Pain Clinic Chain to Pay $11M to Settle Fraud Claims

By Don Thompson, KFF Health News

The owner of one of California’s largest chains of pain management clinics has agreed to pay nearly $11.4 million to California, Oregon, and the federal government to settle allegations of Medicare and Medicaid fraud.

The U.S. Department of Justice and the states’ attorneys general say Francis Lagattuta, a physician, and his Lags Medical Centers performed — and billed for — medically unnecessary tests and procedures on thousands of patients over more than five years.

It was “a brazen scheme to defraud Medicare and Medicaid of millions of dollars by inflicting unnecessary and painful procedures on patients whom they were supposed to be relieving of pain,” Phillip Talbert, U.S. attorney for the Eastern District of California, said in a statement this month.

The federal Medicare program suspended reimbursements to Lags Medical in June 2020, and Medi-Cal, California’s Medicaid program, followed in May 2021. Lags Medical shut down the same day the state suspended reimbursements. The company, based in Lompoc, California, had more than 30 pain clinics, most of them in the Central Valley and the Central Coast.

A KFF Health News review last year found the abrupt closure left more than 20,000 California patients — mostly working-class people on government-funded insurance — struggling to obtain their medical records or continue receiving pain prescriptions, which often included opioids.

Lagattuta and Lags Medical did not admit liability under the settlement. Lagattuta denied the governments’ claims, saying in a statement he was “pleased” to announce the settlement of a “long-standing billing dispute.” As part of the agreement, Lagattuta will be barred for at least five years from receiving Medicare and Medicaid reimbursements.

“Since the Centers have been closed for a couple of years, it made sense for Dr. Lagattuta to settle the dispute and continue to move forward with his other business interests and practice,” Malcolm Segal, an attorney for Lagattuta and the centers, said in the statement.

According to state officials, the federal government will receive the bulk of the money, about $8.5 million. California will receive about $2.7 million, and an additional $130,000 will go to Oregon. The settlement amount is based in part on Lagattuta’s and Lags Medical’s “ability to pay.” It does not cover the governments’ full losses, which the U.S. attorney’s office in Sacramento said are not public record.

Blanket Orders for Unnecessary Tests

A nearly four-year investigation by federal officials and the California Department of Justice found that from March 2016 through August 2021, Lagattuta and his company submitted reimbursement claims for unneeded skin biopsies, spinal cord stimulation procedures, urine drug tests, and other tests and procedures.

Lagattuta began requiring all his clinics to perform various medical procedures on every patient, the officials said, no matter if they were needed or requested by patients’ medical providers. Patients who refused were told they would have their pain medication reduced and could suffer adverse medical consequences.

U.S. and California investigators piggybacked on a federal claim filed in late 2018 by a whistleblower, Steven Capeder, Lags Medical’s former operations and marketing director, who will receive more than $2 million of the settlement.

As part of the settlement, Lagattuta and his company acknowledged that in mid-2016 he began requiring his providers to do at least two to three skin biopsies on Medicare patients each day and told providers to quit if they wouldn’t comply. Such biopsies are used to measure small-fiber neuropathy, which causes burning pain with numbness and tingling in the feet and lower extremities.

According to the settlement, a monthly report in early 2018 set a goal of performing 250 biopsies a week. Lagattuta created a separate team that was required to order at least 150 biopsies weekly, often overruling providers. And the company’s chief executive officer in late 2019 texted Lagattuta to report a particularly high number of biopsies, illustrating the text with emojis of a money bag and a smiley face.

Authorities said Lagattuta violated regulations requiring that skin biopsy results be interpreted by a trained pathologist or neurologist. Instead, they say, Lagattuta had the biopsies read by a family member who had no formal medical training and by a former clinic executive’s spouse, who was trained as a respiratory therapist.

Lags Medical clinics performed more than 22,000 biopsies on Medi-Cal patients from 2016 through 2019.

The settlement also alleges Lagattuta encouraged unsuitable patients to undergo spinal cord stimulation. It describes the procedure as “an invasive surgery of last resort,” in which implants placed near the spinal cord apply low-voltage electrical pulses to nerve fibers.

Lagattuta paid a psychiatrist $3,000 each month to falsely certify that every Lags Medical candidate for the procedure had no psychological or substance use disorders that would negatively affect the outcome, according to the settlement. For instance, the settlement says the psychiatrist overruled a Lags Medical social worker to OK the procedure for a young woman who had bipolar disorder with hallucinations that included hearing a man’s voice ordering her out of bed.

He also issued blanket orders for every patient to have urine drug testing, a policy the company’s CEO said “should be a big money maker.”

KFF Health News found that from 2017 through 2019 nearly 60,000 of the most extensive urine drug tests were billed to Medicare and Medi-Cal under Lagattuta’s provider number. Medicare reimbursed Lagattuta $5.4 million for those tests.

The clinics “carefully examined, tested, and treated” more than 60,000 patients during the time covered by the settlement, “when others might have been content to prescribe medication to mask pain,” said Lagattuta’s statement. 

KFF Health News is a national newsroom that produces in-depth journalism about health issues.

Closed Pain Clinics Were ‘Always Pushing Injections’

By Anna Maria Barry-Jester and Jenny Gold, Kaiser Health News

On May 13 of last year, the cellphones of thousands of California residents undergoing treatment for chronic pain lit up with a terse text message: “Due to unforeseen circumstances, Lags Medical Centers will be closing effective May 19, 2021.”

In a matter of days, Lags Medical, a sprawling network of privately owned pain clinics serving more than 20,000 patients throughout the state’s Central Valley and Central Coast, would shut its doors. Its patients, most of them working-class people reliant on government-funded insurance, were left without ready access to their medical records or handoffs to other physicians.

Many patients were dependent on opioids to manage the pain caused by a debilitating disease or injury, according to alerts about the closures that state health officials emailed to area physicians. They were sent off with one final 30-day prescription, and no clear path for how to handle the agony — whether from their underlying conditions or the physical dependency that accompanies long-term use of painkillers — once that prescription ran out.

The closures came on the same day that the California Department of Health Care Services suspended state Medi-Cal reimbursements to 17 of Lags Medical’s 28 locations, citing without detail “potential harm to patients” and an ongoing investigation by the state Department of Justice into “credible allegations of fraud.”

In the months since, the state has declined to elaborate on the concerns that prompted its investigation. Patients are still in the dark about what happened with their care and to their bodies.

photo by Kathleen Hayden (KHN)

Even as the government remains largely silent about its investigation, interviews with former Lags Medical patients and employees, as well as KHN analyses of reams of Medicare and Medi-Cal billing data and other court and government documents, suggest the clinics operated based on a markedly high-volume and unorthodox approach to pain management. This includes regularly performing skin biopsies that industry experts describe as out of the norm for pain specialists, as well as notably high rates of other sometimes painful procedures, including nerve ablations and high-end urine tests that screen for an extensive list of drugs.

Those procedures generated millions of dollars in insurer payments in recent years for Lags Medical Centers, an affiliated network of clinics under the ownership of Dr. Francis P. Lagattuta. The clinics’ patients primarily were insured by Medicare, the federally funded program for seniors and people with disabilities, or Medi-Cal, California’s Medicaid program for low-income residents.

Taken individually, the fees for each procedure are not eye-popping. But when performed at high volume, they add up to millions of dollars.

Take, for example, the punch biopsy, a medical procedure in which a circular blade is used to extract a sample of deep skin tissue the size of a pencil eraser. The technique is commonly used in dermatology to diagnose skin cancer but has limited use in pain management medicine, usually involving a referral to a neurologist, according to multiple experts interviewed. These experts said it would be unusual to use the procedure as part of routine pain management.

KHN used Medi-Cal records to assess the volume of services performed across the entire chain. But the state could not provide totals for how much Lags Medical was reimbursed because of California’s extensive use of managed-care plans, which do not make their reimbursement rates public. Where possible, KHN estimated the worth of Medi-Cal procedures based on the set rates Medi-Cal pays traditional fee-for-service plans, which are public.

Lags Medical clinics performed more than 22,000 punch biopsies on Medi-Cal patients from 2016 through 2019, according to state data. Medi-Cal reimbursement rates for punch biopsies changed over time. In 2019 the state’s reimbursement rate was more than $200 for a set of three biopsies performed on patients in fee-for-service plans.

Laboratory analysis of punch biopsies was worth far more. Lags Medical clinics sent biopsies to a Lags-affiliated lab co-located at a clinic in Santa Maria, according to medical records and employee interviews. From 2016 through 2019, Lags Medical clinics and providers performed tens of thousands of pathology services associated with the preparation and examination of tissue samples from Medi-Cal patients, according to state records. The services would have been worth an estimated $3.9 million using Medi-Cal’s average fee-for-service rates during that period.

In that same period, Medicare reimbursed Lagattuta at least $5.7 million for pathology activities using those same billing codes, federal data shows.

‘Assembly Line’ Pain Care

Much of the work at Lags Medical was performed by a relatively small number of nurse practitioners and physician assistants, each juggling dozens of patients a day with sporadic, often remote supervision by the medical doctors affiliated with the clinics, according to interviews with former employees. Lagattuta himself lived in Florida for more than a year while serving as medical director, according to testimony he provided as part of an ongoing malpractice lawsuit that names Lagattuta, Lags Medical, and a former employee as defendants.

Former employees said they were given bonuses if they treated more than 32 patients in a day, a strategy Lagattuta confirmed in his deposition in the malpractice lawsuit. “If they saw over, like, 32 patients, they would get, like, $10 a patient,” Lagattuta testified.

The lawsuit, filed in Fresno County Superior Court, accuses a Lags Medical provider in Fresno of puncturing a patient’s lung during a botched injection for back pain. Lagattuta and the other named defendants have denied the incident was due to negligent treatment, saying, in part, the patient consented to the procedure knowing it carried risks.

Hector Sanchez, the nurse practitioner who performed the injection and is named in the lawsuit, testified in his own deposition that providers at the Lags Medical clinic in Fresno each treated from 30 to 40 patients on a typical workday.

