Feds Say Bankrupt Drug Lab Paid Millions in Kickbacks

By Pat Anson, Editor

A bankrupt drug testing lab with a checkered history has been linked to a large money laundering and pill mill operation in Tennessee.

According to an updated indictment in U.S. District Court in Knoxville, Confirmatrix Laboratory in Georgia and Sterling Laboratories in Seattle paid nearly $3 million in illegal kickbacks to have thousands of urine drug test samples sent to them from patients at the Knoxville Hope Clinic (KHC). In return, the labs submitted false claims for "unnecessary" drug tests to Medicare and TennCare, Tennesee’s Medicaid program.

“Confirmatrix, by and through its principals and agents, paid bribes and kickbacks to defendants Clyde Christopher Tipton and Maynard Alvarez in return for causing Medicare and TennCare beneficiaries from KHC to be referred to Confirmatrix for medically unnecessary drug screenings,” the indictment alleges.

“Medical providers at KHC prescribed opioids and other controlled substances to thousands of purported pain patients in exchange for grossly excessive fees. The vast majority of the prescriptions were unreasonable and medically unnecessary. Patients were required to keep follow-up appointments every 28 days to continue receiving their prescriptions. Providers at KHC ordered medically unnecessary Drug Screenings for every patient every 28 days.”

Tipton, Alvarez and six other defendants are accused of drug trafficking and money laundering in the long-running investigation of Tennessee pill mills. The ringleader of the pill mill scheme, a 53-year old grandmother named Sylvia Hofstetter, allegedly made millions of dollars while running clinics that prescribed 12 million opioid prescriptions. Prosecutors have alleged that at least nine patients at the clinics died from drug overdoses.

No one affiliated with Confirmatrix or Sterling Laboratories has been indicted so far in the case. Prosecutors say the   alleged kickbacks were paid from August 2013 to July 2016.

As PNN has reported, Confirmatrix filed for Chapter 11 bankruptcy last November, just two days after its headquarters near Atlanta was raided by FBI agents.  The company was founded by Khalid Satary, a convicted felon and Palestinian national that the federal government has been trying to deport for years.

A 2013 study by the Centers for Medicare and Medicaid Services (CMS) listed Confirmatrix as the most expensive drug lab in the country, collecting an average of $2,406 from Medicare for each patient tested, compared to the national average of $751. The bills from Confirmatrix were high because the company ran an average of nearly 120 different drug screens on each patient, far more than any other drug lab.

These and other abusive billing practices finally caused Medicare to lower its reimbursement rates for drug testing, which led to Confirmatrix’s financial problems.

Although it filed for Chapter 11 bankruptcy nine months ago, Confirmatrix remains in business and continues to bill patients and insurance companies for costly drug screens.

Some current and former patients at the Benefis Pain Management Center, a pain clinic in Great Falls, Montana, have received bills from a collection agency seeking well over $1,000 for drug screens that normally cost a few hundred dollars.

“Confirmatrix is out of network, hence I am stuck with the bill unless Benefis writes it off,” one patient told PNN. “I spoke to my insurance about it and they told me that there are labs in Montana that could have done the same thing and would have been covered by my insurance. She asked me, why they would go to a Georgia lab?”

In a statement to PNN in May, a Benefis official defended the clinic’s continued use of Confirmatrix, saying the company performs a valuable service and “waives many costs.”

“The company we have partnered with has an extensive patient assistance program, which is part of the reason they were selected. That company was selected two years ago because it was one of the few labs nationwide that offered quantitative and qualitative testing AND patient assistant programs,” said Kathy Hill, Chief Operating Officer at Benefis Medical Group.

Confirmatrix’s laboratory, office and warehouse space were recently put up for auction by the bankruptcy court under sealed bid.

Lessons from Dreamland About the Opioid Crisis

By Roger Chriss, Columnist

The book Dreamland: The True Tale of America's Opiate Epidemic by Sam Quinones has become a playbook for many lawmakers, regulators and journalists covering the opioid crisis. It is an award-winning book from 2015 that describes the rise of Mexican “black tar” heroin, pill mills and opioid addiction starting in the 1980’s.

It is not a book about persistent pain disorders or the people who endure them using opioid medications.

