For more, click:here.

To read the transcript of the speech made by Attorney General Eric Holder at the Summit on Health Care Fraud click: here.

The Affpower case was the first internet pharmacy case to use the racketeering statute to prosecute a number of participants in an alleged unlawful internet pharmacy operation and for one of the first times included website owners who were marketers and not involved in the pharmacy or medical affairs of the operation. Defense attorneys had requested access to the computer servers holding the original data, a copy of some of which was used at trial. The prosecutor in the case reported to the Defendants and reportedly the court that the original data had been wiped clean off of the servers, the only data available was that which the government would be using at trial.

The mistrial occurred after the jury originally announced guilty verdicts for all defendants; the jury was polled and it was discovered that one juror did not agree with the verdict. In preparing for the retrial, defense attorneys asked to have an expert review the servers; the expert found that all of the original data was still on the servers. In a bluntly worded order, Chief Judge Irma Gonzalez has ordered prosecutors to explain why she should not dismiss the case due to the misconduct.

For more, click: here.

Huping Zhou, 48, of Los Angeles, pleaded guilty prior to a trial to four misdemeanor counts of violating the federal privacy provisions of the Health Insurance Portability and Accountability Act (HIPAA). Appearing before United States Magistrate Judge Andrew J. Wistrich, Zhou admitted to knowingly obtaining individually identifiable health information without a valid reason, medical or otherwise. Zhou becomes one of the first people in the nation to be convicted of violating the privacy provisions of HIPAA.

Zhou, who is a licensed cardiothoracic surgeon in China, was employed in 2003 at UCLA as a researcher with the UCLA School of Medicine. On October 29, 2003, Zhou received a notice of intent to dismiss him from UCLA for job performance reasons unrelated to his illegal access of medical records. That night, Zhou, without any legal or medical reason, accessed and read his immediate supervisor’s medical records and those of other co-workers. For the next three weeks, Zhou’s continued his illegal accessing of patient records and expanded his illegal conduct to include confidential health records belonging to various celebrities. According to court documents, Zhou accessed the UCLA patient records system 323 times during the three-week period, with most of the accesses involving well known celebrities.

To read more: Click here.

In many instances however, in sort of a wink and a nod, providers either do not charge a co-payment due to “financial hardship” or bill patients for co-payments but fail to aggressively collect the payment.

The Office of Inspector General (OIG) has previously issued guidance stating that the routine waiver of co-payments is a kickback and leads to fraud: Routine waiver of deductibles and copayments by charge-based providers, practitioners or suppliers is unlawful because it results in (1) false claims, (2) violations of the anti-kickback statute, and (3)excessive utilization of items and services paid for by Medicare.

A provider, practitioner or supplier who routinely waives Medicare co-payments or deductibles is misstating its actual charge. For example, if a supplier claims that its charge for a piece of equipment is $100, but routinely waives the co-payment, the actual charge is $80. Medicare should be paying 80% of $80 (or $64), rather than 80 percent of $100 (or $80). As a consequence of the provider's misrepresentation, Medicare program is paying $16 more than it otherwise should for this item.

In certain cases, a provider, practitioner or supplier who routinely waives Medicare co-payments or deductibles also could be held liable under the Medicare and Medicaid anti-kickback statute, 42 U.S.C. 1320a-7b(b), which makes it illegal to offer, pay, solicit or receive anything of value as an inducement to generate business payable by Medicare or Medicaid. When providers, practitioners or suppliers forgive financial obligations for reasons other than genuine financial hardship of the particular patient, they may be unlawfully inducing that patient to purchase items or services from them. Check out this HHS OIG Fraud Alert regarding this practice.

The routine waiver of co-payments is difficult to prove if the provider makes some effort, however nominal, to collect those fees. The failure to collect co-payments is rarely charged as a crime, but has been the subject of whistleblower actions. Nevertheless, it is substantially easier to prove a crime if, like nine Podiatrists in the New York area, a provider specifically advertises in subways, billboards and on flyers that Medicare beneficiaries can get free services. Three of those nine providers were convicted and sentenced to prison recently for Health Care Fraud in part due to the failure to collect overpayments. To read more, click here.

The guidance addressed potentially illegal marketing practices and the connection between marketing practices, kickbacks and false claims. The fraud related to the reporting of pricing by manufacturers to the government as well as the enabling of providers to charge for drugs given to them for free. The kickback issues related to all manner of gifts, grants, research monies paid to physicians to induce them to prescribe particular drugs as well as rebates, unreported discounts on drug products administered by physicians. The investigations and guidance led to a number of changes in the marketing practices of manufacturers to attempt to avoid kickback prosecutions. At the core, bribing doctors, in various ways to write prescriptions for your drugs became dangerous.

Apparently, the message did not get through all the way. Recently there have been a number of settlements and even guilty pleas by pharmaceutical manufacturers, including AstraZeneca ($550 million), Pfizer ($2.3 billion) and Eli Lilly ($1.4 billion) related to other unlawful marketing practices. However, these cases involved the promotion of so called “off label” uses for their drugs, with some allegations kickbacks as well. The Pfizer settlement stems from an investigation instigated by six whistleblowers, who received $102 million from the settlements. The complaint charged that Pfizer sent doctors on all-expense-paid trips to resorts, gave out free massages, and paid kickbacks to doctors, to provide incentives to the doctors for them to prescribe drugs for off-label uses.

There is a question of how effective current marketing efforts are without resorting to outright bribing of physicians to prescribe drugs. In an interesting article, available here, suggests that the current marketing by manufacturers worldwide is not particularly effective, even with increased marketing budgets. Also, the drug industry as a whole is headed for financial trouble with price controls which are likely inevitable. Therefore, it leads to the question of whether some of the discarded and potentially unlawful methods will be finding their way back into use with fines and settlements merely being the cost of doing business.

“Pharmaceuticals Out Of Balance - Reaching the tipping point” is available for download, click here.

Baskaran Thangarasan, one of the conspirators, was paid $50 per file to falsify multiple physical therapy visits for patients who received no therapy. Mr. Thangarasan admitted to producing over 1000 such files during the course of the conspiracy. He now faces a maximum of 10 years in prison for his role although the actual sentence will be somewhat less.

To read the article click here.