Health Care Fraud Blog

SAN DIEGO (January 26) Less than a year after a South Florida internet Pharmacy trial was dismissed in part due to prosecutorial misconduct, (click: here to read more) another large internet pharmacy case may be heading the same way. A federal judge in San Diego is considering dismissal of a case that initially ended in a mistrial last year after allegations arose that the prosecutor in the case made misstatements to the court about data on computer servers obtained by the government that defense attorneys had requested and were told didn’t exist. We reported about this case last summer 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.

The FDA recently moved to shut down internet pharmacy “affiliate” websites in the United States . The Ryan Haight Act, passed in 2008 was the first effort to define the lawful and unlawful practice of telemedicine with respect to controlled substances and required all internet pharmacies to register with the DEA. In addition, many states have moved to restrict or prosecute physicians and pharmacies involved in the internet sales of non-controlled substances. As a consequence, there are fewer of such operations inside the United States and often prescription drugs being purchased online are done from pharmacies located outside the United States . However, the marketers for such pharmacies are often website owners and advertisers known as “affiliates” located inside the United States. Recently the FDA targeted websites operating inside the United States as marketers.

To read more, click here and here.

For more info about Buying Medicine and Medical Products over the Internet, click here.

By Robert David Malove, Esquire

Exclusive to the Health Care Fraud Blog

SAN DIEGO (July 15) In San Diego, on the 44th day of a trial highly touted “Affpower enterprise” internet pharmacy prosecution by the Justice Department, seven defendants learned they were convicted of a range of charges including racketeering. Ten minutes later, after the jury was polled, a juror stated she was coerced into her verdict. A mistrial was declared later, the government indicated it would be trying the defendants again and a briefing schedule was set for motions to dismiss indictment.

The indictment alleged that three U.S. physicians and two pharmacists as well as 11 others, including a pharmacy operator, two recruiters, a credit card processor and eight affiliate web site operators participated in the Affpower distribution network. The 313-count indictment alleged the operation handled more than 1 million online orders and grossed approximately $126 million over a two-year period.

In addition to the doctors and the pharmacists, the indictment named Affpower, located in Costa Rica with computer servers in Cyprus . Affpower further relied on foreign-based agencies, including RX Payments Ltd. of Tel-Aviv , Israel , to process credit-card transactions, and used various bank accounts and an accounting firm in Nicosia , Cyprus , to distribute proceeds of the enterprise.

The defendants were charged with various racketeering and conspiracy to commit racketeering counts. The charges also included the distribution and dispensing of controlled substances, mail and wire fraud, conspiracy to commit money laundering and conspiracy to dispense misbranded drugs with the intent to defraud and mislead.

If convicted, the defendants face a maximum 20 years in prison for RICO and RICO conspiracy; 20 years for mail and wire fraud; 20 years for conspiracy to commit mail and wire fraud; five years for conspiracy to distribute and dispense controlled substances; 20 years for money laundering; five years for conspiracy to violate the Federal Food, Drug, and Cosmetic Act (FDCA), and three years for violating the FDCA. The defendants also face millions of dollars in fines.”

The trial was unusual in several respects. This was one of the first trials charging so called “affiliates,” individuals who are freelance internet advertisers for internet pharmacy operations and are not directly associated with the operation. Secondly, Federal prosecutions often work in a bottom up approach. Lower level participants are generally arrested first, plead guilty and assist the government in the prosecution of those higher in the organization. Here, the case proceeded in a top down approach, the leader of the operation was arrested and assisted in recording his associates and then testified against them. Those that went to trial included 2 pharmacists and five affiliates.

The is the second internet pharmacy trial in a year that was mistried after several months. Previously, Southern District of Florida Case U.S. v. Hernandez, et al, resulted in a mistrial after it was learned jurors were doing research on the case and defendants outside the courtroom.

USA v. Heredia et al Southern District of California case number 3:07-cr-02016-IEG-16

07/10/2009

DE 758 -Minute Entry for proceedings held before Judge Irma E. Gonzalez: Jury Trial as to Dolores Lovin, Mary Aronson, Richard Edward Koch, Philip James Bidwell, Jeffrey A. Light, Tracy ONeal Tyler, Peter P. Bragansa held on 7/10/2009. Day of Trial 44TH. Jury returned at 11:10 AM. Verdicts were read. Jury was polled. Jury Hung and Court declares mistrial.

