Spine Surgeon Charged in Device Kickback Scheme

By Fred Schulte, Kaiser Health News

A Florida orthopedic surgeon and designer of costly spinal surgery implants was arrested Tuesday and charged with paying millions of dollars in kickbacks and bribes to surgeons who agreed to use his company’s devices.

Dr. Kingsley Chin, 57, of Fort Lauderdale, Florida, is the founder, chief executive officer and owner of SpineFrontier, which also does business as LESspine, a device company based in Malden, Massachusetts. Chin and the company’s chief financial officer, Aditya Humad, 36, of Cambridge, Massachusetts, were each indicted on one count of conspiring to violate federal anti-kickback laws, six counts of violating the kickback statute and one count of conspiracy to commit money laundering, officials said.

The indictment alleges that SpineFrontier, Chin and Humad paid surgeons between $250 and $1,000 per hour in sham consulting fees for work they did not perform.

In exchange, the surgeons agreed to use SpineFrontier’s products in operations paid for by federal health care programs such as Medicare and Medicaid. Surgeons accepted between $32,625 and $978,000 in improper payments, according to the indictment.

“Kickback arrangements pollute federal health care programs and take advantage of patient needs for financial gains,” said Nathaniel Mendell, acting U.S. attorney for the District of Massachusetts. “Medical device manufacturers must play by the rules, and we will keep pursuing those who fail to do so, regardless of how their corruption is disguised.”

DR. KINGSLEY CHIN

(Update: In a Sept. 16 press release, Chin’s lawyer called the charges “baseless.”

“Dr. Chin did not commit these alleged offenses. He is a leading Harvard-trained orthopedic spine surgeon and inventor who has dedicated his life to the welfare of others. He is also a role model for aspiring Black professionals who have overcome great hardship and humble beginnings to achieve success through education, grit, and hard work,” said attorney William Weinreb. “It is deeply disappointing that Dr. Chin’s success has attracted the attention of federal law enforcement, who have filed these baseless charges. Dr. Chin looks forward to his day in court – and to reclaiming his good name.”)

Chin and SpineFrontier were the subjects of a KHN investigation published in June that found that manufacturers of hardware for spinal implants, artificial knees and hip joints had paid more than $3.1 billion to orthopedic and neurosurgeons from August 2013 through 2019. These surgeons collected more than half a billion dollars in industry consulting fees, federal payment records show.

Chin, a self-styled “doctorpreneur,” formed SpineFrontier about a decade after completing his training at Harvard Medical School. Chin has patented dozens of pieces of spine surgery hardware, such as doughnut-shaped plastic cages, titanium screws and other products that generated some $100 million in sales for SpineFrontier, according to government officials. In 2018, SpineFrontier valued Chin’s ownership of the company at $75 million, though its current worth is unclear. He maintains a medical practice in Hollywood, Florida.

Seth Orkand, a Boston attorney who represents Humad, said his client “denies all charges, and looks forward to his day in court.”

The Department of Justice filed a civil lawsuit against Chin and SpineFrontier in March 2020, accusing the company of illegally funneling more than $8 million to nearly three dozen spine surgeons through the “sham” consulting fees. Chin and SpineFrontier have yet to file a response to that suit.

However, at least six surgeons have admitted wrongdoing in the civil case and paid a total of $3.3 million in penalties. Another, Dr. Jason Montone, 45, of Lawson, Missouri, pleaded guilty to criminal kickback charges and is set to be sentenced early next year. Federal law prohibits doctors from accepting anything of value from a device-maker for agreeing to use its products, though most offenders don’t face criminal prosecution.

The grand jury indictment lists seven surgeons as having received bribes totaling $2,747,463 to serve as “sham consultants.” One doctor, identified only as “surgeon 7,” received $978,831, according to the indictment. Many of the illicit payments were made through a Fort Lauderdale company controlled by Chin and Humad, according to the indictment.

“Medical device companies that pay surgeons kickbacks, directly or indirectly, corrupt the market, damage the health care system, and jeopardize patient health and safety,” said U.S. Attorney Andrew E. Lelling of the District of Massachusetts. 

