Department of Justice
U.S. Attorney’s Office
Northern District of Alabama
FOR IMMEDIATE RELEASE
Tuesday, March 27, 2018
Compounding Pharmacy Owner Sentenced to Five Years in Prison for $10.5 Million Health Care Fraud
BIRMINGHAM – A federal judge today sentenced the owner of a Decatur compounding pharmacy to five years in prison for conspiring to defraud a federal health insurance program out of more than $10 million. U.S. Attorney Jay E. Town, Food and Drug Administration, Office of Criminal Investigation, Miami Field Office, Special Agent in Charge Justin D. Green and Defense Criminal Investigative Service Special Agent in Charge John F. Khin announced the sentence.
U.S. District Judge R. David Proctor sentenced JOHN CHRISTOPHER LEMLEY, 51, of Decatur, for the health care fraud conspiracy and ordered him to forfeit nearly $1 million as proceeds of the crime. Most of that amount – $918,234 – already has been seized from bank accounts held by Lemley or his businesses, along with a 2015 Lexus Gx-460 Premium bought with criminal proceeds, according to court documents. The judge also ordered Lemley to pay $918,234 in restitution to the federal military health insurance program. Lemley pleaded guilty to the conspiracy charge in November. He must report to prison June 20.
“Every dollar stolen from TRICARE is a dollar that weakens our overall military posture and makes healthcare for our troops even more embattled,” Town said. “Whether $10 million or $10,000, those who intend to defraud the federal government, especially our DOD components, will be joining Mr. Lemley soon.”
“This sentencing, resulting from a complex and widespread investigation by DCIS and other law enforcement partners, is a strong warning to anyone who believes they can get away with conspiring and scheming to fleece the Defense Department's TRICARE system,” Khin said. “Fraud and corruption in our health care programs, especially involving deceptive practices with prescription medications, is far from a ‘victimless’ crime. This defendant selfishly put greed and personal gain before the safety and well-being of our military members, their families, and retirees, who deserve proper medications and the best care available.”
“U.S. consumers rely on the FDA to ensure they receive drugs which are safe, effective, and properly labeled,” Green said. “We remain fully committed to pursuing those individuals who endanger the public health by distributing misbranded products.”
Lemley owned a Decatur pharmacy that operated as Southern Compounding. He also owned Apotheca Supply, which was licensed to relabel and repackage pharmaceutical drugs. Apotheca was located in a suite adjoining Southern Compounding on U.S. Highway 31 South. Lemley also had a 20 percent membership interest in Medworx Sunflower LLC, an affiliate of Medworx Compounding, a pharmacy in Ridgeland, Miss., according to the charges against Lemley and the government’s sentencing memorandum.
Between February 2015 to January 2016, Lemley conspired with others at Medworx Sunflower and Southern Compounding to defraud TRICARE, a U.S. Department of Defense health care program, as well as third-party prescription-drug program administrator Express Scripts Incorporated, according to the court documents. Southern Compounding submitted prescription reimbursement claims to TRICARE as part of ESI’s pharmacy network.
As part of the conspiracy, Lemley conducted the fraud by various means that included improperly contracting with Medworx Compounding to refer prescriptions to Southern Compounding. He also paid kickbacks to independent sales representatives as incentive to refer TRICARE prescriptions, sold misbranded over-the-counter medications as prescription drugs, and failed to reverse claims on prescriptions he knew were forged, according to court documents.
Although ESI’s regulations prohibited Southern Compounding from subcontracting any of its work, Southern entered a management agreement with Medworx in early 2015 whereby Medworx referred prescriptions to Southern Compounding. Southern filled the prescriptions, billed third-party administrators for them and sent almost all the payments received to Medworx. Medworx then returned a portion of those payments directly to Lemley. The amount returned totaled $918,234, representing a distribution for Lemley’s 20 percent membership interest in the Medworx affiliate, Medworx Sunflower.
Southern Compounding’s billings to TRICARE soared in the two months after Southern entered its agreement with Medworx, according to court documents. In the 13 months prior to the agreement, TRICARE paid claims of about $215,561 to Southern. In the two months following the February 2015 agreement, TRICARE, through ESI, paid about $10.5 million in claims to Southern. More than 90 percent of that was profit.
In accordance with Southern’s management agreement with Medworx, Lemley transferred most of the money – about $10.2 million – to Medworx. Most of the transferred money was to fund kickbacks to the independent sales representatives, according court documents.
FDA-OCI and DCIS investigated the case, which Assistant U.S. Attorney Chinelo Dike-Minor prosecuted.
Updated March 27, 2018
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