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Justice News

Department of Justice
U.S. Attorney’s Office
Southern District of Alabama

FOR IMMEDIATE RELEASE
Friday, May 26, 2017

Dr. Couch and Dr. Ruan Sentenced to 240 and 252 Months In Federal Prison For Running Massive Pill Mill

Acting United States Attorney Steve Butler of the Southern District of Alabama, announces that Dr. John Patrick Couch and Dr. Xiulu Ruan were sentenced to 240 months and 252 months, respectively, in federal prison for running a massive pill mill in Mobile, Alabama.

During the sentencing hearing today, Senior Judge Callie V.S. Granade found the doctors were responsible for illegally prescribing opioids, which when converted to their marijuana equivalency, exceeded 90,000 kilograms of marijuana.  In addition, she found that both doctors perjured themselves, and that they utilized special skills to carry out their criminal enterprise.   Thereafter, several family members of deceased Dr. Couch patients spoke to the Court, as did several patients on behalf of the doctor.   Ultimately, Judge Granade sentenced Dr. Couch to 240 months, and Dr. Ruan to 252 months, in federal prison.  Dr. Ruan received a longer sentence based on Judge Granade’s finding that he was the leader of their criminal enterprise.   In addition, she 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.

Prior to the execution of multiple search warrants by the FBI and DEA on May 20, 2015, Dr. Ruan and Dr. Couch jointly owned and operated two pain management clinics under the name Physicians Pain Specialists of Alabama (“PPSA”) as well as C&R Pharmacy.  Following an extensive joint investigation by both FBI-Mobile and DEA-Mobile, 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 Dr. Ruan and Dr. 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 Dr. Ruan and Dr. Couch almost exclusively prescribed these drugs off-label for neck, back, and joint pain.  The jury found that Dr. Ruan and Dr. Couch received illegal kickbacks from Insys Therapeutics, the manufacturer of Subsys, in exchange for the defendants prescribing massive quantities of this drug.  Dr. Ruan and Dr. Couch were both among the top prescribers of Subsys in the entire United States.  Evidence showed that Dr. 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 Dr. 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 Dr. Ruan and Dr. 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, Dr. Ruan and Dr. 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. were written by either Dr. Ruan or Dr. Couch. 

As part of their criminal enterprise, Dr. Ruan and Dr. 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 Dr. Ruan and Dr. 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 Dr. Ruan and Dr. Couch received guaranteed monthly kickbacks from a dispensary management company — Industrial Pharmaceuticals Management (“IPM”) and later Comprehensive Rx (“CRX”) — in exchange for the defendants dispensing certain drugs with high reimbursement rates.   These monthly guaranteed amounts reached $80,000.00 per month for Dr. Ruan and $20,000.00 per month for Dr. 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 Dr. Couch’s patients were abusing drugs at the work place and then seeing patients.   In addition, the jury heard evidence that Dr. Couch knowingly permitted one of his nurse practitioners, Justin Palmer, to forge Dr. Couch’s name on prescriptions for Controlled Substances.  Palmer testified that he forged Dr. 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 doctors were convicted of (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; and (7) Conspiracy to receive illegal kickbacks from Insys Therapeutics in exchange for prescribing Subsys.  In addition, Dr. Ruan was convicted of both conspiracy and substantive money laundering counts.  Each doctor was also convicted of several substantive illegal drug distribution counts related to prescriptions written to particular patients.  Dr. 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 Dr. 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.

Acting United States Attorney Steve Butler said, “Any medical professional who chooses to place profit over patient care should heed the lengthy sentences received by Dr. Couch and Dr. Ruan.  We commend the victims’ family members who spoke so eloquently over the past two days about how the defendants’ criminal conduct impacted, and continues to impact, their lives on a daily basis.  Furthermore, thank you to our law enforcement partners at the FBI and DEA for their persistence in seeing that justice was done in this important case of national interest.  Considering that opioid abuse and trafficking is of significant concern not only to us here in south Alabama, but nationwide, our office will continue to vigorously prosecute these cases.”

“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 Drug Enforcement Administration’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.

FBI-Mobile Special Agent in Charge Robert Lasky stated, “The FBI is committed to the relationships with the law enforcement community that make these types of investigations possible.  We will continue to target illegal activity in the medical profession as was apparent in this case.”

This OCDETF case was jointly investigated by the DEA-Mobile and FBI-Mobile, and was prosecuted by Assistant U.S. Attorneys Christopher Bodnar and Deborah Griffin.

Updated May 26, 2017