DOJ Indicts Opiod Distributor and Executives

Yesterday, a federal grand jury returned an indictment accusing Ohio- based Miami-Luken, former President Anthony Rattini, and former compliance officer James Barclay of conspiring to distribute controlled substances without a legitimate medical purpose. Also indicted were two pharmacist, Devonna Miller-West and Samuel “Randy” Ballengee, who each owned a pharmacy in West Virginia.
The Indictment alleges Miami-Luken, Rattini, and Barclay filled suspicious orders for oxycodone and hydrocodone placed by the pharmacist and “other unnamed physicians, pharmacists, and pharmacies.” That Miami-Luken, Rattini, and Barclay failed to maintain effective controls against diversion and failed to exercise due care in confirming the legitimacy of all orders by continuing to supply oxycodone and hydrocodone. Perhaps more egregious are allegations that Miami-Luken, Rattini, and Barclay continued to distribute oxycodone to physicians that were under investigation by the DEA.
This is the second case that the DOJ has brought against a drug distributor alleging improper opioid sales. In April, the government charged Rochester Drug Co-Operative, Inc, and two of its executives.
According to the Washington Post:

[I]n 2017 that DEA investigators wanted criminal charges filed against executives of the largest drug distributor in the United States, McKesson Corp., after they built a case against the firm alleging violations in nine parts of the country. But they were rebuffed by federal prosecutors and the Justice Department, which settled with the company and fined it $150 million.

The Post also noted that previously undisclosed DEA data shows that drug distributors saturated the country with 76 billion opioid doses between 2006 and 2012, far more than was previously known.

The story can be found here.

Unfortunately, Miami-Luken and Rochester could not buy their way out of criminal prosecution. It will be interesting to see if the government can tie Rattini and Barclay directly to the misconduct.

United States Supreme Court Opinion may impact Sober Home Task Force Prosecutions

In 2017, a combination of Federal and State law enforcement agents, prosecutors, and civilians formed the Sober Home Task Force to combat the opioid crisis in Florida. The task force allegedly set out to eradicate unscrupulous drug treatment centers and sober homes. The actions of the task force has resulted in multiple Federal and State prosecutions.

The State prosecutions are similar and mostly charge violations of the Florida Patient Brokering Act, Fla. Stat. 817.505 in connection with payments made to marketers. Some of the defendants charged in these cases had legal opinions directing how to conduct marketing in a proper and lawful matter. The State, knowing these defendants intend to assert an advice of counsel defense, has taken the position that the violation of the patient brokering act is a general intent crime. Because lack of specific knowledge is not a proper defense to a general intent crime, advice of counsel defense would not be a proper defense. The defense has argued that patient brokering act IS a specific intent crime, similar to violation of the federal Anti-Kickback Statute, and the intent required is knowing and willfully.

The State’s position tramples due process.

The issue of whether or not the patient brokering act is a general intent statute is pending with the Florida District Court of Appeals. In one case, State v. Kigar, the state filed a motion in limine to prohibit the defense, but the judge sided with the defense.  The state took an interlocutory appeal that remains pending.

Last week’s Supreme Court decision in Rehaif v. United States may have resolved the issue in favor of the defendants. Rehaif came to the United States on a student visa to study, but he was academically dismissed. The university notified him that his immigration status would be terminated if he did not transfer to another school or leave the United States, neither of which he did. Rehaif went to a firing range and fired weapons. Rehaif was prosecuted for possession of a firearm by an illegal alien. At the ensuing trial, the district court instructed the jury that it need not find that Rehaif knew he was out of immigration status, and the jury convicted. The U.S. Court of Appeals for the 11th Circuit affirmed, noting substantial agreement among its fellow circuits that the term “knowingly” in 18 U.S.C. § 924(a)(2) applies to possession of the weapon, but not to the status category of the possessor.

Breyer’s majority opinion rejected that position. “In determining Congress’ intent, we start from a longstanding presumption, traceable to the common law, that Congress intends to require a defendant to possess a culpable mental state regarding ‘each of the statutory elements that criminalize otherwise innocent conduct,’” wrote Breyer. “Here we can find no convincing reason to depart from the ordinary presumption in favor of scienter [requirement of guilty mind].”
The opinion further noted that the mens rea element was important for both elements of the statute. As such, the “knowingly” requirement applied to the status aspect of the statute.

While Rehaif involved the hyper technical issue of immigration status, the opinion makes clear that the presumption is in favor of a mens rea argument and not against it like the State is arguing in these sober home cases. Rehaif appears to be a pathway to win against the task force’s overzealous position.