According to Sanchez’s testimony and interviews with two additional former employees, Lags Medical clinics also offered financial bonuses to encourage providers to perform certain medical procedures, including punch biopsies and various injections. “We were incentivized initially to do these things with cash bonuses,” said one former employee, who asked not to be named for fear of retribution. “There was a lot of pressure to get those done, to talk patients into getting these done.”

In his own deposition in the Fresno case, Lagattuta denied paying bonuses for specific medical procedures.

‘Injections, Injections, Injections’

Interviews with 17 former patients revealed common observations at Lags Medical clinics, such as crowded waiting rooms and an assembly-line environment. Many reported feeling pressure to consent to injections and other procedures or risk having their opioid supplies cut off.

Audrey Audelo Ramirez said she had worried for years that the care she was receiving at a Lags Medical clinic in Fresno was subpar. In the past couple of years, she said, there were sometimes so many patients waiting that the line wrapped around the building.

Ramirez, 52, suffers from trigeminal neuralgia, a rare nerve disease that sends shocks of pain across the face so severe it’s known as the “suicide disease.” Over the years, Lags Medical had taken over prescribing almost all her medications. This included not only the opioids and gabapentin she relies on to endure excruciating pain, but also drugs to treat depression, anxiety, and sleep issues.

Ramirez said she often felt pressured to get procedures she didn’t want. “They were always just pushing injections, injections, injections,” she said. She said staffers performed painful punch biopsies on her that resulted in an additional diagnosis of small fiber neuropathy, a nerve disorder that can cause stabbing pain.

She was among numerous patients who said they felt they needed to undergo the recommended procedures if they wanted continued prescriptions for their pain medications. “If you refuse any treatment they say they’re going to give you, you’re considered noncompliant and they stop your medication,” Ramirez said.

She said she eventually agreed to an injection in her face, which she said was administered without adequate sedation. “It was horrible, horrible,” she said. Still, she said, she kept going to the office because there weren’t many other options in her town.

Lagattuta, through his lawyer, declined a request from KHN to respond to questions about the care provided at his clinics, citing the state investigation. “Since there is an active investigation, Dr. Lagattuta cannot comment on it until it is completed,” attorney Matthew Brinegar wrote in an email. Lagattuta’s license remains in good standing, and he said in his deposition in the Fresno lawsuit that he is still seeing patients in California.

Experts interviewed by KHN noted that medical procedures such as injections can have a legitimate role in comprehensive pain management. But they also spoke in general terms about the emergence of a troubling pattern at U.S. pain clinics involving the overuse of procedures. In the 1990s and early 2000s, problematic pain clinics hooked patients on opioids, then demanded cash to continue prescriptions, said Dr. Theodore Parran, who is a professor of medicine at Case Western Reserve University and has served as an expert witness in federal investigations into pain clinics.

“What has replaced them are troubled pain clinics that hook patients with the meds and accept insurance, but overuse procedures which really pay well,” he said. For patients, he added, the consequences are not benign.

“I mean they are painful,” he said. “You’re putting needles into people.”

Cash Bonuses for Procedures

Before moving to California in 1998, Dr. Francis Lagattuta lived in Illinois and worked as a team doctor for the Chicago Bulls during its 1995-96 championship season. Out West, he opened a clinic in Santa Maria, a Latino-majority city along California’s Central Coast known for its strawberry fields, vineyards, and barbecue. From 2015 to 2020, the chain grew from a couple of clinics in Santa Barbara County to dozens throughout California, largely in rural areas, as well as far-flung locations in Washington state, Delaware, and Florida.

The California portion of the chain is organized as more than two dozen corporations and limited liability corporations owned by Lagattuta. His son, Francis P. Lagattuta II, was a manager for the company.

On the Lags Medical website and in conversation with employees, the elder Lagattuta claimed he was on the vanguard of diagnosing and treating small fiber neuropathy. Much of the website has now been taken down. But pages available via an archival site claim he had pioneered a three-pronged approach to pain management that made minimal use of opioids and surgeries, instead emphasizing testing, injections, mental health, diet, and exercise.

“In keeping with his social justice values, Dr. Lagattuta plans to share these findings to the rest of the world, hopefully to help solve the opioid crisis, and end suffering for millions of people struggling with pain,” touted a biography once highlighted on the website.

Dr. Francis Lagattuta (Twitter)

Numerous Lags Medical patients interviewed by KHN said that even when they were given punch biopsies and a subsequent diagnosis of neuropathy, their treatment plan continued to involve high doses of opioid medications.

Dr. Victor C. Wang, chief of the division of pain neurology at Brigham and Women’s Hospital in Boston, said punch biopsies are occasionally used in research but are not a standard part of pain medicine. Instead, small fiber neuropathy is usually diagnosed with a simple clinical exam.

“The treatment is going to be the same whether you have a biopsy or not,” said Wang. “I always tell the fellows, you can do this test or that one, but is it really going to change the management of the patient?”

Ruby Avila, a mother of three in Visalia, remembers having the punch biopsies done at least three times during her four years as a Lags Medical patient. “I have scars down my leg,” she said. Each time, she said, providers removed a set of three skin specimens that were used to diagnose her with small fiber neuropathy.

Avila, 37, who has lived with pain since childhood, had found it validating to finally have a diagnosis. But after learning more about how common the biopsies were at Lags Medical, she was shaken. “It’s overwhelming to hear that they were doing it on a lot of people,” she said.

Sanchez, the nurse practitioner named in the Fresno lawsuit, spoke of other procedures that garnered bonuses: “Trigger point injections, knee injections, hip injections, foot injections for plantar fasciitis and elbow injections” all qualified for $10 bonuses, he said in his testimony.

Two former employees, who asked not to be named, echoed Sanchez, saying they were incentivized to do certain procedures, including injections and punch biopsies.

In his testimony in the Fresno case, Lagattuta denied paying bonuses for procedures. “It was only for the patients,” he said. “We never did it based on procedures.”

Incentive systems for a specific procedure are “completely unethical,” said Dr. Michael Barnett, an assistant professor of health policy at Harvard. “It’s like giving police officers a quota for speeding tickets. What do you think they’re going to do? I can’t think of any justification.”

Dr. Carl Johnson, 77, is a pathologist who directed Lags Medical’s Santa Maria lab from 2018 to 2021. Johnson said the only specimens he looked at came from punch biopsies, the first time in his long career as a pathologist that he had been asked to run such an analysis. On an average day, he said, he examined the slides of about 40 patients, searching for signs of small fiber neuropathy. Lagattuta gave him papers to read on peripheral neuropathy and assured him they were on the cutting edge of care for pain patients.

Johnson said he “never thought there was anything untoward going on” until he arrived on his last day and was told to pack up his belongings because the entire operation was shutting down.

Nerve Ablations and Drug Tests

Lags Medical performed other procedures at rates that also set them apart. From 2015 through 2020 — the span for which KHN had state data — Lags Medical performed more than 24,000 nerve ablations, a procedure in which part of a nerve is destroyed to reduce pain, on Medi-Cal patients. That’s more than 1 in 6 of all nerve ablations billed through Medi-Cal during that period.

An analysis of federal data also shows Lagattuta was an outlier. For example, in 2018 he billed Medicare for nerve ablations more often than 88% of the doctors in his field who performed the procedure.

Lags Medical also used the in-house lab to run drug tests on patients’ urine samples. From 2017 through 2019, Lags Medical facilities often ordered the most extensive — and expensive — set of drug tests, which check for the presence of at least 22 drugs, according to state and federal data.

For perspective, in 2019, more than 23,000 of the most extensive drug tests were ordered on Medi-Cal patients under Lagattuta’s provider number, more than double the number tied to the next highest biller. The next five top billers were all lab companies.

Overall, from 2017 through 2019, nearly 60,000 of the most extensive drug tests were billed to Medicare and Medi-Cal under Lagattuta’s provider number. Medicare reimbursed Lagattuta $5.4 million for these tests during that period. Using state fee-for-service rates, the testing billed to Medi-Cal would have been worth an estimated $6.3 million. That doesn’t include less extensive drug screens or those billed under other providers’ numbers.

Pain management experts described the use of extensive screening as unnecessary in routine pain treatment; the overuse of such tests has been the subject of numerous Medicare investigations in recent years.

Private pain clinics like Lags Medical are only loosely regulated and generally are not required to hold a special license from the state. But the physicians who work there are regulated by the Medical Board of California.

In December 2019, a patient who’d visited clinics in both Visalia and the Central Coast filed a complaint against Lagattuta with the medical board claiming, among other things, that she received biopsies that were not properly performed, that she underwent excessive testing, and that positive drug tests had been falsified. The medical board had another pain management doctor review more than 300 pages of documents and found “no deviations from the standard of care” and “did not find any over testing, or improperly performed biopsies.”

He did, however, find some record-keeping problems, including numerous procedures in which patient consent was not documented. He also found instances in which procedures were performed and repeated without documentation that they were effective. The patient who filed the complaint was given a medial branch nerve block in November 2014, followed by a radiofrequency ablation in December, and another in February. No improvements for the patient were ever noted in the charts, the investigating doctor found.

The medical board chalked it up to a record-keeping error and fined Lagattuta $350.

Opioids Needed for ‘Halfway-Normal Life’

On a warm evening in late July, Leah Munoz drove her power wheelchair around the long plastic tables at the Veterans Memorial Building in Hanford, a dusty farm town in California’s Central Valley. Senior bingo night was crowded with gray-haired players waiting for the game to begin. She found an empty spot and carefully set out $50 worth of bingo cards, alongside her collection of 14 brightly colored daubers.

Munoz, 55 and a mother of six, said she has suffered from a litany of illnesses — thyroid cancer, breast cancer, lupus, osteoarthritis — that leave her in near-constant pain. She’s been playing bingo since she was a little girl, and said it helps distract from the pain and calm her mind. She looks forward to this event all week.

