Author: WorkCompAcademy

For years, hospital executives have expressed frustration when essential drugs like heart medicines have become scarce, or when prices have skyrocketed because investors manipulated the market.

Now, some of the country’s largest hospital systems are taking an aggressive step to combat the problem: They plan to go into the drug business themselves, in a move that appears to be the first on this scale.

Intermountain Healthcare is a not-for-profit health system based in Salt Lake City, Utah, with 22 hospitals, a broad range of clinics and services, about 1,400 employed primary care and secondary care physicians at more than 185 clinics in the Intermountain Medical Group, and health insurance plans from SelectHealth.

The organization just announced a bold initiative to establish a not-for-profit generic drug company aimed at ending shortages and reducing prices. Intermountain Healthcare is leading a collaboration with Ascension, SSM Health, and Trinity Health, in consultation with the U.S. Department of Veterans Affairs, to form the company. The five organizations represent more than 450 hospitals around the U.S. The press release made clear price and availability are the key issues.

The story on Forbes says the new company intends to be an FDA approved manufacturer and will either directly manufacture generic drugs or sub-contract manufacturing to reputable contract manufacturing organizations, providing patients an affordable alternative to products from generic drug companies whose capricious and unfair pricing practices are damaging the generic drug market and hurting consumers.

The company will also seek to stabilize the supply of essential generic medications administered in hospitals, many of which have fallen into chronic shortage. The new initiative will result in lower costs and more predictable supplies of essential generic medicines, helping ensure that patients and their needs come first in the generic drug marketplace.

Several major hospital systems, including Ascension, a Catholic system that is the nation’s largest nonprofit hospital group, plan to participate the new nonprofit company, that will provide a number of generic drugs to the hospitals. The Department of Veterans Affairs is also expressing interest in participating. Other hospitals are expected to join.

“This is a shot across the bow of the bad guys,” said Dr. Marc Harrison, the chief executive of Intermountain Healthcare, the nonprofit that is spearheading the effort. “We are not going to lay down. We are going to go ahead and try and fix it.”

Dr. Carolyn Clancy, the executive in charge of the Veterans Health Administration, said its pharmacy experts have consulted with the other systems about the project and is now working out the details of its possible involvement. “Our strong interest here is minimizing the impact of any shortages of generic drugs,” she said. While she said the agency is able to negotiate good prices for veterans, “we don’t necessarily control supply” and have experienced many of the same shortages, including the recent lack of saline fluids, as the other health groups.

Dr. Kevin A. Schulman, a professor of medicine at the Duke University School of Medicine who has studied the generic drug market and is advising the effort, said: “If they all agree to buy enough to sustain this effort, you will have a huge threat to people that are trying to manipulate the generic drug market. They will want to think twice.”

According to federal prosecutors, Philip Sobol, an orthopedic surgeon, agreed with Michael Drobot to receive kickbacks in exchange for performing surgeries at Pacific Hospital of Long Beach or referring spinal surgery patients to physicians who would perform the spinal surgeries at Pacific Hospital.

Sobol and Drobot concealed the kickbacks through a series of sham agreements including a management agreement and option agreement. Sobol received approximately $5.2 million dollars in kickbacks.

On November 24, 2015, Sobol entered into an agreement to plead guilty to a two-count information that charged him with Conspiracy in violation of 18 U.S.C. § 371, and Interstate Travel in Aid of a Racketeering Enterprise in violation of 18 U.S.C. § 1952.

Sobol further agreed to forfeit the sum of $5,200,000.00 which he admitted represented proceeds he obtained as a result of the offenses to which he entered the guilty plea.

In furtherance of this stipulation, on January 16, 2018, Federal Judge Josephine L. Stanton ordered a money judgment in the amount of $2,000,000.00 in favor of the United States of America and against Defendant Philip A. Sobol.

She furthered ordered that “This Money Judgment is part of the sentence imposed on Defendant Sobol in this case.” He remains to be sentenced in February.

Prosecutors filed a Sentencing Report in his criminal case on December 5. On February 24, 2017, the United States Probation Office reported that his sentencing range was 46-57 months’ imprisonment. The report noted that Sobol had agreed to pay restitution but “did not identify any victims from the harm.”

