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Janitorial Owner Faces $32M Fraud Case

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Detectives with the California Department of Insurance arrested 55 year old Gina Marie Gregori of Lafayette, for allegedly underreporting payroll and ripping off insurers to the tune of $32 million. Gregori was charged with 19 felony counts and is being held on $5,235,000 bail at the San Francisco County Jail.

According to Department of Insurance detectives, over a seven-year period Gregori, owner of GMG Janitorial, GMG Billings, and Apex Janitorial Solutions, allegedly falsified documents and underreported payroll to her workers’ compensation insurance company.

The department’s investigation revealed Gregori was keeping two sets of books, using a payroll processing service to report to Employment Development Department and pay her employees, and keeping a fraudulent set of books that she provided to insurers and insurance auditors, which showed a significantly lower payroll amount.

GMG is a large janitorial company operating throughout the Bay area and Southern California, employing more than 200 employees. The company was founded in 1987 by Gina Gregori, its President. The company claims to provide services for over a million square feet of commercial properties throughout the greater San Francisco Bay Area, LA and Orange Counties.

The investigation was led by the Department of Insurance with assistance from the San Francisco County District Attorney’s Office, who is also prosecuting the case.

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Ohio Files Lawsuit Against Opioid Drugmakers

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Last week Teva Pharmaceuticals, agreed to settle a civil action filed jointly by the Santa Clara County Counsel’s Office and the Orange County District Attorney’s Office for $1.6 million. Teva and four other companies were accused of engaging in deceptive marketing that helped spawn an addiction epidemic in those counties.

The opioid drugmakers who are alleged to have caused an opioid epidemic may now also be responsible for the litigation epidemic which seems to be headed headed their way.

The state of Ohio on Wednesday has now sued five major drug manufacturers, accusing them of misrepresenting the risks of prescription opioid painkillers that have fueled a sky-rocketing drug addiction epidemic. Reuters reports that the suit, filed by Attorney General Mike DeWine, comes as a growing number of state and local governments are suing drugmakers and distributors, seeking to hold them accountable for a deadly and costly opioid crisis.

The five companies Ohio sued were Purdue Pharma LP, Johnson & Johnson’s Janssen Pharmaceuticals Inc unit, a unit of Endo International Plc, Teva Pharmaceutical Industries Ltd’s Cephalon unit and Allergan Plc.

DeWine said the companies helped unleash the crisis by spending millions of dollars marketing and promoting such drugs as OxyContin and Percocet, overstating their benefits and trivializing their potential addictive qualities. “These companies continue to mislead the public,” DeWine said at a press conference in Columbus.

Janssen spokesman Jessica Castles Smith said in an emailed statement: “The allegations in this lawsuit are both legally and factually unfounded.” She said Janssen has acted responsibly regarding its opioid pain medications, which are approved by the U.S. Food and Drug Administration and carry FDA-mandated warnings on their labels about the drugs’ known risks.

Purdue said in an emailed statement: “We share the attorney general’s concerns about the opioid crisis and we are committed to working collaboratively to find solutions.”

Allergan and Teva declined to comment. Endo could not immediately be reached.

The suit, filed in Ross County, in Southern Ohio, where addiction has hit hard, alleges the drug companies violated the Ohio Consumer Sales Practices Act, committed Medicaid fraud, and created a public nuisance by disseminating false and misleading statements.

It seeks to halt deceptive practices, a declaration the companies acted illegally and unspecified damages to the state and consumers.

In Ohio, which has one of the nation’s highest overdose rates, 4,169 people died from overdoses last year, according to figures compiled by the Columbus Dispatch. Last year, 2.3 million Ohio residents were prescribed opioids, nearly a fifth of the state’s population, in turn helping fuel heroin abuse, DeWine said.

Drug companies including Purdue and Johnson & Johnson have been fighting lawsuits by two California counties, the city of Chicago, four counties in New York and the state of Mississippi over their opioid marketing practices.

Several West Virginia counties have filed lawsuits in recent months against drug wholesalers McKesson Corp, Cardinal Health and AmerisourceBergen for failing to report suspicious orders of opioids in the state.

West Virginia’s attorney general earlier reached settlements with Cardinal Health and AmerisourceBergen for a combined $36 million to resolve similar claims.

