Sacramento Man Sentenced to 3 Years in Prison for Causing Misbranded Drugs to Be Sold Online As Weight Loss and Fat Burner Pills

The U.S. Food and Drug Administration (FDA) has stepped up criminal enforcement where misbranded drugs are being sold online to consumers. On May 29, 2019, Scott Edward Cavell of Sacramento was sentenced by U.S. District Judge John A. Mendez to three years in prison for causing misbranded drugs to be introduced into interstate commerce for weight loss. 

According to plea agreement and court documents, between 2015 and 2017, Mr. Cavell, with others, developed a plan to market and sell a drug, 2,4-Dinitrophenol (also known as DNP), as a weight loss drug and “fat burner” despite knowing that DNP is not approved by the FDA as a substance for human consumption. Mr. Cavell sold DNP in pill form and called it a fertilizer — a term under which is it legally sold in other circumstances.

Dietary Supplements Are Subject to FDA Investigation. GNC Entered Into Agreement with Department of Justice to Keep Potentially Illegal Dietary Supplements Out of the Marketplace.

Nutritional supplements are often recommended or sold by practitioners such as chiropractors, naturopathic doctors and other providers. Determining what ingredients are in the products is difficult and a recent settlement shows that retailers will be held responsible for selling products with misbranded supplements or that promise to treat or cure a disease. 

All providers who sell supplements should ensure that the products do not include unlawful dietary supplements to the extent possible. How can a retailer determine if supplements are from natural plants or are synthetic? 

On December 7, 2016, the world’s largest dietary supplement retailer, GNC Holdings Inc. (GNC), entered into a wide-ranging agreement with the Department of Justice to reform its practices related to potentially unlawful dietary ingredients and dietary supplements, and has further promised to embark on a series of voluntary initiatives designed to improve the quality and purity of dietary supplements.

The non-prosecution agreement resolves GNC’s liability for selling certain dietary supplements produced by a firm currently under indictment.  As part of the agreement, GNC has agreed to pay $2.25 million to the U.S. government and cooperate in dietary supplement investigations conducted by the government.

A lengthy investigation conducted by the U.S. Food and Drug Administration (FDA), the U.S. Attorney’s Office for the Northern District of Texas, and the Consumer Protection Branch of the Department of Justice’s Civil Division resulted in allegations that GNC’s practices related to ensuring the legality of products on its shelves were lacking. 

According to an agreed-upon statement of facts that accompanies the non-prosecution agreement, GNC admitted it engaged in acts and omissions that allowed a misbranded supplement— OxyElite Pro Advanced Formula, a product of Dallas-based USPlabs LLC (USP Labs)—to be sold at GNC locations nationwide in 2013.  The statement of facts notes that GNC sold the product based on representations from USP Labs that ingredients contained in the product complied with the law.  It further notes that GNC did not undertake additional testing or require additional certifications to confirm such representations or to verify that the ingredients in the product were as represented. 

USP Labs was indicted in November 2015 and is awaiting trial.  The indictment alleges, among other things, that USP Labs engaged in a conspiracy to import ingredients from China using false certificates of analysis and false labeling, and then lied about the source and nature of those ingredients after it put them in its products.  According to the indictment, USP Labs told some of its retailers and wholesalers that it used natural plant extracts in some of its products, when in fact it was using synthetic stimulants manufactured in a Chinese chemical factory.

California Registered Nurse Who Ordered Botox From Canadian Company Via Internet for Medical Spa Pleads Guilty to Federal Charge of Receipt and Delivery of a Misbranded Drug

One important issue for all medical providers is to understand where FDA medications and injectables come from. Ordering on the Internet or from unauthorized distributers can create serious legal issues, including criminal charges, license discipline and in cases where insurance or Medicare/Medi-Cal (Medicaid) has been billed there will be demands for overpayment and allegations of fraudulent billing.

A registered nurse who owned and operated a day spa in Laguna Niguel, California has learned this lesson the hard way. This month she agreed to plead guilty to a federal charge related to the illegal distribution of Botox that was not approved for use in the United States.  

Bridget “Gigi” Goddard, who allegedly owned Pure Indulgence Skin Rejuvenation in Laguna Niguel, has agreed to plead guilty to one count of receipt and delivery of a misbranded drug, a crime that carries a statutory maximum penalty of three years in federal prison. It would be highly unlikely she would receive the maximum but it is a felony and will likely have license repurcussions.

