District Court Enters Permanent Injunction Against Tennessee Company and Its CEO to Stop Distribution of Unapproved and Misbranded Drugs

Thursday, July 27, 2017

The U.S. District Court for the Eastern District of Tennessee entered a consent decree of permanent injunction against Crown Laboratories Inc. and the firm’s Chief Executive Officer, Jeffrey Bedard, to stop the distribution of unapproved and misbranded drugs, the Department of Justice announced today. The products at issue include urea creams and lotions intended to treat a variety of skin ailments.

The Department filed a complaint in the Eastern District of Tennessee on March 1, at the request of the U.S. Food and Drug Administration (FDA). The complaint alleged that the defendants violated the federal Food, Drug and Cosmetic Act by, among other things, introducing unapproved and misbranded drugs into interstate commerce. Specifically, the complaint alleges that defendants sold a series of dermatological creams, despite the absence of FDA approval or a sufficient showing that these products were safe and effective.

“The public has a right to assume that drugs in the marketplace are safe, effective, have obtained proper approvals, and are labeled with the information necessary to allow for proper use,” said Acting Assistant Attorney General Chad Readler of the Justice Department’s Civil Division. “Where drug manufacturers violate these fundamental requirements, the Department of Justice will continue to work aggressively with the FDA to ensure that the pharmaceutical industry follows the rules. Doing so is necessary to protect American consumers.”

As detailed in the complaint, Crown manufactures a variety of prescription and OTC drugs including prescription urea cream and lotion. The products referenced in the complaint include Rea Lo (Urea 40 percent) Cream, Rea Lo (Urea 40 percent) Lotion, Rea Lo 39 (Urea 39 percent) Cream, Dermasorb XM Complete Kit (Urea 39 persent cream and moisturizer), and Sodium Sulfacetamide 10 percent and Sulfur 5 percent (Sodium Sulfacetamide).

As noted in the complaint, the various urea based products were sold as products intended to treat a series of dermatological conditions, such as dry, rough skin, xerosis, ichthyosis, skin cracks and fissures, dermatitis, eczema, psoriasis, keratosis, and calluses. Sodium Sulfacetamide is intended to treat acne vulgaris, acne rosacea, and seborrheic dermatitis. As products designed to provide dermatological treatment, these drugs required FDA approval for their intended uses – approval that was lacking for all of these products. Distributing unapproved drugs in interstate commerce is a violation of the federal Food, Drug, and Cosmetic Act.

In conjunction with the filing of the complaint, the defendants agreed to settle the case and to be bound by a permanent injunction. The injunction requires Crown to stop the manufacturing, selling and introducing into interstate commerce any Rea Lo (Urea 40 percent) Cream, Rea Lo (Urea 40 percent) Lotion, Rea Lo 39 (Urea 39 percent) Cream, Dermasorb XM Complete Kit, Sodium Sulfacetamide, or any drug labeled similarly to such drugs and containing the same active ingredient(s), unless and until an application has been filed with the FDA and approved by the agency.

In addition, within 20 days after the district court’s order, the defendants are required, among other things, to give FDA written notice that they are prepared to destroy all Rea Lo (Urea 40 percent) Cream, Rea Lo (Urea 40 percent) Lotion, Rea Lo 39 (Urea 39 percent) Cream, Dermasorb XM Complete Kit, Sodium Sulfacetamide, and any unapproved drug labeled similarly to such drugs and containing the same active ingredient(s).

The government is represented by Trial Attorney Mary M. Englehart of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel for Enforcement Susan Williams of the Department of Health and Human Services’ Office of General Counsel’s Food and Drug Division.

Additional information about the Consumer Protection Branch and its enforcement efforts may be found at http://www.justice.gov/civil/consumer-protection-branch.

Celgene Agrees to Pay $280 Million to Resolve Fraud Allegations Related to Promotion of Cancer Drugs For Uses Not Approved by FDA

Monday, July 24, 2017

LOS ANGELES – Celgene Corp., a manufacturer of pharmaceuticals headquartered in Summit, New Jersey, has agreed to pay $280 million to settle fraud allegations related to the promotion of two cancer treatment drugs for uses not approved by the Food and Drug Administration, the Justice Department announced today.

Celgene agreed to pay the settlement to resolve a “whistleblower” lawsuit that alleged it had violated the federal False Claims Act by submitting false claims to Medicare. The lawsuit also alleged that Celgene violated the laws of 28 states and the District of Columbia by submitting fraudulent claims to state health care programs, including California’s Medi-Cal program.