Some might be thinking about the potential for workers’ compensation subrogation against these drug companies.  Most assuredly, the opioid addiction epidemic has had a financial impact on the national cost of industrial claims exacerbated by the effects of these drugs.

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Feds Double Down on Price Gouging Drugmaker

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U.S. taxpayers may have overpaid for EpiPen by as much as $1.27 billion from 2006 through 2016, U.S. Sen. Chuck Grassley said Wednesday, citing an estimate from the Department of Health and Human Services Office of Inspector General. Grassley said that’s far more than the $465 million that EpiPen maker Mylan Pharmaceuticals agreed to in settlement negotiations with the Justice Department. Grassley’s Judiciary Committee has been investigating Mylan’s EpiPen pricing since last year.

Grassley said he learned of the large disparity between Mylan’s settlement amount and the potential overpayment by taxpayers from the Department of Health and Human Services’ Office of Inspector General after asking officials for an accounting of EpiPen overcharges. He has posted a copy of the Report of the Inspector General.

Last October the embattled pharmaceutical company said that it had agreed to settle a case with the Department of Justice for $465 million after it was accused of over-billing the government for its EpiPen product.

Mylan for years classified EpiPen as a generic drug for the purposes of Medicaid’s drug rebate program, and as a result paid a lower rebate rate to Medicaid than did sellers of brand-name drugs. Officials have said that EpiPen, which is used to counteract a potentially fatal allergic reaction known as anaphylaxis, should have been treated as a brand-name product for Medicaid’s rebate program.

Last year the drug company also came under heavy criticism for jacking up the price of the life-saving auto-injector. It raised the price of a two-pack to $608. By comparison, two EpiPens in 2007 cost $94.

Mylan was sued in April by customers who claimed the company engaged in an illegal scheme to dramatically increase the price of EpiPen over the past decade. The suit alleged that the “skyrocketing” list price of EpiPen was the result of Mylan’s payments of rebates to pharmacy benefit managers – including CVS Caremark, Express Scripts and Optum Rx – which handle prescription drug benefit programs for insurance plans.

The class action suit claims violations of consumer protection laws of all U.S. states, as well as a violation of the Racketeer Influenced and Corrupt Organizations Act. If granted class-action status, the suit would cover all consumers.

The suit, filed in U.S. District Court in Seattle, noted that when EpiPen prices were increasing most dramatically, some other companies tried to introduce competing devices. But those companies never succeeded in displacing the market dominance of EpiPen because they did not pay the same level of rebates that Mylan was paying the pharmacy benefit managers, the suit said.

“Mylan has tried every trick in the book to avoid taking accountability to the millions of people who are living without the EpiPen they need to prevent a life-threatening allergic reaction,” said Steve Berman, managing partner of Hagens Berman, which represents the three named plaintiffs in the suit.

Mylan did not comment on the suit when it was filed. With respect to the comments by Grassley, a spokeswoman for Mylan said, ”We have no comment beyond that we continue to work with the government to finalize the settlement as soon as possible.”

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Berkshire Hataway biBERK Grows Online Comp Sales

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biBERK, a, child of Berkshire Hathaway Direct Insurance, is a new unit that lets owners of small businesses shop online for commercial vehicle, general liability, property, workers’ compensation and eventually professional liability insurance. It was previously known as “Cover Your Business” until a March name change that could benefit from Berkshire’s cachet, was the brainchild of Ajit Jain, Berkshire’s top insurance executive.

Jain wanted a hassle-free way for small business owners to bypass insurance agents, often getting quotes within five minutes after completing short questionnaires. “Amazon.com can deliver something to you in four hours,” The biBERK chief operating officer, Rakesh Gupta, who grew up in New Delhi and specialized in “big data” before joining biBERK, said in a recent interview. “If people can buy paper towels on the internet, why not insurance?”

Sales data are confidential, but Gupta said biBERK, or Business Insurance Berkshire Hathaway, is signing up twice as many customers as a year ago.The business reflects none of Omaha-based Berkshire’s appetite for assuming huge insurance risks, such as major catastrophes or American International Group property and casualty claims, in exchange for upfront payments Buffett can invest.

