Health Care & Reproductive Rights

LOS ANGELES – California Attorney General Edmund G. Brown Jr. and the New York and Idaho Attorneys General today announced a settlement agreement with Los Angeles-based First Regional Bank to prevent the bank from providing payment-processing services to online retailers who illegally sell cigarettes and other tobacco products over the Internet.

“Stopping the illegal sale of cigarettes, especially to minors, is a major step in protecting public health. These online tobacco retailers are known to be a major source for young people to get their illegal cigarettes,” said Attorney General Brown. “We’re pleased that First Regional has agreed to take measures to address this important issue and hope that other banks and companies involved in online tobacco sales will follow suit.”

An investigation by Attorney General Brown, in cooperation with New York Attorney General Andrew Cuomo and Idaho Attorney General Lawrence Wasden, determined that First Regional processed income from online tobacco retailers throughout the United States. The investigation included a sting against one of the largest online tobacco retailers, Scott Maybee. It was found that First Regional broke the law by allowing Maybee to process thousands of tobacco sales through the bank.

In June 2008, Attorney General Brown sued Scott Maybee for violating California laws designed to prevent cigarettes from falling into the hands of minors through online purchases. These laws include failing to call the cigarette buyer after 5 p.m. to confirm the sale, failing to impose a two-carton minimum purchase and failing to provide adequate purchase information to credit-card companies so that “Tobacco Products” can be printed on the credit card receipt. Maybee also violated the law when he sold thousands of cigarettes to California consumers that were not fire-safe.

The investigation uncovered evidence that First Regional knew it was facilitating Maybee’s illegal online tobacco sales since 2006. The bank was repeatedly advised to discontinue its practices by the California and New York State Attorneys General. Since June 2008, the Attorneys General of California, New York and Idaho have been working on an agreement with First Regional Bank to ensure that it no longer facilitates the illegal online purchase of tobacco products.

Under the settlement agreement, First Regional will:
• Pay $60,000 in civil penalties, fees and costs
• Maintain and adhere to a formal policy prohibiting the facilitation of online tobacco sales
• Train its employees on the tobacco policy requirements
• Publish its tobacco policy on its public website
• Obtain basic information about its customers and their business operations
• Conduct a background check on potential customers
• Adopt procedures to terminate merchants who violate First Regional’s tobacco policy

Many online tobacco retailers fail to follow laws enacted by states to prevent online cigarettes from falling into the hands of minors. These laws include violating state age-verification laws. Many online retailers also violate numerous other state laws, which include failing to file required monthly sales reports with state tax agencies, selling cigarettes not certified and approved for sale and selling cigarettes that are not be fire-safe, as required by California law.

This agreement furthers the efforts of California and other states to fully implement the tobacco Master Settlement Agreement, a public health agreement that aims to reduce the use of tobacco products and to stop the flow of cheap cigarettes to minors.

Through these efforts, major credit-card companies have already agreed to prevent their cards from being used to facilitate unlawful tobacco sales, and several major shippers refuse to deliver cigarettes purchased online. Clamping down on electronic sales, such as those facilitated by First Regional, will make it more difficult for these retailers to continue their illegal operations.

The settlement agreement is attached.

SAN FRANCISCO– California Attorney General Edmund G. Brown Jr. today filed a motion in federal court to oppose Federal Receiver Clark Kelso’s motion to hold California Governor Arnold Schwarzenegger and Controller John Chiang in contempt for failing to release $8 billion in state funds for a massive prison healthcare facilities construction project.

“Last year, the Legislature approved $7.4 billion in prison construction funds. That money hasn’t even been spent yet, and the Receiver wants $8 billion more,” said Attorney General Brown. “We simply can’t afford to keep throwing billions of dollars of public money into our state correctional system under the veil of secrecy. Once we spend the billions already allocated to improving healthcare in our prisons, then we can determine if more is needed.”

In August, Federal Prison Receiver Clark Kelso filed a motion compelling Governor Arnold Schwarzenegger and Controller John Chiang to hand over an additional $8 billion from the California Treasury over the next 5 years, including $3 billion in this fiscal year, for prison healthcare facility construction. Attorney General Brown argues that the federal court does not have the legal power to mandate state prison construction and there is no evidence in the record justifying the massive sums sought by the Receiver.

