Consumer Health Digest #16-28
Your Weekly Update of News and Reviews
July 24, 2016
Consumer Health Digest is a free weekly e-mail newsletter edited by Stephen Barrett, M.D., with help from William M. London, Ed.D., M.P.H. It summarizes scientific reports; legislative developments; enforcement actions; news reports; Web site evaluations; recommended and nonrecommended books; and other information relevant to consumer protection and consumer decision-making.
Herbalife to pay $200 million to settle FTC charges. Herbalife International of America, Inc., Herbalife International, Inc., and Herbalife, Ltd. have agreed to restructure their U.S. business operations and pay $200 million to settle FTC charges that they deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products. [Herbalife will restructure its multi-level marketing operations and pay $200 million for consumer redress to settle FTC charges. FTC news release, July 15, 2016] The settlement was announced at a videotaped press conference at which FTC chairwoman Edith Ramirez answered questions about the case. Her opening statement noted:
- Herbalife "promised people a dream—a chance to change their lives, quit their jobs, and gain financial freedom."
- The dream portrayed by Herbalife's testimonials and marketing materials was "an illusion" because the vast majority of new distributors found they could make little or no money selling Herbalife products.
- The settlement included a $200 million judgment for refunds to many distributors and "forces the company to implement a major restructuring of its business operations."
- The FTC hopes the principles embodied in the settlement will set an example for the multilevel marketing industry more generally.
In response to the settlement, Carl Icahn (an Herbalife board member and major shareholder) stated that the FTC had "concluded that Herbalife is not a pyramid scheme." However, Ramirez said that was inaccurate, that the settlement made no such determination but focused on correcting Herbalife's improper practices.
Huge Medicare scheme uncovered. Phillip Esformes, who owned many Miami-area skilled nursing and assisted living facilities; Odette Barcha, a hospital administrator; and Arnaldo Carmouze, a physician assistant, were charged with conspiracy, obstruction, money laundering and health care fraud in connection with a $1 billion scheme that involved many Miami-based health care providers. [Three individuals charged in $1 billion Medicare fraud and money laundering scheme. USDOJ news release, July 22, 2016] The indictment alleged:
- Esformes's network of facilities gave him access to thousands of Medicare and Medicaid beneficiaries.
- Many of these beneficiaries did not qualify for skilled nursing home care or for placement in an assisted living facility; however, Esformes and his co-conspirators nevertheless admitted them to Esformes Network facilities where the beneficiaries received medically unnecessary services that were billed to Medicare and Medicaid.
- Esformes and his co-conspirators further enriched themselves by receiving kickbacks in order to steer these beneficiaries to other providers who performed medically unnecessary treatments that were billed to Medicare and Medicaid.
- In order to hide the kickbacks from law enforcement, these kickbacks were often paid in cash, or were disguised as payments to charitable donations, payments for services and sham lease payments, court documents allege.
- Esformes and Barcha were also charged with obstructing justice.
Court documents indicate that in 2006, Esformes paid $15.4 million to resolve a civil fraud case that involved unnecessarily admitting patients from his assisted living facilities into a Miami-area hospital.
Barrett interview podcasted. The Americans for Science Blog has posted a 50-minute podcast in which Dr. Stephen Barrett describes how he became interested in fighting quackery, a wide range of problems he has encountered, why people are vulnerable, and important components of our society that are failing to take protective action.
This page was posted on July 25, 2016.