Attack on pain clinic and laboratory business continues

The United States Attorney in South Carolina has intervened in a False Claims Act case against a chiropractor, his network of pain management clinics, and urine drug testing laboratories. There are three relators in the case. The three relators were previously employed at the limited liability company that owned and operated the pain management clinics as the Chief Operations Officer, Certified Medical Assistant, and Clinic Coordinator respectively.

The Complaint alleges that physicians were employed and paid by Oaktree, one of the pain management clinics owned by the chiropractor. It is further alleged that physicians performed a presumptive POC test at the clinic and ordered definitive UDT testing on urine samples that was processed by Oaktree. Eventually, the chiropractor began operating an independent clinical laboratory, Labsource. The various clinics sent the patient urine samples to Labsource for presumptive and definitive UDT testing. The Complaint alleges that the urine testing was medically unnecessary. The Complaint also alleges that the testing was “excessive” and that physicians had a standing order form for testing in place.

The Complaint further alleges that Oaktree paid physicians for referrals in violation of the Stark Law. Specifically, it is alleged that the physicians were compensated based on the volume and/or value of referrals for UDT testing. It also alleges that physicians entered into direct bill agreement with physicians and other providers in violation of the Anti-Kickback Statute. The “direct bill” agreements had providers pay a set fee for the test panels, but the providers charged the insurance companies a lot more for the tests.

This case demonstrates the conundrum that pain doctors are facing. On the one hand, there is a war on opioid use – pain doctors should be regularly testing patients that are being prescribed opioids. However, routine testing or too much testing is viewed as unnecessary.

Not guilty!

In September 2018, Vance Taylor was indicted for allegedly engaging in a scheme to defraud Rite Aid. Taylor was charged with multiple counts of mail and wire fraud. The alleged scheme involved the two companies owned by Taylor and his partner, Larry Nuckols. The companies, Nuvision Graphics, Inc. and Superior Graphics, Inc. provided advertising services to Rite Aid. James Pilsner was Rite Aid’s Vice President of Advertising and responsible for purchasing advertising services on behalf of Rite Aid.

The Indictment alleged that Nuvision and Superior submitted false and inflated invoices to Rite Aid. The invoices were inflated to include a kickback that would be paid to Pilsner in exchange for purchasing of advertising. Pilsner would email Nuckols with a request for a kickback disguised as a request for equipment or other services. Nuckols would respond and blind copy, Taylor. Nuvision and Superior received over $45 million. Pilsner was paid over $5 million in kickbacks.

Pilsner and Nuckols pled prior to the Indictment of Taylor and agreed to cooperate against Taylor. Taylor proceeded to trial. At trial, Taylor’s defense was that he was just a bystander. Taylor did not dispute that he received emails discussing the kickbacks but argued he didn’t know about the scheme. Taylor presented no affirmative defense, instead, he focused on attacking the credibility of Pilsner and Nuckols. The jury found Taylor not guilty on all counts.

A win for justice!

DOJ Announces Publication “The Evaluation of Corporate Compliance Programs”

Yesterday at the Annual Ethics and Compliance Initiative Conference, Assistant Attorney General Brian A. Benczkowski delivered the keynote address to participants at the conference. During his speech, Assistant Attorney General Benczkowski announced the release of an updated version of the Department of Justice Criminal Division’s Evaluation of Corporate Compliance Programs. The updated version was created to “better harmonize the prior Fraud Section publication with other Department guidance and legal standards” said Bencskowski. He stressed that “[e]ffective compliance programs play a critical role in preventing misconduct, facilitating investigations, and informing fair resolutions.”

The guidance was announced as part of DOJ’s “broader efforts in training, hiring, and enforcement” to improve corporate conduct. Bencskowski noted that the DOJ cannot use a “rigid formula” to assess the effectiveness of corporate compliance programs because criminal investigations are all different. Instead of a strict formula, the updated guidance directs prosecutors to make an individualized determination of the compliance program in each case.

The guidance document directs prosecutors to consider three fundamental questions when evaluating a compliance program: (1) is the program well-designed; (2) is the program effectively implemented; and (3) does the compliance program actually work in practice.

In determining whether the program is well-designed, the guidance discusses the “hallmarks” of well—designed programs, which include, risk assessment, company policies and procedures, training and communications, confidential reporting structure and investigation process, third-party management, and mergers and acquisitions.

In determining whether the program is effectively implemented, the guidance advises that effectively implemented programs include a commitment by senior and middle management, autonomy and resources, and incentives and disciplinary measures.

Finally, in determine whether the compliance program works, the guidance directs prosecutors to evaluate whether the program has a capacity for improvement, periodic testing and review, investigation of misconduct, and analysis and remediation of underlying misconduct.

The full guidance document can be found here.

The purpose of the guidance is to give prosecutors more direction and to incorporate the rest of DOJ’s standards. Let’s see if it works!