Munoz was a Lags Medical patient for about four years and, while her pain never disappeared, the opioids prescribed provided enough relief for her to continue doing the things she loved. “There’s a difference between addiction and dependence. I need it to live a halfway-normal life,” Munoz said.

leah and ramon munoz

After Lags Medical closed in May, her primary care doctor initially refused to refill her opioid prescriptions. She said she called the Lags Medical offices to try to get a copy of her medical records to prove her need, and even showed up in person. But she said she was unable to get them. As the pills dwindled and the pain surged, Munoz said, it became hard to leave her home. “I missed a lot of bingo, a lot of grocery shopping, a lot of going to my grandkids’ birthday parties. You miss out on life,” she said. Ultimately, she said, her primary care doctor referred her to another pain clinic, and she was able to resume her prescription.

Even with pain medications, Munoz said, she never received true relief during her time as a patient at Lags Medical. She said she felt coerced to get several injections, none of which seemed to help. “If I didn’t get the procedures, I didn’t get the pain medication,” she said. Her husband, Ramon, a landscaper who was also a patient, received an injection there that he said left him with permanent stiffness in his neck.

Munoz knows at least five other people at bingo night who were former patients at Lags Medical. One of them, Rick Freeman, came over to her table to chat. He swayed back and forth as he walked, his knees, he explained, swollen after 35 years living with HIV. At Lags Medical, Freeman said, he felt pressured by staff to receive injections if he wanted to continue receiving his opioid prescriptions. “If you don’t cooperate with them, they would reduce your meds down,” he said.

At the front of the room, Gail Soto, who ran the event, sold bingo cards to the latecomers. Soto, 72, said she injured her back while working an administrative job at a construction company years ago and suffers from spinal stenosis, rheumatoid arthritis, and fibromyalgia. She, too, was a patient at Lags Medical for years. In addition to her opioid prescription, Soto said, she received repeated injections and three nerve ablations. At first, the ablations helped, but what staff members didn’t tell her, she said, was that the nerves they destroyed could grow back. Ultimately, she said, the procedures left her in worse pain.

Soto’s biggest concern is the spinal stimulator that she said Lags Medical surgically inserted into her back five years ago. She said the doctors told her the device would work so well that she would no longer need her pain pills. She said they didn’t explain that the device would work only two hours a day, and on one side of her body. She remained in too much pain to give up her meds, she said, and, five years later, the battery is failing.

Soto sleeps in a recliner chair in her three-bedroom mobile home in Lemoore, another small city near Hanford. It’s well kept but humble, and she and her husband keep a collection of wind chimes on the front porch that create a wave of gentle music when a breeze passes by.

The couple take good care of each other and their two beloved Chihuahuas, but life has become increasingly difficult for Soto. As the battery on her spinal stimulator has started to fail, she said, she has sudden electrical pulses that shoot up her body.

GAIL SOTO

“My husband says sometimes when I sleep that my body will just jump up in the air,” she said. But now that Lags Medical is closed, she said, she can’t find a doctor willing to remove the device. “Most doctors are telling me right now, ‘We can’t, because we didn’t [put it in]. We don’t want nothing to do with that.’”

Waitlists and Withdrawal

Audrey Audelo Ramirez said she picked up her final refill from Lags Medical on June 4 and by July 4 had no meds left to treat her pain. Ramirez said she called every pain management clinic in Fresno, but none were taking new patients.

“They left us all high and dry,” she said. “Everybody.”

In the weeks that followed the closures, county officials throughout the Central Valley saw a flood of patients on high doses of opioids in search of new providers, they said. Patients couldn’t access their medical records, so other providers had no idea what their treatments had been.

“We had to create a crisis response to it because there was no organized response at that time,” said Dr. Rais Vohra, the interim health officer for Fresno County.

Fresno County’s health system is already lean, Vohra said. Toss in this abrupt closure and you end up in the kind of crisis rarely seen in other fields of medicine: “You’d never do this with a cancer clinic,” he said. “You’d never abruptly stop chemo.”

The state asked Dr. Phillip Coffin, director of substance abuse research for the San Francisco Department of Public Health, to run provider training and persuade doctors to take on new patients. Many practices have rules against taking new patients on opioids, or will refuse to prescribe doses above certain thresholds.

“We know that when you stop prescribing opioids, some people end up with death from suicide, overdose, increased illicit opioid use, pain exacerbations. It’s really important to have a continuity, and that is not really possible in the current opioid-prescribing culture,” Coffin said. The threat to patients is so severe that the FDA issued a warning in 2019 against cutting patients off from prescription opioids.

Gina, a retired nurse who asked to be identified by only her first name for fear she’d be discriminated against by other doctors, had been a Lags Medical patient for six years. She said she called every practice she could find in her Central Coast town, and was put on a waiting list at one. Suffering from a severe case of scoliosis, she started rationing the pain pills she had come to rely on.

When she finally secured an appointment, she said, she was told by the doctor she was on “some very strong meds” and he would fill only one of her two prescriptions. “You’re like a criminal,” she said. “You’re branded as ‘we don’t trust you.’”

She started experiencing withdrawal symptoms — sweating, lost appetite, sleeplessness, anxiety. Worst of all, her pain “came back with a vengeance,” she said.

“I think about this, what I’d have been like if I’d never gone through pain management. I sometimes wonder if I’d be better off.”

As for Ramirez, her primary care doctor finally secured an appointment for her at another pain clinic, she said. It was in the same space as the old Lags Medical clinic, and she said she recognized many of the staff members. But now there was a new name: Central California Pain Management. From her perspective, it was as if nothing had changed. And she still doesn’t know whether she needs to worry about the care she received during more than four years at Lags Medical.

This story was produced by Kaiser Health News. Senior correspondent Jordan Rau and Phillip Reese, an assistant professor of journalism at California State University-Sacramento, contributed to this report.

Former VP of Genetic Test Company Pleads Guilty to Paying Doctors Illegal Kickbacks

By Pat Anson, PNN Editor

The former vice-president of marketing for a controversial genetic testing company has pleaded guilty in federal court to paying physicians millions of dollars in illegal kickbacks to order genetic tests for Medicare patients.

Donald Matthews, who was Vice President of Market Development for Proove Biosciences, pleaded guilty this week in federal court. Matthews faces up to 5 years in prison and a $250,000 fine when he’s sentenced in October.

Proove filed for bankruptcy in 2017 after its headquarters in Irvine, California was raided by FBI agents. The company specialized in DNA testing that supposedly identified whether a patient is at risk of opioid addiction and what medications would best treat their pain. Proove said its tests, which cost thousands of dollars, were proven effective in peer-reviewed clinical studies, but a genetic expert told STAT News the studies were “hogwash.”

According to Matthews’ plea agreement, Proove paid doctors at least $3.5 million to induce them to order DNA tests for their patients.  The company then billed Medicare approximately $45 million to pay for the tests and received about $21 million in unlawful payments.

“Proove concealed the true nature of the kickbacks by falsely characterizing the payments as compensation for participating in a clinical research program sponsored by Proove,” the U.S. Attorney’s Office in San Diego said in a statement. “In furtherance of the scheme, Proove placed its own employees in doctors’ offices.  The Proove employees collected a cheek swab and completed most of the paperwork associated with the ‘clinical research’ program.”

Prosecutors say Proove paid kickbacks to an undisclosed number of doctors throughout the country, with the payments tied to how many DNA tests that a doctor ordered. When doctors complained about delayed or reduced payments, a Proove executive demanded that they increase their testing volume. 

“Kickbacks corrupt the medical judgment of physicians, generate unnecessary tests and treatments, increase health care costs, and create unfair competition,” said U.S. Attorney Robert Brewer.

‘A Waste of Time and Money’

As PNN has reported, a non-profit healthcare system in Great Falls, Montana had a Proove “patient engagement representative” employed on site at the Benefis Pain Management Center.

“We had a meeting one day and here are these people from Proove Biosciences. They told us they were doing a research project,” said Rodney Lutes, a physician assistant who was later fired by Benefis. “They wanted to come to Benefis, into the pain department, and test our patients.  We were told this would be at no cost to the patient. My understanding was that they weren’t going to charge anybody, but I found out afterwards they were charging insurance companies.

“They said providers who participated in this would get some form of payment for participating in the program and for filling out all the paperwork.”

Lutes’ supervising physician at the clinic was Katrina Lewis, MD, a pain management specialist at Benefis who was on Proove’s Medical Advisory Board. Benefis has denied that Lewis or any of its employees received kickbacks from Proove for referring business to them. The clinic also said the DNA tests were voluntary and only done on patients if they were appropriate.

 A copy of the clinic’s opioid policy obtained by PNN indicates the tests were mandatory for some patients.

“All patients on dosing levels at or higher than the maximum policy dose MUST be submitted for genetic testing,” the policy states.  

Proove had two types of tests for patients in pain management, an “Opioid Risk Test” and an “Opioid Risk Profile.” According to Proove, the tests could determine a patient’s risk of abusing pain medication.

A Benefis patient who took the tests said they were “a waste of time and money.”

“The meds it said I should be taking either didn’t work, stopped working, or made me sick. And the meds I should not be taking I do just fine on,” she told PNN.

Former CEO of U.S. Pain Foundation Released Early from Prison

By Pat Anson, PNN Editor

The founder and former CEO of the U.S. Pain Foundation will spend the next six months in home confinement after being given “compassionate release” from a federal prison due to COVID-19 concerns. Paul Gileno suffers from asthma and other health issues, which puts him at high risk from the coronavirus.

Gileno abruptly resigned from U.S. Pain in 2018 and was later charged with embezzling millions of dollars from the Connecticut-based charity, which at one time claimed to be the largest advocacy group for pain patients. Gileno cut a deal with prosecutors, pleaded guilty to fraud and tax evasion, and in January began serving a one-year sentence at a minimum-security prison in Minersville, Pennsylvania.  

In correspondence with this reporter from prison, Gileno complained about conditions at the facility and said he was worried about becoming infected with COVID-19.

“Basically 100 of us are locked in one building, all sharing the same bathrooms and common areas. I sleep on a top bunk in a room of 30 people which is all open,” said Gileno.