Lesson of the Case. The issue is often whether there is criminal intent and there have been thousands of physicians purchasing. How is that shown? One way is whether the individual received a letter from FDA about it and continued to order from other countries.  FDA has been transparent about notifying medical providers about illegal use of Botox and other medications from outside the U.S. On the FDA website there's a list of medical providers who were notified from 2013 to the present and there's a list of "repeat offenders." Ms. Goddard unfortunately was one of those listed as having been notified in 2013 and apparently still used product from outside the U.S. The undercover agent was key in her case. 

Government Has List of Providers Who Bought From SB Medical, Inc., TC Medical and Gallant Pharmaceutical. This case comes out of a larger federal case against SB Medical that was filed in Alexandria, Virginia against SB Medical, Inc. and its principals. In that case, the company plead guilty and was ordered to pay a $45 million fine and to forfeit $30 million for smuggle misbranded pharmaceuticals into the United States. The government sent letters to medical clinics and medical spas who had bought Botox and other injectables from SB Medical, Inc. and other companies under investigation and then followed up with them. Other entities that were also prosecuted include Gallant Pharmaceutical. 

Allegations Against Ms. Goddard. The government alleged that the Botox that Ms. Goddard purchased had been manufactured for distribution in foreign nations such as Turkey and was not approved by the FDA for distribution in the United States. All Botox products approved for distribution in the United States by the United States Food and Drug Administration are manufactured by Allergan and must be administered under the supervision of a licensed physician. 

Ms. Goddard admitted in her plea agreement that, over the course of several years, she ordered Botox over the internet from Canadian companies that sold unapproved drugs to customers in the United States. In April 2016, the government send an undercover FDA agent to Pure Indulgence which compounded Ms. Goddard's legal issues.  The government alleges that at this undercover visit, Ms. Goddard told the undercover agent that the undercover agent did not need to be examined by a physician before the Botox injections were administered, and she knowingly misled the agent as to whether the Botox was approved for use in the United States.

Ms. Goddard is scheduled to make her first appearance in this case in United States District Court in Santa Ana on December 12. The investigation into Goddard was conducted by FDA’s Office of Criminal Investigation. The case is being prosecuted by Assistant United States Attorney Scott D. Tenley of the Santa Ana branch office.

Attorney Commentary. The high price of Botox and other injectibles have caused entrepreneurs to buy overseas and sell in the U.S. in person or through the Internet. The salespersons represent that the product is the "same" but often that is not the case. In addition, even if the product were Allergan from overseas - if the drugs are not distributed by Allergan and sold in the U.S., it is illegal to import the products from outside the U.S. One of the reasons is that there are counterfeiters who repackage, are not using real product, and the chain of custody is not guaranteed. In addition, there is product liability insurance in the U.S. that is not available for products purchased from outside the U.S. 

While the pricing structure of pharmaceuticals and medical devices may not seem fair, it is the law and medical providers must be careful and instruct office managers and nurses to order from the manufacturer or authorized distributors. If there is an investigation or visit by an FDA agent, it is important to not handle this alone and seek experience counsel since mistakes during an interview can have serious repurcussions.

How do you prevent an FDA investigation from turning into a criminal case? The government looks for criminal intent. The FDA had been heavy handed in some cases and was even named the Botox Police. Allergan had its own financial interest in pursuing charges. 

Tips. First, if there is an interview request -- and trust me, the agents do not call for an appointment and simply show up in pairs -- be polite and ask for time to have an attorney present and so you can gather all your records and prepare for an interview (or decide not to be interviewed depending on the facts). 

Second, do not lie. Do not fabricate records. Do not ask anyone else to lie or fabricate an invoice. This is what the government loves - when someone panics and acts like a foolish teenager and lies without thinking - since it shows "criminal intent." 

Third, do not minimize the importance of these investigations and attempt to handle it on your own. When you are stressed, part of your brain shuts down and at the time of the interview, the FDA or other goverment agency knows a lot more facts than you.

Finally, each case is different and there could be an additional 10 tips but it will be case specific. Even chain pharmacies have counterfeit and fake drugs and over the counter medications. Counterfeiting is a huge business. Be smart and breathe, take your time to get experienced representation and prepare for an interview like you would anything else.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law
Email:  tgreen@greenassoc.com
Office: 213-233-2261

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.

