BALTIMORE, Md. (WRIC) — A doctor who treated patients across Maryland, Virginia and DC will pay a $3.1 million settlement after he pleaded guilty to running multi-million dollar kickback schemes with multiple pharmacies.
Dr. Thomas Raley, Jr., 53, of Baltimore, treated patients in several states and has practiced medicine since 1998, specializing in back and spinal pain.
Beginning in 2013, Raley — along with co-conspirator Seth Meyers, an attorney — approached pharmacist Michael Beatty, who ran a compounding pharmacy in Maryland, to set up an illegal scheme to make all of them rich.
Essentially, Raley agreed to write prescriptions for compounded medications — drugs with custom formulas for those with allergies or unique medical needs — and send them to Beatty’s pharmacy, receiving a cash kickback for each filled prescription, which insurers would pay a premium for.
But Dr. Raley knew that arrangement was illegal, so he had Myers sign on to a “marketing agreement” with Beatty’s pharmacy which ensured that he was paid 50% of the profits from each prescription Raley wrote — and split the kickback with Raley and other doctors in his practice.
Many of these prescriptions were filled by government-funded insurance, such as Tricare (the insurance used by armed services members), Medicare and Medicaid, which were willing to pay the high prices demanded for unnecessary custom drugs.
But Raley’s relationship with Beatty’s company began to sour when they were bought out and refused to hike his kickback up another 10%, so he set out to start his own pharmacy, using Myers and Beatty as a front, because in Maryland, doctors are forbidden from owning or investing in pharmacies.
That scheme never got off the ground, though they did purchase office space and equipment for the business. Instead, Myers approached Mohamed Abdalla, owner of a series of pharmacies in Northern Virginia.
He ultimately signed a similar “marketing agreement'” to the one with Beatty, but this time kicking back 80% of the profits to Dr. Raley and his co-conspirators.
Through a front company, Raley began expanding his take of the illicit profits, hiring his own wife at $200,000 a year and having the company pay for her to lease a Mercedes. Raley also took a $280,000 loan (which was never repaid) to purchase an apartment building in Baltimore and had the company pay for his children to attend private school.
However, Abdalla eventually soured on them as well, demanding in 2016 that he be allowed to keep a higher percentage of the profits. In response, Myers and Raley sued him for the money they claimed to be owed under the kickback contract.
Their partnership, too, dissolved when later that year, Raley told Myers they could no longer work together.
How to Pay
Dr. Raley already agreed to pay $3.1 million in restitution for his role in the scheme, but in a letter filed by his attorneys before his criminal sentencing, they argued that he had played a minor role in the conspiracy, downplaying his involvement.
“Myers and Abdalla readily entered into the illegal arrangements, largely acted without input from Dr. Raley and profited handsomely from the kickback scheme,” they wrote.
They also spent much of the letter complaining that Abdalla had cheated Raley even as he was cheating the government.
“Abdalla concealed his ownership of Royal Care Pharmacy and at least one additional pharmacy from Dr. Raley and hid the fact that he was filling Dr. Raley’s prescriptions at Royal Care to avoid paying him commissions,” they complained.
Ultimately, they called on the judge to impose a sentence of probation, which would have kept the doctor out of jail altogether.
But the prosecution took a much harsher line, pointing out that without Raley, the scheme never would have been possible.
“The defendant committed a serious offense that harmed federal health benefit programs devoted to military members and their families, the retired, and the poor,” they wrote. “In doing so, the defendant, who was already a wealthy man, chose greed over the public.”
They also argued that he was deeply involved in tracking the money generated by the scheme, pointing to his initial role in setting up the arrangements and careful guarding of his share of the illicit profits.
“It was he that sought a kickback relationship first with Fallston and then with Abdalla,” they wrote. “And it was he that demanded monthly compound dispensing reports so that he could audit the pharmacies.”
They concluded by calling for a sentence of four years in prison. The judge was evidently more convinced by their argument than by that of the defense, imposing a sentence of three years — more than anyone else named in the scheme except Abdalla, who was sentenced to four years.