Illegal Pharmaceutical Scheme Has Tyler Connection
Posted/updated on: February 14, 2017 at 6:50 pm
TYLER – A former pharmaceutical benefits manager has pleaded guilty in federal court in Tyler to engaging in illegal kickbacks in East Texas. Douglas M. Pick, 57, of Omaha, Nebraska, pleaded guilty Monday to making unlawful kickback payments before United States Magistrate Judge John D. Love. At sentencing, Pick faces up to three years in federal prison. A sentencing date has not been set.
Federal prosecutors say Pick was the founder and long-time President and CEO of Pharmaceutical Technologies, Inc. (PTI). The company, which operates as a pharmacy benefits manager (PBM), provides for the administration and delivery of pharmacy products and services. PTI uses a network of pharmacies to service employee welfare benefit plans and health care benefit programs across the United States. During Pick’s tenure, PTI contracted with certain individuals, known as “Producers,” who had close business relationships with benefit plans. These benefit plans require administrative services in connection with the delivery of pharmacy products and services to their members. Agreements between PTI and certain producers were used to facilitate the payment of illegal kickbacks. Prosecutors say these producers used their positions to steer the benefit plans to PTI in exchange for kickback payments. The payments by Pick and PTI were based on the volume of business the producers steered to PTI. Such agreements and the related payments violate the Employee Retirement Income Security Act of 1974 (ERISA). Pick, as PTI’s President and CEO, was primarily responsible for the negotiations with producers.
One such Producer was Tom Slack of Tyler. According to the indictment, from 1998-2011, Slack served as the CEO of Tyler-based HealthFirst and its subsidiaries, including HealthFirst RX Solutions (HFRX). HealthFirst, a subsidiary of East Texas Medical Center, provides administrative services to employee benefit plans in East Texas. The plans include health care benefits, such as pharmacy products. HFRX, a private label PBM located in Tyler, provides pharmacy benefit services to HealthFirst’s client plans. In early 2004, Pick and Slack executed a contract in which PTI agreed to administer the pharmacy benefits of HealthFirst’s client plans through HFRX. The agreement specified that HealthFirst would pay PTI an administrative fee for every claim made for the filling of prescriptions. During April and May of 2004, Slack told Pick that he wanted to personally receive money on the pharmacy business from HealthFirst in exchange for directing more business to PTI and automatic renewal of the PTI-HealthFirst agreement each year. Pick agreed that PTI would pay Slack in exchange for this commitment. To do so, Pick and Slack agreed that Slack would approve an increase of the PTI administrative fee imposed on HealthFirst’s clients for each prescription filled. PTI would then pay the increase to a shell company that Slack had established. Slack, who was fired by HealthFirst in July 2011 and later passed away in 2012, received more than $1.5 million in illegal payments/kickbacks from Pick and PTI.
According to the indictment, between 2001 and 2013, Pick, acting on PTI’s behalf, entered into agreements with several Producers who unlawfully used their positions to refer benefit plan business to PTI in exchange for illegal kickback payments. These Producers collectively received illegal payments in excess of $3.5 million.
To resolve the matter, PTI entered into a non-prosecution agreement with the United
States and agreed to pay over $8.5 million. As part of the agreement, PTI agreed to cooperate with the government in the investigation and prosecution of individuals involved in the illegal kickback arrangements and to maintain internal controls, including compliance with ERISA, the Anti-Kickback Statute, and all other applicable statutes.
HealthFirst released the following statement on the case:
HealthFirst TPA, Inc. thanks the U.S. Attorney’s office for the Eastern District of Texas and the team who led the investigation for their diligence in prosecuting the fraudulent scheme, involving Douglas M. Pick and the late Tom Slack, that victimized HealthFirst TPA and its clients. HealthFirst TPA discovered the scheme in 2011 whereupon it notified the federal authorities and immediately reimbursed with interest any clients harmed.
