Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Civil Remedies Division |
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IN THE CASE OF | |
Jeffrey P. Yannello, R.Ph., |
DATE: May 24, 2002 |
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The
Inspector General
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Docket No.C-02-146
Decision No. CR908 |
DECISION | |
DECISION It is my decision to sustain
the determination of the Inspector General (I.G.) to exclude Jeffrey P.
Yannello, R.Ph. (Petitioner) from participating in the Medicare, Medicaid,
and all other federal health care programs, for a period of eight years.
I base my decision on the documentary evidence, the applicable law and
regulations, and the arguments of the parties. It is my finding that Petitioner
was convicted of a criminal offense related to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial misconduct in connection
with the delivery of a health care item or service. Additionally, I find
that his eight-year exclusion is not unreasonable. I. Background This case is before me pursuant
to a request for hearing filed on December 21, 2001 by Petitioner. By letter dated April 30,
2001, the Inspector General (I.G.) notified Petitioner that he was being
excluded from participation in the Medicare, Medicaid, and all other federal
health care programs as defined in section 1128B(f) of the Social Security
Act (Act) for a period of eight years. The I.G. informed Petitioner that
his exclusion was imposed, pursuant to section 1128(a)(3) of the Act (42
United States Code (U.S.C.) � 1320a-7(a)). The exclusion imposed was due
to Petitioner's conviction as defined in section 1128(i) of the Act (42
U.S.C. � 1320a-7(i)) in the United States District Court for the Eastern
District of Pennsylvania, of a criminal offense which occurred after August
21, 1996, and constituted a felony relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial misconduct in connection
with the delivery of a health care item or service. I conducted a prehearing
telephone conference on January 17, 2002. The I.G. is represented in this
case by the Office of Counsel. Although advised of his right to representation,
Petitioner elected to appear on his own behalf. The parties agreed that
the case could be decided based on written arguments and documentary evidence,
and that an in-person evidentiary hearing was unnecessary.
(1) On February 19, 2002, the I.G. submitted its initial brief
(I.G. Br.) and proposed exhibits. The I.G. filed five proposed exhibits.
These have been identified as I.G. Exhibits (I.G. Exs. 1-5). On March
22, 2002, Petitioner filed his response brief (P. Br.). With his brief,
Petitioner filed four proposed exhibits. (2)
These have been identified as Petitioner (Attachments) Exhibits (P. Exs.
A-D). On April 9, 2002, the I.G. submitted her reply brief (I.G. Reply).
Petitioner did not file anything further. The I.G. objected to P. Exs.
C and D on the grounds the proposed exhibits are irrelevant and immaterial.
I agree that P. Exs. C and D refer to other matters and have no bearing
on my decision herein. Nonetheless P. Exs. C & D will be admitted
into the record to help explain my response to one of Petitioner's arguments.
See Sec. V.B.2., below.
Therefore, I admit into evidence I.G. Exs. 1-5 and P. Exs. A-D. II.
Issues
III. Applicable
Law and Regulations Section 1128(a)(3) of the
Act authorizes the Secretary of the U.S. Department of Health and Human
Services (Secretary) to exclude from participation in any federal health
care program (as defined in section 1128B(f) of the Act), any individual
convicted of a felony relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct in connection
with either: (1) the delivery of a health care item or service; or (2)
with respect to any act or omission in a health care program operated
by or financed in whole or in part by any Federal, State, or local government
agency. An exclusion under section
1128(a) of the Act must be for a minimum period of five years. Act, section
1128(c)(3)(B). Aggravating factors can serve as a basis for lengthening
the period of exclusion. 42 C.F.R. � 1001.102(b). If aggravating factors
justify an exclusion longer than five years, mitigating factors may be
considered as a basis for reducing the period of exclusion to no less
than five years. 42 C.F.R. � 1001.102(c). Pursuant to 42 C.F.R. �
1001.2007, a person excluded under section 1128(a)(3) of the Act may file
a request for hearing before an administrative law judge (ALJ). IV. The Parties' Arguments
The I.G. argues that Petitioner
was convicted of a felony relating to fraud, theft, embezzlement, breach
of fiduciary responsibility, or other financial misconduct in the delivery
of a health care item or service. Therefore, Petitioner is subject to
the mandatory minimum period of exclusion, that is, five years. I.G. Br.
at 6; Act, section 1128(c)(3)(B). The I.G. also asserts that,
due to the following aggravating factors and the absence of mitigating
factors, Petitioner's period of exclusion was reasonably lengthened to
eight years:
I.G. Br. at 6-8; 42 C.F.R. �� 1001.102(b)(1),(2), and (5).