The Prison Litigation Reform Act (PLRA), approved by Congress in 1996, makes clear that a court may not force a state to pay for prison construction without its consent. The Receiver’s $8 billion demand includes construction of new prison healthcare facilities containing 10,000 new beds for prisoners with acute and long-term health needs. While California has acknowledged the need to provide constitutionally adequate healthcare, the Receiver has not presented convincing evidence that his wide-ranging plan is “necessary and the least-intrusive” plan required by the U.S. Constitution.

The Receiver has refused to disclose his plan to the public, but according to the Receiver’s motion, “the Facility Improvement project will touch virtually every prison in the state” and “will result in the construction of 7 million square feet of new medical facilities—the equivalent of 70 Wal-Mart stores…”

The $8 billion demand is an enormous increase in state spending for prisons. California built 22 new prisons in 23 years, and prison spending topped almost $10 billion in the 2007-2008 state budget. Last year, the California Legislature authorized $7.4 billion for prison construction and has instituted numerous improvements and reforms to the prison healthcare system. The Attorney General’s motion argues that these improvements should be assessed before allocating more money.

The state has made progress on prison healthcare reform. One of the fundamental problems in fulfilling the state’s constitutional healthcare mandate was the lack of qualified medical staff to treat the inmates. The eighth quarterly report of the Receiver shows that 86% of nursing positions and 81% of physician positions have now been filled. This has significantly improved the level of care provided to prisoners. The state has also implemented upgrades and improvements to its appointment-tracking, medication delivery and laboratory services.

SACRAMENTO--California Attorney General Edmund G. Brown Jr. today released guidelines that, for the first time since California’s Proposition 215 was passed in 1996, clarify the state’s laws governing medical marijuana and provide clear guidelines for patients and law enforcement to ensure that medical marijuana is not diverted to illicit markets.

“California voters approved an initiative legalizing medical marijuana, not street drugs. Marijuana intended for medicinal use should not be sold to non-patients or on illicit markets,” Attorney General Brown said. “These guidelines will help law enforcement agencies perform their duties in accordance with California law and help patients understand their rights under Proposition 215.”

This landmark document marks the first attempt by a state agency to define the types of organizations that are legally permitted to dispense marijuana. Brown’s guidelines affirm the legality of medical marijuana collectives and cooperatives, but make clear that such entities cannot be operated for profit, may not purchase marijuana from unlawful sources and must have a defined organizational structure that includes detailed records proving that users are legitimate patients.

“We welcome the Attorney General’s leadership and expect that compliance with these guidelines will result in fewer unnecessary arrests, citations and seizures of medicine from qualified patients and their primary caregivers,” said Americans for Safe Access Attorney Joe Elford. “No one benefits from confusion over the law. These guidelines will help patients and law enforcement better understand California’s medical marijuana laws.”

In 1996, California voters approved Proposition 215, an initiative that exempted patients and their primary caregivers from criminal liability under state law for the possession and cultivation of marijuana. In addition, The Medical Marijuana Program Act (MMA), enacted by the Legislature in 2004, intended to further clarify lawful medical marijuana practices by establishing a voluntary statewide identification card system, specific limits on the amount of medical marijuana each cardholder could possess, and rules for the cultivation of medical marijuana by collectives and cooperatives. According to Americans for Safe Access, California has more than 200,000 doctor-qualified medial cannabis users.

Several law enforcement agencies have requested that the Attorney General issue guidelines regarding the lawful possession, sale and cultivation of marijuana for medicinal purposes. These law enforcement agencies believe that individuals and cartels, under the cover of Proposition 215, have expanded illegal cultivation and sales of marijuana, which has led to an increase in drug-related violent crime. Most researchers agree that the U.S. marijuana crop has seen a sharp increase in the past decade. A report, “Marijuana Production in the United States” by drug-policy researcher Jon Gettman, estimated that in 2006, more than 21 million pot plants were grown in California at a street value of up to $14 billion.

