Deputy Attorney General Rod Rosenstein announced last week a change in the way cooperation credit is given to corporations in criminal cases. Rosenstein announced that the Department of Justice will allow a company to receive cooperation credit in criminal cases where the company has identified every individual who was “substantially involved in or responsible for the criminal conduct.” Under the prior DOJ policy, referred to as the Yates memo, corporations were required to turn over ALL relevant facts about individuals involved in misconduct.

The new policy will allow for partial credit in criminal cases as well. “If the company is unable to identify all relevant individuals or provide complete factual information despite its good faith efforts to cooperate fully, the organization may still be eligible for cooperation credit.” To receive credit, companies need only identify individuals “substantially involved in or responsible for the misconduct.”

Rosenstein noted that the DOJ wants corporations to focus on identifying the wrongdoers. Rosenstein also noted that it is inefficient for large corporations to identify every single employee that may be connected to the bad conduct.

The revised DOJ policy has been incorporated directly into the United States Attorneys’ Manual, now referred to as the Justice Manual, at 9-28:700 (“The Value of Cooperation”). This is a change from the recent DOJ practice of communicating new guidelines through memoranda named for their authors. The incorporation into the Justice Manual may signal a desire to give the revisions more authority.

Because “substantially involved” is not defined, corporations are left to guess what it means and DOJ staff are still given the authority to decide whether disclosures were sufficient to warrant participation. In the end, the problem with all these policies is that individuals are applying the policies. It remains to be seen whether DOJ staff will award cooperation credit for what they deem less than full disclosure.

One defendant in the highly publicized Insys prosecution has agreed to switch sides and become a cooperator. Former Vice President of Sales at Insys, Alec Burlakoff, has agreed to plead guilty to a racketeering conspiracy. He faces a maximum 20 year sentence. Burlakoff admits that he aggressively pushed a scheme of paying doctors to speak at events in exchange for writing prescriptions for Subsys.

The Government alleges that Insys executives conspired to bribe doctors to prescribe Subsys in order to boost sales. Subsys is an opioid that is FDA approved for cancer patients in severe pain. The government alleges that Subsys was being overprescribed to a wide range of non-cancer patients.

Burlakoff is expected to be a key government witness in the trial starting January. Burlakoff is expected to say that the six remaining defendants aggressively pursued doctors to prescribe Subsys.

Burlakoff had a key role in the scheme. The emails substantiate that Burlakoff was telling his sales team to urge doctors to prescribe Subsys for off label use not just cancer patients.

Emails also reveal that Burlakoff telling his sales team to expect a bump in sales after he paid a visit to a doctor with a large practice. The evidence further revealed the doctor was paid to speak at two Insys events the month following the visit.

Because all defendants were so close to trial and likely operating in a joint defense, it will be interesting to see whether any defendant objects to the scope of Burlakoff’s testimony based on a privilege arising from the joint defense.

After a review ordered by Deputy Attorney General Rod Rosenstein, the Department of Justice has revamped and updated the United States Attorneys’ Manual.  This is the first comprehensive update of the Manual in 20 years.  The Manual is now titled the “Justice Manual.”

The most notable change for that will effect federal criminal practitioners are the changes to the “Principles of Federal Prosecution” section.  The section has been expanded and the language updated.  The updates include language that pushes prosecutors to pursue charges that carry the most substantial penalties.

A few other notable changes

    • The subsection “Need for Free Press and Public Trial” has been removed. The language was replaced with text about balancing “the right of the public to have access to information about the Department of Justice” against other factors.
    • In the section about voting rights, there are no more references to redistricting or racial gerrymandering. There are still references regarding bans on practices such as literacy tests, poll taxes, and measures that deny voting rights based on race.
    • The manual revision also cut language discouraging unnecessary charges, as well as Alford pleas.

The new Manual can be found HERE.

A big victory for the defense in the prosecution of the founder and former top executives at opioid manufacturer Insys Therapeutics.  A magistrate judge assigned to the case ordered federal prosecutors in the United States Attorney’s Office in Boston to turn over documents in the hands of ten different federal agencies’ that could potentially help the company’s former executives fight racketeering and fraud charges.

In June, the defense filed a Motion for an Order Requiring Government to Produce Exculpatory Materials in the Possession of Sister United States Attorney’s Offices and Federal Agencies.  The defense’s motion noted that the same day the Superseding Indictment was unsealed, the United States Attorney’s Office issued a press release acknowledging the joint effort and assistance of six other United States Attorney’s Offices and ten federal agencies that were part of the investigatory team.  However, when pressed by the defense for materials in the hands of the other United States Attorney’s Offices and the federal agencies, the prosecutors claimed those offices and federal agencies were not part of the “prosecution team”.

In its Motion, the defense gave examples of potentially exculpatory materials in the hands of the other ten agencies.  The examples included “any denials by Insys sales representatives or Insys physicians to any federal agent that speaker program payments were intended to be kickbacks”, “DEA communications that opioid products were not suspicious”, and “DEA or FDA communications acknowledging that off-label use of immediate release fentanyl products, such as Subsys, is medically and scientifically legitimate.”