However insurers have been slow to adopt online technology in part because of state regulatory burdens. The company hopes biBERK will attract more younger, more technology-savvy people going into business for themselves.

Berkshire’s entry into online business insurance also is part of an industry-wide movement known as InsureTech, aimed at bringing the wonders of new technology to the $4 trillion-a-year insurance market. In some cases, technology can reduce or even eliminate the cost of processing claims, according to attendees at an industry conference last October in Las Vegas called InsureTech Connect.

Then there’s the sometimes-tedious process of underwriting, or evaluating insurance risk, deciding whether to insure someone and setting the premium charged. With the proper design, that can happen quickly thanks to today’s interconnected information world, said Gupta, a veteran of the former Omaha online information company InfoUSA.

In workers’ compensation, biBERK typically provides instant quotes to 60 percent of applicants, denies 20 percent, and asks 20 percent to speak with representatives. Improvements to the sign-up process now permit 50 percent of customers to buy without human help, up from 10 percent a year ago.

Gupta said business insurance could follow the trajectory of auto insurance, where Berkshire’s Geico unit, as well as rivals Progressive and USAA, won market share from State Farm and Allstate by driving underwriting costs, and premiums, down. “If that happens, we want to be at the forefront,” he said.

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Data Analytics Identifies Fraud Targets in Seconds

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Dr. Mike Cohen is at the cutting edge of a law enforcement innovation that is helping federal agents level the field in the fight against large-scale health-care fraud.

In a demonstration to a reporter from the Christian Science Monitor that Cohen says “no reporter has ever seen,” line after line of data begins to appear on his computer screen, forming a long list of companies and addresses with columns of related measures and rankings assigned to each business. “Your standard pharmacy that is just billing Medicare is going to be $300,000 to $1.5 million,” Cohen says. “Maybe $3 million if you have a really intense population.”

Cohen scrolls through the list on his computer screen. Nine pharmacies at the top of his list show Medicare billing of $100 million or more. “We are not talking about a couple of prescriptions here that are out of sorts,” he says.

Not long ago, it would have taken an entire squad of health-care fraud investigators a decade worth of shoe leather to connect all the dots and compile such a list, Cohen says. Today, he can do it in a few seconds.

“There is no shortage of ways we can twist and crunch numbers to look for targets,” Cohen says. “And there is no shortage of targets.” Health-care fraud has become a big, lucrative enterprise in the United States. No one knows the full extent of the drain on Medicare, Medicaid, and private health insurers. Experts suggest it may cost $100 billion each year.

For decades, federal agents have struggled to keep pace with growing numbers of health-care fraudsters. Now, the hope is that data analytics can inject a new level of oversight and enforcement into the system.

Depending on commands Cohen types into his computer, the displayed results could be a list of the most suspicious doctors, pharmacies, hospitals, drug companies, medical device manufacturers, or others operating in the US health care industry.

The metrics seek to identify patterns in Medicare billing data that resemble known examples of fraud. Health-care swindlers get rich by finding a way to cheat the system and then using that deceptive practice over and over again. Since every transaction in the government-run health-care system is documented, a successful fraud depends on the ability of the swindlers to hide in plain sight amid hundreds of millions of transactions.

If those hundreds of millions of transactions can be organized in a way that identifies patterns of fraud, the suspected perpetrators of that fraud are no longer able to hide from federal agents.

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Teva Settles Santa Clara/Orange County Opioid Suit

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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.

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Opioid Abuse Cost California $4.2 Billion Annually

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A 2015 report by Matrix Global Advisors estimated that prescription painkiller abuse alone results in at least $25 billion in annual healthcare costs and $55 billion in total annual costs to society.

And what state leads the nation in cost? Matrix estimated that the state of California incurs the largest opioid abuse-driven healthcare expense at roughly $4.2 billion annually. On a per-capital basis, Matrix estimates opioid abuse is costing each California resident roughly $110 per year.

In California, the number of babies born affected by drugs has nearly doubled over seven years to more than 3,630 in 2015, according to state public health officials.

“It’s not the mom you expect anymore. It’s not just the mom who came in off the street,” said Dr. Kristin Hoffman, a neonatologist with the UC Davis Children’s Hospital. “We see moms in all socioeconomic classes,” such as those taking opiates like Oxycontin for chronic back pain or other ailments.