Fresno Police Chief Jerry Dyer, President of the California Police Chiefs Association, praised Brown for establishing these guidelines. 'Since Proposition 215 was passed, the laws surrounding the use, possession and distribution of medical marijuana became confusing at best. These newly established guidelines are an essential tool for law enforcement and provide the parameters needed for consistent statewide regulation and enforcement.'

The guidelines encourage patients to participate in the California Department of Public Health’s registration program to obtain a medical marijuana identification card. The identification card protects the holder from arrest for marijuana possession and is one of the best ways to ensure the non-diversion of medical marijuana. Collectives and cooperatives are advised to keep files on their patients with documented verification of their qualified status.

A copy of the Guidelines is attached.

LOS ANGELES--Attorney General Edmund G. Brown Jr. today announced that California will receive $23 million of a $515 million nationwide settlement with Bristol-Myers Squibb. The settlement resolves allegations that the company reported “grossly inflated” drug wholesale prices to California’s Medicaid program in an effort to maintain its market share of prescription drugs.

“The Medi-Cal system requires companies to accurately report drug prices to the state,” Attorney General Brown said. “Bristol Myers-Squibb grossly inflated its reported drug prices and then used the artificially high price to increase its market share. The Bureau of Medi-Cal Fraud and Elder Abuse will continue to investigate and prosecute any alleged fraudulent conduct by any health care provider whose services or products are paid for by Medi-Cal,” Brown added.

The settlement agreement follows a drug-price investigation into Bristol Myers-Squibb and former subsidiary Apothecon that was launched in 2001 by California, the federal government, and other state attorneys general. The investigation was triggered by various whistle blower lawsuits filed around the United States. During the inquiry, Bristol Myers-Squibb voluntarily disclosed potential violations of state and federal anti-kick back law.

California found evidence of violations including: reporting artificially high average wholesale prices for prescription drugs to shut out competitors, organizing kickback schemes to lure pharmacies and wholesalers, illegally marketing an adult anti-psychotic drug as a treatment for children, and hiding the lowest sale price for Serzone to underpay Medicaid. Details of those allegations include:

* Reporting inflated average wholesale prices for physician-administered drugs:

The average wholesale prices for drugs were substantially higher than the prices for which the company sold these products, a scheme designed to maintain market share in the face of competing generic alternative drugs. The company’s sales force would “market the spread” or sell drugs based on the profit margin between the reported average price, which is the basis for Medicare and Medicaid reimbursement, and the actual costs for the same drugs, which were dramatically less than the reported price.

Medi-Cal, which is California’s Medicaid program, reimburses pharmacies and doctors based on prices reported by pharmaceutical manufacturers whose drugs are dispensed to beneficiaries. Because government health insurance programs such as Medi-Cal rely on reported prices to set reimbursement amounts, the company’s conduct caused the state to overpay for drugs.

* Engaging in an array of kickback activities to enhance their market share:

The investigation revealed that Apothecon paid millions of dollars to lure pharmacies and wholesalers to switch from competitors’ generic drugs to the company’s generic products. The payments to doctors included physician consulting programs consisting of trips to luxury resorts, meals at expensive restaurants, and tickets to sports events where doctors allegedly listened to pharmaceutical sales pitches. The kickback schemes targeted payments to doctors to keep generic competitors out of the market.

* Illegally marketing its atypical antipsychotic drug Abilify:

The Food and Drug Administration approved Abilify in November 2002 for the treatment of adult schizophrenia and later for adult bi-polar disorder. The investigation revealed that the company promoted the drug for treatment of children and dementia-related psychosis when neither use was approved by the FDA. This off-label promotion scheme increased the company’s sales between 2002 and 2005.

* Concealing its best price to the U.S. Centers for Medicare and Medicaid Management:

Bristol Myers-Squibb allegedly concealed its best price from the federal Centers for Medicare and Medicaid Management in a private-labeling scheme for its drug Serzone. The federal government uses best price to determine the amount of Medicaid rebates owed to states. The company allegedly affixed Kaiser labels to its Serzone and shipped the drugs at a lower price than was sold to any other customer. The company did not include this low price in its calculations reported to the federal government for Medicaid rebate purposes, thereby underpaying rebates owed to California.