Pursuant to the settlement, which was finalized last week, Celgene will pay $259.3 million to the United States and $20.7 million to the 28 states and the District of Columbia. California will receive $4.7 million, more than any other state.

The settlement resolves allegations brought in a “whistleblower” lawsuit that Celgene promoted two cancer drugs – Thalomid and Revlimid – for uses that were not approved by the FDA and not covered by federal health care programs. The allegations included the use of false and misleading statements about the drugs, and paying kickbacks to physicians to induce them to prescribe the drugs.

“Patients deserve to know their doctors are prescribing drugs that are likely to provide effective treatment, rather than drugs marketed aggressively by pharmaceutical companies,” said Acting United States Attorney Sandra R. Brown.

The whistleblower lawsuit was filed in United States District Court by Beverly Brown, who was employed as a sales manager by Celgene, under the qui tam provisions of the False Claims Act and similar laws of the District of Columbia and the 28 states included in the lawsuit. Under the False Claims Act, private citizens can bring suit on behalf of the United States and share in any recovery. The United States may intervene in the lawsuit, or, as in this case, the whistleblower may pursue the action.

“Today’s recovery again spotlights the importance of the False Claims Act in preserving precious government health plan resources,” said Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “This invaluable law enlists all in the battle against fraudulent health care schemes.

The case, United States ex rel. Brown v. Celgene Corp., CV10-3165, was monitored by the United States Attorney’s Office, the Civil Division’s Commercial Litigation Branch, and HHS-OIG.

The claims settled by this agreement are allegations only, and the defendant did not admit liability in settling the action.

Pain Management Group Agrees To Pay $312,000 To Resolve False Claims Act And Overpayment Allegations

Monday, July 24, 2017

Pain Management Group P.C. (“PMG”), based in Antioch, Tenn., has agreed to pay $312,000 to settle federal and state False Claims Act and overpayment allegations, announced Jack Smith, Acting United States Attorney for the Middle District of Tennessee.

The settlement resolves allegations that PMG caused the submission of false claims to Medicare and TennCare for medically unnecessary urine drug tests. The settlement also resolves allegations that PMG caused the submission of false claims to Medicare and TennCare for non-Food & Drug Administration (“FDA”) approved pharmaceuticals Botox, Supartz, and Eufflexa, which PMG purchased from foreign-based suppliers. The United States contends that PMG administered the non-FDA approved pharmaceuticals to Medicare and TennCare patients and then billed Medicare and TennCare for the pharmaceuticals.

The United States’ investigation was initiated after extensive data analysis identified PMG as a potential outlier in the provision of urine drug testing to Medicare patients. Over the course of the investigation, the United States discovered information regarding PMG’s administration of non-FDA approved drugs to Medicare and TennCare patients. Once informed of the investigation, PMG cooperated and instituted remedial measures to address the United States’ allegations. The alleged conduct occurred during 2014-2015.

This matter was investigated by U.S. Department of Health and Human Services-Office of Inspector General and the Tennessee Bureau of Investigation. Assistant U.S. Attorney Jason Ehrlinspiel represented the United States.

The claims settled by this agreement are allegations only, and there has been no determination of liability.

Senior Executives Of Medical Drug Re-Packager Plead Guilty To Defrauding Healthcare Providers

Friday, July 14, 2017

President and Pharmacist-in-Charge Distributed Cancer Drugs Contaminated With Mold

Earlier today, in federal court in Brooklyn, Gerald Tighe, the president and owner of Med Prep Consulting Inc. (Med Prep), and Stephen Kalinoski, its director of pharmacy and registered pharmacist-in-charge, pleaded guilty to wire fraud conspiracy in connection with their operation of the now-defunct Tinton Falls, New Jersey-based medical drug re-packager and compounding pharmacy. The pleas were entered before United States District Judge I. Leo Glasser.

The guilty pleas were announced by Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York, and Mark McCormack, Special Agent-in-Charge of the U.S. Food and Drug Administration’s Office of Criminal Investigations, Metropolitan Washington Field Office (FDA/OCI).