Quinones interviews heroin couriers and addicts, as well as prescription opioid addicts. He describes heroin smuggling, heroin distribution networks, prescription opioid diversion, carefully crafted medical opioid scams, and misleading marketing by opioid manufacturers. But chronic pain patients do not appear in Dreamland at all.

Early in the book, Quinones brings up a 1980 research letter in The New England Journal of Medicine and the work of Russell Portnoy, both of which are alleged to have contributed to opioid overprescribing. But the overprescribing does not involve people with chronic pain disorders. Instead, Quinones explains that “in the Rust Belt, another kind of pain had emerged. Waves of people sought disability as a way to survive as jobs departed.”

And overprescribing did not necessarily mean over-consumption. As Quinones states, “Seniors realized they could subsidize their retirement by selling their prescription Oxys to younger folks. Some of the first Oxy dealers, in fact, were seniors who saw the value of the pills in their cabinets.”

Such opportunities were not ignored. More conventional drug dealers moved in and unscrupulous physicians opened drug-dealing clinics that we now call pill mills.

Quinones explains how to recognize a pill mill: “I asked a detective, seasoned by investigations into many of these clinics, to describe the difference between a pill mill and a legitimate pain clinic. Look at the parking lot, he said. If you see lines of people standing around outside, smoking, people getting pizza delivered, fistfights, and traffic jams—if you see people in pajamas who don’t care what they look like in public, that’s a pill mill.”

The importance of pill mills to the opioid crisis cannot be understated.

“It helps that OxyContin came in 40 and 80 mg pills, and generic oxycodone came in 10, 15, 20, and 30 mg doses—different denominations for ease of use as currency. The pill mills acted as the central banks, controlling the ‘money supply,’ which they kept constant and plentiful, and thus resisted inflationary or deflationary spikes,” wrote Quinones.

Dreamland goes on to explain that in rural Appalachian communities an underground economy arose with prescription opioids as currency, supported by scamming Medicaid and Social Security disability. Some addicts funded their habit by shoplifting at stores like Walmart and paying dealers for opioid pills with their stolen goods. Other addicts worked with dealers to scam Medicaid to pay for opioids from pill mills or to get opioids from legitimate clinics using forged medical records.

Opioid addiction was also driven by high school and college sports. Quinones explains that “after the games, some of the trainers pulled out a large jar and handed out oxycodone and hydrocodone pills - as many as a dozen to each player. Later in the week, a doctor would write players prescriptions for opiate painkillers, and send student aides to the pharmacy to fill them.”

Thus, the opioid crisis is a tragic result of a confluence of forces, including heroin sold under a business model virtually impervious to traditional law enforcement techniques and legal opioid pills used illicitly. As Quinones explains at the end of the book, “One way to view what happened was as some enormous social experiment to see how many Americans had the propensity for addiction.”

None of this involves medical opioids being used for pain management in people with chronic, progressive, or degenerative disorders. Quinones frequently mentions “chronic pain” but never defines the term precisely. However, his examples consistently refer to ongoing pain from a workplace accident, sports injury or accidental trauma -- not the persistent pain of a medical disorder. He does not interview pain management specialists or chronic pain patients because that is not the point of the book.

However, he does acknowledge the opioid crisis is having an unintended effect on people with persistent pain disorders. Quoting Quinones, “Patients who truly needed low-dose opiate treatment for their pain were having difficulty finding anyone to prescribe it.”

That is the lesson that Dreamland offers but too few people are learning. The opioid crisis is a dire manifestation of a larger problem of substance abuse. It is not about people with chronic pain disorders becoming addicted to opioids and then turning to heroin, an outcome that is exceedingly rare.

If we don’t understand what this book offers, we risk making the same mistakes that many lawmakers, regulators and journalists keep making. We’ll misunderstand the true nature of the opioid crisis and mismanage the response. And that will harm both opioid addicts and chronic pain patients, two groups that have already suffered enough.

Roger Chriss lives with Ehlers Danlos syndrome and is a proud member of the Ehlers-Danlos Society.

Roger is a technical consultant in Washington state, where he specializes in mathematics and research.

The information in this column should not be considered as professional medical advice, diagnosis or treatment. It is for informational purposes only and represents the author’s opinions alone. It does not inherently express or reflect the views, opinions and/or positions of Pain News Network.