Many people – physicians and business people – engaging in arrangements involving sophisticated federal and state anti-kickback issues and self-referral issues, often simply point to someone else who is doing what they claim is the same thing, as if that makes it acceptable.
Tag: pharmaceutical
Compounding pharmaceuticals, specific drugs for specific patients, offers tremendous benefit. The problems arise when the benefit is for the prescribing physician.
Former CEO Michael Babich pleaded guilty last week to charges related to the plethora of kickback allegations surrounding Insys Therapeutics, Inc., and its fentanyl drug, Subsys.
Ride along while Mark discusses the expanding case involving Insys Therapeutics and kickbacks paid to induce prescription of its drug, Subsys.
The federal Anti-Kickback statute makes it illegal to receive anything of value for the referral of federal health care program patients. How are you managing this potential pitfall?
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss
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On October 25, 2017, another physician, Jerrold Rosenberg, M.D., pleaded guilty to charges related to the plethora of kickback prosecutions emanating from Insys Therapeutics, Inc., and its fentanyl drug, Subsys.
Couch and Ruan Sent to Prison
In February of this year, I wrote in my post Pain Medicine Doctors Alleged to Have Received $115,000 in Kickbacks … Plus $40 Million in Illicit Profit, about the cautionary tale of two Mobile, Alabama pain medicine doctors, Drs. John Couch and Xiulu Ruan, both then in the midst of their federal court trial for, as was then alleged, receiving $115,000 in kickbacks from Insys in connection with Subsys.
Among the allegations:
• That Couch and Ruan prescribed, and also sold through their owned pharmacy, large quantities of Subsys, based on misleading diagnoses, defrauding payors.
• That their profit of $40,000,000 from dispensing Subsys and other controlled substances was an illicit profit from a “pill mill.”
• That they received “speaking fees” from Insys based on the number of Subsys prescriptions they wrote.
Subsequently, Couch and Ruan’s trial moved forward to guilty verdicts and then to sentencing: Crouch was sentenced to prison for 240 months and Ruan received an even stiffer sentence, 252 months behind bars.
Neither of the Mobile, Alabama physicians currently reside in the state: Dr. Couch passes (or, does) time at the Federal Correction Institute in Forrest City, Arkansas, while Dr. Ruan enjoys the view from behind bars at the Federal Correction Institute in Oakdale, Louisiana.
In addition to their lengthy prison sentences, the duo was ordered to make restitution of $6,282,023.00 to Medicare, $3,649,092.97 to Blue Cross/Blue Shield of Alabama, $2,285,170.70 to Tricare, and $1,695,929.00 to United Heath Group.
Fanto, Seth, and Gingerich Indicted
In my post dated September 5, 2017, Drugs, Sentencing, and Lock (and Roll on to Another Kickback Prosecution), I wrote about criminal charges brought by the State of Arizona against three pain medicine physicians, Steve Fanto, M.D., Nikesh Seth, M.D., and Sheldon Gingerich, M.D.
The allegations: That the physicians collected sham educational “speaker fees” in exchange for writing prescriptions for Subsys.
The criminal complaint claims that from March 2012 to April 2017, more than $33 million, or 64 percent of Subsys sales in Arizona, came from prescriptions written by Fanto, Seth, and Gingerich.
In additional echoes of the Couch and Ruan prosecution, it was alleged that Drs. Fanto, Nikesh, and Gingerich gave insurers false and misleading information, including that patients had cancer when they did not, to obtain prior authorization for Subsys prescriptions.
Rosenberg Pleads Guilty
And now, in the most recent echo of Subsys “addiction” (addition, that is, to illegally gained money), Jerrold Rosenberg, M.D., a Providence, Rhode Island physiatrist, pleaded guilty last week to federal charges that he committed healthcare fraud and conspired to receive kickbacks in the form of “speakers fees” from Insys in order to induce him to prescribe Subsys.
In their case against Dr. Rosenberg, the United States Attorney General’s office alleged that between 2012 and 2015, he entered into an illegal scheme to take kickbacks from Insys. Specificially the payments were disguised as speaker’s fees from Insys. The “fees” were then a major factor in Rosenberg’s decision to prescribe Subsys to patients.
In an echo of the charges brought against Drs. Couch and Ruan, it was also alleged that Dr. Rosenberg upped his prescriptions of Subsys by fraudulently representing to insurers that his patients suffered from cancer pain when they did not.
