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

Telemedicine (Telehealth) Rules Are Changing Slowly and Medical Boards and Payors Are Slowly Adapting. Be Careful to Follow State, Federal and Payor Rules

Today's New York Times has an article about telemedicine (we call it telehealth in California) entitled "Modern Doctors' House Calls: Skype Calls and Fast Diagnosis." It is a worthwhile read.

In my practice, I get calls from physicians and health care providers telling me that "telemedicine is now legal." This is especially common in aesthetic medicine (medical spas) in compliance with a physician or advanced practitioner visit before services are performed. While it is under certain circumstances, the efforts to make medicine like Uber or Lyft will face some challenges from medical boards, malpractice lawsuits, HIPAA compliance, prescribing issues, and insurance companies.

I have seen many physicians, health care providers and psychologists use Skype and FaceTime without researching their compliance and state rules. Remember, telemedicine (telehealth) is simply a valuable tool for providing health care services. 

It is as good as the policies and procedures followed. It is a valuable tool and can be very helpful to patients and practices. 

Here are things to think about if you are providing or plan to provide health care services via telemedicine (telehealth):

1.  If it is a new patient, you will be held to the standard of care for a physician having an in office visit. 

Physicians are held to the same standards and duties associated with practicing medicine regardless of whether they are practicing via telehealth or face-to-face, in-person visits. Your specialty will also come into play. Thus, if you are an internist or family practice physician, that is the standard. 

What if the patient has not had a physican in a certain number of years? How do you rule out other medical conditions?

How will you run labs (urine or blood) or perform other diagnostic studies? If the standard of care is that you take vital signs, how would that be accomplished?

2.  Prescribing is an issue. How will you prescribe for a new patient without a face to face visit? 

The prescribing laws in California for example are different than the telehealth laws and you must comply with them. For example, California requires that physicians perform a “physical exam” before prescribing drugs, and explicitly outlaws prescribing on “the internet” without a prior examination. Will your documentation meet this standard?

3.  Licensing. Most states require that you be licensed in their state. For example, physicians using telehealth technologies to provide care to patients located in California MUST be licensed in California. There are exceptions for consults but that requires that a physician request the consult and the other physician is simply using your review of the patient or medical records as a consultation.

4.  Informed consent. Physicians are held to the same responsibilities of providing informed consent. How will you obtain the written informed consent? How will that be in your file?

There are ways to handle this. The informed consent could be extremely useful to address some of the other issues raised here (the scope of the visit for example and a requirement that the patient go get a full physical and that you are not the primary care physician) but this needs to be thought out.

5.  HIPAA and State Privacy Laws. Physicians are held to the same responsibilities of ensuring the privacy of medical information. Skype and Facetime may not meet those requirements. They are not fully encrypted. There are services that are HIPAA compliant but Skype is not.

6.  Record keeping. Physicians are held to the same responsibilities of medical recordkeeping. 

7.  Malpractice and informed consent lawsuits and Board Complaints. I can imagine that in a couple of years we will see a lot of horror story lawsuits and Board complaints - probably many of them nuisance - simply because physicians and health care providers did not obtain written informed consents, did not follow HIPAA, did not keep good records and/or did not perform physicals or refer the patient for follow up.

8.  Medicare, Medi-Cal (Medicaid) and Private Insurance. Check with your biller on these issues. Medicare is not allowing billing for telemedicine and make sure your biller does not bill for phone or Skype visits or follow-up.

At present, the state laws are often limiting coverage to urgent care telemedicine.

For example, Washington is the 24th state to ensure reimbursement for some telemedicine services, does NOT cover virtual urgent care outside a medical facility.

It is the future but it will be carrier by carrier. UnitedHealthcare announced that by next year it would cover virtual urgent care visits for most of its 26 million commercial members by next year, citing the shortage of primary care doctors and the cost of less than $50 per virtual visit. Anthem will cover virtual urgent care visits for 16 million members in 11 states by the end of this year, and it expects the number to reach 20 million next year. 

