Margate doctor pleads guilty in multimillion-dollar health care fraud case

A Margate doctor admitted Friday to signing prescriptions for expensive and unnecessary compound medications as part of a health care fraud conspiracy that costs taxpayers millions of dollars.
John Gaffney, 55, of Linwood, pleaded guilty before U.S. District Judge Robert B. Kugler in Camden federal court to an information charging him with conspiracy to commit health care fraud.
Gaffney’s signature appeared on more than 200 prescriptions for the compounds, according to the allegations. He could face up to 10 years in prison when he is sentenced, and owes restitution of nearly $25 million.
“Dr. Gaffney sold phony prescriptions for unnecessary medications to patients he never examined as part of a sophisticated scheme to defraud a prescription benefits program available to New Jersey state and municipal employees,” acting U.S. Attorney William Fitzpatrick said. “In an era when many Americans work hard to maintain affordable health insurance for their families, Dr. Gaffney and his conspirators criminally exploited the health care system and left New Jersey tax payers on the hook for approximately $25 million in losses.”
From January 2015 through April 2016, Gaffney’s conspirators persuaded individuals in New Jersey to obtain expensive and medically unnecessary compounded medications from an out-of-state pharmacy, identified only as the “Compounding Pharmacy.” The conspirators learned that certain compound medication prescriptions – including pain, scar, antifungal, and libido creams, as well as vitamin combinations – were reimbursed for thousands of dollars for a one-month supply.
They found that some New Jersey state and local government and education employees, including teachers, firefighters, municipal police officers, and state troopers, had insurance coverage for these particular compound medications under the State Health Benefits Program manager, named only as the “Pharmacy Benefits Administrator.” The Pharmacy Benefits Administrator would pay prescription drug claims and then bill the state.
Gaffney would sign prescriptions for these compounded medications without  even seeing the “patients” or evaluating whether the compounds were medically necessary. He also signed a blank prescription form that others in the conspiracy copied and used to submit fraudulent prescriptions.
“Doctors play a trusted and vital role in the American healthcare system. John Gaffney broke this trust when he wrote and accepted payment for prescriptions that were medically unnecessary,” said Michael C. Mikulka, special agent-in-charge, New York Region, U.S. Department of Labor, Office of Inspector General. “This fraudulent conduct creates risks for patients and undermines the system. The U.S. Department of Labor Office of Inspector General remains committed to combating illegal prescription drug schemes, like compounded medication fraud, particularly when they victimize programs administered by the Department of Labor. We will continue to work with our law enforcement partners to aggressively investigate allegations of this nature.”
Gaffney received payments of thousands of dollars in cash and other benefits to reward him for his role in the scheme.
“This is another demonstration of the FBI’s commitment to aggressively pursue healthcare fraud, along with our federal, state, and local law enforcement partners and the U.S. Attorney’s Office,” said Special Agent in Charge Timothy Gallagher of the Newark FBI Field Office. “We will not tolerate unscrupulous healthcare professionals who are entrusted with providing honest services to the citizens of New Jersey.”
As part of his plea agreement, Gaffney must forfeit $25,000 in criminal proceeds and pay restitution of at least $24,956,435.08.
Five other conspirators – Matthew Tedesco, Robert Bessey, Michael Pepper, Thomas Hodnett, and Steven Urbanski – pleaded guilty in August 2017 and await sentencing.

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