Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
DATE: May 31, 1990
Docket No. C-155
In the Case of:
Basem F. Kandah, R.Ph.
Petitioner,
- v. -
The Inspector General.
DECISION
By letter dated June 16, 1989, the Inspector General (I.G.) notified Petitioner
that he was being excluded
from participation in the Medicare program and certain federally-assisted State
health care programs for six
years, based on his conviction of a criminal offense related to the unlawful
manufacture, distribution,
prescription, or dispensing of a controlled substance. The I.G. advised Petitioner
that the exclusion was
authorized by section 1128(b)(3) of the Social Security Act. Petitioner timely
requested a hearing on the
issue of whether the length of time of the exclusion was reasonable.
During a telephone prehearing conference on November 3, 1989, Petitioner acknowledged
that he knew of
his right to obtain legal counsel, but he stated that he intended to appear
on his own behalf (pro se).
Petitioner appeared pro se at the evidentiary hearing I conducted on January
23, 1990, in Detroit,
Michigan.
Based on the evidence introduced by both parties at the January 23 hearing,
and the applicable law, I
conclude that the exclusions imposed by the I.G. are authorized by section 1128(b)(3)
of the Social
Security Act and are reasonable. I set forth below my findings of fact and conclusions
of law in support of
this conclusion.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner is a pharmacist who obtained a license to practice pharmacy in
the State of Michigan on April
8, 1977. I.G. Exhibit (Ex.) 26.
2. Petitioner was employed at East Pharmacy Inc., in Detroit, Michigan, from
late August 1985 through
December 1986. Transcript (Tr.) at 144.
3. While employed at East Pharmacy, Inc., from early September, 1985, until
November 14, 1985,
Petitioner personally dispensed dosages of Tylenol with codeine, a Schedule
III controlled substance,
without legitimate prescriptions or other legitimate authorizations. I.G. Ex.
1, 7, 12.
4. On May 26, 1988, Petitioner was convicted of the criminal offense of intentional
and unlawful
distribution of a controlled substance (Tylenol with codeine), in violation
of 21 U.S.C. 841(a)(1), after a
jury trial in the United States District Court for the Eastern District of Michigan.
I.G. Ex. 1.
5. Petitioner's conviction was affirmed on appeal to the United States Court
of Appeals for the Sixth
Circuit, which found that a necessary element of the conviction was a finding
that Petitioner "knew that a
purported prescription was not issued in the usual course of medical practice
. . ." United States v. Hughes,
895 F.2d 1135 (6th Cir. 1990).
6. Petitioner was sentenced to a three-year term of imprisonment, followed
by a special parole term of four
years, and a $50 special assessment. I.G. Ex. 1.
7. The criminal offense of which Petitioner was convicted on May 26, 1988,
is related to the unlawful
manufacture, distribution, prescription, or dispensing of a controlled substance,
within the meaning of
section 1128(b)(3) of the Social Security Act. 42 U.S.C.A. 1320a-7(b)(3).
8. On June 16, 1989, the I.G. notified Petitioner that he was being excluded
from participation in Medicare
and Medicaid for six years, pursuant to section 1128(b)(3) of the Social Security
Act, in light of the May
26, 1988 conviction. I.G. Ex. 2.
9. The exclusion provisions of section 1128 of the Social Security Act establish
neither minimum nor
maximum lengths for exclusions based on section 1128(b)(3).
10. A purpose of section 1128(b)(3) of the Social Security Act is to protect
beneficiaries and program
funds by excluding individuals or entities who by conduct have demonstrated
a risk that they may engage
in fraud, substandard services, abuse, or unsafe practices in connection with
controlled substances until
such time as those excluded can demonstrate that such risk no longer exists.
S. Rep. No. 109, 100th Cong.
1st Sess. 2, reprinted in 1987 U.S. Code Cong. & Admin. News 682.
11. Petitioner committed a serious criminal offense which resulted in his incarceration
for a substantial
period of time. Finding 6.
12. Petitioner engaged in the criminal conduct knowingly and with knowledge
that the conduct was illegal.
I.G. Ex. 1, 7; Tr. at 117-123, 135; United States v. Hughes, supra, pp. 1143-44.
13. Petitioner's criminal conduct continued over a significant period of time
and was not an isolated event.
Tr. at 134-35; United States v. Hughes, supra, p. 1143.
14. This conduct involved a large quantity of controlled substances (approximately
20,000 doses). Tr. at
63.
15. This conduct endangered the health and safety of individuals who obtained
controlled substances from
Petitioner. 21 U.S.C. 841(b); Tr. at 126.