07/15/2009

DE 764 -Minute Entry for proceedings held before Judge Irma E. Gonzalez: Status Hearing re jury trial as to Dolores Lovin, Mary Aronson, Richard Edward Koch, Philip James Bidwell, Jeffrey A. Light, Tracy ONeal Tyler, Peter P. Bragansa held on 7/15/2009. Government will proceed to trial. Rule 29 Motion Hearing set for 10/15/2009 02:00 PM in Courtroom 01 before Judge Irma E. Gonzalez. Motions due 9/17/2009, Government Response due 10/2/2009. Jury Trial set for 2/2/2010 09:00 AM in Courtroom 01 before Judge Irma E. Gonzalez. Excludable(s) started as to Dolores Lovin, Mary Aronson, Richard Edward Koch, Philip James Bidwell, Jeffrey A. Light, Tracy ONeal Tyler, Peter P. Bragansa: Pursuant 3161(h) Court grants government oral motion to declare the case complex.

An Ohio pharmaceutical wholesaler, Masters Pharmaceutical, Inc, agreed to pay $500,000 and entered into a consent decree pertaining to compliance with DEA regulations in settlement of claims that the distributor unlawfully supplied controlled substances to unlawful internet pharmacies and failed to report those sales to the DEA.

The settlement agreement covers the sales of more than 4,199,465 dosage units of hydrocodone, phentermine and alprazolam that occurred between 2005 and 2008 and were not reported to the DEA. DEA has reporting requirements with respect to the theft or diversion of controlled substances under 21 C.F.R. 1301.74(b).

To read more, click here and here.

One significant development in the area of medical and pharmacy practice was the passage last year of The Ryan Haight Online Pharmacy Consumer Protection Act of 2008. This Act modifies the Controlled Substances Act to address the facilitation of the purchase or dispensing or controlled substances via the internet.

Under current DEA regulations, dispensing includes the not just the sale or provision of a prescription drug, but also the issuance of a prescription. The Act also seeks to define components of telemedicine involving controlled substances. The Act takes effect today. On April 6, 2009, the DEA issued interim rules on the implementation of the Act while regulations are formalized. The interim rules require any on-line pharmacy or physician practicing telemedicine to register with the DEA. However, some definitions and the commentary pertaining to the scope of the Act include some interesting positions as to the potential scope of the Act.

Among the changes to the current Controlled Substances Act is a requirement of a face to face physician encounter prior to the issuance of a prescription for a controlled substances and a definition of a “covering physician” and “in person medical evaluation.” The regulatory definition of a “valid prescription” now is part of the statute and includes, in addition to the previous requirement that a prescription be “for a legitimate medical purpose in the usual course of a physician’s practice” to include that the practitioner must have conducted a least one in-person medical evaluation of the patient or be a covering physician.

The in-person evaluation requirement requires that the evaluation be in the physical presence of the physician regardless of what healthcare worker conducts the evaluation. Although there is an argument that since the first part of the Act's provisions only applies to prescriptions facilitated by the internet, and the valid prescription language does as well, any practitioner in an abundance of caution should govern their conduct accordingly.

A copy of the Act was too large to upload, but can be found by searching online for 21 CFR Par t 1 300, 1 301 , 1 304, et al. Implementation of the Ryan Haight Online Pharmacy Consumer Protection Act of 2008; Final Rule.

By Robert David Malove, Esquire

Exclusive to the Health Care Fraud Blog

FORT LAUDERDALE, FL (April 6, 2008) In a stunning development with implications in two large prosecutions, the United States dismissed with prejudice an Indictment against 10 individuals today in a South Florida courtroom, two of whom had already plead guilty and testified in the trial against the other eight defendants. This follows an eight week trial featuring two mistrials, one based on prosecutorial misconduct and also included accusations against the government of witness tampering and the testimony of a federal prosecutor to attempt to refute the testimony that the government gave permission for one of the defendants to operate his business.

The events leading to the dismissal were set in place last week when Judge William Zloch refused to sentence two defendants, Emanuel Anotonio and Theopholis Antoniuo. The judge then issued an order to the remaining defendants to provide legal authority to enable the court to dismiss the remaining defendants. This came after the judge expressed misgivings about whether the government had demonstrated the illegality of the activity of the defendants. The government then filed an unopposed motion to dismiss the remaining defendants, except one physician. It now appears the government is going to dismiss these charges as well.

The government originally charged 13 defendants in a 2007 Indictment in connection with the dispensing of prescription medications, diet drugs, via the internet. The defendants in US v. Hernandez, et al, were physicians, pharmacists, a prescription drug wholesaler and software operators charged with conspiracy and trafficking in controlled substances. The trial began in February of 2009. The nine defendants asserted at trial that their activities as doctors, pharmacists and software providers were lawful and approved by attorneys. The case took several unusual turns, including a government witness, a physician, testifying that he believed he had not committed a crime and had been coerced by federal prosecutors to testify. Two other witnesses, who had plead guilty had their guilty pleas vacated and their charges dismissed today, were operators of software designed to facilitate internet transactions and also had some difficulty explaining why they believed their actions were crimes.

