Category Archives: Health Care Fraud

Home / Archive by category "Health Care Fraud"

BU Law Class Seven: All the Tools in the Regulatory Toolbox

In our most recent session in the Health Care Fraud and Abuse seminar at BU Law, we had a lively review of the variety of different ways federal and state agencies can regulate, encourage, punish, and otherwise direct industry decision-making.  It was a fun exercise, with not enough room on the chalkboard.

 

First, in addition to reading about corporate integrity agreements, exclusion and debarment remedies, civil monetary penalties, and the many criminal statutes that can be brought to bear, students were asked for homework to draw a diagram with one circle in the middle (doctors, hospitals, pharma companies, device companies) and four circles in the corners of the page.  Those four circles would represent 1) DOJ/FBI/and U.S. Attorney’s Offices, 2) State Attorneys General and state agencies, 3) the Food and Drug Administration, and 4) the Office of Inspector General of the Health and Human Services (“HHS/OIG”).  Then, using arrows and lines, they were asked to sketch the types of powers each of the outer circles could exert over the inner circle.  The chart above is our distillation of that collective effort.  Easy, right?

 

Interestingly, the four outer circles are just four of the biggest of a much larger universe of potential regulatory bodies a company or practice might have to deal with.  State pharmacy boards, medical licensing and disciplinary boards, and the like are all out there, too.  No wonder this arena employs so many lawyers.

 

As a particular case study, the class took on Friedman et al. v. Sebelius et. al., a decade plus long piece of litigation in the District of Columbia and the U.S. Court of Appeals for the D.C. Circuit, involving HHS/OIG’s use of its permissive exclusion powers to bar from participation in the government health insurance programs corporate officers convicted of Food Drug Cosmetic Act (“FDCA”) offenses.  Particularly insightful is the 2010 District Court opinion of Judge Ellen Huvelle, in which she affirmed the agency’s exclusion decisions of the lead actors in the FDCA misbranding case.  The dispute stemmed from the guilty pleas of Purdue Pharma and several executives to falsely understating the addition risks of OxyContin, manufactured by Purdue (which, as we know, has led us to a national crisis).  The defendants paid their fines, but then the individuals fought in court when HHS/OIG sought to exclude them for a lengthy period of time.

 

Both the company and the individuals had admitted their misconduct in guilty pleas entered under criminal Rule 11(e)(1)(C) (where the parties ask the court to adopt their agreed-upon disposition of the case, including the sentence.  Why, one wonders, didn’t the defense lawyers for the individuals wrap up the exclusion issue at the same time?  It’s a puzzle — the parties might have spared themselves a decade of litigation.

 

Judge Huvelle’s decision and order affirming the exclusions were based in part on the so-called Responsible Corporate Officer doctrine or “RCO”.  Following two Supreme Court precedents from decades past, United States v. Dotterweich, 320 US. 277 (1943) and United States v. Park, 421 U.S. 658 (1975), the RCO allows for misdemeanor convictions of corporate officers without evidence of direct knowledge of or involvement with the crime, a striking exception from the normal rules of the road in criminal cases.  If the evidence shows that the defendants had the power to stop the criminal conduct in some supervisory role, i.e., responsibility and authority for the work of others, then proof of actual knowledge and intent is not necessary.

 

In effect, the RCO borrows from civil tort law standards for establishing negligence:  that the defendant should have known and did nothing to stop it despite his/her power to do so.

 

If this sounds like a scary situation in which to be a corporate officer, there is a limiting principle or two:  First, this applies only to misdemeanor liability; to prove the felony violation. the government must still prove criminal intent.  Second, this applies only to the FDCA in the panoply of health care fraud criminal statutes.  There are no analogs to this, for example, in the Anti-Kickback Act.

 

So as to not kill the goose that laid the golden egg, government prosecutors use the RCO sparingly, so as to not trigger a judicial limitation on the doctrine.  In my opinion, they don’t use it enough to go after individuals who drive corporate malfeasance.  As an example, multi-billion dollar drug wholesaler AmerisourceBergen recently pled guilty to an FDCA misdemeanor and paid $260 million in criminal fines for wholesale misbranding oncology drugs for years in an unregistered Alabama “pharmacy” that was actually a drug re-packager and manufacturer.  As set forth in the government’s charging document, this lucrative scheme put many very sick patients at risk.

