Center City Doctor Pleads Guilty to Illegally Distributing Controlled Substances and Filing False Tax Returns

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PHILADELPHIA, PA — Acting United States Attorney Jennifer Arbittier Williams announced that Stephen Padnes, M.D., 79, of Glenside, Pennsylvania, a physician formerly licensed in Pennsylvania, entered a guilty plea before United States District Court Judge Gene E.K. Pratter on criminal charges of illegally distributing controlled substances and filing false tax returns.

Williams also announced that Padnes has agreed to pay $2 million to settle a civil lawsuit brought by the United States seeking penalties and damages against him. The settlement resolves allegations that Padnes prescribed opioids without a legitimate medical purpose in violation of the Controlled Substances Act and False Claims Act. The resolution of the Civil Action also excludes Padnes from participating in the Medicare program for at least ten years.

Padnes has also entered into a settlement agreement with the United States whereby he has agreed to the civil forfeiture of over $1.8 million in cash seized from his home as proceeds of unlawful prescribing.

The Drug Enforcement Agency has also rescinded Padnes’s licenses to prescribe controlled substances.

Criminal Guilty Plea

On Tuesday, Padnes pled guilty to the criminal indictment, which charged him with illegally prescribing Schedule II controlled substances, oxycodone and methadone, on seven occasions between December 21, 2015 and June 29, 2016, without any medical necessity and outside the usual course of medical practice. It also charged that Padnes underreported the income earned by his medical practice, the Psychosomatic Medicine and Pain Rehabilitation Center, Inc., to the Internal Revenue Service by more than $700,000 for calendar years 2012, 2013, and 2014. Padnes faces a maximum possible sentence of 149 years’ imprisonment and has agreed to pay $301,219 in restitution to the IRS.

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$2 Million Settlement of the Civil Action and Exclusion from Medicare

Padnes has agreed to pay an additional $2 million to settle the government’s allegations against him in the Civil Action brought pursuant to the Controlled Substances Act and the False Claims Act. Padnes has also agreed to be excluded from participating as a provider in the Medicare program for at least ten (10) years.

The Civil Action alleges that Padnes violated the Controlled Substances Act by issuing prescriptions on hundreds of occasions for Schedule II opioids in 2014, 2015, and 2016 without a legitimate medical purpose. The government alleges numerous instances where Padnes accepted cash payments, hundreds of dollars each, in exchange for prescriptions for high doses of opioids without maintaining medical records in the normal course of medical practice, physical exams, reevaluations, and/or monitoring of the effectiveness of the opioids he prescribed.

The government alleges numerous examples where Padnes regularly prescribed the equivalent of over 1,000 milligrams of morphine per day to certain purported patients in exchange for cash. In one example, the government alleges that Padnes issued prescriptions for so many opioids to a patient that the patient would have needed to consume nearly 70 pills, the equivalent of 4,000 milligrams of morphine, every day. For reference, the Centers for Disease Control and Prevention’s guidance on opioid prescribing for chronic pain patients urges caution when patients are prescribed more than the equivalent of 50 milligrams of morphine per day and should usually not be prescribed greater than the equivalent of 90 milligrams of morphine every day. (See: CDC Guideline for Prescribing Opioids for Chronic Pain: Recommendations)

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The government also alleges that Padnes violated the False Claims Act because Medicare and Medicaid paid to fill thousands of prescriptions that Padnes issued without a legitimate medical purpose, causing a loss to these programs exceeding $1 million.

The Controlled Substances Act provides for penalties for each prescription issued without a legitimate medical purpose up to $25,000 for violations on or before November 2, 2015 and up to $64,820 per violation after November 2, 2015. The False Claims Act allows for damages treble the government’s loss and civil penalties between $5,500 and $11,000 for each false claim presented on or before November 2, 2015 and between $11,181 and $22,363 for each false claim presented after November 2, 2015.

Civil Forfeiture of $1,864,545

On August 12, 2019, the United States filed a civil forfeiture complaint seeking the forfeiture of $1,864,545 cash seized from the defendant’s home during the execution of a search warrant in 2016. The government alleges that cash was the proceeds from Padnes’s unlawful medical practice from at least 2010 to 2016. The government alleges that, during that time, the vast majority of the defendant’s “patients” paid up to approximately $500 in cash for prescriptions for controlled substances, including Schedule II opioids such as oxycodone and methadone, that he wrote outside the usual course of medical practice and without a legitimate medical purpose. The cash was discovered in suitcases and a dresser located in a bedroom in the defendant’s home.

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