Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Danny E. Harris, R. Ph.,
Petitioner,
- v. -
The Inspector General.
DATE: December 2, 1991
Docket No. C-392
DECISION
In a letter dated May 17, 1991 (Notice), the Inspector
General (I.G.) told Petitioner that he was being excluded
from participation in Medicare and State health care
programs for a period of five years. 1/ The Notice
stated that Petitioner was being excluded as a result of
his conviction of a criminal offense related to the
delivery of an item or service under Medicaid. The
Notice advised Petitioner that the exclusion of
individuals convicted of such an offense is mandated by
section 1128(a)(1) of the Social Security Act (Act) for a
period of not less than five years. The I.G. informed
Petitioner that he was being excluded for the minimum
mandatory period of five years.
Petitioner timely requested a hearing and the case was
assigned to me for hearing and decision.
On August 19, 1991, the I.G. moved for summary
disposition. Petitioner filed his opposition to the
motion on September 19, 1991. The I.G. filed a reply on
October 4, 1991. I have considered the arguments made by
the parties in their submissions. I have also considered
the undisputed material facts of the case and applicable
law. I conclude that there are no facts in dispute that
would require an in-person evidentiary hearing. Taking
as true all the facts alleged by Petitioner, I neverthe-
less conclude that the five-year exclusion imposed and
directed by the I.G. against Petitioner is mandated by
law. Therefore, I enter summary disposition in favor of
the I.G.
ISSUE
The issue in this case is whether Petitioner was
convicted of a criminal offense related to the delivery
of an item or service under Medicaid within the meaning
of section 1128(a)(1) of the Act.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner is a pharmacist in the State of Tennessee.
2. Petitioner and Robert L. Parr are co-owners of the
Parr Prescription Center. I.G. Br. at 1; P. Br. at 1. 2/
3. On April 7, 1987, Petitioner and Robert L. Parr,
d/b/a Parr Prescription Center, were indicted by the
grand jury for Montgomery County, Tennessee, on 14 felony
counts of Medicaid fraud. I.G. Ex. 1; I.G. Br. at 1; P.
Br. at 1.
4. The indictment bears case number 24183. I.G. Ex. 1.
5. Count One of the indictment charged that on or about
November 14, 1985, Petitioner and Parr filled a
prescription for Thorazine 25 with a generic substitute,
dispensed that substitute to Medicaid recipient Kate
Godwin (actually a special agent of the Tennessee Bureau
of Investigation), and then billed the Tennessee Medicaid
program for the more expensive brand-name drug, thus
defrauding the State of the difference in value between
the two drugs. I.G. Ex. 1; I.G. Br. at 1-2; P. Br. at 1.
6. Count Two of the indictment charged that on or about
April 30, 1986, Petitioner and Parr filled a prescription
for the drug Theo Dur 200 with a generic substitute,
dispensed that substitute to Medicaid recipient Alexis D.
Wilson (actually a special agent of the Tennessee Bureau
of Investigation), and then billed the Tennessee Medicaid
program for the more expensive brand-name drug, thus
defrauding the State of the difference in value between
the two drugs. I.G. Ex. 1; I.G. Br. at 1-2; P. Br. at 1.
7. In a proposed settlement agreement, dated February
13, 1990, the State agreed to reduce the charges of
Medicaid fraud in counts one and two of the indictment to
charges of mislabeling drugs and to recommend a suspended
sentence of 11 months and 29 days on each of those
counts. I.G. Ex. 2; I.G. Br. at 2; P. Br. at 1.
8. On March 9, 1990, Petitioner pled guilty to two
counts of mislabeling drugs in violation of T.C.A.
section 53-10-105. 3/ I.G. Exs. 3, 4; I.G. Br. at 2; P.
Br. at 1.
9. Based on Petitioner's guilty pleas, the Criminal
Court of Montgomery County, Tennessee, entered separate
judgments of conviction against Petitioner as to counts
one and two. I.G. Exs. 3, 4.
