Monday, October 24, 2016

California and Nevada Ortho Clinics to Pay $2.39 Million to Settle Civil Allegations of Improperly Billing Federal Health Care Programs for Reimported Osteoarthritis Injection Medications (Viscosupplements)

Medical offices often purchase medical devices or medications that are sold all over the world. The same product essentially will be far cheaper in Canada, France, Israel, Mexico or other countries. However, if it is not sold and approved by a U.S. company -- and covered by that company's product liability insurance and registered with the Food and Drug Administration (FDA) -- then it is NOT an approved medical device or medication.

There are many pharmacies and supply companies which sell imported devices or medications from foreign countries and the physicians or office managers do not realize that even though it is labeled the same - that an imported medication or device cannot be billed to a government program or private insurance.  For example, some years ago, we handled a number of cases here in California and Nevada where OB-GYNs bought IUDs (Copper T-380s) that were made outside the United States and were not licensed by Paraguard. There were audits by the state Medicaid programs and the doctors or clinics had to reimburse the programs and notify the patients that these were non-FDA approved devices.  None of the clients we represented had any bad outcomes, but the chain of custody is unknown and there are risks.

A couple of weeks ago in early October 2016, three orthopedic clinics agreed to settle federal and state False Claims Act allegations that they knowingly billed federal and state health care programs for reimported osteoarthritis medications, known as visco-supplements in a case out of Sacramento, California. Viscosupplements, such as Synvisc, Orthovisc, and Euflexxa are injections approved by the FDA for the treatment of osteoarthritis pain in the knee. Viscosupplements are reimbursed by Medicare, Medicaid and other federal health care programs at a set rate based on the average sales price of the domestic product.

The clinics are: (1) Orthopedic Associates of Northern California (Chico, California) will pay $815,794; (2) San Bernardino Medical Orthopaedic Group Inc., DBA Arrowhead Orthopaedics (Redlands, California) will pay $971,903; and (3) Reno Orthopaedic Clinic (Reno, Nevada), will pay $602,335.

The government contended that the clinics "knowingly" purchased deeply discounted viscosupplements that were reimported from foreign countries and billed them to state and federal health care programs in order to profit from the reimbursement system, when such reimported viscosupplements were not reimbursable by those programs. 

The reimported products allegedly included labeling in foreign languages and in English for additional uses not approved in the United States, which demonstrated that the product was reimported. Moreover, because the product was reimported, the government alleged there was no manufacturer assurance that it had not been tampered with or that it was stored appropriately. The ortho clinics denied knowing that the products were reimported.

The government's position is that it wants to maintain the integrity of the health care system to ensure that patients receive drugs and devices that are safe and effective.  

“Medicare will not put the health of its beneficiaries at risk by paying for items that have been ‘reimported’ to this country by foreign suppliers,” said HHS OIG SAC Steven J. Ryan. Mr. Ryan also stated that “Once a product leaves the U.S., there is no accountability for whether it is the actual medication being billed, whether it has been properly stored or whether it could be too old to be useful" and the government "will vigorously pursue providers who use and bill for these substances.”

It is an interesting issue in that big pharma charges different prices for the same product in different parts of the world depending on how much the consumers can pay.  American consumers pay the most in the entire world. Given how easy it is to ship in the modern world, it is not unusual that these products make their way back to the United States. 

This is a lesson for physicians, clinics and hospitals (as well as pharmacies) to understand since any billing for reimported medications or devices will have to be refunded to the government health program or private insurance company. The short term gain in savings is not worth the risk of an audit. Have your office manager and supply personnel ensure that they are purchasing from U.S. suppliers who are FDA approved. If there is an audit or investigation about these issues, hire experienced counsel as soon as possible.  

Posted by Tracy Green, Esq.
Office: 213-233-2261


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