After a six-week trial, a federal, Dallas jury returned a mixed verdict in a trial involving a compounding pharmacy which allegedly made kickback payments to doctors and others. Overall, the verdict was a victory for a defense with only one trial defendant being convicted on any charges.
The Allegations
Defendants were charged with conspiracy to commit health care fraud and numerous counts of paying or receiving kickbacks under the anti-kickback statute. The indictment alleged that for approximately two years, defendants paid and/or received kickbacks in the form of payments to prescribing physicians, pharmacy owners, and Tricare beneficiaries.
More specifically, according to the superseding indictment, defendants paid Tricare beneficiary patients for obtaining and filling prescriptions for compounded drugs, mainly compounded pain creams, scar creams, migraine creams, and vitamins. They disguised these payments to patients as “grants” for participating in a medical study they referred to as Patient Safety Initiative (“PSI Study”) to evaluate the safety and efficacy of compounded drugs. However, according to the government, the PSI Study was not approved by Tricare, was not overseen by a qualified physician or medical professional, had no control group, and was not designed to gather any useful scientific data relating to the safety and efficacy of any drug, and its real purpose was to compile a list of Tricare beneficiaries who had filled prescriptions so that Cesario, Cooper (the primary defendants) and others could calculate how much to pay the beneficiaries. To further disguise the source of those payments to the patients, defendants Cesario and Cooper directed the creation of a charity, the Freedom from Pain Foundation, through which payments were made. Cooper plead guilty and Cesario went to trial.
The other trial defendants included Dr. Simmons, who was the Chief Medical Officer for a marketing company, CMGRX, and helped Cesario and Cooper create the PSI Study. Defendant Dr. Elder-Quintana worked as a contract physician with CMGRX, and Cesario and Cooper made payments to him. Elder wrote thousands of prescriptions for compounded drugs to patients utilizing telemedicine. The doctors were paid in part, through the Freedom from Pain Foundation, for PSI study consulting services. The other defendants included CMGRX employees and others affiliated with the pharmacies, who were also allegedly paid kickbacks.
Takeaways from the Verdict
The mixed verdict supports a thoughtful analysis by the jury. They did not go so far as to find that the entire structure was above board. On the other hand, they appeared to have carefully examine each defendant’s role and intent.
Thirteen defendants were indicted. Seven of those plead guilty and six went to trial. The primary defendant at trial was convicted on multiple counts. Specifically, Cesario was found guilty on eight counts and not guilty on two counts and the jury could not decide on seven other counts against him. The next group of remaining defendants, the doctors, fell in the middle ground. The jurors were deadlocked on counts against the two physicians and one physician was acquitted on one count. The prosecutors intend to retry the doctors. Finally, the three remaining, and more remote defendants were acquitted on all counts.
The defense attorneys did an excellent job distinguishing their clients’ culpability and intent in the alleged scheme. This is always challenging in multi-defendant, white-collar criminal cases. It rarely helps the defendants to become another prosecutor in the courtroom by attacking the structure. However, they need to show that their client was not involved in the wrongdoing or acted on limited information, thereby negating intent.
While the federal, criminal system is based on multi-defendant indictments in which one or more defendants plead guilty and testify against a more culpable player, sometimes that system breaks down. While some of the central defendants went to trial in this case, so did the some of the lesser players and many of the primary defendants plead guilty and testified against less culpable individuals. Further complicating this strategy in healthcare fraud prosecutions is that medical professionals are less likely to plead to a felony because that means mandatory exclusion from government pay programs and loss of licenses and privileges at hospitals and insurance companies.
This indictment strategy works best if the less culpable individuals are offered plea deals that truly limit their exposure with (1) low statutory exposure, (2) agreed loss amounts limited to their role, or (3) agreed sentences under Federal Rule of Criminal Procedure Rule 11(c)(1)(C). Other alternatives include misdemeanor pleas and pretrial diversion resolutions, which are extremely rare in the federal system.
Instead of charging a large group, the government could also bring multiple indictments arising from the same operation, with a fewer number of defendants in each case. We are seeing such cases in the Northern District of Texas. Of course, the government’s charging decisions should be based upon the evidence in each of their investigations, and a large, mega-indictment may be more appropriate in certain scenarios.
Sources: https://www.dallasnews.com/news/crime/2019/12/21/trial-in-massive-fraud-against-troops-healthcare-program-ends-in-dallas-with-mixed-results/; https://www.policymed.com/2017/03/healthcare-providers-accused-of-100-million-kickback-scheme.html.