They admitted to creating a cream for bogus patients and billing insurance

U.S. District Judge Keith Starrett
U.S. District Judge Keith Starrett

A Biloxi man and a Lamar County man pleaded guilty to health care fraud Monday before U.S. District Judge Keith Starrett.

Gerald Jay Schaar, 46, of Biloxi and Jason May, 40, of Lamar County, admitted their roles in a multi-million dollar compounding pharmacy health care fraud conspiracy, said Acting U.S. Attorney Harold Brittain.

The charges against May and Schaar were brought as a result of a national health care fraud enforcement action by the Medicare Fraud Strike Force. As a result of the investigation, 412 people in 41 federal districts across the country were charged in schemes which involved billing Medicare, Medicaid, and TRICARE (a health insurance program for members and veterans of the armed forces and their families) for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries.

“Health care fraud costs the United States tens of billions of dollars a year,” said Christopher Freeze, special agent in charge of the FBI in Mississippi. “The FBI Jackson Division, alongside our law enforcement partners, will continue to seek out those that defraud health care systems in the United States.”

Schaar pleaded guilty to conspiracy to commit health care fraud for his role in a scheme in which he acted as a marketer for a pharmacy in Lamar County and solicited doctors and other medical professionals to write prescriptions without seeing patients for compound topical creams dispensed by the pharmacy.

Schaar later falsified patient records to make it seem as though medical professionals had examined the patients who received prescriptions for the creams. The pharmacy received $2.3 million in reimbursements for the prescriptions solicited by Schaar.

May pleaded guilty to conspiracy to commit health care fraud and money laundering in connection with his role as co-owner and pharmacist in charge of Advantage Pharmacy, which received about $192 million in reimbursements for compound topical creams from TRICARE and other health care benefit programs.

Brittain said May admitted to selecting formulas for compound creams based on reimbursement rates as opposed to medical efficacy. May and Advantage Pharmacy either did not collect patient co-payments for the creams or paid co-payments on behalf of beneficiaries. As a co-owner of Advantage Pharmacy, May received a portion of the reimbursements from the fraudulently obtained creams and transferred some of those proceeds — in transactions greater than $10,000 — into a money market account in his name.

Schaar and May will be sentenced by Starrett on Oct. 17, 2017 in Hattiesburg. May faces a maximum penalty of five years in prison and a $250,000 fine. Schaar faces a maximum penalty of 10 years in prison and a $250,000 fine.

The case was investigated by the FBI’s Hattiesburg Resident Agency, IRS-Criminal Investigation, Defense Criminal Investigative Service, Health and Human Services Office of Inspector General, Mississippi Bureau of Narcotics, and other government agencies. Department of Justice trial attorneys Dustin Davis and Katherine Payerle, and Assistant U.S. Attorney Mary Helen Wall are prosecuting the case for the government.

Kate Magandy: 228-896-2344, @kmagandy