On April 30, 2010 Judge Marcia S. Krieger, United States District Judge,
District of Colorado dismissed 23 guilty counts against Thomas Bader, a
compounding pharmacist and owner of College Pharmacy in Denver Colorado,
while affirming eight counts and $4.8 million in forfeiture.

The case illustrates many of the nuanced risks involved with compounding
pharmacies, importing and exporting of active pharmaceutical ingredients
(API), compounding and selling high profile drugs such as human growth
hormone (HGH) and anabolic steroids, understanding the subtle distinction
between compounding and manufacturing, and the tenuous interplay between
state compounding laws and the Federal Food, Drug and Cosmetic Act (FDCA).

The case stems back to 2007 when Mr. Bader was charged with illegal
distribution, mail fraud, and conspiracy to facilitate the sale of smuggled
goods. Mr. Bader was importing HGH from China and compounding the API into
finished drug products. As Colorado’s compounding statute is very expansive,
he believed his practice to be protected under state law, and outside the
purview of FDCA.

The federal smuggling charges focused on the fact that imported HGH was from
a non-FDA registered facility and the compounded products thus involved new,
unapproved drugs requiring an NDA under FDCA. Mr. Bader was further charged
with illegal distribution of HGH and testosterone cypionate (a controlled
substance) as both products involved promotion for unapproved uses, illegal
under federal law.

On February 2, 2010 a federal jury found Mr. Bader guilty of 31 counts
including illegal distribution of HGH and controlled substances and unlawful
importation (i.e. smuggling) of HGH. Mr. Bader and counsel then moved to
acquit, or alternatively seek a new trial based on a number of legal
propositions including entrapment by estoppel, violation of due process
rights, erroneous juror instructions, failure to establish a criminal
purpose or intent, and insufficient evidence to support the findings.

Ultimately, on April 29, 2010 Judge Krieger dismissed 23 counts involving
illegal distribution of HGH. The Judge acknowledged a number of Mr. Bader’s
sales were for approved uses of HGH, including some even written for
children. Additionally, Mr. Bader had no way of knowing if the
prescriptions were for permissible uses and thus his actions were protected.

Still, the ruling upheld eight guilty counts. Two smuggling charges were
upheld, as importation of HGH from a non-FDA registered facility was seen as
“contrary to law,” and thus illegal. Simple repackaging or relabeling of a
product may be lawful under state compounding laws; however this
“compounding defense” could not shield Mr. Bader from further provisions of
the FDCA.

Five illegal distribution counts involving HGH were upheld as the use of HGH
as an anti-aging drug is unauthorized and illegal. The lone distribution
charge involving controlled-substances was also upheld, as selling and
promoting testosterone cypionate for muscle building and ant-aging is
illegal. Lastly, the judge affirmed $4.8 million forfeiture in assets based
on the nature of the guilty counts. Sentencing in this matter is scheduled
for June 10, 2010.

In sum, compounding pharmacies may be fully compliant with state law, but be
at great risk under federal law. Pharmacies and suppliers of API should
always consult an attorney and be aware of the risks involved. Fuerst
Ittleman, PL has experience with FDA import and export, pharmacy
compounding, and FDCA matters. Please feel free to contact us at
contact@fuerstlaw.com to see how we can help you maintain complete
regulatory compliance with applicable state and federal law.

On April 26, 2010, the Treasury Department unveiled its regulatory agenda as part of the Unified Agenda of Regulatory and Deregulatory Actions covering IRS projects in the corporate tax, international tax, and exempt organizations area.

In the international tax arena, the agenda provides for projects that include guidance on the application of attribution rules to foreign trusts, clarification of the foreign base company sales income rules, and taxable years of foreign corporations. The agenda also includes international guidance projects dealing with US source income effectively connected with a US business and revisions relating to withholding reporting requirements for US source income paid to foreign persons. In the corporate arena, the agenda provides for projects dealing with reorganizations under IRC § 368(a)(1)(E) or (F), recharacterization of certain qualifying income of publically traded partnerships, and interest on deferred tax liability for contingent payment sales pursuant to IRC § 453A. Projects encompassing payments made pursuant to securities lending transactions or sale-repurchase transactions, deferred discharge of indebtedness income, and deferred original issue discount of corporation are also in the works. Finally, with regards to the exempt organizations arena, the IRS is working on guidance addressing charitable contributions of specific motor vehicles, lookback interest and tax-exempt entities, and qualified tax credit bonds.

