Conviction for fraudulent billing Florida and California Medicaid programs for recycled blood-derivative medication was upheld in U.S. v. Bradley

Bradley and codefendants were convicted of conspiracy to commit wire fraud, mail fraud and money laundering along with other federal statutes. Bradley, the lead defendant, owned “Bio-Med Plus,” a pharmaceutical wholesaler that purchased and sold blood-derivatives (intravenous immune globulin) used to treat patients with HIV. The fraud Bradley committed was that he recruited physicians who dispensed blood-derivatives (IVIG) at AIDS clinics in the Miami area to fill their prescription at Bradley’s pharmacies for a kickback. Bradley purchased the unused portions (from patients who failed to appear at the clinic for the IVIG infusion) for one-third of the price that Florida Medicaid paid the pharmacies.

Bio-Med put those derivatives in their inventory and sold the unused derivatives to third party pharmacies in Florida and California for a substantial profit. The third party pharmacies unwittingly billed Medicaid for theses unused prescriptions. Bradley’s pharmacies filled prescriptions with the recycled derivatives and obtained reimbursement from the state’s Medicaid programs.

The Court of Appeals decided that a reasonable jury could find sufficient evidence that the defendants engaged in a scheme to defraud Florida Medicaid and Medi-Cal. It determined that Florida Medicaid and Medi-Cal never intended to reimburse for recycled blood derivatives that had been previously dispensed; that Bradley knew of these policies; that the programs would not knowingly pay for recycled blood derivatives previously dispensed; that the Bradley purchased recycled medications at discount prices from corrupt physicians with the intent to resell them for a significant profit; and that the defendants sold them off at full wholesale prices to pharmacies which dealt almost exclusively with Medicaid patients that bill the Medicaid program as if the blood derivative had never been recycled.

In Bradley’s motion to suppress the search warrant, he argued the warrant was overbroad and lacked particularity to the extent that it allowed the agents to seize all personal and business files relating to Bio-Meds wholesale business. Invoking the “pervasive fraud” doctrine, the Court of Appeals upheld the broad search warrant because the affidavit supporting the warrant demonstrated a pattern of illegal conduct that was likely to extend from the already known fraudulent activity to other areas of the business. The alleged fraud supposedly went beyond the principals and infected those other aspects of the company. Traces of the fraud were likely to be found spread out among the myriad of the company records.

The defendants objected to the admission of evidence of Bradley’s financial success. The Court upheld its admission on the grounds that it allowed the government to prove motive to commit the fraud by showing that Bio-Med made a substantial profit on the recycled derivatives and then showing how Bradley enjoyed the profits and trial judge.