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Novartis Pharmaceuticals Resolves Kickback Case for $51M

Novartis Pharmaceuticals Corporation has agreed to pay $51.25 million to resolve allegations that it violated the False Claims Act by illegally paying the Medicare co-pays for its own drugs.

When a Medicare beneficiary obtains a prescription drug covered by Medicare Part B or Part D, the beneficiary may be required to make a partial payment, which may take the form of a co-payment, co-insurance, or deductible. Congress included co-pay requirements in these programs, in part, to encourage market forces to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs.

The Anti-Kickback Statute prohibits pharmaceutical companies from offering or paying, directly or indirectly, any remuneration – which includes money or any other thing of value – to induce Medicare patients to purchase the companies’ drugs.

Officials say Novartis coordinated with three co-pay foundations to funnel money through the foundations to patients taking Novartis’ own drugs, As a result, the Novartis’ conduct was not ‘charitable,’ but rather functioned as a kickback scheme that undermined the structure of the Medicare program and illegally subsidized the high costs of Novartis’ drugs at the expense of American taxpayers.

Novartis used The Assistance Fund as a conduit to pay kickbacks to Medicare patients taking Gilenya, a Novartis drug for multiple sclerosis, and used the National Organization for Rare Disorders and Chronic Disease Fund as conduits to pay kickbacks to Medicare patients taking Afinitor, a Novartis drug for renal cell carcinoma and progressive neuroendocrine tumors of pancreatic origin.

In October 2012, Novartis learned from Express Scripts, which then was managing Novartis’ free drug program for Gilenya, that Novartis was providing free Gilenya to 364 patients who would become eligible for Medicare the following year.

Novartis and Express Scripts transitioned these patients to Medicare Part D so that, in the future, Novartis would obtain revenue from Medicare when the patients filled their prescriptions for Gilenya.

Knowing that these patients could not afford co-pays for Gilenya, Novartis developed a plan for it to cover their co-pays through The Assistance Fund, which operated a fund that, ostensibly, offered to cover co-pays for any MS patient who met its financial eligibility criteria, regardless of which MS drug the patient was taking.

Novartis entered into a five-year corporate integrity agreement as part of this settlement. Novartis will be required to implement measures, controls, and monitoring designed to promote independence from any patient assistance programs that it finances. In addition, Novartis agreed to implement risk assessment programs and to obtain compliance-related certifications from company executives and Board members.

To date, the Department of Justice has collected over $900 million from ten pharmaceutical companies (United Therapeutics, Pfizer, Actelion, Jazz, Lundbeck, Alexion, Astellas, Amgen, Sanofi, and Novartis) that allegedly used third-party foundations as kickback vehicles. The Department also has reached settlements with four foundations (Patient Access Network Foundation, Chronic Disease Fund, The Assistance Fund, and Patient Services, Inc.) that allegedly conspired or coordinated with these pharmaceutical companies.

CASISF Approves 2020-21 $6.5B Alternative Security Program

The California Self-Insurers’ Security Fund supports businesses by helping lower their workers’ compensation costs and freeing up their working capital.

The program provides a financial backstop to replace security deposits required to collateralize self-insured workers’ compensation liabilities.

The CASISF Board of Trustees has approved and implemented the 2020/21 Alternative Security Program, which frees $6.5 billion in working capital and provides California self-insured businesses greater financial flexibility. Moreover, there has been no increase in the Security Fund’s general assessment from last year.

These continuing savings make the program and costs even more competitive for California self-insured businesses. “The Fund’s historically sound and rigorous credit monitoring practices have positioned the Fund to address the economic impacts of the coronavirus pandemic,” said Dan Sovocool, a partner at Nixon Peabody LLP and the Security Fund’s outside General Counsel. “The Fund continues to be a strong resource and partner for California’s self-insured employers.”

All employers in California are required to have workers’ compensation insurance to cover their employees in the event of work-related injuries or illnesses. Employers may satisfy this requirement by obtaining an insurance policy or gaining authority from the DIR’s Office of Self Insurance Plans (OSIP) to self-insure the businesses’ workers’ compensation liabilities.

Self-insured employers maintain a deposit equal to their estimated liabilities. Employers may post the deposit in cash, letters of credit, surety bonds, or securities. The use of these instruments limits the employer’s ability to use their cash or credit line. In contrast, the Security Fund’s ASP allows employer members to free up their cash or line of credit, allowing them to reinvest this capital back into their businesses. The ASP provides the member with a low-cost substitute for collateral with no balance sheet impact.

