Category: Daily News

The Department of Justice announced a global resolution of its criminal and civil investigations into the opioid manufacturer Purdue Pharma LP, and a civil resolution of its civil investigation into individual shareholders from the Sackler family. The resolutions with Purdue are subject to the approval of the bankruptcy court.

Purdue Pharma has agreed to plead guilty in federal court in New Jersey to a three-count felony information charging it with one count of dual-object conspiracy to defraud the United States and to violate the Food, Drug, and Cosmetic Act, and two counts of conspiracy to violate the Federal Anti-Kickback Statute.

The criminal resolution includes the largest penalties ever levied against a pharmaceutical manufacturer, including a criminal fine of $3.544 billion and an additional $2 billion in criminal forfeiture.

For the $2 billion forfeiture, the company will pay $225 million on the effective date of the bankruptcy, and, as further explained below, the department is willing to credit the value conferred by the company to State and local governments under the department’s anti-piling on and coordination policy.

Purdue has also agreed to a civil settlement in the amount of $2.8 billion to resolve its civil liability under the False Claims Act. Separately, the Sackler family has agreed to pay $225 million in damages to resolve its civil False Claims Act liability.

The resolutions do not include the criminal release of any individuals, including members of the Sackler family, nor are any of the company’s executives or employees receiving civil releases.

While the global resolution with the company is subject to approval by the bankruptcy court in the Southern District of New York, one important condition in the resolution is that the company would cease to operate in its current form and would instead emerge from bankruptcy as a public benefit company (PBC) owned by a trust or similar entity designed for the benefit of the American public, to function entirely in the public interest.

As part of the plea, Purdue will admit that it conspired to defraud the United States by impeding the lawful function of the DEA by representing to the DEA that Purdue maintained an effective anti-diversion program when, in fact, Purdue continued to market its opioid products to more than 100 health care providers whom the company had good reason to believe were diverting opioids and by reporting misleading information to the DEA to boost Purdue’s manufacturing quotas.

In addition, Purdue will admit to conspiring to violate the Federal Anti-Kickback Statute. Purdue made payments to two doctors through Purdue’s doctor speaker program to induce those doctors to write more prescriptions of Purdue’s opioid products. Similarly, from approximately April 2016 through December 2016, Purdue made payments to Practice Fusion Inc., an electronic health records company, in exchange for referring, recommending, and arranging for the ordering of Purdue’s extended release opioid products – OxyContin, Butrans, and Hysingla.

The DOJ resolution does not resolve claims that states may have against Purdue or members of the Sackler family, nor does it impede the debtors’ ability to recover any fraudulent transfers.

Applied Underwriters, Inc. and Applied Risk Services, Inc. filed a lawsuit against the Insurance Commissioner of the State of California and others in U.S. District Court for the Eastern District of California, asserting five claims under the U.S. Constitution.

Applied and its affiliates primarily write workers’ compensation insurance through multiple insurance companies in all fifty states in the United States,and have done so since 2002. California Insurance Company (“CIC”) is the largest of those companies and was formed in 2004. Since that time, CIC has grown into a company with over a billion dollars in assets and over $600 million in capital and surplus.

Applied Underwriters and Applied Risk Services allege that the California Department of Insurance acted in bad faith and abused its authority under state law in ways that have caused substantial harm to the companies.

Disputes between the CDI and Applied Underwriters has a longstanding history. The current dispute arose in January 2019, after a $920 million sale to company founder Steve Menzies, who was an indirect owner of 11.5% of CIC’s shares was announced.

The California Department of Insurance says it must sign off on the deal because one of Applied’s subsidiaries, California Insurance Co., is domiciled in the state. It subsequently denied approval of the sale.

The California Department of Insurance placed California Insurance Company into a conservatorship, allegedly under false pretenses and has abused its authority by trying to force Applied Underwriters to relinquish its rights in connection with the Department’s unlawful actions.