“The CO's (correctional officers) and staff do not wear masks and they come from the outside world. They say they test them, but that consists of taking their temperature. They won’t let us out to get fresh air, only to go eat and come back which is less than 10 minutes.”

PAUL GILENO

In March, Gileno’s attorney filed a motion asking that the remainder of his sentence be modified to home confinement.  A judge rejected that request, but on April 17 a second motion was submitted and Gileno’s release was approved.

“Mr. Gileno has demonstrated that he suffers from asthma and respiratory conditions that place him at greater risk from COVID-19, and that he is unable to properly guard against infection while incarcerated,” Judge Victor Bolden said in his order. “Undue delay in his release could result in catastrophic health consequences for him.”

Prisons and jails around the country have become hot spots for COVID-19. Over 3,000 federal inmates and prison staff have been infected with the virus, with 51 inmate deaths to date. Last month, Attorney General William Barr ordered the federal Bureau of Prisons to identify low-risk inmates who could be released to home confinement. Over 2,500 have been released so far.

Gileno’s sentence has been reduced to time served and he was released from prison April 20. He will remain in home confinement until November 12, and then begin a two-year period of supervised parole. Under another court order, Gileno is required to pay over $3.1 million in restitution to the U.S. Pain Foundation.

Permanent CEO Named

This month U.S. Pain announced the appointment of two new members to its board of directors: Edward Bilsky, PhD, an academic administrator and professor at Pacific Northwest University of Health Sciences, and Jessica Begley, a marriage and family therapist from Texas.

They join board members Ellen Lenox Smith, a retired teacher; Marv Turner, a producer and filmmaker; and Shawn Dickens, a government defense contractor. Dickens was elected Chairman and Treasurer.

The revamped board also voted to appoint Nicole Hemmenway as permanent CEO. Hemmenway had been acting CEO of U.S. Pain in the two years since Gileno’s departure. She had previously served as vice-president and board chair while working with Gileno.

Gileno’s misuse of donated funds allegedly went undetected for three years due to poor oversight by the board, which apparently held no annual meetings or elections as required by Connecticut state law.

“I still find it difficult to believe that nobody else who’d been in upper management of the foundation for several years, knew anything regarding the going out and coming in of money/funds,” former board member Suzanne Stewart wrote in her blog. Stewart resigned in frustration in 2018 because she felt the board was “left in the dark” about how money was being spent.

At one time, U.S. Pain claimed to have over 90,000 members and nearly a quarter of a million social media followers. The non-profit later admitted having only 15,000 people on an email subscriber list.  

According to an audit and U.S. Pain’s 2018 tax return, the charity spent over $1.2 million that year on salaries, employee benefits, lawyers, accountants, tax penalties and business losses – including a failed attempt to operate a bakery. The foundation’s 2019 tax return has not yet been filed.

Pain, Prison and a Pandemic: Life Behind Bars for Former CEO of U.S. Pain Foundation

By Pat Anson, PNN Editor

Self-isolation, social distancing and good hygiene may be the order of the day for most of us during the COVID-19 crisis. But they are next to impossible for Paul Gileno.

“Basically 100 of us are locked in one building, all sharing the same bathrooms and common areas. I sleep on a top bunk in a room of 30 people which is all open,” says Gileno.

Gileno is the founder and former CEO of the U.S. Pain Foundation, which once billed itself as the nation’s largest advocacy group for pain patients. Today he is better known as Inmate #26388014 at Federal Prison Camp Schuylkill, a minimum-security facility in Minersville, Pennsylvania.

Like other federal prisons, Schuylkill has been locked down in an attempt to limit the spread of the coronavirus. All visits have been suspended and inmates spend little time outside of their cells and dorm areas.

“The CO's (correctional officers) and staff do not wear masks and they come from the outside world. They say they test them, but that consists of taking their temperature. They won’t let us out to get fresh air, only to go eat and come back which is less than 10 minutes,” Gileno says. 

In January, Gileno began serving a one-year sentence at Schuylkill for embezzling over $1.5 million from U.S. Pain. He could have gotten up to 25 years, but federal prosecutors agreed to ask for a lesser sentence when Gileno pleaded guilty to fraud and tax evasion.

“I was horrified how pain patients are treated in the outside world. In prison it’s 100 times worse,” wrote Gileno, who recently began corresponding with this reporter by letter and email.

“I am treated terrible here, all of the inmates are treated horrible here. Food is either expired or almost inedible and they are constantly doing raids, shakedowns and lockdowns, sometimes making us stand in the freezing cold for hours while they search our cells.”

Gileno abruptly resigned from U.S. Pain in 2018, but it took nearly a year for the Connecticut-based charity to disclose the full extent of the “financial irregularities” that he was accused of.  

An audit revealed that Gileno used the foundation’s bank account as his own personal piggy bank, writing checks to pay expenses such as his mortgage, car payments and a visit to Universal Studios.

There were also questionable business decisions that were far outside the scope of U.S. Pain’s mission, such as a $100,000 loan to Gileno’s brothers and $165,000 spent on a failed bakery.

The brazen misuse of donated funds somehow went undetected for three years by U.S. Pain’s board of directors and vice-president Nicole Hemmenway, who has been “interim CEO” ever since Gileno’s departure. The non-profit’s board and office staff remain largely the same.

PAUL GILENO

“I don’t know what else I can say about U.S. Pain, except I certainly made mistakes and I mismanaged. But I took full responsibility and I am paying the ultimate price in many ways,” Gileno wrote.

“Sadly the people I loved and respected and who I trusted and hired totally disowned me, left me and refused to handle this in a way where I did not suffer as much as I am suffering. I owned up to my mistakes and never thought I would be treated as I was. With that said, I want U.S. Pain to succeed and I want it to flourish.”  

Gileno says he sleeps on a two-inch mattress that has aggravated his chronic back pain. His only relief comes from ibuprofen or Advil, which he buys at a prison commissary. A doctor visits once a week, but sees only a handful of inmates.

“They are overwhelmed and do not care,” Gileno wrote. “I have met men in so much pain it’s tragic. We have no options here, no physical therapy, no medical attention, no access to any sort of therapy that can relieve some of our pain.

“I must say I am suffering more now in pain than ever before and my anxiety is at an all time high. And they do not treat that either.”

The worst part of prison life for the 47-year old Gileno is that he can’t see his wife and two sons due to the coronavirus lockdown. Schuylkill is a three-and-a-half-hour drive from their home in New York state. Telephone calls are limited to 15 minutes and emails are restricted.

Because of the pandemic, Attorney General William Barr recently ordered the early release of inmates from three federal prisons where coronavirus outbreaks have occurred. But so far there’s no word of that happening at Schuylkill.

“There is a lot of talk about freeing federal inmates but we have not been told anything nor have they informed us if there is a procedure in place,” Gileno says. “I am hoping they are not waiting until it gets here. I am one of the high risk patients they should put on home confinement. Besides all of my pain conditions and RSD, I have chronic asthma and chronic bronchitis.”

Gileno is currently scheduled for release in November. When he gets out, Gileno would like to return to patient advocacy and perhaps run a support program for prisoners in pain.  

“I just hope people with pain know that I am always going to fight for them and all patients and that was always my goal when starting the foundation. I can’t wait to get out to be a patient advocate again and help who I can,” he wrote.

Four Indicted in Compound Pain Cream Scam

By Pat Anson, PNN Editor

Greed and fraud have gone hand-in-hand in the opioid crisis, with drug and genetic test companies, pain clinics, spine surgeons, information technology vendors, addiction treatment doctors and even patient advocacy groups profiting from opioid hysteria or pushing bogus treatments.

You can add to the list pharmacies making compound pain creams.

A federal grand jury has indicted four people in Southern California for healthcare fraud, mail fraud, illegal kickbacks and money laundering as part of a scheme that defrauded two insurers into paying $22 million for medically unnecessary compound pain creams. Some of the creams cost as much as $15,000 per tube.

The fraudulent bills were sent to the U.S. military’s TRICARE health plan and the International Longshore and Warehouse Union’s Pacific Maritime Association Welfare Plan.

Prosecutors say the Orange County-based Professional Compounding Pharmacy (PCP) paid marketers about half of the payments it received from insurers as an incentive to recruit doctors and patients willing to write or accept pain cream prescriptions.

Patients were given $200 each to receive treatment at two bogus pain clinics and to participate in “sham clinical pain studies” on the effectiveness of compound creams as an alternative to opioids.

Among those arrested were James Bell, the owner of PCP and two medical marketing companies, and Dr. Michael Edwards, a Huntington Beach physician who allegedly set up the phony clinics.

Prosecutors say TRICARE was defrauded out of $19 million and the ILWU Plan lost $3 million. The scheme peaked in the first half 2015 and continued into 2016. The fraudulent billings dropped significantly in the second half of 2015, when the insurers reduced their reimbursement rates for compound creams.

This isn’t the first time compound creams have caught the attention of federal investigators.  A 2018 report from the Office of Inspector General for the Department of Health and Human Services found over 500 pharmacies had suspiciously high costs for compound creams and other topical medications billed to Medicare.

Medicare spending for topical medications has skyrocketed, rising from $13.2 million in 2010 to $323.5 million in 2016. Most were prescribed for pain, using ingredients such as lidocaine, a non-opioid anesthetic, or diclofenac, an anti-inflammatory drug.

Do compound pain creams work? A 2019 study at Walter Reed National Military Medical Center concluded the creams should not be used to treat chronic pain. One month after treatment began, researchers found no significant differences in the pain scores of patients who used compound creams and those who used placebo creams.

Healthcare Technology Vendor Took Kickbacks to Promote Rx Opioids

By Pat Anson, PNN Editor

A decade ago, electronic health records (EHRs) were touted as a major innovation that would allow doctors to maintain a digital record of their patients’ medical history, diagnoses, prescriptions and insurance claims. A 2009 federal law encouraged doctors and hospitals to adopt EHRs with over $19 billion in funding to upgrade their information technology.

