Department of Justice (DOJ)

[Michael Scally MD]

CVS Pharmacy Inc. Agrees to Pay $17.5 Million to Resolve False Prescription Billing Case
CVS Pharmacy Inc. Agrees to Pay $17.5 Million to Resolve False Prescription Billing Case

FOR IMMEDIATE RELEASE
Friday, April 15, 2011

WASHINGTON – CVS Pharmacy Inc., the retail pharmacy division of CVS Caremark Corporation that operates more than 7,000 retail pharmacies in 41 states and the District of Columbia, has agreed to pay the United States and 10 states $17.5 million to resolve False Claims Act allegations, the Justice Department announced today.

 

[Michael Scally MD]

Los Angeles-Area Man Pleads Guilty to Establishing Fraudulent Medical Clinics and Using Stolen Doctor Identities to Defraud Medicare of up to $13.6 Million
Los Angeles-Area Man Pleads Guilty to Establishing Fraudulent Medical Clinics and Using Stolen Doctor Identities to Defraud Medicare of up to $13.6 Million

WASHINGTON— A Los Angeles-area man pleaded guilty today to establishing fraudulent medical clinics and using stolen identities of physicians to defraud Medicare of up to $13.6 million, the Departments of Justice and Health and Human Services (HHS) announced.

Eduard Aslanyan, 37, of Sherman Oaks, Calif., pleaded guilty before U.S. District Judge Consuelo B. Marshall in the Central District of California. Aslanyan admitted that between March 2007 and September 2008, he established a series of fraudulent medical clinics in and around Los Angeles to defraud Medicare. Carolyn Vasquez, who pleaded guilty previously to conspiring with Aslanyan to defraud Medicare, recruited physicians to serve as the medical directors of Aslanyan’s fraudulent medical clinics, and helped them negotiate management agreements with Multiple Trading Inc., a shell company Aslanyan owned, which permitted Multiple Trading to manage the day-to-day operations of the clinics. In return for Multiple Trading’s management services, the physicians agreed to pay Multiple Trading 75 percent of all the revenue the physicians received from Medicare for the services that the clinics billed to Medicare. These services were not performed by the physicians, who were rarely at Aslanyan’s fraudulent medical clinics, but by physician assistants who were hired by Aslanyan and Vasquez and were complicit in the fraud scheme at the clinics.

 

[Michael Scally MD]

U.S. Cracks Down on Online Gambling
http://www.nytimes.com/2011/04/16/technology/16poker.html?ref=gambling

In an aggressive attack on Internet gambling, federal prosecutors on Friday unsealed fraud and money laundering charges against operators of three of the most popular online poker sites. The government also seized the Internet addresses of the sites, a new enforcement tactic that effectively shuttered their doors.

Prosecutors charged that the operators of Full Tilt Poker, PokerStars and Absolute Poker tricked banks into processing billions of dollars in payments from customers in the United States. They said the actions violated a federal law passed in 2006 that prohibits illegal Internet gambling operations from accepting payments.

After ‘Black Friday,’ American Poker Faces Cloudy Future
After 'Black Friday,' American Poker Faces Cloudy Future - NYTimes.com

But last week, the Department of Justice unsealed a 52-page indictment against the chief executives of three largest companies that offer online poker games to Americans — PokerStars, Full Tilt Poker, and Absolute Poker — and a related civil complaint against the companies themselves.

 

[Michael Scally MD]

Double Whammy for a Dietary Supplement Company Executive - First Come Civil Charges, Now Criminal Charges
FDA Law Blog: Double Whammy for a Dietary Supplement Company Executive - First Come Civil Charges, Now Criminal Charges

By John R. Fleder –

In 2004, the Federal Trade Commission (“FTC”) brought a civil action against the marketers of products sold as “Coral Calcium Daily” and “Supreme Greens with MSM.” The FTC challenged a number of claims, including that the products allegedly made express or implied claims that they were an effective treatment for cancer and would cause significant weight loss. In 2008, the United States District Court for the District of Massachusetts granted in part the FTC’s motion for summary judgment. Judge O’Toole ruled that certain claims were not adequately substantiated, finding that the infomercials were misleading as a matter of law. After a subsequent bench trial, the District Court entered judgments enjoining the defendants from running deceptive infomercials, and ordered them to pay in excess of $48 million. In 2010, the United States Court of Appeals for the First Circuit affirmed those rulings (see our previous post here). FTC v. Direct Marketing Concepts, 624 F.3d 1 (1st Cir. 2010).

