Federal Compound Pharmacy Fraud
You worked at a compounding pharmacy. Maybe you owned one. Maybe you marketed for one, recruited physicians, processed claims. The pain cream years - 2012 to 2016 - generated massive revenue. TRICARE and workers' comp paid thousands for creams that cost almost nothing to make. Then it ended. The government started investigating. You thought by now they would have moved on to something else.
They haven't.
The federal government turned compounding pharmacy fraud into a prosecution priority that has produced 18-year sentences, $400 million asset forfeitures, and convictions of marketers who never touched a prescription. Six federal agencies - DOJ, DCIS, HHS-OIG, IRS-CI, FDA, and DEA - coordinate investigations that can span years. The Health Care Fraud Strike Force operates in 27 federal districts and has charged more than 5,400 defendants who collectively billed federal programs and private insurers more than $27 billion. If you were anywhere near a compounding pharmacy during those years, you remain a potential target.
Welcome to Spodek Law Group. We handle federal healthcare fraud defense for individuals and companies facing compounding pharmacy investigations. If you've received a subpoena, if federal agents have contacted you, or if you're concerned about your exposure from past involvement with a compounding pharmacy - this article explains exactly what the government is doing and what options exist.
Why Compounding Pharmacy Fraud Became a Federal Priority
The numbers tell the story.
TRICARE compound drug spending went from $24 million in 2010 to over $500 million in 2014. That's a 2,000% increase in four years. By 2015, compound prescriptions represented only 0.5% of all TRICARE prescriptions but accounted for 20% of pharmacy costs. That ratio - half a percent of scripts consuming a fifth of the budget - triggered everything that came after.
The Department of Defense started investigating every compounding pharmacy billing TRICARE. And what they found became prosecution exhibits. Evidence at trial in the Nourian case showed compound creams that cost $15 to make were being billed at $16,000 per prescription. Thats not a typo. Fifteen dollars to manufacture, sixteen thousand dollars billed to the Department of Labor's Workers' Compensation Program. That markup - over 100,000% - is what prosecutors show juries.
The government didn't view this as aggressive billing. They viewed it as fraud. Wade Walters of Mississippi orchestrated the largest TRICARE compounding fraud ever prosecuted. He recieved 18 years in federal prison and was ordered to pay $287.6 million in restitution. Dehshid "David" Nourian got 17.5 years. The court forfeited $405 million in assets tied to his fraud and money laundering. These aren't outliers. There the new baseline for sentencing in compounding pharmacy fraud cases.
Nicholas Borgesano Jr. owned A to Z Pharmacy in Florida. His network submitted $100 million in fraudulent claims for pain creams and scar creams. He bribed doctors to write prescriptions for patients they never saw. The sentence: 15 years federal prison. Real properties, cars, and a 50-foot boat were forfeited. $54 million in restitution.
The era of TRICARE billing anomalies being treated as civil matters is over.
How They Build These Cases
Compounding pharmacy fraud investigations involve multiple federal agencies working together. DOJ leads prosecution. DCIS (Defense Criminal Investigative Service) handles military healthcare fraud. HHS-OIG investigates Medicare and Medicaid billing. IRS Criminal Investigation follows the money. FDA handles drug safety violations. DEA handles controlled substance issues. When you see one agency, assume there others behind it.
The Health Care Fraud Strike Force - formed in 2007 - now operates in 27 federal districts. Since formation, it has charged more than 5,400 defendants who billed federal healthcare programs and private insurers more than $27 billion. These prosecutions are coordinated across agencies with shared evidence and parallel investigations.
But here's what most people dont understand.
Most compounding pharmacy prosecutions didn't start with government detection. They started with whistleblowers. Employees who saw what was happening. Competitors who lost business to pharmacies they knew were committing fraud. Sometimes even physicians who prescribed compounds and later had second thoughts.
Under the False Claims Act, whistleblowers - called "relators" - can file qui tam lawsuits on behalf of the government. If the government intervenes and recovers money, the whistleblower recieves between 15% and 30% of the recovery. When your talking about cases involving hundreds of millions of dollars, that bounty matters. Your former employee knows about it. Your competitor knows about it.
A July 2025 settlement in New Hampshire resulted from a whistleblower complaint. The Florida woman who filed the case recieved a portion of the settlement for exposing falsified diagnoses used to obtain prior authorizations for a compounding pharmacy. An April 2025 case involving OHM Pharmacy Services resulted in the whistleblower recieving $285,040 of the civil settlement.
And heres the irony that destroys people.
The pharmacies documented there own intent. Pharmacy employees figured out which compounds paid the highest reimbursements by "test billing" - submitting claims to insurance to see which formulations generated maximum payment. Those test claims - designed to identify profitable compounds - became prosecution exhibits showing intent to defraud. The internal process used to find profitable formulas created a paper trail of fraud.
