Monthly Archives: October 2017

Derma Fraud with a Side of Greed

South Florida represents a hotbed of health care fraud and abuse and is often referenced as “ground zero” for Medicare fraud. Indeed, South Florida has garnered national attention for the pervasiveness of health care fraud schemes. Recently, the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force involved charging seventy-seven defendants in the Southern District of Florida. Unfortunately, this is a mere snapshot of the long-term consequences for health care fraud in the South Florida Community.

Since 2003, Gary L. Marder, D.O., has enrolled his clinic in Medicare, a federal health care program. Dr. Marder, the owner and operator of the Allergy, Dermatology & Skin Cancer Centers in Port St. Lucie and Okeechobee, treated Medicare beneficiaries via radiation oncology and other clinical laboratory services. Notably, Marder was the sole physician to render services to patients in both offices. During Marder’s absences, no other physician was present.

On December 13, 2013, Theodore A. Schiff, M.D., brought a qui tam action under the False Claims Act (FCA) on behalf of the government. 31 U.S.C. § 3730(b)(1). In the whistleblower suit, Marder allegedly violated the FCA by knowingly creating and submitting false claims to Medicare for reimbursement of dermatology and pathology services. Dr. Schiff noticed an alarming trend in patients that came to him after seeing Marder at one of his offices because many lacked a serious dermatological condition. On October 14, 2014, the United States intervened in the Civil Action.

More recently, on October 18, 2017, Dr. Marder was charged with obstruction of a federal criminal investigation of a health care fraud scheme by delivering falsified and altered patient files subpoenaed by a federal grand jury. Prosecutors claim that Marder submitted false and fraudulent claims to insurance companies for the services of a medical physicist to advise on dosages for radiation treatments from about January 2011 through January 2016. However, at no time did Marder actually have a medical physicist working in his offices. A Qualified Medical Physicist is an individual who is competent to practice independently in one or more of the subfields in medical physics. Instead, Marder instructed his employees to create false patient files with fabricated radiation dosages and calculations with the forged signature of a medical physicist in attempts to hide the alleged fraud.

According to statements made by Marder’s lawyer, the dermatologist will give up his medical license as part of a plea deal that is expected to be finalized later this month. As part of the plea deal, Marder agreed to post a $1 million bond using his $28 million oceanfront property in Palm Beach, Florida as collateral.

In September 2016, the Court granted summary judgment in favor of the United States finding that Dr. Marder knowingly submitted false claims to Medicare by requesting reimbursement for services that he never actually performed or directly supervised. Marder’s frequent absence, including expansive periods of foreign travel, amounted to days corresponding to over fifty percent of the payments he received from Medicare. United States ex rel. Schiff v. Marder, 208 F. Supp. 3d 1296 (S.D. Fla. 2016). According to the qui tam action, Medicare was billed over $69 million and $15.8 million was paid from January 2008 through September 2014. The United States have stipulated to a consent final judgment of over $18 million to settle False Claims Act allegations against Dr. Marder. Prosecutors noted at the time that “outright fraud of the scope and magnitude seen in this case is rarely seen, especially when supported by such irrefutable evidence,” and that “the pervasiveness of Marder’s practices resulted in virtually every reviewed claim being false.”


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Understanding Escobar: Gilead to petition SCOTUS to address circuit split

On October 3, Gilead Sciences, Inc. filed a motion to stay a Ninth Circuit Court of Appeals’ decision pending the filing of Gilead’s petition for a writ of certiorari with the United States Supreme Court. In a unanimous decision announced on July 7, the Ninth Circuit reversed and remanded a trial court’s dismissal of a qui tam action against that the South San Francisco-based biotechnology company.

In the initial suit of 2015, two former Gilead employees brought a qui tam suit against Gilead. They accused the biotech company of retaliation, hiding information about adulterated and misbranded active ingredients, and alleging that the noncompliant drugs, on which the Government spent billions in 2008 and 2009, were not eligible for payment by federal health care programs because the company knowingly made false statements that the drugs passed internal testing in violation of the Federal False Claims Act. Gilead argued that the Government’s continued reimbursement for medications in light of knowing of Gilead’s regulatory violations proved that the discretions did not meet the “materiality” prong required to implicate the FCA. In the 2016 landmark case Universal Health Services v. Escobar, SCOTUS held that, “if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.” 136 S. Ct. 1989, 1995 (2016). While the Ninth Circuit conceded the existence of issues involving the Government’s continued payments to Gilead, notwithstanding, “there are many reasons the FDA may choose not to withdraw a drug approval, unrelated to the concern that the government paid out billions of dollars for nonconforming and adulterated drugs.”

The present issue is whether Gilead breached the FCA by covertly changing to a Chinese active ingredient supplier after winning approval for several HIV drugs and by concealing information about contaminated ingredients when it later sought approval to use that supplier.

In this latest attempt at petitioning SCOTUS to further discern the parameters of its decision in Escobar, Gilead announced that its petition for writ of certiorari will present two questions: (1) whether, under Escobar, a complaint fails the materiality requirement of the False Claims Act when the allegations demonstrate the Government continued paying claims despite knowledge of the alleged misconduct; and (2) whether the Food and Drug Administration’s continued approval of a drug after learning of alleged regulatory violations is fatal to an FCA complaint premised on those violations. Gilead contends that the Ninth Circuit created a Circuit split by virtue of its reversal, stating that the appellate court, “expressly acknowledged its departure from three circuits [interpretations of Escobar].’”

Enacted in 1863, the Federal False Claims Act combatted the influx of fraudulent claims submitted to the federal Government during the Civil War. To aid the Government in its fight against fraud and abuse, Congress empowered whistleblowers to bring suit on behalf of the Government, known as qui tam actions, offering individuals a percentage of the amounts recovered from FCA violators. The FCA imposes liability on persons who: make false or fraudulent statement; with requisite scienter (having actual knowledge, acting in deliberate ignorance, or acting with reckless disregard); that is material; and that caused the Government to pay out money.

In fiscal year 2016, the United States Department of Justice recovered over $4.7 billion in settlements and judgments from civil cases involving fraud and false claims against the federal Government. About $2.5 billion came from the health care industry, including drug companies, medical device companies, hospitals, nursing homes, laboratories, and physicians – this number does not reflect the settlements and judgments from cases filed under similar state FCA causes of action.

If Gilead’s writ of certiorari petition is denied, and the trial court finds for the plaintiffs, the biotech company could be required to pay as much as three times the amount of damages plus $10,957 to $21,916 per claim for violations of the FCA.

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