McFarland v. Florida Pharmacy Solutions et al

RESPONSE in Opposition re MOTION for summary judgment , 411 MOTION for summary judgment , 413 MOTION for summary judgment

M.D. Fla.January 14, 2019

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 FLORIDA PHARMACY SOLUTIONS, MEDIVERSE LLC, MELONIE KOTCHEY, and WAYNE WILKERSON, Defendants. _____________________________________ RELATOR BRADY MCFARLAND’S OPPOSITION TO DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 1 of 49 PageID 3390 i TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION .......................................................................................................................... 1 PROCEDURAL HISTORY............................................................................................................ 2 STATEMENT OF MATERIAL FACTS ....................................................................................... 2 A. FPS is a compounding pharmacy that contracted with TRICARE. ........................ 2 B. Mediverse is a company specializing in compounding pharmacy sales. ................ 4 C. Mediverse joined forces with FPS in 2014 to help grow FPS’s business. .............. 5 D. Mediverse was involved in all material aspects of FPS’s business. ....................... 6 E. Mediverse’s affiliation with Helix gave it unique insight. ..................................... 8 F. Mediverse focused on TRICARE coverage and received payment from FPS in exchange for arranging for the filling of TRICARE-covered prescriptions. ........................................................................................................... 8 1. Mediverse knew that TRICARE coverage was what mattered most. ............. 8 2. Mediverse arranged for FPS to fill TRICARE-covered prescriptions signed by 1stCareMD doctors. ...................................................................... 10 3. Mediverse earned over $12 million from FPS in 2014 and 2015. ................. 16 G. Mediverse recruited and onboarded Wilkerson as an FPS sales representative, and received compensation based on prescriptions generated by Wilkerson. ........................................................................................................ 17 H. Wilkerson earned millions in kickbacks from FPS for TRICARE-covered prescriptions. ......................................................................................................... 21 I. Wilkerson has been indicted and invoked his Fifth Amendment right. ................ 21 J. Mediverse recruited and onboarded Kotchey as an FPS sales representative, and received compensation based on prescriptions generated by Kotchey. ......... 23 K. Kotchey engaged in dubious marketing practices in order to arrange for the filling of TRICARE-covered prescriptions by FPS and to maximize kickbacks............................................................................................................... 23 Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 2 of 49 PageID 3391 ii L. Kotchey earned hundreds of thousands of dollars in kickbacks from FPS for TRICARE-covered prescriptions. ................................................................... 26 LEGAL STANDARDS ................................................................................................................ 26 I. Summary Judgment Standard ........................................................................................... 26 II. FCA Standard.................................................................................................................... 27 III. AKS Standard ................................................................................................................... 28 ARGUMENT ................................................................................................................................ 29 I. McFarland need not prove AKS violations beyond a reasonable doubt. .......................... 29 II. Claims tainted by unlawful kickbacks are per se false under the FCA. ........................... 30 III. AKS violations are presumptively material to the Government’s decision to pay. .......... 31 IV. Genuine issues of material fact bar summary judgment on AKS and FCA scienter. ....... 33 V. Genuine issues of material fact bar summary judgment on whether Defendants received renumeration in exchange for “arranging for” or “recommending” the filling of TRICARE-covered prescriptions by FPS. ......................................................... 35 VI. Genuine issues of material fact bar summary judgment on causation. ............................. 36 VII. Defendants do not actually argue that their conduct satisfies any AKS safe harbor. ....... 37 VIII. Wilkerson’s blanket invocation of the Fifth Amendment bars summary judgment. ........ 38 IX. Defendants are not entitled to attorneys’ fees. .................................................................. 39 CONCLUSION ............................................................................................................................. 40 Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 3 of 49 PageID 3392 iii TABLE OF AUTHORITIES Cases Anderson v. Liberty Lobby, Inc. 477 U.S. 242 (1986) .................................................................................................................. 27 Bonnet v. City of Prichard 661 F.2d 1206 (11th Cir. 1981) ................................................................................................ 39 Davis v. Main St. Family Pharm., LLC 2017 WL 3597509 (N.D. Fla. Apr. 4, 2017)............................................................................... 2 Klaczak v. Consolidated Medical Transport 458 F. Supp. 2d 622 (N.D. Ill. 2006) ........................................................................................ 34 Kona Spring Water Distrib., Ltd. v. World Triathlon Corp. 2007 WL 842969 (M.D. Fla. Mar. 19, 2007) (Merryday, J.) ................................................... 27 Liquid Air Corp. v. Rogers 834 F.3d 1297 (7th Cir. 1987) .................................................................................................. 30 Long Island Savings Bank, FSB v. U.S. 476 F.3d 917 (Fed. Cir. 2007)................................................................................................... 30 Long Island Savings Bank, FSB v. U.S. 503 F.3d 1234 (Fed. Cir. 2007)................................................................................................. 30 McGee v. Sentinel Offender Services, LLC 719 F.2d 1236 (11th Cir. 2013) ................................................................................................ 34 Mikes v. Straus 274 F.3d 687 (2d Cir. 2001)...................................................................................................... 40 Nat’l Phys. Holding Co. v. Middlebury Equity Partners, LLC 2018 WL 1053538 (M.D. Ga. Feb. 26, 2018)........................................................................... 38 Sedima, S.P.R.L. v. Imrex Co. 473 U.S. 479 (1985) .................................................................................................................. 30 U.S. ex rel. Akwa v. General Electric Corp. 74 F.3d 1247 (9th Cir. 1996) .................................................................................................... 36 U.S. ex rel. Bane v. Breathe Easy Pulmonary Servs., Inc. 2009 WL 1148632 (M.D. Fla. Apr. 28. 2009) .......................................................................... 40 U.S. ex rel. Berkeley Heartlab, Inc. 2017 WL 4803911 (D.S.C. Oct. 23, 2017) ......................................................................... 32, 33 Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 4 of 49 PageID 3393 iv U.S. ex rel. Capshaw v. White 2018 WL 6068806 (N.D. Tex. Nov. 20, 2018) ................................................................... 32, 33 U.S. ex rel. Chabot v. Wilson Transp. Mobile Home Serv., Inc. 2010 WL 11537818 (M.D. Fla. Oct. 20, 2010) ........................................................................ 40 U.S. ex rel. Cullins v. Astra, Inc. 2010 WL 625279 (S.D. Fla. Feb. 17, 2010) ............................................................................. 28 U.S. ex rel. Dodge v. ACS State & Local Solutions, Inc. 2009 WL 1748540 (M.D. Fla. June 18, 2009) .......................................................................... 40 U.S. ex rel. Emanuele v. Medicor Assocs. 2017 WL 4867614 (W.D. Pa. Oct. 26, 2017) ........................................................................... 29 U.S. ex rel. Franklin v. Parke-Davis 147 F. Supp. 2d 39 (D. Mass. 2001) ................................................................................... 30, 31 U.S. ex rel. Greenfeld v. Medco Health Solutions, Inc. 880 F.3d 89 (3d Cir. 2018)........................................................................................................ 37 U.S. ex rel. Haycock v. Hughes Aircraft Co. 99 F.3d 1148 (9th Cir. 1996) .................................................................................................... 40 U.S. ex rel. Hefner v. Hackensack University Medical Center 495 F.3d 103 (3d Cir. 2007)...................................................................................................... 34 U.S. ex rel. Keeler v. Eisai, Inc. 568 F. App’x 783 (11th Cir. 2014) (per curiam) ...................................................................... 31 U.S. ex rel. Kester v. Novartis Pharms. Corp. 43 F. Supp. 3d 332 (S.D.N.Y. 2014)................................................................................... 30, 31 U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah 472 F.3d 702 (10th Cir. 2006) .................................................................................................. 37 U.S. ex rel. Williams v. Health Mgmt. Assocs., Inc. 2014 WL 2866250 (M.D. Ga. June 24, 2014) .......................................................................... 29 U.S. ex rel. Wood v. Allergan, Inc. 246 F. Supp. 3d 772 (S.D.N.Y. 2018)................................................................................. 32, 33 U.S. ex rel. Wood v. Allergan, Inc. 899 F.3d 163 (2d Cir. 2018)...................................................................................................... 32 U.S. v. Argomaniz 925 F.3d 1349 (11th Cir. 1991) ................................................................................................ 38 Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 5 of 49 PageID 3394 v U.S. v. Gonzalez 834 F.3d 1206 (11th Cir. 2016) ................................................................................................ 34 U.S. v. LaHue 261 F.3d 993 (10th Cir. 2001) .................................................................................................. 30 U.S. v. Marder 208 F. Supp. 3d 1296 (S.D. Fla. 2016) ............................................................................... 28, 36 U.S. v. Premises Located at Route 13 946 F.2d 749 (11th Cir. 1991) .................................................................................................. 39 U.S. v. Rogan 2006 WL 8427270 (N.D. Ill. Oct. 2, 2006)............................................................................... 29 U.S. v. Roundtree 420 F.2d 845 (5th Cir. 1969) .................................................................................................... 39 U.S. v. Starks 157 F.3d 833 (11th Cir. 1998) .................................................................................................. 29 U.S. v. Vernon 723 F.3d 1234 (11th Cir. 2013) .............................................................................. 34, 35, 36, 37 Universal Health Services, Inc. v. U.S. ex rel. Escobar 136 S. Ct. 1989 (2016) .............................................................................................................. 32 Statutes 32 C.F.R. § 199.1 ............................................................................................................................ 3 31 U.S.C. § 3729(a)(1)(A) ............................................................................................................ 27 31 U.S.C. § 3729(b)(1) ................................................................................................................. 27 31 U.S.C. § 3729(b)(1)(A) ............................................................................................................ 33 31 U.S.C. § 3729(b)(1)(B) ............................................................................................................ 