The SpineFrontier executives set up the separate company partly to evade requirements for device companies to report payments to surgeons to the government, according to the indictment. Some surgeons were told they could bill for more consulting hours if they used more expensive SpineFrontier products, officials said.

Conspiring to violate the kickback laws can bring a sentence of up to five years in prison, while violating the kickback laws can result in a sentence of up to 10 years, officials said.

“Kickbacks paid to surgeons as sham medical consultants, as alleged in this case, cheat patients and taxpayers alike,” said Phillip Coyne, special agent in charge of the U.S. Department of Health and Human Services Office of Inspector General.

“Working with our law enforcement partners, we will continue to investigate kickback schemes that threaten the integrity of our federal health care system, no matter how those schemes are disguised.”

Kaiser Health News is a national newsroom that produces in-depth journalism about health issues.

GlaxoSmithKline Most Heavily Fined Drug Company

By Pat Anson, PNN Editor

The pharmaceutical industry has long been criticized for engaging in illegal or unethical activities, such as fraud, kickbacks and price gouging. A new study published in JAMA shines a light on the scale of the problem, finding that Big Pharma paid over $30 billion in financial penalties for illegal activities in the United States.

Researchers looked at state and federal settlements from 2003 to 2016 and found that almost every large pharmaceutical company had paid a fine for illegal activity. The biggest transgressor was GlaxoSmithKline (GSK), which paid nearly $9.8 billion to settle 27 cases brought against it for bribery, corruption, improper marketing, pricing violations and selling adulterated drugs. In one settlement alone, GSK was fined $3 billion for encouraging doctors to prescribe its antidepressants to children.  

The fines paid by GSK were over three times higher than the amounts paid by Pfizer ($2.9 billion) and Johnson & Johnson ($2.6 billion) during the study period. Researchers say only four of the 26 drug companies they analyzed were not assessed a penalty.

TOP 10 MOST HEAVILY FINED DRUG COMPANIES

1. GlaxoSmithKline $9.8 billion

2. Pfizer $2.9 billion

3. Johnson & Johnson $2.6 billion

4. Abbott Laboratories $2.5 billion

5. Merck $2.1 billion

6. Eli Lilly $1.8 billion

7. Schering-Plough $1.6 billion

8. Wyeth $1.6 billion

9. Bristol Myers Squibb $1.4 billion

10. Novartis $1.2 billion

“Among the large pharmaceutical companies included in this study, 85% had evidence of financial penalties for illegal activities. Given the scope and nature of the illegal activities involving financial penalties, physicians and regulators should exhibit vigilance over the activities of large pharmaceutical firms,” wrote lead author Denis Arnold, PhD, a professor of business ethics at Belk College of Business, University of North Caroline at Charlotte.

“Four firms were not found to have penalties for illegal activities during the sample period. This may indicate an ability for illegal activity to be undetected, although these firms may instead have effective ethics and compliance programs.”

Because the study period ended in 2016, it did not include any recent settlements with drug companies involving opioid litigation. Nor did it cover fines paid outside the U.S., such as the $490 million fine that GSK paid for bribing Chinese doctors to prescribe its medications.

“This has been a deeply disappointing matter for GSK," chief executive Sir Andrew Witty said in a formal apology to the Chinese government in 2014.

Not much has changed at GSK over the years. This year the company agreed to pay $4.5 million in fines in Australia for marketing and price violations involving the pain relief gel Voltaren.  The British pharmaceutical giant was also recently fined $2.8 million by Romania for failing to supply the country with asthma medication.

Drug company executives rarely serve prison time for illegal activities and the large fines do not appear to be much of a deterrent against unethical behavior. The nearly $9.8 billion paid by GSK amounts to less than 2 percent of its total revenues during the study period. On average, GSK’s illegal activities went on for over seven years before the company stopped them, according to the JAMA study.

GSK did not respond to a request for comment for this story.    

Fraud Alert for Speaker Programs

In recent years, federal watchdogs have become increasingly concerned about the use of speaker fees, free meals, entertainment and other kickbacks paid by healthcare companies to promote their drugs and medical devices. In the last three years, companies paid nearly $2 billion to healthcare providers for speaker-related services.