From: BNA Spring Version of Treasury Regulatory Agenda Details Dozens of IRS Projects in Many Areas 29 TMWR 590

Regenerative medicine involves the use of tissues, cells (including stem cells), laboratory-made compounds, and artificial organs to treat injuries and diseases. This approach helps repair specific areas of the body, often without the need for traditional, invasive surgery. For example, research is being conducted to use stem cells to replace cardiac tissue in patients with congestive heart failure. Currently, bone morphogenetic proteins, or BMP, which are genetically modified human proteins that spur bone growth, are being used to help vertebrae fuse back together after certain spine surgeries.

The science and technology of regenerative medicine is expanding at a rapid pace. The current market for regenerative medicine technologies now stands at $1.6 billion, but experts predict that this market could swell to $15-20 billion by 2025. Regenerative medicine is growing so rapidly because it is more efficient and effective for both physicians and patients who will undergo fewer steps in surgery and other medical procedures. Regenerative medicine is growing around the world, with the top five producers of regenerative medicine research coming from the United States, Japan, Germany, United Kingdom, and China. China, specifically, has seen a jump in regenerative medicine from 50 publications in the year 2000 to over 1,000 in 2008.

Virtually every sector of the medical and biotechnology industries stand to expand alongside the worldwide market for regenerative medicine. For instance, the medical device industry will benefit from and aid in regenerative medicine with the development of “delivery systems” for these cellular and other therapies. The delivery systems, such as catheters and similar devices, would allow physicians to repair specific areas of the body with site specific implantation of tissues, cells, or other tissue or cellular-based products. In addition to the domestic demand for delivery systems, this worldwide growth provides a global market for domestic medical device manufactures who can export their devices to meet the needs of foreign regenerative medicine markets.

Fuerst Ittleman, PL has experience with stem cell and other regenerative therapies compliance. We also assist medical device and biotechnology companies with regulatory compliance and export requirements. Please feel free to contact us at contact@fuerstlaw.com to see how we can help your company move forward with regenerative medicine therapies.

Casual news-watchers may have missed the significance of the seemingly unrelated stories, but the legal and regulatory compliance professionals at FHI clearly saw the connection.As we reported previously, federal law enforcement agencies have increased their enforcement focus on Medicare fraud in the Miami area in a significant way. Under this program, on June 23, 2009, Federal officials in Miami announced that eight defendants were charged in an elaborate Medicare fraud that spanned five states, used 29 fake storefronts, and attempted to steal $100 million from Medicare and Medicare Advantage.

The indictments allege that Michel De Jesus Huarte and the defendants fronted their scam through more than a dozen phony medical clinics throughout the Southeast United States. In many cases, the storefronts were simply post office boxes.

They would submit fraudulent invoices to the government, then use check cashing stores to launder the reimbursements; money is harder to track through these stores than through conventional banks. The fraud group owned two check cashing stores in the Miami area and netted between $30,000 and $80,000 in cash several times a week.

According to government court filings, Huarte paid the fake store owners in cash “with the understanding that (they) would flee to Cuba to avoid law enforcement detection or capture.” Two of the defendants and approximately $30 million are still missing.

This fraud ring is similar to a scheme run through the La Bamba Check Cashing store. In that case, the Benitez brothers were accused of laundering $24 million in Medicare fraud money by using shell companies to cash checks at a local chain of stores. As we reported in our blog, Juan Rene Caro, owner of La Bamba, was recently sentenced in Federal court for using the check cashing store to launder funds from a construction fraud ring involving violations of the Bank Secrecy Act. You can read about the harsh sentence handed down to Mr. Caro here.

Viewed through a single lens, these indictments and convictions mean that the Federal government is not only going after those who perpetrate Medicare fraud, but those who move and launder the funds from these schemes as well. The implications are clear: if you are involved in Medicare fraud activities in any way, the government will be coming for you.

Let Fuerst Ittleman assist your health care company with its regulatory compliance to help protect you against fraud and other illegal activities. Please contact us at 305-350-5690 or contact@fuerstlaw.com.

On June 16, 2009, Gilda Industries, a small bakery and importer in Hialeah, Florida, struck a blow for importers everywhere when it prevailed in its case in the U.S. Court of International Trade.  The result of this case is that importers everywhere may qualify for a full refund of the 100% retaliatory duties paid to U.S. Customs and Border Protection (CBP) on certain products imported from the European Union on or after July 29, 2007.

