No Correlation Between Drug War and Use

According to an independent, well-regarded think tank, there is statistically no reason to think that we can reduce drug abuse by locking more people up.

The nonprofit Pew Charitable Trusts spelled it out in a letter this summer to a federal commission that’s looking at ways to combat the widespread problem of opioid abuse.

Its study, which drew on data from the federal government and all fifty states, found no statistically-significant relationship between a state’s rate of incarceration and its rate of drug use, drug arrests, or overdose deaths.

Put another way, locking up more people didn’t correlate with lower rates of drug use, drug arrests, or overdose deaths. These findings held even when the study controlled for race, income, unemployment, and education. The arrest and incarceration rates came from state corrections departments and the U.S. Justice Department. The drug-usage rates came from an annual, national survey funded by the U.S. Department of Health and Human Services. The overdose-death rates came from the Centers for Disease Control and Prevention. The demographic data came from the U.S. Census Bureau, and the income and unemployment data came from the U.S. Labor Department.

The more effective response to opioid abuse, says the letter, is a combination of law enforcement to curb drug trafficking; sentencing alternatives to divert nonviolent people from costly imprisonment; treatment to reduce addiction; and prevention efforts like prescription-drug monitoring programs, which we wrote about last week.

The CURES For What Ails You

Speaking of prescription drugs, almost every state now has a prescription-drug monitoring program (or PDMP). The goal is to curb prescription-drug abuse by discouraging pill-pushing and doctor-shopping. So whether you’re a patient or provider, you should pay attention because law enforcement and licensing boards are watching.

In California, for example, the program is called CURES: the Controlled Substance Utilization Review and Evaluation System. By law, pharmacies must report to CURES every prescription for a Schedule II, III, or IV drug within seven days of dispensing it. And pretty soon, under a law passed last year, doctors will be required to check CURES before prescribing such drugs to a patient for the first time and every four months after that during treatment.

Last week, the California Supreme Court ruled that the California Medical Board could freely access CURES at any time. It didn’t need to get a warrant or show good cause beforehand. The doctor who was being investigated argued that this violated the privacy of his patients. But the Court held that, on balance, the Board’s access was justified by the need to protect the public from drug abuse and protect patients from impaired or negligent doctors.

Even if your state’s law is different, remember that federal law remains supreme. Last month, a federal court decided a case in which the Drug Enforcement Administration (DEA) subpoenaed data from Oregon’s PDMP. Unlike California’s program, Oregon required all agencies—even federal ones—to get a court order before it would respond to a subpoena. It sued to compel the DEA to comply with its law, but it lost. Federal law authorizes the DEA to issue subpoenas on its own, so Oregon couldn’t force it to follow state law.

Feds Arrest Hundreds in Healthcare Raids

Last week, the federal government conducted nationwide raids of healthcare providers and facilities based on $1.3 billion in allegedly false billings.

In one day, the feds arrested 412 people in a coordinated takedown that netted 115 doctors, nurses, and other licensed professionals. The government also brought legal action to exclude 295 providers—including doctors, nurses, and pharmacists—from further participating in federal healthcare programs.

The government says the defendants schemed to defraud Medicare, Medicaid, and Tricare, which is the health-insurance program for veterans, servicemembers, and their families. It alleges that defendants billed for prescription drugs and other treatments or services that were medically unnecessary or never even provided.

The raids were spearheaded by the Department of Justice (DOJ) and the Department of Health and Human Services (HHS). Here’s DOJ’s press release about it, and here’s a factsheet by HHS that tallies up the numbers. The raids were concentrated in Florida, Texas, Michigan, California, Illinois, New York, Louisiana, and Mississippi. But they also captured targets in over two dozen other states across the country.

Patient Privacy Gives Way for Good Cause

If you’re a doctor in California, here’s a healthy reminder that the Medical Board can subpoena your patients’ records for good cause, over their objection and yours.

In a recent decision, the California Court of Appeal upheld an order that compelled a doctor to produce three of his patients’ records even though all three didn’t want them released.

It all started when the Board got a complaint from a private investigator that the doctor, an ophthalmic plastic surgeon, was billing for services he didn’t render, misrepresenting some of the services he did render, and falsifying documents.

The Board began to investigate the complaint, and later, it issued subpoenas for the three patients’ records on the ground that the doctor had departed from the standard of care in their treatment. Two of the patients wrote to the doctor to say they didn’t want their records produced and were happy with their quality of care. The third wrote that he hadn’t received notice of any subpoena, but he didn’t want his records produced, either.

