A Linwood, N.J., pharmaceutical representative and a Philadelphia man entered guilty pleas in federal court in Camden on Thursday in the first salvo of what authorities described as the unraveling of a $28 million prescription drug fraud conspiracy involving Shore firefighters, police officers, teachers, and a state trooper.
Matthew Tedesco, 42, of Linwood, pleaded guilty before U.S. District Judge Robert Kugler to organizing and conspiring to commit health-care benefits fraud. He admitted to receiving more than $11 million from an out-of-state compounding pharmacy, a portion of which he passed along to other coconspirators, according to the guilty plea. He was described as a leader of the scheme.
Shortly after, Robert Bessey, 43, of Philadelphia, a gym floor installer, pleaded guilty to a lesser role in the scheme, admitting to conspiring to commit public health-benefits fraud, netting him $485,000, which was also sent along to others involved in the prescription-drug scheme. He was described as a recruiter in the scheme.
Three more related guilty pleas are listed before the judge on Friday. One person pleading is a 10-year veteran of the Atlantic City Fire Department who resigned this month.
[Update: Steven Urbanski, a 37-year-old pharmaceutical broker from Burlington County, pleaded guilty Friday morning to conspiracy in connection with the same scheme. He will be responsible for $752,000 in restitution; he personally netted more than $113,000, authorities said.)
The pleas were the first of what is expected to be a far-reaching case involving federal and and state grand juries, and targeting municipal employees with public health benefits.
The prescription drug scheme has been the subject of relentless rumors in Shore towns for months. The Margate, Ventnor, and Atlantic City governments were subpoenaed by a federal grand jury this summer for lists of city employees with state health benefits.
On Thursday, Tedesco admitted in court to recruiting public employees — firefighters, police officers, teachers, and a state trooper — with state and school employee public-health benefits to fraudulently obtain medically unnecessary prescriptions for compounded vitamins, pain cream, scar cream, libido cream, and anti-fungal cream.
Compounding is a practice in which "a licensed pharmacist combines, mixes or alters ingredients of one or more drugs in response to a prescription to create a medication tailored to the medical needs of an individual patient," typically used if a patient is allergic to an ingredient in a standard drug, according to the criminal information accompanying the plea.
The pharmacy involved in the charges outlined by the U.S. Attorney's Office was paid more than $50 million by the health plan's pharmacy benefits administrator for prescriptions mailed to individuals in New Jersey during 2015 and 2016. New Jersey was billed for those costs, the U.S. Attorney's Office said.
Those compounded drugs orders yielded an out-of-state pharmacy payments of upward of $10,000 a month from the insurance companies, money that was then divided up among Tedesco and other coconspirators in a series of rewards and kickbacks in the form of a percent of each prescription filled. The guilty plea, as detailed by Assistant U.S. Attorney David Walk, covers the period from January 2015 to April 2016.
As part of the guilty plea, Tedesco is responsible for restitution of more than $28.7 million and forfeiting $11.1 million in criminal proceeds.
The government alleges that doctors were also involved, agreeing to write prescriptions for the expensive creams that had been filled out by Tedesco and others without ever directly examining the recipients, or determining whether there was an appropriate diagnosis. Tedesco would persuade people to obtain prescription compounded drugs "without any evaluation by a medical professional," the government says.
Tedesco and others would obtain insurance information from those who had been recruited and fill out preprinted prescription forms "even though the individuals had no medical necessity for the compounded medications," the accusations say.
"Did you and your coconspirators recruit these New Jersey government and educational employees?" the judge asked Tedesco, in court in a blue suit and yellow tie.
"Yes," he replied. He declined comment after the hearing. He could face a maximum sentence of 10 years in prison. Three FBI agents but no family members were present. The judge set bail at an unsecured bond of $250,000.
Bessey admitted to working with a pharmaceutical sales group to market and recruit people to receive prescription drug benefits for the most expensive of the compound drugs. He also admitted to filling out preprinted prescriptions for these expensive compounded drugs. Assistant U.S. Attorney Jacqueline Carle said Bessey must pay restitution of nearly $2.7 million and forfeit $485,000 in criminal proceeds.
In a statement Thursday afternoon, acting U.S. Attorney for New Jersey William E. Fitzpatrick said the scheme used a "network of recruiters, doctors, and state and local government employees" to defraud the state and health insurers out of millions "by getting reimbursed for phony prescriptions on expensive and medically unnecessary compounded medications."
"This conduct, which fraudulently exploited state health benefits programs and left New Jersey taxpayers on the hook for millions in losses, is especially brazen in an era when health insurance is a constant concern for many Americans," Fitzpatrick said in the statement.
According to the U.S. Attorney's Office, the conspirators "recruited public employees and other individuals covered by the pharmacy benefits administrator to fraudulently obtain compounded medications from the compounding pharmacy without any evaluation by a medical professional that they were medically necessary."
Once they had recruited an employee, Tedesco, Bessey, and others would allegedly obtain the employee's insurance information and fill out a prescription for for a compounding pharmacy. "They would select the compounded medications that paid the most and order 12 months of refills without regard to their medical necessity," the government said in a release.
"Tedesco and others had prescriptions signed by doctors who never saw the patients and never evaluated whether the patients had a medical necessity for the compounded medication," the U.S. attorney detailed. "The prescriptions were then faxed to compounding pharmacy, which filled the prescriptions and billed the pharmacy benefits administrator. Tedesco and others gave money and other benefits to doctors who signed the prescriptions and individuals who agreed to receive the medication."
The judge set sentencing for Dec. 4 for both men.