The Opioid Crisis: An Epidemic Exacerbated by Fraud

The terrible, terrible losses associated with the opioid epidemic are almost too horrifying to describe. Statistics alone cannot explain its scope, but it is important to note that, last year alone, over 100,000 Americans died from drug overdoses across the country. Strikingly, the increase in overdose numbers during the COVID-19 pandemic took place in all 50 states and in the District of Columbia. See https://www.ama-assn.org/about/leadership/2022-critical-year-address-worsening-drug-overdose-crisis.

The opioid epidemic, of course, did not begin with the COVID-19 pandemic. As far back as August 2017, then-Attorney General Jeff Sessions formed an Opioid Fraud and Abuse Detection Unit in the U.S. Department of Justice, with the stated purpose of combatting “the devastating opioid crisis that is ravaging families and communities across America.” See https://www.justice.gov/opa/pr/attorney-general-sessions-announces-opioid-fraud-and-abuse-detection-unit. Yet the number of deaths have continued to rise since then, crushing families and friends.

Certainly there have been positive steps taken in the fight against the opioid epidemic. For example, last October saw a global resolution of the Justice Department’s criminal and civil investigations of Purdue Pharma LP and a civil settlement that the government reached with members of the Sackler Family. See https://www.justice.gov/opa/pr/justice-department-announces-global-resolution-criminal-and-civil-investigations-opioid. The impact of that settlement, however, remains unclear in light of, among other things, Purdue Pharma’s continuing bankruptcy case. Notably, at least two other opioid manufacturers, Insys Therapeutics and Mallinckrodt Pharmaceuticals, also have entered bankruptcy in light of litigation they faced.

To make matters worse, if that is even possible, there is rampant fraud associated with the prescription, sale and use (and misuse) of opioids. As this column will discuss, opioid fraud (or allegations of such fraud) reaches into nearly every segment of the industry, from prescribing physicians and medical staff to pharmacies, and results in significant financial losses to private insurance carriers and government health insurance programs including Medicare and Medicaid. And, to cap it off, there even may be fraud associated with pharmaceutical products that can be used in many instances to save overdose victims before they pass away.

Insurance Fraud

Several months ago, a federal jury in the U.S. District Court for the Eastern District of Michigan convicted a Michigan doctor for his role in masterminding and executing a complex scheme to defraud Medicare and other health insurance programs by administering medically unnecessary spinal injections in exchange for prescriptions of high doses of opioids to patients.

According to court documents and evidence presented at trial, Francisco Patino excessively prescribed highly addictive opioids to his patients at his medical clinic in Livonia, Michigan. In exchange for opioids, these patients would receive (or be billed as if they had received) facet joint or nerve block injections, both of which are lucrative spinal injections. Although these spinal injections were purportedly intended to treat chronic pain, evidence at trial demonstrated that Patino injected patients without regard to medical necessity. Evidence also revealed that if patients refused to accept the injections, Patino would withhold their prescriptions for opioids.

The government asserted that, from January 2012 through July 2017, Patino billed Medicare for more of these injections than any provider in the country. The evidence at trial also showed that in 2016 and 2017, Patino prescribed more 30-milligram oxycodone pills than every other provider in the state of Michigan.

According to the government, Patino also developed illegal kickback relationships with at least one diagnostic laboratory, under which he was paid in exchange for referring his patients’ samples to that lab. As alleged by the government, labs funneled money into bank accounts held by others, who then distributed the money to Patino or spent it on his behalf. The government said that a sizable portion of Patino’s fraud proceeds were devoted toward the promotion of Patino’s specialized diet program and lifestyle and wellness book, and that he paid Ultimate Fighting Championship and other mixed martial arts fighters to promote the Patino Diet.

Patino was convicted of one count of conspiracy to commit health care fraud and wire fraud, two counts of health care fraud, one count of conspiracy to defraud the United States and pay and receive health care kickbacks, one count of conspiracy to commit money laundering and one count of money laundering. See https://www.justice.gov/opa/pr/pain-doctor-convicted-over-100-million-health-care-fraud-scheme#:~:text=A%20federal%20jury%20in%20the,high%20doses%20of%20opioids%20to; see, also, “Medical Director Convicted in $110 Million Addiction Treatment Fraud Scheme” (federal jury convicted Florida doctor for health care fraud scheme that billed private health insurance companies approximately $110 million for addiction treatment services that were not medically necessary), at https://www.justice.gov/opa/pr/medical-director-convicted-110-million-addiction-treatment-fraud-scheme.

Distribution

Another avenue for opioid fraud is the distribution of these medications.

Consider that, in January, a physician and a patient recruiter were charged in Detroit with conspiracy to illegally distribute prescription drugs and other opioid-related offenses.

As alleged, from May 2018 through March 2021, Dr. John Kirkpatrick, who operated Southfield Medical Services in Southfield, Michigan, conspired with Roland Williams and others to issue a significant number of prescription opioids outside the scope of medical practice to recruited “patients” who did not have a legitimate medical need for the drugs. As alleged, Kirkpatrick accepted only cash at his clinic, and used the clinic to prescribe oxycodone and oxymorphone – two of the most addictive and diverted opioids that have a significant street value.

As alleged, Kirkpatrick required each patient to have certain records in a patient file before he would write a controlled substance prescription. The government asserted that Williams and others created fraudulent medical records, including MRI reports and Michigan Automated Prescription System (MAPS) reports, to give the appearance of legitimacy.

