HEALTHCARE FRAUD DEFENSE JOURNAL
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.
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.
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.
After a review ordered by Deputy Attorney General Rod Rosenstein, the Department of Justice has revamped and updated the United States Attorneys’ Manual. This is the first comprehensive update of the Manual in 20 years. The Manual is now titled the “Justice Manual.”
The most notable change for that will effect federal criminal practitioners are the changes to the “Principles of Federal Prosecution” section. The section has been expanded and the language updated. The updates include language that pushes prosecutors to pursue charges that carry the most substantial penalties.
A few other notable changes
- The subsection “Need for Free Press and Public Trial” has been removed. The language was replaced with text about balancing “the right of the public to have access to information about the Department of Justice” against other factors.
- In the section about voting rights, there are no more references to redistricting or racial gerrymandering. There are still references regarding bans on practices such as literacy tests, poll taxes, and measures that deny voting rights based on race.
- The manual revision also cut language discouraging unnecessary charges, as well as Alford pleas.
The new Manual can be found HERE.
A big victory for the defense in the prosecution of the founder and former top executives at opioid manufacturer Insys Therapeutics. A magistrate judge assigned to the case ordered federal prosecutors in the United States Attorney’s Office in Boston to turn over documents in the hands of ten different federal agencies’ that could potentially help the company’s former executives fight racketeering and fraud charges.
In June, the defense filed a Motion for an Order Requiring Government to Produce Exculpatory Materials in the Possession of Sister United States Attorney’s Offices and Federal Agencies. The defense’s motion noted that the same day the Superseding Indictment was unsealed, the United States Attorney’s Office issued a press release acknowledging the joint effort and assistance of six other United States Attorney’s Offices and ten federal agencies that were part of the investigatory team. However, when pressed by the defense for materials in the hands of the other United States Attorney’s Offices and the federal agencies, the prosecutors claimed those offices and federal agencies were not part of the “prosecution team”.
In its Motion, the defense gave examples of potentially exculpatory materials in the hands of the other ten agencies. The examples included “any denials by Insys sales representatives or Insys physicians to any federal agent that speaker program payments were intended to be kickbacks”, “DEA communications that opioid products were not suspicious”, and “DEA or FDA communications acknowledging that off-label use of immediate release fentanyl products, such as Subsys, is medically and scientifically legitimate.”
In Opposition, the thrust of the Government’s argument was that the other offices and the other federal agencies were not part of the prosecution team and as a result its Brady obligations did not extend to those offices. The Government also argued that Defendants didn’t establish that the information sought is material.
The magistrate judge sided with the defense. The judge ordered prosecutors to hand over any documents in the hands of the 10 federal agencies’ that were part of the investigation that could potentially help the company’s former executives fight racketeering and fraud charges. The motion as to the United States Attorney’s Offices was moot because those offices had alerted the court that they did not have any documents.
The Government routinely makes similar arguments related to CMS data in health care fraud prosecutions. Hopefully, this decision paves the way for the release of more information to criminal defendants.
On another note, not sure why the Government wouldn’t want to turn over the information. The Government should be transparent in its production of evidence, especially exculpatory evidence to defendants.
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.
On Friday, the Sixth Circuit in the cases of United States v. Mehmood and United States v. Ahmadani reversed the sentences of two owners of home health care companies. The Sixth Circuit reasoned that the trial judge incorrectly applied the law in calculating the loss figure for sentencing purposes by assigning the loss figure as the gross billings to Medicare.
The Opinion states that “[i]n a case in which the defendant is convicted of a Federal health care offense involving a Government health care program, the aggregate dollar amount of fraudulent bills submitted to the Government health care program shall constitute prima facie evidence of the amount of the intended loss…”
The court noted its agreement with United States v Medina, 485 F.3d 1291, 1304 (11th Cir. 2007) (“Even though [the government’s Medicare witness] testified that Medicare would not pay a claim if they knew parties were receiving kickbacks, this is not sufficient to establish a loss to Medicare.”). Specifically, the court rejected the notion that all claims were illegitimate due to false representations about intent to follow Medicare’s anti-kickback rules.
The Opinion further states that the trial court should have taken into consideration evidence that legitimate services were provided, particularly the testimony of multiple therapists, nurses, and counselors, when calculating loss. The Court specifically concluded that “to calculate loss for sentencing purposes, the value of any legitimate claims, if established, must be offset against the aggregate billings.”
This opinion could have a big impact on health care fraud cases. It could have the effect of narrowing the focus in health fraud prosecutions to the amount of kickbacks paid instead of gross billings. The difference could mean millions in most cases. The narrowed focus will not only reduce sentences, it will reduce restitution and forfeiture amounts.