Dr. Rosenberg is set to be sentenced to prison in January. Pursuant to a plea deal, the now 63 year old physician could spend up to the next 15 years in prison, perhaps actually a life sentence.
He also agreed to pay $754,736 in restitution to healthcare benefit programs.
Insys Executives Indicted
Just so that you don’t think that physicians were the only targets of Insys/Subsys related prosecutions, in December 2016, the federal government indicted a slew of now-former Insys executives for conspiracy to commit racketeering, mail and wire fraud, and conspiracy to violate the anti-kickback law, relating to what the U.S Attorney alleges was a nationwide conspiracy to bribe medical practitioners to unnecessarily prescribe Subsys and defraud payors.
The indicted executives are Michael L. Babich, the former CEO and President of Insys Therapeutics, Alec Burlakoff, the former Vice President of Sales, Richard M. Simon, the former National Director of Sales, Sunrise Lee and Joseph A. Rowan, both former Regional Sales Directors, and former Vice President of Managed Markets, Michael J. Gurry. Each pleaded not guilty to the charges.
Insys as Target
And, the company itself, Insys Therapeutics, Inc., has already paid $9.45 million to resolve state level investigations into the kickback-related affairs.
The Federal Anti-Kickback Statute and Other Prohibitions
In general terms, the federal Anti-Kickback Statute (“AKS”) prohibits the offer, demand, payment, and acceptance of remuneration—that is, of anything of value—for referrals
The federal government, and many courts, interpret the AKS to apply even when an arrangement may have many legitimate purposes; the fact that one of the purposes is to obtain money for the referral of services or to induce further referrals is sufficient to trigger a violation of the law.
State laws differ in their treatment, scope and interpretation, but generally contain similar provisions barring remuneration for referrals, sometimes expressed as anti-kickback or fee-splitting prohibitions.
In addition, federal laws such as wire fraud statues and the Travel Act turn what are “simple” violations (a huge simplification!) of state laws into federal criminal offenses. The federal Controlled Substances Act permits prescribing and dispensing only for legitimate purposes, not in respect of “pill mill” and other massive prescribing activities. Additionally, the federal statute of healthcare fraud makes it a crime to defraud a healthcare benefits program, including a commercial insurer.
The Takeaways for You:
1. Money: The are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in pharmacies and the direct dispensing of pharmaceuticals.
2. Structure: But any deal must be structured in compliance with the federal Anti-Kickback Statute, the Controlled Substances Act, Stark, and numerous other federal laws, as well as with various state law counterparts and other restrictions. Your investment in structuring things correctly is an investment in yourself and your jail-free future.
3. Compliance Auditing: No matter how well structured, it’s essential that you engage in periodic compliance audits coordinated through legal counsel. Laws change and actual behavior impacts all of the structure and planning. Even the best planning can be made worthless if illegal conduct takes place within the context of what was planned to be a proper structure.
4. Investigations: If you learn that you (or any person or entity connected to the operation) are under investigation, immediately engage a team of experienced healthcare attorneys and criminal defense counsel. Many potential prosecutions are resolved at this stage.
5. Indictment and trial: Again, immediately engage a defense team of healthcare and criminal defense counsel.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss
As I comment often, the federal Anti-Kickback statute makes it illegal to receive anything of value for the referral of federal health care program patients.
I’m on my way to work. The speed limit on this road is 40. I’m not going to tell you how fast I’m going, but I will say that I’m going with the flow of traffic.
For argument’s sake, let’s assume what you already think: we’re all going a lot faster than 40 mph. Let’s also assume a policeman pulls over the guy in the silver Honda in front of me.
Do you think that Mr. Honda Driver will be successful arguing his way out of a ticket by exclaiming, “but, officer, everyone is speeding!”
Nope, that’s not going to work.
Even if that sort of argument were to work later in front of a judge, Mr. Honda Driver is still going to spend his day in court, and, depending on how far he’s willing to fight until he settles or gives up, hire a “speeding ticket defense lawyer.” And, then there’s the cost of increased car insurance when the ticket hits his driving record.
So, even if he wins, there’s a transaction cost to speeding, potentially a heavy one.
Most people understand that.
But yet, so many people – physicians and business people – engaging in arrangements involving sophisticated federal and state anti-kickback issues and self-referral issues, often simply point to someone else who’s doing what they claim is the same thing, as if that makes it acceptable.
“Everyone is giving up something for referrals.” “My friend from residency says that his group makes a fortune by doing it.” “No one is going to find out because people do it all the time.” “The hospital says we can do it, and they have a department full of lawyers.”