Former California Resident Sentenced to 30 Months in Federal Custody for Sale of Unapproved “Energy Wave” (Rife) Medical Devices

Former California resident David Perez was sentenced in federal court on April 4, 2016 to 30 months in custody for conspiracy to commit mail fraud (18 U.S.C. Section 371) selling unapproved “Energy Wave” medical devices (non FDA approved) over the Internet and mailing them to customers throughout the United States. These are known as "Rife" machines.

According to admissions in his plea agreement, Mr. Perez marketed the “Energy Wave” device using the website www.myenergywave.com[external link].

Rife machines have been around for years and some alternative practitioners use them. I had an unlicensed practice of medicine criminal case in which a Rife machine figured prominently. While I obtained not guilty verdicts on the multiple counts, my client was not the one who offered the Rife treatment. You can find many Rife machines for sale to this date. This particular "Energy Wave" device allegedly consists of a micro-current frequency generator with a digital readout, two stainless steel cylinders, two personal application plates with connectors and lead wire for the cylinders and plates.  

What caused Mr. Perez legal trouble was that allegedly when he sold them to users, his company also provided users with an operating manual and a list of Auto Codes that set forth over 450 digital settings for the device, directed to treat specific conditions from abdominal pain, AIDS and diabetes to stroke, ulcer and worms.  The Auto Codes and Manuel advised users to connect the cylinders or plates to the machine, and touch them to the body for a recommended run time to treat each condition. 

David Perez admitted selling each device for approximately $1,200-$1,500, and receiving gross proceeds of approximately $271,000.  He also acknowledged in his plea agreement that he intended to defraud and mislead the Food and Drug Administration by attempting to evade the agency’s oversight of medical claims made regarding the Energy Wave device by maintaining a separate website (rifecodes.com) to which he referred customers who needed to obtain the auto codes that allegedly were used to treat the various medical conditions.  Mr. Perez admitted that he knew or should have known a number of his customers were vulnerable because they had purchased the device in an attempt to cure cancer, and that they were marketing the device without the proper FDA approvals.

Given the loss amount and lack of prior criminal history, the 30 months is a high sentence and those selling or marketing non-FDA approved devices that are suggested to be used to cure any diseases (especially cancer) need to be mindful of the FDA's aggressive stance on such marketing and sales.

Posted by Tracy Green, Esq.

California Doctor Sentenced to 6 Months in Federal Prison for Defrauding Patients and Insurers by Implanting Unapproved Copper T-380A IUDs

Over the past eight years, we have represented a number of physicians who had inadvertently used Copper T-380A intrauterine devices (IUDs) that were made outside United States and sold by distributors and suppliers here in the United States. Although the cases were being investigated by the State of California, they did not go criminal once it was shown there was lack of knowledge and no deceit.

These cases are still around since the Copper T-380A is one of the world's most used IUDs and it is essentially identical to ParaGard's version but it is the only one authorized by the Food and Drug Administration (FDA) to distribute in the United States. The price in the U.S. for this product is over $200 while in other countries the identical product can be obtained for $20 to $60. In Canada, for example, suppliers were buying them there and distributing in the U.S. 

Internet pharmacies are selling these devices from Canada and Australia in the United States. This is not allowed and even if the product is identical it is not an FDA approved device. This means that when government or insurance programs are billed for IUDs that are not FDA approved, it is not an approved claim or is a false claim.

A physician has learned the hard way what can happen if one is not careful in using devices that are not FDA approved - even if they seem identical.  According to court documents, Dr. Singh bought unapproved IUDs on the Internet and implanted them in his patients after he was warned by the FDA. 

Former Doctor Charged With Conspiring To Defraud The FDA in Marketing His Hyperbaric Chamber as Approved Medical Device And Billing Medicare and Carriers for Alleged Unsafe and Unnecessary Treatments

On November 18, 2015, a former doctor and others were charged with making misrepresentations to the  Food and Drug Administration (‘FDA”)  in order to obtain clearance for a "hyperbaric chamber" that Mr. O’Brien marketed under the name "Hyperox 101."  

This case probably would not have been prosecuted but for the fact that approxmimately $15 million in claims for treatments were submitted to insurance carriers and Medicare. The Medicare billings in this case appear to have triggered the investigation.

William J. O’Brien III of Philadelphia, Pennsylvania was charged in an indictment with conspiring to defraud the FDA and a separate conspiracy to commit health care fraud. 

A hyperbaric chamber is a sophisticated medical device in which patients breathe 100% pure oxygen for a prolonged period in a pressurized environment.  To achieve a therapeutic effect, the chamber is pressurized to at least 1.4 atmospheres below sea level.  The pressure creates a biochemical reaction that increases oxygen absorption into the blood.  A hyperbaric chamber for treating patients must be constructed using pedigree steel and certified as a pressure vessel for human occupancy. 