16. In 1984, Petitioner was convicted of mislabelling a controlled substance,
based on conduct which
included both mislabelling and unlawful distribution of controlled substances.
Petitioner was sentenced to
a year of probation. I.G. Ex. 28.
17. Based on the 1984 conviction, Petitioner's license to practice pharmacy
was suspended for six months,
and limitations were placed on his license for the rest of the probationary
period. I.G. Ex. 25-27.
18. Petitioner's license to practice pharmacy was suspended by the State of
Michigan on August 15, 1988,
and was revoked on March 21, 1989 (effective April 20, 1989), based on Petitioner's
conviction in 1988
and his underlying conduct. I.G. Ex. 9, 10.
19. The Michigan Board of Pharmacy found that Petitioner's conduct "demonstrated
a lack of good moral
character," and showed that Petitioner "lacks the propensity to serve
the public as a pharmacist in a fair,
honest, and open manner." I.G. Ex. 9, pp. 55-56, (finding adopted in I.G.
Ex. 10).
20. Petitioner presented no evidence that he had provided substantial cooperation
to government
authorities investigating the criminal activities in which he was involved.
21. Petitioner's status as an employee, financial difficulties, and lack of
personal profit beyond his salary,
while mitigating factors, do not establish that a six-year exclusion is extreme
or excessive.
22. The six-year length of the exclusion is reasonable in light of the seriousness
of the offense, the large
number of individual transactions, the length of time during which the criminal
conduct occurred, the
evaluation of Petitioner's moral character by the Michigan Board of Pharmacy,
and Petitioner's prior and
similar criminal offense.
ANALYSIS
Petitioner admitted that he was convicted for a criminal offense related to
"the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance," within
the meaning of section
1128(b)(3) of the Social Security Act. Petitioner did not contest that section
1128(b)(3) authorizes the I.G.
to impose an exclusion in this circumstance. The only issue before me, therefore,
is whether the six-year
length of the exclusion is extreme or excessive (and, thus, unreasonable). For
the reasons set out below, I
conclude that a six-year exclusion is reasonable.
The law does not prescribe minimum or maximum exclusion periods, or contain
any specific guidelines on
reasonable exclusion periods, for section 1128(b)(3) exclusions. To determine
whether this exclusion is
reasonable, I am guided only by the remedial purpose of the exclusion statute
and the policies embodied in
the implementing regulations. Congress intended that section 1128 exclusions
protect beneficiaries and
program funds by excluding from participation in covered programs those individuals
or entities which had
demonstrated (by conduct) untrustworthiness, professional incompetence, or risk
of harm to patients.
Findings of Fact and Conclusions of Law (FFCL) 10; see S. Rep. No. 109, 100th
Cong. 1st Sess. 2,
reprinted in 1987 U.S. Code Cong. & Admin. News, 682. The exclusion law
contemplates that an
excluded individual or entity will not be permitted to participate in covered
programs until there are
reasonable assurances that the type of conduct which was the basis for the exclusion
has not recurred and
will not recur in the future. Section 1128(g).
The length of an exclusion is reasonable if it is: 1) consistent with the statutory
and regulatory policy of
protecting beneficiaries and covered programs; and 2) not extreme or excessive
as a length of time
necessary to establish that the excluded individual or entity no longer poses
a risk to covered programs and
beneficiaries. See 48 Fed. Reg. 3744 (Jan. 27, 1983). To determine these issues,
I examine the seriousness
of the conduct involved and other factors related to the character and trustworthiness
of the excluded party.
The basic facts underlying the conviction were established in the prior criminal
action and reiterated in the
hearing before me. During the period of his employment at East Pharmacy, from
late August 1985 until
November 14, 1985, Petitioner dispensed Tylenol with codeine in response to
telephone authorizations
from personnel at Hubbell Clinic. I.G. Ex. 12, p. 86-87; Tr. at 15, 67. Tylenol
with codeine is a Schedule
III controlled substance. 21 U.S.C. 841(b)(3). These telephone authorizations
were not based on
legitimate prescriptions of a medical doctor in the course of ordinary medical
practice, but were part of a
scheme to illegally distribute Schedule III narcotics and to defraud the Medicare
and Medicaid program
through improper claims for other services to the patients. FFCL 3 and 4; I.G.
Exs. 1, 7, and 12, p. 82; Tr.
at 13-16.