According to court filings and facts presented during the plea proceeding, Med Prep processed numerous drugs, including oncology and dialysis drugs, pain medications, anesthesia drugs, and operating room drugs, in purportedly aseptic conditions. In an effort to gain market share, Med Prep repeatedly misrepresented to its customers, who consisted of hospitals and other healthcare providers, that it adhered to, and in some areas exceeded, industry standards and laws applicable to sterile drug preparation. In fact, Med Prep produced drugs in a facility that fell far short of basic industry standards of cleanliness, creating a risk to the health of already ill patients. Tighe and Kalinoski lied to healthcare providers about Med Prep’s failures to comply with basic sterility practices. Med Prep halted its production of drug products in the summer of 2013, following an incident in which it had distributed intravenous drugs containing visible mold to a Connecticut hospital.

“Today’s guilty pleas mark an important step in our continuing effort to hold accountable those who pursue corporate profits over the health and safety of vulnerable patients suffering from disease,” said Acting United States Attorney Rohde. In announcing the guilty plea, Ms. Rohde gratefully acknowledged the assistance and cooperation of the United States Department of Health and Human Services, Office of the Inspector General, Office of Investigations; the United States Office of Personnel Management, Office of the Inspector General; the Department of Justice, Civil Division, Consumer Protection Branch and Commercial Litigation Branch; the FDA’s Office of the Chief Counsel; the Office of the Attorney General of New Jersey; and the New Jersey Board of Pharmacy.

“Producing unsafe and contaminated drugs poses a serious threat to the U.S. public health and cannot be tolerated,” stated FDA/OCI Special Agent-in-Charge McCormack. “The FDA remains fully committed to aggressively pursuing those who place unsuspecting American consumers at risk by distributing adulterated drugs.”

The sentencing, Tighe and Kalinoski each face up to five years in prison, a fine and the forfeiture of criminal proceeds. They will also be required to make full restitution to their victims.

The case is being prosecuted by Assistant United States Attorneys Alixandra E. Smith, Ameet B. Kabrawala and Erin E. Argo.

The Defendants:

GERALD TIGHE

Age: 59

West Long Branch, New Jersey

STEPHEN KALINOSKI

Age: 53

Middletown, New Jersey

E.D.N.Y. Docket No. 15-CR-62 (ILG)

Drug Company Sales Rep Admits Role in Kickback Scheme Related to Fentanyl Spray Prescriptions

Tuesday, July 11, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that NATALIE LEVINE, 33, of Scottsdale, Arizona, waived her right to be indicted and pleaded guilty today before U.S. District Judge Michael P. Shea in Hartford to one count of engaging in a kickback scheme that defrauded federal healthcare programs.

According to court documents and statements made in court, from approximately March 2013 to October 2014, LEVINE was employed by Insys Therapeutics, an Arizona-based pharmaceutical company that manufactured and sold Subsys, a fentanyl-based sublingual spray that was approved by the Food and Drug Administration solely for the management of breakthrough pain in cancer patients. LEVINE was a sales representative for the company and was responsible for covering the territories that included Connecticut, New Hampshire and Rhode Island.

In pleading guilty, LEVINE admitted that she induced certain medical practitioners, including an advanced practice registered nurse (APRN) in Connecticut, a physician’s assistant (PA) in New Hampshire, and a physician in Rhode Island, to prescribe Subsys by paying them to participate in hundreds of sham “Speaker Programs.” The Speaker Programs, which were typically held at high-end restaurants, were ostensibly designed to gather licensed healthcare professionals who had the capacity to prescribe Subsys and educate them about the drug. In truth, the events were usually just a gathering of friends and co-workers, most of whom did not have the ability to prescribe Subsys, and no educational component took place. “Speakers” were paid a fee that ranged from $1,000 to several thousand dollars for attending these dinners. At times, the sign-in sheets for the Speaker Programs were forged so as to make it appear that the programs had an appropriate audience of healthcare professionals.

The medical practitioners were paid thousands of dollars in illegal kickbacks in order to prescribe Subsys, and induce others to prescribe Subsys, over similar medications. Medicare Part D plans authorized payment for hundreds of Subsys prescriptions written by the three medical practitioners, resulting in a loss of approximately $4.5 million.

LEVINE pleaded guilty to one count of conspiracy to violate the anti-kickback law, an offense that carries a maximum term of imprisonment of five years and a fine of up to $250,000. Judge Shea scheduled sentencing for October 5, 2017.

This investigation is being conducted by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation, with the assistance of the Drug Enforcement Administration’s Tactical Diversion Squad. The case is being prosecuted by Assistant U.S. Attorneys Douglas P. Morabito and Richard M. Molot.