California currently has more than 3,500 private employers protecting more than 2.2 million workers representing a total payroll of nearly $113 billion through self-insurance workers’ compensation plans.

A self-insurance plan protects one of every eight California workers. Self-insured private employers in California represent large and midsized private companies and industry groups.

The California Self-Insurers’ Security Fund (CASISF) has been serving its members for 36 years since its founding on July 6, 1994. It is a member-driven non-profit organization with leadership by a volunteer Board of Trustees representing members serving members. The Security Fund is a strategic partner supporting California self-insured workers’ compensation programs.

Bay Area Woman Sentenced for Filing $9.5M Fraudulent SDI Claims

68 year old Linda Nguyen of Union City, was sentenced to two years in prison for her role in a multi-million dollar mail fraud conspiracy involving California State Disability Indemnity (SDI) benefits. Nguyen pleaded guilty to the charge on July 17, 2019.

The SDI program is designed to provide partial wage replacement benefits to eligible California workers who are unable to work due to a non-work-related illness, injury, or pregnancy. To receive SDI benefits, a claimant must file a claim for benefits supported by a Physician/Practitioner Certification attesting to the claimant’s disability.

Nguyen admitted that from January 2013 until January 2019, she agreed with a licensed physician and others to commit mail fraud by defrauding California’s SDI program.

Specifically, Nguyen admitted she helped non-disabled persons prepare and submit fraudulent applications and certifications for SDI benefits. In exchange for her services, Nguyen charged the non-disabled SDI applicants a fee equal to 10% of the SDI benefits that they received. In addition, she paid the physician for each certification he completed for the fraudulent application.

Nguyen’s plea agreement contains four examples of individuals for whom she completed fraudulent applications.

The agreement further describes how Nguyen paid a physician to complete and sign the practitioner disability certifications even though the applicants were never treated by the physician. Nguyen acknowledged in the agreement that the total loss attributable to the fraudulent scheme in which she participated is estimated to be between $3,500,000 and $9,500,000.

A federal grand jury indicted Nguyen on January 29, 2019, charging her with one count of conspiracy to commit mail fraud, in violation of 18 U.S.C. § 1349, and one count of substantive mail fraud, in violation of 18 U.S.C. § 1341. Nguyen pleaded guilty to the conspiracy count and the substantive mail fraud count was dismissed at sentencing.

In addition to the prison term, Nguyen was ordered to serve a three year term of supervised release, to begin at the end of the prison term, and to pay restitution.

New Reporting Forms Required for Public Self-Insureds

The Department of Industrial Relations’ Office of Self-Insurance Plans (OSIP) has promulgated regulations that require public self-insured employers to submit reports with the information needed to evaluate the administrative cost, workers’ compensation expenditures, solvency and performance of public self-insured employer workers’ compensation programs.

These regulations became effective on July 1 and include the addition of the following new reporting forms:

— Joint Powers Authority Self-Insurer’s Profile and Financial Summary Report (Form J-1)
— Self-Insurer’s Profile and Financial Summary Report (Form P-1)
— Aggregate Claims Information (Form AR-2 Addendum)

The reporting forms for public self-insured employers are posted online. They must be submitted with the 2019-2020 annual report, which is due on October 1, 2020 and annually thereafter.

Employers who require additional time to comply with the regulations this year should contact OSIP Chief Lyn Asio Booz at to request an extension. Deferrals of up to 60 days may be granted to employers who can demonstrate that they may not be able to comply with their reporting requirement.

Blood Type Research May Support COVID-19 Apportionment

With the likelihood of workers’ compensation COVID-19 claims on the horizon, and with presumptions supporting them, opportunities for apportionment of permanent disability may be more important than ever in claims management.

Researchers who just published a new study, report that a person’s blood type may affect their risk for COVID-19, the disease caused by the new corona virus.

The findings appear on the website medRxiv, where health researchers publish studies before they undergo the peer review process required by journals.

Researchers used observational healthcare data on 1559 individuals tested for SARS-CoV-2 (682 COV+) with known blood type in the New York Presbyterian (NYP) hospital system to assess the association between ABO+Rh blood type and SARS-CoV-2 infection status, intubation, and death.

