Insurers Lost $2M in Pain Cream Scam, Prosecutors Say

A former medical supply executive in Arkansas who conspired with physicians to dispense pain creams and patches to workers’ compensation claimants defrauded private insurers out of about $2 million and the federal government out of $3.9 million, federal prosecutors say.

Amanda Dawn Rains, 39, pleaded guilty to a single conspiracy charge last Wednesday, according to the U.S. Attorney’s Office for the Western District of Arkansas. The U.S. Attorneys Office said in press releases that she defrauded both the government’s Office of Workers’ Compensation Programs and private insurers from 2011 to 2017.

Rains supplied physicians with pain creams and patches that were dispensed to injured workers and billed the government and insurers from 15 to 20 times the actual costs. The physicians who prescribed the medications were typically paid half of the profits, the U.S. Attorney’s Office said.

Dr. Robert Dale Bernauer, who ran a clinic in Lake Charles, La., pleaded guilty to fraud charges related to his role in the conspiracy on July 30. He has paid $1,025,273 in restitution to victims in the case, but has not yet been sentenced, prosecutors said.

The U.S. Attorney’s Office said Rains was hired in 2013 by a medical supply and billing company in Rogers, Arkansas and continued the fraud scheme she had started two years earlier. She handled all of the paperwork necessary to bill the government and insurers for the pain creams and patches dispensed to injured workers, responded when insurers questioned the charges and shipped the medications to physicians and clinics.

Prosecutors did not identify Rains’ employer. Court documents related to the case are sealed.

Charging papers stated that the scheme cost the government $3.9 million. Losses to private insurers are still being calculated, but include almost $2 million in payments for medications dispensed by Bernauer alone, the press release said.

Rains may be sentenced to up to five years in prison for the single felony to which she pleaded guilty, but she won’t be sentenced until the U.S. Probation Office completes a pre-sentence investigation report, the U.S. Attorney’s Office said.

Topical pain creams have been a cross driver for workers’ compensation insurers for years. The Workers’ Compensation Research Institute reported in May that payments for dermatological agents increased by 10 percentage states in five states, Connecticut, Kansas, Louisiana, South Caroline and Virginia from 2017 to 2021. Physician dispensing accounted for the majority of payments for dermatological agents and contorted to the rapid growth, WCRI said.

Schemes involving topical pain creams have also been keeping prosecutors busy for years.

On Sept. 24, 72-year-old Virginia physician Leonard Rosen pleaded guilty to a role in a $1.8 million health health care fraud scheme that involved medically unnecessary compounded pain and scar creams.

On Sept. 17, a federal grand jury in New Jersey indicted a Christopher Gualtieri, 48, with conspiracy to commit health care fraud. He allegedly recruited co-workers to submit fraudulent claims for medications, including pain and scar creams that cost a health insurer $4 million.

On July 23, the U.S Attorneys Office in New Jersey announced that pharmaceutical sales representative Carmine A Mattia Jr., 60, was indicted on health care fraud charges for a compounded medication scheme that defrauded an employee benefit plan.

On May 13, federal prosecutors in Pensacola, Fla. announced that 35-year-old pharmacist Andrew E. Fisher was sentenced to two years in prison for after billing Tricare $4.8 million for compounded pain and scar creams and wellness vitamins.