In the year long period that CIC has been in conservation, Applied Underwriters claims the CDI has “refused to resolve matters in good faith,” and has instead demanded that Applied “subject itself to jurisdiction, give up its right to bring this and other lawsuits, and bind itself to other onerous terms.”

The complaint says that up until this week, Insurance Commissioner Lara and his representatives continued to “propose unfair and preposterous terms under the constant threat that if Applied and others did not agree, they would seek court approval for a rehabilitation plan that would be ‘even worse.’”

That rehabilitation plan, originally due in August, was filed October 19.

According to Applied Underwriters, the rehabilitation plan “effectively eliminates CIC’s business in California, and other states, requires CIC to transfer its business to a new insurer of the Commissioner’s choosing, and leaves just a shell CIC with all of its obligations to other reinsurers and affiliates under its contracts and no source of revenue to meet its obligations.”

A new California Workers’ Compensation Institute (CWCI) study examined the initial impact of replacing the statewide average GAF in the workers’ comp Official Medical Fee Schedule (OMFS) with a system that uses smaller Metropolitan Statistical Area (MSA) localities when applying regional cost adjustments as part of the fee schedule formula.

The state adopted the GAF change for services rendered to injured workers on or after 1/1/19 to improve payment accuracy and align OMFS allowable fees with those allowed by Medicare and other systems.

Under the new structure developed by Medicare in 2017, there are 32 payment localities in California.

The CWCI study found that switching from statewide to locality-specific geographic adjustment factors (GAFs) in the calculation of California workers’ comp physician and non-physician service fees has not resulted in a major shift in where the dollars go, and despite concerns, the switch does not appear to have generated inappropriate shifting of billing to higher reimbursed areas, or caused rural providers to leave the system.

The study found that both before and after the switch, medical providers in Los Angeles County accounted for a much larger share of the office visit services and payments than providers in any other locality, though their proportion of services and payments did decrease by about 5 percentage points in the first year after the locality specific GAFs were adopted.

Those decreases, however, were offset by 5 percentage point increases in the proportion of E&M visits and payments to providers in nearby San Bernardino/Riverside Counties, a shift that occurred after a large occupational medicine group expanded into the Inland Empire.

Other than that, the study found no significant changes in the proportion of E&M services or payments among the geographic localities, and no indication of a shift in services or payments to providers in either urban or rural areas of the state

The study also showed that the switch to the new GAF had little effect on the types of E&M services used, as follow-up visits by established patients remained the most prevalent type of office visits, accounting for 86.5% of the E&M services in 2018 and 80.5% in 2019.

A key factor influencing the average payments in each locality was the use of discount contracts, such as those paid to providers within an employer’s medical provider network, which allow payments below the fee schedule amounts.

The percentage of E&M services in the study sample that were paid at a discounted rate fell from 78.3% to 76.6%, but the average discount increased from 15.5% to 17.1%, so thus far the use of these contracts has helped mitigate the impact that the change to the fee schedule’s geographic adjustment factor has had on the average amounts paid for E&M services.

A rapper who boasted in a YouTube music video about getting rich from committing unemployment benefits fraud was just arrested on federal charges of carrying out that very scheme by fraudulently applying for more than $1.2 million in jobless benefits, including by using stolen identities.

Fontrell Antonio Baines, 31, who uses the stage name “Nuke Bizzle,” of Memphis, Tennessee and who currently resides in the Hollywood Hills, was arrested pursuant to a criminal complaint alleging a scheme to fraudulently obtain unemployment insurance benefits under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Baines allegedly exploited the Pandemic Unemployment Assistance (PUA) provision of the CARES Act, which is designed to expand access to unemployment benefits to self-employed workers, independent contractors, and others who would not otherwise be eligible.

According to an affidavit filed with the complaint, Baines possessed and used debit cards pre-loaded with unemployment benefits administered by the California Employment Development Department (EDD). The debit cards were issued in the names of third-parties, including identity theft victims. The applications for these debit cards listed addresses to which Baines had access in Beverly Hills and Koreatown.

