Hootan Melamed has long been accused of masterminding a kickback and fraud scheme that involved a number of accomplices in a conspiracy to refer patients to his pharmacies to fill prescriptions, resulting in close to $200 million in fraudulent workers compensation billings. He was indicted in federal district court for the Southern District of California in 2016.

He allegedly operated and was the de facto owner of New Age Pharmaceuticals Inc., a compounding pharmacy located in Beverly Hills, California. He also had business interests in other pharmacies, including RoxSan Pharmacy Inc., Concierge Compounding Pharmaceuticals, Inc , Alexso, Inc. and Portland Professional Pharmacy, These compound pharmacies supplied compound creams and other custom pharmaceuticals to patients.

Prosecutors alleged that “It was the goal of the conspiracy to fraudulently obtain money from health care benefit programs by submitting claims for prescription pharmaceuticals and DME that were generated through a secret pattern of bribes to doctors (and those acting with them and on their behalf), to induce the doctors to refer patients to particular pharmacies and DME providers, in violation of the doctors’ fiduciary duty to their patients.”

Melamed “paid doctors to recommend certain goods and services and refer workers compensation patients to specific providers for those goods and services, including to pharmacies in which Melamed had an interest for prescription pharmaceuticals.”

The scheme has already resulted in charges and convictions against several co-conspirators, including anesthesiologist Dr. Amir Friedman, medical marketer John Pangelian, Dr. Phong H. Tran, Jean Picard, and Jonathan Pena.

Phong Hung Tran was the owner of Coastline Medical Clinics in Southern California. Dr. Tran was previously a licensed physician in the State of California, but had his license suspended after his arrest and indictment by the San Diego District Attorney’s Office in January 2016.

On November 2, 2020 a plea agreement was reached between Melamed and federal prosecutors and filed with the court. However, that document as well as the Pre-sentencing Report remain sealed by the Court, and thus the terms are unavailable to the public.

Melamed was sentenced on March 29, 2021 to six months in prison, followed by three years of supervised probation.

Prior to sentencing, a document from the “Pharmacy and Worker’s Compensation Industry” was filed in the case, objecting to the “rumored” Plea Agreement recommendation of only 18 months in prison. That document points out that any “sentence less than 7 years would be a huge travesty and mockery to the industry as so many people in the same industry have been watching this case very closely.” That letter goes on to note that this was Melamed’s second felony, and that he lives in a “12 million 15,000 sqft mansion that he put under his mother’s name to shelter assets from his wife during a divorce and now the court system.”

One would speculate that the Plea Agreement offered leniency in exchange for cooperation in the prosecution of many others. This speculation would be consistent with both the sealed plea agreement and pre-sentencing report, and lenient sentence.