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.