United States District Court, S.D. Florida
UNITED STATES OF AMERICA, ex rel. Rafael Troncoso, Plaintiff,
REGO INTERNATIONAL, LLC, et al., Defendants.
CECILIA M. ALTONAGA UNITED STATES DISTRICT JUDGE.
CAUSE came before the Court on Defendants, Kinetic,
Inc. and Rego International, LLC's Motion to Dismiss
First Amended Complaint [ECF No. 64], filed March 23, 2018.
On April 6, 2018, Relator, Rafael Troncoso, filed an
Opposition to Defendants' Joint Motion to Dismiss [ECF
No. 68]. Defendants have not filed a reply memorandum
addressing Relator's arguments in opposition. On April
20, 2018, Relator filed a Notice of Settlement [ECF No. 69],
requesting the Court dismiss Relator's claims against
Kinetic. On April 23, 2018, the Court entered an Order [ECF
No. 70] dismissing Kinetic; thus, the Motion is moot as it
pertains to any arguments raised by Kinetic (see
Mot. 1-8). The Court has carefully considered the
parties' written submissions, the record, and applicable
First Amended Complaint (“FAC”) [ECF No. 26]
describes a scheme Rego developed to recruit and pay
physicians to make referrals for braces, transcutaneous
electrical nerve stimulation units (“T.E.N.S.
units”), and compound creams, resulting in millions of
dollars of false claims being paid by the United States.
(See generally id.). As part of the scheme, Rego
conspired with Kinetic and RX Pro Pharmacy Compounding.
(See id. ¶¶ 41, 53). First, Rego offered
physicians payments for referrals - some of which were for
Medicare and Medicaid patients. (See id.
¶¶ 36, 44). Then, Kinetic and RX Pro Pharmacy would
make those payments. (See id.). Unaware of the
illegal referral payments, the United States caused numerous
false claims submitted by Kinetic and RX Pro Pharmacy to
Medicare and Medicaid to be paid. (See id.
¶¶ 41-42, 53-54).
“describes itself as a business that specializes in
‘Revenue Enhancement programs for Healthcare
Professionals and Institutions.'” (Id.
¶ 12). Rego recruits physicians to participate in its
“stock and bill” program, which it touts as a
“legally compliant way to make ‘passive
income.'” (Id. ¶ 16; see also
id. ¶ 2). Rego does not enter into these agreements
with physicians directly, but instead solicits agreements for
Kinetic and RX Pro Pharmacy. (See id. ¶¶
13, 36, 44).
the “stock and bill” program, physicians are
provided with an inventory of braces by durable medical
equipment (“DME”) providers, which the physicians
then prescribe to their patients. (See id. ¶
17). The patient is effectively given little or no choice
regarding where to buy the brace, purchasing it at the
physician's office from Kinetic. (See id. ¶
18). The physician's staff has the patient fill out
paperwork allowing the DME provider to bill the patient's
insurance company directly for the brace, so the patient does
not pay Kinetic out of pocket. (See id. ¶¶
provider can then charge the insurance carrier much higher
prices for the braces than the patient would pay if she had
purchased the same brace at a pharmacy because by billing an
insurer directly, the DME provider may utilize the maximum
allowable rate set forth in the contract between the
insurance company and the Centers for Medicare and Medicaid
Services. (See id. ¶ 21). Rego has its sales
staff pick up prescriptions and corresponding insurance
paperwork from physicians' offices and restock
physicians' inventory. (See id. ¶ 20). Rego
is paid a commission for each referral the pharmacies receive
under the “stock and bill” contracts it
generates. (See id. ¶ 15).
are paid a monthly “fitting fee” by the DME
provider they contract with. (See id. ¶ 22).
The more expensive the brace, the higher its referral value.
(See id. ¶ 23). The agreements typically pay
$75 per back brace, $65 per knee brace, and similar prices
for walkers and wrist braces. (See id.). The monthly
“fitting fee” is usually set the first three
months of the program, and is decided by averaging the number
and type of braces the office refers per month. (See
id. ¶ 24). The fee has nothing to do with whether
the physician or physician's assistant actually fits a
patient for a brace. (See id. ¶¶ 26-27).
If a physician does not meet his or her monthly average, the
payments stop and the contract is terminated, or the fee is
revised down. (See id.). The monthly fitting fee is
typically in the range of $1, 000 to $2, 500 per month.
(See id. ¶ 25).
addition to the fitting fee, physicians' offices are also
paid a monthly administrative fee and rental fee for storing
the braces. (See id. ¶ 28). These fees increase
monthly payments to participating physicians by approximately
$100. (See id.). Additionally, Rego directs its
salesforce to make cash payments to office administrators,
and takes participating physicians to expensive meals and
events in order to “grease the wheels and keep the
illegal referral network operating smoothly.”
(Id. ¶ 4).
addition to the “stock and bill” program, Rego
solicits physicians to prescribe expensive compound creams
sold by RX Pro Pharmacy and T.E.N.S. units sold by Kinetic.
(See id. ¶¶ 3, 29). Rego offers
physicians a $25.00 payment from RX Pro Pharmacy for each
compound prescription submitted to RX Pro Pharmacy. (See
id. ¶ 14). Rego's salesforce also routs
referrals of T.E.N.S. units to Kinetic. (See id.
¶ 29). Physicians are paid an additional $100 if they
prescribe a T.E.N.S. unit with a back brace. (See
id. ¶ 30). The payments to physicians are only
made, however, if the prescriptions are submitted to and
filled by RX Pro Pharmacy and Kinetic. (See id.).
formerly worked as a salesperson for Rego and its associated
medical equipment providers. (See id. ¶ 6). He
gained knowledge of the referral scheme through his work for
Rego, including recruiting physicians and managing
physicians' accounts. (See id. ¶¶ 6,
34). Relator also had conversations with Bill Rego, the
principal of Rego, about how to bill certain claims to comply
with Medicare billing guidelines. (See id. ¶
brings claims under the qui tam provision of the
False Claims Act (“FCA”) for Rego's
submission of false claims to Medicare and Medicaid for
braces (Count I), and for compound creams and T.E.N.S. units
(Count II). (See generally id.). Relator also
alleges Rego violated the Anti-Kickback Statute
(“AKS”), see 42 U.S.C. § 1320a-7b,
by offering referral payments to induce physicians to
prescribe braces, T.E.N.S. units, and compound creams from
Kinetic and RX Pro Pharmacy. (See FAC ¶¶
Motion, Rego argues the claims alleged do not satisfy the
heightened pleading requirements of Federal Rule of Civil
Procedure 9(b). (See generally Mot.). Rego also
requests the Court grant the Motion with prejudice since
Relator has already amended his complaint. (See id.