33 31 U.S.C. § 3729(b)(2) ................................................................................................................. 27 31 U.S.C. § 3729(b)(4) ................................................................................................................. 27 31 U.S.C. § 3730(d)(4) ................................................................................................................. 39 42 U.S.C. § 1320a-7b(b)(1) .......................................................................................................... 36 42 U.S.C. § 1320a-7b(b)(1)(B) ......................................................................................... 29, 33, 35 Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 6 of 49 PageID 3395 vi 42 U.S.C. § 1320a-7b(g) ......................................................................................................... 28, 30 42 U.S.C. § 1320a-7b(h) ......................................................................................................... 29, 33 Rules Fed. R. Civ. P. 56(a) ..................................................................................................................... 27 Fed. R. Civ. P. 56(d)(1)................................................................................................................. 39 Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 7 of 49 PageID 3396 1 Relator, Brady McFarland, submits this opposition to the motions for summary judgment filed by Mediverse, LLC, Melonie Kotchey, and Wayne Wilkerson (together, “Defendants”). INTRODUCTION Defendants’ motions for summary judgment are a study in misdirection. Defendants seek an order stating that there are no genuine issues of material fact and that they are entitled to judgment as a matter of law. But Defendants entirely ignore the voluminous factual record (including their own contemporaneous correspondence and testimony), instead arguing that McFarland’s lack of knowledge on certain issues, such as Defendants’ state of mind, entitles them to summary judgment. Defendants fundamentally misunderstand how a plaintiff may prove his case. Nothing requires proof of a defendant’s state of mind through the plaintiff’s own testimony. Indeed, here the proof comes from Defendants’ own admissions, testimony, and conduct. Equally misleading is Defendants’ recitation of the governing law. Defendants completely ignore Judge Merryday’s analysis denying their motions to dismiss McFarland’s claims under the False Claims Act (“FCA”) and Anti-Kickback Statute (“AKS”) for failure to state a claim. Instead, they rehash arguments that the Court already rejected. In other instances, Defendants affirmatively misstate the relevant law, including their specious view that McFarland must prove Defendants’ AKS violations beyond a reasonable doubt. Defendants’ conduct here—the knowing and willful receipt of over $16 million in productivity-based compensation in exchange for arranging for the filling of hundreds of TRICARE-covered prescriptions by Florida Pharmacy Solutions (“FPS”)— falls squarely within the ambit of the AKS. Indeed, Defendants admit that they were the key link between teledoctors and patients, on the one hand, and FPS and TRICARE, on the other. Through their conduct, Defendants caused tens of millions of dollars in false claims tainted by kickbacks to be presented to TRICARE, and Defendants are therefore liable for violating the FCA. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 8 of 49 PageID 3397 2 Wilkerson’s motion is particularly misguided. He fails to disclose that he invoked the Fifth Amendment privilege on a blanket basis during his deposition and walked out. He also omits that he has been criminally indicted for dozens of felonies, including for criminal AKS liability for his receipt of the same kickbacks from FPS that McFarland challenges in this action. As set forth in detail below, genuine issues of material fact preclude an award of summary judgment to Defendants, and this action should proceed to trial. PROCEDURAL HISTORY In the Second Amended Complaint, McFarland asserts a single FCA count against Defendants premised on their receipt of unlawful kickbacks from FPS, in violation of the AKS.1 On November 28, 2017, the Court denied Defendants’ motions to dismiss (the “MTD Decision”). (Order (Dkt. 357).) Discovery closed on September 28, 2018. On December 13, 2018, Defendants each moved for summary judgment. (See Kotchey Mot. for Summ. J. (Dkt. 411) (“Kotchey Mot.”); Mediverse Mot. for Summ. J. (Dkt. 412) (“Mediverse Mot.”); Wilkerson Mot. for Summ. J. (Dkt. 413) (“Wilkerson Mot.”). A final pre-trial conference is scheduled for February 14, 2019. (See Order (Dkt. 358) ¶ 5.) A jury trial is set for the April 2019 trial term. (Id. ¶ 7.) STATEMENT OF MATERIAL FACTS A. FPS is a compounding pharmacy that contracted with TRICARE. 1. FPS is a mail-order compounding pharmacy.2 In 2014 and 2015, FPS participated in TRICARE, a federal health care program.3 (See Defs.’ Answers ¶ 3.) 1 To date, FPS has not appeared in the action. 2 A “compounding pharmacy” is one that “compounds a drug to meet an individual patient’s needs, i.e., combine, mix, or alter drug ingredients as directed by an individual provider’s prescription.” See Davis v. Main St. Family Pharm., LLC, 2017 WL 3597509, at *1 n.1 (N.D. Fla. Apr. 4, 2017) (citation omitted). Defendants admit that FPS “is a pharmacy in Florida, and that among its services it compounds pharmaceuticals, and that some of its business is mail-order.” (See Defs.’ Answers (Dkts. 365, 366, 367) ¶ 6.) 3 TRICARE is a federally funded, comprehensive managed health care program that is part of the Department of Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 9 of 49 PageID 3398 3 2. FPS funded its operations through the sale of its products. Ex. 1 at BM001726. TRICARE was FPS’s largest customer, accounting for 15% of FPS’s sales in 2013 and 38% of its sales in 2014. Id. at BM001728. 3. According to data produced by TRICARE, FPS received $2,330,179 from TRICARE in 2014 in connection with 960 claims submitted by FPS. Ex. 2. Then, during the first six months of 2015, FPS’s revenues from TRICARE ballooned, with FPS receiving a staggering $38,539,119 from TRICARE in connection with 4,758 claims submitted by the pharmacy. Id. 4. FPS’s audited financials reflect that its revenues were approximately $36 million during the same six-month period in 2015. Ex. 1 at BM001732. In other words, all of FPS’s 2015 revenue was derived from TRICARE. 5. FPS paid a significant portion of its TRICARE revenues to sales and marketing representatives (including Defendants) as commissions or overrides. For example, FPS’s financials reflect that commissions were the pharmacy’s main expense during the first six months of 2015, with FPS paying $19,871,365 in commissions in connection with $36,046,187 in revenues. Ex. 1 at BM001732, BM001743. 6. In March 2015, TRICARE announced that it would stop covering compounded products like FPS’s, effective May 1, 2015. Ex. 3 at 9. 7. TRICARE produced in this action a spreadsheet listing claims submitted by FPS. For each claim, the spreadsheet reflects, among other things, prescription number, patient name and demographics, prescriber name and demographics, and amount billed (which often exceeded $10,000 per prescription). Exhibit 4 is an excerpt of the spreadsheet reflecting representative Defense’s Military Health System. See 32 C.F.R. § 199.1. TRICARE delivers and finances health care services to active duty service members, military retirees, and their families. Id. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 10 of 49 PageID 3399 4 examples for patients B.L., J.O., and S.S. Due to the number of columns in the spreadsheet, they continue for several pages per prescription. In addition, although each example is only one prescription, there are multiple rows per prescription, since TRICARE includes a separate row for each constituent ingredient comprising a single, compounded treatment. 8. The data in TRICARE’s spreadsheet can be matched with FPS’s internal records. Attached as Exhibit 5 are FPS’s internal records reflecting the same three prescriptions for B.L., J.O., and S.S. reflected in the excerpted TRICARE spreadsheet. 4 Among other things, the prescription numbers, patient names, and TRICARE reimbursement amount (which are listed at the top of page 1 of each example) match TRICARE’s data in Exhibit 4. B. Mediverse is a company specializing in compounding pharmacy sales. 9. Mediverse is a “a nationwide, innovative medical distributor that specializes in compounding pharmacy sales and state-of-the-art pharmacogenetics services.” Ex. 6. 10. Mediverse also serves as a “recruiter,” that “links” sales representatives with medical providers that need sales services. Ex. 7 (“Mediverse Tr.”) 17:14–23. In 2014 and 2015, Mediverse recruited sales representatives for FPS. Id. 17:24–18:3. 11. Mediverse recruits for pharmacies whose patients have insurance coverage, so that Mediverse representatives selling for such pharmacies can be paid commissions based on the pharmacies’ insurance collections. Id. 20:8–21:9. Mediverse advertises that representatives it recruits are paid using “higher than industry standard commission structures.” Ex. 6. 12. Mediverse also considers itself an “Industry Leader” in “Telemedicine.” Ex. 6; Mediverse Tr. 22:15–23:3. It can, for example, point providers “in the direction of the 4 Patient B.L. is associated with Mediverse (see page 1 of the Topical Compounded Therapy questionnaire); Patient J.O. is associated with Wilkerson (see “Sales Rep.” field on page 1); and Patient S.S. is associated with Kotchey (see “Sales Rep.” field on page 1). Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 11 of 49 PageID 3400 5 [telemedicine] companies that we know do a better job.” Id. 23:1–23:3. 13. Chris White owns and controls Mediverse, and serves as its CEO and only officer. Id. 7:16–8:9. White received a doctorate in pharmacology in 2008, but is not a licensed pharmacist. Id. 27:1–28:16. During 2014 and 2015, Mediverse operated out of a residential unit rented by White, and currently operates out of White’s home office. Id. 9:10–11:23. C. Mediverse joined forces with FPS in 2014 to help grow FPS’s business. 14. Mediverse began working with FPS in 2014. Id. 30:2–4. At the time, FPS was preparing for a “growth period,” and FPS sought Mediverse’s aid. Id. 36:11–17. FPS “needed help all around,” but the general idea was “we want to grow, we want more people, we want more products, we want to be a better company and grow our operations.” Id. 37:2–7. 15. White declined FPS’s offer to become an FPS employee, as he “did not want to work specifically for a company.” He instead consulted for FPS through Mediverse. Id. 51:11–18. 16. Mediverse’s consulting for FPS was a “handshake deal” without any formal contract. Id. 51:19–52:1. According to White, Mediverse and FPS never finalized a document setting forth Mediverse’s compensation. Id. 52:10–14. 17. According to White, FPS compensated Mediverse in two ways. First, Mediverse received an “override” for recruiting sales representatives. Id. 52:19–22. In other words, in exchange for “linking up” sales representatives and FPS, Mediverse received compensation from FPS based on sales generated by those representatives. Id. 52:25–53:15. 18. White could not recall the percentage override that Mediverse received, guessing that it was between 2% and 5%. Id. 54:18–24. However, in a sworn interrogatory response, Mediverse stated that it received overrides from FPS ranging from 2.5% to 15%, with an estimated weighted average of 7% to 8%. Ex. 8 ¶ 14. Because FPS could generally bill over $10,000 to TRICARE per prescription, these overrides quickly added up as prescription volume grew. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 12 of 49 PageID 3401 6 19. Second, Mediverse received an override of FPS’s total profits. Mediverse Tr. 52:22–24. According to White, “[p]eriodically, we would sit down, we would go through it together, and [FPS] would come up with what they believed the profits were and give me a share. Would consider it a dividend, but I wasn’t an owner, you know, of their profits.” Id. 56:2–6. 20. White could not recall what percentage of FPS’s profits Mediverse received. Id. 56:21–57:1. No invoices reflect what portion of FPS’s profits Mediverse received. Id. 57:23–58:6. 