 

Charging the company with a misdemeanor in such a situation makes some sense, because a felony conviction would have led to mandatory exclusion, which might have harmed innocent third parties like low level employees or patients who need their drugs.  But if the government is in the misdemeanor neighborhood anyway, why not apply the RCO and go after the corporate captains who profited so handsomely from this?

 

Sally Yates, the Deputy Attorney General who later became famous for her principled stand on the Trump travel ban, wrote a memo during her tenure at the Department of Justice, urging prosecutors to be not-too-quick to give individuals a pass in corporate global settlements.  Part of her reasoning was that to achieve true deterrence, the government must cause corporate malfeasants to fear for their liberty, or at least for the contents of their wallets.  Still, charging corporate officers in these large corporate settlements remains the exception rather than the rule.

 

For some companies even a $260 million fine is just the cost of doing business as usual.  It’s the equivalent of a parking ticket for you and me, except it’s a parking ticket that someone else (shareholders) pays.

BU Law Class Takes On the Food Drug and Cosmetic Act

It wasn’t the first time, and it won’t be the last.

 

Sometimes during the semester of BU Law’s Health Care Fraud and Abuse seminar led by Whistleblower Law Collaborative Attorney Bob Thomas, news stories or case announcements surface at just the right time.  So it was this week — twice.

 

First, the U.S. Department of Justice announced last week the criminal plea of drug wholesaler AmerisourceBergen to charges of intentional misbranding of five oncology drugs that the company had manipulated and repackaged, putting patient health and safety at risk.  (See criminal information and plea.)  Then, just a few days later, the Washington Post and CBS News teamed up on a 60 Minutes Broadcast that exposed a deeply troubling effort by drug companies and distributors to strip the Drug Enforcement Administration of its powers to regulate the illegal distribution of opiates, despite an epidemic of opiate abuse in this country that is killing tens of thousands of Americans every year.

 

So it is not difficult to emphasize to students the relevance of the materials they are reading and analyzing.

 

The Food Drug and Cosmetic Act is a broad statute empowering the federal government (specifically the Food and Drug Administration) to regulate industry’s manufacturing and distribution of food and drugs.  Of particular relevance to the course on Health Care Fraud and Abuse are the concepts of 1) off-label marketing of drugs, 2) misbranding of drugs, 3) adulteration of drugs, and 4) compliance with Current Good Manufacturing Processes (“cGMP”) standards.

 

The statute provides a range of remedies for the agency to employ against industry misbehavior or mistakes.  There are criminal penalties for knowing misconduct, misdemeanor criminal liability for corporate executives who “should have known” and/or been able to stop misconduct, civil liability for damages and/or injunctive relief, as well as a range of administrative remedies, including inspection and recall powers.

 

Importantly, the statute can be used in combination with the False Claims Act to give the agency the power, in conjunction with the Department of Justice, to sue the drug companies for treble damages.  The seminar studied the case of U.S. rel. Eckhard v. Glaxo, a case from Puerto Rico and highlighted in a 60 Minutes expose, in which Glaxo failed to correct serious manufacturing deficiencies despite the repeated efforts of an employee-turned-whistleblower and despite the alarming list of “adverse patient events” from product mix-ups.  This was the first major case of FDCA manufacturing problems being combined with a False Claims Act theory of liability — the theory being that the government (e.g., Medicare, Medicaid) paid for things that were not what they purported to be and were therefore false claims.  This theory of liability has been followed many times since then, including last week’s AmeriSourceBergen plea, which dealt with oncology drug misbranding on a truly massive scale.  (Although this was a criminal plea under the Food Drug and Cosmetic Act, AmeriSourceBergen is also subject to civil False Claims Act suits relating to the same facts, according to its public statements, but those suits have not yet settled or been litigated.)

 

What these cases show, among other things, is how extraordinarily powerful the drug industry is in dealing with the federal agencies and with Congress, how the regulating agencies are often outgunned at every level in their efforts to police misconduct, and the essential role played by whistleblowers in the government’s attempt to protect the public and recoup its own financial losses due to this misconduct.

 

Next week Whistleblower Law Collaborative Attorney David Lieberman will help the students in the course unpack the often mystifying rules around the Stark Laws, another tool in the government’s anti-fraud toolbox.