10. Petitioner was sentenced to 11 months and 29 days'
probation and 100 hours of community service as to count
one and to 11 months and 29 days' probation as to count
two. I.G. Exs. 3, 4.
11. The judgments of conviction entered against
Petitioner bear the same case number as the indictment
(i.e. 24183). I.G. Exs. 3, 4.
12. The judgments of conviction indicate that Petitioner
committed the acts of mislabeling on November 14, 1985
and April 10, 1986, dates which correspond to the conduct
described in counts one and two of the indictment. I.G.
Exs. 1, 3, 4.
13. Petitioner admits that the acts of mislabeling to
which he pled guilty consisted of placing the brand name
on the prescription bottle while dispensing the generic.
P. Br. at 7.
14. Petitioner does not deny that the drugs he pled
guilty to mislabeling were dispensed to special agents of
the Tennessee Bureau of Investigation who were posing as
Tennessee Medicaid recipients. See P. Br. at 7.
15. Claims for reimbursement for the mislabeled drugs
were submitted by Parr Prescription Center to the
Tennessee Medicaid program. I.G. Br. at 2; P. Br. at 1.
16. For purposes of this decision, I assume, without so
finding, that the following facts are true:
a. To lower the cost of prescription drugs to its
citizens, the State of Tennessee has authorized
pharmacists to substitute less costly generic drugs
for higher priced brand-name drugs.
b. Under Tennessee law, if a physician signs a
prescription form on the line indicating
"substitution allowed," a pharmacist may dispense
any lower priced drug having the same generic name
as the brand-name drug prescribed.
c. The prescriptions for the drugs Petitioner pled
guilty to mislabeling were signed by the physicians
on the line indicating "substitution allowed."
d. There is no evidence that Petitioner
individually misbilled, authorized the misbilling,
or had knowledge of misbilling the Medicaid program.
e. The offense to which Petitioner pled guilty does
not require any criminal intent by Petitioner.
f. The offense to which Petitioner pled guilty is
of a nature that does not necessarily relate to the
Medicaid program.
g. Another individual, Robert L. Parr, was jointly
indicted with Petitioner in the state court
proceeding.
h. The I.G. has not excluded Robert L. Parr from
the Medicare and Medicaid programs and no action to
exclude Robert L. Parr is pending.
P. Br. at 2-3.
17. Petitioner was convicted of a criminal offense
related to the delivery of an item or service under the
Tennessee Medicaid program. FFCL 1-16.
18. The Secretary of the Department of Health and Human
Services (Secretary) has delegated to the I.G. the
authority to determine, impose, and direct exclusions
pursuant to section 1128(a)(1) of the Act. 48 Fed. Reg.
21662 (May 13, 1983).
19. On June 6, 1991, the I.G. excluded Petitioner from
participating in Medicare and directed that he be
excluded from participating in Medicaid, pursuant to
section 1128(a)(1) of the Act. I.G. Ex. 5.
20. Even if all the facts asserted by Petitioner are
taken as true, the I.G. is entitled to summary
disposition as a matter of law.
21. The exclusion imposed and directed against
Petitioner by the I.G. is for five years, the minimum
period required under the Act. Social Security Act,
sections 1128(a)(1) and 1128(c)(3)(B).
22. The exclusion imposed and directed against
Petitioner by the I.G. is mandated by law. FFCL 1-17;
Social Security Act, sections 1128(a)(1) and
1128(c)(3)(B).
ANALYSIS
The undisputed facts in this case are sufficient to
support the I.G.'s authority to impose and direct a five-
year exclusion against Petitioner. Even assuming the
truth of the additional facts averred by Petitioner, the
I.G. is entitled to summary disposition as a matter of
law.
Petitioner is a pharmacist and co-owner of the Parr
Prescription Center. FFCL 1, 2. Petitioner admits that
he pled guilty to mislabeling drugs and that the court
entered judgments of conviction against him. 4/ FFCL 8,
9. In pleading guilty, Petitioner admitted that he had
dispensed prescriptions labeled as brand-name drugs but
which actually contained generic substitutes. FFCL 13.
