Former Director of U.S. Pain Foundation Questions Misuse of Funds

By Pat Anson, PNN Editor

A former board member of the U.S. Pain Foundation is raising questions about how former CEO Paul Gileno was able to misappropriate over $2 million in funds from the Connecticut-based non-profit. 

Gileno pleaded guilty to fraud and tax evasion charges in June and is awaiting sentencing.  Federal prosecutors say Gileno used donated funds in the charity’s bank account to write checks to himself and other people for his own personal benefit. The money was used to pay Gileno’s mortgage, car payments, loans to his brothers, and a visit to Universal Studios in Orlando, Florida. The misuse of funds allegedly went undetected for three years.

“I still find it difficult to believe that nobody else who’d been in upper management of the foundation for several years, knew anything regarding the going out and coming in of money/funds,” former board member Suzanne Stewart recently wrote in her blog.

Stewart was a volunteer “ambassador” at U.S. Pain before she was appointed to the board in January, 2018 – a tumultuous time in the charity’s history, as the extent of the misuse of funds was just becoming known. Stewart resigned from the board 8 months later and has remained relatively silent about her board experience, until now.

Stewart wrote in her blog that she was initially excited to join the board, but soon realized something was amiss when she called another board member.

“I called to ask her a few questions, such as: ‘What was it like, being on the Board? What do we do as Board Members etc?’ She laughed & told me that ‘there was no real Board of Directors’. She added that they’d never even had a board meeting!” said Stewart, who lives with Complex Regional Pain Syndrome and other chronic pain conditions.

SUZANNE STEWART

SUZANNE STEWART

“I was a bit disappointed at hearing this news. But it was soon confirmed. The Board of Directors of the US Pain Foundation, were actually just photographs on the USPF website, prior to January, 2018. There was no true Board of Directors. There had been no board meetings or elections.”

Gileno founded the Connecticut Pain Foundation in 2006 after he was disabled by a back injury. In 2011, he launched U.S. Pain and registered as a charity in the state. Connecticut state law requires non-profits to have annual board meetings and to elect their directors and officers.

“So I’m guessing there was there no secretary or treasurer? I’m guessing this means that nobody had to get permission to write checks?” Stewart asks. “Didn’t they have to answer to anyone about how or where to spend donation monies? How does the President, Vice President & Executive Director & other upper management, not know what & where money is coming in and/or going out?”

According to an audit and U.S. Pain’s tax returns, Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018.  Nicole Hemmenway, the current acting CEO, was vice-president and board chair at the time. Two other longtime board members, Wendy Foster and Ellen Lennox Smith, still serve as directors. And Lori Monarca remains as Executive Office Manager, according to U.S. Pain’s website.

Only Gileno has been charged with a crime.

“It seems to me that when upper management realized that things had somehow gotten out of hand and that the USPF might be slipping away, they decided to get lawyers and accountants involved in an attempt to ‘fix’ a situation that they’d created. It seemed to have finally become something larger that they could no longer handle alone,” Stewart wrote.

“Over the following months, I found out what a mess things were and I immediately wanted to resign. I was advised by one of the attorneys, that ‘it wouldn’t look good’ for USPF, if anyone on the Board resigned during that time.”

The board asked for and received Gileno’s resignation in May 2018, although it wasn’t publicly disclosed until December that “financial irregularities” were behind his sudden departure.

Gileno did not comment on Stewart’s post, but praised her work as a patient advocate.

“I can say that I have always admired Suzanne and she is an amazing advocate and I respect her dearly. She has an amazing and supportive husband and family,” Gileno said in an email.  

‘The Very Last Straw’

Stewart eventually resigned because she was unhappy with decisions being made by Hemmenway and the rest of the board. A redacted version of Stewart’s resignation letter was posted on her blog, in which she complained about being “left in the dark” and not knowing “where money is going or where it comes from.”

“The very last straw for me was when the Interim CEO & the rest of the Board, contemplated not telling the USPF ‘In-person’ support group leaders that they were no longer covered by insurance. I was the only Board member who said that I’d have no part of that,” wrote Stewart, who did not respond to a request for comment from PNN for this story.

Hemmenway also did not respond to a request for comment. In a statement last December, she said that Gileno “repeatedly misled and concealed information from the Board of Directors and staff.”

Gileno maintains that he kept the board informed.

