Feldman Firm Obtains Sentence of Probation for Pharmacy Owner in Multi-Million Dollar Kickback Case Related to Dispensing “Footbath” Drugs

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Last week the Feldman Firm, along with esteemed local counsel, obtained a sentence of probation for the Firm’s client, the owner of a mail-in pharmacy in a federal Anti-kickback prosecution in the Eastern District of Missouri (St. Louis) involving more than Five Million dollars. The Department of Justice continues to vigorously investigate pharmacy and laboratory fraud, abuse, and kickbacks.

The pharmacy specialized in dispensing topical creams, oral medications, and antibiotic and antifungal drugs referred to as “foot bath” drugs. The topical creams and oral medications were intended to treat a variety of conditions such as dry skin, pain and muscle spasms. Those drugs included, among others, corticosteroids, lidocaine, topical NSAIDs, and dermacin prizopak (a local anesthetic). The “foot bath” drugs were designed to treat a variety of foot infections and foot pain and included oral antibiotic capsules, bottles of antibiotic solution, and tubes of antifungal cream. Patients were instructed to mix the capsules and the solution with warm water to soak their feet, then to apply the antifungal cream afterward. The foot bath drugs included but were not limited to Vancomycin capsules, Clindamycin 1 % solution, and Ketoconazole 2% cream.

After pharmacy benefit managers (PBM’s) initiated audits and the government executed a search warrant at the pharmacy seizing equipment, electronics, and records, a grand jury returned an indictment alleging a conspiracy to commit health care fraud, a kickback conspiracy, and the payment of kickbacks to marketers.

More specifically, with respect to the relationship between the marketers and the Firm’s client, the government alleged that the owner of the pharmacy paid kickbacks to marketers who referred patients to the pharmacy utilizing a variety of marketing tactics. Two of those methods are noteworthy. The first one involved telehealth consultations with physicians who would prescribe and order the drugs. Another involved a marketing strategy known as “doctor chase” which is not per se unlawful when a marketing organization faxes a prescription pad to the primary care physician of a patient with a note that the patient has requested the drug and, for that reason, seeks the doctors’ authorization to prescribe that drug for their patient. In this case, as in many others, the doctors signed those prescriptions authorizing the pharmacy to dispense those drugs for those patients.

Regardless of the tactics employed by those marketing organizations, the Firm’s client did not manage, supervise, or participate in those marketing campaigns. Nor was there evidence adduced at any proceeding that he knew about the particulars of any marketers’ “doctor chase” model or knew that certain telehealth relationships were potentially non-compliant.

And even though the government alleged health care fraud, the client entered a resolution which avoided both a fraud charge and a conspiracy charge. Instead, the client resolved the case by agreeing to a plea which was limited to substantive violations of the federal Anti-Kickback statute under Title 42 U.S.C. Section 1320a-7b. This is because the case rested on the payments to marketers and the structure of those payments. Ultimately, as seen in many kickback cases involving marketers, the structure of payments is what led to the client’s conviction.

At sentencing, the Firm emphasized some of the salient Section 3553(a) factors including the history and characteristics of the client, his standing in the local community, his acts of generosity and charity, and his devotion to his church, among others. The court then sentenced the client to probation.

The Firm has a substantial amount of experience representing pharmacies and pharmacists and representing sales and marketing professionals in investigations and prosecutions involving allegations of kickbacks. The federal Anti-Kickback statute is a complex statute with safe-harbors, exceptions, and varying case law depending on the geography of the alleged conduct. The Firm regularly litigates these issues, issues related to advice of counsel in kickback cases, and issues related to restitution in kickback cases.

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Article Published by Health Care Fraud defense attorney Andrew Feldman

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Health Care Fraud defense attorney, Andrew S. Feldman, published an article in the ABA Health Law’s monthly E-Source publication, A Cardiologist’s Recent Acquittal Should Send a Message With Respect to Future Medical Necessity Prosecutions. A link to the article is included here.

