Georgia companies to pay nearly $7 million to settle fraud case involving military health system


Medicines and first aid supplies line the table of a temporary pharmacy set up at a school in Malaysia on July 10, 2018, during a military exercise. (Eric J. Chandler/US Coast Guard)

(Tribune News Service) – For years, a Georgia pharmacy ran a lucrative scheme, government prosecutors have claimed. He circumvented federal restrictions on the sale of compound pain creams to members of the US military health care system, making millions of dollars in profit.

Prosecutors said the drugs were compounded in massive quantities and peddled by sales agents equipped with pre-printed prescription pads. To boost sales, the government says, the company used a fake charity and other tricks to waive required co-payments, then charged the government exorbitant rates. Sometimes a product sold to cash-paying patients for $30 was billed to the government at over $600.

Now that company, DermaTran Health Solutions, an insurance company and others accused of defrauding the government will pay more than $6.8 million to settle the civil case, without admitting liability. A whistleblower who brings the matter to the attention of the government will receive approximately $1.4 million of this amount.

The program dates back to 2012, when DermaTran opened in Rome to manufacture and sell custom compound pain creams, according to court documents.

At the same time, according to the government, another company, Pharmacy Insurance Administrators (PIA), was apparently set up to handle billing, although in practice it would have operated as a call center for DermaTran to help patients to fill and refill their prescriptions. When various listeners began to understand the issues and terminate DermaTran from its networks, the company began selling its out-of-network prescriptions to pharmacies in Texas and Alabama that were in-network.

Court documents show that the State Mutual Insurance Company, which is headquartered in Rome and does business in more than 40 states, played a role in the scheme. Its related companies, PIA, Gulfcoast Administrators and Insurance Administrative Solutions, are among the defendants. Those charged in the lawsuit include Delos H. Yancey III, who is chairman and president of State Mutual; Sam R. Moss of Rome; and Robert Gussenhoven of Alabama.

No one immediately responded to an Atlanta Journal-Constitution request for comment from Yancey or State Mutual Insurance. The AJC could not reach Moss or Gussenhoven for comment.

A former DermaTran accountant has come forward, filing a lawsuit in 2017 under the federal misrepresentation law and bringing the matter to the government’s attention.

“The FBI will not sit idly by when there are allegations of companies operating company-wide schemes to illegally line their pockets,” said FBI Atlanta Special Agent in Charge Keri Farley. . The case was prosecuted by the U.S. Attorney’s Office in Atlanta, with the assistance of investigators from the U.S. Postal Service Inspectors General, the Office of Personnel Management, and the Department of Health and Human Services.

As part of the settlement, PIA will pay $6.5 million of the $6.8 million. Texas and Alabama pharmacies or their owners will contribute much of the remainder. DermaTran is no longer in business and was sold last year for $40,000, with the product turned over to the government as part of the settlement.

©2022 The Atlanta Journal-Constitution.

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