Indivior, Inc. Indicted for Fraudulently Marketing Opioids

It has been a big week health care fraud news.

On Tuesday, a federal grand jury sitting in Virginia indicted Indivior, Inc. and Indivior PLC for engaging in a scheme to increase prescriptions of Suboxone Film, an opioid drug used in the treatment of opioid addiction.

According to the Indictment, Indivior ran an internet and telephone program, “Here to Help”, for patients addicted to opioids. Here to Help was touted as a resource for opioid addicted patients. When patients called the Here to Help hotline, the patients were referred to doctors it knew were prescribing its painkiller and other opioids “to more patients than allowed by federal law, at high doses, and in suspect circumstances.” The Indictment claims that Indivior knew the doctors in the Here to Help referral system were issuing prescriptions in a careless and clinically unwarranted manner. According to the government, Indivior executives and employees had firsthand reports and statistical information that the doctors in the referral network were careless.

Suboxone Film was developed around 2007 as a patent-protected alternative to the tablet form of Suboxone. The government alleges that Indivior aggressively marketed Suboxone Film without an established basis, as having a “lower risk of child exposure” and “a less divertible/abusable formulation” than other opioid-addiction treatment drugs. Indivior made these claims in marketing materials and representations to physicians, pharmacists, and health care benefit programs throughout the country.

The government claims that Indivior’s scheme was highly successful because it was able to convert thousands of opioid-addicted patents over to Suboxone Film. Indivior continued to hold onto a high portion of the opioid-addiction treatment market until Suboxone Film became subject to generic competition.

This case confirms that the government will continue to target the opioid industry. It will also be interesting to see whether any executives are targeted.

Back to blogging after the Esformes trial

After two months trying the Esformes case, I come back to big news in health care fraud prosecutions.

Yesterday, the Department of Justice and various U.S. Attorneys offices announced prosecutions against 24 individuals involved in the sale and distribution of Durable Medical Equipment and Telemedicine.

“…one of the largest health care fraud schemes in U.S. history came to an end thanks to close collaboration and coordination between the FBI and partners including HHS-OIG and IRS-CI,” that was the statement yesterday by FBI Assistant Director Robert Johnson when announcing the prosecutions and law enforcement actions against telemedicine and DME companies and individuals.

The Department of Justice is touting the case as the largest health care fraud scheme involving telemedicine and durable medical equipment. The 24 individuals charged, include CEOs, COOs, and others associated with five telemedicine companies and dozens of durable medical equipment companies. The DOJ alleges the scheme involves over $1.2 billion in losses. In addition to the indictments, over 80 search warrants were executed in 17 federal districts.

The scheme allegedly involved the payment of illegal kickbacks and bribes by DME companies in exchange for the referral of Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist, and knee braces that are allegedly medically unnecessary. The DOJ further claims that scheme involved an international telemarketing network with call centers in the Philippines and throughout Latin American that lured the elderly and disabled. The DOJ claims the doctors were paid to prescribe DME without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen. The charged individuals are accussed of using the proceeds of the scheme to purchase luxury items, such as automobiles, yachts, and real estate in the United States and abroad.

The enforcement actions were coordinated by the Health Care Fraud Unit of the Criminal Division’s Fraud Section in conjunction with its strike force, as well as the U.S. Attorney’s Offices for the Districts of South Carolina, New Jersey, and the Middle District of Florida.

Government mined data released in opioid litigation

Litigation over release of data in the opioid litigation gives a glimpse at the volumes of information available to the Department of Justice in health care fraud cases.

Judge Dan Aaron Polster of the Northern District of Ohio is presiding over a multidistrict litigation involving more than 400 federal lawsuits brought by cities, counties, and Native American tribes against makers of prescription painkillers, companies that distribute the painkillers, and pharmacy chains that sell the painkillers. Judge Polster was picked to preside over the litigation for several reasons, including that Ohio has been hard hit by the opioid crisis and that Judge Polster has extensive experience with multidistrict litigation.

In that litigation, the local governments suing the drug companies sought extensive documentation kept by the United States Drug Enforcement Administration (“DEA”) regarding data on painkiller sales. Status reports filed by the parties revealed that the DEA was worried the release of the information would reveal trade secrets.  The DEA also wanted to limit the amount of information provided and wanted a broad protective order to shield the information from release to the media.  The DEA finally relented and agreed to provide some information.

The New York Times has been covering the story, including outlining what data will be released.  A portion of the NYT article and a link to read more is below.


CLEVELAND — The U.S. Department of Justice has shared some federal data about prescription painkiller sales to help with settlement talks between local governments and drug companies targeted in hundreds of lawsuits over the opioid epidemic.