But prosecutors say the Court should apply an additional two level increase because the offense involved more than ten victims.

Prosecutors reported that “it is difficult to determine exactly how many surgeries defendant referred where he received a kickback because the kickbacks were paid through sham management and option agreements that were designed to approximate the number of surgeries referred or performed at Pacific Hospital, Drobot admitted in his plea agreement that he paid between $10,000 and $15,000 per surgery performed.”

His Sentencing Hearing is currently set for February 16, 2018 at 8:30 a.m.

A Brea physician, who is being prosecuted in a baby’s death and for being part of an alleged $100 million workers compensation fraud scam, recently had his medical license restricted pending the outcome of criminal proceedings filed in Orange County.

The interim suspension order agreed to by Dr. Andrew Robert Jarminski, his attorney Peter R. Osinoff and counsel for the Medical Board of California went into effect on Dec. 22.

Jaminski’s legal problems date back to criminal proceedings commenced in 2014 by an Orange County grand jury indictment of Kareem Ahmed of Landmark Medical Management in Ontario and 15 people including Jarminski.

The OCWeekly recent case summary notes that the original indictment specifically cast Ahmed as the ringleader, accusing him of: hiring pharmacists to produce compounded transdermal creams and  paying kickbacks to several physicians and chiropractors, including Dr. Jarminski, for prescribing the cream to their workers’ compensation patients.

Ahmed’s attorneys managed to get most of the counts against their client tossed in March 2016. But the OCDA refiled charges against Ahmed and others that pushed the number of defendants up to 21 people and the alleged fraud ballooned to $100 million. Hearings in the case are set for Feb. 9 and 26 in Orange County Superior Court. Jarminski, had offices in Long Beach and Lawndale when he was first accused of having received $1.9 million in Landmark kickbacks.

As a result of events alleged in the OCDA criminal prosecution, the California Medical Board issued an Accusation against Jarminski in June, 2017 seeking to revoke his license. They claim he commenced treating Priscilla Lujan, an injured worker, in 2011. During the course of her treatment she gave birth to a child who was breastfeeding. The child died after ingesting residue from the compounded transdermal medication he prescribed for her. The ODCA pursued manslaughter charges against Jarminski, and others, for this death.

Attorneys for the defendants have vehemently denied the charges against them. As for Jarminski’s medical license, his lawyers argued that staying a suspension is appropriate because he is presumed innocent until proven guilty, and if he is convicted his license will be revoked by the medical board anyway.

Late last month, Administrative Law Judge Susan L. Formaker agreed that the public can be protected through the restrictions of the interim suspension order, which stipulates that Jarminski cannot dispense or prescribe non-FDA approved compounded medications before the matters before the criminal court and medical board are resolved.

The case of Saul Zuniga involves another challenge to the constitutionality of certain provisions of the IMR process. He asserts that the anonymity of the IMR reviewers violates his right to due process and that the IMR statute violates the guarantee of right to appellate review.

After successfully appealing an IMR determination and obtaining an order remanding the matter back to IMR for review by a different physician reviewer, Zuniga filed a discovery motion seeking the disclosure of the IMR reviewers’ identities. The Workers’ Compensation Judge ruled that he could not release the names of the IMR physicians pursuant to Labor Code section 4610.6(f).

Zuniga filed a petition for reconsideration, which was denied. He then filed a petition in the Court of Appeal arguing that the anonymity of the IMR reviewers violates due process and that the IMR statutes violate the guaranteed right to appellate review. The Court of Appeal rejected his constitutional challenge, and affirmed the WCAB in the unpublished case of Zuniga v WCAB.

Zuniga argued that it is a denial of due process for an IMR to refuse to disclose the identities of the reviewers when the decision of the first reviewer is reversed and the dispute is referred to a different reviewer in the organization. He claimed that without knowing the identities of the reviewers, an applicant is deprived of the opportunity to “dispute the findings of the second reviewer on the ground that they were made by the same reviewer whose opinion was reversed.”