21. Mediverse did produce an undated document entitled “FPS AGREEMENT,” designed by FPS and White “[t]o accomplish a Collaborative Agreement using two forces working together to design synergistic visions & goals.” Ex. 9. The agreement reflects that White would be “paid by FPS through his Consulting Firm, LLC” and would receive 1% of all FPS sales, a 35% override for sales representatives associated with White, and a 40% override for certain representatives, when approved by FPS management. Id. According to White, the agreement was a “preliminary document” and was not executed. Mediverse Tr. 66:7–10. D. Mediverse was involved in all material aspects of FPS’s business. 22. Mediverse consulted on how FPS could increase its sales. Id. 113:8–10. 23. Mediverse consulted on the design and construction of a new pharmacy facility. Id. 116:17–20. 24. Mediverse consulted on the creation of training materials for FPS sales representatives. Id. 139:5–9. 25. Mediverse collected patient demographic information and leads on behalf of FPS. (Mediverse Answer ¶ 127.) 26. Mediverse helped FPS grow its list of products. Mediverse Tr. 39:17–40:1. 27. Mediverse consulted on the FPS prescription pad. Id. 98:12–100:15; see also Ex. 10 (FPS prescription pad listing products and constituent ingredients). This included formatting the Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 13 of 49 PageID 3402 7 pad and researching patient instructions. Mediverse Tr. 98:12–100:15. Mediverse focused on determining which ingredients to mix into FPS’s products and to list on the pad, including by considering what ingredients were covered by insurance. Id. 28. In revising the pad, Mediverse focused on increasing the amount that FPS could bill to insurers, and therefore also increase its commissions and overrides. Because TRICARE covered compounded treatments on a per-ingredient basis, changes to constituent ingredients or the ratio of ingredients allowed Mediverse and FPS to increase reimbursement amounts. In an August 12, 2014 email to Wilkerson, for example, White attached a revised FPS pad and noted that “this thing should pay even better now.” Ex. 11; see also Mediverse Tr. 103:1–13. 29. Mediverse also inserted a box in the lower-left corner of the pad so that FPS could track which sales representative was associated with any given prescription. Ex. 12. When Lindsay Fladd (a co-owner of FPS) told White that including a field on the pad for a sales representative’s name was “pushing the limits,” White responded that “[w]e definitely need this to help with operations and tagging.” Id.; see also Mediverse Tr. 109:16–23. 30. Mediverse also changed the pad to require prescribers to affirmatively opt-out of auto-refills for patients as a way to increase the total number of refills and associated commissions. Mediverse Tr. 149:9–150:24; see also Ex. 10 (“AUTO-RF/Opt Out” in lower-right corner). In other words, Mediverse changed the pad so that the default was that patients would receive refills of any prescription, without a doctor or the patient requesting it. Defendants received the same commission for each refill as for the original prescription. 31. Mediverse consulted on FPS’s Blanket Letters of Authorization, pursuant to which prescribers authorized FPS to change or substitute the component ingredients of prescribed treatments without contacting the prescriber. Mediverse Tr. 344:20–345:5. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 14 of 49 PageID 3403 8 32. Mediverse’s efforts were highly successful, leading to increases in (a) the number of prescriptions filled by FPS, (b) the number of FPS sales representatives, (c) FPS’s revenue, and (d) commissions earned by FPS’s sales representatives. Id. 235:20–236:20. As a result, FPS’s profits increased, of which Mediverse received a percentage. Id. 248:23–249:3. E. Mediverse’s affiliation with Helix gave it unique insight. 33. White also owns Helix Management Solutions, LLC (“Helix”). Id. 41:11–17. FPS hired Helix to improve its billing under its existing contracts with insurers. Id. 42:21–43:2. 34. For example, if FPS was considering formulating a new product, Helix could test- bill the product or its ingredients to an insurer and determine whether it was within coverage. Id. 43:3–23. Helix then provided feedback to FPS on adjudications. Id. 100:16–101:14. 35. Helix operated out of the same building as FPS. Id. 360:25–361:2. 36. FPS paid Helix a percentage commission based on amounts collected by FPS from insurers. Id. 361:14–361:25. 37. Helix was centrally involved in billing prescriptions for FPS in Spring 2015, including those generated by 1stCareMD teledoctors. Id. 246:2–4; see also SOF F.2-3, infra. F. Mediverse focused on TRICARE coverage and received payment from FPS in exchange for arranging for the filling of TRICARE-covered prescriptions. 1. Mediverse knew that TRICARE coverage was what mattered most. 38. As other insurers stopped covering FPS’s products, TRICARE became the only insurer that reimbursed FPS for its products. Id. 278:16–19. Mediverse marketing therefore focused on TRICARE beneficiaries. Id. 276:25–278:15. 39. For example, in January 2015, an FPS sales manager, Jessica Pent, announced that Eric Mayes would be consulting with FPS’s outside sales representatives (such as McFarland) on sales strategies. Ex. 13 at 2. Pent then helpfully nudged FPS sales representatives regarding what Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 15 of 49 PageID 3404 9 areas they should be seeking advice for: “hint; scar, wound, wellness capsule. Just saying.” Id. She also warned representatives that they should “REMEMBER – Your providers should be writing for the ‘Wellness Capsule’ located in the bottom block of the script pad . . . when they write for any pain cream. These have great reimbursement rates.” Id. 40. On January 30, 2015, FPS held a training call with its sales representatives, including McFarland. Ex. 14. During the call, FPS announced that it hired a new sales team, led by Mayes, and they were going to start using telemedicine. Ex. 15 (“McFarland Tr.”) 39:1–4. 41. Following the training call, McFarland scheduled a follow-up call with Mayes to discuss sales strategy. Id. 40:1–8; see also Ex. 16 Mayes responded to McFarland’s email using an email address entitled “Mediverse Sales,” and scheduled a call. Ex. 16. 42. During the call, Mayes told McFarland to concentrate his sales efforts around military bases, where insureds were likely to be covered by TRICARE, which was reimbursing FPS at high rates. McFarland Tr. 40:15–25. Mayes explained that if McFarland focused on selling FPS products around military bases, he would increase his commissions. Id. 41:7–24. 43. Mediverse and FPS thus tailored their efforts to reach TRICARE beneficiaries. In White’s words: “[I]t’s common sense, [] you sell more bottles of water next to the gym, you know, than you do next to the waterfall.” Mediverse Tr. 279:20–22. 44. But Mediverse also recognized that TRICARE was reimbursing for products at very high rates. White testified that “I wish they [wouldn’t] had of. I wish that these things didn’t pay as much as they did pay sometimes. Believe me.” Id. 281:24–282:1. 45. Mediverse knew TRICARE reimbursements were the lynchpin to its business model. For example, on March 12, 2015, White and FPS’s owner, Wes Moss, discussed commission rates for a potential new FPS sales representative. Ex. 17 at Mediverse00906. At the Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 16 of 49 PageID 3405 10 time, there were rumors that TRICARE might change its policies. Moss noted to White: “When they [TRICARE] cut reimbursements to wound [and] scar . . . , we are out of business.” Id. 46. In April 2015, Mediverse continued to recruit new FPS representatives. In an email to FPS announcing the hire of a new marketing group, White explained that they would submit “approximately 100 a day of Tricare scripts daily from here on” out. Ex. 18 at 2. 47. In May 2015, after TRICARE ceased covering FPS products and announced that it would be conducting audits, FPS and Mediverse discussed next steps. FPS’s pharmacist-in-charge, Craig Woodruff, suggested that FPS “throw all available personnel at preparing for this audit” and “to immediately focus on the last 12 months of claims.” Ex. 19 at 8. FPS’s general manager, Jose Otero, responded that he thought FPS had audited every claim through six months prior. Id. In response, Woodruff explained that FPS had “decided to preaudit everything for ESI5 in March” when FPS had received a subpoena concerning Toni Dobson and Dr. Vergot, two of Wilkerson’s prescribers. He continued: “They began working on it, but then April came and the huge push to fill for Tricare resulted in Patricia being pulled of that project to help in the lab, etc.” Id. 48. In other words, FPS and Mediverse decided, as a precautionary measure, to “pre- audit” TRICARE prescriptions in March 2015. But amid the “huge push” to fill TRICARE prescriptions before TRICARE ceased reimbursements, FPS and Mediverse allocated resources to filling as many TRICARE-covered prescriptions as possible. 2. Mediverse arranged for FPS to fill TRICARE-covered prescriptions signed by 1stCareMD doctors. 49. In early 2015, Mediverse and FPS began working with telemedicine providers. Mediverse Tr. 119:7–23. 5 ESI refers to Express Scripts, Inc., the pharmacy benefits manager for TRICARE. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 17 of 49 PageID 3406 11 50. Telemedicine as a sales strategy was first brought to FPS by Christian Ozil, a representative recruited and onboarded by Mediverse. Id. 120:14–122:7; see also Ex. 20 (White and Mayes discussion in February 2015 about new agreement with Ozil’s marketing group). 51. Ozil explained to White that he used telemarketing to find patients who would then receive a telemedicine consultation. Mediverse Tr. 124:12–125:16. 52. Mediverse and FPS performed due diligence on telemedicine. Id. 122:25–123:1. But Mediverse did not seek any legal advice on the topic. Rather, White testified that he believed that (i) the “pharmacy reached out to legal counsel,” (ii) sales representatives using telemedicine “had already reached out to legal counsel,” and (iii) the sales representatives “did their legal work, and felt very comfortable with [the] process. Id. 119:23–120:3, 125:21–126:1. Mediverse did not provide any additional information about any specific legal advice that Mediverse, FPS, or other sales representatives received about telemedicine or about compliance with the AKS. 53. Mediverse knew by early 2015 that it was risky to hire telemarketers. On February 23, 2015, Moss sent to White a CBS News article, noting that it was about telemarketers and a compounding pharmacy. Ex. 21. White responded “Wow. Really.” Id. White admitted that he understood the risk of telemedicine: “there was issues of people doing things they shouldn’t have done. Meaning patient says they didn’t want it and they filled it anyways. Hell, they even refilled it, probably. You know, that’s what killed the industry.” Mediverse Tr. 294:4–8. 54. Notwithstanding the CBS News article, Mediverse moved forward with the telemedicine strategy. On February 27, 2015, Ozil introduced Mediverse to 1stCareMD, a telemedicine company that Ozil was already working with. Id. 166:24–167:3, 171:2–7; Ex. 22 (Ozil group introducing Chris O’Hara, of 1stCareMD, to White and Mayes to get “Florida Mediverse LLC set up so we can send patient scripts to their pharmacy”). Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 18 of 49 PageID 3407 12 55. Chris O’Hara, 1stCareMD’s owner, believed Mediverse was a pharmacy whose patients were requesting product and needed consultation. Ex. 23 (“1stCareMD Tr.”) 10:9–11:4. 56. White had access to 1stCareMD’s patient portal (the “1stCare Portal”). Mediverse Tr. 186:24–187:4. The 1stCare Portal linked patients needing a telemedicine consultation with 1stCareMD’s nationwide roster of teledoctors. 1stCareMD Tr. 8:3–9:16. 57. Patients did not enter their own data into the 1stCare Portal. Rather, Mediverse or its agents uploaded patient information. Id. 9:17–25. Mediverse uploaded patient information as a PDF intake form, which included patient demographics, medical history, and a description of the patient’s ailment(s), along with an attached FPS prescription pad that corresponded to the products that Mediverse was “promoting.” Id. 12:5–13:1, 14:5–11. 58. Upon commencing its work with 1stCareMD in March 2015, Mediverse requested an “editable pt [patient] intake form” that it could use in the 1stCareMD Portal. Ex. 24. The intake form was entitled “Topical Compounded Therapy.” Ex. 25; 1stCareMD Tr. 19:3–25. Mediverse uploaded forms into the portal with “Mediverse” written into the “Company Name” field in the top-right corner of the first page. Ex. 25; 1stCareMD Tr. 20:10–24. Similarly, the forms arrived with “TRICARE” filled in by Mediverse as the insurer. Ex. 25; 1stCareMD Tr. 20:25–21:5. 