IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION UNITED STATES OF AMERICA ex. rel. BRADY MCFARLAND, Case No.: 8:15-CV-01708-SDM-TGW Plaintiff, v. Dispositive Motion Oral Argument Requested FLORIDA PHARMACY SOLUTIONS, MEDIVERSE LLC, MELONIE KOTCHEY, and WAYNE WILKERSON, Defendants. _____________________________________ RELATOR BRADY MCFARLAND’S OPPOSITION TO DEFENDANTS’ MOTIONS TO DISMISS THE SECOND AMENDED COMPLAINT Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 1 of 24 PageID 1850 i TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................................................... ii INTRODUCTION .......................................................................................................................... 1 STATEMENT OF FACTS ............................................................................................................. 3 PROCEDURAL HISTORY ............................................................................................................ 6 ARGUMENT .................................................................................................................................. 7 I. McFarland Has Sufficiently Pleaded a Violation of Section 1320a-7b(b)(1)(B): “Arranging for” or “Recommending” ............................................................................... 10 II. McFarland Has Also Sufficiently Pleaded a Violation of Section 1320a-7b(b)(1)(A): “Referring an Individual” ................................................................................................. 12 A. Non-Doctors Who Receive Payment in Return for Connecting Patients to Healthcare Providers Fall Within a “Referring” Violation of the AKS ................ 12 B. Defendants’ Conduct Goes Far Beyond the Bounds of Mere Advertising, and Defendants Admit They Cannot Meet Any AKS Safe Harbors for Marketing Activities ............................................................................................................... 17 CONCLUSION ............................................................................................................................. 18 Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 2 of 24 PageID 1851 ii TABLE OF AUTHORITIES Cases Modern Med. Labs., Inc. v. Smith-Kline Beecham Clinical Labs., Inc., No. 92-CV-5302, 1994 WL 449281 (N.D. Ill. Aug. 17, 1984) ................................................ 10 U.S. ex rel. Bane v. Breathe Easy Pulmonary Servs., Inc., 597 F. Supp. 2d 1280 (M.D. Fla. 2009) .................................................................................... 16 U.S. ex rel. Cullins v. Astra, Inc., No. 09-CV-60696, 2010 WL 625279 (S.D. Fla. Feb. 17, 2010) .............................................. 16 U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702 (10th Cir. 2006) .................................................................................................. 16 United States v. Amorim et al., No. 12-CR-20265 (S.D. Fla. Aug. 10, 2012) ............................................................................ 10 United States v. Carroll, 320 F. Supp. 2d 748 (S.D. Ill. 2004) ......................................................................................... 10 United States v. Iqbal, 869 F.3d 627 (8th Cir. 2017) .................................................................................................... 14 United States v. Marder, 208 F. Supp. 3d 1296 (S.D. Fla. 2016) ..................................................................................... 16 United States v. Miles, 360 F.3d 472 (5th Cir. 2004) .................................................................................................... 15 United States v. Moran, 778 F.3d 942 (11th Cir. 2015) ............................................................................................ 12, 14 United States v. Patel, 778 F.3d 607 (7th Cir. 2015) ...................................................................................................... 7 United States v. Polin, 194 F.3d 863 (7th Cir. 1999) .............................................................................................. 14, 15 United States v. Shoemaker, 746 F.3d 614 (5th Cir. 2014) .................................................................................................... 15 United States v. Starks, 157 F.3d 833 (11th Cir. 1998) .................................................................................................. 14 United States v. Terrero et al., 571 F. App’x 778 (11th Cir. 2014) ........................................................................................... 10 Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 3 of 24 PageID 1852 iii United States v. Vega, 813 F.3d 386 (1st Cir. 2016) ..................................................................................................... 10 United States v. Vernon, 723 F.3d 1234 (11th Cir. 2013) .......................................................................................... 13, 14 United States v. Williams, 218 F. Supp. 3d 730 (N.D. Ill. 2016) ........................................................................................ 15 Statutes 42 U.S.C. § 1320a-7b(b)(1) ................................................................................................... Passim 42 U.S.C. § 1320a-7b(g) ................................................................................................................. 