They found a higher proportion of blood group A and a lower proportion of blood group O among COV+ patients compared to COV-, though in both cases the result is significant only in Rh positive blood types.

The effect of blood type is not explained by risk factors they considered (age, sex, hypertension, diabetes mellitus, overweight status, and chronic cardiovascular and lung disorders).

In a meta-analysis of NYP data with previously-reported data from China, they found enrichment for A and B and depletion of O blood groups among COVID-19 patients compared to the general population. They also found new evidence of associations between B, AB, and Rh blood groups and COVID-19 and further evidence of recently-discovered associations between A and O blood groups and COVID-19.

The China study was limited because of its small size and it didn’t offer an explanation for its findings, Gao Yingdai, a researcher from the State Key Laboratory of Experimental Hematology in Tianjin, told the South China Morning Post.

The finding that blood type may affect COVID-19 risk could be important for healthcare workers treating COVID-19 patients, because those with A blood types” “might need particularly strengthened personal protection to reduce the chance of infection.”

Also, people with A blood types might require “more vigilant surveillance and aggressive treatment,” and identifying a person’s blood type as a routine part of treating COVID-19 and other coronavirus infections might be helpful, according to the researchers, Newsweek reported.

Court Jurisdiction in Subrogation Action Ends When Case Dismissed

Daniel Brodie Howard suffered major injuries in an automobile accident while acting within the scope of his employment with Agra Tech, Inc. Hartford was Agra Tech, Inc.’s workers’ compensation carrier. He was hospitalized and in a coma. Thus the probate court appointed his brother, David Howard as conservator of his person and estate.

A civil tort action was filed against multiple parties to recover for the injuries. Hartford filed a complaint in intervention seeking to recover the workers’ compensation benefits it had paid as a result of conservatee’s accident.

In 2012, a WCJ found conservatee to be totally and permanently disabled and awarded permanent disability, medical care for life, and attorney fees.

On October 30, 2013, conservatee, Hartford, and Toyota, one of the tort defendants, signed a mediation agreement that called for Toyota to pay a specified sum to conservatee. In 2014, the probate court signed an order approving the compromise of the disputed claim against the other driver and Toyota and directed payments from the settlement proceeds for attorney fees and expenses, to Hartford (for medical and like expenses it had paid), and conservatee (for the balance of the settlement).

Numerous disputes arose between the parties over the distribution of funds, each of which were subsequently resolved.

Then, in 2016, conservatee filed a motion in the probate court to assess attorney fees, asking the probate court to order Hartford to “reimburse Conservatee $150,934.76 in costs and $179,605.48 in attorney’s fees as Hartford’s pro rata share of Conservatee’s costs and attorney’s fees in creating the Toyota settlement.” Conservatee stated the authority for the motion was labor code sections 3856, subdivision (b), and 3860, subdivision (e), and the “common fund” doctrine.

The probate court concluded that it lacked jurisdiction to consider conservatee’s claims because the underlying civil case had been dismissed with prejudice upon conservatee’s request. The court of appeal agreed and affirmed the order in the unpublished case of Conservatorship of Howard.

Conservatee’s motion to assess attorney fees did not revive the civil action or overcome the effect of the voluntary dismissal of that action. Upon dismissal of the civil action, the probate court no longer had jurisdiction to enter any further order distributing the settlement proceeds from the civil action.

Smartphones Cause Uptick in Motor Vehicle Accident Comp Claims

Workers’ Compensation has experienced a long-term decline in overall claim frequency. However, for motor vehicle claims, the story is quite different.

The National Council on Compensation Insurance (NCCI), just published an update to it’s 2018 research brief titled “Motor Vehicle Accidents in Workers Compensation,” which examined the frequency and severity of motor vehicle accidents (MVA) from 2000 to 2016.

The brief noted that frequency decreased for both MVAs and all claims from 2000 to 2011. However, a key finding was that from 2011 to 2016, while the frequency of all workers compensation claims continued to decrease, the frequency of MVAs increased in both WC and in the general population. It cited the rapid expansion of smartphone ownership during this period as a possible contributing factor. Some key findings of the new update show:

MVA frequency increased. From 2011 to 2018, the frequency of MVA lost-time claims increased, while the frequency of all lost-time claims decreased. Our previous research showed that the same was true for the period 2011 to 2016.
— Smartphone ownership over 80%. Smartphone ownership skyrocketed after the introduction of the iPhone in 2007, but growth has tapered off in recent years. As of year-end 2018, the percentage of US adults who own a smartphone is estimated to be over 80%.
— Safety evolves. State-of-the-art vehicle safety features, such as automatic emergency braking, will take time to penetrate the driving pool, as the average car age is just under 12 years.
— MVA claim severity. MVA lost-time claims continue to cost over 80% more than the average lost-time claim, because MVA claims tend to involve severe injuries (e.g., head, neck, and spine).