Petitioner does not dispute that the drugs so mislabeled
were dispensed to special agents of the Tennessee Bureau
of Investigation, posing as Medicaid recipients. FFCL
14. Nor does Petitioner dispute that, as to those
prescriptions, Parr Prescription Center submitted claims
for reimbursement to the Tennessee Medicaid program which
falsely represented that brand-name drugs had been
dispensed. FFCL 15.
Petitioner asserts, however, that he has never admitted
that he had personal knowledge of, or responsibility for,
submitting the fraudulent claims. Further, according to
Petitioner, there has never been a judicial finding that
he had such knowledge or responsibility. Because he was
jointly indicted with his partner, Robert L. Parr,
Petitioner contends that Parr and not Petitioner may be
responsible for all conduct charged in the indictment
except that to which Petitioner pled guilty. Petitioner
further argues that the misdemeanor to which he pled
guilty does not require criminal intent and that the
gravamen of the offense does not necessarily relate to
the Medicaid program. For these reasons, Petitioner
argues that I cannot conclude that Petitioner engaged in
Medicaid fraud or caused an overpayment by the Medicaid
program. Accordingly, Petitioner contends, there is
insufficient evidence to show that his conviction was
program-related.
Petitioner's argument appears to be that section
1128(a)(1) only applies to convictions for the crime of
Medicaid fraud or to conduct which evidences a specific
intent to defraud the Medicaid program. Neither argument
is well-founded. Section 1128(a)(1) is not limited to
convictions for Medicare or Medicaid fraud. Nor does it
require criminal intent. An appellate panel of the
Departmental Appeals Board (Board) addressed both
arguments in Dewayne Franzen, DAB App. 1165 (1990).
The Board in Franzen makes clear that criminal intent is
not required to bring a conviction within the ambit of
section 1128(a)(1):
Section 1128(a)(1) does not require that the
individual must intend to commit a criminal offense,
or indeed fraud, for an exclusion to be proper. It
merely requires . . . that the individual's acts
cause the individual to be convicted of an offense
and that the offense be related to the delivery of
an item or service under the Medicaid program.
Id. at 7. See also, Michael Travers, M.D., DAB CR85
(1989) (Docket No. C-170), aff'd, DAB App. 1237 (1991).
As noted above, Petitioner does not dispute that he was
convicted. Thus, the remaining question under Franzen is
whether the offense of which Petitioner was convicted
related to the delivery of an item or service under
Medicaid.
As to this point, the Franzen decision demonstrates that
in determining whether or not a conviction is program-
related, the ALJ may appropriately look beyond the four
corners of the trial court's judgment:
[T]he ALJ, the finder of fact, can look beyond the
findings of the state court to determine if a
conviction was related to Medicaid. Therefore, the
ALJ's characterization of an offense is not limited
to the state court's or the violated statute's
precise terms for purposes of determining whether a
conviction related to Medicaid.
Id. at 6. See also H. Gene Blankenship, DAB CR42 (1989)
(Docket No. C-67). Thus, the fact that Petitioner pled
guilty to mislabeling drugs, rather than to Medicaid
fraud, is not determinative as to whether his conviction
was program-related. Instead, I am authorized to inquire
into the circumstances surrounding Petitioner's guilty
plea to determine whether it was program-related. In
this case, the circumstances surrounding Petitioner's
conviction convince me that it was "related to the
delivery of an item or service" under Medicaid.
The Act does not define the phrase "criminal offense
related to the delivery of an item or service." However,
Franzen suggests that a conviction is program-related if
the conduct affected the amount paid by the Medicaid
program for identifiable items or services or if it
affected specific items or services delivered to Medicaid
recipients. In finding that Franzen had been convicted
of a program-related crime, the Board made the following
analysis:
It is undisputed that Petitioner dispensed generic
drugs in lieu of the brand name drugs listed on the
prescription labels. It is also undisputed that the
individuals who received the generic drugs rather
than the brand name drugs were Medicaid recipients.
