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Drug Enforcement Administration

New Orleans

Brad L. Byerley, Special Agent in Charge

March 02, 2017

Contact: SA Debbie Webber

Phone Number: (571) 362-4803

Two Mobile Pain Doctors Convicted After Seven-Week Trial

MOBILE, Ala. - A jury has convicted defendants Xiulu Ruan and John Patrick Couch of numerous felonies following a seven-week trial, announced Drug Enforcement (DEA) Stephen G. Azzam and United States Attorney Kenyen R. Brown.

Ruan and Couch jointly owned and operated two pain management clinics under the name Physicians Pain Specialists of (PPSA) as well as C&R Pharmacy.  Following an extensive joint investigation by both DEA and FBI, both individuals were charged with a litany of federal felony offenses, including RICO conspiracy, conspiracy to violate the Controlled Substances Act, substantive drug distribution offenses, conspiracies to commit wire fraud, mail fraud, healthcare fraud, and to violate the Anti-Kickback Statute, as well as money laundering. All charges stemmed from the defendants’ operation of PPSA and C&R Pharmacy.

During the seven-week trial, the United States presented evidence that Ruan and Couch utilized PPSA and C&R Pharmacy as a criminal enterprise to violate the Controlled Substances Act and to commit mail and wire fraud, in violation of the RICO Act.  Specifically, the jury saw evidence that the defendants knowingly and willfully prescribed Schedule II and III Controlled Substances, including fentanyl, outside the usual course of professional practice and not for a legitimate medical purpose. The United States argued the defendants’ motive for this illegal prescribing was their own financial self-interest. The United States also argued that the defendants’ billing practices were systematically designed to unlawfully enrich the doctors.

Of particular importance in the trial were two brand name instant-release fentanyl drugs - Subsys and Abstral. Both Subsys and Abstral are only FDA-indicated for breakthrough cancer pain in opioid-tolerant adult patients.  However, evidence showed that Ruan and Couch almost exclusively prescribed these drugs off-label for neck, back, and joint pain. The jury found that Ruan and Couch received illegal kickbacks from Insys Therapeutics, the manufacturer of Subsys, in exchange for the defendants prescribing massive quantities of this drug.  Ruan and Couch were both among the top prescribers of Subsys in the entire United States. Evidence showed that Ruan began donating his Insys kickback payments the day after he received a copy of a criminal complaint from the Eastern District of Michigan against Dr. Gavin Awerbuch, another prolific Subsys prescriber who had been charged with receiving kickbacks from Insys.

The United States argued that Ruan’s decision to donate his Insys money was done in an attempt to distance himself from the company.  With regard to Abstral, evidence showed that Ruan and Couch purchased approximately $1.6 million worth of stock in Galena Biopharma, the manufacturer of Abstral, and sought to manipulate the stock price by driving up Abstral sales. From the third quarter of 2013 through the 2014, Ruan and Couch were the number one and two prescribers of Abstral in the entire United States. During this same time period, nearly one out of every three Abstral prescriptions written in the U.S. was written by either Ruan or Couch.

As part of their criminal enterprise, Ruan and Couch owned C&R Pharmacy, which was co-located with one of the PPSA clinic locations. C&R Pharmacy would only fill prescriptions written by the doctors at PPSA, and Ruan and Couch split 75% of the profits that came in from the prescription drug reimbursements. Approximately 91% of the Subsys and Abstral prescriptions written by the defendants - which cost patients’ insurance anywhere between $1,000.00 to $24,000.00 per month - were filled at C&R Pharmacy.
In addition to C&R Pharmacy, the defendants also had a worker’s compensation dispensary, from which they directly dispensed Controlled Substances.  The jury heard evidence that Ruan and Couch received guaranteed monthly kickbacks from a dispensary management company - Industrial Pharmaceuticals (IPM) and later Comprehensive (CRX)-in exchange for the defendants dispensing certain drugs with high reimbursement rates.  These monthly guaranteed amounts reached $80,000.00 per month for Ruan and $20,000.00 per month for Couch. The millions paid in kickbacks to the defendants associated with the worker’s compensation dispensary went into private bank accounts set up by the defendants.

While there were some patients who received legitimate medical care at PPSA, the jury heard evidence that many patients rarely saw either of the doctors, and that the nurse practitioners who treated Couch’s patients were abusing drugs at the work place and then seeing patients.