Dr. Angela Vickers, a Sutter Health medical director and expert on drug-exposed infants, said that in the last decade about half of Sutter’s opiate-addicted babies are “born to moms who are working, living in an intact family, very much welcoming their baby, with good prenatal care.”

The American Psychiatric Association released a poll showing that a quarter of all Americans – and 1 in 3 millennials – know someone who is addicted to heroin or prescription painkillers. People who misuse opioid medications often get them from a relative or friend who has a prescription. There were significant differences between generations. Among baby boomers, 10 percent said taking a prescription drug without a prescription isn’t that bad. But among millennials, 18 percent weren’t concerned about taking a drug without a prescription.The survey was conducted in late April. It was released May 22 .

And even insurance underwriters are involved in assessing risk. More than 90 percent of underwriters are concerned about the potential impact that opioid addiction will have on mortality of the insured population, according to a recent survey by Munich Re, one of the world’s leading reinsurers. The survey of life insurance professionals was conducted at the Association of Home Office Underwriters (AHOU) Annual Conference, held in San Diego, California in April 2017.

Opioid addiction medications will soon be more accessible in California, thanks to a $90 million federal grant. One project the state is focusing on is helping more physicians prescribe a drug called buprenorphine. Methadone is the most common drug used to treat opioid addiction. Because it’s a narcotic, it can only be accessed through a heavily-structured treatment program. But Marlies Perez with California’s Department of Health Care Services says the lower-strength buprenorphine can be prescribed by physicians. She says many doctors have been hesitant to prescribe it.

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CDI Suggests 16.5% Comp Premium Reduction

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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.

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Los Gatos Pain Physician Sentenced to 4 Years

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A former doctor who had a practice in Los Gatos has been sentenced to four years in prison for involuntary manslaughter in a case involving a 29-year-old man who died as a result of a drug interaction in January 2012.

Jasna Mrdjen M.D,, 74, ran a pain management clinic in Los Gatos where Santa Clara County prosecutors say she was writing excessive prescriptions for pain medications to patients with minimal evaluation and sometimes without prior medical records. Investigators from multiple law enforcement agencies began looking into her clinic in 2011 after one of Mrdjen’s patients was caught selling the drugs she had prescribed.

During the course of one investigation she prescribed drugs to an undercover officer posing as a patient with foot pain without ever removing her shoe to examine the affected foot, prosecutors said.

With respect to the manslaughter charges, Mrdjen first saw the victim, Steven English, 28, on April 11 , 2011. The medical records did not include a physical examination. Mrdien gave a diagnosis of acute back strain, wrist strain, status post old poorly healed fracture of the wrist, and right hand weakness. The only treatment plan was to take Norco every four to six hours as needed. The record did not include the number of tablets prescribed.

Records reflect that his back pain resolved after his second visit on May 23 , 2011. There was no explanation for the continued use of high dose opioids after the lumbar strain resolved for many months.

On November 11, 2011, English entered the Betty Ford Center treatment program. He was released on January 2 , 2012. Mrdjen prescribed Oxycodone, Flexeril and Clonazepam to English on January 3, 2012 – just one day after he’d returned from this drug treatment rehabilitation program.

Two weeks later, English was found dead at his parents’ home in Truckee and the official cause of death was determined to be multiple drug ingestion.

Mrdjen later altered English’s file and forged English’s signature, according to prosecutors.

On Sept. 26, 2016, she pleaded no contest to nine counts of prescribing a controlled substance without a legitimate purpose, two counts of dispensing a controlled substance to an addict, one count of conspiracy and one count of involuntary manslaughter.

California medical board records reflect that she was a graduate of the University of Zagreb Faculty of Medicine in 1968, and admitted to practice in 1977. She claimed to have certifications from the American Board of Physical Medicine and Rehabilitation. Here medical license was surrendered on December 4, 2012.

The case was investigated by the Santa Clara County Specialized Enforcement Team, the Medical Board of California, the state Department of Justice, the Drug Enforcement Agency, and the Mountain View and Los Gatos/Monte Sereno police departments.

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Drugmaker Execs Now Cooperating With Feds

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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.

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