In other words, they point at all the other speeders.
Let’s, for the moment, give the others the benefit of the doubt: Even if it’s true that they are doing the same thing, it’s essential to remember this all-so-true adage in terms of healthcare compliance: “If you’ve seen one deal you’ve seen one deal.”
You don’t know if that deal was properly structured. And, if it were, you don’t know if the pivotal reason why the deal does work applies to your situation.
These days, unfortunately, physicians and other healthcare providers and their ventures have targets painted on their backs in terms of prosecution. There are federal, state, and even local law enforcement task forces aimed at healthcare fraud. Prosecutors are using new tricks to turn state crimes into federal ones. And, the transaction cost of defending against charges related to a questionable deal can easily exceed $500,000 or even $1 million, plus the attendant months or years of limbo, and the damage to your practice, reputation, and business while the wheels of justice turn slowly.
At the same time, changes in healthcare, especially in terms of new ventures that take advantage of the The Impending Death of Hospitals, bring tremendous opportunity to those willing to pursue it.
In pursuing those opportunities, you must think twice, no, thrice, about how those new ventures and other relationships are structured. If not, you’re inviting whistleblowers – enemies, jilted potential partners, former employees and observers – to simply drop the dime on you or even to file a claim against you under the False Claims Act.
Don’t skimp and save, trying to avoid an expense, when it might just be that the only place you have to spend it is in the federal prison commissary.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss
A recent article by Joseph Walker in the Saturday/Sunday, Feb. 4-5, 2017, issue of The Wall Street Journal, sheds light on the marketing of opioids, the payment of kickbacks, and the high profits that can be made via their sale through physician owned pharmacies. A review of the related indictment reveals even more.
The context is the ongoing trial of two pain medicine physicians, Drs. John Couch and Xiulu Ruan. Prosecutors allege that they received $115,000 in kickbacks from Insys Therapeutics, Inc. in connection with its fentanyl drug, Subsys. The prosecutors allege that the doctors prescribed, and also sold through their owned pharmacy, large quantities of Subsys, and that they defrauded insurance companies by misleading them as to diagnoses. The government also alleges that the doctors’ profit of $40,000,000 from dispensing Subsys and other controlled substances was an illicit profit from a “pill mill.”
A former Insys employee testified that the company would pay the doctors speaking fees based on the number of prescriptions they wrote. Another former employee who plead guilty to conspiring with Drs. Couch and Ruan in the scheme testified that she was under constant pressure to schedule the doctors for speaking engagements and that if she couldn’t, or if events were cancelled, she could have her pay docked.
In general terms, the federal Anti-Kickback statute makes it illegal to receive anything of value for the referral of federal health care program patients. Wire fraud statues, the federal Travel Act and other laws turn what are “simple” violations (a huge simplification!) of state laws into federal criminal offenses. The federal Controlled Substances Act permits prescribing and dispensing only for legitimate purposes, not in respect of “pill mill” activities. Federal healthcare fraud makes it a crime to defraud a healthcare benefits program, including a commercial insurer.
It must be noted that, at this point in time, the case is in trial and neither Drs. Couch nor Ruan have been convicted. Others, though, have plead guilty to conspiring with them.
The takeaways for you:
1. Money: The are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in pharmacies and the direct dispensing of pharmaceuticals.
2. Structure: But any deal must be structured in compliance with the federal Anti-Kickback Statute, the Controlled Substances Act, Stark, and numerous other federal laws, as well as with various state law counterparts and other restrictions. Your investment in structuring things correctly is an investment in yourself and your jail-free future.
3. Compliance Auditing: No matter how well structured, it’s essential that you engage in periodic compliance audits coordinated through legal counsel. Laws change and actual behavior impacts all of the structure and planning. Even the best planning can be made worthless if illegal conduct takes place within the context of what was planned to be a proper structure.
4. Investigations: If you learn that you (or any person or entity connected to the operation) are under investigation, immediately engage a team of experienced healthcare attorneys and criminal defense counsel. Many potential prosecutions are resolved at this stage.
5. Indictment and trial: Again, immediately engage a defense team of healthcare and criminal defense counsel.
We’ve established a strategic alliance with noted white collar defense attorney Lawrence Brown and his firm, Brown PC, in order to bring a wider set of skills and experience to select clients at the auditing, investigation and indictment/trial phase. Please contact me for additional information.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss
If the future of surgery is medicine, then the future of medicines is compounding, the individualization of dosages and drug combinations.
