Dallas Man Admits To Committing $50M TRICARE Fraud

U.S. Attorney's Office

Northern District of Texas

FOR IMMEDIATE RELEASE

Tuesday, October 17, 2017

Dallas Man Admits to Committing $50 Million TRICARE Fraud

DALLAS - Andrew Joseph Baumiller, 38, of Dallas, Texas, pleaded guilty today before U.S. Magistrate Judge David L. Horan to one count of conspiracy to commit health care fraud stemming from a scheme to defraud TRICARE, the health insurance program for members of the military and their families. The announcement was made today by U.S. Attorney John Parker of the Northern District of Texas.

Baumiller faces a maximum statutory penalty of 10 years in federal prison, a $250,000 fine, and will be ordered to pay restitution. Baumiller will remain in custody pending sentencing, which is scheduled before Chief U.S. District Judge Barbara M.G. Lynn in February, 2018.

According to documents filed in the case, Baumiller admitted to conspiring with Richard Robert Cesario, John Paul Cooper, Dr. Walter Neil Simmons, Dr.William F. Elder-Quintana, Joe Larry Straw, Luis Rafael Rios, Michael John Kiselak, and others to defraud TRICARE out of more than $50 million from May 2014 through February 18, 2016, through a scheme involving compounded pain creams, scar creams, and vitamin supplements. Baumiller is the first defendant to plead guilty in this case. Cesario, Cooper, Simmons, Quintana, Straw, Rios, Kiselak, and four other defendants are scheduled for trial next year.

According to the superseding indictment filed October 4, 2016, Cesario and Cooper orchestrated a scheme through their marketing company, CCMGRX, LLC, to generate prescriptions by paying illegal kickbacks to TRICARE beneficiaries and prescribing doctors, and to receive illegal kickbacks in exchange for those prescriptions from four Texas-based compounding pharmacies: Trilogy Pharmacy (Trilogy) in Dallas, 360 Pharmacy Services in Webster, Dandy Drug in Burleson, and Alpha Pharmacy in Irving.

The superseding indictment alleges that the scheme caused TRICARE to suffer an actual loss of more than $100 million. In connection with his guilty plea, Baumiller, who served as the President of Trilogy and oversaw its day-to-day operations, admitted that TRICARE paid Trilogy more than $50 million that was tainted by the payment of illegal kickbacks.

The superseding indictment alleges that Cesario, Cooper, Straw, Rios, Kiselak and others disguised the illegal kickbacks they paid to TRICARE beneficiaries as "grants" for participating in a medical study they referred to as a TRICARE-approved "Patient Safety Initiative" or "PSI Study" designed to evaluate the safety and efficacy of compounded drugs. In reality, the PSI Study was not approved by TRICARE, was not overseen by a qualified physician or medical professional, had no control group, and was not designed to gather any useful scientific data relating to the safety and efficacy of any drug. In connection with his guilty plea, Baumiller admitted that he knew about the sham study but "pretended not to know the truth because CCMGRX was generating so much business and they were all making a lot of money."

Baumiller further admitted that Trilogy paid Cesario, Cooper, Straw, Rios, Kiselak, and other CCMGRX marketing reps as W-2 employees of Trilogy "in order to give a false appearance of compliance with the statutory and regulatory bona fide employee safe harbor provisions of the Anti-Kickback Statute in order to defraud TRICARE and other federal health care programs."

At times, according to the factual resume, Trilogy received prescriptions for patients who lived in states where Trilogy was not licensed to do business. Rather than refuse to fill these prescriptions, Baumiller and others shipped the prescriptions to a local courier, marketing rep, or relative, who in turn shipped the prescriptions to the patient. This enabled Trilogy to increase the number of claims it could submit to TRICARE and other federal health care programs.

The Federal Bureau of Investigation and Defense Criminal Investigative Service investigated the case. Assistant U.S. Attorneys Douglas Brasher and Paul Yanowitch are prosecuting.

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Topic(s):

Healthcare Fraud

Component(s):

DOJ - USAO

Contact:

Lisa Slimak 214-659-8600 [email protected]

Updated October 17, 2017