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.

Slight shift on cooperation credit

Deputy Attorney General Rod Rosenstein announced last week a change in the way cooperation credit is given to corporations in criminal cases. Rosenstein announced that the Department of Justice will allow a company to receive cooperation credit in criminal cases where the company has identified every individual who was “substantially involved in or responsible for the criminal conduct.” Under the prior DOJ policy, referred to as the Yates memo, corporations were required to turn over ALL relevant facts about individuals involved in misconduct.

The new policy will allow for partial credit in criminal cases as well. “If the company is unable to identify all relevant individuals or provide complete factual information despite its good faith efforts to cooperate fully, the organization may still be eligible for cooperation credit.” To receive credit, companies need only identify individuals “substantially involved in or responsible for the misconduct.”

Rosenstein noted that the DOJ wants corporations to focus on identifying the wrongdoers. Rosenstein also noted that it is inefficient for large corporations to identify every single employee that may be connected to the bad conduct.

The revised DOJ policy has been incorporated directly into the United States Attorneys’ Manual, now referred to as the Justice Manual, at 9-28:700 (“The Value of Cooperation”). This is a change from the recent DOJ practice of communicating new guidelines through memoranda named for their authors. The incorporation into the Justice Manual may signal a desire to give the revisions more authority.

Because “substantially involved” is not defined, corporations are left to guess what it means and DOJ staff are still given the authority to decide whether disclosures were sufficient to warrant participation. In the end, the problem with all these policies is that individuals are applying the policies. It remains to be seen whether DOJ staff will award cooperation credit for what they deem less than full disclosure.

Insys – one down and six to go.

One defendant in the highly publicized Insys prosecution has agreed to switch sides and become a cooperator. Former Vice President of Sales at Insys, Alec Burlakoff, has agreed to plead guilty to a racketeering conspiracy. He faces a maximum 20 year sentence. Burlakoff admits that he aggressively pushed a scheme of paying doctors to speak at events in exchange for writing prescriptions for Subsys.

The Government alleges that Insys executives conspired to bribe doctors to prescribe Subsys in order to boost sales. Subsys is an opioid that is FDA approved for cancer patients in severe pain. The government alleges that Subsys was being overprescribed to a wide range of non-cancer patients.

Burlakoff is expected to be a key government witness in the trial starting January. Burlakoff is expected to say that the six remaining defendants aggressively pursued doctors to prescribe Subsys.

Burlakoff had a key role in the scheme. The emails substantiate that Burlakoff was telling his sales team to urge doctors to prescribe Subsys for off label use not just cancer patients.

Emails also reveal that Burlakoff telling his sales team to expect a bump in sales after he paid a visit to a doctor with a large practice. The evidence further revealed the doctor was paid to speak at two Insys events the month following the visit.

Because all defendants were so close to trial and likely operating in a joint defense, it will be interesting to see whether any defendant objects to the scope of Burlakoff’s testimony based on a privilege arising from the joint defense.

Is Telemedicine the new $1 Billion fraud?

The Department of Justice indicted four individuals in Tennessee in an alleged scheme involving telemedicine. The Indictment charges conspiracy to commit healthcare fraud, mail fraud, and introducing misbranded drugs into interstate commerce. According to prosecutors, the scheme involved at least $931 million of allegedly false claims.

Telemedicine involves connecting physicians and patients through electronic media. Physicians are contracted by the telemedicine companies and are paid a contracted fee. Patients pay a fee for the service. Typically, telemedicine companies do not submit claims to insurance companies.

The Indictment alleges that HealthRight LLC, a telemedicine company, fraudulently solicited insurance information from patients using its service. Any patients without insurance coverage were screened out. HealthRight LLC further procured prescriptions for pain creams and similar products preselected by defendants’ companies from unknowing doctors. Once the prescriptions were procured, defendants would massively mark up the price of the products, sometimes over 1000%, and bill to insurance companies. The Indictment further alleges that in most instances, the physician did not speak to the patient directly. Instead, physicians received electronic information claiming that the patient had specifically requested the preselected pain creams and other products.

While the Indictment alleges $931 million of allegedly false claims, the forfeiture prayer only seeks $154 million.

The Telemedicine company HealthRight LLC and its CEO pled guilty in September to an unrelated scheme involving fraudulent telemarketing of dietary supplements, skin creams, and testosterone.

DOJ chipping away at monitorships.

On Friday, the head of the Department of Justice criminal division, Brian Benczkowski, released a memorandum regarding the selection of monitors in criminal division matters.  The new policy was announced to a small audience at New York University School of Law.  The memorandum supersedes guidance contained in Lanny Breuer’s memorandum from 2009 laying out the Department of Justice’s monitor selection process.

Mr. Benczkowski commented when announcing the new policy that “the imposition of a compliance monitor should be the exception, not the rule.”

While the new policy closes tracks the language of the 2009 Breuer memorandum, there are a few key differences designed to put limits on the number and scope of monitorships.  For instance, the memorandum requires that a monitorship be “tailored to address the specific issues and concerns that created the need for the monitor.”  The new policy requires prosecutors to consider the cost associated with monitorships and whether it can be limited scope to avoid unnecessary burdens to the business operations.  Prosecutors will also be required to consider whether the bad actors were terminated and whether a new management team was put in place.  If the bad actors are gone, this seems to be a factor weighing against the need for a monitorship.

The memorandum is located HERE.

Mr. Benczkowski also announced that the Department of Justice will do away with the compliance expert at the Department.  Instead, the Department of Justice will hire prosecutors with a compliance background and/or train prosecutors on compliance.




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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