In a special fraud alert released this week, the Office of Inspector General (OIG) for the Department of Health and Human Services warned against the practice, saying high-priced speaker programs “may be subject to increased scrutiny.” The OIG cited cases where speaker programs were held at wineries, stadiums and restaurants where expensive meals and alcohol were served at no charge to attendees.

“OIG is skeptical about the educational value of such programs. Our investigations have revealed that, often, HCPs (healthcare providers) receive generous compensation to speak at programs offered under circumstances that are not conducive to learning or to speak to audience members who have no legitimate reason to attend,” the report warns.

“Furthermore, studies have shown that HCPs who receive remuneration from a company are more likely to prescribe or order that company’s products. This remuneration to HCPs may skew their clinical decision making in favor of their own and the company’s financial interests, rather than the patient’s best interests.”

Former VP of Genetic Test Company Pleads Guilty to Paying Doctors Illegal Kickbacks

By Pat Anson, PNN Editor

The former vice-president of marketing for a controversial genetic testing company has pleaded guilty in federal court to paying physicians millions of dollars in illegal kickbacks to order genetic tests for Medicare patients.

Donald Matthews, who was Vice President of Market Development for Proove Biosciences, pleaded guilty this week in federal court. Matthews faces up to 5 years in prison and a $250,000 fine when he’s sentenced in October.

Proove filed for bankruptcy in 2017 after its headquarters in Irvine, California was raided by FBI agents. The company specialized in DNA testing that supposedly identified whether a patient is at risk of opioid addiction and what medications would best treat their pain. Proove said its tests, which cost thousands of dollars, were proven effective in peer-reviewed clinical studies, but a genetic expert told STAT News the studies were “hogwash.”

According to Matthews’ plea agreement, Proove paid doctors at least $3.5 million to induce them to order DNA tests for their patients.  The company then billed Medicare approximately $45 million to pay for the tests and received about $21 million in unlawful payments.

“Proove concealed the true nature of the kickbacks by falsely characterizing the payments as compensation for participating in a clinical research program sponsored by Proove,” the U.S. Attorney’s Office in San Diego said in a statement. “In furtherance of the scheme, Proove placed its own employees in doctors’ offices.  The Proove employees collected a cheek swab and completed most of the paperwork associated with the ‘clinical research’ program.”

Prosecutors say Proove paid kickbacks to an undisclosed number of doctors throughout the country, with the payments tied to how many DNA tests that a doctor ordered. When doctors complained about delayed or reduced payments, a Proove executive demanded that they increase their testing volume. 

“Kickbacks corrupt the medical judgment of physicians, generate unnecessary tests and treatments, increase health care costs, and create unfair competition,” said U.S. Attorney Robert Brewer.

‘A Waste of Time and Money’

As PNN has reported, a non-profit healthcare system in Great Falls, Montana had a Proove “patient engagement representative” employed on site at the Benefis Pain Management Center.

“We had a meeting one day and here are these people from Proove Biosciences. They told us they were doing a research project,” said Rodney Lutes, a physician assistant who was later fired by Benefis. “They wanted to come to Benefis, into the pain department, and test our patients.  We were told this would be at no cost to the patient. My understanding was that they weren’t going to charge anybody, but I found out afterwards they were charging insurance companies.

“They said providers who participated in this would get some form of payment for participating in the program and for filling out all the paperwork.”

Lutes’ supervising physician at the clinic was Katrina Lewis, MD, a pain management specialist at Benefis who was on Proove’s Medical Advisory Board. Benefis has denied that Lewis or any of its employees received kickbacks from Proove for referring business to them. The clinic also said the DNA tests were voluntary and only done on patients if they were appropriate.

 A copy of the clinic’s opioid policy obtained by PNN indicates the tests were mandatory for some patients.

“All patients on dosing levels at or higher than the maximum policy dose MUST be submitted for genetic testing,” the policy states.  

Proove had two types of tests for patients in pain management, an “Opioid Risk Test” and an “Opioid Risk Profile.” According to Proove, the tests could determine a patient’s risk of abusing pain medication.

A Benefis patient who took the tests said they were “a waste of time and money.”