The $23 million settlement with Bristol-Myers Squibb will pay approximately $12 million in full restitution to Medi-Cal and $11 million for the state’s False Claims Fund. The state’s lawsuit was filed in San Diego Superior Court in 2003 and then removed to the federal central district court in Los Angeles. Later it was consolidated with a number of other state lawsuits in federal court in Boston.

To date, California has reached settlements worth $9.7 million with five other companies, and their corporate parents, resolving similar allegations. Claims against fifteen companies are still pending.

For copies of the state's settlement and original lawsuit please contact the Attorney General's Press Office at 916-324-5500.

SACRAMENTO - California Attorney General Edmund G. Brown Jr. today joined ten states in announcing that Anheuser-Busch will discontinue its popular alcoholic energy drinks, including Tilt and Bud Extra, and will not produce any caffeinated alcohol beverages in the future.

“Anheuser-Busch, the largest brewing company in the United States, has taken an important action to protect young people from attractive alcohol advertising and marketing,” Attorney General Brown said. “Other major alcohol manufacturers should follow Anheuser-Busch’s lead and eliminate dangerous combinations of caffeine and alcohol from the marketplace.”

Alcoholic energy drinks are prepackaged beverages that combine alcohol and caffeine, guarana, taurine, ginseng and other ingredients associated with non-alcoholic energy drinks. Brown asserts that Anheuser-Busch marketed Bud Extra and Tilt in violation of state consumer protection statues by:

• Making misleading health-related statements about allegedly energizing effects of Bud Extra including increased strength and increased ability to stay up all night after drinking the products
• Failing to disclose its effects on consumers, and ignoring potential consequences of drinking alcoholic beverages that are combined with caffeine or other stimulants
• Directing advertisements of Tilt and Bud Extra to consumers under the age of 21

In November 2007, researchers at Wake Forest University of Medicine found that the combination of caffeine and alcohol sends mixed signals to the nervous system, causing the effect of a “wide awake drunk.” Students who consumed these energy drink cocktails were twice as likely to be involved in alcohol-related accidents and injuries than when drinking alcohol alone. The combination of alcohol and caffeine can be dangerous because individuals may not feel impaired even when blood alcohol levels are very high.

California, along with ten other states, asserted that Anheuser-Busch made misleading health-related statements about the energizing effects of its caffeinated alcohol beverages. Marketing that promoted the alleged energy component of the drinks made the drinks appealing to teens. The company advertised Bud Extra with taglines such as “You can sleep when you’re 30” and “Say hello to a night of fun” and utilized MySpace, YouTube, and other Internet sites popular with underage youth.

In addition, the packaging for many of the alcoholic energy drinks was similar to that for non-alcoholic energy drinks, leading to retailer and parent confusion.

Anheuser-Busch cooperated during the investigation and agreed to reformulate its products to exclude caffeine. As part of the agreement, Anheuser-Busch will discontinue two of its popular alcoholic energy drinks, Tilt and Bud Extra, and will not produce any caffeinated alcohol beverages in the future. Under the agreement the company will:

• Stop manufacturing and marketing all caffeinated alcoholic beverages, including Bud Extra and Tilt as currently formulated
• Reformulate its alcoholic energy drinks so that they do not contain caffeine or other stimulants that are metabolized as caffeine, such as Guarana
• Eliminate all references in advertising to caffeinated formulations and remove any reference to using Bud Extra and Tilt as mixers for other drinks.

Anheuser-Busch also agrees to immediately discontinue the current Tilt website www.tiltthenight.com without hyper linking or directing visitors to a new site. Any new Website may only to promote the reformulated Tilt without caffeine.

Other states which joined California in reaching an agreement with Anheuser-Busch include: Arizona, Connecticut, Idaho, Illinois, Iowa, Maine, Maryland, New Mexico, New York and Ohio. A copy of the multi-state agreement is attached.