Petitioner argued the following with respect to his conviction, exclusion, and claimed mitigating factors:
P. Br. at 1-3.
V.
Findings and Discussion The findings of fact and conclusions of law noted below in italics are followed by a discussion of each finding.
Petitioner was a registered
pharmacist and the owner of First Choice Pharmacy, Inc. in Philadelphia,
Pennsylvania. I.G. Ex. 3, at 1-2. He was charged, by Information, in the
Eastern District of Pennsylvania, with one count of distributing prescription
drug samples not intended to be sold, all in violation of Title 21, U.S.C.,
Sections 333(b)(1)(B), 353(c), and 331(t). I.G. Ex. 3. The Information
under which Petitioner was charged stated that the Petitioner's offense
occurred "[f]rom approximately March 1997 to on or about June 25, 1998.
I.G. Ex. 3, at 2. Sections 333(b)(1)(B), 353(c), and 331(t) are interrelated sections of Title 21 of the U.S.C. Section 331(t) prohibits "the sale, purchase, or trade of a drug, or drug sample or the offer to sell, purchase, or trade a drug or drug sample in violation of section 353(c) . . . ." Section 333(b)(1)(B)
provides that a person commits a prescription drug marketing violation
by "knowingly selling, purchasing, or trading a drug or drug sample or
knowingly offering to sell, purchase, or trade a drug or drug sample,
in violation of section 353(c) of this title . . . ." Section 353(c) of
Title 21 provides that, "[n]o person may sell, purchase, or trade or offer
to sell, purchase, or trade any drug sample." (3)
Because the offense carries a possible prison sentence of up to 10 years,
it is a felony offense. On November 10, 1999, Petitioner
entered into a "Guilty Plea Agreement" with the United States Attorney,
wherein he agreed to plead guilty to a one-count violation of 21 U.S.C.
� 331. In his "Guilty Plea Agreement," Petitioner also agreed that the
offense involved fraud and that the amount of the loss was $13,785.25.
P. Ex. B, at 7. On November 20, 2000, Petitioner
pled guilty to one count of illegal distribution of prescription drug
samples in violation of 21 U.S.C. � 333(b)(1)(B). I.G. Ex. 4, at 1. Petitioner
was sentenced to four months in prison with a supervised release for two
years thereafter. Id.,
at 2, 3. He also was assessed $100, fined $10,000, and ordered to pay
restitution in the amount of $13,785.25. Id.,
at 5. I find that Petitioner's
conviction met the definition of a section 1128(a)(3) conviction in that:
As noted above, Petitioner
made several arguments related to his conviction. He argued that he pled
guilty to selling drug samples on a cash basis and no government agency
lost money as a result of his activities. P. Br. at 1, 2. Without getting
into a side issue of whether or not Petitioner failed to report his cash
sales on his income tax and, thus, caused a loss to the Internal Revenue
Service, I find that the clear language of section 1128(a)(3) provides
that a precipitating offense can be in connection with the delivery of
a health care item or service or with respect to any
act or omission in a health care program operated by or financed by a
government agency. A government agency loss is not required for application
of section 1128(a)(3). In Donald
R. Kirks, M.D., DAB CR765 (2001), a case involving the petitioner's
conviction for embezzlement from a medical foundation, the petitioner
argued he did not defraud the federal government or any other governmental
organization. In that case, Chief ALJ Marion Silva stated, and I agree
with, the following regarding this issue:
Donald
R. Kirks, at 4. In an earlier case, an appellate
panel of the Departmental Appeals Board (Board) reviewed the appeal of
an excluded pharmacist, convicted of one count each of fraud and filing
a false private insurance claim, who argued that "'the Act under which
the [I.G.] operates was not passed by Congress to protect' Blue Cross/Blue
Shield." The Board agreed that the exclusion provisions were aimed at
protecting Medicare and Medicaid from untrustworthy providers, not at
protecting private insurers (or drug manufacturers, as in this case).
The Board pointed out, nevertheless, that Congress determined these public
health programs could best be protected by excluding, among others, those
convicted of financial misconduct if the offenses occurred in delivering
health care to patients not covered by the public programs. Chander
Kachoria, R.Ph., DAB No. 1380 (1993). Petitioner in the case before
me also argued that he did not commit fraud because he did not sell drug
samples to unsuspecting clients. Rather, he sold the samples in their
original packaging to customers with legal prescriptions. I find the Petitioner's
argument to be without merit. First, Petitioner has provided
no evidence to support his bald statement that all persons to whom he
sold the drug samples knew they were samples and had legal prescriptions.