The doctor moved to quash the subpoenas, and the Board opposed it and moved to compel his compliance.

The trial court sided with the Board but limited the subpoenas to a three-year range. It doesn’t appear that the patients pursued their objections in court.

On appeal, the court upheld the order, and in the process, it surveyed the case law on what constitutes good cause for breaching the privacy rights of patients.

In three prior cases, the courts had found no good cause. In one, the evidence consisted of a declaration from the Board’s investigator that supplied no facts, only a conclusion that the records “may offer evidence to substantiate” an allegation of gross negligence. In another, the Board supplied experts who suggested, based on their review of pharmacy records, that two doctors were overprescribing, but they didn’t explain why, and the doctors submitted competent evidence to rebut them.

In the most recent case, however, the court found good cause for the subpoena because of specific billing irregularities and other evidence that a doctor was overprescribing. He’d prescribe large amounts of an amphetamine to one patient. He’d prescribe to the same patients at two different pharmacies on the same day. He’d prescribe the same drugs to multiple family members and refill their prescriptions before the due date.

In this case, too, the court held that substantial evidence supported the trial court’s finding of good cause because the investigator’s partial records revealed serious problems with the claims paperwork, which the Board’s expert reviewed. In some instances, the doctor’s paperwork didn’t support the services he billed for. In others, there was no documentation at all. In some, there were no signatures; in others, no dates of service; and his reports used canned, cut-and-paste language. So the court affirmed the order.

Strict Liability for Pharmacists in California

If you’re a supervising pharmacist in California, you should take note of a recent appellate decision that upheld the pharmacy board’s right to revoke your license because of a subordinate’s intentional misconduct, even if you didn’t know about it.

The pharmacist in the case, who was the pharmacist-in-charge at a retail pharmacy, nearly lost his license because a technician secretly ordered and stole one million dollars’ worth of a dangerous drug over a two-year period. Up until then, the pharmacist had no history of discipline in his thirty years of holding a pharmacy license.

How did it happen? The technician would order large amounts of Norco, which is a compound of acetaminophen and hydrocodone, and have them delivered to the pharmacy on a day she was scheduled to work. When the orders came in, she would hide them in the store room, destroy the packing invoice, and take the drugs to her car (in her purse) whenever the on-duty pharmacist took a break.

The pharmacist-in-charge didn’t catch on to this because he never unpacked any drug deliveries, checked them against invoices, or stocked them; he delegated those tasks to others. And although he would sign off on the deliveries, the supplier’s delivery log only listed the number of containers being delivered, not their contents.

Ultimately, the pharmacist was the one who discovered the theft when he found a bottle of Norco in the store room. Since the pharmacy didn’t sell Norco, he notified management, and the ensuing investigation led to the technician’s arrest.

Even so, the pharmacy board filed an administrative action against him for six violations of the California Business and Professions Code and the Code of Regulations:

  1. Failing to maintain a complete and accurate record of all controlled substances sold, received, or otherwise disposed of. See Bus. & Prof. Code §§ 4005, 4081, 4105, & 4301(j), (0); Code Regs. tit. 16, § 1718.
  2. Failing to maintain records of acquisition and disposition for three years. Bus. & Prof. Code §§ 4081(a), 4105, & 4301(j), (o).
  3. Allowing a technician to sign for dangerous-drug deliveries. Id. §§ 4059.5 & 4301(o).
  4. Failing to properly supervise a technician. Id. §§ 4115(h) & 4301(o).
  5. Failing to secure and maintain the facility and its spaces, fixtures, and equipment from theft. Bus. & Prof. Code §§ 4005 & 4301(o); Code Regs. tit. 16, § 1714(b).
  6. Failing to provide effective controls to prevent the theft. Bus. & Prof. Code §§ 4005 & 4301(o); Code Regs. tit. 16, § 1714(d).

After the administrative hearing, the judge found the pharmacist liable for all but the fifth violation and proposed that he be punished by public censure.

But the board rejected that proposal, which was in its power to do, and found him liable for all six violations. As punishment, it revoked his license but stayed the revocation and placed him on probation for three years, with specific conditions.

In the board’s view, the pharmacist could’ve done more. He could’ve conducted random checks of the orders that he signed for. He could’ve required the pharmacy to close when the on-duty pharmacist took a break. He could’ve audited the pharmacy’s telephonic ordering system, which the technician used to place orders from her home, and restricted access to the passcode she used to do it. Were it not for these lapses, the board concluded, the theft could’ve been discovered sooner.

