N.Y. U.S. Attorney: Pharmaceutical Sales Rep Sentenced for Defrauding Insurance Companies Out of Millions of Dollars

BUFFALO, New York, Oct. 30 -- The U.S. Attorney for the Western District of New York, James P. Kennedy Jr., issued the following news release:

U.S. Attorney James P. Kennedy, Jr. announced today that Scott Trapp, 50, of Clarence, NY, who was convicted of conspiracy to commit health care fraud, was sentenced to serve 36 months in prison by U.S. District Judge Lawrence J. Vilardo. The defendant was also ordered to pay approximately $10,000,000 in restitution.

Assistant U.S. Attorney Maura K. O'Donnell, who handled the case, stated that in 1996 the defendant began working as a pharmaceutical sales representative for various pharmaceutical companies. In 2014, Trapp began marketing "compounded medications," such as pain patches, pain creams, and scar creams. "Compounded medications" are medications created when a licensed pharmacist, a licensed physician, or a person working under the supervision of a licensed pharmacist, combines, mixes, or alters ingredients of a drug to create a medication tailored to the needs of an individual patient.

The compounded medications marketed by the defendant, and his associates, were not tailored to the needs of individual patients. Instead, the medications were tailored to contain ingredients that carried high reimbursement rates from health insurers. Formulations of the medications were modified at times to permit reimbursement from health insurance companies and/or to maximize reimbursement rates. For example, a one month supply of one of the compounded pain creams marketed by Trapp carried a reimbursement rate of $22,000.

Unlike typical pharmaceutical sales representatives who market prescription drugs to physicians, the defendant, and his associates, identified patients whose health insurance covered the medications, and convinced the patients to agree to receive the medications.

In furtherance of the conspiracy, Trapp asked a friend, who was a physician, to sign blank, 12 month prescriptions for compounded medications, in the names of the defendant and his wife. Trapp then duplicated the prescriptions and substituted names of different patients for his own name, allowing for additional prescriptions for compounded medications to be filled without the physician knowledge.

Trapp also recruited, supervised, and compensated others to market the compounded pharmaceuticals. One of those individuals then recruited others to be part of the marketing scheme. The defendant received commission payments of approximately 20% of the reimbursement rate of each prescription he personally marketed which was approved and filled. Trapp also received commission payments of approximately 5% of each prescription marketed and filled by those he supervised, and by the individuals working for those people he supervised.

In total, between 2014 and December 2016, the health care benefit programs provided by Blue Cross Blue Shield (BCBS), the Verizon Medical Expense Plan for New York and New England Associates, National Grid USA, and Sunovion Pharma, paid approximately $5,821,331, for compounded prescriptions fraudulently filled, resulting in losses of: $7,352 to BCBS; $3,601,179 to the Verizon Medical Expense Plan for New York and New England Associates; $1,992,354 to National Grid USA; and $220,445 to Sunovion Pharma.

"Trapp defrauded health care benefit programs by putting his financial well-being above the physical well-being of the patients obtaining medications from him," stated U.S. Attorney Kennedy. "Such conduct will not be tolerated in this District."

The sentencing is the result of an investigation by the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Gary Loeffert; the U.S. Department of Labor, Office of Inspector General, Office of Investigations - Labor Racketeering and Fraud, under the direction of Michael C. Mikulka, Special Agent-in-Charge, New York Region; the U.S. Food and Drug Administration, Office of Criminal Investigations, under the direction of Jeffrey Ebersole, Special Agent-in-Charge New York Field Office; the New York State Financial Services Department, under the direction of Superintendent Linda A. Lacewell; and the Defense Criminal Investigative Service, under the direction of Special Agent-in-Charge Leigh-Alistar Barzey.