For Immediate Release

U.S. Attorney’s Office, District of New Jersey

NEWARK, N.J. – Two pharmacy executives and a pharmacist were arraigned today on charges of defrauding Medicare and TRICARE by submitting fraudulent claims for medically unnecessary prescriptions, Attorney for the United States Vikas Khanna announced. The pharmacy executives are also charged with paying and conspiring to pay illegal kickbacks.

William B. Welwart 69, of Staten Island, New York; Ethan B. Welwart, 35, of Bolivar, New York; and Gary Kaczka, 62, of Saddle Brook, New Jersey, are each charged in a 22-count indictment with conspiracy to commit health care fraud and wire fraud, and health care fraud. William and Ethan Welwart are additionally charged with wire fraud, conspiracy to violate the federal anti-kickback statute, and payment of illegal kickbacks. The defendants appeared today before U.S. District Judge Esther Salas and were each released on $250,000 bond.

According to the indictment:

From January 2017 to December 2020, the defendants operated pharmacies, including Apogee Bio-Pharm LLC in Edison, New Jersey. William B. Welwart was the CEO and owner of Apogee. Ethan B. Welwart was director of operations at Apogee and the purported owner of additional pharmacies used to perpetuate the scheme. Kaczka was a pharmacist-in-charge at Apogee. The defendants and others agreed to engage in a scheme to defraud insurance payors, including Medicare and TRICARE, by working with marketing companies to generate medically unnecessary prescriptions through a telemarketing and telemedicine scheme. The Welwarts and others also agreed to pay kickbacks to marketing companies in return for the marketing companies referring prescriptions for expensive medications to the pharmacies.

The marketing companies identified Medicare and TRICARE beneficiaries to target for expensive drugs and contacted the beneficiaries by telephone to pressure them to agree to try expensive medications, such as pain creams, scar creams, eczema creams, and migraine medication. The marketing companies then transmitted recordings of telephone calls with the beneficiaries, together with pre-marked prescription pads for particular drugs that would yield exorbitant reimbursements, to telemedicine companies. The marketers paid the telemedicine companies kickbacks for every beneficiary referred for a prescription, and the telemedicine companies paid doctors to approve the prescriptions. The marketing companies then directed the prescriptions to pharmacies, including Apogee, with which they had kickback arrangements. The pharmacies filled the prescriptions and sought reimbursement from federal health care benefit programs, including Medicare and TRICARE. The pharmacies, including Apogee, then paid a portion of each reimbursement to the marketing companies as a kickback. The defendants and their conspirators caused a loss to Medicare and other federal health care benefit programs of over $33 million.

The health care fraud and wire fraud conspiracy charges carries a maximum potential penalty of 20 years in prison; the health care fraud charges carry a maximum potential penalty of 10 years in prison; the wire fraud charges carry a maximum potential penalty of 20 years in prison; the charge of conspiracy to violate the Anti-Kickback Statute carries a maximum potential penalty of five years in prison; and the charges of payment of illegal kickbacks are punishable by 10 years in prison. All of the counts are also punishable by a fine of $250,000, or twice the gain or loss from the offense, whichever is greatest.

Attorney for the United States Khanna credited special agents of the FBI, under the direction of Special Agent in Charge James E. Dennehy in Newark; the U.S. Department of Health and Human Services Office of Inspector General, under the direction of Special Agent in Charge Naomi Gruchacz, and U.S. Department of Defense, Office of Inspector General, Defense Criminal Investigative Service, Northeast Field Office, under the direction of Special Agent in Charge Patrick J. Hegarty, with the investigation leading to the indictment.

The government is represented by Assistant U.S. Attorney Katherine M. Romano of the Health Care Fraud Unit and Barbara Ward, Senior Trial Counsel of the Asset Recovery and Money Laundering Unit, in Newark.

The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.


Updated September 18, 2023