59. The forms also listed a “Preferred Pharmacy Fax” in the top-right corner of the first page that told 1stCareMD where to send prescriptions. Ex. 25; 1stCareMD Tr. 21:13–20. 60. The forms listed (888) 732-7207 as the Preferred Pharmacy Fax. Ex. 25; 1stCareMD Tr. 21:21–22. That is an FPS fax number listed by FPS on its marketing materials. E.g., Ex. 26. In email correspondence, Ozil and his colleagues specifically told 1stCareMD they would “have Chris White or Eric Mayes send you the fax number for the pharmacy.” Ex. 22. 61. The forms also listed fields where the patient’s medical conditions could be noted Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 19 of 49 PageID 3408 13 or checked-off. Ex. 25 at 1stCareMD690–92. Mediverse listed such information prior to uploading the intake forms into the 1stCareMD Portal. 1stCareMD Tr. 22:1–23:5. 62. The final section included a “Special Notes” field where Mediverse listed recommended products to the doctor. Ex. 25 at 1stCareMD692; 1stCareMD Tr. 23:6–22. 63. Mediverse attached a one-page, FPS prescription pad to the forms, with specific products already checked-off on the pad. Ex. 25 at 1stCareMD693; 1stCareMD Tr. 24:2–26:18. 64. Upon receipt of an intake form, 1stCareMD assigned a doctor to contact the patient. Id. 14:16–15:4. If 1stCareMD did not have all of the information it needed, Mediverse helped to gather information and get it to 1stCareMD. Mediverse Tr. 270:6–23. 65. If a consultation resulted in a signed prescription, the doctor submitted the prescription to FPS by sending it to the fax number listed by Mediverse on the intake form uploaded into the 1stCare Portal. 1stCareMD Tr. 18:7–15. Exhibit 27 is an example of a 1stCareMD-generated prescription (Exhibit 25), when viewed through FPS’s internal system. 66. In certain cases, 1stCareMD (rather than the doctor herself) sent signed prescriptions to FPS. Id. 48:14–49:5. 1stCareMD was unaware of any case in which a 1stCareMD doctor faxed a signed prescription to a pharmacy other than FPS via the preferred fax number provided by Mediverse. Id. 66:23–67:19. 67. In some instances, Mediverse received signed prescriptions directly from 1stCareMD, which Mediverse submitted to FPS. Mediverse Tr. 191:3–12, 196:7–25. For example, on March 28, 2015, O’Hara emailed a signed, TRICARE-covered prescription to White. Ex. 28. 68. Mediverse also actively tracked patients in the 1stCareMD Portal. For example, on April 24, 2015, White sent a list of patients to 1stCareMD, asking for copies of prescriptions so that “we can knock these out.” Ex. 29 at 3–4. A representative from Ozil’s group responded, asking Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 20 of 49 PageID 3409 14 1stCareMD to get the prescriptions “over asap to Chris White so his staff can bill!!!!” Id. at 3. In a later email dated April 27, recognizing that TRICARE coverage would cease on April 30, the representative asked again: “[H]ave we figured out how to get the scripts over to him? We are on the 1 yard line, shot clock ticking, time is definitely of the [essence].” Id. at 1. 69. 1stCareMD maintained and produced records for each teleconsultation initiated by Mediverse uploading an intake form into the 1stCareMD Portal. 1stCareMD Tr. 30:3–32:8. 70. Records pulled from FPS’s internal tracking system reflect the same prescriptions, including that they are tagged to Mediverse as the sales representative. E.g., Ex. 27 at BM000008. 71. Mediverse stopped working with 1stCareMD in May 2015, when TRICARE stopped covering the FPS products marketed by Mediverse. 1stCareMD Tr. 56:25–57:9. 72. There was no formal contract between Mediverse and 1stCareMD, and White did not recall whether there was an unwritten agreement. Mediverse Tr. 174:19–175:3. 73. According to O’Hara, there was an unwritten “agreement” between 1stCareMD and Mediverse as to what services 1stCareMD would provide and how Mediverse would pay for them. 1stCareMD Tr. 58:19–22. When asked to disclose the terms of that unwritten “agreement,” O’Hara invoked the Fifth Amendment right against self-incrimination. Id. 59:2–12. 74. O’Hara similarly invoked the Fifth Amendment when asked: (i) whether Mediverse paid a flat-rate fee per patient uploaded into the portal; (ii) how Mediverse knew what to pay 1stCareMD; and (iii) who paid 1stCareMD. Id. 59:14–61:10. 75. O’Hara admitted that neither insurers nor FPS paid 1stCareMD. Id. 62:9–22. 76. Mediverse paid $249,300 to 1stCareMD. Ex. 30. Mediverse also paid $363,825 to Profit Centrics, a company with the same Kingsbury, Texas address as 1stCareMD. Ex. 31 77. Mediverse’s income from FPS increased in Spring 2015 as a result of its Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 21 of 49 PageID 3410 15 relationship with Ozil’s group and 1stCareMD. Mediverse Tr. 243:19–244:9. Indeed, there was a “huge push” to fill TRICARE prescriptions before coverage changed on April 30, 2015. Ex. 19 at 8. White acknowledged that “there might have been a huge push of TRICARE because, and only because, it was one of the last few payors.” Mediverse Tr. 321:17–20. 78. FPS extracted staggering amounts from TRICARE in Spring 2015 as a result of Mediverse’s use of 1stCareMD. For example, in a March 28, 2015 email, FPS billing manager Brian Tabor announced total billing of $304,660 for the day, and $6,456,086 for the month. Ex. 32 at 3. Referring to White’s Helix team, he added: “These girls sure are working hard to get these scripts billed out even on a Saturday!” White responded: “Proud of you guys. Thank you so much and keep up the good work.” Id. 79. Three days later, on March 31, 2015, FPS reported $1,097,198 billed in a day, and over $8 million for March. Ex. 33 at 3. An FPS staff member responded, copying White and the Mediverse Sales address: “Holy @$!#!!!! (that stands for holycrap). Way to go team!!!!!” Id. 80. On April 6, 2015, FPS reported over $1.6 million billed in a single day for 164 prescriptions (an average of over $10,000 billed per prescription). Ex. 34 at 3. White responded: “Im so proud of everyone, if we get things running smoother and come together and work together, I am confident that would do 2 million a day.” Id. 81. By April 21, 2015, White’s prediction came true. On that day alone, FPS billed over $2 million to TRICARE. Ex. 35 at 2. 82. During this period, Mediverse and FPS ignored numerous red flags concerning 1stCareMD. Notes added to FPS’s internal prescription-tracking system, for example, reflect that patients contacted by 1stCareMD doctors thought it was a “scam,” and did not recognize the name of the 1stCareMD teledoctor who had purported to sign a prescription. E.g., Ex. 36. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 22 of 49 PageID 3411 16 83. Indeed, in May 2015, Moss forwarded to White a list of patients who refused to receive prescriptions shipped by FPS. Ex. 37 at 2–5. Each patient was covered by TRICARE and assigned to a 1stCareMD doctor. Id. White took no action. Mediverse Tr. 275:6–276:16. 3. Mediverse earned over $12 million from FPS in 2014 and 2015. 84. FPS’s accounting records reflect that between November 14, 2014 and June 15, 2015, FPS paid $12,318,533 to Mediverse. Ex. 38. FPS paid Mediverse $4,940,136 on June 15, 2015, two separate transfers of $500,000 on June 3, 2015, and $1,001,210 on May 26, 2015. Id. In other words, during the first two weeks of June 2015, FPS paid almost $7 million in commissions to Mediverse. FPS designated the vast majority of the transfers as for “Commissions.” Id. 85. Mediverse’s records reflect that it received $11,607,793 from FPS. Ex. 39 at Mediverse000722. But Mediverse is unaware of any invoices or receipts reflecting what services or commissions the payments covered. Mediverse Tr. 241:6–14. 86. Mediverse admitted that payments from FPS increased in Spring 2015 in connection with its work with Ozil and 1stCareMD. Id. 243:19–244:9. 87. Between November 2014 and January 2016, Mediverse paid a total of $2,608,434 to White. Ex. 40; Mediverse Tr. 356:2–19. White could not determine whether such payments were dividends, salary, or bonuses. Mediverse Tr. 356:20–357:3. 88. Mediverse financial reports reflect that it paid White $500,000 on October 27, 2015, with which White purchased a home for $516,471. Ex. 39 at Mediverse000723; see also Mediverse Tr. 354:19–355:9. White characterized the payment as a “dividend.” Mediverse Tr. 355:10–18. 89. In 2015, Mediverse also paid $880,852 to Mayes for his work for Mediverse (through Mayes’s LLC, Medical Marketing Consultants). Ex. 41. 90. Separately, FPS’s accounting records reflect that between January 12, 2015 and June 30, 2015, FPS paid $1,718,692 to Helix in connection with its billing work. Ex. 42. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 23 of 49 PageID 3412 17 91. Faced with such staggering numbers, White testified that “[i]t’s not illegal to make money.” Mediverse Tr. 254:9. He also admitted that during 2014 and 2015, “There was a lot of fraud out there, it just wasn’t us.” Id. 269:22–23. G. Mediverse recruited and onboarded Wilkerson as an FPS sales representative, and received compensation based on prescriptions generated by Wilkerson. 92. Mediverse recruited Wilkerson to FPS, id. 112:22–113:3, and was involved in onboarding him, including doing “due diligence” to “see what they’re capable of,” id. 79:2–21. 93. In return, Mediverse received an override on all prescriptions generated by Wilkerson. Id. 94:20–95:2. 94. Wilkerson began working with Mediverse and FPS in August 2014. Ex. 43. He earned a 30% commission on all sales of FPS’s products. Id.; Ex. 44 ¶ 10. 95. White sent FPS’s prescription pad to Wilkerson for Wilkerson to distribute to his sales team. Ex. 45. White explained that he had revised the pad, so that “this thing should pay even better now.” Id. In explaining FPS and Mediverse’s pay periods, White told Wilkerson that he would be getting a “FAT check” as prescriptions started getting paid. Ex. 46; see also Ex. 47 (“The refills will start banging out now, so the last two weeks of this month should be huge . . . .”). 96. Wilkerson engaged in highly questionable marketing tactics in order to find TRICARE beneficiaries and to arrange for the filling of TRICARE-covered prescriptions by FPS. 97. Wilkerson owns a wellness spa located in Chattanooga, Tennessee called Karma Wellness Spa (“Karma”). (Wilkerson Answer ¶ 35.) Wilkerson worked with a team of sales representatives who solicited TRICARE beneficiaries to receive a telemedicine consultation from one of Wilkerson’s three paid staff prescribers at Karma. Ex. 44 ¶ 8 (admitting that Wilkerson paid hourly or monthly amounts to staff prescribers). Following the consultation, beneficiaries received compounded products from FPS, and Wilkerson and his team split the commissions. Ex. 48 Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 24 of 49 PageID 3413 18 (Wilkerson discussing patients, telemedicine, and commissions with sales team); Ex. 49 (Wilkerson email to sales team noting that “there is huge upside potential in the biz we are in but also some inherent risk” and that “[t]here is great money involved but we have to picky as to who we bring on as reps and make sure we take every opportunity to educate them along the way”). 98. Through his network of representatives, Wilkerson collected leads who were TRICARE beneficiaries, with each lead a chance at a signed FPS prescription and a valuable commission. According to Wilkerson’s “Sales Process” memorandum, the first step was a form filled out by a patient, so that the patient could “choose for what conditions they want treatment.” Ex. 50. Then, the patient filled out an “evaluation form,” which according to Wilkerson, “gives us to ability to use the patient’s evaluation of our product if we wanted to conduct a study.” Id. Next, the forms were sent to one of Wilkerson’s three staff prescribers, who conducted a “phone interview,” signed a prescription, and faxed it to the pharmacy. Id. 99. Emails and medical records reflect these efforts. For example, one patient (A.K.) was first contacted by Matthew Perkins, a Navy employee. See Ex. 51 at 1–2. A.K. filled out a “Pharmacy Order Form” for “Topical Compounded Creams.” Id. at 2. On the form, the field for the patient’s insurance information was pre-filled with “TRICARE.” Id. Perkins then forwarded the form to Michelle Williamson, telling Williamson to “forward to kasey” because “[A.K.] is on the beach and ready for the call” from a teledoctor. Id. Williamson forwarded the form to Kasey Nicholson, one of Wilkerson’s sales representatives. Id. Nicholson then forwarded the form to Michael Chatfield (another of Wilkerson’s sales representatives), who eventually forwarded the information to Toni Dobson (one of Wilkerson’s paid prescribers), so that Dobson could perform a teleconsultation with A.K. and send a prescription to FPS. Id. at 1. 