Petitioner asserted at the hearing that he had not known that these telephone
authorizations were not
legitimate, and, thus, had not intentionally committed the illegal acts. Tr.
at 117-19. Essentially, Petitioner
sought to reopen issues which were part of the criminal action against him,
in which he was convicted, by a
jury, on a charge that he did "knowingly, intentionally and unlawfully
distribute and aid and abet in the
distribution of Tylenol with codeine . . . ." FFCL 4; I.G. Ex. 7, p. 28.
A necessary element of this
conviction was a finding that Petitioner "knew that a purported prescription
was not issued in the usual
course of medical practice." FFCL 5; United States v. Hughes, 895 F.2d
1135, 1143-44 (6th Cir. 1990)
The authority given to the I.G. to impose and direct exclusions pursuant to
section 1128(b)(3) is based on a
prior conviction; the statute clearly contemplates that the Secretary may rely
on findings by the court
necessary to support those convictions. Cf. John W. Foderick, DAB App. No. 1125
(1990) (considering
section 1128(b)(4) licensing actions). Additionally, since a jury in a criminal
trial must be persuaded
beyond a reasonable doubt of their conclusions, these findings were made using
a considerably higher
standard of persuasion than that employed in a civil administrative proceeding
such as this. There would
be no purpose served in relitigating issues related to fundamental elements
of the criminal offense, such as
Petitioner's intent to unlawfully distribute and aid and abet in the distribution
of Tylenol with codeine. In
sum, I conclude that I may rely on the judicial finding that Petitioner acted
knowingly and intentionally.
Furthermore, I was persuaded by the evidence presented at the hearing that
Petitioner was indeed aware
that the telephone authorizations were not legitimate. Petitioner personally
filled almost all of the
prescriptions from the Hubbell Clinic, personally ordered the inventory, and
admitted that he was aware of
the high volume of narcotic prescriptions. Tr. at 135. Petitioner testified
that he had repeatedly expressed
concern about the volume of narcotic prescriptions being dispensed and, indeed,
refused to handle some
prescriptions. Tr. at 118-19. He admitted that the high volume was "odd."
Tr. at 123. He even stated that
he had closed down the pharmacy on some days to express his concern. Tr. at
117-119. But he ultimately
reopened the pharmacy and filled prescriptions. I.G. Ex. 12, pp. 92-93. In a
transcript of a wiretapped
telephone conversation submitted by the I.G., Petitioner indicated to an employee
of Hubbell Clinic calling
in prescriptions that he would fill the prescriptions if she "don't tell
nobody." I.G. Ex. 15, p. 2.
As the Sixth Circuit stated in reviewing the conviction:
Consistent with the "good faith" practice of pharmacy, Kandah [Petitioner]
recognized the problems
with HMC [Hubbell Medical Clinic] prescriptions and initially refused to fill
them. The November 2, 1985
prescriptions, however, were filled after Kandah closed the pharmacy upon realizing
that the prescriptions
were illegal. Kandah's decision to re-open East Pharmacy and continue to fill
prescriptions after realizing
that they were not prescribed within the course of legitimate medical practice
provides ample evidence to
support his conviction for unlawful distribution of controlled substances.
United States v. Hughes, supra, at 1143.
Petitioner's illegal conduct was a serious criminal offense. The seriousness
of the offense is reflected in its
classification as a felony and the sentencing of Petitioner to a significant
period of incarceration. FFCL 6.
Furthermore, the seriousness of the offense is reflected in the fact that Petitioner
was convicted of a
deliberate violation of the law. FFCL 5 and 12.
The offense involved a drug which Congress has determined has a high potential
for abuse. 21 U.S.C.
841(b); see also Tr. at 126. Petitioner admitted that the drug has a possibility
of both physical and
psychological dependence. Tr. at 126. Petitioner's conduct endangered the health
and safety of individuals
to whom he unlawfully dispensed controlled substances. FFCL 15.
Petitioner provided no evidence which convinced me that his criminal conduct
was an isolated incident or a
mistake by an otherwise trustworthy individual. Petitioner's conduct occurred
over a significant period of
time, approximately three months, and involved a large number of dosages and
individual transactions.
FFCL 14, 13. Moreover, this conviction represents the second time Petitioner
has been convicted of a
criminal offense involving unlawful distribution of controlled substances. In
1984, Petitioner was
convicted of dispensing controlled substances without a proper label. FFCL 16;
I.G. Ex. 27-28. Petitioner
admitted in disciplinary proceedings related to his professional license that
this prior conviction was based
on conduct which included dispensing controlled substances without a physician's
order. I.G. Ex. 25-26.