The Medicaid program was thus affected in two ways.
First, program recipients failed to receive drugs
consistent with prescription labels . . . . Second,
the program was billed for the higher-priced brand
name drugs rather than the generic drugs actually
dispensed . . . . As such, Petitioner's action
resulted in an overpayment by the Medicaid program.
Franzen, DAB App. 1165 at 7.
The undisputed facts of this case establish that
Petitioner's crime affected identifiable Medicaid items
or services. In the present case, as in Franzen,
Petitioner pled guilty to misdemeanor charges of placing
brand name prescription labels on bottles in which
generic drugs were dispensed. 5/ The Board's analysis in
Franzen suggests that Petitioner's conduct in dispensing
those mislabeled drugs to apparent Medicaid recipients is
itself sufficient to establish that Petitioner's convic-
tion was related to the delivery of an item or service
under Medicaid. As was the case in Franzen, here the
Tennessee Medicaid recipients (here undercover agents)
did not receive drugs that were consistent with
prescription labels. 6/ Petitioner's conviction was thus
program-related.
Petitioner argues, however, that his conviction cannot be
program-related under Franzen unless it affected services
to recipients and caused an overpayment by the Medicaid
program. See P. Br. at 7. According to Petitioner,
there has been no showing that he personally was
responsible for overbilling Medicaid. Therefore, he
argues, his conviction is not program-related under
Franzen. I find no requirement in Franzen that, to be
program-related, a conviction must both affect services
to recipients and result in an overpayment by Medicaid
for those services.
Moreover, even if such a requirement were present, it
would be satisfied by Petitioner's conviction. In
Franzen, the Board observed, "Petitioner's action
resulted in an overpayment by the Medicaid program"
(emphasis added). In the present case, the ultimate
result of Petitioner's mislabeling was that the Tennessee
Medicaid program was overcharged for the drugs so
mislabeled. This is true whether or not Petitioner
himself submitted or caused to be submitted the claims.
The test suggested by Franzen focuses on whether a
petitioner's conduct has an identifiable impact on
specific reimbursement claims for items or services or on
the items or services themselves. Another approach to
determining whether a conviction is program-related can
be found in Jack W. Greene, DAB App. 1078 (1989), aff'd
sub nom. Greene v. Sullivan, 731 F. Supp. 835 & 838 (E.D.
Tenn. 1990). In Greene, the Board held that a criminal
offense falls within the reach of section 1128(a)(1)
where
[T]he submission of a bill or claim for Medicaid
reimbursement is the necessary step, following the
delivery of the item or service, to bring the "item"
within the purview of the program.
See also Ricardo Santos, DAB CR165 (1991) at 7 (Docket
No. C-376). Under the rationale of Greene, a criminal
offense is related to the delivery of an item or service
under Medicare or Medicaid where the delivery of a
Medicare or Medicaid item or service is an element in the
chain of events giving rise to the offense.
I applied this analysis in Larry W. Dabbs, R.Ph. and Gary
L. Schwendimann, R.Ph., DAB CR151 (1991) at 6 (Docket
Nos. C-370 and C-371). As did Petitioner this case, the
petitioners in Dabbs and Schwendimann pled guilty to
mislabeling drugs which were dispensed to Medicaid
recipients. The petitioners were not convicted of fraud
against Medicaid; however, their crimes were an element
of a chain of events resulting in a Medicaid
reimbursement claim. I concluded that, applying the
rationale of Greene to the facts, the petitioners' crimes
were related to the delivery of Medicaid items or
services.
There is no question that the offense of which Petitioner
was convicted was program-related under the test set out
in Greene and Dabbs and Schwendimann. Undercover special
agents of the Tennessee Bureau of Investigation, posing
as Medicaid recipients, presented prescriptions for
brand-name drugs at the Parr Prescription Center.