The department previously agreed to release certain data on the grounds it not be circulated publicly and be returned or destroyed when the litigation is finished. The information includes a year-by-year, state-by-state breakdown of companies that made and distributed most of the opioids in each state between 2006 and 2014. It also includes how many pills were sold annually in each state and each drug company’s market share.

DOJ Will Share Rx Painkiller Data For Opioid Lawsuit Talks – WOUB Digital

Interestingly, it seems that the DEA can track sales of opioids to the smallest detail, including state sold, year sold, and even manufacturer.  The DEA’s concerns regarding the trade secret nature of its data gives insight into the value of this information to the Government. In fact, data mining is steering prosecutions, but this data is not only valuable to the Government.  Defense attorneys may find value in this same data when defending health care fraud prosecutions.  Defense attorneys are well served demanding that the Government turn over all documents reflecting data mining resulting in the prosecution of the defendant, including cost reports.



The SUPPORT Act and the EKRA

What you need to know about the SUPPORT Act?

In October 2018, Congress enacted the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment, or SUPPORT, which aims to target full manufacturer-to-prescriber line of potential opioid-related fraud and misuse. Providers, prescribers, distributors and manufacturers across the health care spectrum should be aware of the SUPPORT Act’s broad provisions that will become effective over the next few years.

The Eliminating Kickbacks in Recovery Act (EKRA) is a smaller piece of the SUPPORT Act, but it became immediately effective.

The EKRA impacts the marketing activities of clinical labs, recovery homes, and treatment facilities. The EKRA makes payment structures that were perfectly acceptable under the safe harbors under the Anti-Kickback Statute (AKS) illegal.

Specifically, the EKRA makes it a federal crime to knowingly and willfully:

solicit or receive any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or

Pay or offer any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind –

to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or

in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory.

A violation of the EKRA is punishable by up to ten years in prison and a $200,000 fine.

Unlike the AKS, the EKRA applies to all payors, including commercial health plans.

Additionally, the EKRA contains an exception for compensation paid to bona fide employees, but that exception is not applicable if the compensation paid varies with the number of individuals referred, the number of tests or procedures performed, or the amount billed to or received from a health plan.

Essentially, the EKRA makes commission based compensation for marketers employed by clinical laboratories, recovery homes, and clinical treatment centers close to impossible.

Must-watch cases of 2019

Temporary restraining orders—a first-of-its-kind against doctors allegedly prescribing opioids illegally under the Controlled Substances Act (CSA)—were served this week that forbid Michael P. Tricaso, D.O., of Akron, and Gregory J. Gerber, M.D., of Sandusky, Ohio from writing prescriptions.  The Justice Department filed two separate complaints to bar two Ohio doctors from prescribing medications and allege that an investigation revealed the doctors “recklessly and unnecessarily distributed painkillers and other drugs.”  Attorney General Jeff Sessions even made the trip to Cleveland, Ohio to make the announcement.  You can read the press release HERE for more information.

The motions for temporary restraining orders point to the Government’s authority under the Controlled Substance Act for the Attorney General to commence a civil action for appropriate declaratory or injunctive relief relating to any violation of 21 U.S.C. 843(f).

According to the filings, Dr. Tricaso was targeted by a confidential source working for the DEA at a gym.  The confidential source purchased various prescription drugs from Dr. Tricaso, including steroids and Percocet.  The transactions were recorded and Dr. Tricaso is alleged to have made some unfavorable comments including that he would only give the confidential source a prescription for 20 Percocet because that number is “under the radar.”

The allegations against Dr. Gerber are much more extensive, but defensible.  Dr. Gerber was a solo practitioner operating a pain clinic.  The Government claims that Dr. Gerber illegally issued hundreds of prescriptions that exceeded the amount for “legitimate medical purposes.”  As part of its investigation, the Government sent an undercover agent to Dr. Gerber’s offices six times.  The Government alleges that the agent was prescribed by Dr. Gerber a combination of controlled substances, including Oxycodone, with minimal medical examination and no complaints of pain.  The Government also notes that Dr. Gerber was connected to the Insys case and received $175,000 in speaker fees for promoting Subsys.

The motion for temporary restraining order directed at Dr. Gerber attaches an expert medical opinion, patient affidavit, and an affidavit from an agent.  The expert’s affidavit references a review of claims data and medical records.  The expert opines that the prescriptions exceed normal levels.

Also curious is that the Government also attaches as evidence of Dr. Gerber’s illegitimate practices correspondence from Walmart advising that, after an internal review, it will no longer fill prescriptions written by Dr. Gerber.

It will be interesting to watch these cases and see how it develops.


I represent doctors, hospitals, skilled nursing facilities, pharmacies, and other health care providers, during government investigations and defend them in qui tam (whistle-blower) actions. I also regularly counsel companies from a variety of industries on the adoption and operation of their compliance programs and related due diligence issues.

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