Category: Daily News

The Orange County Register reports that a pharmaceutical company has agreed to a $1.6 million settlement with Southern and Northern California prosecutors over allegations of deceptive advertising of opioid painkillers, Santa Clara officials announced this week.

The agreement between Teva Pharmaceuticals, the Santa Clara County Counsel’s Office and the Orange County District Attorney’s Office would head off a civil trial. Teva and four other companies were accused of engaging in deceptive marketing that helped spawn an addiction epidemic.

The agreement, which requires court approval, bars Teva from deceptive marketing. Santa Clara authorities said the settlement funds would go toward helping combat the impacts of the ongoing opioid epidemic in Orange and Santa Clara counties.

“Our residents have borne the costs of the deceptive marketing scheme conducted by opioid drug companies,” said Danny Chou, an assistant county counsel for Santa Clara County, in a statement. “These costs include not only the horrors of addiction for entire families and communities but also increased crime.”

Orange County District Attorney’s Office officials declined to comment until the settlement is finalized.

Teva officials could not be reached for comment. The company has “expressly denied any wrongdoing,” Santa Clara officials noted.

Attorneys with the Orange County District Attorney’s Office and the Santa Clara County Counsel’s Office allege that a joint investigation turned up a “decades-long scheme by the largest manufacturers of prescription opioid painkillers” to downplay the risks of their drugs while exaggerating the benefits.

The 105-page lawsuit, filed in Orange County by District Attorney Tony Rackauckas, alleges that marketing campaigns by Teva – as well as Purdue Pharma, Endo Health Solutions, Janssen Pharmaceuticals and Actavis – helped transform prescription opioids from a niche market geared toward short-term use by cancer patients into a multi-billion-dollar industry in which the highly addictive drugs were used to treat patients with chronic pain.

While the settlement would end Teva’s role in the lawsuit, the charges against Purdue, Endo Health Solutions, Janssen and Actavis remain.

And similar cases have been filed by governmental entities across the nation. Chicago sued Teva Pharmaceuticals, Purdue Pharma Inc. and other drugmakers in 2014, saying they misled doctors and the public about the addictive nature of opiates and pushed prescriptions despite known dangers of addiction. The Chicago case, and others, are still active.

Insurance Commissioner Dave Jones adopted and issued a revised advisory pure premium rate lowering the benchmark to $2.02 per $100 of payroll for workers’ compensation insurance, effective July 1, 2017. This is 16.5 percent less than the average pure premium rate of $2.42 California insurers filed as of January 1, 2017.

Commissioner Jones adopted the Workers’ Compensation Insurance Rating Bureau (WCIRB)’s recommendation to lower the advisory pure premium rate mid-year. Mid-year pure premium rate adjustments are not the norm – new data reflecting a significant change in underlying workers’ compensation costs is required before the commissioner will issue a mid-year adjustment.

Jones issued the mid-year advisory pure premium rate two weeks after a public hearing and careful review of the testimony and evidence submitted. His adoption is only advisory, as the commissioner has no rate authority over workers’ compensation.

“A reduction in the pure premium rate reflects a reduction in the cost to insurers of providing workers’ compensation insurance, which benefits California’s business economy if insurers lower their pricing,” said Insurance Commissioner Dave Jones. “However, there is no legal requirement that these insurers pass these cost savings onto employers, so workers’ compensation insurers continue to file pure premium rates that are higher than the pure premium rate warranted by their costs.”

The mid-year pure premium advisory rate reduction is based on insurers’ cost data indicating workers’ compensation insurers’ medical costs were lower in 2016. Insurers’ net costs in the workers’ compensation system continue to decline as a result of SB 863 and other reform laws enacted by the Legislature and Governor Brown. The WCIRB claims the downward medical loss development is in part driven by continued acceleration in claim settlement, decreasing indemnity claim frequency, and lower than projected loss adjustment expenses.

The WCIRB’s pure premium advisory rate filing demonstrated workers’ compensation insurers continue to charge premiums, which are close to the estimated cost of providing benefits and adjusting expenses. The rates actually charged to employers; however, are on average lower than the rates filed by insurers.

The WCIRB will evaluate workers’ compensation insurance costs again in the summer and fall of this year when it files its 2018 pure premium rate benchmark recommendation with the Department of Insurance. That filing will provide an opportunity to assess whether medical costs continue to be lower and what changes, if any, there are in other costs in the system.

Last December federal prosecutors unsealed a criminal information against former executives of Heritage Pharmaceuticals, a generic drug maker in Eatontown, N.J. The criminal information is set to reverberate through the pharmaceutical world, potentially impacting companies like Mylan, Teva Pharmaceutical, Citron Pharma and two companies controlled by a pair of Indian billionaires, Emcure and Aurobindo Pharma.

In a companion civil case, the former executives have agreed to cooperate with 41 states in their ongoing investigation and litigation regarding possible antitrust activity in the generic drug industry, various state attorneys general said Wednesday.

Jason Malek, Heritage’s former president, and Jeffrey Glazer, its ex-CEO, reached a settlement under which they will provide documents, testimony and other evidence about the potentially sprawling scheme, the states said. The men will also each pay a $25,000 civil penalty to the states. The multistate lawsuit alleges widespread collusion among a large group of pharmaceutical companies to reduce competition and increase the price of generic drugs.

The two also entered into plea agreements with the U.S. Department of Justice after being charged with two counts of criminal violations of the Sherman Antitrust Act, according to a state news release.

The investigation by states would continue to examine a number of additional generic drugs, generic drug companies and executives. An article in Forbes earlier this year claims that federal authorities intend to use Glazer to crack open their big antitrust case against generic drugmakers.

The federal government’s court filings suggest that Glazer is cooperating in the government’s investigation of price collusion by generic drug makers that has been disclosed in the securities filings of several publicly-traded generic drug companies. Mylan and Teva are among the companies that have disclosed receiving subpoenas from the Department of Justice’s antitrust division investigation that seems poised to spill political heat into the generic drug sector.

Malek and Glazer were also named in a RICO case filed by their former employer in November 2016. The suit alleges that before they were fired in August 2016 “Glazer and Malek looted tens of millions of dollars from Heritage by misappropriating its business opportunities, fraudulently obtaining compensation for themselves, and embezzling its intellectual property. Glazer and Malek accomplished this brazen theft by creating at least five dummy corporations, which they used to siphon off Heritage’s profits through numerous racketeering schemes.”

A lawyer by training who graduated from Seton Hall University Law School, Glazer started his career working at New York City law firms and as a lawyer for a pharmaceutical company in New Jersey. Glazer founded Heritage in 2005. He sold the company to Emcure Pharmaceuticals in 2011. Emcure is a generic drug company based in Pune, India, that is run by billionaire Satish Mehta, who is the biggest shareholder of the company.

Three family members and two doctors were charged last week with felony insurance fraud related to what prosecutors described as “a $22 million urine test billing that operated through sober-living homes” in Southern California, the Orange County District Attorney’s Office said in a news release on Tuesday.

Another family member was charged along with the first five defendants with conspiracy to commit medical-insurance fraud.

The charges were revealed two days after publication of the Southern California News Group’s investigation into the region’s rehab industry, including the shady practices of some sober living homes and the excessive insurance charges some rack up for urine tests.

The investigation revealed, among other things, that fraudulent urine tests – often performed by labs owned by the owners of rehabs or sober living homes – were a main tool some in the industry used to bilk millions from insurance companies. “Chronic drug users …. are commodities, exploited by a growing world of drug and alcohol rehab operators who put profit ahead of patient care. Everything from the opioid epidemic and Obamacare to prison realignment and legal loopholes has created conditions in which unethical operators can flourish, using addicts to bilk insurance companies and the public out of hundreds of millions of dollars.”

Certainly not all rehab centers are fraudulent, but the explosive industry growth is remarkable. Malibu has 47 licensed rehab centers and a population of fewer than 13,000 people, making it the city with the highest per-capita concentration of rehab centers in California, according to state data. No. 2 is Costa Mesa, with 102 centers and a population of about 110,000. And those cities aren’t distant outliers; Pasadena, Murrieta, San Bernardino, Woodland Hills, Long Beach – all are among the dozens of communities in Southern California where 10 or more rehab centers have opened shop.

In all, the region is home to 1,117 licensed rehab centers, a number that doesn’t include thousands of unlicensed sober living homes where addicts live as families.

Prosecutors said Philip Ganong of Bakersfield and Pamela Ganong of La Jolla owned sober living homes in Orange County, Bakersfield, Los Angeles and San Diego and also formed a medical testing lab. They are accused of billing four insurance companies – Aetna, Anthem, Cigna and Health Care – a total of $22 million and collecting $15 million.

And prosecutors said the Ganongs hired the charged doctors – Carlos X. Montano of Newport Beach and Suzie Schuder of Corona del Mar – who wrote urine test prescriptions for first three and later seven times a week for the Ganongs’ employees.

The Ganongs and their son, William Ganong of Bakersfield, were charged with 13 counts of insurance fraud, and the elder Ganongs also face 26 counts of money laundering. The prosecutors’ release said the parents’ maximum sentence would be 47 years, eight months in state prison. William Ganong faces a maximum sentence of 36 years, eight months.

Pamela Ganong’s sister, Susan Stinson of Carlsbad, was charged with conspiracy to commit medical insurance fraud and was accused of dropping off paychecks at the sober living facilities and sending emails to the doctors requesting urine test prescriptions. Her maximum sentence would be three years in prison.

Montano was charged with three counts of insurance fraud and conspiracy to commit medical insurance fraud, and his maximum sentence would be 16 years, eight months. Schuder was charged with four counts of insurance fraud and conspiracy to commit insurance fraud. Her maximum sentence would be 17 years, eight months.

Robert Gravlin was employed by the City of Vista as a firefighter from January 6, 1975 until January, 2005. He filed claims for several industrial injuries sustained during the course of that employment including an application alleging cumulative trauma injury to the heart/hypertension and to the skin (skin cancer) sustained during the period from the date when he started working, January 6, 1975, to April 25, 2002, the date applicant received medical information diagnosing hypertension, with an indication of permanent disability and request for treatment.

This date was based upon the November 25, 2002 report of Qualified Medical Evaluator Prakash Jay, M.D., Gravlin subsequently obtained medical evidence of permanent disability in relation to his skin cancer injury when he received the October 23, 2002 report of QME John F. Shega, M.D.

After the examinations by the QMEs, the parties selected Daniel J. Bressler, M.D., to serve as their Agreed Medical Evaluator. Dr. Bressler reported that both applicant’s skin cancer and his heart trouble were presumed by law to have arisen out of and in the course of his firefighter employment.

The dispute at trial was to resolve issues raised by applicant’s contention that one cumulative trauma case is properly applied to both the admitted injury to the skin and to the injury to the heart, and defendant’s contention that there are separate dates of injury for the injury to the heart and for the injury to the skin, and “Anti-Merger,” presumably in reference to the provisions of section 3208.2.

The WCJ accepted applicant’s contention and found one cumulative trauma injury causing injury to the heart and skin.The recommended permanent disability rating for the heart injury is 55% and the recommended permanent disability rating for the skin injury is 35%. Under the MDT, the two ratings combine for a single rating of 74% permanent disability.

Reconsideration was granted and the WCJ’s decision was rescinded in the split panel decision of Gravlin v City of Vista. New findings were entered that applicant sustained two separate cumulative injuries, one to the heart/ hypertension and the other to his skin. The different dates of injury support separate awards of permanent disability for those separate conditions.

Section 5500.5 establishes liability for cumulative trauma based upon the date of injury “as determined” under section 5412, or based upon the last date on which the employee was exposed to the hazards of the occupational disease or cumulative injury, “whichever occurs first.” Here, the dates when applicant obtained knowledge of the disabilities caused by his skin cancer and by his heart condition occurred before the last date of injurious exposure.

The facts in this case are like those in Aetna Casualty and Surety Co. v. Workers’ Comp. Appeals Bd (Coltharp) (1973) 35 Cal.App.3d 329 [38 Cal.Comp.Cases 720] (Coltharp), where the Appeals Board determined that the applicant sustained two cumulative injuries.

Commissioner Newman dissented. He would uphold the decision of the WCJ for the reasons expressed in her Report. Although applicant may have learned of the employment origin of those conditions at different times before he stopped working, the time period of injurious exposure and employment was the same for both conditions. In this circumstance, the WCJ correctly found that both conditions were sustained as part of a single cumulative trauma injury.

A Petition for Writ of Review was filed on May 10, 2017 in the 4th Appellate District, Division 1, case D072155.