“The meds it said I should be taking either didn’t work, stopped working, or made me sick. And the meds I should not be taking I do just fine on,” she told PNN.

Four Indicted in Compound Pain Cream Scam

By Pat Anson, PNN Editor

Greed and fraud have gone hand-in-hand in the opioid crisis, with drug and genetic test companies, pain clinics, spine surgeons, information technology vendors, addiction treatment doctors and even patient advocacy groups profiting from opioid hysteria or pushing bogus treatments.

You can add to the list pharmacies making compound pain creams.

A federal grand jury has indicted four people in Southern California for healthcare fraud, mail fraud, illegal kickbacks and money laundering as part of a scheme that defrauded two insurers into paying $22 million for medically unnecessary compound pain creams. Some of the creams cost as much as $15,000 per tube.

The fraudulent bills were sent to the U.S. military’s TRICARE health plan and the International Longshore and Warehouse Union’s Pacific Maritime Association Welfare Plan.

Prosecutors say the Orange County-based Professional Compounding Pharmacy (PCP) paid marketers about half of the payments it received from insurers as an incentive to recruit doctors and patients willing to write or accept pain cream prescriptions.

Patients were given $200 each to receive treatment at two bogus pain clinics and to participate in “sham clinical pain studies” on the effectiveness of compound creams as an alternative to opioids.

Among those arrested were James Bell, the owner of PCP and two medical marketing companies, and Dr. Michael Edwards, a Huntington Beach physician who allegedly set up the phony clinics.

Prosecutors say TRICARE was defrauded out of $19 million and the ILWU Plan lost $3 million. The scheme peaked in the first half 2015 and continued into 2016. The fraudulent billings dropped significantly in the second half of 2015, when the insurers reduced their reimbursement rates for compound creams.

This isn’t the first time compound creams have caught the attention of federal investigators.  A 2018 report from the Office of Inspector General for the Department of Health and Human Services found over 500 pharmacies had suspiciously high costs for compound creams and other topical medications billed to Medicare.

Medicare spending for topical medications has skyrocketed, rising from $13.2 million in 2010 to $323.5 million in 2016. Most were prescribed for pain, using ingredients such as lidocaine, a non-opioid anesthetic, or diclofenac, an anti-inflammatory drug.

Do compound pain creams work? A 2019 study at Walter Reed National Military Medical Center concluded the creams should not be used to treat chronic pain. One month after treatment began, researchers found no significant differences in the pain scores of patients who used compound creams and those who used placebo creams.

Healthcare Technology Vendor Took Kickbacks to Promote Rx Opioids

By Pat Anson, PNN Editor

A decade ago, electronic health records (EHRs) were touted as a major innovation that would allow doctors to maintain a digital record of their patients’ medical history, diagnoses, prescriptions and insurance claims. A 2009 federal law encouraged doctors and hospitals to adopt EHRs with over $19 billion in funding to upgrade their information technology.

It didn’t take long for someone to game the system and use EHRs to commit fraud on a massive scale.

Practice Fusion, a San Francisco health information technology developer, agreed this week to pay $145 million to resolve criminal and civil allegations that it took kickbacks from drug companies to promote their products to physicians using its EHR software.

Federal prosecutors didn’t release the names of the drug companies, but according to Reuters, Practice Fusion solicited and received $1 million in kickbacks from OxyContin maker Purdue Pharma.

In return, Practice Fusion created an EHR alert advising physicians to switch new pain patients from immediate-released opioids to extended release opioids like OxyContin. From 2016 to 2019, the alert was triggered 230 million times, according to prosecutors.

“Practice Fusion’s conduct is abhorrent.  During the height of the opioid crisis, the company took a million-dollar kickback to allow an opioid company to inject itself in the sacred doctor-patient relationship so that it could peddle even more of its highly addictive and dangerous opioids,” Christina Nolan, U.S. Attorney for the District of Vermont, said in a statement. 

“The companies illegally conspired to allow the drug company to have its thumb on the scale at precisely the moment a doctor was making incredibly intimate, personal, and important decisions about a patient’s medical care, including the need for pain medication and prescription amounts.”