Several other individuals affiliated with Insys Therapeutics, and medical practitioners involved in this kickback scheme, have been charged in the District of Connecticut and in other Districts across the United States.

U.S. Attorney Daly encouraged individuals who suspect health care fraud to report it by calling the Health Care Fraud Task Force (203) 785-9270 or 1-800-HHS-TIPS.

Owner of New England Compounding Center Sentenced for Racketeering Leading to Nationwide Fungal Meningitis Outbreak

Monday, June 26, 2017
Outbreak Was the Largest Public Health Crisis Ever Caused by a Pharmaceutical Product

The owner and head pharmacist of New England Compounding Center (NECC) was sentenced today to nine years in prison in connection with the 2012 nationwide fungal meningitis outbreak, the Department of Justice announced today.

Barry Cadden, 50, of Wrentham, Massachusetts, was sentenced by U.S. District Court Judge Richard G. Stearns to serve 108 months in prison and three years of supervised release, and forfeiture and restitution in an amount to be determined later. In March 2017, Cadden was convicted by a federal jury of racketeering, racketeering conspiracy, mail fraud and introduction of misbranded drugs into interstate commerce with the intent to defraud and mislead.

“Barry Cadden put profits ahead of patients,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Under his direction, employees assured customers that they were getting safe drugs, while Cadden ignored grave environmental failures, used expired active ingredients, and took innumerable other production shortcuts that led to numerous, entirely preventable deaths. As Cadden’s sentence reflects, the Justice Department’s Consumer Protection Branch is committed to prosecuting those who put the health of Americans at risk.”

“Barry Cadden put profits over patients,” said Acting U.S. Attorney William D. Weinreb for the District of Massachusetts. “He used NECC to perpetrate a massive fraud that harmed hundreds of people. Mr. Cadden knew that he was running his business dishonestly, but he kept doing it anyway to make sure the payments kept rolling in. Now he will have to pay for his crimes.”

“Protecting Americans from unsafe and contaminated drugs is at the core of our mission,” said FDA Commissioner Scott Gottlieb, M.D. “Patients should not have to worry about the safety and sterility of the drugs they are prescribed. Since this tragedy, Congress has given the FDA important new authorities, and the agency has implemented key policies, all to provide a greater assurance of safety over compounded medicines. As part of these efforts, we will continue to hold accountable those who violate the law and put patients at risk.”

“Today, Barry Cadden was held responsible for one of the worst public health crises in this country’s history, and the lives of those impacted because of his greed, will never be the same,” said Special Agent in Charge Harold H. Shaw of the FBI, Boston Field Division. “This deadly outbreak was truly a life-changing event for hundreds of victims, and the FBI is grateful to have played a role, alongside our law enforcement partners, in bringing this man to justice.”

In 2012, 753 patients in 20 states were diagnosed with a fungal infection after receiving injections of preservative-free methylprednisolone acetate (MPA) manufactured by NECC. Of those 753 patients, the U.S. Centers for Disease Control and Prevention (CDC) reported that 64 patients in nine states died. The outbreak was the largest public health crisis ever caused by a pharmaceutical product.

Specifically, Cadden directed and authorized the shipping of contaminated MPA to NECC customers nationwide. In addition, he authorized the shipping of drugs before test results confirming their sterility were returned, never notified customers of nonsterile results, and compounded drugs with expired ingredients. Furthermore, certain batches of drugs were manufactured, in part, by an unlicensed pharmacy technician at NECC. Cadden also repeatedly took steps to shield NECC’s operations from regulatory oversight by the FDA by claiming to be a pharmacy dispensing drugs pursuant to valid, patient-specific prescriptions. In fact, NECC routinely dispensed drugs in bulk without valid prescriptions. NECC even used fictional and celebrity names on fake prescriptions to dispense drugs, such as “Michael Jackson,” “Freddie Mae” and “Diana Ross.”

“Today’s sentencing demonstrates the ongoing commitment of the Defense Criminal Investigative Service (DCIS) to protect the integrity of TRICARE, the U.S. Defense Department’s health care program,” stated Special Agent in Charge Leigh-Alistair Barzey of DCIS, Northeast Field Office. “DCIS will continue to work with its law enforcement partners to identify and investigate individuals who disregard pharmaceutical and drug regulations and endanger the health and safety of U.S. military members and their families.‎”

“No veterans receiving VA care were harmed by the fungal meningitis outbreak,” said Special Agent in Charge Donna L. Neves for the Department of Veterans Affairs, Office of Inspector General (VA-OIG). “The VA Office of Inspector General, together with its law enforcement partners, will persist in working drug adulteration cases to ensure veterans continue to receive safe and effective medications for the purpose of healing their ailments.”