It didn’t take long for someone to game the system and use EHRs to commit fraud on a massive scale.

Practice Fusion, a San Francisco health information technology developer, agreed this week to pay $145 million to resolve criminal and civil allegations that it took kickbacks from drug companies to promote their products to physicians using its EHR software.

Federal prosecutors didn’t release the names of the drug companies, but according to Reuters, Practice Fusion solicited and received $1 million in kickbacks from OxyContin maker Purdue Pharma.

In return, Practice Fusion created an EHR alert advising physicians to switch new pain patients from immediate-released opioids to extended release opioids like OxyContin. From 2016 to 2019, the alert was triggered 230 million times, according to prosecutors.

“Practice Fusion’s conduct is abhorrent.  During the height of the opioid crisis, the company took a million-dollar kickback to allow an opioid company to inject itself in the sacred doctor-patient relationship so that it could peddle even more of its highly addictive and dangerous opioids,” Christina Nolan, U.S. Attorney for the District of Vermont, said in a statement. 

“The companies illegally conspired to allow the drug company to have its thumb on the scale at precisely the moment a doctor was making incredibly intimate, personal, and important decisions about a patient’s medical care, including the need for pain medication and prescription amounts.”

Prosecutors say Practice Fusion took kickbacks from more than a dozen pharmaceutical companies, allowing them to design the phony alerts and determine when a healthcare provider received them. “Numerous prescriptions” were written as a result. The federal case is the first criminal action against a vendor of electronic health records.

“Across the country, physicians rely on electronic health records software to provide vital patient data and unbiased medical information during critical encounters with patients,” said Ethan Davis, Principal Deputy Assistant Attorney General.

“Kickbacks from drug companies to software vendors that are designed to improperly influence the physician-patient relationship are unacceptable.  When a software vendor claims to be providing unbiased medical information – especially information relating to the prescription of opioids – we expect honesty and candor to the physicians making treatment decisions based on that information.”

Practice Fusion offers free EHR software to smaller, independent physician practices. The software is used by 112,000 health care providers who see 5 million patient visits each month. Practice Fusion was purchased in 2018 by Chicago-based Allscripts for $100 million in cash.

“Since learning of this matter we have further strengthened Practice Fusion’s compliance program. Allscripts recognizes the devastating impact that opioids have had on communities nationwide, and we are using our technology to fight this epidemic,” an Allscripts spokesman said.

Former CEO of U.S. Pain Foundation Sentenced to Year in Prison

By Pat Anson, PNN Editor

The founder and former CEO of the U.S. Pain Foundation has been sentenced to a year in federal prison for embezzling $1.5 million from the Connecticut-based charity and failing to report the income on his tax returns.

U.S. District Judge Victor Bolden sentenced Paul Gileno to 12 months and one day of imprisonment, followed by two years of supervised release. Gileno pleaded guilty to wire fraud and tax evasion in June.

The 47-year old Gileno is also required to pay full restitution to the charity and the Internal Revenue Service, as well as tax penalties and interest.

"By engaging in wire fraud and tax fraud, the defendant committed very serious crimes over the course of several years,” U.S. Attorney John Durham said in court documents.  

“As the Court is well aware, tax fraud undermines the public’s confidence in the tax system and relies on taxpayers to correctly report all taxable income.  As to the wire fraud offense, the defendant stole money from his employer for his own personal gain.  As such, the defendant’s conduct is very serious."

PAUL GILENO

Gileno faced up to 25 years in prison, but as part of his plea agreement prosecutors agreed to ask for a lesser sentence. In a sentencing memo, prosecutors said Gileno was in “relatively good physical and mental health” and was a hard worker committed to his family.

"I cannot even express how sorry I am for what  have done, I made mistakes, I screwed up majorly, I mismanaged, I was careless and I took money that was not mine, I used it for personal use and I was selfish," Gileno wrote in a letter to the judge. "I took the money and, in my mind, justified it by saying to myself I deserved it at the time and US Pain had it. I justified it in multiple ways."

Gileno's defense attorney also presented numerous testimonies from pain patients and advocates about the help they received from Gileno and his work in patient advocacy.

Gileno will report to prison on January 6, 2020. Until then he is free on bond.

Fraud Went Undetected for Three Years

The money embezzled by Gileno was used to pay his mortgage, car payments, loans to his brothers, and a visit to Universal Studios in Orlando, Florida. The misuse of funds allegedly went undetected for three years.

“I still find it difficult to believe that nobody else who’d been in upper management of the foundation for several years knew anything regarding the going out and coming in of money/funds,” former U.S. Pain board member Suzanne Stewart recently wrote in her blog. Stewart resigned from the board last year because she was concerned about how the charity was being run.

According to an audit and U.S. Pain’s tax returns, Gileno misappropriated over $2 million from the charity from 2016 to 2018.  Nicole Hemmenway, the current acting CEO, was vice-president and board chair at the time. Two other longtime board members, Wendy Foster and Ellen Lennox Smith, still serve as directors. And Lori Monarca remains as Executive Office Manager, according to U.S. Pain’s website.

The board asked for and received Gileno’s resignation in May 2018, although it wasn’t publicly disclosed for several months that financial irregularities were behind his departure.

Since Gileno’s resignation, U.S. Pain says it has taken steps to ensure there was more internal control and financial oversight of its expenses and cash flows.

According to U.S. Pain’s 2018 tax return (the organization’s 2016 and 2017 returns were delinquent and filed late), the charity spent over $1.2 million last year on salaries, employee benefits, lawyers, accountants, tax penalties and business losses. That means less than half of the $2.1 million raised by the charity was spent on programs and services for the pain community.

Earlier this month, U.S. Pain announced the appointment of Shawn Dickens to its board of directors, filling the seat vacated by Suzanne Stewart nearly a year earlier. Dickens is the first U.S. Pain board member who was not appointed by Gileno.

Former Director of U.S. Pain Foundation Questions Misuse of Funds

By Pat Anson, PNN Editor

A former board member of the U.S. Pain Foundation is raising questions about how former CEO Paul Gileno was able to misappropriate over $2 million in funds from the Connecticut-based non-profit. 

Gileno pleaded guilty to fraud and tax evasion charges in June and is awaiting sentencing.  Federal prosecutors say Gileno used donated funds in the charity’s bank account to write checks to himself and other people for his own personal benefit. The money was used to pay Gileno’s mortgage, car payments, loans to his brothers, and a visit to Universal Studios in Orlando, Florida. The misuse of funds allegedly went undetected for three years.

“I still find it difficult to believe that nobody else who’d been in upper management of the foundation for several years, knew anything regarding the going out and coming in of money/funds,” former board member Suzanne Stewart recently wrote in her blog.

Stewart was a volunteer “ambassador” at U.S. Pain before she was appointed to the board in January, 2018 – a tumultuous time in the charity’s history, as the extent of the misuse of funds was just becoming known. Stewart resigned from the board 8 months later and has remained relatively silent about her board experience, until now.

Stewart wrote in her blog that she was initially excited to join the board, but soon realized something was amiss when she called another board member.

“I called to ask her a few questions, such as: ‘What was it like, being on the Board? What do we do as Board Members etc?’ She laughed & told me that ‘there was no real Board of Directors’. She added that they’d never even had a board meeting!” said Stewart, who lives with Complex Regional Pain Syndrome and other chronic pain conditions.

SUZANNE STEWART

“I was a bit disappointed at hearing this news. But it was soon confirmed. The Board of Directors of the US Pain Foundation, were actually just photographs on the USPF website, prior to January, 2018. There was no true Board of Directors. There had been no board meetings or elections.”

Gileno founded the Connecticut Pain Foundation in 2006 after he was disabled by a back injury. In 2011, he launched U.S. Pain and registered as a charity in the state. Connecticut state law requires non-profits to have annual board meetings and to elect their directors and officers.

“So I’m guessing there was there no secretary or treasurer? I’m guessing this means that nobody had to get permission to write checks?” Stewart asks. “Didn’t they have to answer to anyone about how or where to spend donation monies? How does the President, Vice President & Executive Director & other upper management, not know what & where money is coming in and/or going out?”

According to an audit and U.S. Pain’s tax returns, Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018.  Nicole Hemmenway, the current acting CEO, was vice-president and board chair at the time. Two other longtime board members, Wendy Foster and Ellen Lennox Smith, still serve as directors. And Lori Monarca remains as Executive Office Manager, according to U.S. Pain’s website.

Only Gileno has been charged with a crime.

“It seems to me that when upper management realized that things had somehow gotten out of hand and that the USPF might be slipping away, they decided to get lawyers and accountants involved in an attempt to ‘fix’ a situation that they’d created. It seemed to have finally become something larger that they could no longer handle alone,” Stewart wrote.

“Over the following months, I found out what a mess things were and I immediately wanted to resign. I was advised by one of the attorneys, that ‘it wouldn’t look good’ for USPF, if anyone on the Board resigned during that time.”

The board asked for and received Gileno’s resignation in May 2018, although it wasn’t publicly disclosed until December that “financial irregularities” were behind his sudden departure.

Gileno did not comment on Stewart’s post, but praised her work as a patient advocate.

“I can say that I have always admired Suzanne and she is an amazing advocate and I respect her dearly. She has an amazing and supportive husband and family,” Gileno said in an email.  

‘The Very Last Straw’

Stewart eventually resigned because she was unhappy with decisions being made by Hemmenway and the rest of the board. A redacted version of Stewart’s resignation letter was posted on her blog, in which she complained about being “left in the dark” and not knowing “where money is going or where it comes from.”

“The very last straw for me was when the Interim CEO & the rest of the Board, contemplated not telling the USPF ‘In-person’ support group leaders that they were no longer covered by insurance. I was the only Board member who said that I’d have no part of that,” wrote Stewart, who did not respond to a request for comment from PNN for this story.

Hemmenway also did not respond to a request for comment. In a statement last December, she said that Gileno “repeatedly misled and concealed information from the Board of Directors and staff.”

Gileno maintains that he kept the board informed.