Prosecutors say Practice Fusion took kickbacks from more than a dozen pharmaceutical companies, allowing them to design the phony alerts and determine when a healthcare provider received them. “Numerous prescriptions” were written as a result. The federal case is the first criminal action against a vendor of electronic health records.

“Across the country, physicians rely on electronic health records software to provide vital patient data and unbiased medical information during critical encounters with patients,” said Ethan Davis, Principal Deputy Assistant Attorney General.

“Kickbacks from drug companies to software vendors that are designed to improperly influence the physician-patient relationship are unacceptable.  When a software vendor claims to be providing unbiased medical information – especially information relating to the prescription of opioids – we expect honesty and candor to the physicians making treatment decisions based on that information.”

Practice Fusion offers free EHR software to smaller, independent physician practices. The software is used by 112,000 health care providers who see 5 million patient visits each month. Practice Fusion was purchased in 2018 by Chicago-based Allscripts for $100 million in cash.

“Since learning of this matter we have further strengthened Practice Fusion’s compliance program. Allscripts recognizes the devastating impact that opioids have had on communities nationwide, and we are using our technology to fight this epidemic,” an Allscripts spokesman said.

CreakyJoints Under Scrutiny for Ties to Drug Makers

By Pat Anson, PNN Editor

Patient advocacy groups are coming under scrutiny again for their financial ties to drug companies. The latest is the Global Healthy Living Foundation (GHLF), a non-profit charity that created CreakyJoints, a website and social media platform that raises awareness about arthritis and other chronic illnesses. 

According to Bloomberg News reporter Ben Elgin, the foundation and CreakyJoints have long had a cozy relationship with Pfizer, Amgen, Johnson & Johnson and other corporate donors. Pfizer has donated nearly $1 million to the foundation over the past decade and one of its vice-presidents even serves on GHLF’s board of directors.

In a speech to drug makers in 2010, GHLF president Seth Ginsberg reportedly sought their donations -- while at the same time promising the companies “higher profits” and “sales rep participation in our programs.”

Ginsberg, who was diagnosed with spondyloarthritis as a teenager, co-founded GHLF in 1999 with marketing executive Louis Tharp.

In addition to CreakyJoints, GHLF has two other “grassroots” programs, Fail First Hurts and the 50-State Network, which advocate for healthcare policies that often align with the interests of its donors.  

According to GHLF’s 2017 tax return, the foundation had over $5 million in annual revenue. Ginsberg was paid a salary of $384,000, while Tharp received $220,000 as Executive Director.  Nearly $300,000 was also paid to a for-profit marketing company established by the two men, although it’s unclear what the payment was for.

Bloomberg reported that GHLF’s tax returns “reflect errors and unexplained entries that have obscured the amounts of money flowing to its cofounders.”

“Are they operating in a way that is extremely transparent? It’s safe to say they’re not,” Brian Mittendorf, a professor of accounting at Ohio State University told Bloomberg. “From looking at their disclosures, you have no idea how closely they’re related to some of the entities it pays.”

At least one GHLF board member and several patient volunteers reportedly left the organization because they were troubled by its relationships with donors.

GHLF did not grant an interview to Bloomberg, but replied to questions in writing.

“The only time we engage in advocacy is when it helps patients. If it doesn’t help patients, we don’t do it,” the foundation said in a statement. “Our mission is to engage in patient-centered research, provide advocacy for access-to-care, and to support people living with chronic disease by providing a supportive environment and accessible education.”

In a related story, Bloomberg reported that several other recently formed non-profits – such as the U.S. Rural Health Network --  appear to be little more than front organizations for the pharmaceutical industry.

“There are a number of groups created by pharma companies that look and act like patient organizations, but they’re 100 percent funded by industry,” said Marc Boutin, chief executive officer of the National Health Council. “They sound and look like patient organizations, but they take positions that industry wants.”

Drug Companies Fined for Co-Pay Programs

Last week two drug companies agreed to pay $125 million in fines to settle allegations that they used charitable foundations as front organizations to bilk Medicare.

