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Practice Fusion, backed by top VCs before selling in 2018, pushed doctors to prescribe opioids in kickback scheme
Practice Fusion, a medical records startup that attracted more than $150 million from VCs, including at Founders Fund, Kleiner Perkins, and Artis Ventures, has received its share of negative press since selling to its older, publicly traded rival Allscripts in a $100 million cash deal in early 2018.
Yet it appears that Practice Fusion, founded in 2005, was run even more poorly than has been previously reported. In fact, the company was just tied to same drug overdose epidemic that has killed tens of thousands of Americans in just the last few years alone.
How is it possible that a seemingly boring, venture-backed, San Francisco-based medical records startup could have that kind of impact? In a word: kickbacks.
According to the U.S. Department of Justice, Practice Fusion solicited and received pay from an (unnamed for now) opioid company in exchange for using its EHR software to influence doctors in the act of prescribing opioid pain medications.
Specifically, according to court documents released earlier today by federal prosecutors in Vermont, Practice Fusion solicited a nearly $1 million payment from the opioid company, promising that in exchange it would create alerts in its software that would cause physicians to write more prescriptions for extended release opioids than were needed.
Practice Fusion has agreed to pay $145 million to resolve the DOJ’s criminal and civil investigations, including a $26 million criminal fine and a $118.6 million civil settlement that “also resolves allegations of kickbacks relating to thirteen other CDS arrangements where Practice Fusion agreed with pharmaceutical companies to implement CDS alerts intended to increase sales of their products.”
It has also agreed to post documents about its conduct on a public website — though apparently not on its own site, which instead features very typical marketing language, beginning with the suggestion that visitors, “Meet the EHR that helps independent practices thrive.”
The news isn’t featured on Practice Fusion’s blog or press section or a separate “resource center” area, either. Neither is information available on the site of Allscripts, which says it has already taken measures to address the ordeal. A statement released by an Allscript’s vice president today reads: “Since learning of this matter we have further strengthened Practice Fusion’s compliance program. Allscripts recognizes the devastating impact that opioids have had on communities nationwide, and we are using our technology to fight this epidemic.”
Allscripts has denied from the start that it knew the depths of Practice Fusion’s woes, even while it apparently had an inkling that all was not hunky-dory. According to numerous reports, AllScripts submitted a nonbinding letter of intent in May 2017 to purchase Practice Fusion for between $225 million and $250 million, which is twice what it paid seven months later.
According to FierceBiotech, Allscripts pulled its offer in June 2017 after an other EHR vendor, eClinicalWorks, settled with federal prosecutors for $155 million to resolve allegations that it falsified EHR certification. The “settlement suddenly clarified [for Allscripts] just how expensive a similar legal battle could be,” says the outlet, noting that the DOJ had separately reached out to Practice Fusion with questions about its own EHR certification in March of 2017.
Either way, by last August, AllScripts was ready to put the entire ordeal behind it, announcing during a second quarter earning call that it had agreed to pay the $145 million settlement after reaching an agreement with the DOJ related to what was then an ongoing investigation.
At the time, Allscripts President Rick Poulton told shareholders, “As you know from our previous SEC filings, DOJ began investigations into certain practices of Practice Fusion before we acquired the business early last year. These investigations had many similarities that have either been settled or remain active with many of our industry competitors.”
Poulton added during that same call, “After acquiring Practice Fusion, the DOJ investigations continued to expand and required expanding levels of resources from us to support.”
The company’s new admission of guilt and accompanying settlement is a black mark for those involved with Practice Fusion from its earliest days, particularly given that this latest news punctuates a string of concerning revelations about the way that Practice Fusion was managed.
Soon after the startup was acquired by Allscripts, for example, CNBC published a report outlining “several years of missed targets,” a “management shake-up that resulted in the ouster of founder and CEO Ryan Howard,” and a board that was “quietly looking for a way out.”
CNBC also reported that many longtime employees left the company with nothing while managers “banked millions” in a pre-arranged carve-out.
Christina Nolan, U.S. Attorney for the District of Vermont had her own harsh words in delivering news of the settlement earlier today, calling Practice Fusion’s conduct “abhorrent.”
Said Nolan, “During the height of the opioid crisis, the company took a million-dollar kickback to allow an opioid company to inject itself in the sacred doctor-patient relationship so that it could peddle even more of its highly addictive and dangerous opioids.