Class Four: How to Influence Physicians Without Running Afoul of the Anti-Kickback Act

In the BU Law School Health Care Fraud and Abuse seminar, the topic this week is the anti-bribery law known as the Anti-Kickback Act, a criminal statute. The law prohibits the solicitation, receipt, or offering of “any remuneration,” direct or indirect, in cash or in kind between a vendor of drugs or devices and a provider (doctor or hospital) if such remuneration is tied in some way to referrals of business. It is a sweeping statute, designed to stop economic influences from driving physicians’ medical decisions.

 

There are all sorts of cases that have arisen under this law, from brazen cash-under-the-table bags of cash to much more subtle forms of “inducement.” Regulated industries have adopted voluntary codes of conduct on this topic, and virtually every pharmaceutical company compliance plan addresses this issue in some form or another. But still companies keep getting in trouble.

 

Why?

 

Part of the reason is that very few companies have adopted any alternative to the traditional eat-what-you-kill model of compensating their sales representatives. Generous bonus structures usually allow sales reps to greatly increase their compensation if they tear the cover off the ball in selling the product. Reps who hit high numbers that are out of line with their peers are often held up as heroes rather than being subjected to scrutiny about how they achieved such anomalous results. Reps who don’t push the envelope are often treated as laggards or simply let go.

 

One thing should be clear, though. It is not the sales reps who drive the numbers game; they are simply the troops following the orders. Sales targets are put in place by management, who often has investor and Wall Street expectations in mind. So there is an inherent tension between profit maximization and compliance with the law. Companies that have gotten in trouble with the AKA have failed to manage that tension.

 

For class this week, the students were given the following assignment to consider: “Assume that there are two similar products on the market, bioequivalent and the same in every way that matters (safety, efficacy, price, ease of administration). They are made by two competing companies who care very much about market share and are willing to be very aggressive in making sure that the other company doesn’t increase its market share to their detriment. The question arises: how can we get more doctors to write our drug rather than the competitor’s? In light of the AKA, what can you do to get their attention and potentially influence their prescription writing practices, without running afoul of the AKA?

 

Answers included:

 

Major advertising expenditures, both in television, trade journals, magazines and social media.

 

Attractive branding and naming of the product.

 

Making targeted charitable donations to earn goodwill in the community of patients and providers.

 

Hiring (or continuing to hire) very good looking, outgoing, friendly sales reps. (This suggestion was partly in jest, but only partly!)

 

Offering free screenings to patients.

 

Offering direct-to-consumer coupons to prospective patients.

 

Determining whether any beneficial arrangements can be made with third parties, such as pharmacies, group purchasing associations, wholesalers, and pharmacy benefit managers.

 

 

Welcome to the world of trying to make a profit while staying out of serious trouble. It’s tricky out there!

Health Care Fraud and Abuse Class Three: Taking on Theories of Liability

This week’s class at BU Law School in Bob Thomas’ course on Health Care Fraud and Abuse started the deep dive into theories of liability under the False Claims Act, and recent ways in which the law has evolved.

 

Starting with the language from the False Claims Act, the question of what actually is “false or fraudulent” within the meaning of the law was a good place to start.  Most “claims” are on their face truthful (e.g., provider treated patient in XYZ manner on ABC date), so how does the statute capture concepts of falsity or fraud in these circumstances?  If a doctor’s medical judgment has been polluted by a kickback or by illegal off-label promotion, for example, how does that make the doctor’s claims for reimbursement “false or fraudulent”?

 

Courts grappling with this question came up with their own body of judge-made law, using concepts of “express” and “implied certification” to hold (sometimes) that as a “condition of participation” in government health care programs or a “condition of payment”, there can be embedded in every claim an express or implied certification of compliance with applicable laws.  Thus, the argument goes, the government requires that contractors obey applicable laws and contracts only for “taint-free” services and is entitled to reimbursement where claims, even those that on their face are truthful, have been tainted by illegality.  The entity engaged in the bad conduct “caused” the doctor to submit a tainted claim, the theory goes.

 

Some courts have had trouble with these concepts, particularly where the non-compliant activity was, relatively speaking, trivial in nature or something that the paying government agency was already well aware of.  The Supreme Court recently clarified this complicated landscape — to a degree — in its Escobar decision of 2016.   In Escobar, the Court held that “implied certification” is a valid theory of liability, BUT that only false claims “material” to the agency’s payment determination would count for liability under the FCA.   In other words, if the transgression, had it been known, would have had a reasonable chance of changing the agency’s decision to pay the claim, then it’s material.  Lawyers have been quick to point out, however, that “materiality” is a factual question requiring discovery from government agencies.  So while it may be easier for whistleblower suits to survive initial legal challenges (motions to dismiss), the discovery phase of a case could be tricky as defense lawyers try to prove that a paying agency such as the Center for Medicare and Medicaid Services (“CMS”) was sufficiently aware of the issue and didn’t care enough about it to deny the claims.  Lots of work for lawyers ahead on that front.