Nothing in the information, plea agreement, or other documents relating
to his conviction support Petitioner's contention that the drug samples
were all sold to knowing persons who had prescriptions for the drugs.
Moreover, Petitioner should have known he should not be selling the samples
because the packages are generally marked they are not for sale. His knowledge
of wrongdoing is evidenced by his selling the drug samples for "cash,"
thus, keeping the sales off his records. Second, as noted above,
in his signed "Guilty Plea Agreement," Petitioner stipulated "that the
offense involved fraud" and therefore, the fraud and deceit section of
the sentencing guidelines would apply in his case. P. Ex. B, at 7. Third, I find it hard to
accept that selling prescription drugs "for cash" without anyone paying
the manufacturer for the drugs is not "fraud." Of course, the manufacturers
distributed the samples without expectation of payment, but their distribution
of samples caused the manufacturers to incur expected marketing costs
and they, in turn, hoped for a marketing benefit. Obviously, the exclusion
provisions of the Act are not designed to protect marketing benefits for
drug manufacturers. At first blush, one wonders why it is a criminal offense
at the felony level to sell products a manufacturer gives away. The likely
answer is that it is the products' nature that requires control of their
distribution. Drug samples may be relatively easy to obtain during a physician
visit. Substantial harm could result from sales or distribution of these
products without a professional intermediary knowledgeable in drug dosages
and interactions. Further, cash "under the table" sales prevent the record-keeping
required for oversight of these drugs. Petitioner also argued he
was not aware of the potential for exclusion at the time he signed his
plea agreement and may not have signed the agreement had he known. Other
excluded individuals have similarly argued that they lacked knowledge
they could be excluded from Medicare and Medicaid program participation
when they signed plea agreements. The Board has not previously accepted
this argument that the lack of knowledge keeps an individual free from
exclusion. Narendra M. Patel,
M.D., DAB No. 1736 (2000). Section 1128 of the Act is triggered
by a conviction and neither the ALJ nor the Board can collaterally attack
the underlying conviction or relitigate the validity of the conviction.
42 C.F.R. � 1001.2007(d); Travers
v. Shalala, 20 F.3rd 993, 998 (9th Cir. 1994). Moreover,
I note that the "Guilty Plea Agreement" signed by the Petitioner, and
submitted by him as "P. Ex. B.," states in numbered paragraph 11, that:
P. Ex. B, at 7. Petitioner should have been
on notice to investigate the possible effects his conviction would have
on his pharmacological practice. With respect to Petitioner's argument that he did not know the drug samples he sold were stolen as opposed to simply discarded by the physicians to whom they had been given, I find it irrelevant whether the drug samples were stolen or discarded. The law to which Petitioner pled guilty, makes it illegal to "sell" prescription drug samples, regardless of how they were obtained. 21 U.S.C. � 331.
On April 30, 2001, the I.G. notified Petitioner that he was being excluded from participation in the Medicare, Medicaid, and all federal health care programs for a minimum period of eight years. I.G. Ex. 1. That action was taken pursuant to section 1128(a)(3) of the Act due to his conviction as defined in Section 1128(i)(3). An exclusion under section 1128(a)(3) of the Act must be for a mandatory minimum period of five years as set forth in section 1128(c)(3)(B) of the Act which states:
When the I.G. imposes an
exclusion for the mandatory five-year period, the issue of the length
of such exclusion is not considered. 42 C.F.R. � 1001.2007(a)(2). Aggravating
factors which justify extending the exclusion period may be taken into
account, but the five-year term will not be shortened. Petitioner was convicted
of a felony offense, related to fraud, theft, embezzlement, breach of
fiduciary responsibility, or financial misconduct in connection with the
delivery of a health care item or service. The I.G. was required to exclude
him, pursuant to section 1128(a)(3) of the Act, for at least five years.
Consequently, the only issue in controversy is whether the eight-year
exclusion period imposed against Petitioner is unreasonable. The I.G. has discretion
to impose an exclusion of more than five years in appropriate circumstances.