The Court of Appeal responded by noting that under Article XIV, Section 4 of the California Constitution, the Legislature “is . . . expressly vested with plenary power unlimited by any provision of this Constitution, to create, and enforce a complete system of worker’s compensation by appropriate legislation.”

As the Court of Appeal held in Stevens, the due process clause of the California Constitution (Cal. Const., art. I, § 7, subd. (a)) does not limit the Legislature’s authority to create a workers’ compensation system. (Stevens, supra, 241 Cal.App.4th at pp. 1092-1093.) Section 4 therefore “supersedes the state Constitution’s due process clause with respect to legislation passed under the Legislature’s plenary powers over the workers’ compensation system.”

The Court also ruled that Zuniga’s federal due process claim fails as well. The Court of Appeal in Stevens  concluded that the IMR process, including the confidentiality requirement of section 4610.6, subdivision (f), does not violate the federal due process clause. (Stevens, supra, 241 Cal.App.4th at pp. 1096-1101; see also Ramirez, supra, 10 Cal.App.5th at pp. 227-229.)

The Court of Appeal in Stevens assumed that an IMR determination is state action and implicates a protected property interest, which are prerequisites to a federal due process claim. (Stevens, supra, 241 Cal.App.4th at pp. 1096-1098.) The court concluded that even so, Stevens’s due process claim failed because the IMR process “afford[s] ample process. ‘The core of due process is the right to notice and a meaningful opportunity to be heard.’”

When due process must be afforded, the amount of process required is determined by balancing the affected private interest, the risk of erroneous deprivation of this interest, the probable value, if any, of additional or substitute safeguards, and the government’s interest in the process.

On February 20, 2014, the owner of the Pacific Hospital of Long Beach, Michael D. Drobot, entered into a plea agreement in the case captioned United States v. Michael D. Drobot, pursuant to which he agreed to plead guilty to conspiracy and payment of kickbacks in connection with a federal health care program.

Pursuant to his plea agreement, Drobot agreed to forfeit all “right title, and interest” in assets “derived from or acquired as a result of, or used to facilitate the commission of, defendant’s illegal activities.” Drobot further agreed “[t]o the Court’s entry of an order of forfeiture at or before sentencing with respect to these assets and to the forfeiture of the assets.”

After a number of “sealed” documents were filed by the parties, and reviewed by the court on the topic of this forfeiture, Federal Judge Josephine L. Staton signed an Order on January 10, 2018 directing a personal money judgment of forfeiture in the amount of $10,000,000.00 in favor of the United States of America against defendant Michael D. Drobot.

The terms of the forfeiture require the payment of $300,000 in cash. In addition liens were imposed on in the favor of the United States Attorney’s Office (USAO) on all properties in Oregon owner by Drobot. He was then ordered to sell the Oregon properties and pay all net proceeds (gross proceeds less taxes, costs, and other normal and customary costs associated with the sale) to the USAO.

He was also ordered to sell his 1965 Aston Martin, 1958 Porsche, and 1971 Mercedes Benz, and pay the proceeds to the USAO.

This personal money judgment of forfeiture is part of the sentence imposed on defendant in this case. The Court retained jurisdiction to enforce this judgment.

But that is not all for Mr. Drobot.

A hearing to determine victim losses pursuant to 18 U.S.C. § 3664(d)(5) and to determine the final amount of restitution is scheduled for May 11, 2018 at 10:30 a.m. And the Court will determine his criminal sentence this week.

However, Drobot plead guilty early in the case, and agreed to “cooperate” with authorities. Conceptually, as a result of his cooperation, many successful prosecutions of well known physicians were successful. No doubt this will be taken into consideration.

Drobot has also filed letters from various supporters asking for leniency.

Attorney Donald G. Norris authored a support letter dated January 11. He handleled many of Mr. Drobot’s civil matters, both before and after the government investigation and prosecution in the case now before the Court, including the civil RICO case that was brought by State Compensation Insurance Fund before Judge Andrew Guilford. He argues that Drobot “already suffered considerable punishment” as a result of the many criminal and civil cases. He asks that “this Court not impose a sentence of imprisonment, and if one is imposed, a short term.”