Health Care Fraud Blog

Early in the last decade the federal government began paying substantial attention to the marketing of drugs by manufacturers. Investigations and eventual settlements with Tap Pharmaceuticals ($875 million) and AstraZeneca ($350 million) paved the way for compliance guidance by CMS Office of Inspector General (OIG) published in 2003.

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.

In an interesting suit filed against Amgen, the maker of Epogen, as well as two large dialysis clinic chains, Fresenius and Davita, a whistleblower alleges that salespeople for the drug company told clinic operators and physicians working there to prescribe specific dosage levels of the drug Epogen for patients based upon the maximum reimbursement under Medicare for the drug rather than actual patient needs.

Epogen, used to treat anemia, comes in 1 ml vials with various unit doses between 1000 and 10,000 units of the drug. The cost, and reimbursement for the vials, administered to the patients at the clinics, can vary dramatically based upon the unit dosage used. The whistleblower is a former sales manager for Amgen and is also a nurse practitioner. The Federal False Claims Act requires the person bringing the suit on behalf of the federal government, referred to as a Relator, to have first hand knowledge of the fraud alleged. The Relator can receive up to 25% of the amount recovered under the suit.

For more, click here.

Often, we hear that white collar crime is treated differently than other types of crime. However, it is often who commits white collar crime that brings about different treatment. I had a client indicted for fraud related to a DME. Monthly, he would send me articles about large DME companies paying large fines and false claims settlements for the same conduct he was alleged to have engaged in and asked the simple question, “Why am I supposed to go to jail and they don’t?”

People arrested for crimes, and in particular health care fraud can find many rationales for conduct that objectively looks bad; some form the bases for defenses; some are to try to feel better. One reaction is generally the same for nearly all, whether it is speeding or a million dollar fraud, “everyone is doing it.” A variation on that theme, and a fair one is that often individuals and small companies are treated much differently than much larger companies.

In 2004, at the same time Pfizer was negotiating a resolution of a $460 million settlement with the United States for unlawful “off label” uses of its drugs, it also was planning and executing marketing campaigns for other drugs doing precisely the same conduct. The results, a huge fine and restitution, but no criminal charges for individuals. An individual that takes a million dollars in a Medicare fraud scheme is going to jail; as are employees and others most closely associated with that person and the scheme. The world’s largest drug company agreed it participated in a $1 billion in Medicare fraud and pays money. The company, or likely a subsidiary, also plead guilty to a crime, but no person goes to jail. $2 billion is not a small sum, but many sitting in prison wonder why the rules are different.

Currently, the highest dollar “amount of loss” category for sentencing purposes involving fraud is for a loss figure of $400,000,000 or more, garnering a 30 level sentencing enhancement; whereas $1,000,000 or more will get a 16 level enhancement. If someone participated in a scheme with a resulting loss of $1million dollars, they are likely to go to prison for a minimum (without other adjustments) of 41 months. This sentence could be applicable to the person who masterminded the scheme as well as some low level employee who merely assisted. A person who participates in a scheme with a resulting loss of $1 billion would be subject to prison for a minimum of 188 months; however in this case, no one goes to jail. Clients complain, "the rich (corporate defendants) get richer, while the poor (individual defendant) gets prison."

Click here to read more.

WASHINGTON, D.C.(September 2, 2009) The U.S. Department of Justice announced the largest health care fraud settlement in history. A landmark $2.3 billion health-care fraud settlement involving Pfizer Inc., has put the pharmaceutical industry on notice that promoting drugs for unauthorized uses won't be tolerated by the Obama administration, government officials and legal experts said.” To read the DOJ press release: Click here

In a case originating in the 1990’s, former pharmaceutical sales representatives for Johnson and Johnson (J&J) alleged 80% of a medication they marketed, Procrit, was used to commit Medicare Fraud; an amount equal to $3 billion for the company as a whole. Sales of the drug were promoted using several methods, all alleged to be illegal. One method was called “the spread.” The spread is the difference between the amount J&J would sell the drug using undisclosed discounts to physicians and hospitals and the amount those providers could claim and receive in reimbursement.

