Life Science Compliance Update

November 27, 2017

Vermont AG Probing Pharma and Physician Relationships


The Vermont attorney general is investigating the extent to which drug and device makers may have violated state law by giving gifts or payments for other items to health care providers, according to a source familiar with the matter.

As some of our readers may recall, Vermont banned industry gift giving to health care providers over concerns that the payments influence the way physicians practice medicine and prescribe medications, a contentious issue that later led the federal government to create a database to which drug and device makers must report any payments to physicians and teaching hospitals.

The Vermont law prohibits payments from industry to physicians in the form of food, entertainment, travel, or most anything of value – few exemptions exist.

However, a check of the federal Open Payments database shows that in 2016, companies gave over $2,200 in gifts, provided roughly $173,400 in travel, and gave an estimated $54,400 in food and beverage.

According to Merideth Chaudoir, an assistant attorney general, “Our office is unable to discuss or comment on whether or not there may or may not be an investigation. Generally, our policy is not to comment on whether or not there may or may not be an investigation such as a probe or other investigatory method. Our office gets thousands of complaints a year and, in order to protect the privacy of individuals and businesses, we do not disclose that information.”

However, some of the reportings may have been done in error due to confusion over reporting requirements. This is because the federal Sunshine Act requires companies to report payments made to physicians and teaching hospitals to the Open Payments database. Since federal law pre-empts state law, companies are not required to report to Vermont any gifts provided to Vermont physicians and teaching hospitals, though they may opt to do so on a voluntary basis.

The Vermont law, on the other hand, more broadly requires companies to report all payments to all health care providers, including payments made to nurse practitioners and physician assistants, as well as benefit plan administrators and hospital foundations. Payments made to these individuals and entities are not required to be reported to the Open Payments database. As a result, some reporting failures could be due inadvertent administrative errors.

The Vermont attorney general may file a civil suit for any violation of either the gift ban or reporting requirements. Any company that fails to comply with the gift ban or fails to report payments may incur a $10,000 penalty for each violation.

Currently, only two other states have similar gift bans. Maine enacted a prohibition this summer and Massachusetts has had such a law for several years.

However, interest in such a law continues to grow. In August 2017, New Jersey Governor Chris Christie introduced a bill to prohibit gifts, including cash, entertainment, and recreational items, given to doctors. The proposed legislation would also cap physician income from industry members at $10,000 annually, the first such effort by any state.

Earlier this year, a bill in California was introduced that would also prohibit gifts. However, that legislation has been put on hold for the time being.

March 13, 2017

Healthcare Providers Accused of $100 Million Kickback Scheme


A dozen doctors, pharmacy owners, and marketing professionals have been accused of being involved in a sham medical study used to bilk up to $102 million from Tricare, the publicly funded federal health program for military and their family members. According to federal prosecutors, the scheme involved physicians prescribing “compounded” drugs, such as pain, scar, and migraine creams to military families. The twelve participants were charged in a thirty-five count superseding indictment.

The defendants include: Dr. Walter Neil Simmons, 47, of Mesa, Arizona; Dr. William F. Elder-Quintana, 50, of El Paso, Texas; Jeffrey Eugene Fuller, 51, of Dallas, Texas; Andrew Joseph Baumiller, 37, of Dallas, Texas; Jeffry Dobbs Cockerell, 61, of Houston, Texas; Steven Bernard Kuper, 43, of Burleson, Texas; Ravi Morisetty, 42, of Irving, Texas; Joe Larry Straw, 46, of Frisco, Texas;  Luis Rafael Rios, 50, of Killeen, Texas; and Michael John Kiselak, 49, of Southlake, Texas.

The superseding indictment alleges that from roughly May 2014 to mid-February 2016, the twelve defendants conspired to run a scheme to defraud TRICARE in connection with the prescription of compounded pain and scar creams. The scheme involved the payment of kickbacks to TRICARE beneficiaries, payment of kickbacks to prescribing physicians, and the payment of kickbacks to marketers by the owners of compounding pharmacies.