 

As an example of an “implied certification” type claim, the seminar explored the current state of liability theories relating to “off-label promotion” of drugs and/or medical devices.  This theory, long a favorite of prosecutors, is premised on the notion that the marketing of unapproved uses of drugs or devices can lead to FCA liability.  While doctors are free to write prescriptions off label, companies are constrained by regulations from the Food and Drug Administration (“FDA”) in what they can say to promote such uses.  Running afoul of those restrictions has landed many a company in hot water on the theory of implied certification:  that claims are valid only if they are not tainted by illegal activity that caused the claim to happen.

 

Recently, however, the defense bar has successfully argued for a free speech (First Amendment) limitation on such FDA regulation and FCA liability.  The argument, successfully advanced in a Second Circuit case known as Caronia, is that if there is nothing false or misleading about off-label promotion, it must be protected by the “commercial speech” doctrine under the First Amendment.  The Supreme Court has not taken this question up directly, so Caronia is the law only in the Second Circuit Court of Appeals, but prosecutors are now forewarned that any off-label case they bring should include, at a minimum, some showing of falsity or deception, or some material omission in the communications in order to survive a defense challenge under the First Amendment.

 

Finally, as a way of tying together some of these concepts of “materiality” under Escobar and deceptive marketing, the class examined the tricky fact pattern that is often presented in off-label scenarios:  where the FDA has expressly not approved a certain use, but CMS has decided, based on available data in certain “compendia”, to reimburse off-label claims anyway.  Under Escobar, the fact that the paying agency is aware of the off-label promotion and literature, even reviews it, and pays the claim anyway makes prosecution of an off-label case highly problematic.  A prosecutor or whistleblower lawyer would need, for an FCA case to survive, substantial evidence of false and deceptive practices, or other illegal conduct like kickbacks, to keep such a case alive.

 

Speaking of kickbacks, that’s what the class will talk about next week.

John Oliver Explains Dialysis

John Oliver recently devoted most of his show “Last Week Tonight” to explaining how America funds kidney dialysis.  Oliver admitted the topic was likely to make his viewers push the button on your TV remote marked “Dear God Literally Anything Else.”

 

 

 

But it’s an important topic.  The United States “continues to have one of the industrialized world’s highest mortality rates for dialysis care,” despite spending more on it than other nations.

 

Since 1972, the federal government has covered all kidney dialysis.  We now spend 1 percent of the federal budget just on kidney dialysis.  That’s half as much as we spend on the entire Department of Education!

 

Why do we spend so much? You can probably guess, fraud and greed. Two large companies, Fresenius Medical Care and DaVita, control 70 percent of the market.

 

Megallan Handford, a former DaVita employee who was fired for trying to unionize its employees, explained that:

 

“When I was working at DaVita, the priorities for transitioning patients was to get them on dialysis and get the next patient on as soon as possible,” Handford told Oliver. “You would have sometimes 15, maybe 25 minutes to get that next patient on the machine, so you were not properly disinfecting.”

 

This focus on profits above patients is reflected in the nearly $1 Billion in False Claims Act Settlements that DaVita has paid out in the last several years:

 

 

Nor do these settlements appear to represent the end of DaVita’s legal issues.  DaVita faces a lawsuit and related government subpoenas over use of a non-profit, the American Kidney Foundation to push patients from government healthcare to Healthcare Exchange-offered private plans in order to dramatically increase its reimbursements.

 

Nor should you think that Fresenius is without blame.  For example, in 2000,  a team led by Suzanne Durrell  secured the largest global settlement to date in a health care fraud case against Fresenius Medical Care. The investigation resulted in a record-setting $101 million criminal fine; an aggregate civil settlement payment of $385 million; and the withdrawal by the company of more than $130 million in pending claims for reimbursement with the Medicare Program.

 

If you have concerns about patient harm and fraud against the government by a healthcare company, please contact us to discuss how whistleblower laws including those above can protect and reward you and help ensure that the patients and taxpayers are protected.