In addition, the jury heard evidence that Couch knowingly permitted one of his nurse practitioners, Justin Palmer, to forge Couch’s name on prescriptions for Controlled Substances.  Palmer testified that he forged Couch’s name approximately 25,000 times between January 1, 2011 and May 20, 2015.

Prior to trial, Justin Palmer and Bridgette Parker, both nurse practitioners for Couch, pled guilty to conspiring to prescribe Controlled Substances outside the usual course of professional practice and not for a legitimate medical purpose.  Christopher Manfuso, who worked for IPM and later owned CRX, pled guilty to conspiring to pay illegal kickbacks to the doctors.  Michael Drobot, Jr., who owned IPM at the time, also admitted to paying the defendants illegal kickbacks as part of a plea agreement in a separate case in the Central District of California.  Finally, Insys Therapeutics drug rep, Natalie Perhacs, pled guilty to conspiring to pay illegal kickbacks associated with the prescribing of Subsys. Palmer, Parker, Manfuso, and Perhacs all testified during the trial.

After seven-weeks of trial, 81 witnesses, and three days of deliberation, the jury reached the following verdicts:  Both defendants were convicted (1) RICO conspiracy; (2) Conspiracy to prescribe Schedule II and III Controlled Substances outside the usual course of professional practice; (3) Conspiracy to prescribe more than 40 grams of fentanyl outside the usual course of professional practice; (4) Conspiracy to commit healthcare fraud; (5) Conspiracy to commit mail and wire fraud; (6) Conspiracy to receive illegal kickbacks from IPM/CRX related to the workers compensation dispensary; (7) Conspiracy to receive illegal kickbacks from Insys Therapeutics in exchange for prescribing Subsys.  Ruan was also convicted of both conspiracy and substantive money laundering counts.  Each defendant was also convicted of several substantive illegal drug distribution counts related to prescriptions written to particular patients.  Ruan was acquitted of one substantive charge related to prescriptions written for a patient.

It is believed this is the first time in United States history that a jury has convicted doctors of RICO charges related to the operation of a pill mill.

Following their convictions, the defendants agreed to forfeit to the United States several houses, beach condos, and bank accounts, as well as 23 luxury cars, including multiple Bentleys, Lamborghinis, Mercedes, and Ferraris. In addition to the forfeited property, each doctor agreed to an additional $5,000,000.00 money judgment.

 “The abuse of prescription drugs remains a significant problem in our communities.  For the health and safety of our citizens, DEA will continue to target the illegal diversion of these pharmaceuticals, which can result in the tearing apart of families and the destruction of individual lives.  It is particularly egregious when the perpetrators of such illegal acts are health care professionals, like these two doctors, responsible for ensuring that potentially dangerous drugs are dispensed properly.  We hope that the convictions in this case serves as a reminder to anyone who might illegally divert pharmaceuticals that they will be held accountable for the harm they cause,” said Stephen G. Azzam, Special Agent in Charge of the Drug Enforcement Administration’s New Orleans Field Division.

“We appreciate the hard work put forth by the jury as well as all the agencies responsible for this investigation.  Healthcare professionals should be held to a higher standard and a federal jury confirmed that.  This office will continue to aggressively prosecute these types of cases as they are crucial to the state of this nation’s healthcare status,” said U.S. Attorney Kenyen Brown for the Southern District of Alabama.

“As an agency we are extremely pleased with the jury’s verdict.  This case is an example of what can be done when federal, state, and local law enforcement work together in a common goal to ensure our country’s health care professionals are following the law when prescribing pharmaceuticals with a highly addictive nature,” said Robert Laskey, Special Agent in Charge of the Federal Bureau of Investigation, Mobile Division.

Sentencing for Dr. Couch and Dr. Ruan will take place on May 25th and 26th, respectively. The jury finding that the amount of fentanyl illegally prescribed exceeded 40 grams means the defendants are subject to a 60-month mandatory minimum, although their guidelines are expected to be much higher.

This case was jointly investigated by the DEA-Mobile and FBI-Mobile.

Parents and children are encouraged to educate themselves about the dangers of drugs by visiting DEA’s interactive websites at www.JustThinkTwice.com, www.GetSmartAboutDrugs.com and www.dea.gov.
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