Petitioner admits that he dispensed generic drugs in
bottles labeled to indicate that the corresponding brand-
name drugs were being dispensed. Petitioner admits that
someone at Parr Prescription Center submitted claims to
the Tennessee Medicaid program which falsely represented
that brand-name drugs had been dispensed. Petitioner's
actions in mislabeling the drugs were an indispensable
link in the chain of events leading to the false claims.
But for Petitioner's dispensing of the mislabeled drugs
to persons who appeared to be Medicaid recipients, there
would have been no item or service for which a bill could
be submitted to the Medicaid program.
Petitioner has asked that I draw a conclusion of law that
the I.G. is entitled to exclude Petitioner, if at all,
under the permissive exclusion provisions of section
1128(b)(3) of the Act. That section permits the I.G. to
exclude individuals or entities that have been convicted
of a criminal offense related to the unlawful manufac-
ture, distribution, prescription, or dispensing of a
controlled substance. It is well settled, however, that
where an individual's conduct arguably falls within both
the mandatory provisions of section 1128(a)(1) and the
permissive provisions of one or more subsections of
section 1128(b), the I.G. is required to exclude the
individual for the minimum mandatory period prescribed
by sections 1128(a)(1) and 1128(c)(3)(B). See Greene.
Because I have concluded that Petitioner was convicted
of a program-related crime, I cannot conclude that
Petitioner's exclusion should be governed by section
1128(b)(3).
CONCLUSION
Based on the law and on the facts viewed in the light
most favorable to Petitioner, I conclude that the I.G.'s
determination to exclude Petitioner from participation in
Medicare, and to direct his exclusion from Medicaid, for
five years was mandated by law. Therefore, I am denying
Petitioner's request for an in-person evidentiary hearing
and I am granting the I.G.'s motion for summary
disposition.
___________________________
Steven T. Kessel
Administrative Law Judge
1. "State health care program" is defined by section
1128(h) of the Social Security Act to cover three types
of federally-financed health care programs, including
Medicaid. I use the term "Medicaid" in this decision to
include all State health care programs from which
Petitioner was excluded.
2. The I.G.'s exhibits and brief are cited as I.G. Ex.
(number) and I.G. Br. at (page). Petitioner's brief is
cited as P. Br. at (page). For purposes of creating a
record in this case, I have admitted all of the I.G.'s
and Petitioner's exhibits into evidence. I cite to my
findings of fact and conclusions of law as FFCL (number).
3. Petitioner asserts that the statutory section number
referenced in the judgments is incorrect. According to
Petitioner, he pled guilty to T.C.A. section 53-1-109.
P. Br. at 1. Petitioner concedes however, that he pled
guilty to the conduct described in the judgments, i.e.
mislabeling drugs. Id. For this reason, I conclude
that, even if the section number is incorrectly cited in
the judgments, this fact is irrelevant for purposes of my
decision.
4. Petitioner apparently does not dispute that he was
"convicted" of a criminal offense within the meaning of
section 1128(i) of the Act. Section 1128(i) defines
several alternatives which satisfy the requirement of a
conviction. Section 1128(i)(1) provides that an
individual is "convicted" when a court has entered a
judgment of conviction against that individual. Section
1128(i)(3) provides that an individual is also
"convicted" when a guilty plea by that individual has
been accepted by a court. Thus, Petitioner was
"convicted" under the definition of either section
1128(i)(1) or section 1128(i)(3).
5. Unlike the present case, in Franzen there had been a
finding that the petitioner himself had submitted bills
to Medicaid and had received overpayments.
6. Petitioner argues that recipients did receive drugs
which were consistent with prescription labels because
the physicians who signed the prescriptions had indicated
that generic substitution was permitted. P. Br. at 7.
This argument misses the point. By authorizing generic
substitution, the physicians did not authorize dispensing
generic drugs labeled as brand names. Thus, recipients
were affected, because the drug in the bottle they
received was not the drug named on the label.