A Medical Device Daily Staff Report

The FDA Office of Criminal Investigation (OCI) said that Martin Bradley III and Martin Bradley, Jr., officers of Bio-Med Plus , a Florida pharmaceutical wholesale distributor, have been convicted of more than 247 criminal counts as the result of an extensive OCI investigation of an illegal medical products diversion scheme which defrauded the Medicaid and Medicare programs of more than $45 million.

The Bradleys face significant penalties, including incarceration, fines and restitution. The government is seeking forfeiture of more than $39 million in assets owned by the Bradleys and Bio-Med Plus.

The Bradleys started Bio-Med Plus in 1995 and quickly grew to be the fourth largest wholesaler of blood-based drug products in the country, with annual sales of more than $200 million, mostly to hospitals.

The criminal counts on which the Bradleys were convicted included wire fraud, money laundering, conspiracy, and racketeering.

Albert Tellechea, president of Infustat (Miami), was also convicted of conspiracy to commit wire fraud and for paying kickbacks to healthcare providers.

The OCI investigation uncovered various schemes in which the defendants bought and sold millions of dollars of illegally obtained medications, primarily blood derivative drugs, which are used in the treatment of AIDS, cancer, hemophilia, and other ailments.

“This type of illicit diversion not only defrauds and deceives the unsuspecting public but also presents potential health risks to patients who rely on these critical medications for their treatment,“ said Margaret Glavin, associate commissioner for regulatory affairs.

One of the schemes involved the payment of kickbacks to physicians who wrote fake prescriptions for injectable blood-based medicines, many of which cost thousands of dollars per treatment. These prescriptions were subsequently submitted for payment to Florida and California Medicaid and Medicare programs and the medications diverted to Bio-Med Plus, where they were then sold in the open pharmaceutical wholesale market.

In other legalities:

• Another in a series of securities class actions has been filed against PainCare Holdings (Orlando, Florida), a provider of pain management therapies.

The complaint seeks damages for those who purchased the company's common stock during the period Aug. 27, 2002, through March 15, 2006.

According to the complaint, beginning on Aug. 27, 2002, and continuing throughout the class period, PainCare issued press releases and made various filings with the SEC that were materially false and misleading. It alleges that the defendants overstated and exaggerated the company's financial health and earnings, enabling the company to acquire $103 million worth of related companies to fuel growth.

“But unbeknownst to investors, PainCare accounted for its acquisitions in violation of the Generally Accepted Accounting Principles,“ according to the complaint.

On March 15, the company announced that it would have to restate all of its financial results – from its inception to the present – in order to adjust for the improper accounting of its corporate acquisitions. The first day of trading following the announcement, PainCare's common stock fell 12.6% on heavy volume and was down over 50% from its class period high of $5.25 per share. Since then, PainCare's share price has continued a steady decline, closing at $1.69 per share on March 27.

The suit was filed by the firm of Berman DeValerio Pease Tabacco Burt & Pucillo.