Yes, you can be prosecuted for a violation of the Health Insurance Portability and Accountability Act.
The Department of Justice threatened to bring more prosecutions for HIPAA violations two years ago. They were serious.
Last week, the United States Attorney’s Office in Western District of Pennsylvania brought charges against Linda Sue Kalina for illegally obtaining the medical records of more than 100 patients in violation of HIPAA.
Kalina worked as a patient information coordinator at a hospital. In her capacity as a patient information coordinator, Kalina was authorized to access patient health information. However, Kalina was not permitted to obtain the electronic records.
The Indictment states that Kalina references four separate occasions when Kalina disclosed the medical information of three patients.
The Indictment charges six counts. Kalina’s arraignment is pending.
On February 6, 2018, Dr. Andres Mencia was arrested at his clinic on federal charges of Conspiracy to Dispense Controlled Substances, Conspiracy to Commit Health Care Fraud and Wire Fraud, and Money Laundering. The Government alleges that Dr. Mencia and his medical assistants were prescribing high amounts of opioids and other addictive drugs. The Government alleges that Dr. Mencia was prescribing opioids and other drugs in exchange for cash payments.
The prosecution was the result of an undercover investigation involving agents posing as patients. The defense has argued in pleadings that Dr. Mencia is rarely seen on the surveillance video. The defense has also argued that the undercover recordings rarely include Dr. Mencia. The defense also argues that Dr. Mencia’s medical assistants were meeting with the patients and seen pocketing money on video. The medical assistants quickly pled guilty and will testify against Dr. Mencia.
As if defending a pill mill case is not hard enough, forty-six days before the scheduled trial, the Government filed its Fifth Superseding Indictment adding a charge of structuring to avoid reporting requirements. And just 13 calendar days before the trial the Government noticed seven experts for trial. The expert disclosures reveal that the Government will present evidence of overdose deaths, which seem extremely prejudicial. The defense promptly filed a motion to exclude the late disclosed experts, which was denied without prejudice today.
Given the additional charges and the money laundering counts, Dr. Mencia is facing over twenty years if convicted at trial.
Despite overwhelming odds, the trial is moving full steam ahead on Monday. Marcos Beaton of Black, Srebnick, Kornspan, and Stumpf is representing Dr. Mencia at the trial.
UPDATE – Dr. Mencia found not guilty on 9 out of 10 counts. The jury voted guilty on the charge of conspiracy to distribute a controlled substance. The Miami Herald has the story here.
Sixth Circuit reversed a decision by the trial court to set aside guilty verdicts for health care fraud and making false statements of a federal jury. Opinion.
Dr. Paulus was a successful Kentucky cardiologist and the first in the nation for the total amount billed to Medicare for angiograms.
Government prosecuted Dr. Paulus alleging that he exaggerated the degree of patients’ stenosis or artery blockages and often claimed 70% blockage when in reality there was 40% or lower blockage. If an angiogram shows at least 70% blockage, the accepted standard of medical care allows a doctor to insert a stent with no further testing.
The trial lasted 27 days. The Government presented testimony of nine doctors. The Government’s experts acknowledged that the interpretations of angiograms could vary from one doctor to another.
Regardless, the jury convicted Dr. Paulus of ten counts of false statements and one count of health care fraud and acquitted on five counts of false statements.
The trial court reversed the guilty verdict and ordered a new trial. The trial court found that Dr. Paulus’ interpretations of angiograms – the images that allow doctors to determine whether patient’s artery has become dangerously narrow and in need of a stent – was a “subjective medical opinion, incapable of confirmation or contradiction.”
The Government appealed.
Sixth Circuit sided with the Government and reversed the trial court finding that “a doctor who deliberately inflates the blockage he sees on an angiogram has told a lie; if he does so to bill a more expensive procedure, then he has also committed fraud. Even state-of-the-art scientific measurements may sometimes be imprecise. But in these circumstances, it is up to the jury—not the court—to decide whether the government’s proof is worthy of belief.”
I think the concerns regarding the consequences of this decision are best summarized by the NACDL in its Amicus Brief filed in the case:
Overturning the judgment below would create a precedent allowing the government to obtain criminal convictions against physicians making difficult, highly subjective medical decisions primarily on the basis of the testimony of a single expert with a contrary view. At best, this type of evidence can establish good faith medical error or perhaps negligence, which Congress did not intend tocriminalize and are already appropriately dealt with by other legal means.