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Medical marketers are often used inside and outside of workers’ compensation to induce physicians to prescribe a variety of products such as compounded medications, DME and other items as “profit enhancement” schemes for a medical practice. Little attention has been given when responding to lien claims in these cases to the application of the Insurance Fraud Prevention Act provisions contained in Insurance Code section 1871 as a possible tool to defend those claims when a capper (ie. marketer) has been used to seduce to the doctor. The Court of Appeal in the published opinion in The State of California ex rel. Michael Wilson et al. et al. v. Superior Court of Los Angeles County, Bristol-Meyers Squibb Co may have opened the door to the use of this tool where a “person” was “employed” to recruit the doctor into a scheme, even without a prescription by prescription quid pro quo.

Michael Wilson, a former Bristol-Meyers Squibb Co. sales representative filed the underlying qui tam action against the drug maker. The California Insurance Commissioner later intervened and participated in the litigation.

The lawsuit alleges that in marketing its drugs, Bristol-Meyers Squibb Co., (BMS) engaged in a course of illegal and fraudulent conduct aimed at doctors, health care providers, pharmacists, and insurance companies. It alleges BMS targeted high-prescribing physicians, members of formulary committees, and sometimes their families, to be recipients of lavish gifts and other benefits (such as tickets to sporting events and concerts, free rounds of golf, resort vacations, meals, gifts, and other such incentives – characterized in the complaint as “kickbacks”), in order to induce physicians to prescribe BMS’s drugs and to reward them for doing so.  And it alleges the targeted physicians “wrote prescriptions and submitted them to the private insurance companies . . . as a result of kickbacks BMS provided to them.” The suit alleges that in carrying out this program, BMS effectively employed physicians and others to act as runners and cappers, paying them for the purpose of procuring patients whose prescriptions will be covered by insurance. This conduct, the suit alleges, violated the Insurance Fraud Prevention Act, Insurance Code section 1871.7, subdivisions (a) and (b), as well as a number of provisions of the Penal Code.

At issue in the case is the proof required to establish a violation of subdivision (a) of Insurance Code section 1871.7, a portion of the IFPA that relates to health insurance and workers’ compensation insurance fraud, informally entitled, “Employment of persons to procure clients or patients.” Subdivision (a) makes it unlawful to knowingly employ runners or cappers to procure clients or patients to obtain insurance benefits. The trial court ruled in favor of BMS on a summary judgment hearing, and the Court of Appeal granted writ review in part due to the dearth of appellate review of matters involving interpretation of section 1871.7,

The court of appeal reversed the dismissal of the claim, and remanded the case for further proceedings. In doing so, it clarified the requirements for proof of a case of violation of IFPA contained in section 1871.7.  Some of the language of the published opinion is as follows.

The conduct made unlawful by subdivision (a) is identified by a single verb: To employ. Subdivision (a)’s single verb makes a single act unlawful: “Employment”. What kind of employment is unlawful? Employment of a person or persons (“runners, cappers, steerers or other persons”), for a specified purpose: “. . . to procure clients or patients to perform or obtain services or benefits . . . that will be the basis for” an insurance claim. Subdivision (a) is violated by the employment of others with that objective; it does not make proof of that result a prerequisite to its violation. Based upon this language the Court of Appeal ruled “there can be a violation of subdivision (a) without proof that the item or service of value provided or promised to the physician caused a particular prescription to be written.”

Subdivision (a) identifies certain running and capping activities as unlawful without regard to whether the resulting services are competently rendered. Running and capping activities are disfavored and unlawful not just because they may often result in services that are excessive or unnecessary, but also because their purpose is to unfairly (and perhaps deceptively) obtain the benefits (clients, patients, prescriptions, claims, etc.) that otherwise might have gone to others who did not use the prohibited methods. In enacting section 1871.7, the Legislature could have concluded that using runners and cappers for the prohibited purpose tends to result in additional insurance claims and payments, that have substantial social costs despite their inability to be identified on an individual basis. Subdivision (b) identifies remedies for conduct that the Legislature has concluded leads to undesirable results that are rarely subject to available proof.

Section 1871.7 contains no specification that proof of unlawful conduct, or of causation, must necessarily be on a prescription-by-prescription or claim-by-claim basis, and such a requirement would be contrary to the statute’s clear purpose. While subdivision (b)’s final sentence requires proof of deceit and causation, section 1871.7’s primary focus is on the unlawful conduct identified in subdivision (a); the proof of resulting claims is required in order to measure the penalties to be assessed, not to define the targeted wrong – the employment of runners and cappers for the unlawful purpose. Yet the requirement that each prescription and claim to an insurer must be attributed to a quid pro quo arrangement involving the drug company and the physician shifts the focus from the conduct identified in subdivision (a) – which is unlawful without regard to its success in producing prescriptions and claims – to conduct that would constitute bribery and kickbacks, for which success is an essential element.

“Subdivision (a) remains a viable identification of running or capping activity as conduct that the Legislature has found to be unlawful, and to be “almost always” a harbinger of fraud.  (Analysis of Sen. Comm. on Crim. Proc., Sen. Bill 465 (1995-1996 Reg. Sess.) p. 5.)”

“Under the clear language of subdivision (b), the equitable and other remedies that do not constitute the “penalty prescribed in this paragraph” may be imposed without proof that a prescription or claim resulted from the unlawful conduct, or that any resulting claim was fraudulent or deceitful.”

“A substantial purpose for subdivisions (a) and (b)’s enactment is to enable the assessment of civil penalties for unlawful running and capping activities, without the practically impossible showing that a particular claim resulted from a particular violation.”

This opinion may provide new tools for the defense of certain medical lien claims.  The opinion specifies a broad and liberal interpretation of what is unlawful under 1871.7(a).  Thus for example, when a medical supplier hires a “person” to market a group of PTP’s to recommend or prescribe its products to industrially injured workers, is that in effect illegal “employment’ of a capper, runner, steerer or “other person?”  If so, there is no need to show quid pro quo, or any kickback, or a direct relationship with the prescriptions that were written. According to this decision, the use of a marketer alone is “almost always” a harbinger of fraud and thus conduct declared unlawful.  It remains to be seen if this can be a viable defense to liens in such cases.