If you understand the current interplay between Average Wholesale Price (AWP), ingredient cost, discounts off AWP given by Pharmacy Benefit Managers (PBMs) and other elements that go into drug pricing, please give me a call as the more I learn, it is apparent the less that I know.

However, I do know one thing: any mother or father who shops in a supermarket would understand the basic cost of salt and sugar. I would bet that if you walked into any supermarket in the country and asked any individual, regardless of their native language, they would come within $3.00 of guessing the price of the appropriate cost of a pound of sugar or a pound of salt.

Imagine how shocked anyone would be to learn that Baxter International was selling “bags” of salt and sugar to Medicaid according to a lawsuit filed by the State of Louisiana. Now, admittedly, the “bag” of salt and the “bag” of sugar sold to Medicaid were actually in the form of a saline solution and a dextrose solution. The solutions were provided in intravenous drip bags. The drip bags are more difficult to produce than buying salt or sugar off the shelf, however, not terribly difficult.

A number of recent cases have shown that the drug companies are prepared to pay millions and, sometimes, billions of dollars to settle cases involving prescribing drugs for unapproved uses. These “Qui Tam” matters are brought by individuals who have learned information that is not otherwise available to the Federal Government. New Jersey has a similar “Whistleblower Law” technically referred to as the “False Claims Act“.

Of interest in the recent cases with settlements is the fact that there has been no real action taken against the doctors who may be the worst offenders in prescribing the drugs. According to ProPublica, statistics show that 15 drug and medical device companies have paid $6.5 billion since 2008 to settle accusations of either marketing fraud or payment of kickbacks. In the various suits, approximately 75 doctors were named as being involved but none of the doctors were sanctioned in any way.

Drug maker Eli Lilly pleaded guilty to illegally marketing an anti-psychotic drug “Zyprexa”. Eli Lilly paid $1.4 billion in criminal penalties and settlements in the various civil lawsuits. Interestingly, one doctor, psychiatrist George Jerusalem, prescribed more than $1 million a year worth of Zyprexa. Dr. Jerusalem was a consulting psychiatrist to more than 100 nursing homes and was treating between 3,000 and 5,000 residents. Among other allegations, it was alleged that Eli Lilly had paid Dr. Jerusalem in excess of $50,000.00 in “consulting fees”.
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Only in New Jersey can you have a doctor bill nearly a million dollars in charges to Medicare and Medicaid in less than eighteen months. It is obviously very difficult to bill those kinds of numbers working alone; however, Dr. Yousuf Masood and his wife came up with a plan to produce these kinds of numbers. Dr. Masood hired three medical school graduates who had failed to pass the required test to become licensed to practice medicine in New Jersey. In court, the Masoods admitted they knew that the three they had hired were not licensed to practice medicine in New Jersey. To add insult to injury, it was learned that two of the three individuals hired by Dr. Masood were found through Craig’s List.

On April 21, 2011, both husband and wife pled guilty in Federal Court to one count each of conspiracy to commit healthcare fraud according to the U.S. Attorney for the District of New Jersey. As part of the guilty plea, Dr. Masood indicated that he had billed Medicare and Medicaid for more than 20,000 patient visits. The doctor claimed that he had performed the patient exams, when in fact the exams were completed by the three unlicensed physicians. During 2009, Dr. Masood was the top Medicaid prescribing doctor in the state of New Jersey. Interestingly, his prescriptions exceeded nine million dollars in one year. The second highest drug-prescribing doctor in the state of New Jersey did not reach six million dollars in prescriptions during that same year.

Recently, there have been a number of articles on the New Jersey School Construction Corporation. The original “SCC” was charged with building schools in areas of need. However, many years later we are left to wonder about the success of the program. Pundits say that hundreds of millions of dollars have been spent, with no real accounting. Supporters feel that schools have been completed in areas that might not have been otherwise helped.

The original “SCC” was abolished in 2007 and replaced by the School Construction Authority.

Governor Christie recently stopped payments on a Burlington County high school. The reason; the $27 million project was $17 million over budget. Where does all the money go? Some goes to acquiring property. However, in Gloucester City $13 million was spent acquiring 70 properties and no school has been built. In Camden, 34 properties were acquired and no school there either.