CMGRX Participants

Cesario and Cooper co-owned CMGRX, LLC, (CMGRX), a Texas limited liability company formed in September 2014. The ‘CMG’ in CMGRX stands for Compound Marketing Group. CMGRX primarily marketed compounded pain and scar creams to current and former U.S. military members and their families, on behalf of various compounding pharmacies. CMGRX’s principle marketing tool was a sham medical study through which individuals were paid monetary compensation in exchange for obtaining compounded drugs with their TRICARE prescription benefits. Cesario served as CMGRX’s CEO and Treasurer and Cooper served as its President and Secretary. Neither had any medical, nursing or pharmaceutical licensing or education. CMGRX ceased operations in mid-2015, shortly after TRICARE announced changes to its coverage of compounded drugs. From October 2014 through June 2015, TRICARE paid more than $102 million for compounded drug prescriptions generated by CMGRX.

Defendants Straw and Kiselak led marketing groups for CMGRX, recruiting military members and their families, offering them monetary compensation in exchange for obtaining compounded drugs with their TRICARE prescription benefits. Defendant Rios, a marketer and patient recruiter in Straw’s marketing group, recruited hundreds of beneficiaries on and around Fort Hood.

Per the superseding indictment, Cesario, Cooper, Straw, Rios, Kiselak and their coconspirators paid TRICARE beneficiaries for obtaining and filling prescriptions for compounded drugs, principally compounded pain creams, scar creams, migraine creams, and vitamins. They disguised these payments to TRICARE beneficiaries as “grants” for participating in a medical study they referred to as a TRICARE-approved “Patient Safety Initiative” or “PSI Study” to evaluate the safety and efficacy of compounded drugs. However, the PSI Study was not approved by TRICARE, was not overseen by a qualified physician or medical professional, had no control group, and was not designed to gather any useful scientific data relating to the safety and efficacy of any drug. Its true purpose was to compile a list of TRICARE beneficiaries who had filled prescriptions so that Cesario, Cooper and their coconspirators could calculate how much to pay the beneficiaries.

To further disguise the source of those kickbacks to TRICARE beneficiaries, Cesario and Cooper directed the creation of a charity and funneled the payments to the beneficiaries through the charity. Kiselak introduced Cesario and Cooper to an individual who helped them create the “Freedom from Pain Foundation” and registered it as a tax-exempt charitable foundation. The foundation, however, was funded entirely by payments from Cesario and Cooper, or business accounts they controlled, and from November 2014 to June 2015, they paid approximately $2.8 million to the foundation, most which was used to pay TRICARE beneficiaries and doctors.

Doctors Involved

Defendant Simmons served as the Chief Medical Officer for CMGRX and helped Cesario and Cooper create the PSI Study. Defendant Elder-Quintana worked as a contract physician with CMGRX., and Cesario and Cooper paid him to prescribe compounded drugs to TRICARE beneficiaries. Some of the payments were made directly to Elder, while others were made to Aztec Medicus, PLLC, a company he owned and controlled. Elder wrote thousands of prescriptions for compounded drugs to TRICARE beneficiaries who he never met in person and for whom he conducted only a cursory consultation via telephone. In an effort to disguise physician kickbacks, Cesario, Cooper and their coconspirators funneled some payments through the Freedom from Pain Foundation, under the false premise that the physicians were providing consulting services in connection with the PSI Study.

Pharmacies Involved

Trilogy Pharmacy, a compounding pharmacy in the TRICARE network, paid Cesario, Cooper, Straw, Rios, Kiselak and other CMGRX employees kickbacks in exchange for sending prescriptions for compounded drugs to Trilogy. Baumiller worked closely with Fuller, Cesario and Cooper to disguise these kickbacks as employee wages. Defendant Cockerell owned and operated 360 Pharmacy Services, a compounding pharmacy in the TRICARE network. 360 Pharmacy paid kickbacks to Cesario and Cooper in exchange for sending prescriptions to them.

Defendant Kuper owned and operated FW Medical Supplies LLC, a compounding pharmacy in the TRICARE network that did business under the name Dandy Drug. Dandy Drug paid kickbacks to Cesario and Cooper in exchange for referring prescriptions to them. Defendant Morisetty owned and operated Dena Group, LLC, a compounding pharmacy in the TRICARE network that did business under the name Alpha Pharmacy. Alpha Pharmacy paid kickbacks to Cesario and Cooper in exchange for referring prescriptions to them.