For more information designed to help educate parents and the general public about alcoholic energy drinks please visit the Attorney General's Crime and Violence Prevention Center at: http://www.safestate.org/index.cfm?navId=1375

LOS ANGELES--California Attorney General Edmund G. Brown Jr. today announced a plan to create an online prescription drug database so that authorized doctors and pharmacies can stop drug dealers and addicts who collect dangerous narcotics from multiple doctors.

“Every year thousands of doctors try to check their patient’s prescription history information but California’s current database is difficult to access,” Attorney General Brown told a news conference. “If California puts this information online, with real-time access, it will give authorized doctors and pharmacies the technology they need to fight prescription drug abuse which is burdening our healthcare system.”

Brown is working with the Troy and Alana Pack Foundation--founded by Bob Pack whose 7 and 10 year-old children were killed by a driver under the influence of prescription drugs obtained from multiple doctors--to enhance California’s current prescription database by providing real-time Internet access for law enforcement and medical personnel.

Since 1940, the California Department of Justice has maintained a state database of dispensed prescription drugs with a high potential for misuse. Today, this prescription information is stored in the state’s Controlled Substance Utilization Review and Evaluation System or CURES, which contains 86 million schedule II, III and IV prescriptions dispensed in California. Examples of drugs that are tracked in the state’s database include Morphine, Vicodin, Oxycodone, Codeine, amphetamine, and analogs of methadone and opium.

The attorney general currently receives more than 60,000 requests annually from authorized doctors and pharmacies for patient prescription history information. Such requests are currently processed within several days by fax or telephone which makes it difficult for doctors and pharmacists to quickly review a patient’s prescription history before dispensing another controlled drug.

California’s new online CURES system will make it much easier for authorized individuals to quickly review prescription information to help prevent “doctor shopping,” or gathering large quantities of prescription medications by visiting multiple doctors. The new online database, which the state is preparing to launch in 2009, is expected to cost $3.5 million over the next three years.

The new CURES program will give doctors and pharmacists the technology they need to monitor the prescribing and dispensing of controlled medications. Attorney General Brown said that if doctors and pharmacies have real-time access to prescription history information, it will help them make better prescribing decisions and cut down on prescription drug abuse in California.

“If doctors can easily check their own patients’ prescription history, it will reduce the number of people who are able to obtain large quantities of narcotics from many different physicians,” Brown said.

According to the Drug Abuse Warning Network, there were 598,000 emergency room visits involving non-medical use of prescription or other pharmaceutical drugs in 2005. 55% of these visits involved multiple drugs.

In 2005, Senator Tom Torlakson and the Troy and Alana Pack Foundation authored Senate Bill 734 which authorized new tamper-resistant prescription pads and permitted online access to the CURES system, pending the acquisition of private funding. The Troy and Alana Pack Foundation is working with Kaiser Permanente, The California State Board of Pharmacy and the California Attorney General’s Office to develop the new database.

“As a pioneer in the development of online medical information, Kaiser Permanente is proud to have contributed to the feasibility study and development of the database,” said Kaiser Permanente Pharmacy Operations Professional Affairs Leader Steven W. Gray. “With the aid of this database, physicians and pharmacists will have valuable patient history information readily available to make the best and safest patient care decisions.”

Virginia Herold, executive officer of the California State Board of Pharmacy said: 'The California State Board of Pharmacy has long been a strong supporter of the CURES system. This new system will reduce drug diversion from pharmacies--it is an important enhancement to patient care and law enforcement.'

Kentucky was the first state to put all its prescription history information online for authorized doctors, pharmacists and law enforcement. California’s new database will be the largest online prescription drug database in the United States.

A Frequently Asked Questions document is attached. For more information on the California Department of Justice Bureau of Narcotic Enforcement and California’s current prescription drug monitoring system visit: http://ag.ca.gov/bne/trips.php

SAN DIEGO--California Attorney General Edmund G. Brown Jr. today announced a “groundbreaking settlement” with Merck & Co. which requires the pharmaceutical manufacturer to obtain Federal Drug Administration approval before running any television drug advertisements for new pain medications.

