Life Science Compliance Update

March 13, 2017

Healthcare Providers Accused of $100 Million Kickback Scheme

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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.

Charges

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

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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.

February 06, 2017

Discussion on Open Payments by Philadelphia-Region Doctors

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An article in the Philadelphia Business Journal published in early January 2017 focused on Open Payments and payment information available to the public, and how the public availability of the data is affecting doctors and the way they treat patients.

According to the article, Dr. Stanley Schwartz is on a mission to change how physicians treat diabetic patients. The Ardmore endocrinologist, an advocate for reducing the use of insulin in diabetics in favor of other medicine regimens, placed 15th in a ranking of area physicians who received non-research payments from drug companies and medical-device makers.

"To me the Sunshine Act is, you'll excuse the expression, 'a necessary evil' that is meant to reassure people that I approach the care of my patients ethically as I go out and teach physicians across the region, across the country and across the world how to better take care of diabetes," Schwartz said. "It's a necessary evil because there is a worry money may alter my care. What I submit is maybe there are some doctors where that is true, but in my own mind I feel very comfortable telling you that for me, that's not true."

CMS, in its most recent Open Payments report, noted the total payments nationwide fell into three major categories: $2.6 billion for general non-research-related payments, which include speaking fees and food and travel; $3.89 billion for research payments; and $1.03 billion for royalties, licensing fees or ownership or investment interests held by physicians or their immediate family members.

Payments Made to Specialty Physicians

In the article, it was noted that thirteen of the twenty doctors who received the highest payments in the tri-state area were orthopedic surgeons who specialize in knee, shoulder, and spine specialties. Eight of those thirteen are part of the Philadelphia-based Rothman Institute.

Dr. Alexander Vacarro, president of the Rothman Institute, noted, "Rothman Institute is fully committed to the transparency mandated by the Sunshine Act. As national and international leaders in musculoskeletal science, several of our physicians receive compensation for their tireless dedication to basic science and clinical research in an effort to advance the field of orthopedics. Working in conjunction with industry brings this life-saving technology to not only the patients in the communities we serve, but also to people around the world. The physicians of Rothman Institute remain completely transparent in reporting income from these arrangements and will continue to do so."

According to Patricia Audet, chairwoman of the department of pharmaceutical and health care business at the University of Sciences in Philadelphia, "The issue of physician payments is important because it made people aware of payments made to potentially influence doctors. But it doesn't mean all payments are for influencing doctors."

A Doctor’s Perspective

Dr. Schwartz is a member of the speaker bureaus for several pharmaceutical companies, and he spends roughly one-third of his time teaching other doctors about the "disease state" of diabetes and two-thirds of his time discussing specific medicines that he uses as part of the treatment regimen he has developed to treat diabetics. "If there is a drug I don't believe in, I won't speak for it," he said. "I don't speak for everybody who asks. I speak for ones I believe fit into the construct of what I teach."

Schwartz notes that he "get[s] a rush" out of educating others. "When I see people's eyes light up it gives me a good feeling," he said. "The second pleasure I get is I am changing diabetes not just here, but all over the world. One month ago I spoke in Korea, next month I am speaking in Manila. I've been to China four times. … I think it's a responsibility for somebody like me to educate others, even if our process if being funded by pharmaceutical companies, because I am doing it in an ethical way. I can do it throughout the world and help millions of patients."

He makes no apologies for accepting payment from drug companies to instruct physicians. "Every time I speak to 200 doctors, each of those doctors may have 5,000 diabetic patients," he said. "I am affecting the care of [potentially] a million patients. Shouldn't I get reimbursed if I can do it ethically? I know I can do it ethically."

As an aside, with a quick visit to Dr. Schwartz’ website, one can tell he truly appreciates learning and sharing his knowledge with others. His website includes numerous publications, newsletters, and papers authored by the doctor.

Critics Discuss Flaws and Potential Fixes

One of the most vocal critics of the Sunshine Act and open payment database is the American Medical Association, which after the most recent data was released, issued a statement saying, "While we appreciate the efforts of CMS to verify the data submitted by industry, continued data errors and registration challenges during the previous two years have thwarted many physicians from participating in the review and validation process. The integrity goals of the Open Payments database will not be met as long as physician review is obstructed by a registration procedure that is confusing, time consuming, and overly burdensome."

Dr. Sharad Mansukani had one of the highest totals among physicians in the Philadelphia area, $5 million in payments. The payments were primarily dividends from Par Pharmaceuticals. Dr. Mansukani, however, seems to have appeared in the database in error. "I haven't practiced for well over 10 years," he said. "I work for the private equity firm that owned Par prior to its sale, and I was also on Par's board of directors at the time. My compensation had nothing to do with me being a physician. It was [the result] of my personal investment in the company and my role with the private equity firm and the board of directors."

Former University of Pennsylvania bioethicist Arthur Caplan, now a professor of bioethics at New York University's Langone Medical Center, believes the Sunshine Act has had its desired effect - but he advised regulators to pay even closer attention to another vehicle drug companies are using, sometimes improperly, to promote their brands. He stated that the Sunshine Act has “discouraged some of the shenanigans” we used to see in previous decades, such as “cushy dinners and excursions to balmy locations." He noted that in today’s world, medication choices are dictated less by doctors and more by pharmaceutical benefit management firms with lists of preferred medicines for treating specific medical conditions.

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