One of the defendants in that action was Donald Barrett, who owned half of Direct Marketing Concepts. On April 26, 2011, the United States Attorney’s Office in Massachusetts filed a criminal Information against Mr. Barrett in connection with his companies' sales of these same products. The government alleged that he unlawfully introduced Supreme Greens into interstate commerce. The government alleged the products were drug products, and that sales of these products was unlawful because the products were misbranded in that they did not have adequate directions for use. On May 2, 2011, the United States Attorney's office issued a press release announcing that Mr. Barrett had agreed to plead guilty to an FDC Act misdemeanor charge, along with tax charges. According to the government, Mr. Barrett faces a possible three year jail sentence and a fine.

These cases are noteworthy on a number of grounds. First, the FTC action shows that the Commission is seeking and will surely continue to seek large monetary payments from dietary supplement companies and their executives when the FTC believes that certain defendants have made large sums of money from sales of their products. Second, it shows, that company executives can face criminal charges for the same type of activity.

However, what is most striking about these cases is that the government will use both civil and criminal remedies against company executives for FTC Act and FDC Act violations. Indeed, it is quite clear that the FTC and the FDA are working closely these days to coordinate their enforcement activities. Nevertheless, this coordination poses severe landmines for companies, their executives and the lawyers who represent them. Absent some type of global resolution of all potential criminal and civil charges, the end of either a criminal or civil case may not mean the end of a company executive's legal problems.

 

[Michael Scally MD]

Pharmaceutical Giant, Serono, Agrees to Pay $44.3 Million to Settle False Claims Act Case
Pharmaceutical Giant, Serono, Agrees to Pay $44.3 Million to Settle False Claims Act Case

WASHINGTON - P harmaceutical manufacturers Serono Laboratories Inc., EMD Serono Inc., Merck Serono S.A, and Ares Trading S.A. have agreed to pay $44.3 million to resolve False Claims Act allegations in connection with the marketing of the drug Rebif, the Justice Department announced.

The settlement resolves allegations that Serono paid health care providers from the launch of Rebif in about January 2002 through December 2009, to induce them to promote or prescribe Rebif, a recombinant interferon injectable that is used to treat relapsing forms of multiple sclerosis. Serono is alleged to have made payments to providers for hundreds of speaker training meetings and programs, as well as payments for attending consultant, marketing and advisory board meetings, all at upscale resorts and other locations. Serono’s actions allegedly resulted in the submission of false claims to federal health care programs including Medicare and Medicaid for the payment of Rebif, i.e., claims that were tainted by kickbacks.

Rebif - Interferon beta-1a Subcutaneous Injection: http://www.ncbi.nlm.nih.gov/pubmedhealth/PMH0000249/.

 

[Michael Scally MD]

DIETARY SUPPLEMENTS MANUFACTURER SENTENCED
http://www.justice.gov/usao/id/news/2011/may/tribravus05052011.html

Tribravus Enterprises, LLC, dba IForce Nutrition, was sentenced today in federal court in Boise for causing purported dietary supplements to be unlawfully manufactured and distributed in interstate commerce, U.S. Attorney Wendy J. Olson announced. Chief U.S. District Judge B. Lynn Winmill sentenced Tribravus to three years probation; a $125,000 fine, payable in installments, and a $400 special assessment. As conditions of probation, the court ordered future financial disclosures and a monitoring and testing protocol that includes testing of all products distributed by Tribravus / IForce for banned steroids.