“Merck’s aggressive television advertising convinced hundreds of thousands of consumers to seek Vioxx prescriptions before the drug’s risk were fully understood,” Attorney General Brown said. “Today’s groundbreaking settlement prevents Merck from releasing new television drug advertisements without obtaining federal approval.”

Today’s settlement resolves 30 state lawsuits challenging Merck’s marketing practices for Vioxx, a non-sterodial anti-inflammatory drug used to treat symptoms of arthritis as well as chronic and acute pain.

In 1999 Merck launched an aggressive promotional campaign directed at both consumers and health care professionals in which the company allegedly misrepresented the cardiovascular dangers of Vioxx. In 2004, Merck admitted that Vioxx caused serious cardiovascular adverse events and withdrew the drug from the market.

California alleged that one of the problems with the Vioxx marketing campaign was that the direct to consumer advertising began when the drug was first released and before doctors had an opportunity to gain experience with the drug and its potential side effects. Under today’s settlement, Merck may not launch a television advertising campaign for a newly approved pain drug if the Federal Drug Administration recommends delaying such television advertising.

The settlement, which also requires Merck to pay $58 million in restitution to states, is the largest monetary settlement that a group of states have obtained in a pharmaceutical advertising case. California will receive $5.3 million of the settlement funds to pay attorneys’ fees, future enforcement and consumer education.

The settlement places other restrictions on Merck’s future conduct including:

• Prohibiting the use of deceptive scientific data when marketing new drugs to doctors
• Prohibiting Merck from “ghost writing” articles and studies for publication
• Requiring disclosure of conflicts of interest when Merck promotional speakers make presentations at supposedly independent Continuing Medical Education programs
• Requiring Merck to submit clinical trial results of FDA-approved Merck products to the National Library of Medicine

Merck’s principle place of business is One Merck Drive, Whitehouse Station, New Jersey. Merck advertised, sold, promoted and distributed the prescription drug rofecoxib, marketed under the name Vioxx, in California and nationwide.

Other states which participated in today’s settlement include: Arizona, Arkansas, Connecticut, Florida, District of Columbia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Washington, and Wisconsin..

Please contact the attorney general's press office for a copy of the complaint and settlement

NOTE TO EDITORS: Dr. Wesley Albert was booked this morning on second degree murder for violating Penal Code Section 187(a). Our earlier report of a PC 192(a) involuntary manslaughter charge was incorrect.

RIVERSIDE--Following a ten-month investigation, California Department of Justice special agents today arrested Dr. Wesley Albert, 78, in Lake Elsinore for writing large quantities of prescription drugs which led to an individual's death in Riverside last year.

“Prescription drugs are extremely potent, even lethal,” Attorney General Edmund G. Brown Jr. said “The California Department of Justice will crack down on crooked doctors who sell dangerous narcotics to people without a legitimate medical condition,” Brown added.

The California Department of Justice opened its investigation into Dr. Albert’s medical practice after a former patient was arrested in Encinitas in April 2007 for possessing controlled prescription drugs. Undercover agents discovered that Dr. Albert was running a prescription mill from his room at the Lake Elsinore Casino and Hotel in which he churned out hundreds of prescriptions for dangerous narcotics including Vicodin, Xanax, Soma and Oxycontin.

Dr. Albert routinely prescribed more than 5 times the normal quantity of these drugs, sometimes up to 500 pills per person per month, and pocketed between $50 and $100 cash per prescription.

In November, Jason Morgan, 28, a resident of Riverside, died after Dr. Albert gave him large prescriptions for Soma, also known as Carisoprodol, which is a centrally acting skeletal muscle relaxant prescribed for treatment of acute, musculoskeletal pain. Investigators found Jason Morgan with 30 bottles of narcotics that Dr. Albert had prescribed.

Early this morning, special agents arrested Dr. Albert at his residence at the 18000 block of Applewood Way in Lake Elsinore, California. Agents charged Dr. Albert with second degree murder, Penal Code Section 187(a), for prescribing medication without pathology. He was booked into Riverside County Jail in Murrieta. Bail is set for $2 million.

