Welcome to Spodek Law Group. Our goal is to give you the reality of federal compound pharmacy fraud charges - not the sanitized version defense websites present, not the clinical legal fiction, but the actual truth about what happens when the government decides your compounding pharmacy billed too much.
The investigation into your pharmacy started before you knew about it. This is the first thing you need to understand. When TRICARE compound spending exploded from $24 million in 2010 to $1.75 billion in 2015, the federal government did not launch investigations to determine whether fraud existed. They already knew the numbers were mathematically impossible. Compound prescriptions represented only 0.5% of all TRICARE prescriptions but accounted for 20% of total pharmacy costs. That ratio is not a question. It is evidence.
By the time a subpoena arrives at your pharmacy, by the time FBI agents appear at your door, the prosecution has already identified you through billing data analysis. The investigation exists not to discover whether fraud occurred but to build the case they have already decided to make against you. This is the reality that changes everything about how you should respond to any contact from federal investigators.
The Investigation Started Before You Knew
Federal healthcare fraud investigations dont work the way most people expect. There is no whistleblower moment, no patient complaint that triggers scrutiny. The government has access to every claim you have ever submitted. Algorithms analyze your billing patterns and compare them against regional and national averages. When your reimbursement rates exceed certain thresholds, you are automaticaly flagged.
Heres the thing - by the time you receive a Civil Investigative Demand requesting documents, the government has already identified what they believe the problem is. They've seen your billing data. Theyve cross-referenced your prescribing patterns with every other pharmacy in the country. The CID isnt the start of an investigation. Its the middle of one that may have been running for years.
The sealed investigation period makes this worse. Federal qui tam cases can remain under seal for 60 days minimum - but in practice, the government seeks extension after extension. Most compound pharmacy fraud cases remain sealed for two to three years while prosecutors build their case. You might be running your pharmacy, paying your employees, serving patients, completly unaware that your every business decision is being documented for future prosecution.
Think about that. The government might be watching you for years before you know theres a problem. Every payment to a marketer. Every consulting arrangement with a prescriber. Every ingredient choice in your compounds. All of it recorded, analyzed, and interpreted in the worst possible light - while you operate in total darkness.
What the $15 Cream Taught Federal Prosecutors
The compound cream schemes that generated billions in TRICARE fraud revealed something important about how prosecutors think. These creams cost aproximately $15 to manufacture. They were billed at $16,000 per prescription. Thats a 106,567% markup that somehow cleared insurance audits for years.
When prosecutors saw those numbers, they didnt ask whether the medications helped patients. They didnt investigate whether the prescriptions were clinicaly appropriate. They saw a markup so extreme that fraud was the only explanation. And heres were it gets interesting - they were right about many cases. But the prosecutorial framework they developed didnt distinguish between pharmacies committing deliberate fraud and pharmacies that simply operated within a broken reimbursement system.
The irony cuts deep. TRICARE actualy encouraged compound medications as cost-effective alternatives to brand name drugs. Military health benefits promoted compounding as a way to reduce prescription costs. Then, when enterprising pharmacies took them up on that offer, the same system prosecuted them for fraud. OK so the message was: we wanted you to compound, just not this much, and we never told you where the line was until you crossed it.
At Spodek Law Group, weve seen this pattern repeat. A pharmacist builds a legitimate business. They work with marketers to find patients. They use expensive ingredients because thats what gets reimbursed. Then they discover that every business practice they thought was legal has been recharacterized as criminal fraud. The billing ratio that made there pharmacy profitable is now the evidence that puts them in prison.
Why Your Medical Records Wont Save You
Many pharmacists facing compound fraud charges believe their defense is simple: the prescriptions were medically necessary. The patients needed these medications. The compounds helped people. Surely that matters?
It dosent. Not the way you think.
If a kickback influenced any prescription, medical necessity becomes irrelevant. This is the Anti-Kickback Statute in action. The government dosent need to prove the medication wasnt needed. They only need to prove that some payment or benefit influenced the prescribing decision. Once that kickback taint exists, every claim becomes false - regardless of whether patients genuinly benefited from the medication.
Heres the part nobody talks about. A pharmacist might have a stack of patient records demonstrating clinical improvement. Lab results. Follow-up visits. Genuine medical documentation showing the compounds worked. None of it matters if the prosecution can prove that a recruiter was paid a percentage of reimbursements, or that a prescribing doctor received "consulting fees" that correlated with prescription volume.
The law creates a paradox that defense attorneys understand but pharmacists often dont grasp until its too late. Having detailed records actualy hurts you in some cases. Prosecutors argue that extensive documentation proves you knew exactly what you were doing. You werent an innocent pharmacist caught up in a confusing system - you were a sophisticated operator who documented everything to create cover for a fraud scheme.