8 Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 4 of 24 PageID 1853 1 Relator, Brady McFarland, by and through undersigned counsel, submits this memorandum of law in opposition to the motions to dismiss the Second Amended Complaint (the “SAC”) filed by Defendants Mediverse, LLC (“Mediverse”), Melonie Kotchey (“Kotchey”), and Wayne Wilkerson (“Wilkerson”) (together, “Defendants”). INTRODUCTION McFarland brings this action under the False Claims Act (the “FCA”) against Florida Pharmacy Solutions (“FPS”), a mail-order compounding pharmacy, and three of FPS’s most productive marketing representatives, Mediverse, Kotchey, and Wilkerson. Together, Defendants engaged in a year-long fraudulent scheme in which they took advantage of a billing loophole at TRICARE, the federally funded healthcare benefit provider for active duty service members, retired service members, and their dependents. This billing loophole allowed FPS to seek tens of thousands of dollars from TRICARE for each compounded pain cream, scar cream, or wellness capsule that it filled for a TRICARE beneficiary. The scheme could only work if FPS had a steady stream of TRICARE beneficiaries seeking mail-order compounded prescriptions from the pharmacy. Enter marketing representatives Mediverse, Kotchey, and Wilkerson, who engaged in aggressive tactics to identify and locate TRICARE beneficiaries across the country. Once identified, the marketing representatives gathered health data and insurance information from these beneficiaries, and determined specific FPS products that they “recommended” be prescribed. Next, the marketing representatives directed the beneficiaries to teledoctors selected or employed by the marketing representatives who would perform perfunctory telemedicine consultations, rubber-stamp prescriptions for the recommended FPS products, and then, per the marketing representatives’ specific instructions, submit the prescriptions to FPS (and not some other local or mail-order pharmacy). Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 5 of 24 PageID 1854 2 In return for arranging for the delivery of this steady stream of TRICARE-covered prescriptions to FPS, FPS paid Mediverse, Kotchey, and Wilkerson substantial remuneration in the form of commissions tied directly to amounts reimbursed by TRICARE to FPS for the prescriptions. These payments-which in the case of Mediverse alone, totaled a staggering $12.3 million during the eight-month period between November 2014 and June 2015-were in blatant violation of the Anti-Kickback Statute (the “AKS”). Defendants attempt to avoid liability here by arguing that they could not “refer” patients to FPS as a matter of law because they were not the teledoctors who wrote the prescriptions that FPS filled, and in turn, TRICARE reimbursed. This argument fails because each affirmative step that Defendants took was intended to ensure that FPS was the pharmacy that filled the compounded prescriptions at issue here. Both the plain language of the AKS and Eleventh Circuit case law make clear that a doctor is not the only person who can “refer” a patient under the AKS. Instead, if an individual, like Defendants here, receives a kickback in return for taking affirmative steps to direct patients to a particular provider of goods or items reimbursed by a federal health program, he violates the AKS’s prohibition on referring patients in return for remuneration. Moreover, Defendants’ unsupported and overly narrow reading of “refer” in one governing subsection of the AKS ignores that McFarland’s claim against them also pleads a violation of a separate subsection of the AKS that does not include the term “refer,” and rather, imposes liability on a person who, in return for a kickback, “arranges for” or “recommends” a healthcare good reimbursed to the provider by the federal government. Thus, even if Defendants are correct about the scope of “referring” liability under the AKS, McFarland’s claim based on the “arranging for” or “recommending” subsection of the AKS survives. Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 6 of 24 PageID 1855 3 STATEMENT OF FACTS Defendant FPS is a mail-order, Tampa-based compounding pharmacy that specializes in providing prescription pain creams, scar creams, and wellness capsules to patients nationwide. (SAC ¶¶ 6, 33.) “Compounding” refers to the process of mixing a personalized medication for a patient that is based on a specific, doctor-prescribed formula and ratio of active ingredients. (Id. ¶ 7.) Defendants Mediverse, Kotchey, and Wilkerson are marketing representatives who specialize in the nationwide sale of compounded pain creams, scar creams, and wellness capsules. (Id. ¶ 13.) Relator Brady McFarland, too, worked for FPS in a marketing role. (Id. ¶ 57.) Through his position, McFarland had direct access to FPS records, including those maintained in its integrated, online sales platform, called “FPSTrack.” (See id. ¶¶ 58-74 (describing McFarland’s role at FPS), ¶¶ 75-117 (describing McFarland’s discovery of Defendants’ scheme through an in-depth review of FPSTrack and other FPS billing and sales records).) The federally funded TRICARE program provides healthcare insurance to the United States armed forces, including active-duty service members, retired service members, and their dependents. (Id. ¶ 1.) In 2014, Defendants discovered that a billing loophole in TRICARE’s system permitted FPS to seek reimbursement from TRICARE on a per ingredient basis for covered prescriptions, resulting in reimbursements of tens of thousands of dollars per TRICARE-covered