Florida 'Pill Mill' Crackdown Sets Off a Rush Into Georgia
TUCKER, Ga.—After his Florida used-car dealership failed two summers ago, Jeffrey Gonzalez decided to switch careers. So he moved to Georgia and opened a clinic prescribing opioid painkillers.
He picked this Atlanta suburb because while Florida law stipulates that only doctors can own such facilities, Georgia imposes no such restrictions. Within a few months, Mr. Gonzalez was open for business. To staff up, he hired two physicians through a Craigslist ad. His lead doctor wasn't a pain specialist, but a gynecologist.
"The laws are minimal at best," said Mr. Gonzalez, 46 years old. "We had a green light from every agency that we spoke to."
More than 16,000 people die from opioid overdoses every year. Now, Dr. Russell Portenoy, who campaigned for wider prescription of pain medications like Vicodin, Oxycontin and Percocet, is having second thoughts.
Previously, Florida to the south was home to much of the "pill mill" trade, attracting drug dealers and addicts from thousands of miles away to stock up on prescriptions of oxycodone or hydrocodone they could either sell or use to get high themselves. But a Florida crackdown is sending the business sprinting across the border to Georgia.
The rapid cross-border shift reflects how quickly operators can migrate when the business environment sours—and why it is difficult to fight the prescription-drug epidemic on a national scale. Today Georgia is home to more than 125 clinics, up from fewer than 10 in 2010, according to Rick Allen, director of the state's Drugs and Narcotics Agency. Per capita prescription sales of oxycodone tripled between 2000 and 2010.
Within months of opening in 2011, Mr. Gonzalez's clinic, Southern Health Management Inc., was seeing up to 50 patients a day. But his fortunes came crashing down on a steamy afternoon this past June when police and Drug Enforcement Administration agents wearing ski masks stormed the clinic, looking for evidence it had prescribed painkillers that made their way onto the black market.
Mr. Gonzalez was led out in handcuffs. DEA agents loaded dozens of boxes of medical records into big white trucks and seized $180,000 in cash and assets. Two weeks later, law enforcement returned and arrested a doctor.
"I had no idea this was going on right under our nose," said Robert James, the DeKalb County district attorney, referring to his state's pain-clinic problems.
Other states could be caught off guard in the coming years, says Sam Olens, Georgia's attorney general. "Once the pill mills leave Georgia, they'll simply go north of us," says Mr. Olens, looking for other states with looser regulations.
Mr. Gonzalez's clinic, which stood next door to DeKalb County's police headquarters, hasn't reopened. Mr. Gonzalez and two employees face charges of conspiracy to distribute oxycodone. A trial date hasn't yet been set, according to Mr. Gonzalez.
The company and Southern Health workers deny any wrongdoing. "Everything we did was by the book. We didn't come close to breaking any laws, we didn't bend any. It was perfect," says Mr. Gonzalez.
He believes he was an "easy target" because he came from Florida and has a prior criminal arrest, for allegedly late payments to his auto supplier. That allegation is still being settled in court. Mr. Gonzalez denies wrongdoing and hasn't been indicted.
Harry Sommers, the special agent in charge of the DEA's Atlanta field division, declined to comment on the specifics of the Southern Health case. Speaking about DEA cases in general, he said, "We're not randomly out there doing anything. There is nothing random about it."
The White House says prescription painkillers are the nation's No. 1 drug epidemic. More than 16,500 people die annually in the U.S. from opioid painkillers, more than from heroin and cocaine combined.
To combat abuse, drug and law-enforcement officials are relying on a patchwork of state laws. Only eight states restrict pain-clinic ownership to medical professionals. While 42 states have prescription-drug monitoring programs, they don't all track the same information. Only 10 are actively sharing data with other states. Others aren't linked in part because of patient-privacy concerns and a lack of funds.
Without uniform regulations across all states, "efforts to crack down on pill mills become like a game of Whac-A-Mole—as soon as one disappears, another one pops up," U.S. Sen. Sherrod Brown (D., Ohio) wrote in a letter to Georgia Gov. Nathan Deal in July.