“Today’s sentencing is an example of the dedicated work of law enforcement, along with the U.S. Attorney’s Office Health Care Fraud Unit in their steadfast pursuit of justice in the largest public health crisis caused by a pharmaceutical product in this nation’s history,” said Inspector in Charge Shelly Binkowski of the U.S. Postal Inspection Service. “The U.S. Postal Inspection Service will continue to be vigilant in investigating cases where the U.S. mail is used to put our nation’s citizens at risk.”

Assistant U.S. Attorneys George P. Varghese and Amanda P.M. Strachan of Weinreb’s Health Care Fraud Unit and Trial Attorney John W.M. Claud of the Justice Department’s Consumer Protection Branch prosecuted the case.

 

Physician and Wife to Pay $1.2 Million For False Claims Act Allegations that They Billed for Unapproved Drugs

Tuesday, June 27, 2017

Dr. Anindya Sen and Patricia Posey Sen will pay $1.208 million to resolve state and federal False Claims Act allegations that their medical practice billed Medicare and Tennessee Medicaid (TennCare) for anticancer and infusion drugs that were produced for sale in foreign countries and not approved by the U.S. Food and Drug Administration (FDA) for marketing in the United States, the Department of Justice announced today. Dr. Sen owns and operates East Tennessee Cancer & Blood Center and East Tennessee Hematology Oncology and Internal Medicine located in Greeneville and Johnson City, Tennessee. Mrs. Sen managed Dr. Sen’s medical practice from 2009 through 2012.

“Billing for foreign drugs that are not approved by the FDA undermines federal health care programs and could potentially risk patient safety,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The Department of Justice is committed to maintaining the integrity of the health care system and ensuring that patient safety, not physician misconduct, determines health care decisions.”

“Medical providers and practitioners that distribute and disseminate unapproved and potentially unsafe drugs—especially those used in cancer treatment—put at risk the health and safety of the American consumer,” said U.S. Attorney Nancy Stallard Harr for the Eastern District of Tennessee. “This settlement reflects our ongoing commitment to safeguard the federal health care programs and vital care that they provide.”

The United States alleged that the unapproved drugs that the Sens provided to patients and billed to Medicare and TennCare were not reimbursable under those programs. The United States further alleged that the Sens purchased unapproved drugs because they were less expensive than the drugs approved by FDA for marketing in the United States. The Sens thus allegedly profitted by administering the cheaper unapproved drugs.

The United States’ investigation was a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Eastern District of Tennessee, the Department of Health and Human Services Office of General Counsel, the Food and Drug Administration Office of Criminal Investigations and Office of Chief Counsel, the FBI’s Knoxville Division and the Tennessee Bureau of Investigation.

 

Doctor And Son Admit Defrauding Medicare, Agree To $1.78 Million Settlement

 

Tuesday, June 13, 2017

CAMDEN, N.J. – A doctor and his chiropractor son today admitted conspiring to defraud Medicare by using unqualified people to give physical therapy to Medicare recipients, Acting U.S. Attorney William E. Fitzpatrick announced.

Robert Claude McGrath D.O., 65, and his son Robert Christopher McGrath, 47, both of Cherry Hill, New Jersey, each pleaded guilty before U.S. District Judge Robert B. Kugler in Camden federal court to separate informations charging them each with conspiracy to commit health care fraud.

The McGraths, together with their practice, the Atlantic Spine & Joint Institute, have also agreed to pay $1.78 million as part of a civil settlement to resolve allegations that they illegally billed Medicare for those treatments.

“Elderly patients who need physical therapy deserve properly licensed and supervised caregivers,” Acting U.S. Attorney Fitzpatrick said. “Instead, the McGraths for years used unqualified and unsupervised employees to treat their patients, all while fraudulently billing Medicare for the phony services.”

“Patients undergoing physical therapy at the McGraths’ practice sought simply to feel and move better,” said Michael Harpster, Special Agent in Charge of the FBI’s Philadelphia Division. “It seems all the defendants sought was to enrich themselves at those patients’ – and U.S. taxpayers’ – expense. Medicare fraud deals a big blow to a critical piece of our health care system. Every dollar lost to bogus billing is a dollar less to use for legitimate treatments and services.”

