Health Care Enforcement Year in Review & 2019 Outlook: Criminal Enforcement Trends

by Mintz - Health Care Viewpoints
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Criminal healthcare enforcement in 2018 once again focused heavily on opioids, targeting manufacturers, prescribers, dispensers and those who contribute to the addiction epidemic, and on prosecution of individuals for a variety of offenses.  In addition, the DOJ announced some expected policy changes related to the way it investigates and prosecutes corporations as well as the restrictions placed on corporations after resolution of government charges.  We will address each of these issues in this post and will attempt to forecast what we expect to occur in the coming year.

Opioids

The DOJ’s criminal prosecutions of individuals in cases involving opioids continued apace in 2018.  Doctors, nurses, sales reps, and pharmacists were charged under drug trafficking statutes, and those convicted typically received harsh sentences.  The annual Health Care Fraud Takedown in July saw charges brought against 601 defendants, including 165 health care professionals.  162 of those defendants – over half of are physicians – were charged for prescribing or distributing opioids.  The government’s Takedown press release noted that the sweep went beyond providers and that a patient was charged for fraudulently obtaining hydrocodone.

As discussed in our 2018 Outlook post, several individual employees and the owner of Insys, which makes a rapid onset Fentanyl spray for breakthrough cancer pain, were indicted for a variety of crimes for inducing providers to over-prescribe its drug.  The charges against the individuals stem from the company’s speaker program, through which high prescribers of the company’s drug were allegedly rewarded with fees paid pursuant to “sham” speaking engagements.  The indicted individuals begin trial in mid-January and will face a barrage of convicted and cooperating physicians, sales reps, and, most recently, the company’s head of sales, who pled guilty in November to a single RICO conspiracy count as well as the former CEO, who pled at the end of 2018.  The judge in the case, a former federal prosecutor and white-collar defense lawyer, has expressed skepticism about the propriety of the RICO charge.  It will be interesting to see if that charging decision leads to over-complication of the issues to be decided by the jury or if, as the government hopes, it allows for an array of conduct to be tied together and enhanced sentences imposed if defendants are convicted.

In April, the DOJ intervened in five consolidated False Claims Act cases against Insys, and the company thereafter announced in August that it had reached an “agreement in principle” to settle the DOJ’s criminal and civil investigations for $150 million to be paid over five years.  The precise terms of that agreement remain confidential.

Some other notable opioid-related developments worth watching are the issuance of warnings by various U.S. Attorney’s Offices to opioid prescribers and the mammoth multi-district civil litigation in the U.S. District Court for the Northern District of Ohio.

In November, the U.S. Attorney in Massachusetts reported that his office had sent letters to a number of opioid prescribers informing them that an analysis of prescriber data had identified them as having prescribed opioids to a patient within 60 days of that patient’s death or to a patient who subsequently died from an overdose.  These warnings – which reportedly have been sent by other U.S. Attorney’s Offices as well – were intended to remind prescribers that their practices are being closely scrutinized, including the medical necessity justification for opioid prescriptions.

As of the date of this post, over 1,200 cases against opioid manufacturers have been consolidated in the multi-district National Prescription Opiate Litigation.  As the discovery phase of the case draws to a close, plaintiffs have cast a wide net in search of additional evidence of industry-wide wrongdoing in the hope of leveraging a landmark resolution along the lines of the historic 1998 tobacco industry settlement.

Telemedicine

The DOJ has for several years indicated that it was taking a hard look at the rapidly growing telemedicine industry.  In October 2018, the government announced charges in what it termed a “Billion-Dollar Telemedicine Fraud Conspiracy.”  The case brought in the U.S. District Court for the Eastern District of Tennessee charges four individuals and seven companies in a scheme in which patients were allegedly deceived into requesting treatment, and physicians were allegedly deceived into writing prescriptions to be filled at defendants’ compounding pharmacies at enormously inflated prices.  Patients and physicians communicated via an “e-consult” platform that was supposedly subject to manipulation by the defendants, and, for 95% of the prescriptions ordered, the prescriber allegedly never spoke with the patient.  This matter highlight one type of arrangement that concerns government when providers treat patients remotely.  Scrutiny in this burgeoning segment of the health care market is sure to continue.

Medical Necessity

With a number of significant medical necessity case appeals pending, the government has continued to successfully bring and resolve these cases.  In September, a Florida-based hospital chain, Health Management Associates, agreed to pay more than $260 million to resolve a DOJ Criminal Fraud Section investigation into the hospital’s “aggressive plan” to increase expensive but unnecessary emergency department admissions.

In the Western District of Tennessee, a father, mother, and their son were sentenced to a combined 20 years in prison after they were convicted at trial of forging documents in order to sell unnecessary power wheelchairs and back braces to Medicare, Medicaid, and TRICARE patients.

In a case in which bills for unnecessary services were submitted by a billing company, a New York surgeon was sentenced after trial to 13 years and ordered to pay over $15 million for procedures billed to Medicare that were not needed and not performed.