The pharmacist offered expert testimony that the custom, practice, and standard of care in the community didn’t require a pharmacist to monitor every menial task, but the board rejected that testimony and concluded that a supervising pharmacist’s legal duties included checking his staff’s work, actively monitoring inventories, and randomly auditing deliveries. And the board interpreted section 4081 to hold a pharmacist-in-charge liable for such violations regardless of whether he was aware of them.

The pharmacist asked the board to reconsider its decision, and when that was denied, he petitioned the trial court to challenge it by what’s called a writ of administrative mandamus. See Civ. Proc. Code § 1094.5.

The trial court denied his petition, so he appealed his case to the court of appeal, but he lost again. The appellate court agreed with him that he had a fundamental right to maintain his pharmacy license. See Hoang v. Cal. Bd. of Pharmacy (2014) 230 Cal. App. 4th 448, 455. But the court agreed with the board that, as a pharmacist-in-charge, he was responsible for the pharmacy’s compliance and for maintaining an inventory of dangerous drugs, whether he knew about them or not. Cf. § 4081(c) (precluding criminal liability for the acts of others without actual knowledge of wrongdoing). The court reasoned that this rule would better protect the public and align with a rule of strict liability under other licensing statutes. See Margarito v. State Athletic Comm’n (2010) 189 Cal. App. 4th 159, 168-69 (collecting cases).

In the end, the court even agreed that the technician’s prolonged, extensive theft was substantial evidence in itself that the pharmacist had failed to properly supervise things.

Sounds like strict liability to me.

U.S. Sentencing Commission Amends Guidelines for White-Collar Fraud Cases

Any day now, the U.S. Sentencing Commission will submit to Congress a set of proposed amendments to the federal sentencing guidelines that it voted to approve three weeks ago. That matters because, in federal court, the guidelines drive most sentences and influence nearly all of them. If Congress doesn’t object to the amendments, they will go effective on November 1. Here’s a copy of the April 9 press release, and here’s a link to the text of the amendments on the Sentencing Commission’s website.

In particular, the proposed amendments will affect the main sentencing guideline that governs white-collar fraud cases. See U.S.S.G. § 2B1.1. Let us count the ways.

First, the amendments will change the definition of a defendant’s “intended loss,” which is important because § 2B1.1 punishes you based on the amount of loss you cause, and it defines “loss” as the greater of the actual loss or the intended loss. Currently, the guideline defines “intended loss” as the monetary harm that “was intended to result from the offense,” but the amendments would define it as the monetary harm that “the defendant purposely sought to inflict.” The aim of the new language is to align your punishment more with your specific intent and mental state.

Second, the amendments will change the way § 2B1.1 accounts for the number of victims. Right now, the guideline punishes you at progressively higher levels if your offense involved ten or more victims, fifty or more victims, or 250 or more victims. The amendments will shift the emphasis away from just the number of victims, which can include people whose losses were negligible, and toward the number of victims who suffered “substantial financial hardship” as a result. With this change, if even one victim suffered substantial financial hardship from the offense, the guideline will punish you for it, and it will punish you at progressively higher levels if you’re deemed to have caused such hardship for five or more victims or 25 or more victims. So what qualifies as substantial financial hardship? The court will decide that based on whether your victims became insolvent, had to file for bankruptcy, lost a big chunk of their savings, or other such factors.

Third, the amendments will revise the enhancement for offenses that involve the so-called use of “sophisticated means.” Right now, you get a bump in your sentence if the court concludes that your offense involved especially complex or intricate conduct. The amended guideline will clarify that this enhancement doesn’t apply unless you personally engaged in or caused the conduct that constituted the sophisticated means.

The proposed amendments include other important or interesting changes. They will affect how the guidelines compute your criminal history and how they assess the scope of your liability for the acts of others. They will adjust the various monetary tables in the guidelines to account for inflation. And they will make changes associated with the reclassification of hydrocodone from a Schedule III to a Schedule II controlled substance.

But the amendments to the fraud guideline have made the biggest splash, even as the defense bar continues to debate and analyze their sweep and significance.

Will they apply retroactively? Here’s a report that suggests the answer may be no.

What Is A Kickback, Anyway?

When is it a bribe, when is it business, and when is it speech? We know it’s a bribe if you toss some cash in someone’s lap, but what if you just give them some good business advice? Well, that may have value, too, so it could be a kickback, but then what if you charge them for it? Okay, well, that doesn’t sound like a kickback, but then what if you charge them for it cheap? Hmm. It can get complicated.