 

Material Instincts: Wood, Escobar & the CMS Provider Form Jungle

Alleging health care fraud is no picnic. It inevitably involves a journey into a morass of government regulations, not made easier by the fact that the heart of any case, the false or fraudulent claims, tend to be found in one or more of a plethora of forms for Medicaid or Medicare reimbursement. No wonder that the Supreme Court, in a transformative 2016 case advancing a new standard for determining what fraud really matters, lamented that “billing parties are often subject to thousands of complex statutory and regulatory provisions.” Universal Health Services v. United States ex rel. Escobar, 136 S. Ct. 1989, 2002 (2016). Good lawyers can help navigate this jungle, and to their aid comes a new case out of the Southern District of New York, United States ex. rel. Wood v. Allergan, Inc., 10-cv-5645 (March 31, 2017), which elaborates on the circumstances under which violations of one of those thousands of provisions should be taken seriously, in the process cutting through a lot of uncertainty about the exact wording of claims forms (while also drawing on a case in which our firm played a key role, United States ex rel. Westmoreland v. Amgen, Inc., 812 F. Supp. 2d 39 (D. Mass. 2011), in which we prevailed after the 1st Circuit reversed an earlier unfavorable decision, New York v. Amgen Inc., 652 F. 3d 103 (1st Cir. 2011)).

 
 

In Wood, a former Senior Manager at Allergan, which makes prescription eye care drugs, alleged that the company had “violated the FCA and the Anti-Kickback Statute (“AKS”) . . . by providing substantial quantities of free drugs and other goods to physicians in exchange for their prescribing to beneficiaries of Medicare, Medicaid, and other government programs the company’s brand name drugs.” Id. at 3. Wood identified false claims resulting from Allergan’s activities by pointing to the Centers for Medicaid and Medicare Services (“CMS”) Provider Agreement for Medicare Part D and Form 855I, which contain certifications of compliance with the AKS. Id. at 53. Violations of the AKS made those claims expressly false (and the pharmaceutical company could be held liable under the False Claims Act for “causing” those false claims even though it wasn’t the submitter of them). Furthermore, even though Wood did not identify express certifications or references to the AKS on Medicaid provider applications and state claims forms or on the CMS Form 1500, instead alleging only generally that many states require AKS certifications, references on the forms to “applicable Federal or State laws,” sufficed to imply that claims on the forms were false or fraudulent if there had been noncompliance with the AKS. Id. at 60. That reasoning accords with Amgen, 652 F. 3d at 112-14, in which the court looked to state anti-kickback statutes and regulations in four states, and provider agreements that had sufficient express wording in two more, to find that noncompliance with the AKS can result in false or fraudulent claims.

 
 

Escobar demands that for liability, the noncompliance must be “material,” that is, it must really matter, preventing unfairness to potential defendants by holding them liable for running afoul of some trivial provision amid the jungle of forms and regulations. Escobar, 136 S. Ct at 2003. How do we know what really matters? Wood cuts through some of the cryptic factors that Escobar discussed with an appeal to policy; violations of the AKS matter not because they involve rule-breaking but because “violation of the AKS is a far cry from an ‘insubstantial’ regulatory violation like, say, requiring ‘that [government] contractors buy American-made staplers’ rather than foreign staplers.” Id. at 61 (quoting Escobar, 136 S. Ct. at 2004.) There the Wood court builds on its comment, in identifying falsity, that “[k]ickbacks are designed to influence providers’ independent medical judgment in a way that is fundamentally at odds with the functioning of the system as a whole.” Id. at 60 (quoting United States ex rel. Westmoreland v. Amgen, Inc., 812 F. Supp. 2d 39, 53-54 (D. Mass. 2011)). Another kickback case, United States ex rel. Hutcheson v. Blackstone Medical, Inc., 647 F.3d 377 (1st Cir. 2011), also took AKS compliance language in provider agreements and hospital cost reports as indicative of materiality, suggesting that testimony from parties to the contract could help establish it further. Id. at 394-95.

 
 

This refreshing application of Escobar avoids getting mired in a fact-intensive counterfactual investigation into whether or not government officials would have paid the Allergan-caused false claims, had they known of the kickbacks at issue, and relies on our instinct about why kickbacks matter, as much as the language of the statute. This builds on the best of Escobar; an appeal to common sense. At the Escobar Oral Argument, Justice Kagan drew a powerful analogy between an unlicensed doctor and guns that don’t shoot as examples of fraud that anyone would recognize, which made its way into the opinion in the compelling quote that “because a reasonable person would realize the imperative of a functioning firearm, a defendant’s failure to appreciate the materiality of that condition  would amount to ‘deliberate ignorance’ or ‘reckless disregard’ of the “truth or falsity of the information” even if the Government did not spell this out.” United States ex rel. Escobar, 136 S. Ct. at 2001-02; Transcript of Oral Argument at 16 (No. 15-7). Signs that the lower courts have picked up on Escobar’s theme of indignation is good news for righteous whistleblowers, since they can convince courts to rule in their favor by an appeal to the overarching policy damaged by the fraud, as much as by digging into the regulations.

Watch Out for Supplements!

 

We’ve written before about the murky territory that exists between drug manufacturers and pharmacies.  It’s a great example of how distinctions that once made sense can fail to address changed circumstances or the cleverness of people who like to game the system.  Right now here in federal court in Boston, one of the principals of the infamous New England Compounding Center is on trial for second degree murder — that’s right, murder — for his role in the scandal that led to two dozen deaths.

 
 

Laws changed because of what that case revealed:  that industrial-sized drug repackagers and compounders were posing as pharmacies, subject only to state pharmacy regulations, even though they were not really pharmacies but drug manufacturers anxious to avoid federal oversight.  Today, the federal Drug Quality and Security Act and the Compounding Quality Act make such gamesmanship far more difficult, and allow for federal oversight over compounders and repackagers who are handling drugs on an industrial-scale basis.  One change:  the “cGMP” standards (short for “current good manufacturing practices”) will now apply.  One can no longer hide behind a pharmacy sign and play games with drug products before sending them on to unsuspecting consumers. No doubt lives will be saved as a result of these new laws.

 
 

Yet supplements are a similar accident waiting to happen.

 
 

Most people know and understand that the Food and Drug Administration (“FDA”) regulates the activities of drug manufacturers and food producers, ensuring that the drugs we take and the food we eat are safe.  On the drug side, this means that before a drug can be sold, the manufacturer must satisfy the FDA through a series of rigorous submissions showing that the drug is 1) safe and 2) effective.  Detailed labeling requirements allow consumers to have a fighting chance in the effort to understand what they are taking and what the risks are.

 
 

The regulation of food is handled somewhat differently, but also has human safety as its paramount object.  Two areas are well understood and well justified:  inspection and labeling.  The FDA has the authority to inspect plants that are engaged in large scale food production.  Slaughterhouses, for example, are subject to FDA inspection to ensure that meat is safe and that plant conditions are sufficiently sanitary to avoid contamination.  Recalls can result from the FDA’s inspection authority, with the aim of preventing human consumption of unsafe meat.  (History buffs may perhaps know that the genesis of the Food, Drug and Cosmetic Act, as it is now known, was the exposure of unsanitary and unsafe conditions in the Chicago meat-packing industry, made vivid in Upton Sinclair’s The Jungle.)

 
 

Labeling is another safeguard.  Now, given the astonishing amount of additives that go into processed foods, food producers are required to accurately label the ingredients in a processed food package.  This, too, gives consumers a fighting chance.  If you’re diligent, you can pause and think twice before buying that package whose key ingredient is Red Dye Number 7.

 
 

But one secret most consumers don’t understand — but should — is that the FDA’s jurisdiction does not extend to supplements.  At least not yet.  So consider this a public service announcement.  Those products on the shelves that make outrageous claims about enhancements to your body and to your health are mostly supplements and outside the rules that apply to food or drugs.  No one has had to prove to the FDA or anyone else that: 1) it is what it purports to be, 2) it’s safe, or 3) that it’s effective in the ways that it claims.  Buyer beware!

 
 

As we see so often in our whistleblower practice, when rules are unclear, temptation takes over.  Last week’s front page story in the Boston Globe provides a sobering glimpse into what’s out there.

 
 

Jared Wheat, the CEO of High-Tech Pharmaceuticals, is a twice-convicted drug dealer who thought up the idea for his “High-Tech” drug supplement business while serving time in prison for his conviction for selling ecstasy.  In 2003, according to the article, he was again convicted for running an illegal online “pharmacy.”  (Sound familiar?)  Nonetheless, his company currently grosses $100 million per year by selling dietary supplements with catchy names like Black Widow and Yellow Scorpion.  Due to Congressional inaction (and general coziness with industry), there is little that the FDA can do to police the supplement industry, unless provided specific information about safety risks, by people like whistleblowers.