compounded prescription. (Id. ¶ 9.) During late 2014 and the first half of 2015, FPS filled thousands of pain cream, scar cream, and wellness capsule prescriptions for TRICARE beneficiaries, and sought and obtained reimbursement from TRICARE for these prescriptions. (Id. ¶ 10.) FPS derived massive revenues from TRICARE in 2014 and 2015. In 2014, TRICARE became FPS’s largest customer, accounting for 38% of its total revenues of $20.6 million. (Id. ¶¶ 173-74.) The percentage of FPS’s revenues derived from TRICARE only grew in 2015, and in the Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 7 of 24 PageID 1856 4 first six months of 2015 alone, TRICARE reimbursements accounted for almost all of FPS’s $36 million in revenues. (Id. ¶¶ 176-77.) FPS was able to seek reimbursement from TRICARE for such a high volume of TRICARE-covered prescriptions only through the efforts of marketing representatives like Defendants. (Id. ¶ 23.) Mediverse describes itself as “a nationwide, innovative medical distributor that specializes in compounding pharmacy sales and state-of-the-art pharmacogenetic services.” (Id. ¶ 123.) Along with its billing services affiliate called Helix, Mediverse joined FPS in 2014 as FPS’s designated marketing team, working out of FPS’s office in Tampa. (Id. ¶¶ 122, 124.) Mediverse’s staff of marketers used cold calling and data mining methods to identify TRICARE beneficiaries, and also purchased TRICARE beneficiary leads from other third-party marketing companies located throughout the country. (Id. ¶ 126.) Mediverse next gathered information from the beneficiaries about their TRICARE coverage and medical history, listed that information on a pre-printed “Topical Compounded Therapy” questionnaire, and recommended specific FPS compounded products in a “Special Notes” field at the end of the questionnaire. (Id. ¶¶ 127-29, 131-35 & Ex. E.) Every Mediverse-generated questionnaire that McFarland uncovered through manual searches of FPS’s records identifies TRICARE as the paying insurer. (Id. ¶ 130.) In other words, Mediverse was specifically targeting TRICARE beneficiaries. Next, Mediverse arranged for the TRICARE beneficiaries to attend fifteen-minute, perfunctory telemedicine consultations with teledoctors from 1stCareMD, a medical staffing agency. (Id. ¶¶ 137-41.) The 1stCareMD teledoctors signed prescriptions on FPS prescription pads, and, per Mediverse’s instructions, delivered signed prescriptions to FPS. (Id. ¶ 142.) The 1stCareMD teledoctors rubber-stamped prescriptions for the “Recommended Products” included in the Special Notes field of Mediverse’s Topical Compounding Therapy questionnaire, often Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 8 of 24 PageID 1857 5 writing more than one prescription per patient, as Mediverse and FPS encouraged and recommended they should do. (Id. ¶¶ 50-52, 135, 143.) Mediverse also ensured that the teledoctors signed “Blanket Letters of Authorization” (“BLOAs”)-often on Mediverse-logoed letterhead- that authorized FPS to make substitutions of prescribed compounded formulas without seeking specific approval from the prescribing teledoctor. (Id. ¶¶ 144-45.) These BLOAs listed FPS as within “Mediverse’s Network of Pharmacies.” (Id. ¶¶ 144-45.) Kotchey, who owns a marketing company called Treasure Health, operated through a similar marketing scheme of identifying TRICARE beneficiaries and working with teledoctors to generate signed FPS prescriptions. (Id. ¶¶ 158-59.) Kotchey even requested on numerous occasions that FPS ship TRICARE-covered prescriptions to her residential address instead of to the TRICARE beneficiary who purportedly needed the treatment to ensure that the prescription was filled by FPS and that she could receive her kickback. (Id. ¶¶ 161-66.) Kotchey also misled TRICARE beneficiaries into believing they were part of a medical survey or study. (Id. ¶ 167.) Wilkerson is a marketing and sales representative who specializes in the nationwide sale of compounded treatments, and is the owner of a marketing company called Top Tier Medical, LLC. (Id. ¶ 35.) Wilkerson is also the owner of Karma Wellness Spa, a facility that provides aesthetic and medical treatments, and that employs doctors and nurse practitioners who practice telemedicine. (Id. ¶ 36.) Wilkerson began funneling TRICARE-covered prescriptions to FPS in August 2014. (Id. ¶ 111.) These prescriptions were written for TRICARE beneficiaries located primarily in or around Norfolk, Virginia and Clarksville, Tennessee, which are both locations with a major military presence and a high saturation of TRICARE beneficiaries. (Id. ¶ 110.) Wilkerson used cold calling, data mining, and other marketing tactics to identify TRICARE beneficiaries in these locations. (Id. ¶ 14.) Three prescribers on Wilkerson’s staff at Karma Wellness Spa Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 9 of 24 PageID 1858 6 performed telemedicine consultations for these TRICARE beneficiaries, and then submitted rubber-stamped prescriptions to FPS. (Id. ¶ 111.) Thus, unlike Mediverse, which worked with teledoctors from 1stCareMD, Wilkerson worked with his own staff teledoctors. (Id. ¶ 137.) Wilkerson’s staff teledoctors each signed BLOAs authorizing FPS to substitute ingredients and to change formulas in order to maximize TRICARE reimbursements. (Id. ¶ 112.) In return for arranging for the delivery of TRICARE-covered prescriptions to FPS, FPS paid Defendants substantial remuneration (which FPS described as “commissions” in its accounting