“They are trying to cover their asses for being (an) inadequate board I guess,” Gileno told PNN last year. “I never misled them. They were part of U.S. Pain for over 10 years and I talked with them daily. Nicole and I were close like a brother and sister and I never hid one thing.”

Whether the board knew about the misuse of funds or not, nonprofit experts say board members have a fiduciary responsibility to provide oversight and know how money is being spent. 

“U.S. Pain board members claim they did not know about their former CEO’s misuse of funds. This, however, does not change the fact that they should have known, and are, in fact, required by law to have controls in place to ensure those funds are used for the benefit of its stakeholders,” says Stefanie Lee Berardi, a patient advocate and grant writer who worked in nonprofit management.

“Serving on a board of directors is a great opportunity to contribute your time and talent to non-profit organizations who are doing great work. However, you should know that when you accept that position, you have a legal responsibility to use good judgement when making decisions on behalf of the organization, to put the organization’s interests before your own, and to ensure the organization is legally compliant.”

Gileno remains under investigation by the Connecticut Attorney General’s office, which may seek a court order to prevent him from ever serving again as a nonprofit officer or director.

Under state law, a Superior Court Judge could remove non-profit directors “engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion,” but no such action against U.S. Pain appears likely.

“As much as we would like to have seen their entire board ousted, the truth of the matter is that the only way that happens is if the state shuts them down. So far, with the completion of their audit, they have likely done enough to satisfy the state,” said Berardi, who thinks U.S. Pain should find new directors and officers to manage the organization. 

“If we are looking at best practices for board management, they absolutely should have a comprehensive plan for recruitment, induction, development, and succession. These board functions should be enumerated in the bylaws, updated at regular intervals, and formally adopted,” she said. “Recruiting ‘new blood’ should just be regular order.” 

(Update: On October 1, 2019 U.S. Pain announced the appointment of Shawn Dickens to its board of directors, filling the seat vacated by Suzanne Stewart nearly a year earlier.)

At one time, U.S. Pain claimed to be the nation’s largest pain patient advocacy group, with over 90,000 members and nearly a quarter of a million social media followers. It was a dubious claim, as the non-profit later admitted having only 15,000 people on an email subscriber list.  

According to the audit and U.S. Pain’s 2018 tax return (the organization’s 2016 and 2017 returns were delinquent and filed late), the charity spent over $1.2 million last year on salaries, employee benefits, lawyers, accountants, tax penalties and business losses – including a failed attempt to operate a bakery.

Co-Pay Assistance Programs Fail to Help Uninsured Patients

By Pat Anson, PNN Editor

Co-pay assistance programs – also known as co-pay charities – are ostensibly designed to help needy patients pay for prescription drugs. But a new study by researchers at the Johns Hopkins Bloomberg School of Public Health found that nearly all co-pay programs fail to cover uninsured patients who need financial help the most.

The researchers also found that co-pay programs were more likely to cover high-cost, brand-name prescription drugs, despite the availability of lower-priced generic medications. The findings are published online in JAMA.

“Independent patient assistance programs favor higher-priced drugs, and the higher the drug price, the higher the likelihood of it being covered,” says co-author Gerard Anderson, PhD, professor in the Bloomberg School’s Department of Health Policy and Management. “Unfortunately patients with the greatest financial needs -- people without health insurance -- do not qualify for these programs.”

Anderson and his colleagues looked at the six largest charity organizations, which ran 274 different patient assistance programs in 2018.

Most of the programs only covered drugs for cancer-related conditions or genetic and rare diseases. None offered free drugs and typically they only covered the most expensive medications.

“Only covering insured patients may help these programs cover more patients with their limited funds,” said lead author So-Yeon Kang, MPH, a research assistant in the Bloomberg School’s Department of Health Policy and Management. “But leaving out the uninsured diminishes the charitable aspects of these organizations supported by tax-exempted donations.”

Misconduct Widespread

Patient assistance programs run by independent charities are usually funded by pharmaceutical companies. Federal investigations into several co-pay assistance programs led to multimillion-dollar settlements with drug companies for allegedly steering patients to their higher-priced drugs.

Over the past year, Pfizer, Amgen, Jazz Pharmaceuticals, Astellas Pharma, Lundbeck and Alexion have all paid heavy fines to settle allegations that they used co-pay programs to defraud Medicare. Federal anti-kickback laws prohibit pharmaceutical companies from making any kind of payment to induce Medicare patients to purchase their drugs. The prohibition includes co-pays.

“We are committed to ensuring that pharmaceutical companies do not use third-party foundations to pay kickbacks masking the high prices those companies charge for their drugs,”  U.S. Attorney Andrew Lelling said in a statement. “This misconduct is widespread, and enforcement will continue until pharmaceutical companies stop circumventing the anti-kickback laws to artificially bolster high drug prices, all at the expense of American taxpayers.”

Similar allegations were made against Insys Therapeutics and the “Gain Against Pain” co-pay program run by the U.S. Pain Foundation. Insys donated over $3.1 million to U.S. Pain, with most of the money going to its co-pay program to help patients pay for Subsys, an expensive fentanyl spray made by Insys. A four-day supply of Subsys can cost nearly $24,000.

The founder of Insys and four former executives were recently found guilty of racketeering charges unrelated to the co-pay program. The company also agreed to pay $225 million in fines and penalties to settle criminal and civil investigations. U.S. Pain ended the “Gain Against Pain” program in 2018 and said it would no longer accept funding from Insys.

In an editorial, Katherine Kraschel, a lecturer at Yale Law School, and Gregory Curfman, MD, deputy editor of JAMA, called for more oversight of co-pay programs to make sure they help patients who truly need it.

“Although patient assistance programs may provide important financial relief for patients, the current patient assistance program structure largely neglects uninsured individuals,” they wrote.  “Absent other regulatory interventions, the Department of Justice needs to continue to scrutinize patient assistance program practices, and the Internal Revenue Service and state attorneys general should examine the tax-exempt status of patient assistance programs.”

Feds Found ‘Staggering’ Drug Testing Fraud at Tennessee Pain Clinics

By Fred Schulte, Kaiser Health News

The Justice Department has accused a defunct chain of Tennessee-based pain clinics of cheating Medicare and other taxpayer-funded health insurers out of at least $25 million in needless urine drug tests and genetic testing.

The civil lawsuit names Comprehensive Pain Specialists, also known as Anesthesia Services Associates PLLC; four of its physician owners; and a former top executive. The doctors include Tennessee Republican State Sen. Steven Dickerson and Peter Kroll, both anesthesiologists.

At its peak, CPS ran 60 pain clinics in a dozen states and treated some 48,000 patients per month, according to the suit. It shut down abruptly last summer, leaving many chronic pain patients scrambling to find a new source of narcotic medicines.

The Justice Department fraud case centers largely on the company’s lucrative urine-testing lab in Brentwood, Tenn., which CPS financed with a $1.5 million loan. The suit also alleges overbilling from acupuncture and other services offered to patients.

CPS was the subject of a November 2017 investigation by Kaiser Health News that scrutinized Medicare billings for urine drug tests.

Medicare and other federal programs paid over $70 million from 2011 to 2018 for CPS-ordered urine tests, an amount the lawsuit called “staggering.” TennCare, the state’s Medicaid program, paid more than $9 million more during that time.

“For this reason, CPS considered [urine tests] to be ‘liquid gold’ — with revenues of tens of millions of dollars for what was largely unnecessary medical testing,” according to the suit.

The chain’s owners and then-CEO John Davis “viewed every CPS patient as an opportunity to make money, without regard to the individualized need for treatment,” the suit alleges. Davis was convicted last year in Nashville on federal criminal health care fraud charges. He has since filed a motion for a new trial.

Dan Martin, an attorney representing Kroll, said in an emailed statement: “We are aware of the allegations and very familiar with the actual facts. Dr. Kroll did not engage in any wrongdoing whatsoever, and we look forward to correcting the government’s misunderstanding of the facts.”

Dickerson’s attorney, Ed Yarbrough, also issued a statement that read: “Dr. Dickerson is an honest man. We will prove that in court.” 

$8.5 Billion Annually Spent on Drug Tests

In its investigation, KHN, with assistance from researchers at the Mayo Clinic, found that spending on urine screens and related genetic tests quadrupled from 2011 to 2014 to an estimated $8.5 billion a year — more than the entire budget of the Environmental Protection Agency. The federal government paid medical providers more to conduct urine drug tests in 2014 than it spent on the four most recommended cancer screenings combined.

CPS was among the nation’s most aggressive testers. KHN found that in 2014 five of its medical professionals stood among the nation’s top billers. Anita Bayles, a nurse practitioner working at a CPS clinic in Cleveland, Tenn., generated $1.1 million in urine-test billings that year, according to Medicare records analyzed by KHN.

The Justice Department suit says that CPS believed Bayles ordered too many urine tests and overprescribed opioids and in September 2016 decided to fire her. But the decision was reversed by CEO Davis “because of her ability to generate revenues,” according to the suit. Bayles could not be reached for comment.

IMAGE COURTESY OF MARK COLLEN AND PAIN EXHIBIT

Though CPS ran six or more urine tests a year on many patients receiving narcotics, its doctors often did not review the results to make sure patients did not abuse them, according to the suit.

Kroll, who also served as CPS’ medical director, told KHN in 2017 that the high volume of tests was justified to keep patients safe and to reduce chances of black market sales of pills.

Kroll billed Medicare $1.8 million for urine tests in 2015, the KHN analysis of Medicare billing records found.

Kroll said in a 2017 interview that he and Dickerson came up with the idea to open a high-quality pain practice over a cup of coffee at a Nashville Starbucks in 2005.

But the Justice Department alleges that CPS expanded rapidly through bilking the government, conduct that its top executives and founders “failed to take any action to stop,” according to the suit.

In what is called a “particularly egregious example of this fraudulent conduct,” the Justice Department alleged that Kroll caused over 2,500 claims to be submitted to Medicare, for which CPS was paid almost $350,000, during a 10-day period in May 2017 when Kroll was on vacation in Italy.