Dr. Albert is expected to be arraigned on Friday at 1:00 p.m. in the Riverside County Superior Court. The Riverside County District Attorney’s Office will prosecute the case.

The San Diego Pharmaceutical Narcotic Enforcement Team, often referred to as RxNet, led the investigation which resulted in today’s arrest. RxNet, part of the California Department of Justice Bureau of Narcotic Enforcement, conducts investigations into forged, altered, and fraudulent prescriptions, and the illegal and illicit diversion of pharmaceutical controlled substances.

Other agencies which assisted during the investigation include the Riverside County District Attorney's Office and the Drug Enforcement Agency.

For more information on the California Attorney General's Bureau of Narcotic Enforcement visit: http://ag.ca.gov/bne/

LOS ANGELES--California Attorney General Edmund G. Brown Jr. today announced the arrest of two physicians, three clinic administrators, and eleven assistants for luring pregnant women to a fake health clinic that fraudulently billed the state’s Medi-Cal program for at least $2 million.

“The Medi-Cal program is a vital medical program for the most vulnerable Californians--I won’t tolerate rip offs from this program by doctors or anyone else,” Attorney General Brown said.

The suspects hired recruiters, known as cappers, to solicit pregnant women walking in the street outside the clinic. The cappers enticed women to visit the clinic by offering approximately $30 or free baby merchandise or the promise of certain medical services. Recruiters were paid $100, under the table, for every pregnant woman they could convince to visit the clinic.

The clinic targeted pregnant women so that it could enroll them in a special presumptive eligibility Medi-Cal program, designed for low income Californians who do not have health insurance for prenatal care. Clinic staff enrolled the women in this program, thereby allowing doctors to immediately bill the state at a higher rate for temporary prenatal health benefits.

Women who visited the clinic were instructed not to use their real names or dates of birth on the patient intake forms given to them by the clinic’s personnel.

During the clinic visits, patients received unnecessary services like pregnancy tests or unnecessary blood tests. Solicitors then told patients that if they wanted additional cash or gifts they could return to the clinic and re-enroll using a different name and date of birth. Under this scheme, the clinic maintained a steady source of people to generate false Medi-Cal claims.

The clinic billed Medi-Cal $400-$500 per pregnant patient for a wide array of prenatal services that were generally not provided. For example, the clinic would conduct unnecessary blood tests, a scam which ripped off an additional $100-$200 from the Medi-Cal program.

The defendants arrested today at the Downtown M Medical Clinic on Wilshire Boulevard and elsewhere include: the clinic’s owner Dr. Peter Shrier, the office manager Ella Rozenberg, Ella’s husband Arkady Rozenberg, Dr. Anna Gravich, a physician who helped falsify medical records, and Anna’s husband, Gersha Gravich, who helped run the clinic. The others arrested were sidewalk solicitors who recruited the patients. The activities at the clinic remain under investigation.

Shrier, the Rozenbergs and the Graviches are charged with violating Penal Code sections 487(a) & 12022.6(a)(3), theft of more than $1.3 million, and violating Welfare and Institutions Code section 14107, presenting false Medi-Cal claims. The solicitors are charged with violating Welfare and Institutions Code section 14107.2, paying for Medi-Cal referrals.

The Department of Justice launched an investigation into the clinic after a former employee tipped off the department after being fired for questioning suspicious billing practices. During the investigation, special agents interviewed witnesses and reviewed key Medi-Cal and bank records. The case will be prosecuted by the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse.

Other law enforcement personnel that assisted the Bureau of Medi-Cal Fraud and Elder Abuse during today’s arrest include the following: the U.S. Department of Health and Human Services Office of the Inspector General, the Federal Bureau of Investigation, Los Angeles Sheriff’s Major Crimes Bureau, Department of Homeland Security and the Internal Revenue Service.

The Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse investigates and prosecutes those who file fraudulent claims for medical services, medical equipment and drugs.

Medi Cal is a government program that pays for essential medical services for California’s qualifying poor. It is funded by the state and federal governments and administered by the California Department of Health Care Services.