In Opposition, the thrust of the Government’s argument was that the other offices and the other federal agencies were not part of the prosecution team and as a result its Brady obligations did not extend to those offices.  The Government also argued that Defendants didn’t establish that the information sought is material.

The magistrate judge sided with the defense.  The judge ordered prosecutors to hand over any documents in the hands of the 10 federal agencies’ that were part of the investigation that could potentially help the company’s former executives fight racketeering and fraud charges.  The motion as to the United States Attorney’s Offices was moot because those offices had alerted the court that they did not have any documents.

The Government routinely makes similar arguments related to CMS data in health care fraud prosecutions.  Hopefully, this decision paves the way for the release of more information to criminal defendants.

On another note, not sure why the Government wouldn’t want to turn over the information.  The Government should be transparent in its production of evidence, especially exculpatory evidence to defendants.

 

On Friday, the Sixth Circuit in the cases of United States v. Mehmood and United States v. Ahmadani reversed the sentences of two owners of home health care companies. The Sixth Circuit reasoned that the trial judge incorrectly applied the law in calculating the loss figure for sentencing purposes by assigning the loss figure as the gross billings to Medicare.

The Opinion states that “[i]n a case in which the defendant is convicted of a Federal health care offense involving a Government health care program, the aggregate dollar amount of fraudulent bills submitted to the Government health care program shall constitute prima facie evidence of the amount of the intended loss…”

The court noted its agreement with United States v Medina, 485 F.3d 1291, 1304 (11th Cir. 2007) (“Even though [the government’s Medicare witness] testified that Medicare would not pay a claim if they knew parties were receiving kickbacks, this is not sufficient to establish a loss to Medicare.”). Specifically, the court rejected the notion that all claims were illegitimate due to false representations about intent to follow Medicare’s anti-kickback rules.

The Opinion further states that the trial court should have taken into consideration evidence that legitimate services were provided, particularly the testimony of multiple therapists, nurses, and counselors, when calculating loss.  The Court specifically concluded that “to calculate loss for sentencing purposes, the value of any legitimate claims, if established, must be offset against the aggregate billings.”

This opinion could have a big impact on health care fraud cases. It could have the effect of narrowing the focus in health fraud prosecutions to the amount of kickbacks paid instead of gross billings. The difference could mean millions in most cases. The narrowed focus will not only reduce sentences, it will reduce restitution and forfeiture amounts.

 

Yes, you can be prosecuted for a violation of the Health Insurance Portability and Accountability Act.

The Department of Justice threatened to bring more prosecutions for HIPAA violations two years ago.  They were serious.

Last week, the United States Attorney’s Office in Western District of Pennsylvania brought charges against Linda Sue Kalina for illegally obtaining the medical records of more than 100 patients in violation of HIPAA.

Kalina worked as a patient information coordinator at a hospital.  In her capacity as a patient information coordinator, Kalina was authorized to access patient health information.  However, Kalina was not permitted to obtain the electronic records.

The Indictment states that Kalina references four separate occasions when Kalina disclosed the medical information of three patients.

The Indictment charges six counts.  Kalina’s arraignment is pending.

Last week, I attended the American Bar Association National Institute on White Collar Crime in San Diego. I had the opportunity to speak on a panel with a great group of lawyers, which included Laura B. Angelini, Laura G. Hoey, Joseph G. Petrosinelli, and Gregg Shapiro.

The panel discussed the Government’s recent focus on donations by pharmaceutical companies to charity organizations that subsidize copays on expensive drugs. These charity programs are referred to as Patient Assistance Programs (“PAP”). The Department of Justice, led by a team of prosecutors, primarily out of the U.S. Attorney’s Office in Boston, is investigating whether these donations violate the AKS.

It has been widely reported that more than a dozen companies have received subpoenas, the charity organizations are wondering whether they will need to shut down, and patients are growing concerned about their access to these drugs.

Even though the OIG issued guidance in 2005 on how to structure these PAPs to avoid any issue with the Anti-Kickback Statute, today, the Government seems concerned that the charitable organizations are merely a conduit of the pharmaceutical companies to funnel money to patients. It seems the Government is also concerned that the pharmaceutical companies are simply trying to push their own products.

The panel surmised that the Government is most concerned with PAPs that are sharing extensive data with the pharmaceutical company donors, with PAPs that are asking companies to donate a certain amount, situations where the PAPs are working on behalf of donors, and situations where assistance is only provided for donor drugs and not all drugs.

The panel also discussed how the government versus everyone else views co-pays. It appears that the Government views co-pays as a way to give consumers a cost-effective option. The insurance industry uses co-pays for cost sharing among insurance providers.

Defense attorneys on the panel noted that it will be very difficult for the Government to establish “inducement” as required by the AKS because the pharmaceutical company never touched the patient.

While the panel could not agree on how to resolve the problem of access to drugs for patients without a violation of the AKS, some best practices were discussed, which included: (1) pharmaceutical company should wall off the charity from the rest of the company and definitely no one from the commercial team should be involved; (2) budget donations; (3) know what the pharmaceutical company is getting from the charitable organizations; and (4) get a legal opinion.