There is a notable disparity in smartphone ownership between younger and older drivers. Nearly all drivers under age 30, but only half of drivers over age 65, own a smartphone. This suggests that smartphone ownership among employed drivers may creep further upward as younger individuals enter the workforce and older workers retire.

However, since the vast majority of drivers now own smartphones, we may not see the same MVA frequency increases that occurred during the period when smartphone ownership was significantly increasing.

Greater use of cell phone blocking technology would also be expected to make driving safer, if enabled by the driver. This technology, available through smartphone apps, prohibits calls or texts while the vehicle is in motion. Alternatively, Bluetooth technology allows for hands-free communication while driving.

Several factors that may put downward pressure on MVA claim frequency include (i) stricter state cell phone laws, and (ii) vehicle safety improvements.

The source of data for this study is Statistical Plan data for NCCI states. This database contains detailed policy information, which allows an analysis of frequency and severity by various claim characteristics.

Privette Doctrine Tested Again in Roofer Fall Claim

Yosemite Community College District hired contractors to complete a remodeling project at the campus that included roof repair and replacement on several buildings. Kitchell CEM was the general contractor or program manager for the project. This included developing and implementing a program-wide safety program. Western Single Ply-Nevada was the roofing subcontractor. The plaintiff Ramon Mora was its employee.

In 2015 a 2×4, without the typical accompanying 2×6, was anchored to the edge of the roof to use as scaffolding. While Mora was on the 2×4 anchor board without a safety harness, the board gave way and he fell over 20 feet off the unprotected roof edge.

Mora filed a civil action that alleged General Contractor owed him a duty of care and breached that duty by failing to develop and implement a safety program that included fall prevention and protection measures.

The trial court sustained the General Contractor’s demurrer. The order stated (1) workers’ compensation was “the sole and exclusive remedy for employees who sustain injuries while performing work in the scope of their employment”; (2) General Contractor “did not have the requisite degree of control over the property to support a claim for Premises Liability”; and (3) the negligence allegations were insufficient to state a cause of action against General Contractor. The Court of Appeal reversed in the unpublished case of Mora v Kitchell CEM.

The Privette doctrine will bar causes of action by an independent contractor’s employee against a non-negligent hirer that did not affirmatively act. A hirer can be a landowner, general contractor, or any other entity that hires an independent contractor.

Plaintiff’s complaint alleges that Roofing Subcontractor “was a subcontractor hired to perform reroofing work at the SUBJECT PREMISES.” The complaint does not state who hired Roofing Subcontractor “to perform reroofing work.” Thus, on the face of the complaint, the hirer of Roofing Subcontractor is not clearly and affirmatively shown. Consequently, at the pleading stage, the Privette doctrine cannot be a bar to the complaint because the hirer is not identified.

It is worthy of note that this opinion will likely be of limited value to this plaintiff. The identical issues will be tested again after a motion for summary judgment. Such a motion can included undisputed facts that establish the defendant as the General Contractor, and thus protected by Privette. This appeal is the result of Mora’s sixth amended complaint, and Mora has undoubtedly had difficulty establishing his case thus far.

Beverly Hills Doctor Arrested for $52M Insurance Fraud

A Beverly Hills anesthesiologist and his girlfriend, the owner of a Los Alamitos-based laboratory, are behind bars on charges of stealing about $52 million in an alleged insurance fraud scheme.

Dr. Randy Rosen, who was involved in a civil federal lawsuit involving a health care fraud scheme at a Long Beach hospital that was settled in 2017, was being held on $52 million bail along with co-defendant Liza Vismanos, who are both scheduled to be arraigned when a judge will also consider lowering their bail.

Vismanos owns the Wellness Wave surgical center in Beverly Hills and the Lotus Labs medical laboratory in Los Alamitos, according to the bail motion.