“They are trying to cover their asses for being (an) inadequate board I guess,” Gileno told PNN last year. “I never misled them. They were part of U.S. Pain for over 10 years and I talked with them daily. Nicole and I were close like a brother and sister and I never hid one thing.”

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Whether the board knew about the misuse of funds or not, nonprofit experts say board members have a fiduciary responsibility to provide oversight and know how money is being spent. 

“U.S. Pain board members claim they did not know about their former CEO’s misuse of funds. This, however, does not change the fact that they should have known, and are, in fact, required by law to have controls in place to ensure those funds are used for the benefit of its stakeholders,” says Stefanie Lee Berardi, a patient advocate and grant writer who worked in nonprofit management.

“Serving on a board of directors is a great opportunity to contribute your time and talent to non-profit organizations who are doing great work. However, you should know that when you accept that position, you have a legal responsibility to use good judgement when making decisions on behalf of the organization, to put the organization’s interests before your own, and to ensure the organization is legally compliant.”

Gileno remains under investigation by the Connecticut Attorney General’s office, which may seek a court order to prevent him from ever serving again as a nonprofit officer or director.

Under state law, a Superior Court Judge could remove non-profit directors “engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion,” but no such action against U.S. Pain appears likely.

“As much as we would like to have seen their entire board ousted, the truth of the matter is that the only way that happens is if the state shuts them down. So far, with the completion of their audit, they have likely done enough to satisfy the state,” said Berardi, who thinks U.S. Pain should find new directors and officers to manage the organization. 

“If we are looking at best practices for board management, they absolutely should have a comprehensive plan for recruitment, induction, development, and succession. These board functions should be enumerated in the bylaws, updated at regular intervals, and formally adopted,” she said. “Recruiting ‘new blood’ should just be regular order.” 

(Update: On October 1, 2019 U.S. Pain announced the appointment of Shawn Dickens to its board of directors, filling the seat vacated by Suzanne Stewart nearly a year earlier.)

At one time, U.S. Pain claimed to be the nation’s largest pain patient advocacy group, with over 90,000 members and nearly a quarter of a million social media followers. It was a dubious claim, as the non-profit later admitted having only 15,000 people on an email subscriber list.  

According to the audit and U.S. Pain’s 2018 tax return (the organization’s 2016 and 2017 returns were delinquent and filed late), the charity spent over $1.2 million last year on salaries, employee benefits, lawyers, accountants, tax penalties and business losses – including a failed attempt to operate a bakery.

Co-Pay Assistance Programs Fail to Help Uninsured Patients

By Pat Anson, PNN Editor

Co-pay assistance programs – also known as co-pay charities – are ostensibly designed to help needy patients pay for prescription drugs. But a new study by researchers at the Johns Hopkins Bloomberg School of Public Health found that nearly all co-pay programs fail to cover uninsured patients who need financial help the most.

The researchers also found that co-pay programs were more likely to cover high-cost, brand-name prescription drugs, despite the availability of lower-priced generic medications. The findings are published online in JAMA.

“Independent patient assistance programs favor higher-priced drugs, and the higher the drug price, the higher the likelihood of it being covered,” says co-author Gerard Anderson, PhD, professor in the Bloomberg School’s Department of Health Policy and Management. “Unfortunately patients with the greatest financial needs -- people without health insurance -- do not qualify for these programs.”

Anderson and his colleagues looked at the six largest charity organizations, which ran 274 different patient assistance programs in 2018.

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Most of the programs only covered drugs for cancer-related conditions or genetic and rare diseases. None offered free drugs and typically they only covered the most expensive medications.

“Only covering insured patients may help these programs cover more patients with their limited funds,” said lead author So-Yeon Kang, MPH, a research assistant in the Bloomberg School’s Department of Health Policy and Management. “But leaving out the uninsured diminishes the charitable aspects of these organizations supported by tax-exempted donations.”

Misconduct Widespread

Patient assistance programs run by independent charities are usually funded by pharmaceutical companies. Federal investigations into several co-pay assistance programs led to multimillion-dollar settlements with drug companies for allegedly steering patients to their higher-priced drugs.

Over the past year, Pfizer, Amgen, Jazz Pharmaceuticals, Astellas Pharma, Lundbeck and Alexion have all paid heavy fines to settle allegations that they used co-pay programs to defraud Medicare. Federal anti-kickback laws prohibit pharmaceutical companies from making any kind of payment to induce Medicare patients to purchase their drugs. The prohibition includes co-pays.