In Petitioner's case, the I.G. added three years to the statutory five-year
minimum. The Secretary has published
regulations which establish the criteria for determining the length of
exclusions imposed pursuant to section 1128 of the Act. The regulation
which sets forth the applicable criteria for an exclusion imposed pursuant
to section 1128(a) is 42 C.F.R. � 1001.102. The applicable criteria are
expressed as either aggravating or mitigating factors. The relevant aggravating
factors are stated at 42 C.F.R. �
1001.102(b). The relevant mitigating factors are stated at 42 C.F.R. �
1001.102(c). An exclusion may be imposed for a period of more than five
years where there exists an aggravating factor or factors not offset by
any mitigating factor or factors. The aggravating and mitigating
factors that are set forth in the regulations function as rules of evidence
for deciding the length of exclusions. Evidence which does not pertain
to one of the specific aggravating or mitigating factors is not relevant
and may not be used to decide whether an exclusion of a particular length
is reasonable. The regulations do not prescribe
the weight that is to be given to evidence that relates to an aggravating
or a mitigating factor. While the regulation tells the decision maker
what criteria may be used to determine the length of an exclusion, it
does not tell the decision maker how to weigh relevant evidence to arrive
at an exclusion that is reasonable in a given case. However, there is an overall
statutory purpose to which the regulations must adhere. An exclusion is
not intended to be punishment. The purpose of any exclusion that is imposed
under section 1128 of the Act is to protect federally-funded health care
programs and beneficiaries and recipients of those programs from an individual
who has been shown not to be trustworthy. Therefore, in deciding the length
of an exclusion that is imposed pursuant to section 1128 of the Act, the
question that must be considered is: what is reasonably necessary to protect
the programs and their beneficiaries and recipients from an untrustworthy
individual? In a case involving an exclusion that is imposed pursuant
to section 1128(a)(3), the factors that are contained in 42 C.F.R. � 1001.102(b)
and (c) state the criteria which may be used to answer this question.
The aggravating factors that the I.G. may consider in lengthening a period of exclusion are found at 42 C.F.R. � 1001.102(b). In the instant case, the I.G. contends that a basis exists for enlarging the period of exclusion in view of these three factors:
With respect to the first
alleged factor, I find that the Petitioner's felony offense involved the
loss to an entity of over $1500. In his signed "Guilty Plea Agreement,"
the parties, including Petitioner, stipulated that the amount of the loss
was $13,785.25. P. Ex. B, at 7. Moreover, the court ordered Petitioner
to pay $13,785.25 in restitution. It is appropriate to consider the amount
ordered for restitution to correspond to the amount of the loss to an
entity. Steven Alonzo Henry,
M.D., DAB CR638 (2000). Thus, the evidence shows that the loss
involved more than $1500. Petitioner argued that no government agency
suffered a loss. The only possible entities suffering a loss from Petitioner's
criminal offense would have been the drug manufacturers who had given
away the drug samples. As noted above, however, for section 1128(a)(3)
of the Act to apply or for this aggravating factor to apply, the loss
does not have to be incurred by a government agency. Donald
R. Kirks, M.D., DAB CR765 (2001). 42 C.F.R. � 1001.102(b)(1), relating
to this alleged aggravating factor, states clearly that: The acts resulting in the
conviction, or similar acts, resulted in financial loss to a government
program OR to one or more entities of $1500 or more.
(emphasis added). Accordingly, I find the
I.G. has proven this aggravating factor. With regard to the second
factor, I find that the acts resulting in the conviction were committed
over a period of one year or more. 42 C.F.R. � 1001.102(b)(2). Petitioner
argued he had his business for just over one year, but the I.G. provided
no proof he was actually involved in the sale of drug samples for that
entire time period. I note, however, that Petitioner provided no evidence,
other than his own statement, that he was not involved in selling the
samples over the entire period at issue. More importantly, a preponderance
of the evidence indicates he was involved in selling drug samples over
a one-year period. In paragraph one of Petitioner's "Guilty Plea Agreement,"
Petitioner states that his violation arose, "from his receipt and sale
of stolen drug samples while he was owner of First Choice Pharmacy, Inc.,
5936 Lansdowne Avenue, Philadelphia, Pennsylvania from March 1997 until
June 25, 1998." P. Ex. B, at 1. The Information to which Petitioner pled
guilty states, that "from approximately in or about March, 1997 to on
or about June 25, 1998, . . . [Petitioner] did knowingly trade, sell,
and offer to trade and sell, samples of the following drugs to others
. . . ." I.G. Ex. 3, at 2-3. As Petitioner cannot collaterally attack
the underlying conviction, I find that the I.G. has proven the second
aggravating factor. With regard to the third
factor, 42 C.F.R. � 1001.102(b)(5) provides for enlarging the period of
exclusion if "the sentence imposed by the court included incarceration."
On November 20, 2000, subsequent to entering a guilty plea, a judge of
the United States District Court sentenced Petitioner to four months in
prison. Therefore, I find the I.G. has proven this aggravating factor.