Amgen and Japanese drug maker Astellas Pharma paid the foundations to establish co-pay prescription drug programs for Medicare patients. Federal prosecutors say the programs were primarily designed not to help patients, but to illegally pay their co-pays for Astellas and Amgen products.

Federal anti-kickback laws prohibit pharmaceutical companies from making any kind of payment to induce Medicare patients to purchase their drugs. The prohibition includes co-pays.

“The companies’ payments to the foundations were not ‘donations,’ but rather were kickbacks that undermined the structure of the Medicare program and illegally subsidized the high costs of the companies’ drugs at the expense of American taxpayers,” U.S. Attorney Andrew Lelling said in a statement.

“When pharmaceutical companies use foundations to create funds that are used improperly to subsidize the co-pays of only their own drugs, it violates the law and undercuts a key safeguard against rising drug costs,” said U.S. Assistant Attorney General Jody Hunt.

Last year, Pfizer paid nearly $24 million to settle allegations that it also used a co-pay program to pay Medicare for the company’s prescription drugs.

U.S. Pain Foundation Co-Pay

The U.S. Pain Foundation is under investigation by the U.S. Senate Finance Committee for a similar co-pay program established with Insys Therapeutics, a controversial Arizona drug company. Insys makes Subsys, an expensive and potent fentanyl spray blamed for hundreds of overdose deaths.

U.S. Pain received $2.5 million from Insys to launch the “Gain Against Pain” program, which ostensibly helped Medicare patients pay for drugs prescribed for breakthrough cancer pain. Critics say the program was primarily used to increase prescriptions for Subsys, which can cost $24,000 for just a four-day supply.

Former U.S. Pain CEO Paul Gileno initially defended the co-pay program, saying the money from Insys “does not influence our values,” but later resigned over allegations that he misappropriated $2 million from his own charity.

The Gain Against Pain program was subsequently shutdown in August 2018 and U.S. Pain said it would no longer accept funding from Insys.

Sen. Ron Wyden (D-OR), the ranking member of the Senate Finance Committee, sent a lengthy letter last December to U.S. Pain interim CEO Nicole Hemmenway asking a series of questions about the Insys co-pay program. According to the senator’s office, Wyden has still not gotten a full response.  

“The U.S. Pain Foundation has yet to provide a substantial amount of the information that Senator Wyden requested in his letter. Staff is in communication with the organization in order to get to the bottom of the organization’s financial relationship with pharmaceutical manufacturers, including Insys, and its compliance with applicable federal laws,” a Wyden spokesperson said in a statement to PNN.

A federal jury in Boston is currently in its third week of deliberations in a criminal case against Insys founder John Kapoor and four former executives of the company, who are accused of bribing doctors to boost sales of Subsys. 

U.S. Pain also remains under investigation by the Connecticut Attorney General’s office for financial irregularities that led to Gileno’s resignation.

Feds Bust Operators of Bogus Medical Clinics

By Pat Anson, Editor

Hardly a day goes by without the U.S. Drug Enforcement Administration announcing a new drug bust or the sentencing of someone for drug trafficking. The announcements have become so routine they’re often ignored by the news media.

But a drug bust in Los Angeles this week is worth sharing, if only because it shows that the underground market for prescription painkillers is booming and criminals are eager to take advantage of it.

The DEA announced the indictment of 14 defendants and released details of a brazen scheme that involved a string of sham medical clinics, fake prescriptions and kickbacks to doctors who were paid “for sitting at home.”

The feds estimate that at least two million prescription pills – most of them painkillers – were diverted and sold to customers looking for pain relief or to get high.

Indictments by a federal grand jury allege the suspects established seven bogus medical clinics in the Los Angeles area. The clinics would periodically open and then close, after illegally obtaining large quantities of oxycodone, hydrocodone, alprazolam (Xanax) and other prescription drugs from pharmacies using fake prescriptions. The drugs were then sold to street level drug dealers.

Prosecutors say the ringleader of the scheme -- Minas Matosyan, aka “Maserati Mike” -- hired corrupt doctors to write fraudulent prescriptions under their names in exchange for kickbacks.

“This investigation targeted a financially motivated racket that diverted deadly and addictive prescription painkillers to the black market,” said David Downing, DEA Special Agent in Charge of the Los Angeles Division.