“We are committed to ensuring that pharmaceutical companies do not use third-party foundations to pay kickbacks masking the high prices those companies charge for their drugs,”  U.S. Attorney Andrew Lelling said in a statement. “This misconduct is widespread, and enforcement will continue until pharmaceutical companies stop circumventing the anti-kickback laws to artificially bolster high drug prices, all at the expense of American taxpayers.”

Similar allegations were made against Insys Therapeutics and the “Gain Against Pain” co-pay program run by the U.S. Pain Foundation. Insys donated over $3.1 million to U.S. Pain, with most of the money going to its co-pay program to help patients pay for Subsys, an expensive fentanyl spray made by Insys. A four-day supply of Subsys can cost nearly $24,000.

The founder of Insys and four former executives were recently found guilty of racketeering charges unrelated to the co-pay program. The company also agreed to pay $225 million in fines and penalties to settle criminal and civil investigations. U.S. Pain ended the “Gain Against Pain” program in 2018 and said it would no longer accept funding from Insys.

In an editorial, Katherine Kraschel, a lecturer at Yale Law School, and Gregory Curfman, MD, deputy editor of JAMA, called for more oversight of co-pay programs to make sure they help patients who truly need it.

“Although patient assistance programs may provide important financial relief for patients, the current patient assistance program structure largely neglects uninsured individuals,” they wrote.  “Absent other regulatory interventions, the Department of Justice needs to continue to scrutinize patient assistance program practices, and the Internal Revenue Service and state attorneys general should examine the tax-exempt status of patient assistance programs.”

Feds Found ‘Staggering’ Drug Testing Fraud at Tennessee Pain Clinics

By Fred Schulte, Kaiser Health News

The Justice Department has accused a defunct chain of Tennessee-based pain clinics of cheating Medicare and other taxpayer-funded health insurers out of at least $25 million in needless urine drug tests and genetic testing.

The civil lawsuit names Comprehensive Pain Specialists, also known as Anesthesia Services Associates PLLC; four of its physician owners; and a former top executive. The doctors include Tennessee Republican State Sen. Steven Dickerson and Peter Kroll, both anesthesiologists.

At its peak, CPS ran 60 pain clinics in a dozen states and treated some 48,000 patients per month, according to the suit. It shut down abruptly last summer, leaving many chronic pain patients scrambling to find a new source of narcotic medicines.

The Justice Department fraud case centers largely on the company’s lucrative urine-testing lab in Brentwood, Tenn., which CPS financed with a $1.5 million loan. The suit also alleges overbilling from acupuncture and other services offered to patients.

CPS was the subject of a November 2017 investigation by Kaiser Health News that scrutinized Medicare billings for urine drug tests.

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Medicare and other federal programs paid over $70 million from 2011 to 2018 for CPS-ordered urine tests, an amount the lawsuit called “staggering.” TennCare, the state’s Medicaid program, paid more than $9 million more during that time.

“For this reason, CPS considered [urine tests] to be ‘liquid gold’ — with revenues of tens of millions of dollars for what was largely unnecessary medical testing,” according to the suit.

The chain’s owners and then-CEO John Davis “viewed every CPS patient as an opportunity to make money, without regard to the individualized need for treatment,” the suit alleges. Davis was convicted last year in Nashville on federal criminal health care fraud charges. He has since filed a motion for a new trial.

Dan Martin, an attorney representing Kroll, said in an emailed statement: “We are aware of the allegations and very familiar with the actual facts. Dr. Kroll did not engage in any wrongdoing whatsoever, and we look forward to correcting the government’s misunderstanding of the facts.”

Dickerson’s attorney, Ed Yarbrough, also issued a statement that read: “Dr. Dickerson is an honest man. We will prove that in court.” 

$8.5 Billion Annually Spent on Drug Tests

In its investigation, KHN, with assistance from researchers at the Mayo Clinic, found that spending on urine screens and related genetic tests quadrupled from 2011 to 2014 to an estimated $8.5 billion a year — more than the entire budget of the Environmental Protection Agency. The federal government paid medical providers more to conduct urine drug tests in 2014 than it spent on the four most recommended cancer screenings combined.

CPS was among the nation’s most aggressive testers. KHN found that in 2014 five of its medical professionals stood among the nation’s top billers. Anita Bayles, a nurse practitioner working at a CPS clinic in Cleveland, Tenn., generated $1.1 million in urine-test billings that year, according to Medicare records analyzed by KHN.