 
 

When Harvard researcher Dr. Pieter Cohen began running tests on the products of High-Tech and other companies’ supplements, he found that the supplements contained unsafe levels of certain synthetic compounds and publicly urged FDA to inspect the facilities.  He was slapped with a libel suit brought by Wheat and was forced to justify all of his findings in an unpleasant libel trial.  Although Cohen won the suit, Wheat unabashedly says that he hopes the hundreds of thousands of dollars he spent on the libel suit will make researchers think twice before publishing their results.  The incoming President says he wants to “open up” libel laws to make this type of lawsuit easier.

 
 

We’re entering into a political phase where all manner of regulations will be questioned.  If people have their eyes open, though, they will urge restraint, because many of the existing regulations are clearly making us safer.  (Do we really want to go back to the days portrayed in The Jungle?)

 
 

Under a Trump Administration, we should certainly not expect any expansion of regulation into new areas like food supplements.  It will remain Caveat Emptor! for the indefinite future, with consumers at a real disadvantage.

 
 

Be careful out there!

 

Accountable Care May Mean Less Fraud Too

 

The lead story in Friday’s Boston Globe was about a “massive change” coming to the Commonwealth’s Medicaid program, known as MassHealth.  As many of you know, Medicaid is the federal health insurance program for the impoverished that is jointly funded by the states and the federal government but administered by the states.  So there are 50 Medicaid programs, each run a little differently from each other, based upon local conditions.

 

 

What was news on Friday was the federal government’s approval of an overhaul of MassHealth, shifting from the traditional “fee for service” mode of payment, where a doctor submits a bill to MassHealth for a service he/she has rendered, to an “accountable care” model, where doctors and hospitals are given a set amount of money to care for a population of patients with complex medical needs.  (Private health insurance companies and Medicare have already taken steps in this direction.)

 

 

This overhaul has two aims in mind:  improvement of patient care and cost accountability, both laudable goals.

 

 

But there’s another point here that the article missed that I think should be mentioned:  this accountable care model could decrease fraud and abuse in the health care system.

 

 

Why so?

 

 

Health insurance programs, particularly the Medicaid and Medicare programs, are run on “honor systems” whereby claims are paid before being fully verified.  There are millions of claims per day to the Medicare and Medicaid systems, and the program would break down if every claim had to be fully verified before being paid.  So the programs pay the claims and chase problems later, the so called “Pay and Chase” model.  Well it turns out that the combination of “fee for service” and these honor systems creates a kind of perfect storm for fraud.  It’s just too easy to do.  Pad a claim here, up-code a claim there; pretty soon it’s real money.  Tens of billions per year by the time you add it all up.

 

 

By taking out the fee for service component of some of these reimbursement formulae, we remove a lot of the built-in temptation for fraud.  In other words, when it’s easy for providers to over-prescribe and increase their levels of compensation, it will happen.  By providing incentives to avoid over-prescribing, you slow down the temptation to pad bills and engage in self-enrichment behaviors.

 

 

This will be interesting to watch.  Health care is complicated.  Thwarting the pernicious creep of fraud and abuse is complicated, too.  But perhaps this notion of “accountable care” will turn out to have another layer of accountability:  a slowdown in health care fraud and abuse.

 

OxyContin Marketing: Peddling Opiates for Profit

 

This fall, whistleblower attorney Bob Thomas has again been teaching as an adjunct professor at BU Law School, offering a course on Health Care Fraud and Abuse.  As the title suggests, the course is about the many ways in which the government health care reimbursement systems such as Medicare and Medicaid are gamed by fraudsters, and what’s being done about it.

 

One of the more interesting aspects of teaching a course in this area of the law is the dynamic nature of the subject matter.  Each year the syllabus must be updated because of amendments to laws like the False Claims Act or regulations under statutes like the Food Drug and Cosmetic Act (dealing with misbranding and off-label marketing, among other things), and case law interpreting new issues being litigated (such as the Supreme Court’s recent Escobar opinion).   The course also shows students why it’s important to read the news and to pay attention to the many ways the content of the course intersects with real life issues in front of us.

