Douglas M. Pick, 57, of Omaha, Nebraska, has pleaded guilty to orchestrating a sweeping kickback operation that bled millions from employee benefit plans across the country. The former founder, President, and CEO of Pharmaceutical Technologies, Inc. (PTI) admitted in federal court in Tyler, Texas, to funneling illegal payments to insiders who steered business to his pharmacy benefits manager (PBM). Pick now faces up to three years in federal prison.
Acting United States Attorney Brit Featherston confirmed the plea, delivered before U.S. Magistrate Judge John D. Love. Between 2001 and 2013, Pick brokered deals with so-called “Producers” — middlemen with influence over employee welfare and healthcare benefit plans. These individuals used their positions to direct business to PTI in exchange for cash kickbacks tied directly to the volume of prescriptions processed. The scheme violated the Employee Retirement Income Security Act of 1974 (ERISA), and Pick, as the top executive, personally negotiated the corrupt agreements.
Collectively, Producers received over $3.5 million in illicit payments. One key figure was Tom Slack, former CEO of Tyler-based HealthFirst and its subsidiary HealthFirst RX Solutions (HFRX). Slack, who died in 2012, set up a shell company to hide the fraud. In 2004, he demanded personal payments from Pick in exchange for renewing PTI’s contracts and steering more business their way. Pick agreed. The pair inflated administrative fees charged to HealthFirst clients, then siphoned the difference — over $1.5 million — to Slack’s phantom company.
Another Producer, Gary Gustafson of Eden Prairie, Minnesota, raked in nearly $750,000 in illegal kickbacks from Pick and PTI. Gustafson pleaded guilty to federal health care fraud charges in May 2016 in the District of Minnesota and is awaiting sentencing. His cooperation may have helped federal investigators peel back layers of the scheme, which operated under the radar for more than a decade.
PTI, the Nebraska-based PBM that administers pharmacy services through a national network of providers, avoided criminal prosecution by entering a non-prosecution agreement with the U.S. government. In exchange for immunity, the company agreed to pay more than $8.5 million and pledged full cooperation with ongoing investigations into the network of corrupt deals that sustained the fraud.
The Eastern District of Texas has become a hotspot for health care fraud prosecutions, and Pick’s guilty plea underscores the federal crackdown on PBMs abusing their gatekeeper role in prescription drug delivery. With sentencing pending, Pick’s fall from CEO to felon exposes the rot festering beneath the surface of America’s complex health care billing system — where influence was bought, plans were looted, and executives walked away with millions — until now.
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Key Facts
- State: Texas
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
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