Both insurers are relying on third-party telemedicine companies to provide the doctors and the technology platform for the service, just as most health systems do for now. Remember that these patients are already in the system where physicians have access to their records and they have a primary care physician. And the limit currently is for "urgent care." 

I believe that technology will vastly improve patients' lives and reduce the cost of health care. It will take time for us to adapt face-to-face to virtual examinations and get patients, providers, insurers, licensing boards, and malpractice standard of care all on the same page. If you are doing this, take the time to create policies and procedurers and run your plan by a health care lawyer. This is preventive medicine for your own practice.

For information or advice for your own practice, feel free to contact attorney Tracy Green at tgreen@greensasoc.com or 213-233-2260. Be careful out there.

Tracy Green Quoted In Sac Bee Article "Legislation Aims to Crack Down On Illegal Medical Spas"

Robert Kneshke/Shutterstock

Medical spas are the latest focus in California's legislature. Tracy Green was quoted extensively in an article in the Sacramento Bee entitled "Bill Aims to Crack Down on Illegal Medical Spas" by journalist Anika Anand.

Why is this such a big issue in California? First, California has some of the strictest laws prohibiting the "corporate practice of medicine" in the United States. In plain English this means that in Californa a business corporation which is not owned by a physician or is not a professional medical corporation (at least 51% owned by a physician) can NOT employ a physician or nurse to provide professional medical services. There are some exceptions for hospitals and HMOs.  Some states like Arizona and Nevada do not have these laws and allow non-physicians to own medical practices.

Second, this is about money. Dermatologists, plastic surgeons, and other physicians are seeing business people open "medical spas" offering Botox, Juviderm, laser hair removal and other "medical" treatments at a lower cost because they do not have a physician on site and are undercutting prices and taking their business. The ability to get patients to pay cash (no insurance reimbursement) for these cosmetic and anti-aging medical procedures is a big draw since our aging population is willing to pay for these procedures.

Third, people opening medical spas do not hire attorneys at the outset -- even for a couple of hours -- to make sure they are complying with state laws. There are so many medical businesses that do not comply with the laws that they fail to realize they are violating state laws and are committing felonies. Failure to understand the laws is not a defense to the unlicensed practice of medicine charge.

Fourth, this crackdown follows Medical Board hearings regarding the level of supervision of nurses who perform cosmetic procedures such as Botox injections and laser hair removal. There was a push for higher level of supervision for these procedures but that could adversely affect nurses' ability to perform procedures in hospitals and clinics that are not cosmetic related. The increased enforcement seems to be a result of those hearings.

Finally, the Medical Board seems to be using these criminal cases in order to deter others and send a message out to the medical community. If an individual hires a physician to be a medical director and a nurse to perform Botox or laser hair removal - it is a felony or misdemeanor of practicing medicine without a license. It is a Business and Profession Code violation and under the current laws no one need prove intent to defraud or criminal intent. The physician can be charged with aiding and abetting the unlicensed practice of medicine as well. This means it is easy for the government to shut down illegally structured medical spas, execute search warrants and charge the individuals involved. 

How many medical spas are in California? We do not know. Medical spas are not required to register with any official government agency, so there is no way to obtain an exact count. The legislature's concern is that a significant number of the "medical spas" are operating without proper medical supervision. California is currently proposing to strengthen its laws governing medical spas and in the meantime the Medical Board is initiating criminal investigations and cases against medical spas that are not legally compliant.

In my opinion, this crackdown and proposed legislation is unnecessarily detrimental. The maximum fine would be increased from $1,200 to $50,000 and the jail time would also be increased substantially. This would unfairly target those unfamiliar with the existing operating guidelines. There are more effective ways to ensure compliance with business regulations than criminalizing the conduct.  While I understand the importance of compliance and have worked in my own practice to help various spas achieve fully compliance, this new law would be overly harsh. For physicians and nurses, the criminal charges could adversely affect their licenses.

Extreme criminal charges are heavy-handed unless the case involves repeat offenders or people who have been told that this is the law. Rather than focusing so many resources on intensive investigation and prosecution, the state should be concentrated on making people aware of the proper way to operate these types of businesses.