“The companies illegally conspired to allow the drug company to have its thumb on the scale at precisely the moment a doctor was making incredibly intimate, personal, and important decisions about a patient’s medical care, including the need for pain medication and prescription amounts.”
According to the Centers for Disease Control and Prevention, overdose deaths from opioids have increased almost six times since 1999. Overdoses involving opioids killed close to 50,000 in 2017, and 36% of those deaths involved prescription opioids.
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H1 Insights is giving the healthcare industry the ultimate professional database
“I want to build a business which profiles every single researcher and healthcare professional in the world and I want to sell it to industry,” says Ariel Katz, the co-founder and chief executive of H1 Insights.
With the healthcare industry on a mission to digitize and analyze every conceivable datapoint it can to wring more efficiencies out of its incredibly fragmented and broken system, for Katz, there’s no opportunity that seems more obvious than giving the industry data on its own professionals.
The idea may sound like nothing more than creating a LinkedIn for healthcare professionals, but building an accurate account of the professional ecosystem could be a huge help to businesses as diverse as pharmaceutical companies, hospitals, insurers, and, eventually, consumers.
For Katz, it’s the continuation of a longstanding mission to create transparency for datasets that were previously opaque. Katz sold his first company, Research Connection (which became LabSpot), three years ago. That company was designed to uncover the research underway at universities around the country so students could see where they should apply for undergraduate and graduate studies.
After the sale the young entrepreneur went on a vacation to India, and it was there that he met his co-founder Ian Sax. “He backpacked there to follow his wife who was volunteering with Mother Theresa [and] ended up starting a staffing company.”
The two men became friends and collaborated on projects — including a software that would help medical school students find jobs.
Conversations between the two soon hit upon the lack of transparency around what research was happening at what universities and which clinical trials were underway at which hospitals. A visible network of experts, the two men thought, would go a long way toward solving a number of the healthcare industry’s seemingly intractable problems.
“Pharma, biotech, and medical devices spend $30 billion per year partnering with researchers and hospitals,” says Katz. “If you could allow a user sitting on the pharmaceutical side to sort and search and rank and analyze researchers… it would help reduce the cost and solve the problem.”
While Katz says the transparency can help solve a number of healthcare’s drug development and discovery problems, he’s wary about creating others. H1 Insights has built certain rules on how its database should be used, which Katz hopes will limit abuse.
“We don’t sell to sales and marketing arms at pharmaceutical companies,” he says. The risk there is that these sales and marketing arms could put undue pressure on doctors to skew research.
The data that H1 collects is already public, so there’s no need for the company to use user generated data to build out its dataset. “It’s all public. The biggest problem is de-duping it,” says Katz.
The company already has 350,000 academic researchers and 4 million healthcare professionals in its database already.
That body of knowledge was enough to attract Y Combinator, which accepted H1 Insight into its latest cohort of companies.
With the accelerator’s help, H1 Insights wants to take its business global and develop applications for the pharmaceutical industry, care providers and ultimately consumers.
The initial application for all of that data is clinical trials.
“The number one reason why clinical trials fail is recruitment,” says Katz. “If you can find a principal investigator who has done a successful clinical trial in an adjacent space,” pharma companies can improve their chances for success, according to Katz.
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Planned nuclear storage material could decay faster than expected
Enlarge / Waste in a temporary storage facility. (credit: Scott Peters, US House)
A number of countries, including the United States, has been planning for long-term storage of nuclear wastes. While many of these nations plan to keep the waste isolated from water, that's not something that can be guaranteed over the extremely long lifespans of the waste. If water reaches the radioactive isotopes, there's the chance that the isotopes could contaminate the groundwater in the area and spread well beyond the site of the storage repository.
To prevent that, plans are to have multiple layers of defense. The waste itself will be incorporated into a chemically inert, insoluble glass. And the glass itself will be placed in a stainless steel flask that will keep it from mixing with the surroundings.
Each of those materials seems to work well in tests. But now, a large team of researchers has found that, in combination, the materials aren't as robust as we'd like them to be. The problems only occur if water somehow gets into the container, but if it does, the interface between the glass and stainless steel actually accelerates chemical reactions that degrade both.
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