Because the black market for painkillers is driven by a huge volume of purchases that cross state lines, state officials say they can't overcome the epidemic without federal direction and dollars, particularly when their own budgets have tightened. "It's not like we can have border checks from Kentucky. We border seven states," says Kentucky Attorney General Jack Conway. "This is the type of issue that cries out for investment by the federal government."
For its part, the DEA is focused on trying to stifle black-market sales. In states where pill mills are flourishing, the DEA is arresting pain-clinic owners and seizing assets, since doctors and dealers are easily replaced.
The DEA has also been investigating large wholesalers like Cardinal Health Inc., McKesson Corp., and AmerisourceBergen Corp. which together distribute more than 95% of the nation's prescription drugs. This year the DEA suspended Cardinal's controlled-substance license for two years at a Florida warehouse for repeatedly overlooking escalating oxycodone orders placed by pharmacies. In August, AmerisourceBergen disclosed that federal prosecutors and agents had issued two subpoenas over how the wholesaler monitored the distribution of narcotic painkillers and other drugs.
McKesson and AmerisourceBergen declined to comment. In an email, Cardinal's CEO, George Barrett said, "Real and lasting change in the fight against prescription drug abuse requires clear guidelines and doctors, pharmacists, manufacturers, distributors and regulators working together in a coordinated and timely manner."
Florida started cracking down in 2010, creating strike forces to close illicit pain clinics and tracking controlled-substance sales. The efforts cut Florida's number of pain clinics in half by the end of this past June.
In contrast, Georgia failed to vote this year on a proposed law requiring pain clinics to be owned by medical professionals. It has no law that empowers the state's medical board to close shady operators and suspend the licenses of unscrupulous doctors. The Peach state also lacks a database that tracks the number of prescriptions each clinic writes, though it plans one for next spring.
Georgia has only five police detectives solely pursuing prescription-drug cases statewide. By comparison, Broward County, Fla., has eight to itself.
Mr. Gonzalez said his Florida used-car dealership failed because of the tough economy and because his former supplier took him to court on criminal charges of grand larceny for late payments on three cars.
Before trying his hand at used cars, Mr. Gonzalez was briefly a "hurricane chaser," racing into the heart of storms and compiling early damage reports to sell to oil companies or commodities traders. But in 2006 and 2007, he says, there weren't any major storms. So the business went under.
"We had half a million dollars worth of stuff and weren't able to do anything with it," says Mr. Gonzalez. He said the money went toward cutting-edge meteorology equipment—and Hummers.
He became interested in pain clinics after observing one across the street from his used-car lot, Hurricane Motors. "I hate pill mills," says Mr. Gonzalez. He says he tears down advertisements for pain clinics from telephone poles and keeps them in a pile.
To help run Southern Health, he enlisted Loree Nichols, a friend from Tampa whom he had known after she sold his house years before. Ms. Nichols, 42, has no previous experience in health care.
He chose metro Atlanta over Kentucky or Tennessee because it was populous. "In Atlanta, I expected not to be targeted for doing something that wasn't illegal, but was controversial," says Mr. Gonzalez.
For startup funding, he sold some of his personal belongings and borrowed from friends, cobbling together around $40,000. He found what he considered a perfect location: a two-story former hospital, separated from DeKalb County police headquarters by just a parking lot and some shrubs. He says he figured the proximity to cops would scare away addicts and dealers.
In November 2010, Mr. Gonzalez posted an ad on Craigslist: "Anesthesiologist, General Practitioner, Medical Doctor Needed." The ad said doctors could work between two and 12 hours daily, and pick their days.
Southern Health opened with two doctors, one computer, a filing cabinet and some basic examination equipment. For the first month, it was open three days a week and saw five or six patients daily.
The company charged $200 per patient, with discounts to veterans, senior citizens and the disabled. About 90% of patients paid in cash and 10% with credit card, Ms. Nichols says. Few had insurance.
Southern Health spent 10% of its revenue on paying for advertisements using Google's Ad Word service. "If you punched in 'pain management Atlanta' or 'pain clinic Atlanta,' we would come up," says Mr. Gonzalez.
After six months, Southern Health averaged about 30 patients a day. That translated to about $30,000 of pretax revenue a week, of which Mr. Gonzalez said he took home 10%.