Welcome to the world, and welcome especially to the world of health-care-fraud and false-claims-act litigation, where a pending case out of Pennsylvania illustrates the complexity well.

Five years ago, two putative whistleblowers sued Allergan, a manufacturer of prescription eye-care drugs and other products, on behalf of the federal government and about twenty individual states under the whistleblower, or qui tam, provisions of the federal False Claims Act and analogous state laws.

Five years later, the litigation is not much further along; all of the federal and state governments (who are supposedly victims of the fraud) have declined to intervene in the case, and the plaintiffs, who are referred to as “relators” in false-claims-act litigation, have switched their theory. They first alleged an off-label-promotion scheme, but now they’re alleging a violation of the federal Anti-Kickback Statute. How? They allege that Allergan offered eye doctors a kickback in the form of business consulting and practice-management advice, including access to a restricted, Allergan-hosted website, along with other benefits. Although the company charged an annual subscription fee of around $900 to access the website, the relators allege that the fair-market value of these expert services “far exceeds the nominal annual membership fee for access to Allegan’s exclusive website.”

The Anti-Kickback Statute makes it illegal for someone to knowingly and willfully offer or pay any remuneration to any person to induce or reward the referral of business in a federal healthcare program. 42 U.S.C. § 1320a-7b(b)(2). Under the statute, remuneration is broadly defined to include transfers of goods or services either for free or for non-fair-market value. Id. § 1320a-7a(i)(6).

On April 29, Allergan filed a motion to dismiss on the grounds that the relators didn’t plead a valid claim under the False Claims Act, a proper violation under the Anti-Kickback Statute, or a proper fraud under the Federal Rules of Civil Procedure, among other reasons.

But the company argued something else as well. It argued that the relators’ theory of liability violated the First Amendment because the practice-management advice and consulting it provided was protected speech, not remuneration under the Anti-Kickback Statute.

Well, the Department of Justice didn’t care for that, apparently, and on June 6, it filed a brief in the case saying, in effect, let’s not go there. The government noted that, even though it didn’t intervene, it remained a real party in interest, and it retained a keen interest in the interpretation of the False Claims Act and Anti-Kickback Statute. It urged the court not to adopt the company’s interpretation that speech does not or cannot constitute remuneration, because if speech has value, it can be used to induce or reward business. The government took no other position on the merits of the motion.

Johnson & Johnson to Pay $2.2 Billion to Settle Charges Regarding Children and the Elderly

Last week, healthcare giant Johnson & Johnson agreed to pay $2.2 billion and plead guilty to a misdemeanor in order to settle a long-running civil and criminal investigation by the U.S. Justice Department into its off-label marketing of certain drugs, including the antipsychotic Risperdal. Under federal law, drug makers may not market drugs for a use that has not been approved by the Food and Drug Administration, though doctors may still prescribe drugs for such unapproved, off-label use.

The government had alleged that Johnson & Johnson promoted Risperdal for use by elderly dementia patients—despite evidence of an increased risk of stroke—as well as by developmentally-challenged boys—despite knowing they could develop breasts as a result of elevated hormone production. The government further alleged that the company paid kickbacks to doctors and pharmacies as part of its promotional campaigns.

The company did not admit civil liability or wrongdoing as part of the settlement, which also requires it to upgrade its compliance practices and submit to five years of monitoring by the Health and Human Services Department’s Office of Inspector General. The settlement also preserves the company’s ability to sell its products to government health programs. Losing that ability, which is commonly referred to as debarment, can devastate a business that depends on government grants or contracts or that provides services under federal programs like Medicare or Medicaid.

The deal represents the government’s third-largest settlement ever with a pharmaceutical company. Number one on the list is the GlaxoSmithKline settlement from 2012, which totaled $3 billion and also included a guilty plea to criminal charges. The second-largest settlement was back in 2009, when Pfizer coughed up $2.3 billion to resolve a criminal investigation.

For Johnson & Johnson, the litigation may have been a cost of doing business. The company sold $24.2 billion of Risperdal from 2003 to 2010, and because the drug’s patent protection expired in 2008, it’s now far less critical to the company’s financial statements. In August, the company said that resolving the litigation would not have “a material adverse effect” on its finances, and indeed, the $2.2 billion settlement is reported to represent just 12.5 percent of revenue for its most recent quarter.

Ratings and Reviews

10.0Mani Dabiri
Mani DabiriReviewsout of 7 reviews
The National Trial Lawyers
The National Trial Lawyers
Mani Dabiri American Bar Foundation Emblem