 

This week was a perfect example.  What would normally have the potential to be a fairly dry topic (“Remedies:  exclusion and debarment, and corporate integrity agreements”) evolved into something directly connected to an evolving news story.

 

As a case study on corporate officers being excluded from the Medicare and Medicaid programs after pleading guilty under the “responsible corporate officer doctrine,” students were asked to read the 2010 Friedman case from the district court in D.C., in which Judge Huvelle upheld lengthy periods of exclusions for three high ranking officers of Purdue Pharmaceuticals, Inc.  The Purdue settlement in 2007 was a blockbuster at the time:  $634 million in civil damages and criminal fines, criminal pleas by a subsidiary and three corporate officers, tens of millions in personal fines against the officers, and a corporate integrity agreement imposed against the company.  Why?  Because the company irresponsibly (and criminally) marketed its highly addictive painkiller OxyContin as safe and non-addictive, and as a reliable substitute for other non-addictive painkillers.  This behavior is credited by many observers as a key driver of our current opioid epidemic.  The investigation of the company started in 2001 and lasted several years, covering the marketing schemes going all the way back to the 1990’s.

 

Well right on cue, just as the class was evaluating the many aspects of this “global” (civil, criminal, and administrative) settlement, Purdue Pharmaceuticals was right back in the news.  First, the always provocative but usually spot-on John Oliver took the company to task for ignoring patient safety and for fueling the opioid epidemic.  Then, this morning on the front page of the Boston Globe, another article appeared about Purdue and its marketing of OxyContin, showing how the company manipulated pharmacy benefit managers (“PBMs”) to remove limitations on physicians’ prescription-writing abilities for the drug.  This latter scheme was not part of the government’s 2007 prosecution of the company, but may be the subject of future lawsuits, according to the article.  With a huge public health crisis in the works and a flourishing black market for its addictive painkiller, it seems Purdue just couldn’t say no to schemes to get its product into as many hands as possible.  With sales rep bonuses as high as five times their base salary, the message was clear:  Sell, Sell, Sell.  Lost in that emphasis was the horrible toll this would take on patients, some of whom would injure themselves intentionally to be able to obtain further prescriptions of OxyContin.

 

For the BU students, it was a perfect example of one of the recurring themes of the course:  Do any of these remedies really slow down fraudsters?  If not, what should we be doing differently?

Spotlight on Nursing Home Fraud

There has been a lot of attention lately to nursing home fraud, which is heavily reimbursed by Medicare.  In January, the  U.S. Attorney’s Office for the District of Massachusetts and the U.S. Department of Justice reached a $125 million Medicare fraud settlement with Kindred/RehabCare, the country’s largest nursing home therapy provider. In February,  the Boston Globe reported on new efforts by the Commonwealth of Massachusetts to regulate nursing home providers, following an investigative series the Globe did last year about “how an out-of-state chain had assembled its string of nursing homes with scant attention from regulators. That company, Synergy Health Centers, has been beset by reports of substandard care — festering pressure sores, medication errors, poor infection control, inadequate training, and short-staffing.”

 
The DOJ settlement by contract therapy providers RehabCare Group Inc., RehabCare Group East Inc., and their parent, Kindred Healthcare Inc., resolved allegations raised by whistleblowers that the company violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred. RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in forty-four states to provide rehabilitation therapy to their nursing home patients.  In addition to the settlement with Kindred/RehabCare in January, the DOJ also settled claims with four SNFs for their role in submitting false claims to Medicare; those settlements totaled some $8.225 million. Previously, DOJ had reached settlements totaling over $500 million with a number of other SNFs who had contracted with RehabCare and allegedly submitted false claims to Medicare.

 
The list of allegations against Kindred/RehabCare is breathtaking, even for someone who may have become somewhat jaded or cynical about the depths of health care fraud in this country. Perhaps the most troubling one is “Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care).” Really?

 
Meanwhile, the Boston Globe series highlighted a different kind of concerns—substandard quality of care provided to patients, such as festering pressure sores, medication errors, poor infection control, inadequate training, and short-staffing. This too is a form of Medicare fraud—the patients are not getting the services Medicare is paying for. Worse yet, they are being injured. (See also earlier article in Globe exposé.)

 
Vigilance is needed by all of us to protect the lives and quality of care of our nursing home population as well as to protect our Medicare dollars. We applaud the whistleblowers, the government, and the media for keeping the focus on this industry.