The Justice Department suit says that CPS believed Bayles ordered too many urine tests and overprescribed opioids and in September 2016 decided to fire her. But the decision was reversed by CEO Davis “because of her ability to generate revenues,” according to the suit. Bayles could not be reached for comment.

IMAGE COURTESY OF MARK COLLEN AND PAIN EXHIBIT

IMAGE COURTESY OF MARK COLLEN AND PAIN EXHIBIT

Though CPS ran six or more urine tests a year on many patients receiving narcotics, its doctors often did not review the results to make sure patients did not abuse them, according to the suit.

Kroll, who also served as CPS’ medical director, told KHN in 2017 that the high volume of tests was justified to keep patients safe and to reduce chances of black market sales of pills.

Kroll billed Medicare $1.8 million for urine tests in 2015, the KHN analysis of Medicare billing records found.

Kroll said in a 2017 interview that he and Dickerson came up with the idea to open a high-quality pain practice over a cup of coffee at a Nashville Starbucks in 2005.

But the Justice Department alleges that CPS expanded rapidly through bilking the government, conduct that its top executives and founders “failed to take any action to stop,” according to the suit.

In what is called a “particularly egregious example of this fraudulent conduct,” the Justice Department alleged that Kroll caused over 2,500 claims to be submitted to Medicare, for which CPS was paid almost $350,000, during a 10-day period in May 2017 when Kroll was on vacation in Italy.

“Because of these fraudulent claims, Kroll’s billing privileges with Medicare have been revoked,” according to the suit.

The lawsuit states that Medicare officials began investigating overcharging for urine testing at CPS in 2014 and eventually directed the company to repay the government $27.4 million in an extrapolated penalty. But CPS aggressively appealed the decision and managed to get it overturned and stay in business.

Once among the largest pain management groups in the Southeast, CPS crumbled amid financial woes that included nearly a dozen civil suits alleging unpaid debts, as well as the criminal case against Davis. In a court filing in December, the company said that it had terminated all of its employees and that its debts “greatly exceed its assets.”

In total, Medicare paid CPS over $150 million from 2011 to 2018, a large part of which was related to urine testing, while TennCare paid CPS over $32.5 million, according to the suit.

The Justice Department complaint consolidates several whistleblower cases filed against the company by doctors and other former employees. Federal whistleblower cases seek recovery of money paid improperly and can include treble damages, or three times the amount of the original overpayment.

One of the whistleblowers said he toured the lab with CPS executives and observed an “overpowering and unpleasant smell of urine.” In response, a CPS executive said, “To me, it smells like money,” according to the whistleblower’s suit.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.

U.S. Pain Foundation Founder Pleads Guilty to Fraud and Tax Evasion

By Pat Anson, PNN Editor

Paul Gileno, the former CEO and founder of the U.S. Pain Foundation, has pleaded guilty to fraud and tax evasion charges stemming from his misuse of funds from the Connecticut-based non-profit.

Gileno, 46, waived his right to be indicted and pleaded guilty Monday before U.S. District Judge Victor Bolden in Bridgeport, Connecticut. He faces up to 25 years in prison, but as part of the plea agreement prosecutors agreed to ask for a lesser sentence because of Gileno’s “prompt recognition and affirmative acceptance of personal responsibility.” A sentencing date has not been set.

According to court documents, Gileno embezzled nearly $1.6 million from the foundation from 2015 to 2017 and failed to report the income on his personal tax returns. For that, he owes an unpaid federal tax of over $532,000. Gileno must also pay a fine and make full restitution to the foundation and Internal Revenue Service, as well as tax penalties and interest.

Prosecutors say Gileno used the foundation’s bank account to write checks to himself and issued payments to other people for his own benefit. The money was used to pay for personal expenses, such as Gileno’s mortgage, car payments and a $3,600 visit to Universal Studios in Orlando, Florida. The misuse of funds went undetected for three years.

“Gileno failed to maintain accurate books and records of the United States Pain Foundation and in a number of instances, made false and fraudulent representations to the Board regarding the expenditures,” prosecutors said.

PAUL GILENO

PAUL GILENO

“I hope your readers realize I did make mistakes but that should not take away from all the good work I did and the organization I created,” Gileno said in an email to PNN. “The board has been the same for the past 9 years and I hope they continue to help people with pain and use the programs we created together."