records) in amounts directly tied to the reimbursements that FPS received from TRICARE for the filling of the prescriptions. (Id. ¶¶ 18, 22, 116, 148, 169.) During the first half of 2015 alone, FPS paid $19.9 million in commissions to its marketing representatives, which included Defendants. (Id. ¶ 178.) Between November 7, 2014 and June 15, 2015, FPS accounting records reflect that FPS transferred a total of $12.3 million in “commissions” to Mediverse, including several transfers exceeding $500,000 each, and one transfer totaling $4,940,136.53. (Id. ¶ 183 (listing FPS’s payments to Mediverse by amount, date, transfer method, and FPS bank account).) Between September 26, 2014 and August 13, 2015, FPS transferred a total of $794,650 in “commissions” to Kotchey. (Id. ¶ 186 (listing FPS’s payments to Kotchey by amount, date, transfer method, and FPS bank account).) And between September 11, 2014 and June 18, 2015, FPS transferred a total of $3.5 million in “commissions” to Wilkerson. (Id. ¶ 185 (listing FPS’s payments to Wilkerson by amount, date, transfer method, and FPS bank account).) PROCEDURAL HISTORY The Court previously dismissed McFarland’s Amended Complaint, which asserted five separate FCA causes of action against seventy defendants, including Mediverse, Kotchey, and Wilkerson. (See July 24, 2017 Order (Dkt. 320) (the “MTD Order”).) In the MTD Order, the Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 10 of 24 PageID 1859 7 Court granted McFarland leave to amend certain claims, including McFarland’s FCA claim premised on violations of the AKS, which was Count III in the Amended Complaint, and is Count I (and the only Count) in the SAC. Id. at 22-23. Relator timely filed the SAC, which asserts a single FCA count against four of the defendants that had been named in the Amended Complaint. (See SAC (Dkt. 334).) Unlike the Amended Complaint, the SAC’s allegations do not focus on the lack of medical necessity of FPS’s prescriptions. Instead, the SAC focuses on the unlawful kickbacks received by Defendants from FPS. Mediverse and Kotchey previously filed Answers to the Amended Complaint (see Dkts. 189-90), and were served electronically with notice of the SAC. The other two Defendants named in the SAC-Wilkerson and FPS-were each personally served with the SAC. (See Returns of Service (Dkts. 344-45).) To date, FPS has not appeared in the action. Mediverse, Kotchey, and Wilkerson1 have each moved to dismiss the SAC, asserting identical arguments. (See Kotchey’s Mot. to Dismiss SAC (Dkt. 340); Mediverse’s Mot. to Dismiss SAC (Dkt. 341); Wilkerson’s Mot. to Dismiss SAC (Dkt. 347) (together, “Defs.’ Mots.”).) ARGUMENT The purpose of the AKS is to prohibit the payment or receipt of kickbacks in connection with healthcare goods and services reimbursed by federal health programs, such as TRICARE, in order to prevent fraud on those programs. See United States v. Patel, 778 F.3d 607, 612 (7th Cir. 2015). The AKS is necessarily broad, because while some schemes to fraudulently obtain 1 Wilkerson filed his motion to dismiss on October 10, 2017-the same day that this brief in opposition to Mediverse and Kotchey’s motions to dismiss is due. Because Wilkerson raises the same legal defense as Mediverse and Kotchey, McFarland is responding to all three motions to dismiss via this opposition brief, even though it is requiring a same- day turnaround as to Wilkerson’s motion to dismiss. Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 11 of 24 PageID 1860 8 reimbursement by federal health programs may be straight-forward and simple, many are not. Instead, they are multi-step processes that include numerous participants. The AKS makes participation in both simple and complex schemes to obtain reimbursement from federal health programs illegal if, as part of those schemes, a participant pays or receives an unlawful kickback. There are four independent ways to establish AKS liability.2 See 42 U.S.C. § 1320a-7b(b). Two ways relate to the payment of kickbacks, and the other two relate to the receipt of kickbacks. Id. McFarland’s complaint asserts that Defendants violated both Sections 1320a-7b(b)(1)(A) and (b)(1)(B), which are the two subsections of the AKS relating to the receipt of kickbacks.3 In full, Section 1320a-7b(b)(1) provides: (b) Illegal remunerations (1) whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind-- (A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or (B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both. 2 A violation of any of the four subsections of the AKS constitutes a false claim for purposes of the FCA. See 42 U.S.C. § 1320a-7b(g) (“In addition to the penalties provided for in this section or section 1320a-7a of this title, a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the FCA].”). 3 The payment of kickbacks, which is the subject of Relator’s AKS claim against FPS and not at-issue here, is addressed by Sections 1320a-7b(b)(2)(A) and (b)(2)(B). Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 12 of 24 PageID 1861 9 Defendants’ statutory argument in their motions to dismiss relates only to Section 1320a- 7b(b)(1)(A) and Defendants’ narrow reading of the term “referring” as used in that subsection.4 Thus, even if the Court were to agree with Defendants’ interpretation of the AKS-which is in contradiction of the statute’s plain language and Eleventh Circuit case law interpreting it-that would only pertain to McFarland’s allegations of unlawful kickbacks under Section 1320a- 7b(b)(1)(A). Defendants make no argument relevant to McFarland’s allegations of the receipt of unlawful kickbacks under Section 1320a-7b(b)(1)(B), and thus McFarland’s claims must survive Defendants’ motion to dismiss. Moreover, Defendants’ attempt to read the term “referring” in Section 1320a-7b(b)(1)(A) so narrowly as to prohibit the prosecution of an AKS violation against them because they did not write the prescriptions that FPS filled and billed to TRICARE must fail. Defendants’ argument ignores that their entire business model was based on TRICARE-covered prescriptions going to FPS to be reimbursed by TRICARE so that Defendants could receive kickbacks. And thus, as McFarland pleaded, everything Defendants did-(1) identifying TRICARE beneficiaries; (2) connecting the beneficiaries with teledoctors; (3) providing those teledoctors with health information about the beneficiaries; (4) suggesting specific compounded FPS prescriptions for the beneficiaries; (5) providing an FPS prescription pad to teledoctors with those prescriptions already included; and (6) instructing teledoctors to submit signed prescriptions to FPS and not some other pharmacy-was intended to “refer” patients to FPS to get their prescriptions filled. As alleged here, the plain language of the AKS and Eleventh Circuit case law rejects the narrow reading of “referring” suggested by Defendants. 4 Although Defendants cite both Rule 9(b) and Rule 12(b)(6) in the “Legal Standards” section of their briefs, the sole argument they make for dismissal is McFarland’s failure to adequately allege “referring” under the AKS, and therefore Rule 12(b)(6) governs Defendants’ motion to dismiss. Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 13 of 24 PageID 1862 10 I. McFarland Has Sufficiently Pleaded a Violation of Section 1320a-7b(b)(1)(B): “Arranging for” or “Recommending” As outlined above, Section 1320a-7b(b)(1)(B) is an independent avenue to establishing AKS liability against a recipient of unlawful remuneration, irrespective of any formal or informal “referral.” See, e.g., United States v. Vega, 813 F.3d 386, 396 (1st Cir. 2016) (affirming conviction for receipt of unlawful kickbacks under Section 1320a-7b(b)(1)(B) against marketing representative who received unlawful commissions from medical supply company); United States v. Carroll, 320 F. Supp. 2d 748, 755-56 (S.D. Ill. 2004) (denying motion to dismiss indictment for violation of Section 1320a-7b(b)(1)(B) where defendants gave away free products in order to induce medical supply company to purchase, lease, or order additional products from defendants);5 Modern Med. Labs., Inc. v. Smith-Kline Beecham Clinical Labs., Inc., No. 92-CV-5302, 1994 WL 449281, at *3-4 (N.D. Ill. Aug. 17, 1984) (recognizing that Sections 1320a-7b(b)(1)(A) and (b)(1)(B) are independent, and holding that Section 1320a-7b(b)(1)(B) rendered contract unenforceable where marketing company “arranged for laboratory testing services” to be purchased by its customers from medical laboratory, and marketing company received commissions for those purchases). Defendants make no argument that McFarland’s claim based 5 In at least one case within the Eleventh Circuit, the United States has brought criminal charges against the recipients of unlawful kickbacks solely under a Section 1320a-7b(b)(1)(B) theory and without any reference to Section 1320a- 7b(b)(1)(A) or “referrals.” See 2d Superseding Indictment at 14-15 (Counts 25-30), United States v. Amorim et al., No. 12-CR-20265 (S.D. Fla. Aug. 10, 2012) (Dkt. 231) (charging defendants with unlawful receipt of kickbacks in violation of Section 1320a-7b(b)(1)(B)); Court’s Instructions to the Jury at 15-16 (Dkt. 470) (instructing jury that defendants could be found guilty of an AKS violation only if it was proved that they “solicited or received the remuneration or kickback in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service or item . . . .”); Jury Verdict (Dkt. 476) (finding defendant guilty of violating Section 1320a-7b(b)(1)(B)), aff’d, United States v. Terrero et al., 571 F. App’x 778, 780 (11th Cir. 2014) (unpublished). Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 14 of 24 PageID 1863 11 upon a violation of this subsection failed to state a claim under the AKS or FCA. Thus, there is no basis to dismiss McFarland’s claim based on this subsection. However, even if Defendants had raised an argument as to the sufficiency of McFarland’s pleading of a violation of Section 1320a-7b(b)(1)(B), that argument would fail. The allegations against Defendants fit squarely within the text of Section 1320a-7b(b)(1)(B). Under that provision, a person violates the AKS if he: (i) knowingly and willfully; (ii) receives any remuneration directly or indirectly, in cash or in kind; (iii) in return for arranging for or recommending purchasing or ordering any good or item; (iv) for which payment may be made in whole or in part under a Federal health program. Here, McFarland has plainly alleged that Defendants (i) knowingly and willfully (ii) received remuneration in the form of cash commissions from FPS (iii) in return for “arranging for” TRICARE beneficiaries to purchase or order compounded goods from FPS through their marketing activities and physician networks, (iv) for which TRICARE paid. (With respect to the third requirement, McFarland has similarly alleged that Defendants “recommended” the purchasing of FPS’s products by TRICARE beneficiaries, and received remuneration from FPS in return for these recommendations.) McFarland