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From Health Law Daily, July 31, 2013

Pharmacy executives’ guilty verdicts were supported by sufficient evidence for a reasonable jury to make that decision

By Jay Nawrocki, MA

The setting aside by the trial judge of the jury’s verdict of guilty for violations of the Anti-Kickback Statute against Chris Vernon, chief financial officer (CFO) of MedfusionRx was reversed and the jury’s verdict of guilty was reinstated (U.S. v Vernon, July 26, 2103, Hull, F). The denial of the trial judge of the motion of Jeff Vernon, MedfusionRx’s chief executive officer (CEO) and Butch Brill to set aside the jury’s guilty verdict against them was affirmed. In each case there was substantial evidence that a reasonable jury could reach a guilty verdict on charges of substantive violations of the Anti-Kickback statute by both of the Vernons and of health care fraud conspiracy by Brill. The referral provision of the Anti-Kickback statute does not apply only to physicians, as both Vernons had argued.

Illegal referrals. MedfusionRx sold specialty medication known as factor medication, used to treat hemophilia, to Medicaid beneficiaries in Alabama. Factor medication is expensive and has a high rate of profitability for the pharmacy providing it. The Vernons were charged and convicted by a jury of violating the Anti-Kickback Statute because they paid, Lori Brill, Butch Brill’s estranged wife, several thousand dollars over a number of years to refer Medicaid patients suffering from hemophilia to MedfusionRx to have their prescriptions for the factor medication filled. A portion of Ms. Brill’s compensation was on a commission basis and was dependent upon the number of Medicaid beneficiaries she could steer to MedfusionRx.

Referral. The U.S. government appealed the decision of the trial judge to set aside Chris Vernon’s jury verdict. Chris Vernon argued that he did not violate the Anti-Kickback Statute because only a physician can refer a patient to MedfusionRx and that Ms. Brill was a patient advocate and not a physician. The Anti-Kickback statute at 42 U.S.C. sec. 1320a-7b(1) and (b)2 says that a violation occurs when “in return for referring an individual…” or when a person “refer(s) an individual,” the referring person receives any remuneration. Chris Vernon argued that only a physician can refer a person to MedfusionRx for a prescription and that “refer” has a specific meaning in the statute.

The court, however, looked at other nearby sections of the statute and concluded the specific meaning of “refer” is not the meaning in use in the statute. The court said the statute, “speaks broadly to ‘whoever knowingly and willfully…pays any remuneration’ to ‘any person to induce such person…to refer an individual.’” The court also noted that other courts have applied the same reasoning to this argument and that the decision relied upon by Chris Vernon, United States v. Miles heard before the Fifth Circuit Court of Appeals, did not apply as the set of facts in that case were dramatically different than this case. John Vernon made the same argument in seeking the setting aside of his conviction and the court denied it for the same reason.

Sufficiency of evidence. There was sufficient evidence that all the elements needed for a jury to decide that the Vernon’s were guilty of the charge were present. Although Chris Vernon argued that he never signed a check to Ms. Brill or her company there was evidence that he would have, not the least being that he was the CFO of the company and he routinely signed checks on the company’s behalf. This and other evidence could lead a reasonable jury to find that there was payment.

There was substantial evidence that the payments were designed to induce or refer Medicaid patients to MedfusionRx to have their factor medication prescriptions filled Ms. Brill, the owner of the company to which payments were made, provided no other services as required by Alabama Medicaid laws for providers of factor medication. The evidence showed that she merely helped patients get their prescriptions filled and helped patients with daily activities. No evidence was presented to show that Ms. Brill or her company (1) provided educational materials and programs to the Medicaid beneficiaries, (2) provided supplies, (3) tracked the amount of factor medication a patient had on-hand, or (4) provided an annual in-home assessment. Ms. Brill and her firm could have been required to provide these services as part of her compensation, but she was not.

Willfullness. There was sufficient evidence for a reasonable jury to find that both Vernon brothers acted willfully. They knew the commission-based nature of MedfusionRx’s payments, and that the Anti-Kickback statute criminalizes that arrangement. Emails showed that they were involved in the calculation of the amount to be paid to Ms. Brill’s company. Both were advised by the company’s compliance plan that these practices were a violation of the Anti-Kickback statute. An attorney involved in the potential sale of the company said that he could find no way to fit the arrangement with Ms. Brill and her company into one of the Anti-Kickback statute’s safe harbors. In spite of all of this knowledge the Vernons continued to be involved in the issuing of checks to Ms. Brill and her company. Finally the Vernons argued that they did nothing to hide their activities and acted as if everything was legal, but the court noted that the Anti-Kickback statute does not require furtive activity to establish willfulness.

Conspiracy and jury instructions. Butch Brill was convicted of health care conspiracy when he accepted roughly $19,000 from his estranged wife to purchase a vehicle. There was plenty of evidence to lead a reasonable jury to determine that he knew that the money was coming from illegal activities. Jeffery Vernon could not show and did not present his argument at the correct time that jury instructions lead to a duplicitous indictment, misstated the law, or provided constructive amendment to the indictment allowing the jury to convict for a charge for which he was not indicted.

The case numbers are 12-12767; 12-13266; and 12-13311.

Attorneys: Christopher B. Brinson (U.S. Attorney's Office) for the United States of America.

Cases: Casedecisons AnitkickbackNews FraudNews MedicaidNews AlabamaNews FloridaNews GeorgiaNews

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