Home Health

Like telemedicine, home health is an area that the government continues to scrutinize closely given what the government believes are rampant opportunities for fraud involving vulnerable patient victims.  A Miami home health agency owner was sentenced to 20 years in prison and ordered to pay $66.4 million in restitution and forfeit additional amounts for paying bribes and kickbacks to patient recruiters and for submitting false claims for beneficiaries who did not quality for Medicare coverage.

Kickbacks

Many cases brought in 2018 charged providers, vendors, diagnostic labs, and DME suppliers with soliciting, receiving, or providing illegal kickbacks.  In a case that featured undercover informants wearing wires and search warrants, the former CEO of American Senior Communities and various co-defendants plead guilty to fraud, kickbacks, and money laundering conspiracy charges related to agreements with vendors to inflate prices and kickback the difference to the defendants.  The CEO was sentenced to almost 10 years in prison.

A 45-year-old compounding pharmacy owner in Florida entered into a plea agreement and was sentenced to 15 years in prison and ordered to repay $54 million in restitution for, among other violations, paying a physician to write prescriptions for patients that the doctor never saw.

Medical Devices/Off-label Promotion

The government continues to take a very unforgiving view of companies that promote devices or drugs beyond the uses specifically approved by the FDA.  ev3, the maker of a device used for brain surgery, pled guilty to an information charging a misdemeanor violation of the Food, Drug and Cosmetic Act.  The government charged that the company’s sales representatives were incentivized to encourage surgeons to use its product for “unapproved and potentially dangerous uses outside the brain.” The company agreed to pay an $11.9 million criminal fine and forfeit an additional $6 million.  The government agreed not to prosecute ev3’s parent company citing the fact that the parent acquired ev3 several years after and had no prior knowledge of or involvement in the misconduct and took significant steps to prevent future misconduct of the type alleged.  While the parent company avoided a corporate integrity agreement, it entered into a “Side Letter Agreement” that required it to revamp its compliance program and conduct ongoing monitoring and annual reporting to the government through 2021.

DOJ Policy Changes

We have been closely following the DOJ’s implementation of the policies announced in the Yates Memo in our own investigations and in those public investigations in which its effects can be seen.  When first announced in 2015, the policy described in the memo required corporations to identify “all individuals involved in or responsible for the misconduct” in order to receive cooperation credit from the government.  In November 2018, Deputy Attorney General Rosenstein announced a softening of the Yates Memo’s requirements and a revised policy that permits a company to receive full cooperation credit in criminal or civil investigations if it identifies those individuals who were “substantially involved” in the wrongdoing.  This welcome development gives corporations and the government a little more negotiating room when deciding how to handle allegations of misconduct.

As observed in a post earlier this year, the Department extended its 2017 FCPA Corporate Enforcement Policy to be used as “non-binding guidance” in other areas of investigation beyond the FCPA.  In its continuing effort to provide more predictability to companies deciding whether to self-report misconduct, the DOJ indicated that, absent aggravating factors, it may more readily decline to bring charges in cases where companies self-disclose misconduct promptly, cooperate fully with the government’s investigation, remediate completely and disgorge any ill-gotten gains.  While still far from complete predictability, this is a further step in the right direction that better enables companies and counsel to effectively navigate a potential crisis.

Two final policy changes of note from the DOJ were the announcement that a corporate monitorship should only be imposed when truly necessary and that the Criminal Division will not continue to fill the position of corporate compliance counsel following the departure of the only person to have held the position.  With respect to monitorships, the Criminal Division announced a new policy that states that “a monitor will not be necessary in may corporate criminal resolutions, and the scope of any monitorship should be appropriately tailored to address the specific issues and concerns that created the need for a monitor.”  The memo further requires Criminal Division attorneys to “consider not only the projected monetary costs to the business organization, but also whether the proposed scope of the monitor’s role is appropriately tailored to avoid unnecessary burdens to the business’s operations.”

The Criminal Division also announced that the position of corporate compliance counsel has been eliminated but indicated that review of the effectiveness of corporations’ compliance policies will continue to be considered in every investigation by the DOJ team running the matter.  The DOJ wanted to make clear that the elimination of the position was not to be mistakenly interpreted as a lessening of the government’s focus on whether a company maintains a robust compliance program to deter and detect wrongdoing.

What Will 2019 Bring?

We expect that 2019 will continue to feature aggressive opioid prosecutions with the government monitoring the opioid Multi-District Litigation for any evidence developed that demonstrates criminal or civil liability.  We also anticipate ongoing focus on wrongdoing involving vulnerable victims or patient harm.  The DOJ has already announced a particular emphasis on elder fraud and conducted a Takedown-like sweep of elder fraud defendants in February 2018.  Finally, we expect to see the increased prominence of state Attorneys General and state Medicaid Fraud Control Units in health care fraud investigations and prosecutions.  We will continue to update our blog posts throughout 2019 with important developments in criminal healthcare fraud investigations and cases.

Our Health Care Enforcement Defense team is blogging on its annual review of key government policies, case law developments, and enforcement actions in 2018, and the impact these trends are expected to have on enforcement in the year ahead. Our series will continue tomorrow with a discussion of FCA litigation developments. Stay tuned for the rest of our series and an invitation to our annual webinar, Health Care Enforcement Review & 2019 Outlook, on January 30, 2019.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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