As he awaits sentencing, Gileno said he was “trying to focus my life on my two boys who are 5 and 4 and need their dad."

Acting CEO Nicole Hemmenway did not respond to a request for comment on Gileno’s guilty plea, but the foundation released a statement.

“While the last year has been difficult, the organization has never lost sight of its guiding mission to educate, empower, support, and advocate for the 50 million Americans living with chronic pain,” the foundation said. “We are thankful that resolution of these issues is coming to an end, and are committed to continuing to serve people with pain, stronger than ever.”

As PNN has reported, Gileno was forced to resign in May, 2018 after “financial irregularities” were finally discovered by the board. A few months later, Gileno confessed in an email to misusing charitable funds.

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this. I did take money and I will pay the ultimate price,” Gileno wrote.

According to an audit released last month and U.S. Pain’s 2018 tax return, Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018. The misused funds were reported to the IRS as “excess benefit transactions,” a broad category that includes unauthorized compensation, reimbursement for personal expenses, and payments to Gileno’s family members.

In addition to the $32,537 that Gileno was paid for roughly five months of work in 2018, he collected over $166,000 in excess benefits. The latter amount includes a $36,000 payment to an unidentified company owned by Gileno. It is not clear what the payment was for.

Gileno’s wife, sister and step-daughter were paid nearly $71,000 in wages in 2018. It is not clear what work they did. Gileno’s sister also received an unspecified amount of severance pay and maternity leave.

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The auditor also reported that U.S. Pain has been unable to recover any money from a $100,000 investment in SMJ Homes, a real estate business owned by Gileno’s brothers. A promissory note from the company was due in February 2019, but has not be repaid, according to the audit.  

Gileno disputes the auditor’s finding and says most of the money was paid back.

“U.S. Pain has failed to tell you that the investment that was made with my brothers have been mostly paid back and they were paid 4 years of interest at 6 percent a year which was paid monthly and was deposited by people from U.S. Pain. It was never a surprise U.S. Pain cashed all the checks,” Gileno wrote. 

The foundation at one time claimed to be the nation’s largest non-profit patient advocacy group. While it’s unclear how many members U.S. Pain actually has, it remains well-funded. Major corporate donors to U.S. Pain include Abbvie, Amgen, Lilly, Sanofi, Novartis, Teva, Abbott, Pfizer and other pharmaceutical companies.   

After Gileno’s departure, the board scrapped a $2.5 million prescription co-pay program with Insys Therapeutics, a controversial drug maker whose founder and four former executives were recently convicted of racketeering.

U.S. Pain says it has implemented new policies, oversight measures and a system of checks and balances to ensure that only appropriate expenses are paid by the foundation.

How U.S. Pain Foundation Inflated Its Membership

By Pat Anson, PNN Editor

The U.S. Pain Foundation has long claimed to be “the leading chronic pain advocacy organization in the country,” with volunteers in 50 states and nearly a quarter of a million social media followers.

“What started as a small grassroots group now has 90,000 members nationwide and a network of 1,000 volunteers,” a U.S. Pain press release said in 2017.  

Impressive numbers like that helped the Connecticut based non-profit rise to national prominence in the pain community and raise several million dollars in donations from major healthcare companies such as Pfizer, Lilly, AstraZeneca, Novartis and Johnson & Johnson.

But PNN has learned that the tabulation of U.S. Pain’s membership and followers is unreliable and misleading. At best, they’re a product of bad metrics and marketing hype. At worst, they’re evidence of consumer fraud.  

“If they’re talking about members, then they should have a verified roll of members. And if they’ve inflated that number and there’s no rational basis for coming up with the number that they’re telling the public, then that could potentially be considered consumer fraud,” says attorney Seth Perlman, who has represented non-profits for 30 years.

In recent months, U.S. Pain has announced it is “undergoing a complete revamp of its transparency policies and procedures.” One of the first things the organization did was significantly downsize its membership from 90,000 to 15,000.

U.S. PAIN FOUNDATION 2016 PROMOTION

U.S. PAIN FOUNDATION 2016 PROMOTION

What happened to the 75,000 missing members?

“We have changed the way we classify and report members,” interim CEO and board chair Nicole Hemmenway said in an email to PNN. “Previously, ‘members’ included mailing list subscribers, support group participants, INvisible Project readers, anyone who received our print materials, and people who attend our events. Now the term ‘member’ has been redefined as the number of individuals who have signed up for our mailing list.”