As business improved, Mr. Gonzalez decorated the space with new carpeting and fresh paint, along with an Atlanta-skyline picture from Ikea and some art bought on eBay—four aluminum panels arranged on the walls.
To screen out addicts or dealers, Mr. Gonzalez says new patients were required to fill out a 17-page application that he wrote himself and included a waiver that read, "The physician assumes no liability." Patients also agreed to provide their medical histories so Southern Health staff could call other doctors, dentists, hospitals and pharmacies to make sure they weren't visiting multiple physicians or falsifying their records, he says.
Only about 13% of the 6,800 patients Southern Health treated became patients who returned on a monthly basis, says Mr. Gonzalez, a fact he cites as evidence his facility wasn't a pill mill.
Southern Health had its growing pains, Mr. Gonzalez says. One part-time physician wasn't given another shift after he asked Mr. Gonzalez and Ms. Nichols, "What could I do to make this patient happy?" he says.
"We didn't like the doctor asking us anything to do with what he was prescribing," he says. "I had zero input on what anybody was prescribed." The doctor couldn't be reached for comment.
About half of the Southern Health's patients came from out of state, mostly Kentucky and Tennessee, according to Mr. Gonzalez. According to law enforcement, clinics that treat many out-of-state patients and accept cash payments are red flags for a pill mill.
Ms. Nichols says the facility followed state laws. "Sure, there are red flags here, but you got to check them out. Just because there are red flags doesn't mean anything is wrong," she says. Among other things, she says, Southern Health doctors tried to wean patients off high-dosage oxycodone, typically never prescribing more than 120 pills at a time.
It is unclear when the DEA started investigating Southern Health. The clinic attracted on-site inspections from the cops and state pharmacy regulators in early 2011 when it tried installing a pharmacy on-site, Mr. Gonzalez says.
Mr. Gonzalez's ties to Florida, as well as the criminal charge for grand larceny tied to his auto-supplier dispute, made him a target, he says. He also believes his clinic was "harassed" because doctors didn't write prescriptions for extended-release painkillers like Purdue Pharma LP's OxyContin or Endo Pharmaceuticals Inc.'s Opana. Both branded drugs have safety features that make abuse more difficult. Southern Health's mostly uninsured clientele couldn't afford those drugs, which are about eight times more expensive, Mr. Gonzalez says.
Nick Stabile, a family friend of Mr. Gonzalez's from Tampa, came to the clinic in November 2011 to oversee some remodeling there. "He'd just tell me what needed to be done," said Mr. Stabile, who earned about $500 a week.
Over time, Mr. Stabile began helping with patient paperwork. He also would walk around several times a day with a bowl of oatmeal bars, crackers, pretzels and snack bags and offer them to waiting patients. He was at the clinic in June when about 50 masked DEA agents stormed in and walked out Mr. Gonzalez and Ms. Nichols in handcuffs. Mr. Stabile stood up against a wall for 45 minutes with some co-workers. "It was a nightmare," says Mr. Stabile. "They made us all feel like criminals." Mr. Stabile was neither arrested nor accused of wrongdoing. He has moved back to Florida.
"They came in with an army," says Mr. Gonzalez. He believes Southern Health was made an example of in order to serve as a warning to Georgia pain clinics. Now the building is being subleased to an urgent-care clinic.
Following the first DEA raid in June, Mr. Gonzalez posted $50,000 bond on charges of conspiracy to distribute oxycodone. Ms. Nichols was booked for the same charge and released on $35,000 bond. She denies wrongdoing. Southern Health briefly reopened, though with fewer patients.
About two weeks later, DEA officials returned. When the clinic's lead doctor, state-licensed gynecologist Michael Assevero, arrived for work, he was arrested on charges of conspiring to distribute oxycodone. Mr. Assevero declined to comment. None of the arrests has led to indictments.
Mr. Gonzalez says he has no regrets and still hopes to operate a pain clinic. "I knew pill mills were a problem," he says. "I saw the market for people with actual issues.
He doesn't believe his inexperience in the medical field is a hindrance, comparing himself to a restaurant owner who never worked as a cook. "We're called entrepreneurs for a reason," Mr. Gonzalez says.
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Florida 'Pill Mill' Crackdown Sets Off a Rush Into Georgia