The Kickback You Didnt Know Was a Kickback
Many compound pharmacists now facing federal charges genuinly believed their business arrangements were legal. They had lawyers review contracts. They structured payments as "consulting agreements" or "marketing fees." They thought they were operating within the bounds of normal business practice.
But heres the kicker - the Anti-Kickback Statute dosent care what you called the payment. It cares about function. If a payment's purpose was to induce referrals, its a kickback. Period.
Consider how these arrangements typicaly worked. A pharmacy would hire patient recruiters who would find military service members with TRICARE coverage. The recruiters would connect these patients with doctors who would prescribe compound medications. The pharmacy would pay recruiters a percentage of the reimbursement - sometimes described as "marketing fees" or "patient outreach compensation."
Every one of those claims becomes a false claim. Not becuase the medication wasnt provided. Not because the patient didnt need it. Because the referral was tainted by financial inducement. And each false claim carries penalties of up to $27,894 plus treble damages - three times what the government paid.
Let that sink in.
If your pharmacy submitted 500 prescriptions based on recruiter referrals, your looking at $13.9 million in penalties before treble damages are calculated. A "marketing arrangement" that seemed like normal business practice becomes a forty-million-dollar exposure that eliminates everything youve built over your career.
Todd Spodek has explained this to countless clients who simply could not beleive their "consulting agreements" with doctors were illegal. The doctors provided no actual consulting services, prosecutors argue. They were paid to prescribe. The arrangement might have had legal window dressing, but its function was pure kickback - and the government has become extremly skilled at proving that function.
How One Cooperator Sends Everyone to Prison
In the Central Rexall case out of Louisiana, over 50 people have been convicted or pleaded guilty. Pharmacists. Pharmacy owners. Patient recruiters. Doctors. Marketers. Everyone in the chain went down.
Heres were people get confused about federal healthcare fraud prosecution. The government dosent need to catch you directly. They need to catch someone who can testify against you.
When a patient recruiter gets subpoenaed, they are facing five to ten years in federal prison. There lawyer immediately begins negotiating. The recruiter has nothing to offer except information about the people who paid them - the pharmacy owners, the salespeople, the prescribers. In exchange for reduced sentancing, the recruiter provides testimony that proves the one element prosecutors find hardest to establish on there own: criminal intent.
See the problem? Your defense might have been that you didnt know the payments were illegal. You thought it was legitimate marketing. You operated in good faith. But now a cooperator is testifying that you explicitely discussed avoiding legal scrutiny. That you structured payments to look like consulting fees. That you knew exactly what you were doing.
The cooperator might be exaggerating. They might be lying. But juries hear testimony from someone who was there, someone who participated, someone who says you knew. Against that, your protestations of innocence sound hollow.
This is the cooperation trap that destroys compound pharmacy defenses. The government dosent prosecute just one person - they prosecute everyone, then use each defendant against the others. By the time you go to trial, half your former employees and business partners are testifying for the prosecution.
18 Years: What Wade Walters Learned Too Late
Wade Walters received 18 years in federal prison for his role in the largest TRICARE compounding pharmacy fraud ever prosecuted - a $510 million scheme. He was also ordered to pay $345 million in restitution.
Stop and think about that sentence.
Eighteen years. For pain cream billing. More time than many people serve for violent crimes. More time than some murderers receive. And Walters isnt unique - David Nourian got 17 years and six months for a $145 million scheme, with $405 million in assets forfeited. Nicholas Borgesano Jr. received 15 years for a $100 million Florida operation.
These arnt abstract numbers. These are people who owned pharmacies, employed staff, thought they were building businesses. Now they're spending the next two decades in federal prison while there families lose everything to asset forfeiture.
The forfeiture aspect deserves special attention. In the Nourian case, the government seized $405 million in assets - nearly three times the fraud amount. They dont just take your profits. They trace proceeds through every purchase, investment, and transfer youve ever made. The house. The cars. The retirement accounts. The kids' college funds. Everything connected to "fraud proceeds" gets forfeited, and the governments definition of "connected" is extremly broad.
Compound pharmacy fraud dosent just end careers. It eliminates wealth accumulated over decades. It destroys families. And the sentences are long enough that many defendants will be elderly when released - if they survive the sentence at all.
The Multiple Agency Assault
Compound pharmacy fraud investigations dont involve just one federal agency. Your being investigated by a coordinated machine that includes the FBI, the Department of Justice, the Office of Inspector General for Health and Human Services, the IRS Criminal Investigation division, and sometimes the DEA and state attorneys general offices. Each agency brings its own investigators, its own prosecutors, and its own enforcement priorities.
The IRS Criminal Investigation unit deserves particular attention. IRS-CI agents specialize in following money trails. They examine every financial transaction your pharmacy ever made. They trace payments to recruiters, marketing companies, physicians, and anyone else who received money connected to your operation. When you read about $405 million in asset forfeitures, understand that IRS-CI agents spent years mapping exactly where every dollar went.
