, retirees, their families, and survivors.

Courtheyn recruited individuals to submit false and fraudulent claims for medically unnecessary compounded medications, such as pain creams, scar creams, wound creams, and metabolic vitamins, without regard to medical necessity. Compounding is a practice in which a licensed pharmacist or physician combines, mixes or alters ingredients of a drug to create a medication tailored to the needs of an individual patient. Pharmacies engaging in the practice are referred to as “compounding pharmacies.” Generally, compounded medications are not approved by the Food and Drug Administration (FDA), but can be prescribed by a physician when an FDA-approved drug does not meet the health needs of a particular patient. Compounded medications are supposed to be tailored to a patient’s particular medical need.

Courtheyn and others targeted individuals with health insurance plans that paid for compounded medications and had high reimbursements, and convinced these individuals to obtain compounded medications through their health insurance plan regardless of medical necessity.

Courtheyn was partners with Steven M. Butcher, a New York resident who was the owner and operator of another marketing company, MedMax LLC, involved in the marketing of medically unnecessary compounded medications. Courtheyn and Butcher had relationships with various compounding pharmacies, either directly or indirectly, through billing and distribution companies, which had their own network of compounding pharmacies. Courtheyn and Butcher sent prescriptions directly to a compounding pharmacy or to a billing and distribution company, which referred prescriptions to a particular compounding pharmacy and submitted claims to the appropriate health insurance plan on behalf of that pharmacy. In return for steering prescriptions to certain compounded pharmacies, Courtheyn and Butcher received a percentage of the reimbursement received by the pharmacy for each paid claim. Health insurance plans were reimbursing compounding pharmacies from $3,000 and $43,000 for each compounded prescription.

To maximize profit, Courtheyn operated IntegriMed and KA Compounding as a multi-level marketing company. He recruited several individuals as “sales representatives” who were paid a certain percentage of the reimbursement amount for each medically unnecessary compounded medication the sales rep caused to be filled and billed to a paying health insurance plan. If a sales representative was a beneficiary of a paying health insurance plan, Courtheyn also paid these individuals for obtaining their own or their family members’ medically unnecessary compounded medications.

The compounded medications Courtheyn and Butcher marketed and sold were not individualized to address the specific therapeutic needs of a specific patient. Instead, he chose drugs to be included in a compounded medication in order to maximize reimbursement and profit and not based on medical necessity. To get the medically unnecessary medications prescribed, Courtheyn and Butcher contracted and paid telemedicine companies with the expectation that their telemedicine physicians would prescribe compounded medications regardless of medical need. In total, Courtheyn defrauded health care benefit programs of at least $10 million, including TRICARE, which was defrauded at least $3.5 million.

The count of conspiracy to commit health care fraud carries a maximum potential punishment of 10 years in prison; conspiracy to violate the Anti-Kickback Statute carries a maximum potential penalty of five years. Both offenses are also punishable by a fine of $250,000, or twice the gross gain or loss from the offense.

Butcher pleaded guilty on Feb. 14, 2018, before U.S. District Judge John Michael Vazquez in Newark federal court to conspiracy to commit health care fraud and conspiracy to violate the Anti-Kickback Statute. He admitted to defrauding health care benefit programs of $45 million. Butcher is awaiting sentencing.

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark; and U.S. Department of Defense, Office of the Inspector General, Defense Criminal Investigative Service, under the direction of Special Agent in Charge Leigh-Alistair Barzey, with the ongoing investigation leading to today’s arrest.

The government is represented by Assistant U.S. Attorney Erica Liu, Deputy Chief of the Criminal Division in Newark.

Defense counsel: Michael Elliot Esq. and Mindy Sauter Esq, Dallas, Texas