Hemmenway has been interim CEO since May, when U.S. Pain’s founder and longtime CEO Paul Gileno resigned at the request of the board of directors.  “As the new leader, I am heading up a review and revision of our governance and transparency policies,” Hemmenway said. 

But full transparency has been slow in coming. Not until last week did Hemmenway and the board disclose the reason behind Gileno’s forced resignation. An internal audit found evidence of “financial irregularities” and that Gileno embezzled an undisclosed amount of money from the non-profit.  

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this,” Gileno confessed in an email sent to U.S. Pain’s leadership.  

We asked Gileno why U.S. Pain’s membership numbers were so high while he was CEO. 

“Our stats were based on email sign ups, social media sign ups and in-person sign ups,” Gileno said. “I have no clue why they were reduced.” 

In addition to the steep drop in membership, U.S. Pain has also seen a decline in its social media following. At one time, the organization claimed to have 59,000 followers on Twitter.

That was reduced to about 13,000 followers after Twitter purged from its system millions of fake and inactive accounts. 

from US Pain foundation 2018 promotion

from US Pain foundation 2018 promotion

“The (Twitter) reform takes aim at a pervasive form of social media fraud,” The New York Times reported. “Many users have inflated their followers on Twitter or other services with automated or fake accounts, buying the appearance of social influence to bolster their political activism, business endeavors or entertainment careers.”  

Some of the followers that U.S. Pain has on Twitter were apparently bought and paid for in a promotional scheme to sign up new followers. Hemmenway says the board never authorized such an expenditure. 

“Based on records, in 2016, $515 was spent on a Twitter digital marketing initiative under previous leadership. This is not something the Board or others within the organization were aware of or approved,” Hemmenway said. 

Hemmenway has been a key member of U.S. Pain since it was founded in 2011, serving as vice-president until Gileno’s departure. According to Gileno, she oversaw the non-profit’s social media efforts. “Nicole and the board have always been in charge of that, as was director of communications,” Gileno told PNN. 

Even after the Twitter purge, U.S. Pain still appears to have an unusual number of suspicious followers. StatusPeople.com, a website that analyzes Twitter data, estimates that only a third of @US_Pain’s 13,000 followers are legitimate. The rest are either fake or inactive.

SOURCE: STATUSPEOPLE.COM

SOURCE: STATUSPEOPLE.COM

There is no similar way to analyze the legitimacy of U.S. Pain’s 216,000 followers on Facebook, a social media platform where you can also buy followers.

Consumer Fraud Issue

Marketing that misleads or exaggerates may be all too common in the for-profit world, but it’s risky business for a charity dependent on donations and public goodwill. Taken too far, it could lead to allegations of civil or even criminal misconduct, according to attorney Seth Perlman. 

“That’s only an issue if they use those numbers to impress upon the donating public or their supporters about how widespread their message is. And how much awareness the organization has with the public. If they’re using it as a way to inducing people to support the organization, it’s a potential consumer fraud issue,” said Perlman. “If you mislead the public and present information that is incorrect and is purposely inflated, the regulators take an extremely dim view of that.  

“It’s almost always a civil matter, unless it rises to the level of an absolute egregious fraud where there is absolutely no basis for making the claims that they did and it was simply a rip off.  Then that could turn into criminal (fraud). But the civil remedies are significant, including removal of the board of directors.” 

As PNN has reported, U.S. Pain is now under investigation by the Connecticut Attorney General’s office and the Connecticut Department of Consumer Protection, which regulates charities in the state.  Because its registration as a charity recently expired, U.S. Pain at this time cannot legally solicit donations in Connecticut. 

Federal prosecutors at the U.S. Attorney’s Office would neither confirm or deny if they were investigating U.S. Pain and its former CEO, although Gileno anticipates going to prison for fraud or tax evasion.  

“I will have to go to jail maybe as long as 3 years for taking the money from US Pain,” Gileno said in his confession. 

U.S. Pain is also in danger of losing its tax-exempt status.  The non-profit’s tax returns for 2016 and 2017 have not been filed and are delinquent.  Under IRS rules, a non-profit that does not file returns for three consecutive years automatically loses its tax exemption. Hemmenway blames Gileno for the long delay in filing, but expects the tax returns to be completed in coming weeks. 

