Peter Pappas, Health Care Fraud, New Jersey 2016

Newark, N.J. – In a shocking case of health care fraud, Peter Pappas, 44, of Drexel Hill, Pennsylvania, has admitted to filling his own medically unnecessary prescriptions and recruiting others to do the same as part of a scheme to fraudulently obtain reimbursements for compound medication prescriptions.

The scheme, which caused losses of $3.69 million, was led by Pappas, an employee of a New Jersey pharmaceutical company. According to documents filed in this case and statements made in court, Pappas was recruited by an individual identified as "co-conspirator #1 (CC-1)" to assist a marketing business identified as "Company A." CC-1 offered Pappas "commission" payments in return for compounded medication, creams, and vitamins that Pappas obtained at specific specialty pharmacies for himself and family members and that were billed to his employer’s prescription drug benefit plan.

Afterwards, the compounded prescription products were sent to Pappas from a pharmacy outside his home state. On Oct. 15, 2014, Pappas received a $9,023.86 check from Company A, which was a percentage of the amount paid by Pappas’s employer to the compounding pharmacy for filling the prescriptions. From September 2014 through November 2015, Pappas refilled compounded prescriptions on forms provided by CC-1 and Company A at certain specific compounding pharmacies selected by Company A, and in return, received commission checks and wire transfers from Company A.

Pappas also recruited co-workers and others to join the scheme, including TRICARE beneficiaries. TRICARE, which is managed by the Defense Health Agency at the U.S. Department of Defense, is a health care benefit program for uniform service members of the U.S. military and their families. Pappas admitted that he attempted to recruit TRICARE beneficiaries because he knew that TRICARE gave high reimbursements for compounded medication and creams.

Altogether, Pappas received $481,773 from Company A for his role in the conspiracy. His employer, TRICARE, and other insurance companies lost at least $3.69 million from the scheme. Pappas faces a statutory maximum of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for Oct. 25, 2016.

On June 29, 2016, Stephanie Naar, 27, of St. Louis, Missouri, who had been an employee of the same New Jersey pharmaceutical company as Pappas, pleaded guilty before Judge Vazquez and admitted accepting thousands of dollars in exchange for obtaining and filling her own medically unnecessary prescriptions for compounded medication and creams.

Pappas is accused of one count of conspiracy to commit health care fraud. The U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark is representing the government in the case.

Related Federal Cases