Over the past couple of weeks, the Federal Courts have passed on a spate of fraud allegations against hospitals. In the past, New Jersey hospitals have been hit with similar claims and, in fact, some New Jersey hospitals have settled with the Federal Government for these allegations of fraud. The claims allege what amounts to improper or inflated billing practices. The terms of art for inflated billing is “upcoding”. Upcoding is basically where the hospital bills for a procedure which may have been more intricate and provides for a larger reimbursement from the Federal Government. The “upcoding” refers to a different billing “code” that the Federal Government assigns to certain procedures. By submitting a claim for a more difficult or intricate procedure, the hospital is reimbursed a larger amount of money. Although there are variants on this upcoding issue, a qualified fraud attorney can explain the intricacies.

“Upcoding” can occur in hospitals as well as physician’s offices, nursing homes or, for that matter, dental offices and counselors’ offices. The upcoding can come in the form of billing for a more difficult procedure but it can also come in the form of billing for a longer procedure. For example, a false claim was brought against a counselor for billing for one-hour sessions when in fact the sessions were only lasting 45 minutes. After the fraud was reported, the investigators engaged in some simple math. The accumulation of the hours billed by the professional far exceeded that which was possible.

As a New Jersey Whistleblower Attorney I am truly amazing how long whistleblower cases can take! This is best exemplified by the recent IRS announcement of their FIRST award. The time lapse is interesting because the IRS established a whistleblower office in 2006. Nearly five years later, the IRS announces its first award to a whistleblower.

The facts are fairly interesting in that the whistleblower was actually an accountant. The accountant reported the underpayment of in excess of $20 million in taxes and interests from a financial services firm. At the time of the report, the accountant was working for the company he reported.

The “new” IRS program announced in 2006 was designed to encourage tips in larger cases and the awards to the person supplying the information can vary between 15% and 30% of the amount of money recovered by the IRS. The IRS awarded the whistleblower 22% of the taxes recovered.

What the heck is a Compendium, and better yet, what the heck is the Compendium of Unimplemented Recommendations? AND how could it be used in New Jersey?

In March, 2011, the Department of Health and Human Services, Office of the Inspector General (OIG) issued its “Compendium of Unimplemented Recommendations”. On first blush, it is hard to imagine that any entity called the “Office of Inspector General” would issue a publication which outlines ways to save money or improve the programs that were not undertaken. However, a deeper analysis is necessary. The compendium outlines the implementation of cost savings or improvements which require either legislative, regulatory or administration action and, in some cases, more than one of the three actions are necessary.

The compendium covers Medicare, Medicaid and Public Health and Human Services as different parts of the compendium. The compendium, in the opening pages, makes a number of “priority recommendations.” The priority recommendations vary from non-monetary recommendations to suggestions that have estimated savings exceeding $3 billion. The recommendations also provide ideas for the Food and Drug Administration, the National Institutes of Health, the Indian Health Service, Medicaid and other federal entities.

Kid Brand announced the termination of two executives because of problems involving underpayment of customs duty on furniture. The New Jersey company appears to owe as much as $7 million to U.S. Customs.
The allegation against the company, and subsidiary LaLobi, relates to duty that should have been paid on furniture manufactured in China. The duty is owed because of what is referred to as “anti-dumping” provisions. “Dumping” is a practice where a manufacturer sells a product at or below the actual production cost. The Customs Service imposes the duty to “level the playing field” for U.S. manufacturers.
It has not yet been disclosed how the information came to the attention of Custom officials. However, if the information was brought to the officials’ attention by a “whistleblower” the Federal Government will be paying a “relator fee” of up to 30%. It is unusual for the government to pay the full 30%. Rewards of 15-20% are not unusual. If a relator is involved a reward of around $1.4 million can be expected.

A telecommunications company paid $16.5 Million for improper billing practices. Avaya, a New Jersey-based company, billed governmental agencies for telephone equipment that either didn’t work or had been replaced. A concerned individual brought the improper conduct to light. Under the Federal Whistleblower Statute, the individual will be paid for providing the information. Although it has yet to be announced, the amount paid to the person disclosing the information will exceed $ 3 million. If you know of improper billing practices like this, call us.

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