Financial Advisor Guilty in Far-Reaching Compound Pharmacy Fraud

compound pharmacy fraud

A West New York financial advisor who was charged in a far-reaching compound pharmacy fraud healthcare conspiracy to defraud New Jersey state and local health benefits programs and other insurers out of more than $4 million was found guilty on 11 counts.

Kaival Patel, 54 was convicted earlier this month following an 11-day trial. He and a relative, Dr. Saurabh Patel, were indicted in January 2022.

According to the indictment, Kaival Patel and his wife operated ABC Healthy Living LLC to market medical products and services, including compound prescription medications. Patel’s wife formed ABC Healthy Living in her name to conceal her husband’s connection because “Kaival Patel was precluded by his employer from engaging in certain outside business activities,” according to the indictment.

How the Compound Pharmacy Fraud Worked

Kaival Patel and his compound pharmacy fraud conspirators learned that some state and local government employees had insurance that would reimburse up to thousands of dollars for a one-month supply of certain compound medications such as vitamins, scar creams, pain creams, libido creams, and acid reflux medications.

Kaival Patel and a conspirator convinced Dr. Saurabh, who owned a clinic, to authorize prescriptions for the compound medications for patients that were not medically necessary. Kaival Patel received commissions for the prescriptions. Kaival Patel also conspired with a compounding pharmacist to add unnecessary ingredients to the medications to make them even more expensive.

He and his conspirators paid a group of corrections officers to go to Dr. Saurabh Patel’s medical practice to obtain the unnecessary and fraudulent prescriptions.

In addition, Kaival Patel also told Dr. Saurabh Patel which insurance companies covered the compound medications and requested that he prescribe those medications to existing patients of his practice with those insurance plans to further benefit he and his wife. Kaival Patel received $490,000.00 through ABC for his efforts.

Padding the Profits

In this compound pharmacy fraud, Kaival Patel also conspired with a compounding pharmacist to add unnecessary ingredients to the medications to make them even more expensive.

Compounded medications are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. Although compounded drugs are not approved by the Food and Drug Administration (FDA), they are properly prescribed when a physician determines that an FDA-approved medication does not meet the health needs of a particular patient, such as if a patient is allergic to a dye or other ingredient.

Others Involved

To date, approximately 47 people have been convicted or pleaded guilty in the overarching conspiracy.

In February 2023, Dr. Saurabh Patel pleaded guilty to a superseding information charging him with one count of conspiring to commit healthcare fraud.

Another co-conspirator, Paul Camarda, a pharmaceutical sales representative and a leader and manager of the compound pharmacy fraud conspiracy, pleaded guilty in July 2021 to one count of conspiracy to commit health care fraud and one count of conspiracy to obstruct justice and engage in money laundering. Camarda received more than $2.2 million in payments for the prescriptions he and those working with him arranged.

Sentencing Set for Next Year

On the count of conspiracy to commit wire fraud and healthcare fraud, Kaival Patel faces a maximum penalty of 20 years in prison and a fine of $250,000 fine, or twice the gross pecuniary loss from the offense, whichever is greatest. On each of the remaining 10 counts, he faces a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross pecuniary gain or loss from the offense, whichever is greatest. Sentencing is scheduled for April 10, 2024. In addition, he has been barred by the Securities and Exchange Commission from acting as a broker or otherwise associating with a broker-dealer firm.

As we have previously written about, the government aggressively pursued compound prescription fraud. In 2018, the U.S. Department of Health and Human Services Office of the Inspector General released a report outlining the reasons why compounding drug fraud has increased in recent years.

How We Can Help

How We Can Help

Civil and criminal penalties can be significant, resulting in both jail time and financial penalties. The Health Law Offices of Anthony C. Vitale has been representing clients under investigation for more than three decades. The firm conducts confidential defense investigations and will take you through the process in an effort to reduce or eliminate criminal, civil, licensure and administrative liability.

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