The Prison Sentences Nobody Expected
"I never touched a prescription. I never billed anyone. I just worked in marketing."
It dosent matter.
Richard Hall of Fort Worth worked as a health care executive for CMGRX. He created and marketed expensive compounded medications. He paid marketers to recruit doctors to write prescriptions. He never submitted a claim himself. A federal jury convicted him. The sentence: 20 years in federal prison.
The Anti-Kickback Statute reaches everyone in the referral chain - not just pharmacists and owners. Sales representatives who recruited physicians have been sentenced. Marketers who arranged prescriptions have been sentenced. Physicians who wrote scripts without examining patients have been sentenced. The statute makes it a felony to knowingly pay or recieve remuneration in exchange for referrals of federal healthcare program business. You dont have to submit the claim yourself.
Recent sentencing examples from DOJ press releases:
- Wade Walters: 18 years for $510 million TRICARE fraud
- David Nourian: 17.5 years for $145 million Workers' Comp fraud, $405M assets forfeited
- Nicholas Borgesano Jr.: 15 years for $100 million Florida pharmacy scheme
- Richard Hall: 20 years for $70 million CMGRX fraud
- Raad Kouza: 8 years, brother Ramis 5 years, for $15 million Michigan scheme
The charge stacking compounds the problem. One compounded prescription can trigger multiple federal charges.
- Health Care Fraud (18 U.S.C. § 1347) - up to 10 years, or 20 if injury, life if death
- Wire Fraud (18 U.S.C. § 1343) - up to 20-30 years
- Anti-Kickback Violation (42 U.S.C. § 1320a-7b) - 5 years per violation
- Money Laundering (18 U.S.C. § 1956) - up to 20 years
- Aggravated Identity Theft (18 U.S.C. § 1028A) - mandatory +2 years consecutive
And thats just criminal exposure. The civil False Claims Act imposes treble damages plus penalties of $11,665 to $23,331 per false claim. When your talking about thousands of prescriptions, the civil liability alone can be catastrophic.
Central Rexall Drugs in Louisiana: Two executives - Christopher Kyle Johnston and Trent Brockmeier - were convicted in March 2025 of conspiracy to commit wire fraud and health care fraud, conspiracy to commit identity theft, and conspiracy to commit money laundering. There scheme involved TRICARE and New Jersey state health plans. The pain creams, scar creams, and vitamin combinations they pushed weren't based on medical need. They were based on which formulations generated maximum reimbursement.
If Your Connected to a Compounding Pharmacy
The single most important rule:
Do not cooperate with investigators without counsel.
This sounds obvious. But cooperation without an attorney frequently creates new charges rather then resolving anything. When pharmacy employees talk to federal agents trying to "clear things up," there statements often become the basis for additional charges - including 18 U.S.C. § 1001 false statement charges when details dont match what the government already has in documents and billing records. The interview you thought would help becomes another felony.
If you worked at, owned, marketed for, or prescribed compounds from a compounding pharmacy:
- Don't discuss the matter with former colleagues. Those conversations can be monitored or recounted by cooperating witnesses.
- Don't destroy any records. Document destruction creates obstruction charges.
- Determine whether there's a sealed qui tam complaint. Your exposure may already be documented in a whistleblower lawsuit you dont know about.
- Understand your civil vs criminal exposure. Early intervention before grand jury involvement may enable civil resolution through the False Claims Act.
Todd Spodek has defended individuals facing federal healthcare fraud charges including compounding pharmacy investigations. He understands the difference between civil False Claims Act exposure - where negotiated settlements remain possible - and criminal indictment - where the government has already made the decision to prosecute.
When Your Ready
If you worked at, owned, marketed for, or prescribed compounds from a compounding pharmacy - and your concerned about federal exposure - Spodek Law Group can help you understand where you stand.
The consultation is free. Theirs no obligation.
What you'll get is an honest assessment. Is there a sealed qui tam complaint? Has the investigation reached criminal grand jury stage? What does your civil exposure look like under the False Claims Act? What are realistic outcomes based on how these cases actualy resolve - not best-case fantasies, but what happens in the real world of federal healthcare fraud prosecution?
The statute of limitations for healthcare fraud runs 6 years from the conduct. For some schemes, the limitations period extends beyond the last act of fraud. If you were involved with compounding pharmacies during 2012-2016, the window may still be open.
Call us at 212-300-5196. The earlier you have counsel, the more options exist. Once a grand jury returns an indictment, the options narrow dramatically.
Dont wait until federal agents show up at your door.
Were here when you need us.