Tracy Green Interviewed On NPR Station On "Use Of Unappoved Birth Control Devices Common In U.S." National Issues With Physicians Using IUDs Manufactured In Other Countries.

Tracy Green was interviewed by radio station WRNI (Rhode Island's NPR Station) in a program entitled "Use Of Unappoved Birth Control Devices Common In U.S."

This is a program on OB-GYNs using IUDs from Canada. In the U.S. only IUDs from two companies are "FDA approved" even if the IUD is the same as ones purchased from other countries.

In the article and program, Green was quoted as follows:

"They just thought, wow, this is a great deal," said lawyer Tracy Green. " Don't be a knucklehead and over pay."   Green practices in Los Angeles, and she represented five doctors who did the same thing three years ago in California. She says the practice was pretty widespread.

"One of my doctors, it was another OBGYN who called him and said, Boy, my office, we found a great price.' And you know, they're all board certified OB-GYNs," Green said. "They just thought this was a great deal."

Green says the IUDs appeared to be identical to the ones the doctors usually prescribed. They even had the same packaging. The lawyer representing the Rhode Island doctors who bought the UN-approved IUDs declined to speak on tape for this story, but he's argued the same thing: There was nothing different about these devices; they were just cheaper because they came from Canada.

Attorney Commentary:  I have represented numerous physicians on this particular issue in California over the past three years.  The issue for physicians who bill Medicare or Medicaid (Medi-Cal) for non-FDA approved devices is that they cannot bill the programs and will be liable for repaying any claims submitted.  Whether a case proceeds to criminal prosecution will depend on whether there was criminal intent and if the physician knew it was a non-FDA approved device. It has been my experience that often the physicians are not buying the supplies, the non-FDA supplies were sold by pharmacies or other supply companies, and that just because the price was lower does not trigger a suspicion that it is non-FDA approved.

Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.  

Any questions or comments  should be directed to Tracy Green, a very experienced California FDA attorney, Medical Board attorney, Medi-Cal fraud attorney and physician attorney at tgreen@greenassoc.com.

The firm focuses its practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing licensed health care providers and in health care fraud related matters in California and throughout the country. Their website is: http://www.greenassoc.com/

Oakland Man Pleads Guilty To Distributing Drugs On Internet Without Prescription

The internet prescription cases continue to be filed around the country. On June 18, 2009, in San Francisco Federal Court, Roger L. Hollins Roberts pled guilty to distributing drugs purported to be Viagra and Cialis without a prescription. Specifically, he plead guilty to misbranding drugs while held for sale with intent to defraud or mislead, in violation of 21 U.S.C. §§ 331(k) and 333(a)(2).

In pleading guilty, Mr. Roberts admitted to operating Internet Web sites known as www.viagra-on-wheels.com and www.sexpills-on-wheels.com, which advertised delivery services specializing in local delivery or overnight mail delivery of brand-name prescription erectile dysfunction drugs, particularly Viagra and Cialis. The drugs the defendant advertised and sold on these Web sites were drugs that he imported from the People’s Republic of China and Mexico.

They bore the labels “Viagra” and “Cialis” and contained the same active ingredients as those drugs. Roberts also admitted that the Web sites falsely stated that the drugs were approved by the U.S. Food and Drug Administration, that they were obtained directly from licensed pharmaceutical manufacturers, and that they were sold in compliance with FDA regulations.

One aggravating fact was that Mr. Roberts had never been registered as a pharmacist or licensed medical practitioner with the State of California.

The sentencing of Mr. Roberts is scheduled for September 24 before Judge White in San Francisco. Any sentence following conviction would be imposed by the court after consideration of the plea agreement, the U.S. Sentencing Guidelines, and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Any questions or comments should be directed to: tgreen@greenassoc.com or 213-233-2260.

Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing licensed health care providers. Their website is: http://www.greenassoc.com/

Misbranded Drugs Case: Doctor Convicted By Jury Of Buying Non-FDA Approved Cancer Drugs From Foreign Countries And Using Them In His Oncology Practice

On May 8, 2009, a California physician, Vinod Chandrashekm Patwardhan, of Claremont, California was convicted by a jury in federal court in Riverside of conspiracy, two counts of introducing misbranded drugs into interstate commerce with intent to defraud or mislead, and three counts of smuggling foreign misbranded cancer drugs into the United States .