J&J, it is alleged, artificially inflated its prices as reflected in reports to the public and government to increase the spread. Those allegations are actually not new, J&J had previously settled with the United States over that issue. J&J sought to have the case dismissed on that basis and was initially successful. However, the suit also alleges that the manufacturer also engaged in other practices such as providing “discount cards” disguised as kickbacks at $1000 per card for physicians to use to purchase the already discounted drugs. The physicians would then bill Medicare for the full price of the drug even though they had paid next to nothing for the drug. In addition the suit alleges that J&J would pay large grants and speaking fees as bribes to physicians to purchase the drug. Those allegations will be allowed to proceed.

For more details, click here

A Branchburg, NJ, woman, Mary Holloway, age 47, was sentenced in U. S District Court in Massachusetts for violating the Food, Drug and Cosmetic Act for marketing the drug Bextra for uses and dosages that were not approved by the Food and Drug Administration.

According to government prosecutors: From approximately November 2001, through April 2005, HOLLOWAY was employed as a Regional Manager at a pharmaceutical company and was responsible for sales in her region of the drug Bextra. Bextra was a Cox-II inhibitor and had been approved in by the Food and Drug Administration (FDA) in November 2001 for the signs and symptoms of osteoarthritis, adult rheumatoid arthritis, at 10 mgs and primary dysmennorhea at 20 mgs, twice a day as needed. In 2001, the FDA specifically denied the request of the pharmaceutical company to approve it for acute pain, including the pain of surgery. The FDA told the pharmaceutical company that it could not approve it for these other indications because the safety in these other uses had not been established. Specifically, the FDA was concerned about the results of a study in which there was an excess of cardiovascular events in patients who had undergone coronary artery bypass graft surgery and used Bextra.

HOLLOWAY was aware of the FDA’s safety concerns, but that she nonetheless had her sales staff of approximately 100 employees sell Bextra for precisely the uses that the FDA refused to approve. For example, HOLLOWAY trained and encouraged her sales teams to promote Bextra by obtaining protocols from doctors that instructed that Bextra be used for the pain of surgery, an unapproved use, and at 20 mgs, an unapproved dose. HOLLOWAY also instructed her staff to market Bextra for use before, during and after surgery to reduce the risk of deep vein thrombosis, which is a form of life threatening blood clots, even though she knew there were no studies showing that Bextra was safe and effective for this use. Finally, HOLLOWAY encouraged her staff to make false safety claims about Bextra in order to sell the drug.

Holloway was sentenced by United States Magistrate Judge Judith Dein to pay a $75,000 fine and twenty-four months of probation after pleading guilty to an Information charging her with distribution of a misbranded drug.

Many in the healthcare industry and the attorneys who represent them in South Florida notice trends in law enforcement and criminal prosecutions that are logically preceded by increased audit activity. There are generally surges in prosecutions following increased outlays in Medicare and Medicaid spending on services, claims or equipment. Recently, the federal government has dedicated substantial resources, particularly in South Florida , to the prosecutions of physicians and clinic owners alleged to be engaged in fraud related to the administration of HIV medications; these were preceded by increased audits and overpayment demands with regard to most of the physicians and clinics later prosecuted.

With the 2006 amendments to Medicare and the creation of Part D, there was a tremendous surge in prescription drug spending by the Medicare Program, however the audit activity did not really catch up with the increased spending until recently. In South Florida, private Medicare contractors including Integrity Health, Trust Solutions and National Audit, along with the internal units of drug plan insurers have vigorously stepped up activity with fraud units conducting expansive and coordinated and almost search warrant like audits. The targets of these audit investigations often extend not only to pharmacies, but physicians who issue a large number of prescriptions for expensive medications.

The stakes can be quite high. Pharmacy owners, providers and health care administrators should be aware that these audits are not random and are generally a pretext to a referral to law enforcement authorities and should treat an audit like a search, including the use of competent counsel to preserve the provider’s rights and to avoid questioning intended to elicit incriminating information

One recent article indicates that audit activity has detected increased pharmacy fraud is found here.