However, the trial got even more unusual when one defendant, Lawrence Pinkoff, presented evidence over the objection of the government that the defendant had been operating his internet pharmacy related business for several years with the knowledge and permission of the United States government while he was a cooperating witness in an investigation in the Southern District of Georgia. This lead to the government presenting the testimony of an Assistant United States Attorney, James Durham, the prosecutor in the Georgia case.

The prosecutor testified that he was unaware of Mr. Pinkoff’s business activities despite being present and failing to object to those same activities at a hearing in 2003 in which the defendant sought permission of the court in Georgia to do so. Mr. Pinkoff had testified that he had told the government on numerous occasions about his business, so much so that the business formed the basis for his undercover work for the United States.

Mr. Durham’s testimony and the other evidence presented in the Hernandez trial lead to a motion filed last week by lawyers for the defendants in the Georgia prosecution, US v. Bradley, seeking to overturn the convictions of the defendants in that case and permit the defendants to take discovery depositions of federal agents and prosecutors. The basis of the motion was the failure of the United States to turn over evidence that Mr. Pinkoff was being simultaneously investigated and being used as a cooperating witness in that prosecution. The prosecution of Mr. Pinkoff in the Southern District of Florida commenced several months after the convictions of the Bradley defendants. Mr. Pinkoff’s attorney argued at trial that the government used his client to secure the Bradley conviction, allowing him to operate his business without disclosing to him they intended to prosecute him after he was done testifying.

The Hernandez trial originally made headlines when a mistrial had been declared after several jurors admitted to doing outside research during the trial, including Googling the defendants. One week earlier the judge declared a mistrial and dismissed four defendants for prosecutorial misconduct when the prosecutor made inappropriate comments during the testimony of defendant, Frank Hernandez, regarding the defendants’ Fifth Amendment Privilege. The judge ruled that the inappropriate comments were intentional and dismissed the four defendants that had not testified.

The United States has had an uneven record in prosecuting internet pharmacy cases. This has in part led to amendment of the Controlled Substances Act in 2008 through the Ryan Haight Act, designed to clarify the law concerning internet pharmacy and telemedicine. The Act became law in October of 2008 and regulations are currently pending.

Prior to adjourning, Judge Zloch commented that the case had indeed been a fascinating one. Several defense attorneys thanked the Court and government attorneys for the manner in which the case was ultimately resolved.

Exclusive COVERAGE BY Health CareFraud Blog

DALLAS, TX (August 27, 2008) - The federal government’s largest health fraud case involving online pharmacies was scheduled to conclude today with the sentencing of Ryokesh Johar Saran (Joe Saran) before US District Judge Jorge A. Solis in the Northern District of Texas. Saran as well and the 30 corporations he controlled were scheduled for sentencing. Sentencing for the corporate and individual defendants was indefinitely postponed due to the apparent heart attack Saran suffered en route to court.

Benson Weintraub, the nationally renown federal sentencing expert and a former full-time professor of law along with publisher of the Health Care Fraud Blog, Robert Malove, both of Fort Lauderdale have represented Saran and the corporate defendants for more than two-years and have been mounting a virtually unprecedented course of complex presentece litigation. The defense has challenged the criminalization of Group Purchasing Organizations (GPO), comparing it to “pharmaceutical arbitrage” according to recent defense pleadings.

Though the government’s theory of “intended loss” reflects a gross exaggeration of loss, artificially inflating the sentencing range called for by the advisory United States Sentencing Guidelines. The amount of restitution, $69,000, better reflects the relative severity of the offense behavior caused by Saran and 30 individual codefendants,

The case was launched by the US Attorney General’s office with much fanfare, but Saran, the lead defendant and virtually only one not yet sentenced, has challenged the methodology by which the government arrived at its loss calculations, particularly in view of the “actual loss” associated with the Mandatory Victim Restitution Act (MVRA).

Defense lawyers and US Attorneys are tracking the Saran case as a benchmark in health care fraud sentencing litigation based on the novel issues presented by his counsel. Similar theories of “loss” asserted by the DOJ Trial Attorneys from Washington were recently rejected by two federal judges in Miami before whom Weintraub and Malove recently prevailed at sentencing.

The defense issued subpoenas for agents of the FBI and FDA as part of it’s reaction to the prosecution’ failure to abide by its earlier commitment to turn over all Brady material in mitigation of punishment. The government moved to quash the subpoenas and that litigation, too, is still in progress. The defense preemptively filed a motion to enforce the government’s promise made one-year ago of an incremental turnover of Brady materials and the defendant’s statements. Parenthetically, Chad Meacham, lead counsel for the Dallas US Attorneys office, repudiated the discovery stipulation reached between the defense and his predecessor, Bill McMurrey, now a partner at the Dallas office of Bracewell and Giuliani.