Suspect Information:

Peter Reuben Shrier
Recommended Bail: $500,000
DOB: 05/14/41
Sex: M Race: W Hair: Brn Eyes: Brn Ht: 5'10' Wt: 200
Residence: 4738 Tobias Ave. Sherman Oaks, CA 91403
Business: 2500 Wilshire Blvd, Suite 100 Los Angeles, CA 90057

Arkady Rozenberg
Recommended Bail: $500,000
DOB: 05/30/50
Sex: M Race: W Hair: Brn Eyes: Brn Ht: 6'01' Wt: 215
Residence: 2309 Apollo Dr. Los Angeles, CA 90046
Business: 2500 Wilshire Blvd, Suite 100 Los Angeles, CA 90057

Ella Rozenberg
Recommended Bail: $500,000
DOB: 12/24/52
Sex: F Race: W Hair: Bln Eyes: Grn Ht: 5'06' Wt: 175
Residence: 2309 Apollo Dr. Los Angeles, CA 90046
Business: 2500 Wilshire Blvd, Suite 100 Los Angeles, CA 90057

Gersha Gravich
Recommended Bail: $500,000
DOB: 10/26/47
Sex: M Race: W Hair: Brn Eyes: Brn Ht: 5'10' Wt: 220
Residence: 2515 Apollo Dr. Los Angeles, CA 90046
Business: 2500 Wilshire Blvd, Suite 100 Los Angeles, CA 90057
Aliases: Gregory Gravich

Anna Gravich
Recommended Bail: $500,000
DOB: 01/08/48
Sex: F Race: W Hair: Bln Eyes: Grn Ht: 5'03' Wt: 170
Residence: 2515 Apollo Dr. Los Angeles, CA 90046
Business: 2500 Wilshire Blvd, Suite 100 Los Angeles, CA 90057
Aliases: Ana Gravich

The suspects are being held in Los Angeles County Jail, awaiting arraignment and bail review later this week. The case will be prosecuted by the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse.

The investigation into this case is ongoing.

The criminal complaint is attached.

LOS ANGELES—California Attorney General Edmund G. Brown Jr. today settled an antitrust lawsuit that charged Barr Pharmaceuticals with taking $20 million for keeping off the market a cheaper, generic version of the oral contraceptive Ovcon.

“Barr illegally kept its generic drug off the market in exchange for $20 million from Warner Chilcott, thereby keeping drug prices higher,” Attorney General Brown said. “Today’s agreement ensures that these pharmaceutical companies will not collude to keep affordable medications away from consumers,” Brown added.

In 2005, California and thirty-three other states and the District of Columbia sued Barr Pharmaceuticals and Warner Chilcott for entering into an illegal arrangement by which Barr agreed not to sell generic Ovcon for five years in exchange for $20 million. The states’ alleged that the agreement violated state and federal antitrust laws and artificially inflated the price of Ovcon.

Non-competition agreements, as well as pharmaceutical industry practices including efforts to steer consumers to more costly medications, have increased the average retail price of prescription medications 8.3% annually, triple the rate of inflation.

In 2003, Warner Chilcott made approximately $61 million from sales of brand name Ovcon. In 2005, the company reported a 16% increase in annual revenue from Ovcon sales.

After the states filed their lawsuit Warner Chilcott voided its agreement with Barr, opening the door to competition between the two companies. Within one month of restoring competition in late 2006, the Ovcon price dropped 18%, from $39 to $32. As of May 2007, Ovcon prices were down to $20, a total drop of nearly 50%.

Under today’s settlement, Barr will not enter into non-competition agreements with companies that sell brand name drugs. In addition, a ten-year consent decree with California requires Barr to provide the state with copies of any future related agreements. Without the consent decree such agreements have traditionally been kept secret between the companies. Barr will also pay California approximately $500,000 in statutory penalties and attorneys fees.

Previously, California reached a similar settlement with Warner Chilcott, which bars the company from entering non-competitive agreements with generic drug manufacturers.

Americans spent $275 billion on prescription drugs in 2006, expenditures which will grow about 8% per year. Between 1994 and 2005, the total volume of drugs prescribed grew 71% according to a Kaiser Family Foundation analysis.

The multi-state settlement agreement is attached.