Evidence gathered during the investigation established that at least 92 debit cards that had been pre-loaded with more than $1.2 million in fraudulently obtained benefits were mailed to these addresses, according to the affidavit. Baines and his co-schemers allegedly accessed more than $704,000 of these benefits through cash withdrawals, including in Las Vegas, as well as purchases of merchandise and services.

The affidavit further alleges that Baines bragged about his ability to defraud the EDD in a music video posted on YouTube and in postings to his Instagram account, under the handles “nukebizzle1” and “nukebizzle23.” For example, Baines appears in a music video called “EDD” in which he boasts about doing “my swagger for EDD” and, holding up a stack of envelopes from EDD, getting rich by “go[ing] to the bank with a stack of these” – presumably a reference to the debit cards that come in the mail. A second rapper in the video intones, “You gotta sell cocaine, I just file a claim”.

On September 23, Las Vegas police arrested Baines, who had in his possession eight debit cards, seven of which were in the names of other persons, the affidavit states.

The criminal complaint alleges three felony offenses – access device fraud, aggravated identity theft, and interstate transportation of stolen property. If convicted of all of these charges, Baines would face a statutory maximum sentence of 22 years in federal prison.

If COVID-19 behaves like other workers’ compensation lung and disease claims, about two out of 100 cases may result in some degree of permanent partial disability and one out of 5,000 may result in permanent total disability, according to a new report by the National Council on Compensation Insurance.

In a follow up to the report by the Claims Journal, Jeff Eddinger, NCCI’s senior division executive for regulatory business management, said Thursday that’s not enough to be a major cost driver, but does represent a real risk that insurers should keep in mind when assessing the potential impact of the pandemic on losses.

“The vast majority of COVID claims are small-dollar claims,” Eddinger said in a telephone interview. “There is a small percentage that will result in permanent disability claims.”

NCCI has included the potential for permanent disability into its Hypothetical Scenarios Tool, a calculator released in May that models COVID-19 costs under various scenarios. The calculator allows users to adjust assumptions, such as the percentage of workers who are infected, the percentage hospitalized and now the percentage who are permanently disabled.

Adjusting the calculator to assume no permanent disability claims results in projected COVID-19 costs of $25.1 billion for the 38 states that use NCCI services. But the total cost increases by $4 billion when using the new default settings for permanent disability provided by NCCI.

NCCI said in a previous study that it assumes 8.5% of workers who file claims will require hospitalization for moderate symptoms and 1.5% will develop severe cases that require critical care.

The bottom line: There is a 2.3% chance that a reported COVID-19 claim will result in permanent partial injury and there’s a 0.05% chance that a COVID claim will result in a permanent total injury.

The Claims Journal analysis continues to note that data reported by state officials in California and Florida suggests that COVID-19 claims have become a sizable fraction of the total number of workers compensation claims filed. According to the California Division of Workers’ Compensation, COVID-19 was the cause of 44,354 first reports of injury from Jan. 1 to Sept. 30, or 11% of the total number.

The Florida Division of Workers’ Compensation reports that 21,221 COVID-19 indemnity claims have been filed as of Sept. 30, or 31.8% of the total number of injury and illness claims in the state.

Marsh issued a report this week that concludes, “many of the most dire predictions about COVID-19’s impact on workers’ compensation systems have not been realized.”

“Claims of COVID-19 exposure in the workplace have been outpaced by a decline in other types of reported occupational injuries, and the workers’ compensation insurance market remains competitive,” the report says.

Marsh said data from its clients shows that the number of new claims reported from January through August showed illness and injury rates ranged from a 29% decrease in April to a 5% increase in June.

The claims filed so far have proven to be inexpensive: 96% cost less than $3,500, according to one respondent to the Health Strategy Associates survey.