Back in February of this year, I wrote in my post Pain Medicine Doctors Alleged to Have Received $115,000 in Kickbacks … Plus $40 Million in Illicit Profit, about the cautionary tale of Drs. John Couch and Xiulu Ruan, both then in the midst of their federal court trial for, as was then alleged, receiving $115,000 in kickbacks from Insys Therapeutics, Inc. in connection with its fentanyl drug, Subsys.
Among the allegations:
- That Couch and Ruan prescribed, and also sold through their owned pharmacy, large quantities of Subsys, based on misleading diagnoses, defrauding payors.
- That their profit of $40,000,000 from dispensing Subsys and other controlled substances was an illicit profit from a “pill mill.”
- That they received “speaking fees” from Insys based on the number of Subsys prescriptions they wrote.
As I commented then, the federal Anti-Kickback statute makes it illegal to receive anything of value for the referral of federal health care program patients. Wire fraud statues, the federal Travel Act and other laws turn what are “simple” violations (a huge simplification!) of state laws into federal criminal offenses. The federal Controlled Substances Act permits prescribing and dispensing only for legitimate purposes, not in respect of “pill mill” activities. Federal healthcare fraud makes it a crime to defraud a healthcare benefits program, including a commercial insurer.
Over the ensuing months, Couch and Ruan’s trial moved forward to guilty verdicts and then to sentencing: Crouch was sentenced to prison for 240 months and Ruan received an even stiffer sentence, 252 months behind bars.
In addition, the duo was ordered to make restitution of $6,282,023.00 to Medicare, $3,649,092.97 to Blue Cross/Blue Shield of Alabama, $2,285,170.70 to Tricare, and $1,695,929.00 to United Heath Group.
And Another Subsys Prosecution
Just last week, the State of Arizona brought criminal charges in state court against three pain medicine physicians, Steve Fanto, M.D., Nikesh Seth, M.D., and Sheldon Gingerich, M.D., as well as against Insys and Insys executives.
The allegations: That the physicians collected sham educational “speaker fees” in exchange for writing prescriptions for Subsys.
The criminal complaint claims that from March 2012 to April 2017, more than $33 million, or 64 percent of Subsys sales in Arizona, came from prescriptions written by Fanto, Seth, and Gingerich.
In additional echoes of the Couch and Ruan prosecution, it’s alleged that Drs. Fanto, Nikesh, and Gingerich gave insurers false and misleading information, including that patients had cancer when they did not, to obtain prior authorization for Subsys prescriptions.
Once Again, the Takeaways for You:
1. Money: The are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in pharmacies and the direct dispensing of pharmaceuticals.
2. Structure: But any deal must be structured in compliance with the federal Anti-Kickback Statute, the Controlled Substances Act, Stark, and numerous other federal laws, as well as with various state law counterparts and other restrictions. Your investment in structuring things correctly is an investment in yourself and your jail-free future.
3. Compliance Auditing: No matter how well structured, it’s essential that you engage in periodic compliance audits coordinated through legal counsel. Laws change and actual behavior impacts all of the structure and planning. Even the best planning can be made worthless if illegal conduct takes place within the context of what was planned to be a proper structure.
4. Investigations: If you learn that you (or any person or entity connected to the operation) are under investigation, immediately engage a team of experienced healthcare attorneys and criminal defense counsel. Many potential prosecutions are resolved at this stage.
5. Indictment and trial: Again, immediately engage a defense team of healthcare and criminal defense counsel.
We’ve established a strategic alliance with noted white collar defense attorney Lawrence Brown and his firm, Brown PC, in order to bring a wider set of skills and experience to select clients at the auditing, investigation and indictment/trial phase. Please contact me for additional information.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss