In day two of the landmark pharma trial, prosecutors showed video testimony from Dr. Russell Portenoy, a pain specialist who previously advocated for the use of opioids for chronic pain and was paid by pharma companies to do so.

He discussed how drugmakers such as J&J and subsidiary Janssen would pay doctors to speak favorably about their products at third-party conferences or publish papers under their names showing J&J products in a positive light.

Portenoy also described how Janssen used continuing medical education programs as marketing tools. He previously co-chaired a program called the National Pain Education Council.

Despite serving as co-chair and knowing that it was funded by Janssen, Portenoy said he had no idea the company was using its CME content selectively for marketing purposes.

“At best, there is a firewall between CME and marketing,” he said in his testimony. “This demonstrates why the firewall was necessary, why the rules have gotten much stronger. Continuing medical education programming, which was not intended for marketing purposes, and certainly the academic people who were devoting their energies to it did not consider themselves contributing to marketing in any way, it was actually being used by the company as a marketing strategy.”

Portenoy and Oklahoma’s lawyers reviewed J&J’s business plans for its opioid products Nucynta and Duragesic for 2012 and 2002, respectively. In these documents, J&J described using CME, key opinion leaders and paid speakers to promote the drugs and take market share from its competitor, OxyContin maker Purdue Pharma.

Portenoy said he had been paid to speak by companies such as J&J and Purdue and discussed how these drugmakers could get around rules against kickbacks by paying doctors through third-party professional societies.

“If a drug company was sponsoring a conference at a professional society meeting “the educational payment would go to professional society and then the professional society may be able to transfer it to the speakers,” he explained. “The speakers programs had the primary objective to educate doctors, but the messages that doctors would give when giving talks for the speakers bureau were generally favorable.”

Much of the marketing of opioids targeted doctors, but Oklahoma argued that because of the use of paid speaker programs and biased academic publications, doctors weren’t getting the whole picture.

Portenoy said that pharma companies were trying to obscure the risks of opioids in their marketing and education to doctors. He added that the companies highlighted the favorable aspects of opioids to doctors while downplaying risks and education about how to properly choose patients for opioid treatment and monitor them for signs of addiction.

“I’ve come to conclude that their conduct in marketing without context, without education about risk, produced an increase of inappropriate and unsafe prescribing that contributed to the public health problem,” Portenoy said.

If doctors aren’t properly educated about the drugs they are prescribing, patients who come in for pain problems may be incorrectly chosen to receive products not suited for them.

Two defendants entered no contest pleas to attempting to defraud multiple insurers of approximately $120,000 by having students sign over their Supplement Job Displacement vouchers and collecting the money without providing required vocational training.

Salvador Franco, Jr., 42, of Downey and Mirella Flores, 45, of Paramount were each charged with one felony count of conspiring to commit a crime, 18 felony counts of making a fraudulent statement to obtain or deny compensation, and 18 felony counts of fraudulent claims. On May 24, 2019, both defendants accepted a court offer and pled no contest to all counts.

Franco and Flores were immediately sentenced to three years of formal probation and ordered to pay $88,000 in restitution to insurers and $62,000 in investigative costs to the California Department of Insurance. The defendants were also sentenced to 90 days in Orange County Jail, however this was stayed pending the completion of 275 hours of community service by Franco and 250 hours by Flores.

Between 2015 and 2017, Franco and Flores participated in an alleged Supplemental Job Displacement Voucher Fraud scheme involving the Technical School, Inc., doing business as Technical College, Inc., and Graduates Do Succeed Institute, doing business as GDS Institute. Franco was a 20 percent owner and a Director of Technical College as well as its Chief Financial Officer. He was also the Chief Financial Officer of GDS Institute. Flores was an employee for both schools.

The defendants conspired and offered to provide workers’ compensation claimants with either at-home or off-site training for a few hours a week along with work related materials such as a computer. In exchange, claimants were expected to sign over their Supplement Job Displacement Vouchers that were valued between $4,000 and $10,000. Other students were offered a monetary payment in exchange for signing over their vouchers and not attending any training.

The enrollment materials allegedly sent to insurers for payment on the vouchers, however, vastly misrepresented the training that the claimants were going to receive. Instead of listing the at-home training, the provision of supplies, or the kickbacks to the students, defendants described the training as being several hundred hours in length, requiring full-time (40 hours per week) attendance at one of the schools’ campuses.

Compwest Insurance Company was alerted to the alleged fraudulent scheme by a claimant living in Orange County who did not receive the promised in-home training from Technical College. Compwest then notified both OCDA and the California Department of Insurance, who agreed to jointly investigate the complaint. Shortly thereafter, the Los Angeles District Attorney’s Office joined the investigation.

Deputy District Attorney Steven Schriver of the Insurance Fraud Unit prosecuted this case.

A few recent decisions have enhanced the ability of employers to obtain apportionment of permanent disability. However the court successes may be short lived as a new proposed law is rapidly gaining momentum in the California Legislature to limit or water down apportionment law adopted in 2004 by S.B. 899.

In April 2017, the Court of Appeal published its decision in the City of Jackson v WCAB (Rice) which confirmed apportionment to genetic factors. Christopher Rice was a police officer who suffered a spine injury. A PQME found that genetic factors were significant factors in his permanent impairment. The Court of Appeal reversed the WCAB which refused to allow apportionment to genetics.

In December 2018, the Court of Appeal published its decision in City of Petaluma v WCAB and Aaron Lindh. In that case a PQME concluded that 85 percent of his disability was due to a previously asymptomatic, underlying condition. The ALJ, however, rejected apportionment and reconsideration was denied by the WCAB. The Court of Appeal reversed, and granted apportionment finding that the requirement that the asymptomatic preexisting condition will, in and of itself, naturally progress to disable the claimant. was “the law prior to 2004” and is no longer a requirement for apportionment to an underlying condition.

And recent panel decisions show that the WCAB seems to be ruling in conformity with these decisions. In the 2018 WCAB panel decision in Schuy v City of Yuba, the WCJ rejected the opinion of and AME that said that Marilyn Schuy’s continuous trauma low back injury was 50% caused by progression of a degenerative back condition. A WCAB panel reversed citing the Court of Appeal City of Jackson v Rice, and the provisions of Labor Code sections 4663 & 4664(a) which allows apportionment to non industrial causation.

This year the California Legislature again introduced legislation poised to limit apportionment in several ways with SB 731. The proposed law adds a sentence to LC 4663 (c) “The approximate percentage of the permanent disability caused by other factors shall not include consideration of race, religious creed, color, national origin, age, gender, marital status, sex, sexual identity, sexual orientation, or genetic characteristics.”

SB 731 has been passed by the California Senate on 5/19/2019, and is now being heard in the State Assembly as of 5/22/2019. Clearly the proposed law will nullify City of Jackson v WCAB (Rice) since apportionment in that case was based on genetics. Apportionment in the Schuy case which is based upon a degenerative condition is arguably based upon “age” as well, a factor to be outlawed if the bill becomes law.

Similar bills were passed by the legislature and then vetoed by Governors Arnold Schwarzenegger and Jerry Brown for many years. It is likely that SB 731 will again be passed by the legislature. It is not clear what response Governor Gavin Newsom will have if itis passed.

Teva Pharmaceutical Industries Ltd.’s move to pay $85 million to resolve an Oklahoma lawsuit alleging it and other drugmakers illegally marketed opioid painkillers, fueling a public health crisis, leaves Johnson & Johnson in the uncomfortable position of being the state’s sole target in the first opioid lawsuit set to start on May 28.

Bloombert reports that the settlement with Oklahoma’s attorney general, announced Sunday, came nearly on the eve of trial and followed a $270 million deal by Purdue Pharma LP in March to resolve identical claims over the marketing of its opioid-based OxyContin painkiller. The state alleged the three companies duped doctors into prescribing the powerful medications for unapproved ailments, causing fatal overdoses and drug-addiction woes.

Oklahoma is seeking at least $10 billion in damages and penalties for current and future outlays tied to the opioid epidemic. The trial is slated to be the first test of public-nuisance laws against opioid manufacturers and distributors. At least 42 states and more than 1,900 municipalities also have sued companies in the industry, demanding billions of dollars in damages.

J&J — known for being loath to settle mass-tort litigation at the early stages — so far hasn’t cut an out-of-court deal to end the case, set to start May 28. Oklahoma Attorney General Mike Hunter has tagged the company as the “kingpin” of the opioid crisis because it once sold its own version of opioid painkillers as well as the active ingredient.

Andrew Wheatley, a spokesman for J&J and its Janssen unit, said Sunday the drugmaker was ready to defend itself at trial from Oklahoma’s claims that its painkillers caused a public nuisance in the state. Hunter contends J&J’s illegal marketing created a nuisance that forced the state to spend hundreds of millions of dollars to address the societal fall-out of opioid-related overdoses and addictions.

“We disagree with the state’s overly expansive theories of public nuisance law, which should not apply in this situation,” Wheatley said in an emailed statement. “At the same time, as with all litigation, if an appropriate resolution is possible that avoids the expense and uncertainty of a trial, we are always open to that option.”

There may be other settlements later this year as the focus on opioid litigation shifts to Cleveland, where a federal judge has set two test trials for October to allow juries to consider public-nuisance claims over drug-marketing campaigns, said Carl Tobias, a University of Richmond law professor who teaches as product-liability cases.

U.S. District Judge Dan Polster is overseeing more than 1,900 suits filed by U.S. cities and counties seeking recoup tax dollars spent fighting the opioid epidemic. Polster unsuccessfully sought to push the companies and local governments into settling and then set the test trials to get the case moving.

The Justice Department’s Tax Division announced that a federal grand jury returned an indictment against attorney Scott Norris Johnson, 57, of Carmichael, charging him with three counts of making and subscribing a false tax return.

Johnson is known to sue small businesses citing minor ADA infractions, and based on the law, he can collect thousands of dollars in violations and recoup his own attorney’s fees. He almost always settles for tens of thousands of dollars.

According to the indictment, Johnson owned and operated Disabled Access Prevents Injury Inc. (DAPI), a legal services corporation. First using DAPI, and later using a law firm, Johnson filed thousands of lawsuits in the Eastern District of California and elsewhere. Johnson named himself as the plaintiff in the lawsuits and made claims under the Americans with Disabilities Act of 1990, the California Disabled Persons Act, and the California Unruh Civil Rights Act.

The East Bay Times reported that In December 2015, attorney Catherine Corfee, who often represents small businesses sued by Johnson, said she received an email from a federal prosecutor that there was a criminal grand jury probe into Johnson’s “treatment of settlement proceeds for ADA lawsuits.”

She recounted more than a decade opposing Johnson in court and how he would try to add physical injury wording to the settlements despite not alleging any such damages in the original complaint.

“I have refused to allow the words ’caused injury’ to make sure he pays his taxes,” Corfee said.

“I’m not going to participate in tax fraud,” she said. “Not one of my cases did I ever need to request medical records. If you don’t allege (physical injuries) in the lawsuit, then why settle for it?”  But, she said, other attorneys and defendants may not be as careful when finalizing their settlements.

Under the Small Business Job Protection Act of 1996, payments related to lawsuit settlements or awards are taxable unless they were paid on account of personal physical injury or physical sickness. Johnson, however, allegedly materially underreported the taxable income he received from lawsuit settlements and awards on his income tax returns for tax years 2012, 2013, and 2014. By understating his income on his tax returns, Johnson and DAPI paid little to no income tax for tax years 2012, 2013 and 2014.

This case is the product of an investigation by the Internal Revenue Service Criminal Investigation. Assistant U.S. Attorney Katherine T. Lydon and Trial Attorney Tim Russo of the Tax Division are prosecuting the case.