For further reading on this matter, please refer directly to the Sacramento Bee article where I am quoted. In the meantime, the key word is get compliant as soon as possible and seek legal advice BEFORE you open your medical spa business. If you have already opened a medical spa or aesthetic medical practice, get compliant ASAP.

Posted by Tracy Green, Esq. Please email Ms. Green, a very experienced health care attorney and medical spa attorney at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.  

California Medical Board Increases Investigations, Search Warrants And Arrests In Medical Spas And Practices Offering Laser Skin and Hair Procedures, Botox and Injectibles: Time To Make Sure Your Practice Is Compliant!

If your medical practice or medical spa offers laser hair removal, botox, injectibles, laser skin treatment, or sales of prescribed items such as Latisse or Retin A – it is time to make sure your practice is compliant. Why? The Medical Board of California is aggressively investigating the unlicensed practice of medicine. It has a separate department called “Operation Safe Medicine.” 

This investigation is not limited to backroom medical practices but includes practices owned by physicians where the level of medical supervision is not sufficient, nurses operate a laser for hair removal where there has not been a good faith or "directed" medical exam by a physician or advanced practitioners such as a physician assistant or nurse practitioner, and receptionists selling Latisse to patients without a good faith medical exam and prescription. Nurses who are used to hospital settings are often surprised at the requirements in a clinic setting for seemingly routine procedures such as laser hair removal. 

If you are a “medical director” for any practice offering these medical services or a plastic surgeon or dermatologist using nurses, it is critical that the practice is compliant since you could be charged with aiding and abetting the unlicensed practice of medicine.

I recently concluded a criminal case where a physician did a “favor” and agreed to be an unpaid medical director for a location offering laser hair removal but did not have any presence at the facility. This led to a criminal case being filed and disciplinary charges. The case was resolved where the physician kept her license but if there had been compliance and the physician understood the law at the beginning – the case never would have happened. 

I had another case where a plastic surgeon client allowed an independent contractor registered nurse to inject Botox without a good faith medical exam by the physician. The compliance changes I drafted were instituted immediately and the Medical Board investigation was closed without incident. I have had numerous cases where compliance was successfully instituted to avoid the possibility of any Medical Board complaints or investigations.

Why am I writing this article? Just in the last three weeks, I know of 3 cases where there have been search warrants and/or arrests. Apart from the cases I am handling, the Medical Board issued a press release on June 8, 2012 where it announced the arrests and felony charges against a non-medical owner of Laser Solutions in Beverly Hills, CA for practicing medicine without a license. 

In the past OSM has focused on a variety of unlicensed practices (selling contact lenses without prescriptions, unlicensed midwifes, etc.) but lately the cosmetic practices are targeted. The climate is not favorable for these practices and the Medical Board is sending in undercover agents. There have been hearings at the Medical Board about the level of supervision for nurses in medical spas and cosmetic practices and one of the outcomes of these hearings was increased enforcement. 

How do these cases get initiated? Often they are complaints from competitors or former employees. The complaints are rarely filed by patients. In my experience, I have seen physicians and nurses remain vastly ignorant of the rules and regulations and unintentionally violate the law. If your practice is not compliant or you are not sure, now is the time to change your practices and procedures. In some cases, ownership also needs to be modified. Seek experience counsel and become compliant. Do not fear that by making changes you will be admitting guilt. Just become compliant.

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

 Any questions or comments should be directed to Tracy Green a very experienced Medical Board attorney, health care litigation attorney, medical spa attorney, physician attorney, and nurse attorney. She is very familiar with the issues of ownership, corporate practice of medicine, unlicensed practice of medicine and related issues in cosmetic areas. The firm website is: http://www.greenassoc.com/

Medical Spas Under Investigation In California - Is Your Practice Legal?

The California Medical and Nursing Boards are targeting "medical spas" or aesthetic practice locations where they suspect that are owned by laypersons, nurses or other non-physicians.  They are also targeting clinics or spas where there is a suspicion of unlicensed personnel performing procedures or nurses performing services but not being supervised properly.

