Final Medoc Defendant Sentenced in $4.4 Million Prescription Kickback Scheme

The final defendant in the Medoc kickback conspiracy was sentenced yesterday to 10 months in federal prison for his role in a prescription kickback scheme that cost federal insurance programs more than $4.4 million, announced U.S. Attorney for the Northern District of Texas Leigha Simonton.

The first indictment was filed in January 2020. Those sentenced include:

• Kevin Douglas Kuykendall, cofounder of Medoc Health Services, sentenced to 36 months in prison and ordered to pay $4.4 million in restitution for conspiracy to solicit and receive illegal kickbacks
• Sabrina Burmester Kuykendall, Kevin's wife, sentenced to 36 months' probation and ordered to pay $4.4 million in restitution for conspiracy to solicit and receive illegal kickbacks
• Mark David Schneider, cofounder of Medoc Health Services, sentenced to 15 months in prison and ordered to pay $4.4 million in restitution for conspiracy to solicit and receive illegal kickbacks
• Michael Ray Schneider, sentenced to 14 months in prison and ordered to pay $4.4 million in restitution for conspiracy to solicit and receive illegal kickbacks
• Trenton Lynn Moody, sentenced to 12 months and 1 day in prison and ordered to pay $257,500 in restitution for conspiracy to solicit and receive illegal kickbacks
• Cuong "Michael" Nguyen, founder of Total RX pharmacy, sentenced to 10 months in prison for misprision (concealment) of a felony and paid in restitution in the amount of $591,142
• Moky Chung, sentenced to 10 months in prison and ordered to pay $150,000 in restitution for conspiracy to solicit and receive illegal kickbacks

According to court documents, Medoc conspirators knowingly solicited illegal kickbacks from Total RX, a Rowlett pharmacy that was struggling to stay afloat.

In December 2014, Medoc executives Kevin Kuykendall and Mark Schneider approached Total RX owner Cuong Nguyen with a proposal: Nguyen could convert Total RX from an infusion pharmacy into a compounding pharmacy and begin filling prescriptions for Medoc. In return for referring lucrative prescriptions to Total RX, Medoc would receive a 50 percent commission.

The initial agreement only covered prescriptions covered by private insurers and specifically excluded any prescriptions paid by federal insurance programs, such as Medicare, Medicaid, Tricare, and Worker's Compensation. At the time, Kuykendall and Schneider acknowledged that Medoc could not get paid on prescriptions paid by federal insurance programs. (They later admitted they knew of the federal Anti-Kickback Statute (AKS), which makes it illegal to receive remuneration in return for the referral of prescriptions funded by federal insurers.)

However, in early 2015, Kevin Kuykendall directed Nguyen to enter into a sham employment agreement with Mark Schneider's brother, co-defendant Michael Ray Schneider, which would grant him a 45 percent commission on all prescriptions covered by federal health insurance that were referred by Medoc to Total RX.

Though nominally an "employee" of the pharmacy, Michael Schneider would be neither trained nor supervised Total RX. He would not work out of the Total RX offices, would not perform duties at Total RX's behest, and would rarely communicate with Total RX. In court documents, multiple defendants admitted that the employment agreement between Michael Schneider and Total RX served as a way to "paper up" the payment of illegal kickbacks on prescriptions paid out by federal insurers.

Defendants Kevin Kuykendall, Mark Schneider, Moky Cheung, and Trenton Moody then created various entities, including "Barolo Partners," to receive and distribute Mr. Schneider's purported salary payments. A portion of the money deposited into the Barolo account was eventually dispersed to K&S Biotherapeutics, an entity controlled by the Kuykendalls, and to Radiux Resources, an entity controlled by Moky Chung.

Beginning in August 2015, Medoc entered into a similar scheme with Doctors Specialty Pharmacy (DSP). In return for Medoc referring prescriptions to DSP, the pharmacy paid a hefty commission to the conspirators via Vantage Investment Partners, an entity they created for that purpose. The money was disguised as payment for "marketing services," but no marketing occurred.

In total for the various schemes, the conspirators submitted claims for $10,448,856.90. and received payment of $5,837,219.70.

In 2019, the U.S. Attorney's Office for the Northern District of Texas intervened and filed its own complaint in a civil qui tam lawsuit that relator Mark Adams brought in 2017 pursuant to the False Claims Act, captioned United States ex rel. Mark Adams v. Medoc Health Services, L.L.C. et al., Civ. No. 3:17-CV-2977-M (N.D. Tex., Dallas Division). Under the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of the recovery. As part of the resolution of these civil claims, Kevin and Sabrina Kuykendall paid $4 million, and Trenton Moody paid $600,000 to the United States. In addition, Mark and Michael Schneider stipulated to entry of a $3 million civil judgment; Cuong "Michael" Nguyen to a $2.25 million civil judgment; and Moky Cheung to a $300,000 civil judgment.

FBI, HHS-OIG, Department of Labor, and the Texas Attorney General's Office Medicaid Fraud Control Unit, conducted the investigation. Assistant U.S. Attorneys Donna Max, Doug Brasher, Nick Bunch (fmr), and Matthew Smid (fmr) prosecuted the criminal case. Assistant U.S. Attorneys Kenneth Coffin, Richard Guiltinan, Beverly Chapman, Katie Carr Jacobs, and Clayton Ray Mahaffey (fmr) handled the civil suit.