Drug Enforcement Administration

New Orleans

Brad L. Byerley, Special Agent in Charge

May 26, 2017

Contact: SA Debbie Webber

Phone Number: (571) 362-4803

2 Mobile Doctors Get Long Sentences For Running “Pill Mills”

Couch and Ruan convicted of RICO conspiracy, healthcare fraud, illegal workers comp kickbacks, receiving illegal kickbacks from Insys Therapeutics, more

MOBILE, Ala. - Today, John Patrick Couch and Xiulu Ruan were sentenced to respectively 240 months and 252 months in federal prison for running a massive pill mill in Mobile, Alabama, announced DEA Special Agent-in-Charge Stephen G. Azzam and Acting United States Attorney Steve Butler of the Southern District of Alabama.

During the sentencing hearing, a judge found the doctors were responsible for illegally prescribing opioids. In addition, the judge found that both doctors perjured themselves, and that they utilized special skills to carry out their criminal enterprise. Thereafter, several family members of deceased Couch patients spoke to the Court, as did several patients on behalf of Couch. Ruan received a longer sentence based on the judge’s finding that he was the leader of their criminal enterprise. In addition, the judge ordered them to pay restitution in the following amounts: $6,282,023.00 to Medicare, $3,649,092.97 to Blue Cross/Blue Shield of Alabama, $2,285,170.70 to Tricare, and $1,695,929.00 to United Heath Group.

“The DEA is committed to investigating and bringing to justice those who divert and traffic prescription drugs,” said Special Agent-in-Charge Stephen G. Azzam of the DEA’s New Orleans Field Office. “Opiate abuse is a major problem in Alabama and throughout the nation. The diversion of prescription pain killers contributes to the widespread abuse of opiates and is a gateway to heroin addiction, which is devastating our local communities. This investigation demonstrates the strength of collaborative law enforcement efforts in Alabama and our strong partnership with the U.S. Attorney’s Office to aggressively pursue anyone who illicitly distributes these drugs. The lengthy sentences received by Dr. Ruan and Dr. Couch appropriately reflect the devastation they caused. These sentences will protect the community from these convicted felons and hopefully deter other medical practitioners who are inclined to put profit over patient health and safety,” said Azzam.

Prior to the execution of multiple search warrants by the DEA and the FBI on May 20, 2015, Couch and Ruan 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 doctors 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, which lasted from early January to late February, the United States presented evidence that Couch and Ruan 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 Couch and Ruan almost exclusively prescribed these drugs off-label for neck, back, and joint pain. The jury found that they received illegal kickbacks from Insys Therapeutics, the manufacturer of Subsys, in exchange for the defendants prescribing massive quantities of this drug. Couch and Ruan were 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 Couch and Ruan 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, Couch and Ruan 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 Couch or Ruan.

As part of their criminal enterprise, Couch and Ruan 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 Couch and Ruan split 75 percent of the profits that came in from the prescription drug reimbursements. Approximately 91 percent 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 Couch and Ruan 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 while working at PPSA.

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. In addition, Ruan was 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.

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 doctors agreed to an additional $5,000,000.00 money judgment. The United States is currently in the process of preparing to sell at auction the forfeited vehicles and property.

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. They have already been sentenced to federal prison for 30 months and 20 months, respectively. Christopher Manfuso, who worked for IPM and later owned CRX, pled guilty to conspiring to pay illegal kickbacks to the doctors. He has been sentenced to 6 months home confinement and a $50,000.00 fine. Finally, Insys Therapeutics drug rep Natalie Perhacs pled guilty to conspiring to pay illegal kickbacks associated with the prescribing of Subsys. Perhacs currently awaits sentencing. All four testified against the doctors at trial.

This case was jointly investigated by the DEA and FBI. 

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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