Multiple agencies means multiple angles of attack. While FBI agents interview witnesses and gather testimony about your business practices, OIG investigators review your claims data and billing patterns. IRS agents trace your personal finances and identify assets for potential forfeiture. Prosecutors from multiple districts may coordinate charges, ensuring that even if one case fails, others remain viable.
This coordination extends across state lines. The Central Rexall prosecution involved fraud affecting both TRICARE and New Jersey state health benefits. Defendants faced federal charges that drew on evidence from investigations in multiple jurisdictions. You cannot escape by claiming that different offices werent talking to each other. They were. They are.
The practical implication is overwhelming: you cannot outrun, outmaneuver, or outwait a coordinated federal investigation. The resources arrayed against you are virtually unlimited. The timelines they operate on extend for years. And the cooperation between agencies means that evidence gathered by one becomes available to all.
The Statute of Limitations Is Longer Than You Think
If you were involved in compound pharmacy billing between 2014 and 2018 - the peak years of TRICARE compound spending - you might think your safe now. The five-year statute of limitations has passed. The government cant charge you anymore.
Your wrong.
The False Claims Act allows civil actions up to six years from the fraudulent act, or three years after the government discovers the fraud - but no more than ten years total. Combined with the sealed investigation period, this means conduct from 2015 can potentialy be prosecuted into 2025. Schemes from 2018 could see charges as late as 2028.
And those are just the general rules. The government has argued for tolling in various circumstances, extending deadlines even further. If you fled the country. If you concealed assets. If you made false statements that delayed discovery. Each of these can extend the limitations period.
At Spodek Law Group, we regulary consult with pharmacists who beleived their exposure had expired, only to discover they remained vulnerable to prosecution. The relief they felt when five years passed was premature. The governments timeline is longer than most people realize.
The Only Window to Fight This
Federal healthcare fraud carries a conviction rate exceeding 90%. Once charges are filed, you are almost certainly going to lose at trial. This is the statistical reality that defense attorneys understand and clients often refuse to accept until its too late.
The only real window to fight a compound pharmacy fraud case is before charges are filed. Pre-indictment intervention is where cases are won or lost.
If you receive a Civil Investigative Demand, you have leverage. If agents show up asking questions, you have leverage. If you learn through any channel that your pharmacy is under investigation, you have leverage. But that leverage evaporates the moment charges drop.
Heres what effective pre-indictment defense looks like. An experienced federal healthcare fraud attorney reviews your billing practices, your marketing arrangements, your prescriber relationships. They identify the governments likely theory before prosecutors have finalized it. They engage with the government directly, presenting mitigating facts, challenging assumptions, demonstrating that charging decisions should favor declination.
This dosent work after indictment. Once a grand jury returns charges, the prosecution is committed. They've invested resources. They've made public announcements. Careers are attached to conviction. The 90%+ conviction rate reflects this reality - cases that go to trial are cases prosecutors felt confident enough to charge, and confident prosecutors usualy win.
What To Do If You Think Your Being Investigated
If you have any reason to beleive your compound pharmacy is under federal investigation, the time to act is now. Not when charges drop. Not when agents appear at your door. Now.
Do not speak to investigators without an attorney present. Every word you say becomes evidence. Statements that seem innocent can be recharacterized as consciousness of guilt. Cooperating without counsel has destroyed more defenses than any other single mistake.
Do not destroy documents. Federal obstruction charges carry there own sentences, and prosecutors love adding them because they demonstrate consciousness of guilt. If your shredding records, youve already lost the intent argument.
Do not warn associates. Witness tampering charges turn a healthcare fraud case into something far worse. And in an environment where everyone might become a cooperator, the person you warn today might be testifying against you tomorrow.
What you should do: contact experienced federal defense counsel immediatly. The investigation may have been running for years without your knowledge. You might have limited time before charging decisions are made. Every day without representation is a day the government builds there case while you operate blind.
Todd Spodek and the team at Spodek Law Group have handled federal healthcare fraud cases for years. We understand how these investigations work, how prosecutors think, and what strategies actualy affect outcomes. More importantly, we understand that compound pharmacy fraud cases are not about whether you helped patients - they are about billing patterns, business arrangements, and prosecutorial discretion.
The clock started when you learned about this investigation. Maybe it started when you read this article and recognized your own situation. Call Spodek Law Group at 212-300-5196. That window is closing. And once charges drop, the 90%+ conviction rate becomes your reality.
You need someone who has been through this before. Someone who understands that the investigation started before you knew, that your medical records wont save you, that the kickback you didnt know was a kickback is still a federal crime. The government has been preparing for years.
Now its your turn to prepare.
212-300-5196.
