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John Gaffney, 55, of Linwood, pleaded guilty to conspiracy to commit health-benefits fraud before U.S. District Judge Robert B. Kugler. Gaffney admitted he wrote more than 200 fraudulent prescriptions for teachers, police and firefighters, resulting in fraud of more than $24 million.
Gaffney’s plea makes the sixth guilty plea in the past month related to this widespread investigation, and is the first to involve a doctor.
Federal authorities have been investigating health-benefits fraud in three Absecon Island municipalities — Atlantic City, Ventnor and Margate — over the past few months.
In August, there were five guilty pleas from people admitting to health care fraud.
The plea agreements detail a massive prescription-fraud scheme that involved recruiting public employees — teachers, firefighters, municipal police officers and a state trooper — to obtain prescriptions for patients whom doctors never treated.
The prescriptions included compounded pain creams, scar creams, antifungal creams, libido creams and certain vitamin combinations. In exchange, the doctors would receive kickbacks from an out-of-state compounding pharmacy and pay co-conspirators.
Gaffney admitted to writing more than 200 unnecessary prescriptions for teachers, police and firefighters with the NJ Direct insurance plan. In return, Gaffney received more than $25,000 in cash and gifts, including dinners and bottles of wine, according to his Philadelphia-based attorney Michael Engle.
“Dr. Gaffney is extremely remorseful for his actions,” Engle said. “Dr. Gaffney recognizes his conduct was illegal and if he could take it back he would.”
Gaffney’s sentencing date is scheduled for Jan. 5.
Drug compounding, a process where a pharmacist mixes ingredients into a custom drug, is legal, but the resulting drugs are expensive. Recent federal prosecutions have shown here and elsewhere they are a target for fraud.
Federal subpoenas were issued in June to Atlantic City, Ventnor and Margate seeking information about potential fraud targeting public-employee prescription benefits.
A separate investigation led by Atlantic County Prosecutor Damon G. Tyner also is focusing on public-employee prescription fraud, including compounded medications.
Matthew Tedesco, a 42-year-old pharmaceutical representative from Linwood, pleaded guilty to health care fraud charges before Kugler for leading a conspiracy that netted him $11 million in profit in little more than a year.
In a plea deal with prosecutors, Tedesco and Robert Bessey, 43, of Philadelphia, also described recruiting public employees to obtain prescriptions for patients whom doctors never treated.
In exchange, the doctors would receive kickbacks from an out-of-state compounding pharmacy. Tedesco also recruited patients to request expensive, unneeded drugs without having seen a doctor, according to his plea.
Using preprinted prescription forms, the two men targeted medications with the highest possible reimbursement, and often sought 12 months of refills “without regard for the medical necessity,” according to the criminal information.
Both men are scheduled to be sentenced Dec. 4 and could face as many as 10 years in prison.
Former Atlantic City firefighter Michael Pepper, 45, of Northfield, entered a guilty plea also in August, along with Steven Robert Urbanski, 37, a pharmacological broker from Marlton, and Thomas J. Hodnett, 41, a pharmaceutical sales representative from Voorhees.
The trio served as recruiters in the conspiracy, according to court documents.
They could face as many as 10 years in prison and have sentencing dates scheduled for Dec. 5.