Details of compounding drug fraud case and blood-collection kickbacks found in Kauffman affidavit
The warrant to search Dr. James Kauffman’s office gives insight into a multimillion dollar prescription fraud case that involved several public employees.
There is also information about kickbacks Kauffman may have gotten from a blood collection operation.
To date, 19 people have pleaded guilty in federal court to compounding fraud, including firefighters from Margate and Atlantic City, and a Margate doctor.
The compounding cases represent about $50 million in fraudulent charges.
While the accompanying public charging documents have not named the agencies involved, the warrant specifies a shell company known as Boardwalk Medical LLC, which was created by a Northfield pharmaceutical representative, William Hickman.
Working as a go-between, Boardwalk facilitated the compounding scheme Kauffman profited from, according to the warrant.
A request for comment was left with Hickman’s wife on Sunday. She initially denied Will Hickman lived there, although their address and his name are used in the affidavit. There has been no subsequent response from Hickman.
The warrant says compounded meds typically cost just $10 to blend, but are billed at as much as $6,000 per dose.
The warrant alleges prescriptions were filled by Central Rexall Drug Inc. in Hammond, Louisiana, with Hickman’s Northfield company, Boardwalk Medical, setting up the transaction as a “recruiter.”
The Louisiana pharmacy, which opened in 1896 and once was the oldest business in Hammond, is listed as having closed in February 2017. An employee had complained online the company was unstable and struggling financially in 2016, laying off employees.
Boardwalk got 40 percent of the profit, with Central keeping 60 percent, according to the warrant. Patients and doctors each also got a kickback, according to the affidavit, although amounts are not specified.
Records, subpoenaed from prescription administrator Express Scripts prior to the search of Kauffman’s office, indicate the doctor prescribed compounded meds more than 750 times – 650 times to Central Rexall – between Jan. 1, 2015 and June 1, 2016.
Most compounds written by Kauffman were for vitamins or health supplements, according to the warrant. Those are not typical prescriptions for an endocrinology practice.
A cooperating witness, cited in the warrant, told authorities she also was solicited by Hickman, but turned him down. Kauffman, however, still made off-the-books cash payments to her, she had told authorities.
The warrant alleges Kauffman also benefitted financially from an in-house blood collection operation.
A satellite site for a North Jersey blood diagnostic company, Infinity Labs, was quartered within his own medical office and paid rent, a set-up that is not legal unless the lab is sequestered in its own office with a door.
Kauffman also allegedly got kickbacks from Infinity, although no amount was cited in the warrant.
The warrant also alleges Kauffman often unnecessarily ordered an expensive diagnostic heart test in exchange for kickbacks. As an endocrinologist, Kauffman primarily treated diabetes and thyroid conditions, not cardiac conditions.
A review of Kauffman’s phone records showed he routinely phoned principals at both Infinity and the Boston Heart Test business, which is in Framingham, Massachusetts.