explicitly alleges that Defendants’ activities were an instrumental part of Defendants’ scheme. Defendants identified TRICARE beneficiaries located nationwide, gathered medical and insurance information from the beneficiaries, recommended specific FPS products to beneficiaries and teledoctors, directed beneficiaries to teledoctors that they selected or employed who would rubber-stamp prescriptions on FPS prescription pads, and directed teledoctors to submit signed prescriptions specifically to FPS and not some other pharmacy. (SAC ¶¶ 14, 35-36, Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 15 of 24 PageID 1864 12 111-12, 126-45, 159-66.) Indeed, Mediverse even operated out of FPS’s office in Tampa as FPS’s designated sales team. (Id. ¶¶ 122, 124.) And Wilkerson used his own staff doctors and nurse practitioners to perform teleconsultations, which allowed him to ensure that any resulting prescriptions were submitted to FPS. (Id. ¶ 111.) These activities plainly qualify both as “arranging for” the ordering or purchasing of FPS items or goods and “recommending” the ordering or purchasing of FPS items or goods, and therefore McFarland has adequately alleged AKS violations against Defendants under Section 1320a-7b(b)(1)(B).6 II. McFarland Has Also Sufficiently Pleaded a Violation of Section 1320a-7b(b)(1)(A): “Referring an Individual” McFarland has also adequately pleaded that Defendants violated Section 1320a- 7b(b)(1)(A) by receiving remuneration in return for “referring” TRICARE beneficiaries to FPS. A. Non-Doctors Who Receive Payment in Return for Connecting Patients to Healthcare Providers Fall Within a “Referring” Violation of the AKS The Eleventh Circuit has expressly held that a non-doctor can commit a violation of the AKS’s prohibition on “referring an individual” by being paid to recruit patients and connect them with a healthcare provider. United States v. Moran, 778 F.3d 942, 962 (11th Cir. 2015). In Moran, the Eleventh Circuit upheld an AKS conviction against a “patient recruiter” where a mental health facility paid the recruiter on a per patient basis for locating potential patients and directing them to a mental health facility. Id. Although the recruiter did not provide any healthcare services to the patients or prescribe any treatment to be provided by the facility, the Court nonetheless held that 6 Defendants also take issue with McFarland’s description of their activities as “funneling” TRICARE-covered prescriptions to FPS. (See Defs.’ Mots. ¶ 8.) But that is precisely what Defendants did in “arranging for” teledoctors to submit TRICARE-covered prescriptions to FPS. In other words, the detailed allegations describing the manner in which Defendants “funneled” prescriptions to FPS are factual allegations “showing that the pleader is entitled to relief” under the AKS and FCA. Fed. R. Civ. P. 8(a)(2). Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 16 of 24 PageID 1865 13 the recruiter’s involvement in directing patients to the mental health facility was sufficient to uphold an AKS conviction. Indeed, in United States v. Vernon, 723 F.3d 1234 (11th Cir. 2013), the Eleventh Circuit explicitly rejected the same argument Defendants make here. There, the Court affirmed a conviction against a defendant who paid a kickback to induce the referral of patients to his pharmacy by a non-doctor, an employee of a healthcare services company.7 Id. at 1241, 1254-56. The defendant argued that only a doctor can refer a patient, and thus Section 1320a-7b(b)(2)(A) is limited to payments made to physicians for physician referrals. Id. at 1254. In rejecting the defendant’s argument, the Court held that the “text of the statute alone adequately refutes [defendant’s] argument.” Id. The Court noted that the argument that only a doctor can refer a patient “wholly fails because the plain language of the statute is not limited to payments to physicians who prescribe medication. Rather, it speaks broadly to ‘whoever knowingly and willfully . . . pays any remuneration’ to ‘any person to induce such person . . . to refer an individual.’” Id. (quoting 42 U.S.C. § 1320a-7b(b)(2)(A)) (emphasis and alterations in original). The Court went on to state that the non-doctor “was effectively responsible for deciding which specialty pharmacy to use for the filling of her [] patients’ prescriptions,” and therefore the evidence supported the conclusion that “[the non-doctor] had the capacity to, and did, refer [] clients to [the pharmacy] for the filling of their [] prescriptions.” Id. The Court also made clear 7 The “referring” language in the subsection of the AKS related to the payment of kickbacks mirrors the “referring” language in the subsection applicable here related to the receipt of kickbacks. So, although Vernon is discussing a different subsection of the AKS, the “referring an individual” language is used in the same way as in the section relevant to this motion. Compare 42 U.S.C. § 1320a-7b(b)(2)(A) (offering payment “to induce” a person to refer an individual), with id. 42 U.S.C. § 1320a-7b(b)(1)(A) (receiving payment “in return for” referring an individual). Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 17 of 24 PageID 1866 14 that the “fact that [the non-doctor] and her [] employees could not actually prescribe the [] medication is irrelevant.”8 Id. Here, McFarland pleaded that Defendants were effectively responsible for deciding which compounding pharmacy would be used to fill the TRICARE beneficiaries’ prescriptions. Defendants selected FPS items to recommend to beneficiaries, provided those recommendations to teledoctors so that the teledoctors could rubber-stamp them, and directed the teledoctors to submit prescriptions to FPS and not some other pharmacy. (SAC ¶¶ 14, 35-36, 111-12, 126-45, 159-66.) Defendants’ actions ensured that the prescriptions would be filled by FPS. Indeed, Wilkerson even used his own staff teledoctors to further ensure that any rubber-stamped prescriptions would go to FPS. (Id. ¶ 111.) Thus, like the defendants in Moran and Vernon, Defendants cannot hide behind their overly narrow reading of the AKS to protect them from the repercussions of knowingly receiving remuneration in return for directing TRICARE beneficiaries and their rubber-stamped prescriptions to FPS. The Eleventh Circuit is not alone in upholding AKS convictions against marketers for conduct like that alleged to have been committed by Defendants here. See, e.g., United States v. Iqbal, 869 F.3d 627, 630-01 (8th Cir. 2017) (evidence supported AKS conviction against marketer seeking remuneration from home health agency in return for inducing his network of local physicians to refer patients to agency); United States v. Polin, 194 F.3d 863, 866 (7th Cir. 1999) (evidence supported AKS conviction where director of cardiac monitoring clinic made payments 8 The Court also cited United States v. Starks, 157 F.3d 833, 835-37 (11th Cir. 1998) for the proposition that a non- doctor can “refer” a patient for purposes of the AKS. See Vernon, 723 F.3d at 1254-55. In Starks, the Court affirmed AKS convictions premised on payments made by the director of a drug addiction treatment center to community health aides who advised pregnant women to seek treatment at the drug addiction treatment center. Starks, 157 F.3d at 835- 37. The health aides received $125 if a referred woman sought in-patient treatment from the center, and another $125 if a referred woman stayed in the program for at least two weeks. Id. at 836. Although the Vernon Court noted that the defendant in Starks did not specifically argue that the community health aides were incapable of causing “referrals” due to their non-doctor status, the Vernon Court nonetheless found “the facts and the outcome in Starks [] instructive.” Vernon, 723 F.3d at 1255. Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 18 of 24 PageID 1867 15 to pacemaker sales representative each time a physician contacted by the sales representative referred a Medicare patient to the client and where doctor authorization “seemed to be more of a formality or rubber stamping of” the sales representative’s referral); United States v. Williams, 218 F. Supp. 3d 730, 737-38 (N.D. Ill. 2016) (rejecting marketing representative’s argument that he did not “refer” Medicare beneficiaries to home health agency because an intermediary doctor had to approve referrals before any services were provided).9 Moreover, contrary to Defendants’ argument, it is no defense to an AKS claim that the teledoctors (selected or employed by Defendants for their willingness to perform telemedicine consultations and rubber-stamp FPS prescriptions) signed prescriptions as an intermediate step in the process. See, e.g., Polin, 194 F.3d at 866 (payments between cardiac monitoring provider and marketing representative violated AKS notwithstanding that doctors recruited by marketer had to authorize monitoring service as intermediate step); Williams, 218 F. Supp. 3d at 737-38 (marketing representative violated AKS even where intermediary doctor approved referrals before any health services were provided). Thus, the fact that Defendants did not personally sign the prescriptions submitted to FPS does not shield them from AKS liability for their “recommending” or “arranging for” the writing of the prescriptions, or for their role in “referring” TRICARE beneficiaries to FPS. (Cf Defs.’ Mots. ¶ 35 (arguing that “intervention” of prescribing doctors “breaks the causality that must be shown to plead a kickback” against Defendants).) As to Wilkerson, this argument is particularly brazen, considering he employed his own staff teledoctors to perform telemedicine consultations. 9 Defendants also cite United States v. Miles, 360 F.3d 472 (5th Cir. 2004) in passing as a case that stands for the proposition that only if the referring non-doctor is the “relevant decisionmaker” can he be convicted receiving an unlawful kickback. The Eleventh Circuit has not adopted the relevant decisionmaker framework, and the Fifth Circuit has subsequently clarified that whether the payee is a “relevant decisionmaker” goes only to the intent element of the AKS, and is not “an independent, substantive requirement of the statute,” which would “be tantamount to re-writing the statutory text.” United States v. Shoemaker, 746 F.3d 614, 629 (5th Cir. 2014). Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 19 of 24 PageID 1868 16 Nor is it a defense under the FCA that the teledoctors played a role in causing the presentment of false claims to the United States, since, under the FCA, a defendant is liable for “causing” a false claim to be presented to the United States if his or her conduct “was (1) a substantial factor in inducing providers to submit claims for reimbursement, and (2) if the submission of claims for reimbursement was reasonably foreseeable or anticipated as a natural consequence of [d]efendants’ conduct.” United States v. Marder, 208 F. Supp. 3d 1296, 1312-13 (S.D. Fla. 2016) (internal quotation marks and citation omitted); see also U.S. ex rel. Cullins v. Astra, Inc., No. 09-CV-60696, 2010 WL 625279, at *3 (S.D. Fla. Feb. 17, 2010). Even the two causation cases cited by Defendants (see Defs.’ Mots. ¶ 35) support the adequate pleading of an FCA claim here. See U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 715 (10th Cir. 2006) (describing proximate causation standard under FCA as requiring “some sort of an affirmative action on the part of the defendant,” as opposed to “mere passive acquiescence”); U.S. ex rel. Bane v. Breathe Easy Pulmonary Servs., Inc., 597 F. Supp. 2d 1280, 1291-92 (M.D. Fla. 2009) (granting motion for summary judgment where link between defendant’s conduct and entity that actually submitted the false claims to government was “simply too attenuated to support liability”). Defendants’ central and affirmative role in FPS’s presentment of false claims tainted by kickbacks was absolutely a substantial factor in FPS’s submissions of claims to TRICARE for reimbursement. Defendants took repeated and affirmative steps that were necessary to FPS presenting the false claims, including (i) recruiting TRICARE beneficiaries, (ii) liaising with or employing teledoctors, (iii) recommending specific FPS products to TRICARE beneficiaries and teledoctors, and (iv) instructing teledoctors to submit signed prescriptions to FPS and not some other pharmacy. (SAC ¶¶ 14, 35-36, 111-12, 126-45, 159-66.) And it was also foreseeable to Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 20 of 24 PageID 1869 17 Defendants that the claims would be submitted to TRICARE, as that was the entire point of Defendants’ scheme-to receive millions of dollars in kickbacks that were tied directly to the amounts dispersed by the United States to FPS. (Id. ¶¶ 116, 180-86.) It cannot be the case that the payor of kickbacks tied to government reimbursements (FPS) can be liable for causing the presentment of a false claim to the United States, but not the recipients on the other side of the kickback transactions (Mediverse, Kotchey, and Wilkerson). Defendants’ conduct ensured that the rubber-stamped prescriptions written by teledoctors for TRICARE beneficiaries would be filled by FPS. Thus, Defendants’ argument that they did not “refer” the beneficiaries to FPS must fail. B. Defendants’ Conduct Goes Far Beyond the Bounds of Mere Advertising, and Defendants Admit They Cannot Meet Any AKS Safe Harbors for Marketing Activities Characterizing their conduct as bona fide “marketing tactics,” Defendants argue that “[s]urely, there must be a method by which to promote compounding pharmacy services to Tricare patients without committing a crime.” (Defs.’ Mots. ¶¶ 29-30.) But McFarland has pleaded far more affirmative conduct than the passive advertising that Defendants use as examples (such as billboards, websites, television advertisements, and direct mailings). Defendants did not simply post an innocent billboard or send direct mailers to the general public advertising FPS’s compounded products. Rather, they specifically targeted TRICARE beneficiaries located nationwide (knowing that TRICARE reimbursed FPS at inflated amounts), contacted beneficiaries, gathered detailed health information from beneficiaries, recommended specific FPS products to beneficiaries and teledoctors, put beneficiaries in contact with pre-selected or staff teledoctors who they knew would rubber-stamp FPS-branded prescriptions following a perfunctory telemedicine consultation, and ensured that the teledoctors submitted prescriptions to Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 21 of 24 PageID 1870 18 FPS and not to some other compounding pharmacy. (SAC ¶¶ 14, 35-36, 111-12, 126-45, 159- 66.) If there is, in fact, some “method by which to promote compounding pharmacy services to Tricare patients without committing a crime,”-as Defendants rhetorically posit-this simply was not the way. Indeed, Defendants recognize that the AKS and federal regulations provide certain marketing-related safe harbors that would, if strictly complied with, shield legitimate marketing activities from AKS liability. (See Defs.’ Mots. ¶¶ 22-27.) But Defendants also admit that their conduct does not satisfy any of those safe harbors. (Id.) CONCLUSION For the foregoing reasons, McFarland respectfully requests that the Court deny Defendants’ motions to dismiss the Second Amended Complaint. Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 22 of 24 PageID 1871 19 Date: October 10, 2017 REID COLLINS & TSAI LLP /s P. Jason Collins P. Jason Collins (admitted pro hac vice) Craig A. Boneau (admitted pro hac vice) Ryan M. Goldstein (admitted pro hac vice) Reid Collins & Tsai LLP 1301 S. Capital of Texas Hwy Building C, Suite 300 Austin, Texas 78746 Telephone: 512.647.6100 Facsimile: 512.647.6129 jcollins@rctlegal.com cboneau@rctlegal.com rgoldstein@rctlegal.com Trial Counsel for Relator Brady McFarland EWUSIAK LAW, P.A. /s/ Joel Ewusiak Joel Ewusiak Fla. Bar No.: 0509361 6601 Memorial Highway, Suite 311 Tampa, FL 33615 P: 727.286.3559 F: 727.286.3219 E: joel@ewusiaklaw.com Local Counsel for Relator Brady McFarland Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 23 of 24 PageID 1872 20 CERTIFICATE OF SERVICE I HEREBY CERTIFY that, on October 10, 2017, the foregoing document was filed using the CM/ECF system, which will send notice of electronic filing to all counsel of record. /s/ P. Jason Collins P. Jason Collins Case 8:15-cv-01708-SDM-TGW Document 348 Filed 10/10/17 Page 24 of 24 PageID 1873
