Man gets 8 months in scheme on Tricare

Michael Sean Brady, a former medical sales representative in Little Rock, on Wednesday became the first person to be sentenced in a multimillion-dollar Arkansas-based scheme to defraud Tricare, the U.S. military’s health insurer.

The 50-year-old father, who was supported in court by about 30 friends and family members, pleaded guilty in October to conspiring to violate the federal Anti-Kickback Statute. He admitted participating in a get-rich-quick scheme led by 43-year-old Brad Duke of Little Rock, another medical sales representative who has been identified as the ringleader.

Duke, Brady and at least four other people have pleaded guilty since October to participating in a conspiracy to generate Tricare-reimbursed prescriptions for compounded medications for a Mississippi compounding pharmacy that paid the recruiters a commission.

In court Wednesday, Brady faced a potential prison sentence of 2 to 2½ years, partly because of the amount of money involved — $484,000 in payments he received over four months, from December 2014 through April 2015. His attorney said he has paid back $312,141, which constitutes the amount of commissions earned during that time.

While defense attorney Chuck Banks of Little Rock argued for a probation-only sentence, saying Brady’s actions were misrepresented by the numbers alone, Assistant U.S. Attorney Alex Morgan urged Chief U.S. District Judge Brian Miller to impose a sentence within the guideline range to set an example for others who might be inclined to join in a “rampant” escalation of health care fraud.

In October, U.S. Attorney Cody Hiland said the Arkansas-based conspiracy generated more than $10 million in prescriptions for certain compounded medications — pain cream, scar cream and supplements — in a year’s time. He said that nationally, Tricare paid nearly $2 billion in 2015 for compounded prescription drugs, constituting an 18-fold increase that prompted investigations across the country.

Banks said that in December of 2014, Brady was approached by Duke about helping him promote certain compounded medications through a deal Duke had made with MedwoRx Compounding Pharmacy. Banks said Brady, known as Sean, had previously worked for Duke, and “trusted and relied upon Duke’s words and actions to be honest.”

Banks said Brady agreed to Duke’s proposal to help recruit Tricare beneficiaries in exchange for 20 percent of what Tricare paid MedwoRx, believing it to be a “standard arrangement used in the industry to promote a new product.”

One method Brady used was to offer $100 gift cards to patients who agreed to receive their prescriptions from MedwoRx, Banks said, noting in a sentencing memo that “the pharmaceutical sales industry has a historical use of incentive cards when breaking into a new market.”

But shortly after receiving his first payment of about $150,000, Brady “began to question the legitimacy and validity of Duke’s plan,” Banks said. He said Brady continued recruiting beneficiaries and receiving payments, however, while Duke assured him that the solicitation was proper.

“At no time during these four months did Sean Brady have concerns that his judgments and actions constituted a federal crime,” Banks said, noting that Brady even had a police officer in North Little Rock help him recruit veterans who had been experiencing significant injury-related wounds or injuries.

“He accumulated 14 clients and, during that first fourmonth period, there were no complaints from [police], physicians, compounders, and especially no complaints from the veterans that this product didn’t work,” the defense attorney said.

When approached by investigators in March 2016, Brady cooperated with authorities, Banks said, noting that the “grave error in judgment” has cost Brady his stellar reputation and his career. Banks also noted that Brady has paid taxes on the commissions he earned.

Miller indicated he was considering giving Brady a sentencing break because his participation in the conspiracy lasted only about four months. The judge noted that he isn’t inclined to give defendants a lot of credit at sentencing time for paying back stolen money, “because if I do that, I’m essentially letting them buy justice.”

Morgan balked at the idea of a below-guidelines sentence, noting that Brady was “in the industry since 1995” and should have immediately known it was wrong to recruit patients.

“This came off your back, off my back, off the backs of everybody in here,” he told the judge.

The prosecutor also argued that the nature of health care fraud is that there isn’t always a “mastermind” to focus on, which means that individual, incremental players must be held accountable in order to deter others.

Morgan said that the reason the scheme ended isn’t because Brady cooperated, but, “because Tricare finally found out what was going on, and turned off the faucet.”

Banks complained that “blind indifference is now a federal crime,” and said, “These dadgum mathematical formulas,” referring to federal sentencing guidelines, “have shot him up here where he’s burdened.”

“Bad people ought to be doing hard time,” Banks said. “Good people [who commit crimes] should be punished, but it doesn’t mean every one of them has to be doing hard time.”

Ultimately, Miller imposed an eight-month prison sentence — well below the guideline range — to be followed by two years of supervised release, saying, “I never had the conviction that Mr. Brady needed to do two years.”