“In approximately June 2017, Rosen/Vismanos entered into a fraud scheme specifically targeting patients from addiction recovery rehabs to bill their private medical insurance carriers primarily for two types of procedures; a non-FDA approved Naltrexone implant and Cortisone injections,” according to the bail motion.

Rosen put his patients under anesthesia for these procedures in order to bill insurance for a major medical surgery at an approximate cost of $80,000 per procedure,” according to the bail motion.

“Per Rosen’s records he performed these procedures in as little as one-minute increments with as many as 72 procedures per day. Additionally, Rosen collected blood and urine from his patients, which was processed at Lotus Labs at a cost of approximately $4,000 per day after the procedure with no known medical necessity.”

Investigators allege 18 insurance companies were billed from June 2017 to May 2019 $661,940,464 and the two received $51,060,523.

The two are also accused of using two “body-broker” groups that would “sell Rosen patients in exchange for a kickback of the insurance proceeds,” the bail motion alleges.

The “marketers” would – often pay the patients (oftentimes $500 to $2,000 per procedure) to incentivize them into returning to Rosen for multiple procedures,” the bail motion alleges.

Investigators also allege “at least 35 of Rosen’s patients involved in this scheme have passed away, many by overdose,” according to the bail motion.

Investigators also said the alleged scheme was the subject of a CBS report in July 2018 that “focused on the death of a patient,” but “despite this attention Rosen/Vismanos continued with their fraud scheme, continued paying kickbacks and patients continued to die.”

Telemedicine in Workers’ Comp – New Normal or Fraud Opportunity?

Telemedicine has grown more popular over the past few months as physicians utilized new methods to connect with and diagnose their patients in the wake of the COVID-19 shutdowns. However, even before these changes became necessary, a report by Property Casualty 360 says that many employers and medical offices found that virtual appointments delivered another alternative to providing care for some patients.

“When an injured employee suffers a serious or complex injury, nurses can be a valuable resource to promote recovery and return to work,” says Jennifer Cogbill, vice president, GBCARE at Gallagher Bassett.

There are a wide range of medical services that can be provided remotely from kiosks in airports and pharmacies that allow individuals to check their pulse, blood pressure, temperature and other vitals to triaging care through telehealth visits. In these cases, nurses usually serve as the gatekeepers who determine what level of care is required for a patient, from a bandage to something more serious.

Dave Lupinsky, vice president of medical review services at CorVel Corporation, which provides health care management services for employers, third-party administrators, insurers and government entities, finds that care management starts by assessing which level of care is required: self-care that patients can provide to themselves with guidance from a nurse or other service provider, telecare provided remotely or care in a traditional brick and mortar location such as an emergency room or occupational clinic for more serious situations.

For most patients, the visits are conducted either over a desktop computer or some sort of mobile device (e.g., cell phone or tablet).

Despite the convenience tele-visits provide, some very real limitations must be considered. Some patients may not be technology savvy and have trouble accessing the patient portal or getting their computer to operate correctly (i.e., turning on the camera or microphone). Telemedicine also is not applicable for all injury and treatment types due to the limitations with the exam and other services needed.

As telemedicine moves from a niche service to more mainstream use, the value in terms of insurance and workers’ compensation claims will grow exponentially. James Quiggle, senior director of communications for the Coalition Against Insurance Fraud, anticipates that a new surge of tele-scams could well become America’s next large surge of medical fraud.

Workers’ comp, auto and health insurers could find themselves confronting surges of false telemedicine claims. Insurers in each line have a unique vulnerability due to the large volume of medical claims,” he asserts. “

Scams focus on exams, tests and treatments that don’t require physical contact ” often abusing telemed codes. Many scams will be familiar, only using telemed as the fraud delivery vehicle. Providers might do dozens of perfunctory, two-minute, tele-consults to see if a patient is injured and needs physical therapy. Doctors bill insurers for one-hour sessions and receive kickbacks for referring patients to the physical therapist.”

Large crime rings will profit mightily from telemedicine. Telemarketing firms can hire phone boiler rooms to tele-recruit hundreds of bogus patients. The patients are referred to colluding providers for bogus tele-consults and treatment,” he says, outlining how the fraud process will develop.

While not a panacea, telemedicine does provide another tool for medical professionals to connect with patients, particularly in a time when social distancing seems prudent. However, like every aspect of new technology, it needs to be implemented wisely.