This consistent pattern of behavior shows that Petitioner generally lacked respect
for the laws respecting
controlled substances.
Nor did Petitioner present evidence which convinced me that he has changed
and become more trustworthy
since the time he engaged in criminal conduct. Petitioner provided no evidence
that he sought to dissociate
himself from those who had facilitated his criminal conduct, even after the
Hubbell Clinic had been closed
by federal authorities. Petitioner continued working at East Pharmacy up until
the point when it closed in
December 1986. Tr. at 143. The record contains no evidence that Petitioner cooperated
with investigating
authorities by alerting authorities to the criminal conduct of others, or that
he assisted in the prosecution of
others.
In considering all the factors relating to the length of exclusion necessary
to protect the programs and
beneficiaries, I also find significant the findings of the Michigan Board of
Pharmacy in revoking
Petitioner's license. The Board of Pharmacy found that Petitioner had "demonstrated
a lack of good moral
character" and that Petitioner "lacks the propensity to serve the
public in a fair, honest, and open manner."
FFCL 18 and 19. This provides an independent basis for me to conclude that a
responsible and trustworthy
pharmacist would have refused to dispense controlled substances in these circumstances.
The Board of Pharmacy's findings on Petitioner's moral character confirm my
own assessment based on
observations of Petitioner as a witness on his own behalf during the January
23, 1990 hearing. Petitioner
was evasive on many issues, and did not impress me as open and honest about
his conduct and state of
mind. For example, his testimony that he had not questioned the legitimacy of
the telephone authorizations
was inconsistent with evidence that he had protested to his employer and to
the Hubbell Clinic about the
amount of controlled substances being ordered. See, e.g., Tr. at 117-18.
The factors discussed above provide justification for a substantial exclusion,
but I also consider three
factors which the Petitioner asserted as mitigating factors. First, Petitioner
asserted that he was only an
employee and did not direct the pharmacy or arrange the overall scheme to distribute
controlled substances.
Second, Petitioner asserted that he was paid a flat salary of $11.50 per hour
and did not receive any other
benefit from the criminal conduct. Third, Petitioner asserted that he had experienced
difficulty in securing
employment and had financial pressures which limited his ability to question
the propriety of the
pharmacy's business. The I.G. provided no evidence to undercut the factual basis
for these assertions.
The first two factors, status as an employee and lack of personal profit outside
of salary, are indeed
significant factors which I have seriously considered. These factors indicate
that Petitioner was not
motivated by greed and may not have actively or maliciously sought to break
the law. These factors
suggest that Petitioner will not, in the future, be likely to engage in criminal
conduct based solely on greed
or a malevolent intent. While this does not excuse Petitioner's criminal conduct,
all else being equal, the
maximum period of exclusion reasonable here would be shorter than it would be
for a pharmacist who
owned and operated a pharmacy, and who directly profited from criminal conduct.
The third factor, Petitioner's employment and financial difficulties, does
not provide any additional insight
into whether Petitioner can be expected to conduct himself responsibly in the
future. He is likely to face
similar employment and financial difficulties should he seek to pursue his career
as a pharmacist. Thus, I
do not assign much weight to this third factor.
In weighing all the factors discussed above, I conclude that the six-year period
of the exclusion is
reasonable. I accord most weight to the seriousness of the offense, the large
number of individual
transactions, and the lengthy period of time over which the criminal conduct
occurred. I find significant
support for the six-year length in the determination by the trial court to impose
a seven-year sentence. As I
discuss further below, I might find that a longer exclusion was warranted except
for the factors such as
Petitioner's employee status and lack of personal profit.
In the similar case of Leonard N. Schwartz, DAB Civ. Rem. C-62 (1989), I found
an eight-year exclusion
to be reasonable. In comparing the two cases, I find no inconsistency. The convictions
were for similar
types of activities. While the controlled substances in Schwartz were of a more
dangerous level and were
dispensed over a longer period, the conviction was of a lesser offense and there
was no prior criminal
record. The major difference between the cases is that Schwartz involved a pharmacy
owner who
instigated and profited from the criminal conduct, and this case involves an
employee who neither
instigated the conduct nor profited outside of his salary. This difference is
reflected in the shorter length of
the exclusion period here.
CONCLUSION
Based on the evidence in this case and the law, I conclude that the I.G.'s
determination to exclude
Petitioner from participation in the Medicare program, and to direct that Petitioner
be excluded from
participation in State health care programs, for six years, is reasonable. Therefore,
I am entering a decision
in favor of the I.G. in this case.
Steven T. Kessel
Administrative Law Judge