100. Other leads submitted to Wilkerson and his staff prescribers included the Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 25 of 49 PageID 3414 19 “Evaluation Agreement” referenced in Wilkerson’s Sales Process memorandum. See, e.g., Ex. 52 at TB000009. In the agreement, the patient purported to “agree[] to evaluate products that have been known to help some people treat certain skin issues or conditions” and that “if prescribed this product, he or she will use the product as directed by the prescribing medical professional, and will provide an evaluation of the product’s performance.” Id. The patient also acknowledged that “[i]n exchange for providing an evaluation, the undersigned . . . may receive financial payment.” Id. In other words, Wilkerson was paying beneficiaries to purportedly “evaluate” FPS’s products. 101. Wilkerson paid staff prescribers hourly wages to perform “script calling” on leads from Karma. See, e.g., Ex. 53. The prescribers recognized that many of the leads sent by Wilkerson and his sales team were “dead leads” not interested in a consultation. Ex. 54. 102. Nevertheless, the prescribers focused on signing as many prescriptions as possible. For example, on November 26, 2014, Dobson reported to Brande Breneman (Karma’s spa director) that she had 31 patients to call the next day, and that “[f]ingers crossed,” she would “get most of them done well enough to send scripts out.” Ex. 55. Breneman responded and copied Wilkerson, listing a series of patients who needed a teleconsultation as soon as possible so that prescriptions could be faxed to FPS by “EOM” (end of month). Id. at 1. For several, there was already a “chart complete . . . , script ready, signed, info on script, and their insurance page is complete.” Id. All that was left—notwithstanding that the prescription was already “signed and ready”—was a perfunctory call from one of Wilkerson’s prescribers. Id. 103. Mediverse ignored numerous red flags about Wilkerson’s sales practices. For example, in an August 19, 2014 email to Wilkerson, White listed a series of patients for whom FPS needed additional information, such as social security number, address, and date of birth. Ex. 56. For several of the patients, White reported that upon inquiry by Mediverse, they did not Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 26 of 49 PageID 3415 20 recognize the name of Wilkerson’s prescriber (Candace Craven), with one patient reporting that “he’s never heard of doctor Craven and hung up.” Id. White noted that the prescription for another patient “paid great,” even though the patient also reported not knowing who Craven was. Id. 104. Like Mediverse, Wilkerson was focused on TRICARE coverage. The patient demographic forms that Wilkerson used to collect leads had “TRICARE” automatically typed into the insurance field. See, e.g., Ex. 51 at 3. And Wilkerson’s sales representatives often flagged that leads were covered by TRICARE. See, e.g., Ex. 55 at 2 (Email subject line: “TriCare scripts”). 105. In a January 2015 email chain, Wilkerson discussed with White a news article reporting that TRICARE would not, at that time, be changing its reimbursement policies. Ex. 57. Wilkerson explained: “Good News guys!! This confirms what we already were anticipating. Tricare voted to continue covering compounding without a PA [prior authorization]. Its money making time. Saddle up.” Id. at 1. 106. One month later, Wilkerson sent a set of documents to White. Ex. 58 at 2–9. He noted: “Looks like changes may be coming to Tri-care sooner than we though. Not some pleasant info.” Id. at 10. White replied: “DAMN, I will dig in and let you know what I hear.” Id. 107. By December 2014, Wilkerson’s clinic was under investigation. On December 21, 2014, Dr. Vergot resigned as a prescriber due to the “investigation.” Ex. 59. Wilkerson doubled- down, seeking information from his counsel6 about “potential partners in the telemedicine area,” since “[o]ur ability for our providers signing and sending scripts has been limited because of the legal issue . . . and I need to partner with a telemedicine company as soon as possible.” Ex. 60 at 1. He bluntly added: “Every day we cannot send scripts in costs us big money.” Id. 108. The investigation continued, and on March 6, 2015, investigators met with Dobson. 6 In this action, Wilkerson affirmatively waived attorney-client privilege. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 27 of 49 PageID 3416 21 Ex. 61. Two days later, Dobson resigned, noting that “I cannot in good conscience continue to see [Karma’s] patients and prescribe.” Ex. 62. H. Wilkerson earned millions in kickbacks from FPS for TRICARE-covered prescriptions. 109. FPS’s accounting records reflect that between September 11, 2014 and June 18, 2015, FPS paid $3,512,267 to Wilkerson through his LLC, Top Tier Medical. Ex. 63. FPS designated each transfer in its accounting system as for “Commissions.” 110. FPS made payments to Wilkerson in irregular, lump-sum transfers that were tied to TRICARE reimbursements for prescriptions that Wilkerson arranged for FPS to fill. See, e.g., Ex. 64 (FPS report reflecting TRICARE payments for prescriptions tagged to Wilkerson). I. Wilkerson has been indicted and invoked his Fifth Amendment right. 111. At the outset of Wilkerson’s deposition, his counsel stated that he was recommending that Wilkerson invoke his Fifth Amendment right, on a blanket basis, “for all the questions that are to be presented” Ex. 65 (“Wilkerson Tr.”) 3:23–4:9. Wilkerson affirmatively stated: “I’m not going to answer any questions. I invoke my Fifth Amendment right.” Id. 4:18–25. 112. McFarland objected to Wilkerson’s assertion of blanket privilege and sought to proceed. Id. 5:4–12. When asked for his address, Wilkerson invoked the privilege. Id. 5:14–25. 113. When asked whether he received commissions from FPS, Wilkerson’s counsel interjected and instructed Wilkerson not to answer. Id. 6:1–6. 114. Wilkerson again invoked the Fifth Amendment when asked whether he arranged for FPS to fill prescriptions for TRICARE beneficiaries contacted by Wilkerson’s sales representatives. Id. 7:22–6. Wilkerson and his counsel then walked out of the deposition with the record open and McFarland’s counsel prepared to ask questions. Id. 8:7–21; see also Ex. 66. 115. On September 25, 2018, a federal grand jury indicted Wilkerson for his Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 28 of 49 PageID 3417 22 involvement “in a scheme to defraud health insurance providers and government funded insurance by marketing topical creams and other medications to individuals with reimbursable prescription drug coverage plans that paid for the cream and medications.” See Ex. 67 ¶ 1 (the “Indictment”).7 116. The Indictment alleges that Wilkerson “employed the services of health care professionals (doctors or nurse practitioners) for the purposes of writing prescriptions for topical creams and medications for the customers recruited by defendants and marketers working on their behalf.” Id. ¶ 3. “The prescriptions were then sent to compounding pharmacies; the pharmacies would then bill the health insurance provider or TRICARE. The defendants then received a commission from the dispensing pharmacy in the form of a large percentage of the amount paid for the creams/medicines by the health insurance providers or TRICARE.” Id. 117. The Indictment charges Wilkerson with (i) Wire Fraud (Counts 1–21), (ii) Mail Fraud (Counts 106–110), (iii) Health Care Fraud (Counts 132–136), (iv) Money Laundering Conspiracy (Count 150), (v) Payment of Illegal Remuneration in violation of the AKS (Counts 151–156), and (vi) Receipt of Illegal Remuneration in violation of the AKS, including for a $728,660 payment received by Wilkerson from FPS (Counts 167–169). 118. With respect to the AKS, the Indictment charges Wilkerson with knowingly receiving kickbacks and bribes in return for “arranging for” the purchasing of goods for which TRICARE would be paying. Id. at 23–24. 119. The Government has also charged two of Wilkerson’s prescribers. On April 11, 2018, Dr. Vergot pleaded guilty to Conspiracy to Commit Healthcare Fraud against TRICARE. Ex. 68. On November 27, 2018, Candace Craven pleaded guilty to the same offense. Ex. 69. 7 As the ringleader of the alleged conspiracy, Wilkerson is the first named defendant in the Superseding Indictment, but was not a defendant in the original Indictment. The other defendants all worked as part of Wilkerson’s sales team. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 29 of 49 PageID 3418 23 J. Mediverse recruited and onboarded Kotchey as an FPS sales representative, and received compensation based on prescriptions generated by Kotchey. 120. Kotchey was introduced to Mediverse in 2014. Ex. 70 (“Kotchey Tr.”) 29:10–18. 121. Mediverse vetted and onboarded Kotchey at FPS. Mediverse Tr. 80:5–23. 122. FPS paid Kotchey a 25% commission for all payments received from insurers for FPS products sold by Kotchey. Kotchey Tr. 54:5–8. K. Kotchey engaged in dubious marketing practices in order to arrange for the filling of TRICARE-covered prescriptions by FPS and to maximize kickbacks. 123. Like Wilkerson and Mediverse, Kotchey focused on arranging for TRICARE- covered prescriptions to be filled by FPS. 124. Kotchey knew that when Government payors were involved, different laws applied. Id. 338:1–12. But she focused her efforts specifically on TRICARE. She told White in a February 10, 2015 email: “FYI, only selling to the VA/Tri Care [beneficiaries] moving forward. It’s just not getting paid for anymore” by other insurers. Ex. 71 at Kotchey000442. 125. Kotchey used intake forms that had “TRICARE” as a pre-populated field for the patient’s insurance. See, e.g., Ex. 72 at BM000613; Ex. 73 at BM000756; Kotchey Tr. 191:1–2. 126. Kotchey also solicited TRICARE beneficiaries through an online survey she created, www.tricaresurvey.com, offering $300 to any person with military benefits that filled it out. Ex. 74. Kotchey attended military job fairs to find survey-takers. Id. In an April 30, 2015 email to her counsel,8 Kotchey admitted that she was operating a website “where folks can take a survey, and their [sic] then a lead that can qualify for a prescription as well.” Ex. 75. 127. Kotchey marketed FPS’s products to brick-and-mortar doctors, but also worked with telemedicine providers. Indeed, FPS told Kotchey that “telemedicine was working out well 8 In this action, Kotchey waived attorney-client privilege. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 30 of 49 PageID 3419 24 and patients were liking it, and it’s an option.” Kotchey Tr. 161:1–8. 128. In February 2015, Kotchey contacted a telemedicine provider, HouseCalls24/7 (“HouseCalls”), explaining that she had a “small volume of Tricare leads and an intake form” similar to one used for inbound calls. Ex. 76 at Kotchey000407. 129. According to HouseCalls’ owner, Larry Speir, marketers like Kotchey performed intake and provided patient information directly to HouseCalls, which then facilitated telemedicine consultations between patients and teledoctors. Ex. 77 ¶¶ 3–8. 130. Marketers like Kotchey also provided blank prescription pads and fax numbers for physicians to use for any signed prescriptions. Id. ¶ 9. Kotchey made sure that HouseCalls knew how to get the right fax number for FPS, Kotchey Tr. 95:9–16, and that HouseCalls had the right FPS prescription pads, id. 110:12–19. 131. Kotchey’s emails reflect that she sent leads to HouseCalls. For example, Kotchey wrote to Speir on March 17, 2015, checking on the “first 3” leads and noting that “[n]o one has been called yet” by a teledoctor. Ex. 78 at Kotchey000398. When Speir told Kotchey that HouseCalls was working on the consultations, Kotchey explained that she “really need[s] these initial ones done by today if possible,” and offered to “pay extra to the doctors for their time and attention.” Id. at Kotchey00396. Kotchey admitted to her counsel that “I hired [a] Telehealth group, and I am sending them leads. . . . They send it back, and then I send it to the pharmacy.” Ex. 75. 