Former pharmaceuticals sales rep Jay Schaar was the last person to take the stand Tuesday in the trial of Dr. Albert Diaz, a Coast doctor charged with 16 counts in connection to a scheme officials say defrauded TRICARE and other health care providers by prescribing medically unnecessary compounds.
The trial began Monday at William M. Colmer Federal Courthouse in Hattiesburg.
Schaar testified Diaz, whose medical practice is in Biloxi, wrote prescriptions without examining patients who lived in Hattiesburg and had the prescriptions filled by Hattiesburg-based Advantage Pharmacy for nearly $3.4 million between March 2011 and March 2015.
More than $2.3 million of that money was reimbursed to the pharmacy by TRICARE, a health care benefit program for the military, veterans and their family members.
Diaz also allegedly submitted false patient records for an audit for TRICARE and indicated he had examined his patients before prescribing them compounded medications. Schaar testified the patient records were obtained long after Diaz wrote the prescriptions.
Diaz of Ocean Springs, an obstetrician and gynecologist, was indicted in October.
Even though ob/gyn doctors specialize in treating female patients, Diaz allegedly wrote prescriptions for compounded pain creams and pills to several male patients.
Three of the male patients, including one who was 16 at the time, testified they never saw Diaz before receiving the prescription medicines. All three either worked for or were related to Randy Thomley, owner of Thomley’s Christmas Tree Farm, who helped them get the prescriptions started, according to testimony.
Albert “James” Hardwick said Thomley told him he would get paid for participating in a medical study if he started using the creams and pills. He signed up himself, his wife, LeAnn, and daughter Mica. He said he was paid more than $37,000 for the alleged study, which involved no doctor until Diaz appeared at his house on a Saturday to conduct an “examination.”
Hardwick said Diaz did not examine him. He filled out and signed paperwork while Diaz asked a couple questions. Thomley and a male nurse came with Diaz, according to testimony.
LeAnn Hardwick testified she did not know about the compounded medicines until she found a package of them on her doorstep one day. She tried to call Advantage to stop the prescriptions but was told they were on auto refill so they could not be stopped.
Jonah McCleary, 19, who now lives with his mother in Olympia, Washington, testified he and his father, Damon, worked as farm hands for the Thomleys.
His father also recruited drug reps to help sell the compounding creams, according to testimony. McCleary said his father was paid a 6 percent commission for whatever the drug reps sold.
He said both he and his parents received the compounded creams and pills, accumulating “two to three milk crates-worth” over about two years.
McCleary and LeAnn Hardwick testified the first compounded pain medications came from Dr. Brantley Nichols, an oral surgeon.
The third man to testify was Samuel Clinton, Thomley’s stepfather, who began receiving the compounded creams after his wife asked him to try the new pain ointment her son was promoting.
Clinton said he was prescribed two other creams and vitamin pills. He began complaining, however, of getting too many bottles of the cream.
“They would send me three bottles at a time at least two times a month,” he said. “I couldn’t nearly keep up with the usage.”
Thomley and Nichols are not among the four people who have been indicted in the case.
Diaz’s attorney John Collette in his opening statement said Diaz did not write the prescriptions, nor did he profit from them.
“You’re going to see money all over the place,” Collette told the jury. “But what you won’t see is one dime going to (Diaz).
“I don’t believe there will be any proof Dr. Diaz did any of it.”
Schaar, 47, of Biloxi pleaded guilty in July to conspiracy to commit health care fraud. He said Diaz received no kickbacks for writing the prescriptions.
Schaar said Diaz was uncomfortable with signing the pre-printed prescriptions when he learned they were billed to TRICARE.
“You don’t mess with the government,” Schaar said Diaz told him.
The only witness to testify Monday was Schaar’s co-defendant Jason May, who also pleaded guilty in July to conspiracy to commit health care fraud and money laundering of around $190 million.
May was the pharmacist in charge at Advantage Pharmacy in Hattiesburg from December 2011 to January 2016, when federal agents searched the facility and took documents, computers and other materials, forcing the pharmacy to close.
May identified around 100 vials of compounded creams and pills as those prescribed by Diaz to several patients, including multiple family members.
He testified the creams, used for treating chronic pain, were created to derive the maximum reimbursement value and were not tested for medicinal value.
“They were made largely based on retail value and profitability,” May said.
Some of the creams included ketamine, a controlled substance. Others included ingredients that could be purchased separately over the counter.
One prescription’s reimbursement value was around $13,580. Others ranged from $690 to $5,800.
May said the pharmacy sometimes decreased the copay to keep patients from canceling their prescriptions.
If convicted, Diaz faces up to 305 years in prison and fines of up to $7.5 million.
Also indicted is a nurse practitioner, Susan Perry of Grand Bay, Alabama, who operated Immediate Family Clinic in Biloxi. Her trial is set to begin in Hattiesburg during the court term beginning April 16.