The decision in Gilda Industries v. United States becomes the latest chapter in what is known as the “EC-Beef Hormones” dispute.  The dispute began in 1985 when the European Community (now the European Union) banned imports of beef and beef products from the United States that had been treated with hormones.  As a result, the U.S. imposed a 100% retaliatory tariff on a “retaliation list” of European Union products.

In theory, the retaliatory measures should have ended in mid-2007.  However, when CBP continued to collect the retaliatory tariffs after that date, Gilda took the matter to court.

The Court found that the 100% retaliatory tariffs did, in fact, terminate on July 29, 2007, and it ordered CBP to refund the retaliatory duties collected on Gilda’s imports after that date.  The Court’s opinion, however, opens the door for a full refund on all of the retaliatory duties paid to CBP after that date for all of the affected products

Importers who qualify for refunds should immediately file an action with the U.S. Court of International Trade to preserve the right to the refunds.  These actions must be filed before July 29, 2009.

The list of products subject to the 100% retaliatory duties – for which refund may be due -includes various meats, cheeses, vegetables and other food items.  For the complete list of products affected, click here.

For the decision of the Court in Gilda Industries v. United States, click here.

If you are importer who believes that you may be due refunds of duties from CBP under this decision, please contact Fuerst Ittleman at 305-350-5690 or contact@fuerstlaw.com.  You should not delay.

Efforts to crack down on Medicare and Medicaid fraud has focused the radars of federal and state law enforcement onto the Miami-Dade county area. On June 19, 2009, state investigators from the Florida Agency for Health Care Administration (“AHCA”) revealed more Medicaid fraud in Miami-Dade: the state paid for unnecessary or unaccounted oxygen equipment.

Recent government studies have estimated Medicare and Medicaid fraud to be at least $60 billion a year nationwide. According to the FBI and the Department of Justice, Medicare and Medicaid fraud is big business in Miami Dade County reaching at least $2.5 billion a year.

Fraudulent billing for medical equipment is the latest scam plaguing Medicaid which, according to the AHCA, spent over $90 million on medical equipment last year alone. When over $1.4 million was spent on oxygen equipment in Miami-Dade County last year, this raised the suspicions of the AHCA.

Attempts to curb Medicaid and Medicare fraud in South Florida are nothing new. In March, Medicaid investigators commenced similar investigations of Miami-Dade’s home health industry. On June 15th, Governor Charlie Christ signed into law a bill that declared Miami-Dade a “crisis area for healthcare fraud” and tightened regulations on home health agencies, home medical equipment providers, and health care clinics.

These recent efforts by the state come on top of increased efforts by the federal government to stem the tide of fraud and wasteful government spending in Medicare and Medicaid. The first of these efforts, the Medicare Strike Force, was started in 2007. In two years, federal prosecutors have filed 87 indictments charging 159 defendants with fraud offenses. This past May, the federal government announced a new task force – the Health Care Fraud Prevention and Enforcement Team, or HEAT – which will increase healthcare fraud enforcement in Miami-Dade County.

With increased efforts of law enforcement cracking down on the industry, let FHI help your health care business with its regulatory compliance. Contact us at 305-350-5690 or contact@fuerstlaw.com.

Bio-Nucleonics, Inc., a leading Florida company specializing in radiopharmaceuticals, medical devices and imaging agents, gave a hearty “Thanks” to Fuerst Ittleman in its most recent issue of BioBulletin, the company’s newsletter.

Fuerst Ittleman recently assisted Bio-Nucleonics with gaining FDA approval for the company’s new Doral, Florida product manufacturing facility. The FDA’s approval certifies that Bio-Nucleonics uses “current Good Manufacturing Practice” (cGMP) in all its production at this state-of-the art facility.

The FDA also gave approval to Bio-Nucleonics for its proposed release criteria and timeframes for specific lot release tests to be completed prior to shipment of finished drug products. The importance of this ruling is that no material is lost to radioactive decay and each dose can be shipped immediately to the customer.

FHI assisted Bio-Nucleonics with both of these efforts. We found it such a pleasure to work with clients who were as knowledgeable, dedicated, and thorough as the team at Bio-Nucleonics, and we’re glad that they liked working with us, too. To see the entire BioBulletin newsletter, click here.

Let Fuerst Ittleman help guide your company to its next success. For more information, contact us today at 305.350.5690 or contact@fuerstlaw.com

On June 4, 2009, the IRS announced plans for a comprehensive program aimed at tax return preparers.  According to IRS Commissioner Doug Shulman, the recommendations of the Service will “better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.”