132. On many occasions, Kotchey herself faxed completed HouseCalls prescriptions to FPS from her home office. Kotchey Tr. 186:21–187:5. Kotchey explained that it was her role “to facilitate, you know, I need to make sure everything is done.” Id. 188:10–12. 133. Marketers like Kotchey paid a flat-fee to HouseCalls for each telemedicine consultation. Ex. 77 ¶ 11. In Kotchey’s case, she paid $75 per consultation to HouseCalls. Kotchey Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 31 of 49 PageID 3420 25 Tr. 126:6–14, 127:14–20, 299:6–22. 134. In other words, Kotchey served as a facilitator that linked a telemedicine provider with a pharmacy and paid for the consultations. Id. 177:21–23. In exchange, Kotchey received a 25% commission from FPS for any prescriptions that resulted. Id. 177:24–178:1. 135. Kotchey also purchased patient leads from marketing companies, which she then sent to HouseCalls. Id. 197:24–198:12. Thus, Kotchey not only linked FPS with a telemedicine provider, but she funneled patients to the telemedicine provider. In other words, part of Kotchey’s role as an FPS sales representative was to hire a marketing company that could find patients who were interested in a telemedicine consultation, who following the consultation, might receive an FPS product, billed to TRICARE. Id. 201:21–202:14. 136. Kotchey was often in direct contact with patients who received FPS products. Typically, FPS called patients to verify their shipping address. But notes entered by FPS on April 13, 2015 for a prescription tagged to Kotchey state that “Per rep Melonie, no need to contact the patient, he is aware of the copay, delivery address is verified.” Ex. 73 at BM000754. FPS then shipped the prescription. Weeks later, on May 1, 2015, an FPS staff member updated the notes to reflect that the “[patient] called upset because they’ve never heard of the doctor and received the script. I asked if he did any kind of survey and they said no.” Id. at BM000755. 137. Similarly, FPS’s notes for another prescription reflect that an FPS staff member “called [patient] to get insurance info [and] she asked if it was the survey she did over the phone through her friend and will be free . . . She said . . . she will call her friend that did survey.” Ex. 79 at BM000044. Next, the representative “called Meloney [sic] . . . explained to her what was going on[,] she will call her friend to see what’s up[.] [S]he said she would email back outcome.” Id. 138. Kotchey arranged for FPS and its affiliated pharmacy, Kissimmee, to fill Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 32 of 49 PageID 3421 26 prescriptions for her friends and family. When commissions were later withheld from Kotchey for such prescriptions due to an audit by TRICARE, she admitted to her counsel: “I know for a fact, all of these patients received their medications as many of them are my personal friends and family in the military that have Tricare Insurance.” Ex. 80 at Kotchey530. Kotchey earned commissions for these prescriptions, as for any others. Kotchey Tr. 56:8–57:21, 263:3–9. 139. Kotchey received prescriptions for patients directly at her home. Ex. 81 at BM000036 (listing Kotchey’s residence as shipping address for patient with Alaska billing address); Kotchey Tr. 273:19–278:8 (admitting receipt of commission on $18,000 FPS product prescribed by HouseCalls for patient living in Alaska but shipped to Kotchey’s residence). 140. Although Kotchey had counsel advising her in 2014 and 2015, she did not seek or receive any legal advice about the AKS or its application to marketing. Kotchey Tr. 41:16–42:9. L. Kotchey earned hundreds of thousands of dollars in kickbacks from FPS for TRICARE-covered prescriptions. 141. FPS’s accounting records reflect that between September 16, 2014 and June 13, 2015, FPS paid $794,650 to Kotchey through her LLC, Treasure Health. Ex. 82. FPS designated each transfer in its accounting system as for “Commissions.” 142. Kotchey agreed with the accuracy of FPS’s records. Kotchey Tr. 100:4–14. 143. She also recognized during 2014 and 2015 that TRICARE was reimbursing claims at what she characterized as “outrageous” amounts that “negatively impact[ed] the industry.” Id. 332:17–333:13. Kotchey knew that “some of the ingredients” in FPS’s treatments “were cheap,” and yet TRICARE “would pay so much,” resulting in massive commissions. Id. 333:8–13. LEGAL STANDARDS I. Summary Judgment Standard A district court may grant summary judgment only if “the movant shows that there is no Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 33 of 49 PageID 3422 27 genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A factual dispute precludes summary judgment. See generally Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). “[A] plaintiff against whom summary judgment is sought need not conclusively prove his case but must establish only a genuine issue of material fact.” Kona Spring Water Distrib., Ltd. v. World Triathlon Corp., 2007 WL 842969, at *2 (M.D. Fla. Mar. 19, 2007) (Merryday, J.). “In considering a motion for summary judgment, ‘credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.’” Id. (quoting Liberty Lobby, 477 U.S. at 255)).9 II. FCA Standard The FCA imposes liability upon any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). The FCA defines “knowingly” as “actual knowledge,” “reckless disregard,” or “deliberate ignorance” of truth or falsity, and “require[s] no proof of specific intent to defraud.” Id. § 3729(b)(1). The term “claim” under the FCA means “any request or demand, whether under a contract or otherwise, for money or property” from the United States. Id. § 3729(b)(2). A false claim is “material” if it has “a natural tendency to influence, or [is] capable of influencing,” the Government’s payment decision. Id. § 3729(b)(4). But as Judge Merryday held concerning a prior version of the operative complaint, “a False Claims Act claim predicated on a violation of the amended Anti-Kickback Statute,” such those McFarland asserts here, “need not allege materiality because a violation of the Anti-Kickback Statute presumptively establishes a False Claims Act violation.” (See Order (Dkt. 320) at 11.) 9 Defendants cite a number of cases addressing Rule 9(b) pleading standards. E.g., Mediverse Mot. ¶ 31. But the Court already rejected Defendants’ Rule 9(b) particularity challenge. See MTD Decision at 5. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 34 of 49 PageID 3423 28 A defendant may be liable under the FCA if he directly submits the false claim or “causes” another to submit the claim. See, e.g., U.S. ex rel. Cullins v. Astra, Inc., 2010 WL 625279, at *3 (S.D. Fla. Feb. 17, 2010) (“The parties agree Cullins does not allege that Astra itself ever presented a false claim to the government. But that does not make Count I defective because to be liable a person does not need to be the one who actually presents the claim.” (emphasis in original) (internal citations omitted)). “Although the FCA does not define the phrase ‘cause to be presented,’ courts have applied traditional concepts of proximate causation to determine whether there is a sufficient nexus between the Defendants’ conduct and the ultimate presentation of the allegedly false claim.” U.S. v. Marder, 208 F. Supp. 3d 1296, 1312 (S.D. Fla. 2016) (internal quotation marks and citation omitted)). “Under this analysis, a defendant’s conduct may be found to have caused the submission of a claim for [] reimbursement if the 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.” Id. at 1312–13 (internal quotation marks and citation omitted). III. AKS Standard In 2010, Congress passed legislation, now codified in the AKS, making clear that a claim procured in violation of the AKS is per se a false or fraudulent claim under the FCA. See 42 U.S.C. § 1320a-7b(g) (“[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].”). In this action, McFarland’s only theory of falsity and FCA liability is premised on Defendants’ violation of the AKS. The Court addressed the bulk of the governing AKS standard in the MTD Decision denying Defendants’ motions to dismiss. In brief, the AKS “prohibits the knowing and willful receipt of ‘any remuneration’ in return for ‘referring’ a person to a medical provider who might request reimbursement under a federal health-care program.” MTD Decision at 4 (quoting 42 U.S.C. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 35 of 49 PageID 3424 29 § 1320a-7b(b)(1)(A)). But “[i]n addition to the ban on compensating a person for ‘referring’ a prospective patient, the [AKS] prohibits the knowing and willful receipt of remuneration ‘in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good . . . or item’ for which a federal health-care program might pay.” Id. (quoting 42 U.S.C. § 1320a-7b(b)(1)(B)). In the MTD Decision, the Court held that McFarland adequately alleged under § 1320a-7b(b)(1)(B) that Defendants violated the AKS when they received remuneration from FPS “in exchange for ‘arranging’ or ‘recommending’ the Tricare beneficiaries ordering from FPS of pain cream, scar cream, and wellness capsules.” Id. at 5. For purposes of the AKS’s scienter element, a defendant must have acted “knowingly and willfully.” To act knowingly mean to have acted “voluntarily and intentionally and not because of a mistake or by accident.” U.S. ex rel. Williams v. Health Mgmt. Assocs., Inc., 2014 WL 2866250, at *12 (M.D. Ga. June 24, 2014). To act willfully means to have acted “voluntarily and purposely” with the “intent to do something the law forbids, that is with a bad purpose, either to disobey or disregard the law.” U.S. v. Starks, 157 F.3d 833, 837–38 (11th Cir. 1998). But a defendant need not have acted with specific intent to violate the AKS. 42 U.S.C. § 1320a-7b(h). ARGUMENT I. McFarland need not prove AKS violations beyond a reasonable doubt. Courts have routinely rejected Defendants’ argument that McFarland must prove an AKS violation “beyond a reasonable doubt.” See generally U.S. ex rel. Emanuele v. Medicor Assocs., 2017 WL 4867614, at *7–8 (W.D. Pa. Oct. 26, 2017) (surveying case law and FCA/AKS jury instructions). That the AKS is both a criminal statute and a predicate for civil FCA liability does not mean that McFarland must meet a criminal standard. Indeed, [t]he criminality of predicate offenses in an underlying civil statute . . . does not mandate application of a higher burden of proof in a civil case.” U.S. v. Rogan, 2006 WL 8427270, at *18 & n.12 (N.D. Ill. Oct. 2, 2006) (plaintiff Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 36 of 49 PageID 3425 30 need only prove unlawful kickbacks by a preponderance); see generally Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 491 (1985) (“In a number of settings, conduct that can be punished as criminal only upon proof beyond a reasonable doubt will support civil sanctions under a preponderance standard.”); Liquid Air Corp. v. Rogers, 834 F.3d 1297, 1302 (7th Cir. 1987) (“The requirement of proof beyond a reasonable doubt in a non-criminal case is extremely rare.”). Defendants cite jury instructions from one case—U.S. v. LaHue, 261 F.3d 993, 1016 n.11 (10th Cir. 2001)—for the idea that McFarland must prove their AKS violations beyond a reasonable doubt. E.g., Mediverse Mot. ¶ 64. But LaHue was a criminal case, so the instructions there are immaterial.10 Other than LaHue, Defendants offer no support for their position. II. Claims tainted by unlawful kickbacks are per se false under the FCA. As noted above, a 2010 amendment to the AKS clarified that a claim premised on an AKS violation is per se false. 42 U.S.C. § 1320a-7b(g); see also, e.g., U.S. ex rel. Kester v. Novartis Pharms. Corp., 43 F. Supp. 3d 332, 363 (S.D.N.Y. 2014) (amendment “made clear that compliance with the AKS is a precondition to the reimbursement of claims, not just a condition of participation; claims tainted by AKS violations are ineligible for reimbursement and, thus, ‘false’”). Defendants, however, ignore the 2010 amendment. E.g., Mediverse Mot. ¶¶ 41–44, 77–78. Instead, they wrongly argue, “[a] relator alleging a kickback in a false claims action must show that the provider which submitted claims for reimbursement, and received such reimbursement, certified compliance of the claims with the anti-kickback statutes.” Id. ¶ 41 (citing U.S. ex rel. Franklin v. Parke-Davis, 147 F. Supp. 2d 39, 54 (D. Mass. 2001)). Defendants are wrong. The 2010 amendment to the AKS abrogated Parke-Davis. For 10 Other cases cited by Defendants on this issue appear to be completely irrelevant. For example, Long Island Savings Bank, FSB v. U.S., 476 F.3d 917 (Fed. Cir. 2007) did not arise under the FCA or AKS. And the decision quoted by Defendants was later withdrawn and vacated. See 503 F.3d 1234, 1237 (Fed. Cir. 2007). Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 37 of 49 PageID 3426 31 example, the holding in Parke-Davis that “a violation of the federal antikickback provision is not a per se violation of the FCA,” 147 F. Supp. 2d at 54 (emphasis added), is no longer good law in light of the passage of § 1320a-7b(g), which provides the opposite: a claim that results from an AKS violation is now per se false under the FCA. Similarly, Defendants’ reliance on U.S. ex rel. Keeler v. Eisai, Inc., 568 F. App’x 783 (11th Cir. 2014) (per curiam) is misplaced. There, in an unpublished decision, the Eleventh Circuit relied on Parke-Davis in holding that a relator asserting an FCA claim premised on an AKS violation must prove an express or implied certification, and that “in order for the antikickback violation to be transformed into an actionable FCA claim, the government must have conditioned payment of a claim upon the claimant’s certification of compliance with the antikickback provision.” Id. at 799 (quoting Parke-Davis, 147 F. Supp. 2d at 54). Keeler, however, involved claims submitted to the Government prior to the 2010 AKS amendment, and therefore does not incorporate § 1320a-7b(g) and per se falsity into its analysis. Pursuant to the amendment to the AKS, it is now black-letter law that “the act of submitting a claim for reimbursement itself implie[s] compliance with the AKS, even in absence of any express certification of compliance.” See Novartis, 43 F. Supp. 3d at 364 (internal quotation marks and citation omitted). Here, each of the claims submitted by Defendants to TRICARE post-date the 2010 amendment, and therefore the act of submitting the claims necessarily implied compliance with the AKS. See also Part III, infra. The claims are per se false. III. AKS violations are presumptively material to the Government’s decision to pay. Judge Merryday held in connection with an earlier version of the operative complaint that “a[n] [FCA] claim predicated on a violation of the amended [AKS] need not allege materiality because a violation of the [AKS] presumptively establishes a [FCA] Act violation.” (See Order (Dkt. 320) at 11.) That analysis was and remains correct, because a violation of the AKS is presumptively material. See, e.g., U.S. ex rel. Capshaw v. White, 2018 WL 6068806, at *4 (N.D. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 38 of 49 PageID 3427 32 Tex. Nov. 20, 2018) (“AKS violations are the not ‘garden-variety breaches of contract or regulatory violations’ that the Supreme Court sought [in Escobar] to shield from the wrath of the FCA. They are serious, consequential, felony transgressions of law that the Government actively enforces. Every indication is that this is precisely the kind of violation the FCA is supposed to reach.”); U.S. ex rel. Wood v. Allergan, Inc., 246 F. Supp. 3d 772, 817–18 (S.D.N.Y. 2018) (“[T]he Court has no trouble concluding that compliance with the AKS is a ‘material’ condition of payment,” since, among other things, “violation of the AKS is a far cry from an ‘insubstantial’ regulatory violation”), rev’d on other grounds, 899 F.3d 163 (2d Cir. 2018); see also U.S. ex rel. Berkeley Heartlab, Inc., 2017 WL 4803911, at *7 (D.S.C. Oct. 23, 2017). No matter how many times Defendants invoke Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016), this action—which is premised solely on violations of the AKS and not any certifications concerning technical regulatory requirements—simply is not one barred by the Supreme Court’s materiality analysis. Escobar was, of course, a significant development in FCA jurisprudence. But it is not a decision with implications here. In any event, the taint of an unlawful kickback was material to TRICARE’s decision to pay claims. Faced with mounting losses due to marketing schemes such as Defendants’, TRICARE ceased payments for all compounded prescriptions on May 1, 2015. St. of Material Facts (“SOF”) ¶ 6. Moreover, although they reference TRICARE’s decision earlier in 2015 to continue to pay claims, Defendants have not presented any evidence that the Government continued to pay claims, after that date, with knowledge of their AKS violations and compensation terms. See, e.g., Berkeley, 2017 WL 4803911, at *7 (defendants failed to provide any evidence showing that the Government knew that claims it was paying were “actually tainted by an illegal kickback scheme” (emphasis added)). And the Government has prosecuted marketers, prescribers, and pharmacies involved in Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 39 of 49 PageID 3428 33 TRICARE billing schemes, including Wilkerson, who has been indicated11 for criminal violations of the AKS in connection with his marketing for FPS. SOF ¶¶ 115–19. In sum: As Judge Merryday held and as examined in Allergan, White, and Berkeley, a violation of the AKS is presumptively material to the Government’s payment decision. At the very least, genuine issues of material fact on materiality preclude summary judgment for Defendants. IV. Genuine issues of material fact bar summary judgment on AKS and FCA scienter. Under the FCA, McFarland must show that Defendants acted “knowingly,” means “actual knowledge,” “reckless disregard,” or “deliberate ignorance” of truth or falsity. 31 U.S.C. § 3729(b)(1)(A). But the FCA “require[s] no proof of specific intent to defraud.” Id. § 3729(b)(1)(B). Under the AKS, McFarland must show that Defendants acted “knowingly and willfully.” 42 U.S.C. § 1320a-7b(b)(1)(B). But he need not show that Defendants acted with specific intent to violate the AKS. See id. § 1320a-7b(h). The evidence of Defendants’ mens rea is overwhelming. Defendants were intensely focused on generating TRICARE leads to increase the odds of a signed FPS prescription and a valuable commission. SOF ¶¶ 38–91, 96–114, 122–43. They recognized that the amount of money was “outrageous,” that TRICARE’s continued payment of claims meant it was “money making time,” and that there was a “huge push” to fill TRICARE prescriptions before coverage changed. Id. ¶¶ 47, 77, 105, 143. Indeed, Mediverse admitted that it knew “there was a lot of fraud” in the industry, and even after reviewing an article reporting issues involving compounding pharmacies and telemarketers, it doubled-down and engaged 1stCareMD to churn out as many prescriptions 11 Defendants’ argument that the Government’s decision not to intervene shows that their violations of the AKS were not material, e.g., Mediverse Mot. ¶ 54, is completely unsupported by the FCA, which expressly permits relators to pursue claims absent Government intervention. In any event, the fact that the Government has indicted Wilkerson for a criminal felony shows that his conduct was material to the Government. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 40 of 49 PageID 3429 34 as possible in Spring 2015 before TRICARE’s policies changed.12 Id. ¶¶ 53–54, 91. Moreover, Defendants engaged in highly questionable conduct, such as using an online survey to generate TRICARE leads and paying beneficiaries to “evaluate” compounded products. Id. ¶¶ 100, 126. That McFarland testified that he did not “know what [Defendants] were thinking” when they committed the conduct at-issue in this case is not determinative. E.g., Mediverse Mot. ¶ 27. McFarland need not prove Defendants’ state of mind through his own testimony; indeed, it would be a strange case if a plaintiff’s testimony solely established a defendant’s mens rea. Finally, Defendants’ vague references to advice they purportedly received from counsel are insufficient. SOF ¶¶ 52, 140. As an initial matter, reliance on the advice of counsel is an affirmative defense under the AKS, on which Defendants bear the burden of proof. U.S. v. Vernon, 723 F.3d 1234, 1269 (11th Cir. 2013). Here, Defendants did not assert the defense in their Answers. But even if they had, to succeed, Defendants must show: (1) they disclosed to counsel all material facts that were relevant to the advice for which they consulted counsel; and (2) thereafter, they relied in good faith on the advice given by counsel. Id. Defendants have not provided any evidence that they sought and obtained legal advice about their compliance with the AKS, or that they relied in good faith on advice provided by counsel about the AKS.13 12 Klaczak v. Consolidated Medical Transport, 458 F. Supp. 2d 622, 679 (N.D. Ill. 2006), cited by Defendants, is inapposite. There, the court granted summary judgment because there was no evidence that the defendants earned anything of value. Here, Defendants together earned over $16 million in cash from FPS in less than a year. So, too, is U.S. v. Gonzalez, 834 F.3d 1206 (11th Cir. 2016), which involved a criminal charge of health care fraud, not the FCA. In any event, Gonzalez supports McFarland. There, the Eleventh Circuit upheld a conviction against a clinic nurse who paid kickbacks to patients. Defendants’ reliance on McGee v. Sentinel Offender Services, LLC, 719 F.2d 1236 (11th Cir. 2013) is also misplaced, as that case was decided under Georgia state law. 13 U.S. ex rel. Hefner v. Hackensack University Medical Center, 495 F.3d 103, 110 (3d Cir. 2007) does not stand for the proposition that “[a] defendant’s demonstrated attempts at compliance, to include consulting healthcare legal counsel can entirely eliminate a showing of knowledge and intent to violate the anti-kickback laws.” E.g., Mediverse Mot. ¶ 59. In any event, Defendants have not sustained their burden to show their attempts at compliance with relevant law or their attempts to consult legal counsel on the application of the AKS to their conduct. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 41 of 49 PageID 3430 35 V. Genuine issues of material fact bar summary judgment on whether Defendants received renumeration in exchange for “arranging for” or “recommending” the filling of TRICARE-covered prescriptions by FPS. Defendants do not meaningfully engage on the actual theory of McFarland’s case against them: Defendants violated the AKS by receiving millions of dollars in renumeration from FPS in return for arranging for or recommending the ordering of TRICARE-covered prescriptions from FPS. See § 1320a-7b(b)(1)(B). McFarland has met his burden under Rule 56. Among other things, Defendants (i) solicited TRICARE beneficiaries and developed leads, (ii) arranged for those leads to receive a telemedicine consultation by uploading (a) intake forms and pre-populated FPS prescriptions pads that checked- off specific products into the 1stCareMD Portal, (b) sending leads to HouseCalls, or (c) sending leads to the Karma prescribers, (iii) covered the cost of telemedicine consultations, and (iv) arranged for prescribers to specifically submit signed TRICARE-covered prescriptions to FPS via FPS’s preferred fax number. SOF ¶¶ 38–91, 96–114, 122–43. Defendants were not innocent marketers handing out FPS flyers to doctors for use with their patients. Rather, Defendants were involved at every step of the process that resulted in an FPS prescription and a commission to Defendants, including finding patients, connecting those patients with prescribers, and linking patients and prescribers with FPS. Indeed, Mediverse even designed the FPS prescription pad in order to maximize insurance adjudications and concomitant commissions. SOF ¶¶ 22–32. There is no requirement that Defendants “control” the stream of patient referrals. E.g., Mediverse Mot. ¶ 82 (citing U.S. v. Vernon, 723 F.3d 1234 (11th Cir. 2013)). Rather, as Judge Merryday held in citing Vernon in the MTD Decision, the AKS forbids “unlawful remuneration that far exceeds a reasonable payment for [Defendants’] ‘marketing’ efforts on behalf of FPS.” MTD Decision at 5. In Vernon, the Eleventh Circuit explained in dicta that a person can violate the “referral” prong of the AKS if she receives payments as “the relevant decisionmaker.” But Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 42 of 49 PageID 3431 36 Vernon does not require the recipient of remuneration to “control” the stream of referrals or serve as the final gatekeeper, i.e., be the actual prescriber. Here, as discussed above, the evidence demonstrates that Defendants—who received remuneration only if a prescribed treatment was filled by FPS, and not some other pharmacy—made the decision concerning which compounding pharmacy to “arrange for” prescribers and TRICARE beneficiaries to use.14 In any event, even if “control” of the patient stream is the standard, McFarland has satisfied it. In short, given their central role in connecting TRICARE beneficiaries, teledoctors, and FPS, and in facilitating the writing of an FPS prescription, a jury could easily find that Defendants “arranged for” or “recommended” that FPS fill TRICARE-covered prescriptions. Similarly, given the amount of money Defendants received as commissions or overrides for TRICARE-covered prescriptions and the fact they only received payment if FPS billed TRICARE, a jury could find that Defendants received renumeration from FPS “in exchange for” these activities. VI. Genuine issues of material fact bar summary judgment on causation. The evidence establishes that Defendants were a “substantial factor” in causing false claims tainted by kickbacks to be presented to TRICARE. Marder, 208 F. Supp. 3d at 1312. FPS could not submit any claim for payment without Defendants’ efforts to (i) solicit TRICARE beneficiaries and develop leads, (ii) arrange for those leads to receive a telemedicine consultation (paid for by Defendants), and (iii) arrange for doctors prescribing treatments to submit signed prescriptions specifically to FPS. SOF ¶¶ 38–91, 96–114, 122–43. There is no evidence in the record that prescribers or TRICARE beneficiaries selected FPS to fill prescriptions. Rather, the evidence 14 Citing U.S. ex rel. Akwa v. General Electric Corp., 74 F.3d 1247 (9th Cir. 1996), Defendants argue that because productivity-based compensation was common in the industry, the payments they received cannot qualify as kickbacks. E.g., Mediverse Mot. ¶ 74. Akwa does not support that argument. At bottom, Defendants are arguing that if enough participants in a market violate the AKS or defraud the Government, the conduct is no longer illegal. But the AKS criminalizes the receipt of “any remuneration,” whether “overtly or covertly.” 