According to documents filed in this case and statements made in court:
The McGraths owned and operated Atlantic Spine & Joint Institute, a medical practice with offices in Westmont, New Jersey, and Wayne, Pennsylvania. Under Medicare rules, physical therapy had to be provided by Robert Claude McGrath or by a trained physical therapist under his supervision. However, from January 2011 through April 2016, the McGraths sought to defraud Medicare by employing unlicensed, untrained persons to give physical therapy to Medicare patients, at times when Robert Claude McGrath was not even in the office to supervise. They then submitted bills to Medicare fraudulently identifying Robert Claude McGrath as the provider of physical therapy.
The defendants each face a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing for both defendants is scheduled for Sept. 19, 2017.

“These criminals face serving time in prison as well as paying out a $1.78 million settlement,” said Scott J. Lampert, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Additionally, my agency reserves the right to exclude both father and son from Medicare, Medicaid, and other federal health programs.”

“People trust medical professionals to treat them and not cheat them,” said Special Agent in Charge Mark S. McCormack, FDA Office of Criminal Investigations’ Metro Washington Field Office. “Our office will continue to work with our federal law enforcement partners to pursue and bring to justice those who would exploit this vulnerable population.”

In the related civil settlement, also announced today, the McGraths and Atlantic Spine agreed to pay $1.78 million plus interest to the federal government to resolve allegations that the fraudulent bills submitted under the McGraths’ scheme caused false claims to be submitted to Medicare in violation of the False Claims Act.
The civil settlement resolves certain claims filed by Linda Stevens, a former billing manager at Atlantic Spine, in the District of New Jersey, under the federal False Claims Act. The federal False Claims Act contains a qui tam, or whistleblower, provision that permits whistleblowers to file suit on behalf of the United States for false claims against the government, and to share in any recovery. Ms. Stevens will receive approximately $338,200 from the settlement proceeds, along with her attorney’s fees.

Acting U.S. Attorney Fitzpatrick credited agents of the FBI’s South Jersey Resident Agency, under the direction of Special Agent in Charge Harpster in Philadelphia, special agents from the Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge Lampert, and special agents from the Food and Drug Administration, Office of Criminal Investigations, under the direction of Special Agent in Charge McCormack, with the investigation.

Assistant U.S. Attorneys R. David Walk Jr. and Andrew A. Caffrey III of the U.S. Attorney’s Office Health Care and Government Fraud Unit represented the government in the criminal case and the civil case, respectively.

The New Jersey U.S. Attorney’s Office reorganized its health care practice in 2010 and created a stand-along Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since that time, the office has recovered more than $1.33 billion in health care and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act, and other statutes.

Defense counsel:
Robert Christopher McGrath and Atlantic Spine & Joint Institute: Riza I. Dagli Esq., Roseland, New Jersey.
Robert Claude McGrath: Perry Primavera Esq., Hackensack, New Jersey
Counsel for Relator Linda Stevens: Brian J. McCormick Jr., Philadelphia

 

Seller of “Miracle Mineral Solution” Convicted for Marketing Toxic Chemical as a Miracle Cure

A federal jury in the Eastern District of Washington returned a guilty verdict yesterday against a Spokane, Washington, man for selling industrial bleach as a miracle cure for numerous diseases and illnesses, including cancer, AIDS, malaria, hepatitis, lyme disease, asthma and the common cold, the Department of Justice announced.

Louis Daniel Smith, 45, was convicted following a seven-day trial of conspiracy, smuggling, selling misbranded drugs and defrauding the United States. Evidence at trial showed that Smith operated a business called “Project GreenLife” (PGL) from 2007 to 2011.  PGL sold a product called “Miracle Mineral Supplement,” or MMS, over the Internet.  MMS is a mixture of sodium chlorite and water.  Sodium chlorite is an industrial chemical used as a pesticide and for hydraulic fracking and wastewater treatment.  Sodium chlorite cannot be sold for human consumption and suppliers of the chemical include a warning sheet stating that it can cause potentially fatal side effects if swallowed.

“This verdict demonstrates that the Department of Justice will prosecute those who sell dangerous chemicals as miracle cures to sick people and their desperate loved ones,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “Consumers have the right to expect that the medicines that they purchase are safe and effective.”  Mizer thanked the jury for its service and its careful consideration of the evidence.