Recognizing that “tax return preparers help Americans with one of their biggest financial transactions each year,” Mr. Shulman announced that the IRS “must ensure that all preparers are ethical, provide good service and are qualified.”  Certainly, the need for such recommendations from the IRS is great.  A recent study by the Treasury Inspector General for Tax Administration found that 61% of tax returns completed by unlicensed paid preparers contained errors.

Moreover, the tax return preparation industry is enormous and getting bigger.  According to IRS estimates, over 80% of taxpayers either hire a tax preparer or use tax-preparation software.  And while enrolled agents, certified public accountants and licensed tax attorneys must register with the IRS and meet minimum training requirements, other, unregulated tax return preparers can work on tax returns without such safeguards.  “Right now, there is no clear national standard regulation of paid tax-return preparers,” said Mr. Shulman.

Although still in formation, the IRS reports that the potential recommendations could focus on:

• a new model for the regulation of tax return preparers
• service and outreach for return preparers
• education and training of return preparers
• enforcement related to return preparer misconduct.

The process will begin with information gathering from agents, lawyers and accountants as well as unlicensed tax preparers and software vendors.  The agency reported that it will also seek the input of consumer groups and taxpayers, and will open “a transparent and open dialogue about the issues,” according to Mr. Shulman.  “At this early and critical stage of the process, we need to hear from the broadest possible range of stakeholders.”

Fuerst Ittleman will continue to monitor this evolving effort by the IRS, both for how it will affect our clients and friends, but also to remain actively involved in developing the recommendations with the agency.

For more information, contact Fuerst Ittleman today at 305.350.5690 or contact@fuerstlaw.com.

The House Energy and Commerce Committee convened to discuss draft legislation that would broadly affect regulation of food production, importation, and manufacturing inside and outside of the U.S.  Newly confirmed FDA Commissioner Margaret Hamburg testified before the committee on The Food Safety Enhancement Act of 2009 (FSEA).

FSEA’s major initiatives are:

• Registration fees for domestic and foreign producers as well as importers
• Creation of an identification system for businesses in the food supply chain
• Risk-based frequency levels of inspection
• Increasing FDA’s subpoena power
• Two tier approach to recalls: voluntary and mandatory

Democratic Party proponents, led by Representative Dingell of Michigan, emphasized the “dire situation” of food safety and characterized the legislation as a means of recreating the FDA with new and stronger enforcement and financing tools.  Opponents largely criticized the passing of costs to consumers, regulation that does not guarantee results, and also chided the hearing on draft legislation, rather than a finalized text.  Another recurring critique was the broad discretion given to make mandatory recalls.  Some committee members took exception to the Commissioner’s admission that senior officials, not only the Commissioner, might be given the power to issue mandatory recalls.

Commissioner Hamburg unequivocally supported the legislation, saying that it would base food safety monitoring on prevention.  She also agreed with the legislation’s legal empowerment of the agency as well as its requirement that user fees be generated by the food industry.

This week has seen the publication of two reports of groundbreaking results in the field of stem cell research.

Scientists at San Diego California’s Salk Institute for Biological Studies have published a report in Nature describing the creation of induced pluripotent stem (iPS) cells.  Dr. Juan Carlos Izpisua Belmonte’s team applied gene therapy techniques to correct defective cells from patients afflicted with Fanconi anemia.  The team reports that the created iPS cells are indistinguishable from human embryonic stem cells.  Although the research has not yet been used in humans, the iPS cells create hope that such correction might be done to the diseased cells of Fanconi anemia patients. Upon correction, the cells could be reintroduced to the patient, without risk of rejection, to rid the patient of the affliction.

Chinese Scientists at the Shanghai Institute of Biochemistry and Cell Biology have created iPS cells adaptable to the human body from the tissue of pigs.  Similarly, the iPS cells resulting from the Chinese team’s procedure are identical to embryonic stem cells.  Researchers believe that these results accomplish a necessary step towards the use of pigs to generate human-compatible organs.  Some also think this research could enable human-like simulations of human diseases and thus a platform for drug and biologic testing which would be as much like a human clinical trial as possible.

View the reports here:
http://www.nature.com/nature/journal/vaop/ncurrent/pdf/nature08129.pdf

http://jmcb.oxfordjournals.org/cgi/content/abstract/mjp003