42 U.S.C. § 1320a–7b(b)(1). Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 43 of 49 PageID 3432 37 shows that it was Defendants who selected FPS as the pharmacy and provided FPS-branded prescription pads and FPS’s fax number to prescribers for the submission of prescriptions. SOF ¶¶ 59–60, 130. Indeed, in many cases, Defendants themselves submitted prescriptions to FPS, an extraordinarily central role in medical care for a sales representative. SOF ¶¶ 67, 131–32. Contrary to Defendants’ argument, the signing of a prescription (necessarily by someone other than Defendants) does not “break the causality that must be shown to plead a kickback.” E.g., Mediverse Mot. ¶ 81. The Eleventh Circuit has held that a person without prescribing authority can unlawfully “refer” patients under the AKS. See Vernon, 723 F.3d at 1255. The same is true for Defendants, who even without prescribing authority, unlawfully “arranged for” FPS to fill prescriptions. A holding that a doctor signing a prescription breaks the causal chain would vitiate Vernon, this Court’s MTD Decision, and completely shield marketers from AKS liability.15 VII. Defendants do not actually argue that their conduct satisfies any AKS safe harbor. The AKS includes several safe harbors that Defendants vaguely refer to. E.g., Mediverse Mot. ¶¶ 65–70. But Defendants do not point to any safe harbor that their conduct satisfies. Indeed, Defendants made an identical argument in their motions to dismiss, and have simply copied-and- 15 Defendants’ reliance on U.S. ex rel. Greenfeld v. Medco Health Solutions, Inc., 880 F.3d 89 (3d Cir. 2018) is misplaced. As an initial matter, Defendants’ statement that a relator must show that “the submission of a false claim was directly caused by an alleged kickback payment” is a patent misstatement of the holding in Greenfeld. E.g., Mediverse Mot. ¶ 32 (emphasis in originals). The Court in Greenfeld held the opposite, stating that “the broad statutory context of the [FCA] and the [AKS] supports the Government’s reading, as neither requires a plaintiff to show that a kickback directly influenced a patient’s decision to use a particular medical provider.” 880 F.3d at 97 (emphasis added). In any event, as set forth above, McFarland has put forward substantial evidence satisfying the framework in Greenfeld that a relator provide evidence of a “link” between the AKS violation and the submission of false claims by the provider. Among other things, Defendants’ submission of FPS’s fax number to prescribers is a clear link. As is the fact that Defendants were only paid upon the actual submission of a claim for reimbursement by FPS. Equally misplaced is Defendants’ reliance on U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702 (10th Cir. 2006). There, the Court held that a relator must show “an affirmative action on the part of the defendant[]” that is more than “passive acquiescence” to the submission of false claims. As discussed above, McFarland has shown far more than passive acquiescence by Defendants to FPS’s submission of false claims tainted by kickbacks. Indeed, the evidence shows that Defendants focused their sales efforts on finding TRICARE beneficiaries and linking them to teledoctors, and that Defendants affirmatively arranged for resulting prescriptions to be submitted to FPS so that FPS could file claims, seek TRICARE reimbursement, and pay commissions. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 44 of 49 PageID 3433 38 pasted their prior argument. Compare id. ¶¶ 65–70, with Mediverse Mot. to Dismiss 2d Am. Compl. ¶¶ 23–27. In denying Defendants’ motions to dismiss, Judge Merryday explained that “[t]o the extent that Kotchey, Mediverse, and Wilkerson argue that the application of the [AKS] risks prohibiting lawful marketing tactics, the heightened mens rea requirement and several ‘safe harbors’ in the [AKS] limit liability.” MTD Decision at 5. Now, following discovery, Defendants have not come forward with any evidence that they fit within any safe harbor. And, as discussed above, there are certainly genuine issues of material fact as to their mens rea. Nor are Defendants correct that McFarland seeks to hold them accountable simply because they do not satisfy a safe harbor. E.g., Mediverse Mot. ¶ 70. Rather, as discussed above, the evidence demonstrates that Defendants affirmatively violated the AKS. This is not a case in which the relator assumes that there was a violation of the AKS by virtue of the defendant’s inability to satisfy a safe harbor. Rather, McFarland has come forward with the medical records, contracts, TRICARE data, emails, and testimony to show that Defendants violated the AKS.16 VIII. Wilkerson’s blanket invocation of the Fifth Amendment bars summary judgment. Wilkerson is not entitled to summary judgment because he failed to attend his deposition and sought to invoke the Fifth Amendment on a blanket basis. SOF ¶¶ 111–14. Generally, a “blanket refusal . . . to testify will not support a fifth amendment claim.” U.S. v. Argomaniz, 925 F.3d 1349, 1356 (11th Cir. 1991). Rather, “[i]t is well established that a person . . . instead[] must invoke the privilege question by question . . . .” Nat’l Phys. Holding Co. v. Middlebury Equity Partners, LLC, 2018 WL 1053538, at *2 (M.D. Ga. Feb. 26, 2018) (citing U.S. v. Roundtree, 420 16 Wilkerson and Kotchey’s argument that all McFarland can show is “aggressive patient marketing techniques,” Wilkerson Mot ¶ 66; Kotchey Mot. ¶ 83, is belied by the MTD Decision. See MTD Decision at 5 (“If true, the facts alleged in the complaint appear to demonstrate not innocent compensation for ‘marketing’ but rather unlawful remuneration that far exceeds a reasonable payment for [Defendants’] ‘marketing’ efforts on behalf of FPS.”). In any event, the cases cited by Wilkerson and Kotchey are inapplicable. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 45 of 49 PageID 3434 39 F.2d 845, 852 (5th Cir. 1969)).17 If Wilkerson is going to seek summary judgment, he should first appear for a deposition and invoke the Fifth Amendment in the proper manner. During the brief period that Wilkerson appeared for his deposition, he invoked the Fifth Amendment when asked whether FPS paid him commissions and whether he arranged for FPS to fill prescriptions for TRICARE beneficiaries contacted by Wilkerson’s sales representatives. SOF ¶¶ 113–14. Although an adverse inference may not be available to a plaintiff where a “defendant in both a civil and a criminal case[] is forced to choose between waiving his privilege against self- incrimination or losing the civil case on summary judgment,” U.S. v. Premises Located at Route 13, 946 F.2d 749, 756 (11th Cir. 1991), McFarland seeks only to avoid summary judgment. Short of an adverse inference, the Court may certainly take Wilkerson’s refusal to testify into account in denying summary judgment. At the very least, McFarland must have an opportunity to depose Wilkerson (even if he properly invokes the Fifth Amendment question-by-question) before judgment is entered for Wilkerson. See Fed. R. Civ. P. 56(d)(1) & Ex. 66. IX. Defendants are not entitled to attorneys’ fees. Defendants move for an award of attorneys’ fees, e.g., Mediverse Mot. ¶¶ 85–87, under a provision of the FCA that authorizes the Court to award reasonable fees, in its discretion, “if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” 31 U.S.C. § 3730(d)(4) (emphasis added). Defendants are not entitled attorneys’ fees. “An action is frivolous when the case is so lacking in arguable merit as to be groundless or without foundation rather than whether the claim was ultimately successful.” U.S. ex rel. Bane v. Breathe Easy Pulmonary Servs., Inc., 2009 WL 17 Roundtree is binding precedent. See Bonnet v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981). Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 46 of 49 PageID 3435 40 1148632, at *5 (M.D. Fla. Apr. 28. 2009) (internal quotation marks and citation omitted). “Similarly, an action is clearly vexatious or brought primarily for purposes of harassment when the plaintiff pursues the litigation with an improper purpose, such as to annoy or embarrass the defendant.” Id. (internal quotation marks and citation omitted). Indeed, “an award of fees should be reserved for rare and special circumstances.” Id. at *4; see also, e.g., U.S. ex rel. Chabot v. Wilson Transp. Mobile Home Serv., Inc., 2010 WL 11537818, at *2–3 (M.D. Fla. Oct. 20, 2010) (declining to award fees where, among other things, “issues were complicated and ‘hotly contested’”); U.S. ex rel. Dodge v. ACS State & Local Solutions, Inc., 2009 WL 1748540, at *1 (M.D. Fla. June 18, 2009) (no fees where case “was a close call”).18 Here, Defendants have utterly failed to show that McFarland’s claims are “clearly frivolous,” “clearly vexatious,” or “brought primarily for purposes of harassment.” Defendants cite no case from this Court or from within the Eleventh Circuit awarding attorneys’ fees to a prevailing defendant under the FCA. And this action is not the “rare and special circumstance” where an award of fees is appropriate. Indeed, how can McFarland’s claims be clearly frivolous or vexatious when they survived a fully litigated motion to dismiss for failure to state a claim? Wilkerson’s request for fees is particularly brazen considering his invocation of the Fifth Amendment on a blanket basis and that he has been indicted for the very conduct challenged by McFarland. CONCLUSION For the foregoing reasons, McFarland respectfully requests that the Court deny Defendants’ motions for summary judgment. 18 The out-of-Circuit cases Defendants rely on are inapposite. In Mikes v. Straus, 274 F.3d 687, 705 (2d Cir. 2001), the Court upheld an award of fees where the marketers earned remuneration through flat-rate consulting fees that did not depend on productivity. Here, Defendants’ compensation was incentive-based and directly tied to whether they could arrange for FPS to fill prescriptions. Similarly, in U.S. ex rel. Haycock v. Hughes Aircraft Co., 99 F.3d 1148, 1148 (9th Cir. 1996) (unpublished), the defendant provided declarations from government officials showing that the officials approved the defendant’s specific conduct. Defendants have no such evidence here. Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 47 of 49 PageID 3436 41 Date: January 14, 2019 REID COLLINS & TSAI LLP /s/ Ryan M. Goldstein 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 421 Filed 01/14/19 Page 48 of 49 PageID 3437 42 CERTIFICATE OF SERVICE I HEREBY CERTIFY that, on January 14, 2019, the foregoing document was filed using the CM/ECF system, which will send notice of electronic filing to all counsel of record. /s/ Ryan M. Goldstein Ryan M. Goldstein Case 8:15-cv-01708-SDM-TGW Document 421 Filed 01/14/19 Page 49 of 49 PageID 3438