 

As reinforced throughout the article, the Government prosecuted a cardiologist for health care fraud related to a cardiologist’s decision to place heart stents in particular patients suffering from coronary heart disease. In such cases, a vigorous Health Care Fraud defense is critical. Indeed, the Government, in general, has increased the quantity and scope of medical necessity prosecutions. Simply put, a medical necessity prosecution is, simply put, a prosecution based on the theory that the service provided by the individual health care provider or physician (e.g. cardiologist, dermatologist, urologist, dentist, or spinal surgeon) was medically unnecessary. Whether or not a service or good is reasonable and necessary dictates whether the Government or a commercial payor will pay the physician’s tab. What the Government is saying is that you submitted your bill but we do not think we should pay because you are asking us to pay for services you say you performed but which we claim are unnecessary.

 

This is nothing new. What is new are prosecutions like the prosecution against Dr. Richard Paulus. A prosecution that, candidly, should have been declined at the investigative phase but instead prosecutors doubled down with a False Claims Act prosecution without a whistleblower on the exact same facts. The centerpiece of the Paulus indictment was that Dr. Paulus had performed cardiac stent procedures which were unnecessary to justify billing for these expensive cardiac procedures. In civil and criminal health care fraud land though, there must be a lie. What was the lie? According to the Government, it was the amount of blockage – the degree to which a heart valve is blocked and cannot circulate blood to the rest of the body – recorded by Dr. Paulus after his interpretation of patient angiograms.  One problem (and there were a few) with that theory in Paulus’ case was that “expert” opinions on the degree and percentage of that blockage were all over the map – 20%, 40%, 70%, 80%. The Government experts also disagreed with one another on this critical issue.  There was no clear financial motive, there was no evidence of destroying or concealing evidence, there was no evidence that Dr. Paulus recorded or directed others to record false patient symptoms to justify any of the cardiac stents. As the district court underscored in the Order entering a judgment of acquittal following trial – the health care fraud statute is “not intended to penalize a person who exercises a health care treatment choice or makes a medical or health care judgment in good faith simply because there is a difference of opinion regarding the form of diagnosis or treatment.” 

 

Hiring a Health Care Fraud defense attorney is an important decision. The Feldman Firm would welcome the opportunity to assist you if you are under investigation for or if you have been accused of a health care fraud offense. 

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Charge Bargaining in AntiKickback Case Involving Bribes for Test Referrals

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Charge Bargaining in Anti-Kickback Case Involving Bribes for Test Referrals to Clinical Laboratory

The headline in the case of United States v. Dennis Aponte, (D.N.J. 2014) is nothing new: a physician received illegal kickbacks in exchange for referring patient blood specimens to a diagnostic laboratory, Biodiagnostic Laboratory Services, LLC, which were ultimately billed to government payers – Medicare and Medicaid. The lab earned more than $200 million in illegal revenue from a kickback scheme involving sham lease agreements, sham services agreements, and other kickback arrangements with physicians. In fact, the lab used a sales and marketing entity, in many cases, as a “middle man” or “consultant” to deliver cash payments to physicians. Some of those discussions were intercepted by audio recordings or were provided to the government in the form of text messages. Thus far, there is nothing atypical about this case.[1]

What is interesting and impressive about this case, however, is that government never charged the defendant-physician with a violation of the health care fraud statute or the Anti-Kickback statute. Instead, counsel for the defendant-physician negotiated a plea to a one count Information alleging a violation of the Travel Act. (18 U.S.C. Section 1952).

But, why would the parties agree to a Travel Act plea?

The government resurrected the use of the Travel Act as an alternative method of prosecuting certain forms of commercial bribery not covered by the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Yetthe government seldom uses the Travel Act to prosecute violations of the Federal Anti-Kickback Statute.

Stated simply, defense counsel successfully negotiated a sweet-heart deal.

First, the arrangement permitted the physician to plea to a Travel Act charge and to avoid a plea to a more serious criminal charge of health care fraud with a statutory maximum of 20 years.

Second, the physician avoided mandatory exclusion under the health care fraud statute.

Third, although there are at least 16 grounds for exclusion, including a violation of the Anti-Kickback Statute, or a “criminal offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct” pursuant to OIG’s permissive exclusion authorities, OIG-HHS may encounter some difficulties showing that the Travel Act violation in this case constitutes an offense triggering permissive exclusion. [2] Even if they did, the physician might be able to negotiate an Integrity Agreement with OIG.

In sum, the plea agreement in Aponte reinforces that, whenever possible, clients should take advantage of charge-bargaining in health care fraud cases to minimize the likelihood of a potentially lengthy sentence and to avoid automatic exclusion from federal health care programs.

 

 

 

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