Undercover agents are being sent in on a regular basis. Additional investigators have been hired to help conduct these investigations. In some cases, misdemeanor charges for the unlicensed practice of medicine or aiding and abetting the unlicensed practice are being filed.  I have a number of cases where Board investigations are ongoing, cases where we have successfully closed the investigations, and a recent case where a physician, nurse and unlicensed persons were charged criminally (more about that later). In addition, disciplinary charges are being brought against some professionals for their involvement in medical spas that were not structured properly or were not being operated within all the proper legal parameters.

How Does The Board Decide Who To Investigate?

Typically, the investigations are generated by complaints by competitors. Many times the complaints are anonymous and sometimes they are someone affiliated with a competitor. It takes only a simple complaint such as "Practice X is being run and operated by a nurse" to generate a full investigation.

There are also complaints by patients which trigger these investigations -- a quality of care complaint will ultimately raise the questions of who owns the business being investigated and who are the physicians, physician assistants, nurse practitioners or nurses involved in supervision, treatment or ownership.

How Can I Prepare For These Investigations?

It is best to prepare in advance -- long before any investigator comes to your office. Hiring legal counsel knowledgeable about this field can help you save money and legal problems in the long run. If you know that your business is not structured properly -- NOW is the time to restructure and become compliant with all laws, rules and regulations. Restructuring and compliance not only includes ownership issues but also practice and supervision issues, websites, advertising, payment arrangements and related business issues. It is much cheaper to pay for preventative legal counsel than to pay for the defense of an investigation, administrative action or criminal case.

Do NOT be afraid that if you make changes now it will "look suspicious" or imply that you were doing it wrong before. The Boards look for current compliance. If you made mistakes in the past, fix them and move on so you are compliant.

The California Medical Board has publications on its website that are informative as to what is legal and what is not legal and serves as notice to physicians on this issue. For example, "The Bottom Line: The Business of Medicine - Medical Spas" warns physicians about being "medical directors" and lending their license for clinics or spas for which they have no legal ownership or responsibility. In addition, the Medical Board has a publication entitled "Use of Mid-Level Practitioners for Laser, Dermabrators, Botox and Other Treatments" that is a helpful outline and should be read by anyone in this business.

In addition, it is important to understand that California is a state that does not allow the "corporate practice of medicine" or ownership of a medical practice by unlicensed professionals. However, there are ways to structure professional medical corporations that are owned 51% by a physician and 49% by other licensed health care professionals such as nurses, physician assistants or nurse practitioners.


What Should I Do If An Investigator Sends Me A Letter Or Comes To My Office?

Do NOT agree to be interviewed without legal counsel. Be friendly and arrange for any interview to be held while you have your counsel present. If you believe you are legally compliant, get together all the business records, delegation of service agreements, protocols and other information you will need. If you are not legally compliant, it is time to do so ASAP. Do not get paralyzed and take action.


What Type Of Cases Go Criminal?

Based on my experience, the cases that go criminal are where unlicensed personnel like medical assistants are performing procedures such as laser hair removal, Botox, etc. or where the corporate structure of the business is illegal on its face (the nurse or nursing corporation owns the business and the physician is a "medical director" for little or no pay).  In one recent case, not only was there an illegal structure but the physician and nurse submitted to interviews and admitted to damaging facts.

An important rule is do NOT agree to be interviewed without legal counsel. Be friendly but insistent that any interview be held later. Then have your attorney arrange for any interview to be held at a later date.

In sum, most cases do not result in criminal charges. However, if your business is not legally structured, now is the time to fix this issue before anything else happens. I have had numerous clients who were not structured legally -- but I helped them become legally compliant long before any investigator showed up at their office or right after the investigator from the Department of Consumer Affairs sent a letter.

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 medical spa attorney, health care law attorney, and Medical Board and Nursing Board attorney at tgreen@greenassoc.com. See the difference that having an experienced lawyer makes.

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 administrative board and discipline matters in California and throughout the country. They are currently accepting new clients. Their website is: http://www.greenassoc.com/