At the end of 2024, a New Jersey jury partially acquitted Chad Beene, a former National Sales Manager for Main Avenue Pharmacy, in a conspiracy and kickback lawsuit. Federal prosecutors alleged that Beene and his co-conspirators created an illegal scheme by which they paid several marketing companies illegal kickbacks for obtaining prescriptions of “medically unnecessary” and “exorbitantly priced” compounded medications.
While working for Main Avenue Pharmacy, Beene cleaned up pre-prepared prescription pads and developed marketing plans. However, he had no prior health care work experience.
According to the government, Main Avenue Pharmacy allegedly engaged in fraudulent sales of compounded creams used to treat chronic pain, resulting in an alleged $35 million False Claims. The government alleged that the defendants figured out which compounds were paying the highest reimbursements by having its pharmacists engage in a practice known as “test billing,” where the pharmacist would submit a phony claim to insurance to see which compound would generate the highest reimbursements. Main Avenue also received tips from other pharmacies and marketing companies about which compounds were generating the highest reimbursements.
Once Main Avenue identified lucrative formulas for compounds, it would create large easy-to-use prescription pads with those formulas on it. The prescription pad included check boxes for doctors to select a particular compounded formula, which increased the likelihood that the doctor would not alter the high-paying formula. There was also a place to select up to a dozen refills and a box authorizing the pharmacy to alter the ingredients itself in case an insurer wasn’t covering a particular compounded medication.
The government alleged that most of the doctors who signed the compounded medication prescriptions did not without examining – or even speaking to – the patient. Once the prescription was signed, it would be returned to the marketing company who submitted the prescription to Main Avenue. The prescription would then be filled and submitted to health insurance (including federal programs) for reimbursement. Kickbacks would allegedly be paid by Main Avenue to the marketing companies based on the volume of referrals and reimbursement amounts received.
The trial lasted three weeks, with the jury deliberating for five days. One of the key components to the case may have been a “good faith” jury instruction, which permitted the jurors to consider whether Mr. Beene understood that certain business practices – including commission-based payments to marketers – may be considered illegal.
Despite his co-conspirators pleading guilty and subsequently testifying against him, Mr. Beene was found not guilty on six of the counts levied against him and the jury was unable to reach a verdict on nine additional counts.
“The case against Mr. Beene highlights the importance of carefully examining the intent behind business practices, especially in highly regulated industries like healthcare,” said Michael Wynne of Gregor Wynne Arney, who represented Mr. Beene. “Our hope is that this case sheds light on the complexities of compliance and the need for clear guidelines in this field,” Wynne added. “It also underscores that defendants deserve a fair trial and the opportunity to demonstrate their good faith.”
The case also serves as a reminder that while the government may win a majority of the cases it engages in; it does not win every case – particularly those taken to trial. This may be more apparent in situations where the regulations are complex, and intent cannot easily be proven.