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Health care fraud conviction reinstated after court of appeals finds the evidence of guilt was sufficient

From the 11th judicial circuit in Miami, Florida, in U.S. v. Vernon, the defendants were convicted of health care fraud following a trial. The charges involved dispensing factor medication, a blood clotting medication used to treat hemophilia. Defendant Vernon ran a specialty pharmacy that dispensed prescriptions for factor medication, an expensive medication that earned big profits as a result of the high Medicare reimbursement rate. In order to gain more factor medication business the business would pay individuals and businesses large percentages of its profit for referring their hemophiliac clients to the defendant’s company for filling prescriptions. Other defendants were paid kickbacks of up to 45 % of the profit earned from filling the prescriptions for clients. Another defendant, Waters, had several family members who were hemophiliacs and he moved these patients from the competitor to the Vernon’s pharmacy after he was hired by the company as a full time employee and he signed a contract as a hemophilia sales associate earning $400,000 in 2007, $700,000 in 2008, $325,000 in 2009, together with many fringe benefits. In exchange for these payments Waters ensured that his hemophiliac clients filled their medication through defendants’ company. He did not recruit new patients as his contract required. The jury found Vernon guilty of violating the anti-kickback statute, which criminalizes the offering or paying of kickbacks. Following the verdict the court set aside the guilty verdict and granting his Rule 29 motion. The government appealed. Two defendants appealed the denial of rule 29 motions.

The 11th Circuit reversed the district court’s order granting Vernon’s Rule 29 motion because it found sufficient evidence Vernon violated the Anti-Kickback statute,42 U.S.C. 1320a-7b(b)(2)(A) by knowingly and willfully paying money to Brill, who had “clients” that were also hemophilia patients. The evidence showed that the purported employee relationship between Waters and the Vernon’s company was sham. Waters worked at home rarely visiting the office, received no oversight or direction from the pharmacy, spent most of this time in casinos or performing other non-work related tasks. Another defendant, Brill, referred to Vernon’s pharmacy to fill their prescriptions in exchange for payments. The court rejected Vernon’s argument that the language “to induce” Brill “to refer an individual” to Vernon’s pharmacy was a term of art that means a request by a physician for an item or service. It found it included referring by any individual and could apply to Brill.

Vernon also argued the jury instruction misstated the anti-kickback law because it allowed the jury to convict him without finding the required nexus between the improper referrals and Medicare coverage that is without finding that Jeff Vernon and the pharmacy paid kickbacks for the referral of patients whose factor medication prescriptions were covered by Medicaid. He argued that the jury instructions allowed convictions so long as the referred patients received Medicaid benefits for some health care services, even services unrelated to the illegal referrals. The 11th Circuit found no error because any doubt left by the instruction was cured by the indictment itself which set forth the required nexus between federal health care benefits and the services provided to patients.