As further alleged, Kirkpatrick authorized electronic prescriptions for “Schedule II” controlled substances, which were issued under Kirkpatrick’s DEA license and without a medical evaluation by him. According to the government, Kirkpatrick prescribed more than 574,604 dosage units of Schedule II controlled substances, with a conservative street value of more than $17 million. See https://www.justice.gov/usao-edmi/pr/area-doctor-patient-recruiter-charged-17-million-illegal-opioid-distribution-conspiracy; see, also, “Wasilla Doctor Sentenced for Illegal Prescriptions that Resulted in Five Deaths” (medical doctor illegally dispensed and distributed controlled substances to patients), at https://www.justice.gov/usao-ak/pr/wasilla-doctor-sentenced-illegal-prescriptions-resulted-five-deaths.

Pharmacies

Pharmacies are another institution that may be involved in opioid fraud. For example, in late December, the government alleged that three Texas-based pharmacies – Keystone Pharmacy, Peoples Pharmacy and Chrisco Pharmacy – had illegally dispensed nearly four million pills of the Schedule II opioids hydrocodone and oxycodone since January 2018.

Keystone owner and pharmacist-in-charge Anthony Obute was charged with illegally distributing and dispensing hydrocodone and the Schedule IV muscle relaxer carisoprodol. As alleged by the authorities, Obute operated Keystone as a pill mill, illegally distributing hydrocodone and oxycodone. The government alleged that from about September 2018 to about September 2020, Obute directed Keystone to purchase around 1.1 million of the highest-strength, short-acting hydrocodone and oxycodone pills commercially available, which he then sold to so-called “crew leaders,” or drug traffickers who paid individuals to pose as patients to obtain pills to sell on the black market.

In addition, Ophelia Emeakoroha, the pharmacist-in-charge at Peoples, was charged with illegally distributing and dispensing hydrocodone and oxycodone. According to court documents, from about January 1, 2019 to about December 31, 2019, Emeakoroha caused Peoples to purchase around 250,000 of the highest-strength, short-acting hydrocodone and oxycodone pills commercially available, which she then sold to crew leaders in a scheme similar to Keystone’s.

Finally, Christopher Obaze and Eric Tubbe were charged for their alleged illicit operation of Chrisco as a pill mill. According to court documents, from around January 2018 to around October 2021, Obaze was the pharmacist-in-charge and Tubbe was a pharmacy technician at Chrisco, which the two men used as a front to purchase and then illegally sell around 2.25 million of the highest-strength short-acting hydrocodone and oxycodone pills commercially available. The indictment alleged that Obaze and Tubbe sold the pills, in bulk, directly to drug traffickers, without the involvement of doctors, prescriptions or patients. See https://www.justice.gov/opa/pr/operators-three-texas-pharmacies-and-two-pain-clinics-arrested-illegally-dispensing-nearly; see, also, “Medical doctor, pharmacists, and 11 others charged with operating illegal pill mills” (Atlanta-area gynecologist, two pharmacists and 10 other individuals charged with alleged illegal sale and distribution of controlled substances to addicts and drug dealers), at https://www.justice.gov/usao-ndga/pr/medical-doctor-pharmacists-and-11-others-charged-operating-illegal-pill-mills.

Prescription Fraud

Another recent case illustrates a different form of, and different parties that can be involved in, opioid fraud.

In this case, Lindsey Cox worked for a dental practice in St. Albans, Vermont. The government contended that between April and November 2016, Cox conspired with another employee to generate fake prescriptions for controlled substances and to forge the signature of a licensed prescriber. According to prosecutors, Cox and others then filled the fake prescriptions – which typically were for oxycodone – at several area pharmacies. In addition, Cox allegedly embezzled $71,942.60 from her employer by manipulating and falsifying payment records in the dental practice’s billing software. Cox pleaded guilty to conspiring to acquire controlled substances by fraud and theft in connection with healthcare.

This past December, U.S. District Judge Christina Reiss imposed a sentence on Cox of five years of probation to run concurrently on each count and ordered Cox to pay restitution to her former employer in the amount of $71,942.60. See https://www.justice.gov/usao-vt/pr/swanton-woman-sentenced-prescription-fraud-and-embezzlement-scheme-and-ordered-pay.

Anti-Overdose Drug

Finally, it is worth highlighting a settlement that the Justice Department reached last November with Kaléo Inc., a Virginia-based pharmaceutical manufacturer, involving the drug Evzio, an injectable form of naloxone hydrochloride indicated for use to reverse opioid overdose. See https://www.justice.gov/opa/pr/kal-o-inc-agrees-pay-127-million-resolve-allegations-false-claims-anti-overdose-drug.

The company agreed to pay the United States $12.7 million to resolve allegations that it caused the submission of false claims for Evzio – the highest-priced version of naloxone on the market.

Insurers frequently required the submission of prior authorization requests before they would approve coverage for Evzio. The government alleged that, between March 14, 2017 and April 30, 2020, Kaléo directed prescribing doctors to send Evzio prescriptions to certain preferred pharmacies that in turn (1) submitted false prior authorization requests for Evzio that misrepresented to insurers that the prescribing physicians submitted the request when the pharmacies did so and/or that contained false or misleading assertions about the patients’ medical histories, such as false statements that patients had previously tried and failed less costly alternatives to Evzio, and (2) dispensed Evzio without collecting or attempting to collect co-payment obligations from government beneficiaries. The government contended that Kaléo knew of or deliberately ignored this alleged misconduct, but nevertheless kept directing business to these pharmacies. The government also alleged that Kaléo provided illegal remuneration to prescribing physicians and their office staff in violation of the federal Anti-Kickback Statute to induce and reward their prescribing of Evzio.

Conclusion

Without a doubt, government prosecutors across the country will continue to battle opioid-related fraud with the goal of removing the financial benefits to those involved. Similarly, insurance carriers and other interested parties will remain active in battling this fraud. Time will tell how effective all this will be in helping to tamp down on the continuing opioid epidemic and, ultimately, defeating this scourge.

Reprinted with permission from the March 3, 2022, issue of the New York Law Journal^©, ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.