The government presented evidence that Smith instructed consumers to combine MMS with citric acid to create chlorine dioxide, add water and drink the resulting mixture to cure numerous illnesses. Chlorine dioxide is a potent agent used to bleach textiles, among other industrial applications.  Chlorine dioxide is a severe respiratory and eye irritant that can cause nausea, diarrhea and dehydration.  According to the instructions for use that Smith provided with his product, nausea, diarrhea and vomiting were all signs that the miracle cure was working.  The instructions also stated that despite a risk of possible brain damage, the product might still be appropriate for pregnant women or infants who were seriously ill.

According to the evidence presented at trial, Smith created phony “water purification” and “wastewater treatment” businesses in order to obtain sodium chlorite and ship his MMS without being detected by the U.S. Food and Drug Administration (FDA) or U.S. Customs and Border Protection.  The government also presented evidence that Smith hid evidence from FDA inspectors and destroyed evidence while law enforcement agents were executing search warrants on his residence and business.

Before trial, three of Smith’s alleged co-conspirators, Chris Olson, Tammy Olson and Karis DeLong, Smith’s wife, pleaded guilty to introducing misbranded drugs into interstate commerce.  Chris Olson, along with alleged co-conspirators Matthew Darjanny and Joseph Lachnit, testified at trial that Smith was the leader of PGL.

In all, the jury convicted Smith of one count of conspiracy to commit multiple crimes, three counts of introducing misbranded drugs into interstate commerce with intent to defraud or mislead and one count of fraudulently smuggling merchandise into the United States.  The jury found Smith not guilty on one out of four of the misbranded drug counts. He faces a statutory maximum of 34 years in prison at his Sept. 9 sentencing.

The case was investigated by agents of the FDA’s Office of Criminal Investigations and the U.S. Postal Inspection Service.  The case was prosecuted by Christopher E. Parisi and Timothy T. Finley of the Civil Division’s Consumer Protection Branchin Washington, D.C.

Biomet Companies to Pay Over $6 Million to Resolve False Claims Act Allegations Concerning Bone Growth Stimulators

EBI LLC, doing business as Biomet Spine and Bone Healing Technologies and Biomet Inc. have agreed to pay $6.07 million to resolve allegations that EBI violated the False Claims Act by paying kickbacks to induce use of its bone growth stimulators and billing federal health care programs for refurbished stimulators, the Department of Justice announced today.  EBI is a medical device company located in Parsippany, New Jersey, that sells bone growth stimulators, which are used to repair fractures that are slow to heal.  It is a subsidiary of Biomet, which is based in Warsaw, Indiana.

“Medical device companies must not use improper financial incentives to influence the decision to use their products,” said Acting Deputy Assistant Attorney General August Flentje of the Justice Department’s Civil Division.  “This settlement demonstrates the department’s commitment to protect patients, and the taxpayers who fund their care, by ensuring that medical decisions are based on the patients’ medical needs rather than the financial interests of others.”

The United States alleged that, from 2001 to 2008, EBI paid staff at doctors’ offices to influence doctors to order its bone growth stimulators.  These payments were allegedly provided pursuant to personal service agreements with staff members. The United States concluded that these payments violated the Anti-Kickback Act and resulted in false billings to various federal health care programs, including Medicare.  The settlement also resolves EBI’s disclosure that it received federal reimbursements for bone growth stimulators that had been refurbished.

“This settlement demonstrates our resolve in ensuring that patients receive, and the government pays for, health care that is based on sound medical judgment, and not compromised by kickbacks,” said U.S. Attorney Carmen M. Ortiz of the District of Massachusetts.

“Kickbacks taint medical decision-making, cause overutilization of services, and lead to increased taxpayer and patient costs,” said Special Agent in Charge Phillip Coyne of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “These improper inducements have no place in government health programs relied on by millions of Americans.”

The settlement resolves in part an allegation filed in a lawsuit by Yu Yue, a former product manager for EBI, in federal court in New Jersey.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  Yu’s share has not yet been determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Civil Division; the U.S. Attorney’s Office for the District of Massachusetts; HHS-OIG; the U.S. Postal Service Office of Inspector General; the Defense Criminal Investigative Service; the U.S. Department of Veterans Affairs, Office of Inspector General and the U.S. Food and Drug Administration, Office of Criminal Investigations.

Ms. Yu’s case is captioned United States ex rel. Yu v. Biomet, Inc., Civil Action No. 09-1731 (D.N.J.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.