Each defendant is charged with one count of conspiracy to commit health care fraud, which carries a maximum statutory penalty of ten years in federal prison and a $250,000 fine. Cesario and Cooper are also each charged with fourteen counts of payment and/or receipt of illegal remuneration. Each of the remaining defendants, except for Simmons, is charged with at least one count of payment and/or receipt of illegal remuneration. The maximum statutory penalty, upon conviction for each of those counts is five years in federal prison and a $250,000 fine. Restitution may also be ordered.

The superseding indictment also includes a forfeiture request, which would require the defendants upon conviction to forfeit any property traceable to the offense, including real estate in several cities in Texas and Jacksonville, Florida; funds in bank accounts and investment accounts; numerous vehicles; boats and recreational vehicles; numerous firearms; jewelry and artwork; and other various investments to the United States.

Other Probes

There have been at least two other federal probes claiming that certain pharmacies are paying kickbacks to doctors who have ordered expensive compound drugs for their patients. One probe involved a California pharmacy that billed the state’s workers’ compensation program for pricy markups. Another probe involved a Florida doctor who was indicted on a charge of taking kickbacks for sending prescriptions, billed to Tricare and Medicare, for creams costing as much as $21,000 for a one-month supply.

March 06, 2017

ASCO Removes Restrictions on Researchers’ Conflict of Interest


The American Society of Clinical Oncology (ASCO) has removed all restrictions on author relationships previously in the 2013 Policy for Relationships with Companies statement, and all eligible manuscripts and abstracts otherwise will be considered for peer review, regardless of any financial relationships of authors. The decision was announced in the Journal of Clinical Oncology, the official journal of ASCO, in January 2017.

The 2013 policy restricted publication and presentation of research in certain ASCO forums, making abstracts and articles describing company-funded original research to be ineligible for consideration if the first, last, or corresponding author had been a company employee, investor, or paid speaker during the previous two years. ASCO felt that since they are a “leading source of cancer information worldwide,” and therefore, they “have a responsibility to ensure that important new information is disseminated to our members and the larger cancer community.”

The policy prompted researchers to voice their concerns of barring “ASCO members and highly qualified scientists from presenting their important original research to the oncology community in a setting where the work could be critically reviewed and discussed.” Following the outpour of such concerns, the restrictions were placed on hold and ASCO collected data for the following two years on the relationships of authors who submitted manuscripts or abstracts.

The collected data showed that potentially restricted submissions amounted to less than two percent of accepted journal articles, and roughly eleven percent of accepted meeting abstracts. The largest number of the abstracts related to developmental therapeutics and tumor biology, and a majority of them were accepted for poster presentation or publication. Turning to the remaining small number of abstracts accepted for oral presentation, ASCO examined the existing conflict of interest management strategies that the organization employs, such as slide review and live audit, when a heightened risk of bias is identified through disclosure.

Chief Medical Officer of ASCO, Richard L. Schilsky, MD, along with his ASCO colleagues, finally decided, “We have reached the conclusion that continued disclosure of commercial relationships, rigorous peer review, and management of potential conflicts of interest for all work submitted to ASCO best support our goals of trust and transparency and providing value to our members as a source for scientifically sound and unbiased original research.”

“ASCO continues to support universal and accessible disclosure of financial relationships with companies by authors, speakers, reviewers and participants in ASCO activities,” Schilsky and colleagues wrote. “ASCO welcomes further research and engagement with audiences on the most effective ways of communicating and managing disclosure information and on the impact of conflict of interest policies on scientific discourse.”

ASCO notes that it is important to point out that the ASCO policy continues to meet (or exceed) standards for accredited continuing medical education providers developed by the Accreditation Council for Continuing Medical Education Standards for Commercial Support as well as the standards for other interactions with companies described in the Council of Medical Specialty Societies Code for Interactions with Companies. Thus, eliminating author restrictions on submissions does not remove the prohibition on some company employees as speakers at ASCO meetings where accredited continuing medical education is offered.


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