“Because of the inaccurate and incomplete information provided by the former CEO, it has taken a significant amount of time to compile accurate books and records,” she said. “The organization has been working diligently with its new team to prepare the 2016 and 2017 returns, with the goal of filing them by the end of the year.”

Prescription Pain Creams Flagged for Medicare Fraud

By Julie Appleby, Kaiser Health News

Medicare pays hundreds of millions of dollars each year for prescription creams, gels and lotions made-to-order by pharmacies — mainly as pain treatments. But a new report finds that officials are concerned about possible fraud and patient safety risks from products made at nearly a quarter of the pharmacies that fill the bulk of those prescriptions.

“Although some of this billing may be legitimate, all of these pharmacies warrant further scrutiny,” concludes the report from the Office of the Inspector General for the Department of Health and Human Services.

In total, 547 pharmacies — nearly 23 percent of those that submit most of the bills to Medicare for making these creams — hit one or more of five red-flag markers set by investigators.

Those included what the researchers called “extremely high” prices; large percentages of Medicare members getting identical drugs — 16 of the pharmacies billed for identical drugs for 200 or more customers; “greatly increased” year-over-year billing — 20 pharmacies increased their billing by more than 10,000 percent; or having a single medical provider writing more than 131 prescriptions.

More than half of those pharmacies hit two or more measures — and 10 hit all five.

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One Oregon pharmacy, for example, submitted claims for 91 percent of its customers. A pharmacy in New York submitted 5,342 prescriptions ordered by one podiatrist, while a Florida pharmacy saw its Medicare billing for such treatments go from $7,468 in 2015 to $1.8 million the following year.

Many of the pharmacies are clustered in four cities: Detroit, Houston, Los Angeles and New York.

The report comes amid ongoing concern by Medicare officials about these custom-made — or compounded — drugs. In addition to questions like those raised in the report about overuse and pricing, safety has been a key issue in recent years. A meningitis outbreak in 2012 was linked to a Massachusetts pharmacy that did not maintain sterile conditions and sold tainted made-to-order injections that killed 64 Americans.

When done safely, pharmacy-made compounded drugs provide a legitimate option for patients whose medical needs can’t be met by commercially available products mass-produced by pharmaceutical companies. For example, a patient who can’t swallow a commercially available prescription pill might get a liquid version of a drug.

State boards of pharmacy generally oversee compounding pharmacies, and the drugs they produce are not considered approved by the Food and Drug Administration.

Rising Cost of Compounded Drugs

The new report focuses on concerns with compounded topical medications.

Medicare spending for such treatments has skyrocketed, rising more than 2,350 percent, from $13.2 million in 2010 to $323.5 million in 2016. Price hikes and an increase in the number of prescriptions written drove the increase, the report said.

It is not the first time the inspector general has looked at compounded drugs. A 2016 report found that overall spending on all types of compounded drugs — not just topical medications — rose sharply.

The U.S. Postal Service inspector general and the Department of Defense also have raised concerns about rising spending and possible fraud for compounded drugs.

In response to those previous reports, the International Academy of Compounding Pharmacists, the industry’s trade group, has said that legitimately compounded drugs “can dramatically improve a patient’s quality of life,” noting that proper billing controls need to be in place. The inspector general’s report in 2016, it added, found that “such controls are not in place.”

This report, which the compounding trade group has not yet reviewed, focuses on topical drugs and a subset of the 15,290 pharmacies that provide at least one such prescription each year. It looked at billing records from the 2,388 pharmacies that do at least 10 such prescriptions a year — providing 93 percent of all compounded topical drugs paid for by Medicare.

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Most of the prescriptions were for pain treatment, made from ingredients such as lidocaine, an anesthetic, or diclofenac sodium, an anti-inflammatory drug.

On average, those compounds were more expensive than non-compounded drugs with the same ingredients.

For example, Medicare paid an average of $751 per tube of compounded lidocaine, and $1,506 for the diclofenac, according to the inspector general’s report. Non-compounded tubes of those drugs averaged $445 and $128, respectively.

FDA Commissioner Scott Gottlieb recently outlined new efforts his agency is taking to oversee compounded drugs in the wake of legislation passed by Congress following the meningitis outbreak.

“The FDA is inspecting compounding facilities to assess whether drugs that are essentially copies of FDA-approved drugs are being compounded for patients” who could otherwise take a product sold commercially, he said in a statement issued on June 28.

Gottlieb also said the FDA plans to make more information available to patients and their doctors about compounded topical pain creams, including information about their effectiveness and any potential safety risks.

