Date: 02-13-2015

Case Style: United States of America v. Dr. Michael J. Reinstein

Case Number: 1:15-cr-00044

Judge: Sharon Johnson Coleman

Court: United States District Court for the Northern District of Illinois (Cook County)

Plaintiff's Attorney: Robert Barba and Ryan S. Hedges

Defendant's Attorney: Terry Campbell

Description: CHICAGO, IL — A long-time Chicago psychiatrist pleaded guilty to a federal crime for receiving illegal kickbacks and benefits totaling nearly $600,000 from pharmaceutical companies in exchange for regularly prescribing the anti-psychotic drug clozapine to his patients. The defendant, Dr. MICHAEL J. REINSTEIN, also agreed to pay the United States and the State of Illinois $3.79 million to settle a parallel civil lawsuit alleging that, by prescribing clozapine in exchange for kickbacks, Reinstein caused the submission of at least 140,000 false claims to Medicare and Medicaid for the clozapine he prescribed for thousands of elderly and indigent mentally ill patients in at least 30 area nursing homes and other facilities, federal and state law enforcement officials announced today.

Reinstein, 71, of Skokie, pleaded guilty to one count of violating the federal Medicare and Medicaid Anti-Kickback Statute at his arraignment in U.S. District Court after he was charged on February 3. His cooperation plea agreement calls for the government to recommend a sentence of 18.5 months in prison when he is sentenced on a date to be determined by U.S. District Judge Sharon Johnson Coleman.

Both the criminal and civil cases involve the promotion of generic clozapine, a rarely prescribed anti-psychotic drug that has serious potential side effects and is generally considered a drug of last resort, particularly for elderly patients. While clozapine has been shown to be effective for treatment-resistant forms of schizophrenia, it is also known to cause numerous side effects, including a potentially deadly decrease in white blood cells, seizures, inflammation of the heart muscle, and increased mortality in elderly patients.

Reinstein, a psychiatrist in the Chicago area since 1973 with an office in Chicago’s Uptown neighborhood since at least 1999, quickly became one of the largest prescribers of generic clozapine in the country after obtaining a consulting agreement worth $50,000 per year, plus other compensation, from the manufacturer of the drug.

Under the civil settlement, Reinstein will pay the United States $1,837,968 and the State of Illinois $1,956,741 within 10 days. The settlement resolves a civil lawsuit that the United States filed in November 2012, and the State of Illinois joined in March 2013, on behalf of the U.S. Department of Health and Human Services and the Illinois Department of Healthcare and Family Services. United States v. Reinstein, 12 C 9167 (NDIL).

“Physicians must prescribe medications for their patients solely on the basis of the patient’s best medical interests and not because those decisions were improperly influenced by kickbacks and other financial favors,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.

“The Department of Justice is committed to ensuring that physicians who accept payments from pharmaceutical manufacturers to influence prescribing decisions are held accountable,” said Acting Assistant Attorney General for the Justice Department’s Civil Division Joyce R. Branda. “Schemes such as this one undermine the health care system and take advantage of elderly patients who are among the most vulnerable health care recipients.”

“The defendant put his patients at great risk of serious health problems to benefit his personal interests at taxpayer expense,” said Attorney General Lisa Madigan, whose office handled the civil litigation.

In March 2014, Teva Pharmaceuticals USA, Inc., and IVAX Pharmaceuticals LLC, paid the United States and the State of Illinois $27.6 million to settle allegations that they violated state and federal False Claims Acts by making payments to Reinstein in return for his prescriptions of clozapine to his patients.

The civil lawsuit against Reinstein alleged that he solicited and accepted kickbacks from IVAX and Teva in exchange for prescribing clozapine to Medicare and Medicaid patients between August 2003 and July 2011. Reinstein violated the federal and state False Claims Acts by causing the submission of prescription drug claims to the Medicare and Medicaid programs for clozapine prescriptions generated by the kickbacks IVAX and Teva paid Reinstein, the suit alleged.

Reinstein also submitted and/or caused to be submitted to both Medicaid and Medicare claims for his professional services involving “pharmacologic management” of those patients for whom he prescribed clozapine. However, Reinstein allegedly did not engage in meaningful pharmacological management, because his prescribing decisions for his clozapine patients were based on the kickbacks he received rather than his independent medical judgment or the individual needs of his patients.