“Because of these fraudulent claims, Kroll’s billing privileges with Medicare have been revoked,” according to the suit.

The lawsuit states that Medicare officials began investigating overcharging for urine testing at CPS in 2014 and eventually directed the company to repay the government $27.4 million in an extrapolated penalty. But CPS aggressively appealed the decision and managed to get it overturned and stay in business.

Once among the largest pain management groups in the Southeast, CPS crumbled amid financial woes that included nearly a dozen civil suits alleging unpaid debts, as well as the criminal case against Davis. In a court filing in December, the company said that it had terminated all of its employees and that its debts “greatly exceed its assets.”

In total, Medicare paid CPS over $150 million from 2011 to 2018, a large part of which was related to urine testing, while TennCare paid CPS over $32.5 million, according to the suit.

The Justice Department complaint consolidates several whistleblower cases filed against the company by doctors and other former employees. Federal whistleblower cases seek recovery of money paid improperly and can include treble damages, or three times the amount of the original overpayment.

One of the whistleblowers said he toured the lab with CPS executives and observed an “overpowering and unpleasant smell of urine.” In response, a CPS executive said, “To me, it smells like money,” according to the whistleblower’s suit.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.

U.S. Pain Foundation Founder Pleads Guilty to Fraud and Tax Evasion

By Pat Anson, PNN Editor

Paul Gileno, the former CEO and founder of the U.S. Pain Foundation, has pleaded guilty to fraud and tax evasion charges stemming from his misuse of funds from the Connecticut-based non-profit.

Gileno, 46, waived his right to be indicted and pleaded guilty Monday before U.S. District Judge Victor Bolden in Bridgeport, Connecticut. He faces up to 25 years in prison, but as part of the plea agreement prosecutors agreed to ask for a lesser sentence because of Gileno’s “prompt recognition and affirmative acceptance of personal responsibility.” A sentencing date has not been set.

According to court documents, Gileno embezzled nearly $1.6 million from the foundation from 2015 to 2017 and failed to report the income on his personal tax returns. For that, he owes an unpaid federal tax of over $532,000. Gileno must also pay a fine and make full restitution to the foundation and Internal Revenue Service, as well as tax penalties and interest.

Prosecutors say Gileno used the foundation’s bank account to write checks to himself and issued payments to other people for his own benefit. The money was used to pay for personal expenses, such as Gileno’s mortgage, car payments and a $3,600 visit to Universal Studios in Orlando, Florida. The misuse of funds went undetected for three years.

“Gileno failed to maintain accurate books and records of the United States Pain Foundation and in a number of instances, made false and fraudulent representations to the Board regarding the expenditures,” prosecutors said.

PAUL GILENO

“I hope your readers realize I did make mistakes but that should not take away from all the good work I did and the organization I created,” Gileno said in an email to PNN. “The board has been the same for the past 9 years and I hope they continue to help people with pain and use the programs we created together."

As he awaits sentencing, Gileno said he was “trying to focus my life on my two boys who are 5 and 4 and need their dad."

Acting CEO Nicole Hemmenway did not respond to a request for comment on Gileno’s guilty plea, but the foundation released a statement.

“While the last year has been difficult, the organization has never lost sight of its guiding mission to educate, empower, support, and advocate for the 50 million Americans living with chronic pain,” the foundation said. “We are thankful that resolution of these issues is coming to an end, and are committed to continuing to serve people with pain, stronger than ever.”

As PNN has reported, Gileno was forced to resign in May, 2018 after “financial irregularities” were finally discovered by the board. A few months later, Gileno confessed in an email to misusing charitable funds.

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this. I did take money and I will pay the ultimate price,” Gileno wrote.

According to an audit released last month and U.S. Pain’s 2018 tax return, Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018. The misused funds were reported to the IRS as “excess benefit transactions,” a broad category that includes unauthorized compensation, reimbursement for personal expenses, and payments to Gileno’s family members.

In addition to the $32,537 that Gileno was paid for roughly five months of work in 2018, he collected over $166,000 in excess benefits. The latter amount includes a $36,000 payment to an unidentified company owned by Gileno. It is not clear what the payment was for.

Gileno’s wife, sister and step-daughter were paid nearly $71,000 in wages in 2018. It is not clear what work they did. Gileno’s sister also received an unspecified amount of severance pay and maternity leave.

The auditor also reported that U.S. Pain has been unable to recover any money from a $100,000 investment in SMJ Homes, a real estate business owned by Gileno’s brothers. A promissory note from the company was due in February 2019, but has not be repaid, according to the audit.  

Gileno disputes the auditor’s finding and says most of the money was paid back.

“U.S. Pain has failed to tell you that the investment that was made with my brothers have been mostly paid back and they were paid 4 years of interest at 6 percent a year which was paid monthly and was deposited by people from U.S. Pain. It was never a surprise U.S. Pain cashed all the checks,” Gileno wrote. 

The foundation at one time claimed to be the nation’s largest non-profit patient advocacy group. While it’s unclear how many members U.S. Pain actually has, it remains well-funded. Major corporate donors to U.S. Pain include Abbvie, Amgen, Lilly, Sanofi, Novartis, Teva, Abbott, Pfizer and other pharmaceutical companies.   

After Gileno’s departure, the board scrapped a $2.5 million prescription co-pay program with Insys Therapeutics, a controversial drug maker whose founder and four former executives were recently convicted of racketeering.

U.S. Pain says it has implemented new policies, oversight measures and a system of checks and balances to ensure that only appropriate expenses are paid by the foundation.

How U.S. Pain Foundation Inflated Its Membership

By Pat Anson, PNN Editor

The U.S. Pain Foundation has long claimed to be “the leading chronic pain advocacy organization in the country,” with volunteers in 50 states and nearly a quarter of a million social media followers.

“What started as a small grassroots group now has 90,000 members nationwide and a network of 1,000 volunteers,” a U.S. Pain press release said in 2017.  

Impressive numbers like that helped the Connecticut based non-profit rise to national prominence in the pain community and raise several million dollars in donations from major healthcare companies such as Pfizer, Lilly, AstraZeneca, Novartis and Johnson & Johnson.

But PNN has learned that the tabulation of U.S. Pain’s membership and followers is unreliable and misleading. At best, they’re a product of bad metrics and marketing hype. At worst, they’re evidence of consumer fraud.  

“If they’re talking about members, then they should have a verified roll of members. And if they’ve inflated that number and there’s no rational basis for coming up with the number that they’re telling the public, then that could potentially be considered consumer fraud,” says attorney Seth Perlman, who has represented non-profits for 30 years.

In recent months, U.S. Pain has announced it is “undergoing a complete revamp of its transparency policies and procedures.” One of the first things the organization did was significantly downsize its membership from 90,000 to 15,000.

U.S. PAIN FOUNDATION 2016 PROMOTION

What happened to the 75,000 missing members?

“We have changed the way we classify and report members,” interim CEO and board chair Nicole Hemmenway said in an email to PNN. “Previously, ‘members’ included mailing list subscribers, support group participants, INvisible Project readers, anyone who received our print materials, and people who attend our events. Now the term ‘member’ has been redefined as the number of individuals who have signed up for our mailing list.”

Hemmenway has been interim CEO since May, when U.S. Pain’s founder and longtime CEO Paul Gileno resigned at the request of the board of directors.  “As the new leader, I am heading up a review and revision of our governance and transparency policies,” Hemmenway said. 

But full transparency has been slow in coming. Not until last week did Hemmenway and the board disclose the reason behind Gileno’s forced resignation. An internal audit found evidence of “financial irregularities” and that Gileno embezzled an undisclosed amount of money from the non-profit.  

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this,” Gileno confessed in an email sent to U.S. Pain’s leadership.  

We asked Gileno why U.S. Pain’s membership numbers were so high while he was CEO. 

“Our stats were based on email sign ups, social media sign ups and in-person sign ups,” Gileno said. “I have no clue why they were reduced.” 

In addition to the steep drop in membership, U.S. Pain has also seen a decline in its social media following. At one time, the organization claimed to have 59,000 followers on Twitter.

That was reduced to about 13,000 followers after Twitter purged from its system millions of fake and inactive accounts. 

from US Pain foundation 2018 promotion

“The (Twitter) reform takes aim at a pervasive form of social media fraud,” The New York Times reported. “Many users have inflated their followers on Twitter or other services with automated or fake accounts, buying the appearance of social influence to bolster their political activism, business endeavors or entertainment careers.”  

Some of the followers that U.S. Pain has on Twitter were apparently bought and paid for in a promotional scheme to sign up new followers. Hemmenway says the board never authorized such an expenditure. 

“Based on records, in 2016, $515 was spent on a Twitter digital marketing initiative under previous leadership. This is not something the Board or others within the organization were aware of or approved,” Hemmenway said. 

Hemmenway has been a key member of U.S. Pain since it was founded in 2011, serving as vice-president until Gileno’s departure. According to Gileno, she oversaw the non-profit’s social media efforts. “Nicole and the board have always been in charge of that, as was director of communications,” Gileno told PNN. 

Even after the Twitter purge, U.S. Pain still appears to have an unusual number of suspicious followers. StatusPeople.com, a website that analyzes Twitter data, estimates that only a third of @US_Pain’s 13,000 followers are legitimate. The rest are either fake or inactive.

SOURCE: STATUSPEOPLE.COM

There is no similar way to analyze the legitimacy of U.S. Pain’s 216,000 followers on Facebook, a social media platform where you can also buy followers.

Consumer Fraud Issue

Marketing that misleads or exaggerates may be all too common in the for-profit world, but it’s risky business for a charity dependent on donations and public goodwill. Taken too far, it could lead to allegations of civil or even criminal misconduct, according to attorney Seth Perlman. 

“That’s only an issue if they use those numbers to impress upon the donating public or their supporters about how widespread their message is. And how much awareness the organization has with the public. If they’re using it as a way to inducing people to support the organization, it’s a potential consumer fraud issue,” said Perlman. “If you mislead the public and present information that is incorrect and is purposely inflated, the regulators take an extremely dim view of that.  