“The two indictments charge 14 defendants who allegedly participated in an elaborate scheme they mistakenly hoped would conceal a high-volume drug trafficking operation,” said Acting U.S. Attorney Sandra R. Brown.

The indictments describe how Matosyan would “rent out recruited doctors to sham clinics.”  In one example described in court documents, Matosyan provided a corrupt doctor to a clinic owner in exchange for $120,000. When the clinic owner failed to pay the money and suggested that Matosyan “take back” the corrupt doctor, Matosyan demanded his money and said, “Doctors are like underwear to me. I don’t take back used things.”

In a recorded conversation, Matosyan also discussed how one doctor was paid “for sitting at home,” while thousands of narcotic pills were prescribed in that doctor’s name and Medicare was fraudulently billed more than $500,000 for the drugs.

Prosecutors say the identities of doctors who refused to participate in the scheme were sometimes stolen. In an intercepted telephone conversation, Matosyan offered one doctor a deal to “sit home making $20,000 a month doing nothing.” When the doctor refused the offer, the defendants allegedly created prescription pads in the doctor’s name and began selling fraudulent prescriptions for oxycodone without the doctor’s knowledge or consent. 

The conspirators also issued fake prescriptions and submitted fraudulent billings in the name of a doctor who was deceased.

The indictment alleges that criminal defense attorney Fred Minassian tried to deter the investigation. After a load of Vicodin was seized from one customer, Matosyan and Minassian allegedly conspired to create fake medical records to throw investigators off track.

Matosyan, Minassian and 10 other defendants were arrested and arraigned in federal court. Authorities are still looking for the two remaining fugitives.

While the DEA continues to bust drug dealers and unscrupulous doctors, the diversion of opioid medication by patients is actually quite rare. A DEA report last year found that less than one percent of legally prescribed painkillers are diverted. The agency also said the prescribing and abuse of opioid medication is also dropping, along with the number of admissions to treatment centers for painkiller addiction.

Patients ‘Treated Like Livestock’ in Kickback Scheme

By Pat Anson, Editor

Federal prosecutors have charged five people, including a former hospital executive and two orthopedic surgeons, with fraud in a $580 million kickback scheme involving thousands of spinal surgeries at two southern California hospitals.

The alleged scheme included tens of millions of dollars in illegal kickbacks paid to chiropractors, doctors and other health care providers over an eight year period.  As a result of the payments, thousands of patients were referred to Pacific Hospital in Long Beach for spinal surgeries that were paid for by Medicare or California worker’s compensation system.

“Medical referrals should be based on what’s best for the patient – not what’s best for the doctor’s bank account,” said IRS Special AgentErick Martinez. “In paying the kickbacks and submitting the resulting claims for spinal surgeries and medical services, the defendants acted with the intent to defraud workers’ compensation insurance carriers and to deprive the patients of their right to honest services.”

Two of the defendants have already pleaded guilty, and three others have agreed to plead guilty in the coming weeks. Prosecutors say all five have agreed to cooperate in the government’s ongoing investigation.

A second kickback scheme encouraged doctors to refer patients to the Tri-City Regional Medical Center in Hawaiian Gardens.

“Injured workers were treated like livestock by doctors and hospitals who paid or accepted kickbacks and bribes in exchange for referrals,” said California Insurance Commissioner Dave Jones. “Injured workers are put at risk when their medical treatment is based on kickbacks and bribes instead of their medical needs.”

The defendants include James Canedo, the former chief financial officer of Pacific Hospital. Canedo pleaded guilty in September to mail fraud, money laundering, paying or receiving kickbacks and other charges.

Orthopedic surgeons Philip Sobol and Mitchell Cohen, chiropractor Alan Ivar, and Paul Randall, a former health care marketer at the two hospitals, also agreed to plead guilty to charges stemming from the kickback scheme. Ivar admitted he was paid a monthly retainer by Pacific Hospital for over a decade to refer patients.  

Prosecutors say the conspirators typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery. Over 4,400 patients were referred to the hospitals, including some who lived hundreds of miles away.