Apart from the admissions Reinstein made in his guilty plea to criminal conduct, the civil settlement is neither an admission of liability by Reinstein nor a concession by the United States or the State of Illinois that their claims were not well-founded.

In pleading guilty in the criminal case, Reinstein admitted that until 2003, he prescribed Clozaril, the brand name version of the clozapine molecule, even though less expensive, generic versions of the drug were available after 1997, because the manufacturer of Clozaril paid Reinstein thousands of dollars annually for speaking engagements to promote the drug. After the patent for Clozaril expired, Reinstein resisted pharmacy and drug company efforts to switch his patients to generic clozapine and he continued to be the largest prescriber of Clozaril to Medicaid recipients in the United States. In July 2003, the manufacturer of Clozaril stopped paying Reinstein for speaking engagements and he agreed to meet with IVAX representatives about switching his patients to generic clozapine.

Shortly later in 2003, Reinstein agreed to switch his patients to IVAX’s generic clozapine after IVAX agreed to pay him $50,000 per year under a consulting agreement and to fund a clozapine research study by a Reinstein-affiliated entity. IVAX renewed its annual consulting agreement with Reinstein and Teva continued paying Reinstein consulting and speaker fees realted to clozapine after acquiring IVAX in January 2006. Teva and IVAX employees renewed consulting and speaking agreements with Reinstein for $50,000 each year between 2004 and 2007, $40,000 for 2008, and $24,000 for 2009. Between 2004 and 2009, Teva and IVAX paid Reinstein a total of approximately $234,000 for consulting and speaking related to clozapine.

Between 2004 and 2009, the manufacturer of an orally disintegrating form of the clozapine molecule also paid Reinstein for speaking engagements, totaling approximately $135,000. In addition, this same manufacturer paid Reinstein’s research company at least $20,000 for a study related to orally disintegrating clozapine, with Reinstein acting as the principal investigator and using his patients. In part because of these payments, between January 2005 and March 2006, Reinstein switched more than half of his patients from generic clozapine to the orally disintegrating clozapine.

Further, employees of Teva and IVAX caused the pharmaceutical companies to pay entertainment expenses for Reinstein and his associates, including expensive meals, tickets to sporting events, and all-expense-paid trips to Miami, all as part of an effort to induce him to prescribe IVAX/Teva clozapine. These entertainment expenses totaled approximately $30,000.

In March 2006, during an all-expense-paid trip to Miami, Teva and IVAX employees asked Reinstein what they could do to get him to prescribe more clozapine and less of the orally disintegrating clozapine to his patients. Reinstein told them that Teva should hire Individual A, whom he described as an important source of patient referrals for him. In May 2006, Teva hired Individual A to a part-time position entering white blood cell count data for some of Reinstein’s patients into the national clozapine registry at a rate of $20 per hour for a maximum of 30 hours per week. Over the next several months, Reinstein switched hundreds of his patients from the orally disintegrating clozapine to generic clozapine, knowing that Teva’s hiring of and payments to Individual A were illegal because they were at least partly in return for his prescriptions of clozapine. Between July 2006 and July 2011, Teva paid Individual A approximately $112,000.

In July 2006, Teva paid a research company affiliated with Reinstein for another clozapine study. The payments to the research company by IVAX in 2004 and Teva in 2006 totaled approximately $61,000. During this time period, the research company made monthly payments to Reinstein for rent and medical director fees. Overall, Reinstein admitted receiving payments totaling approximately $592,000 through various forms of illegal remuneration. In each scenario, Reinstein knew that the compensation was illegal because the payments were at least partly in exchange for his prescriptions of clozapine.

The civil settlement resulted from of a coordinated effort by the U.S. Attorney’s Office for the Northern District of Illinois, the Civil Fraud Section of the Commercial Litigation Branch of the Justice Department’s Civil Division, the Department of Health and Human Services Office of Inspector General, the Chicago Office of the Federal Bureau of Investigation, and the Illinois Attorney General’s Office.

Outcome: See above

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Defendant's Experts:

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