Dr. Patwardhan is an oncologist who maintained offices in Upland and Chino. The evidence presented during a seven-day trial showed that Patwardhan regularly purchased unapproved cancer drugs from foreign countries including India, Honduras, Panama and the Philippines.

From 2004 until his arrest last August, Patwardhan smuggled or caused to be smuggled more than $1.3 million worth of unapproved drugs from foreign countries. The investigation revealed that Patwardhan and his employees made at least 34 trips to foreign countries to obtain drugs that were smuggled into the United States. Most of Patwardhan’s patients were receiving the unapproved and misbranded foreign drugs, a fact Patwardhan concealed from his patients.

Dr. Patwardhan charged the patients, their insurance companies and Medicare for the unapproved drugs at the same rate that he would charge for FDA-approved drugs, even though he had paid significantly less for the unapproved foreign drugs.

For example, one invoice signed by the doctor, showed that he approved the $888,900 purchase of 100 vials of Docetax 80 mg and 300 vials of two other drugs, also illegible. Docetax is used in for the treatment of metastatic breast cancer. Other drugs included Pemnat 500 mg, Neupeg and Grafeel 1 ml, made in India and Farmorubicina manufactured in Italy. These medications are not FDA approved when purchased from other countries even if they are the same medications.
Authorities began investigating Patwardhan in March 2008 after one of his employees said the doctor was treating patients with cheaper cancer medications purchased from India and Honduras that were not approved for use in the U.S. by the Federal Drug Administration.

Two of Patwardhan’s former employees have pleaded guilty to misdemeanor charges of introducing unapproved new drugs into interstate commerce and are scheduled to be sentenced later this year.

Dr. Patwardhan treated about 35 cancer patients a week and allegedly told investigators prior to charges being filed that he had been bringing in medication for "quite some time." Employees became suspicious of the unauthorized drugs because Dr. Patwardhan would bring them in gym bags or other concealed packages. Generally, FDA approved oncology drugs are shipped by U.S. companies in refrigerated containers through Federal Express or other courier services.

One employee told investigators that Patwardhan traveled to India three or four times a year and had been purchasing cancer medication from there for six or seven years. Employees said he also had one person purchasing drugs from Honduras and asked them to purchase drugs on trips to Canada and the Philippines.

Dr. Patwardhan is scheduled to be sentenced by United States District Court Judge Virginia A. Phillips on July 20. At sentencing, Patwardhan faces a statutory maximum penalty of 71 years in federal prison.

Attorney Comments: Although the U.S. Attorney spokesman stated that this is the first such case he had seen in 12 years, we have seen numerous cases such as this one. This type of case arises by the huge difference in prices between FDA approved medications or devices in the U.S. and the price for these same medications or devices in other countries. The U.S. prices can be anywhere to 300% to more than 1,000% more than the foreign prices.

There appears to be no evidence that any patients were harmed by these medications made in other countries. Instead, it was a case about providing and billing for non-FDA approved medications (and bringing them into the U.S.) Some drugs made in other countries do not have safety controls that are required by the FDA but these drugs did not seem to have these issues.

Our office handled a number of cases where Copper T-380 IUDs made in other countries were being sold by pharmacies and suppliers to medical offices. The price differences were very large and enabled the offices to provide these IUDs to their patients. The price of the FDA approved IUDs distributed by only one company were higher than the reimbursement for Medi-Cal. The device appeared identical and there was no indication that there was any difference between the devices made outside the U.S. Nevertheless, some physicians were charged criminally where it could be shown that they knew the device was made overseas and that it was bought at a significant discount. Some of our clients were able to avoid criminal prosecutions but each case was fact specific.
It appears that Dr. Patwardhan was offering these medications made outside the U.S. to HMO patients where the HMOs refused payment or treatment. Regardless of the doctor's intentions, cases such as these are often open and shut when it is possible to prove that the physician knew that the medication or device was from another country and was not FDA approved. Insult is added to injury where the physician bills for the non-FDA approved drug or device and the Medicare and Medi-Cal manuals are clear that only FDA approved drugs or devices are reimbursable.

Be wary of suppliers coming to your office and offering drugs or devices at a large discount. Further, do not succumb to the temptation of saving money by buying drugs or devices from other countries (including Canada) and then billing for them. In the event of any question about whether you are purchasing FDA approved drugs or devices or have failed to do so in the past, err on the side of caution and involve your health care attorney or compliance officer at the earliest time possible.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.