In his brief, Petitioner
asserted several factors which he does not refer to as mitigating factors
but I will consider his arguments as relevant to possible mitigating factors.
As noted above, for determining the reasonableness of the length of exclusion,
the ALJ can only consider the existence of mitigating factors if aggravating
factors exist and the ALJ can only consider the mitigating factors listed
in the regulations. 42 C.F.R. �
1001.102(c). One mitigating factor would
exist if Petitioner's cooperation with federal or state officials had
resulted in others being convicted or excluded from Medicare, Medicaid
and all other federal health care programs, or additional cases being
investigated or reports being issued by the appropriate law enforcement
agency identifying program vulnerabilities or weaknesses, or the imposition
against anyone of a civil money penalty. 42 C.F.R. � 1001.102(c)(3). In
his brief, in a parenthetical comment, Petitioner suggested that he had
identified by name and place of employment the person who was the source
of the samples he sold. P. Br. at 3. He provided no evidence, however,
either through a presentence report or other court documents, to show
that his cooperation resulted in other convictions, exclusions, investigations
or penalties. Nothing in the sentencing documents in the record refer
to other convictions or investigations. See
I.G. Ex. 4. Therefore, I find the Petitioner has not shown that the mitigating
factor in section 1001.102(c)(3) should be considered in his case. Petitioner also, as noted
above, submitted exhibits appearing to be newspaper articles about several
pharmacists and doctors who were convicted of selling drug samples or
other healthcare fraud. P. Exs. C, D. Petitioner argued his crime was
minor in comparison and these other individuals were not excluded from
participation in Medicare, Medicaid or other federal health care programs.
Of course, this record contains no evidence as to whether or not the cited
individuals were excluded. More importantly, the fact that others may
have been treated more leniently is not a mitigating factor I can consider.
42 C.F.R. � 1001.102(c). What happened in other situations is not relevant
to my decision here unless the other situations are included in authoritative
legal decisions that are precedent herein. In sum, I find the Petitioner has not shown the presence of any mitigating factors. Obviously, Petitioner's
conduct is the type that Congress sought to deter for the protection of
the beneficiaries of the Federal and State health care programs. It follows
that, since Petitioner poses a risk to the welfare of Medicare and Medicaid
recipients, his untrustworthiness makes him unfit to participate in any
of these programs. I must determine whether
the length of exclusion is unreasonable based on the facts as found by
me. In order to make that determination, I must consider whether the length
of the exclusion imposed by the I.G. is within a reasonable range. Thus,
to determine if the I.G.'s length of exclusion is unreasonable, I must
consider the parties' evidence as it pertains to the aggravating and mitigating
factors delineated at 42 C.F.R. � 1001.102 and, based upon my findings,
if the I.G.'s decision is within a reasonable range. For the reasons previously
stated above and in light of my consideration of the regulatory criteria,
I find that the eight-year exclusion imposed by the I.G. is within a reasonable
range of possible exclusion periods given the circumstances of this case,
in which three aggravating and no mitigating factors were present. I find
that the three-year additional exclusion imposed by the I.G. is not excessive.
The eight-year exclusion is a legitimate remedial remedy, which is consistent
with the purpose of section 1128 of the Act. In essence, the purpose of
section 1128 of the Act is to protect federally-funded health care programs
and their beneficiaries and recipients from untrustworthy individuals. VI.
Conclusion Sections 1128(a)(3) and 1128(c)(3)(B) of the Act mandate that Petitioner be excluded from Medicare, Medicaid, and all other federal health care programs for a period of at least five years because of his criminal conviction for a felony offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct which occurred after August 21, 1996, in connection with the delivery of a health care item. The I.G. was also justified in lengthening the period of exclusion due to the existence of aggravating factors. The eight-year exclusion is therefore sustained. |
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JUDGE | |
Anne E. Blair Administrative Law Judge |
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FOOTNOTES | |
1. During the prehearing telephone conference, I advised Petitioner he could request an in-person hearing after the briefing if he felt it was necessary. Having received no such request, I make this decision on the documentary record in the case. 2. Petitioner added "Attachments" A, B, C & D to his brief. Because they are few in number, I have not renumbered them to conform to Civil Remedies Division procedures. 3. Because these statutory provisions are interrelated, I do not find it relevant, contrary to Petitioner's argument, that the Information charging him referenced all three sections of Title 21, while the "Guilty Plea Agreement" references only Section 331 and the accepted plea references only section 333(b)(1)(B). | |