“It’s almost always a civil matter, unless it rises to the level of an absolute egregious fraud where there is absolutely no basis for making the claims that they did and it was simply a rip off.  Then that could turn into criminal (fraud). But the civil remedies are significant, including removal of the board of directors.” 

As PNN has reported, U.S. Pain is now under investigation by the Connecticut Attorney General’s office and the Connecticut Department of Consumer Protection, which regulates charities in the state.  Because its registration as a charity recently expired, U.S. Pain at this time cannot legally solicit donations in Connecticut. 

Federal prosecutors at the U.S. Attorney’s Office would neither confirm or deny if they were investigating U.S. Pain and its former CEO, although Gileno anticipates going to prison for fraud or tax evasion.  

“I will have to go to jail maybe as long as 3 years for taking the money from US Pain,” Gileno said in his confession. 

U.S. Pain is also in danger of losing its tax-exempt status.  The non-profit’s tax returns for 2016 and 2017 have not been filed and are delinquent.  Under IRS rules, a non-profit that does not file returns for three consecutive years automatically loses its tax exemption. Hemmenway blames Gileno for the long delay in filing, but expects the tax returns to be completed in coming weeks. 

“Because of the inaccurate and incomplete information provided by the former CEO, it has taken a significant amount of time to compile accurate books and records,” she said. “The organization has been working diligently with its new team to prepare the 2016 and 2017 returns, with the goal of filing them by the end of the year.”

Prescription Pain Creams Flagged for Medicare Fraud

By Julie Appleby, Kaiser Health News

Medicare pays hundreds of millions of dollars each year for prescription creams, gels and lotions made-to-order by pharmacies — mainly as pain treatments. But a new report finds that officials are concerned about possible fraud and patient safety risks from products made at nearly a quarter of the pharmacies that fill the bulk of those prescriptions.

“Although some of this billing may be legitimate, all of these pharmacies warrant further scrutiny,” concludes the report from the Office of the Inspector General for the Department of Health and Human Services.

In total, 547 pharmacies — nearly 23 percent of those that submit most of the bills to Medicare for making these creams — hit one or more of five red-flag markers set by investigators.

Those included what the researchers called “extremely high” prices; large percentages of Medicare members getting identical drugs — 16 of the pharmacies billed for identical drugs for 200 or more customers; “greatly increased” year-over-year billing — 20 pharmacies increased their billing by more than 10,000 percent; or having a single medical provider writing more than 131 prescriptions.

More than half of those pharmacies hit two or more measures — and 10 hit all five.

One Oregon pharmacy, for example, submitted claims for 91 percent of its customers. A pharmacy in New York submitted 5,342 prescriptions ordered by one podiatrist, while a Florida pharmacy saw its Medicare billing for such treatments go from $7,468 in 2015 to $1.8 million the following year.

Many of the pharmacies are clustered in four cities: Detroit, Houston, Los Angeles and New York.

The report comes amid ongoing concern by Medicare officials about these custom-made — or compounded — drugs. In addition to questions like those raised in the report about overuse and pricing, safety has been a key issue in recent years. A meningitis outbreak in 2012 was linked to a Massachusetts pharmacy that did not maintain sterile conditions and sold tainted made-to-order injections that killed 64 Americans.

When done safely, pharmacy-made compounded drugs provide a legitimate option for patients whose medical needs can’t be met by commercially available products mass-produced by pharmaceutical companies. For example, a patient who can’t swallow a commercially available prescription pill might get a liquid version of a drug.

State boards of pharmacy generally oversee compounding pharmacies, and the drugs they produce are not considered approved by the Food and Drug Administration.

Rising Cost of Compounded Drugs

The new report focuses on concerns with compounded topical medications.

Medicare spending for such treatments has skyrocketed, rising more than 2,350 percent, from $13.2 million in 2010 to $323.5 million in 2016. Price hikes and an increase in the number of prescriptions written drove the increase, the report said.

It is not the first time the inspector general has looked at compounded drugs. A 2016 report found that overall spending on all types of compounded drugs — not just topical medications — rose sharply.

The U.S. Postal Service inspector general and the Department of Defense also have raised concerns about rising spending and possible fraud for compounded drugs.

In response to those previous reports, the International Academy of Compounding Pharmacists, the industry’s trade group, has said that legitimately compounded drugs “can dramatically improve a patient’s quality of life,” noting that proper billing controls need to be in place. The inspector general’s report in 2016, it added, found that “such controls are not in place.”

This report, which the compounding trade group has not yet reviewed, focuses on topical drugs and a subset of the 15,290 pharmacies that provide at least one such prescription each year. It looked at billing records from the 2,388 pharmacies that do at least 10 such prescriptions a year — providing 93 percent of all compounded topical drugs paid for by Medicare.

Most of the prescriptions were for pain treatment, made from ingredients such as lidocaine, an anesthetic, or diclofenac sodium, an anti-inflammatory drug.

On average, those compounds were more expensive than non-compounded drugs with the same ingredients.

For example, Medicare paid an average of $751 per tube of compounded lidocaine, and $1,506 for the diclofenac, according to the inspector general’s report. Non-compounded tubes of those drugs averaged $445 and $128, respectively.

FDA Commissioner Scott Gottlieb recently outlined new efforts his agency is taking to oversee compounded drugs in the wake of legislation passed by Congress following the meningitis outbreak.

“The FDA is inspecting compounding facilities to assess whether drugs that are essentially copies of FDA-approved drugs are being compounded for patients” who could otherwise take a product sold commercially, he said in a statement issued on June 28.

Gottlieb also said the FDA plans to make more information available to patients and their doctors about compounded topical pain creams, including information about their effectiveness and any potential safety risks.

Not being effective is a safety risk, noted Miriam Anderson, a researcher with the inspector general’s office who helped write the report.

The report urged the Centers for Medicare & Medicaid Services to clarify some of its policies to emphasize that insurers can limit the use of compounded drugs by requiring prior authorization or other steps. The agency concurred with the recommendations, according to the report, including the need to “follow up on pharmacies with questionable Part D billing and the prescribers associated with these pharmacies.”

Anderson said the inspector general’s office is continuing to probe the issue.

“We will investigate a number of leads on specific pharmacies and prescribers who were identified as having these questionable patterns,” she said. “Whenever we see that kind of increase in spending, it raises concern about fraud, waste and abuse.”

Kaiser Health News’ coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.

GOP Report Blames Medicaid for Opioid Crisis

By Pat Anson, Editor

A new congressional report claims there is “overwhelming evidence” that Medicaid has  contributed to the nation’s opioid crisis by making it easy for beneficiaries to obtain and abuse opioid prescriptions.

The lengthy report, called “Drugs for Dollars: How Medicaid Helps Fuel the Opioid Epidemic,” was prepared by the Republican controlled Senate Homeland Security and Governmental Affairs Committee. Democrats on the committee complained the report was concocted to discredit and demonize Medicaid expansion under the Affordable Care Act, also known as Obamacare.

The report cites 1,072 people since 2010 that have been convicted or accused of using Medicaid to improperly obtain prescription opioids.  That is only a tiny fraction of the nearly 70 million people enrolled in Medicaid, but the report nevertheless draws some sweeping conclusions.

“Overwhelming evidence shows that Medicaid has inadvertently contributed to the national tragedy that is the opioid epidemic, and has taken a toll that is playing out in courtrooms across the nation,” the committee staff reported.

“Other well-intended government programs, such as Medicare, may provide similar incentives for rational actors to engage in bad behavior with highly addictive opioids. These issues hold major ramifications for public policy, along with the nation’s health. They deserve serious consideration and a sober national debate, one we hope this staff report will help to initiate. The victims of this terrible epidemic deserve no less.”

The report cites dozens of examples of doctors and beneficiaries abusing the system, such as a $1 billion scheme to defraud Medicaid and Medicare that involved numerous health care providers.

Committee staff also claimed that drug overdose deaths were rising nearly twice as fast in Medicaid expansion states as in non-expansion states. About 12 million more Americans receive Medicaid coverage under Obamacare.

“While there is clearly no single cause to the epidemic, evidence has emerged that Medicaid is playing a perverse and unintended role in helping to fuel and fund the opioid epidemic,” Sen. Ron Johnson (R-WI) wrote in a letter to Eric Hargan, the Acting Secretary of the Department of Health and Human Services.

“The data uncovered in this examination point to a larger systematic problem – because opioids are easily obtained and inexpensive through Medicaid, the structure of the program itself creates a series of incentives for beneficiaries to use opioids and sell them for potentially enormous profits.”

‘Total Hogwash’

The committee’s ranking Democrat, Sen. Claire McKaskill of Missouri, called the report misleading.

"This idea that Medicaid expansion is fueling the rise in opioid deaths is total hogwash," McCaskill said in a statement. "It is not supported by the facts. And I am concerned that this committee is using taxpayer dollars to push out this misinformation to advance a political agenda."

“Separate scientific studies conducted by other authors show that (the) opioid epidemic predates Medicaid expansion and that recent increases in overdoses stem from fentanyl and heroin, not prescriptions obtained through Medicaid.  Unlike the report released by the majority staff today, these studies were both scientific and comprehensive.”

The report’s conclusions were also questioned by a longtime critic of opioid prescribing.

“I believe the access to prescribers that Medicaid, Medicare and commercial insurance offers does increase the likelihood that someone might develop a disease often caused by prescriptions,” said Andrew Kolodny, MD, founder and Executive director of Physicians for Responsible Opioid Prescribing (PROP).

“But I do not believe that Medicaid should be singled out in this regard. Opioid overdoses have been increasing in people with all types of insurance and in people from all economic groups, from rich to poor.”

A report released this week by the Kaiser Family Foundation found that states with above average overdose death rates includes 18 states that expanded their Medicaid coverage and 8 states that did not.  Overall, Medicaid covers nearly 40% of the two million Americans estimated to have opioid addiction.