Under the terms of their plea agreements, Sobol faces a federal prison term of up to 10 years; Canedo, Ivar and Randall could be sentenced to as much as five years; and Cohen faces up to three years in prison. All will be required to pay restitution to the victims of the scheme, which in Canedo’s case will be at least $20 million.

Millennium Wins FDA Contract Despite Fraud Charges

By Pat Anson, Editor

Just days after agreeing to pay $256 million to the federal government to settle fraud and kickback charges, Millennium Health has been selected to provide urine drug tests to the Food and Drug Administration for a clinical trial.

The trial will assess the development of opioid tolerance in patients taking pain medication with an abuse deterrent formula. Millennium could potentially make $1.6 million under the FDA contract.

"Long term opioid treatment can produce positive outcomes when prescribed and used appropriately, but they also carry risks that must be managed. UDT (urine drug testing) plays a critical role in aiding the clinician in evaluating patient safety. Millennium's selection as a service partner in this important initiative reflects our advanced technical and analytic capabilities and commitment to excellence," said Millennium CEO Brock Hardaway.

Millennium -- the nation’s largest drug testing company -- won the contract soon after it agreed to settle fraud charges under the Federal False Claims Act. Millennium was accused of bilking Medicare, Medicaid and other federal health care programs for a large number of medically unnecessary urine drug and genetic tests. The San Diego based firm was also accused of violating federal kickback laws by providing physicians with free urine “point of care” (POC) test cups if they referred more expensive laboratory testing to Millennium.  

“Millennium allegedly promoted indiscriminate and unnecessary testing that increased medical costs without serving patients’ real medical needs,” said U.S. Attorney Carmen M. Ortiz of the District of Massachusetts.  “A laboratory that promotes and knowingly conducts medically unnecessary drug testing operates unlawfully and squanders our precious federal health care resources.”

Under terms of its settlement with the Department of Justice (DOJ), Millennium will pay $237 million to settle claims for unnecessary urine and genetic tests. Millennium also entered into a corporate integrity agreement with the Department of Health and Human Services, and will pay $19.2 million to the Centers for Medicare and Medicaid Services to resolve issues over its billing practices. The government, in turn, will pay whistleblowers over $30 million for their help in building the case against Millennium.

“Millennium used a variety of schemes to cause physicians, including many of its biggest referrers, to routinely order excessive amounts of UDT (urine drug tests) for all patients (including Medicare and Medicaid patients) regardless of individual patient assessment or need. Millennium’s abusive practices included the use of physician standing order forms to encourage routine, excessive UDT, and the dissemination of false and misleading statements about drug abuse rates and the value of its testing,” the original government complaint said.

"While Millennium may debate some of the merits of the DOJ's allegations, we respect the government's role in health care oversight and enforcement,” said Millennium's Hardaway. “At the end of the day, it was time to bring closure to an investigation that began nearly four years ago. Millennium Health is currently a very different organization than we were in the past. We fully embrace our obligation to both commercial and publicly funded health plans to provide value to the health care system overall and ensure that doctors who order our testing solutions adequately demonstrate that those solutions are clinically necessary.”

After the settlement was reached, Moody's Investors Service downgraded Millennium's Health's corporate debt rating and said its rating outlook was negative.

"The downgrade reflects Moody's expectation that Millennium will complete a distressed debt exchange or file for Chapter 11 bankruptcy in the near term. Moody's is estimating that lenders will suffer material losses in the event of a default," Moody's said in a statement.

Millennium is not the first drug testing company to face fraud and kickback charges. Competitors Amertiox, Calloway Labs, Quest Diagnostics, and LabCorp have all faced similar charges and paid millions of dollars in fines.As a result of these cases, Medicare has proposed lowering its billing rates for diagnostic testing as early as 2016, moving to a flat-rate fee structure to prevent drug-testing companies from charging more by testing for more substances.

As Pain News Network has reported, urine drug testing grew into a lucrative $4 billion industry – what some call “liquid gold” – largely because so many doctors who treat addicts and chronic pain patients require them to submit to urine drug screens. In many cases, point-of-care tests are used, even though many experts consider them unreliable.