Not being effective is a safety risk, noted Miriam Anderson, a researcher with the inspector general’s office who helped write the report.

The report urged the Centers for Medicare & Medicaid Services to clarify some of its policies to emphasize that insurers can limit the use of compounded drugs by requiring prior authorization or other steps. The agency concurred with the recommendations, according to the report, including the need to “follow up on pharmacies with questionable Part D billing and the prescribers associated with these pharmacies.”

Anderson said the inspector general’s office is continuing to probe the issue.

“We will investigate a number of leads on specific pharmacies and prescribers who were identified as having these questionable patterns,” she said. “Whenever we see that kind of increase in spending, it raises concern about fraud, waste and abuse.”

Kaiser Health News’ coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.

GOP Report Blames Medicaid for Opioid Crisis

By Pat Anson, Editor

A new congressional report claims there is “overwhelming evidence” that Medicaid has  contributed to the nation’s opioid crisis by making it easy for beneficiaries to obtain and abuse opioid prescriptions.

The lengthy report, called “Drugs for Dollars: How Medicaid Helps Fuel the Opioid Epidemic,” was prepared by the Republican controlled Senate Homeland Security and Governmental Affairs Committee. Democrats on the committee complained the report was concocted to discredit and demonize Medicaid expansion under the Affordable Care Act, also known as Obamacare.

The report cites 1,072 people since 2010 that have been convicted or accused of using Medicaid to improperly obtain prescription opioids.  That is only a tiny fraction of the nearly 70 million people enrolled in Medicaid, but the report nevertheless draws some sweeping conclusions.

“Overwhelming evidence shows that Medicaid has inadvertently contributed to the national tragedy that is the opioid epidemic, and has taken a toll that is playing out in courtrooms across the nation,” the committee staff reported.

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“Other well-intended government programs, such as Medicare, may provide similar incentives for rational actors to engage in bad behavior with highly addictive opioids. These issues hold major ramifications for public policy, along with the nation’s health. They deserve serious consideration and a sober national debate, one we hope this staff report will help to initiate. The victims of this terrible epidemic deserve no less.”

The report cites dozens of examples of doctors and beneficiaries abusing the system, such as a $1 billion scheme to defraud Medicaid and Medicare that involved numerous health care providers.

Committee staff also claimed that drug overdose deaths were rising nearly twice as fast in Medicaid expansion states as in non-expansion states. About 12 million more Americans receive Medicaid coverage under Obamacare.

“While there is clearly no single cause to the epidemic, evidence has emerged that Medicaid is playing a perverse and unintended role in helping to fuel and fund the opioid epidemic,” Sen. Ron Johnson (R-WI) wrote in a letter to Eric Hargan, the Acting Secretary of the Department of Health and Human Services.

“The data uncovered in this examination point to a larger systematic problem – because opioids are easily obtained and inexpensive through Medicaid, the structure of the program itself creates a series of incentives for beneficiaries to use opioids and sell them for potentially enormous profits.”

‘Total Hogwash’

The committee’s ranking Democrat, Sen. Claire McKaskill of Missouri, called the report misleading.

"This idea that Medicaid expansion is fueling the rise in opioid deaths is total hogwash," McCaskill said in a statement. "It is not supported by the facts. And I am concerned that this committee is using taxpayer dollars to push out this misinformation to advance a political agenda."

“Separate scientific studies conducted by other authors show that (the) opioid epidemic predates Medicaid expansion and that recent increases in overdoses stem from fentanyl and heroin, not prescriptions obtained through Medicaid.  Unlike the report released by the majority staff today, these studies were both scientific and comprehensive.”

The report’s conclusions were also questioned by a longtime critic of opioid prescribing.

“I believe the access to prescribers that Medicaid, Medicare and commercial insurance offers does increase the likelihood that someone might develop a disease often caused by prescriptions,” said Andrew Kolodny, MD, founder and Executive director of Physicians for Responsible Opioid Prescribing (PROP).

“But I do not believe that Medicaid should be singled out in this regard. Opioid overdoses have been increasing in people with all types of insurance and in people from all economic groups, from rich to poor.”

A report released this week by the Kaiser Family Foundation found that states with above average overdose death rates includes 18 states that expanded their Medicaid coverage and 8 states that did not.  Overall, Medicaid covers nearly 40% of the two million Americans estimated to have opioid addiction.