According to the plea agreement, Tribravus / IForce distributed the products “17aPheraFLEX,” “Dymethazine” and “Methadrol” as dietary supplements. The FDA found that these products contained synthetic steroids, known as “DMT” or “Madol” and “Superdrol.” Thus they were not dietary supplements but rather unapproved drugs under the Food, Drug and Cosmetic Act. Tribravus Enterprises agreed to pay the $125,000 fine and implement a testing protocol for its products to ensure future products sold as dietary supplements do not contain synthetic steroids.

 

[Michael Scally MD]

Criminal Contempt for Allegedly Storing Dietary Supplements Under Insanitary Conditions
FDA Law Blog: Criminal Contempt for Allegedly Storing Dietary Supplements Under Insanitary Conditions

The DOJ has announced that a New Jersey jury found two dietary supplement companies and their owner and managers guilty of criminal contempt for allegedly violating a Consent Decree that had enjoined them from engaging in certain conduct.

In 2009, the government filed a complaint against Mohamed Desoky and his companies, Quality Formulation Laboratories, Inc. (“QFL”), and American Sports Nutrition, Inc., for allegedly introducing into interstate commerce dietary supplements that were adulterated and misbranded. The products were allegedly produced under insanitary conditions (for instance, an FDA investigator claimed to have noted numerous live and dead rodents in the manufacturing area), and the product labels allegedly failed to disclose a major food allergen. Mr. Desoky and his companies entered into a Consent Decree of Permanent Injunction in 2010 that restrained and enjoined them from directly or indirectly receiving, manufacturing, preparing, packing, labeling, and distributing any article of food, including dietary supplements, until certain conditions had been met and FDA provided written notification of authorization to resume operations.

Shortly after the Consent Decree was signed, FDA agents conducted an inspection of QFL’s facility and allegedly found evidence that some manufacturing and packing continued at the facility after the Consent Decree was signed, even though FDA claimed that it had not authorized the facility to reopen. FDA also found that employees were being transported from the QFL facility to a new facility in order to continue manufacturing, packing, and shipping dietary supplements. As a result, the government filed criminal contempt charges against Mr. Desoky, his companies, and his sons, who allegedly helped Mr. Desoky set up his new facility even though they knew about the Consent Decree.

In September 2010, even after being charged with criminal contempt, QFL allegedly continued operations without FDA’s approval, and shipped finished product to at least one customer. An undercover FDA agent performed a pick-up of finished food products from QFL in January 2011, and one of Mr. Desoky’s sons allegedly loaded the truck for distribution. After contempt charges were filed, the case went to trial in the District of New Jersey, and a jury returned a guilty verdict.

It is often thought that companies and their executives can end their disputes with FDA by entering into a Consent Decree. In fact, FDA often shifts its resources from companies that FDA has sued to other companies once the company that has been sued settles the case. However, this case shows that FDA can and sometimes does pursue contempt sanctions against persons who FDA believes have violated the terms of a Consent Decree. As a result, companies entering into Consent Decrees must be prepared to understand and follow FDA’s interpretation of a Consent Decree or risk contempt sanctions if the company fails to do what FDA is expecting the company to do. Alternatively, a company and its executives can litigate the injunction suit by not signing a Consent Decree. Contempt sanctions can be very serious, including possible jail time and heavy fines.

This case may also be an indication that FDA intends to take dietary supplement GMPs seriously and will be vigilant to go after dietary supplement manufacturing facilities. Dietary supplement GMPs became effective in June 2008 for large companies, June 2009 for medium companies, and June 2010 for companies with fewer than 20 employees. Last year, FDA issued its first Warning Letter for alleged violations of dietary supplement GMPs, and last month dietary supplement GMPs survived a court challenge. This case may be one of many future challenges against firms that allegedly manufacture dietary supplements in violation of GMP regulations.

 

[Michael Scally MD]

Not an Empty Threat; Recent FDA Seizure Actions Follow Warning Letters to a Dietary Supplement Distributor and a Winery
FDA Law Blog: Not an Empty Threat; Recent FDA Seizure Actions Follow Warning Letters to a Dietary Supplement Distributor and a Winery

Recent FDA enforcement actions suggest that FDA will diligently pursue companies that have received Warning Letters for certain violations – and that have allegedly failed to clean up their act.