Judge Hands Younger Drobot 41-Month Sentence

Friday, March 9, 2018 | 0

Michael R. Drobot, the son of the former owner of Pacific Hospital of Long Beach, was sentenced to 41 months in federal prison for operating a drug dispensing program used to pay kickbacks to providers who referred patients to his father's hospital.

Drobot will have to start serving his sentence in May after he appears at a restitution hearing with his father, Michael D. Drobot, as well as other co-defendants in the case.

A spokesman for the U.S. Attorney’s Office in Los Angeles said he did not know whether U.S. District Judge Josephine Staton imposed any fines or penalties during Thursday’s sentencing hearing. Staton on Feb. 6 ordered Drobot to forfeit $1 million he admitted to acquiring as a result of his illegal activities in a 2016 plea agreement.

Drobot's attorney, Jason de Bretteville, a shareholder with Stradling, Yocca, Carlson & Rauth in Newport Beach, on Thursday said he had no comment.

Drobot faced up to 10 years under the terms of the agreement, in which he pleaded guilty to one count of conspiracy and one count of paying kickbacks.

After taking over as chief operating officer of California Pharmacy Management in 2003, the younger Drobot learned that his father and other con-conspirators were using the company to facilitate kickback payments.

“The conspirators used CPM as a vehicle to pay certain doctors and chiropractors kickbacks for referring patients to Pacific Hospital for spinal surgeries and other services, and used the CPM dispensary management contracts to cover up the true nature of the kickback payments,” according to the plea agreement. “When (Industrial Pharmacy Management) formed in or about 2005, the conspirators used it in a similar manner."

In 2005, the younger Drobot started recruiting doctors and chiropractors to enter into contracts with CPM and asking if they were interested in receiving kickbacks for referring patients to have spinal surgeries performed at Pacific Hospital, according to court papers.

He also acted as a liaison between providers receiving kickbacks, and his father and other conspirators. For example, if a provider complained about not receiving a kickback payment on time and threatened to stop referring patients to Pacific Hospital or to cancel the drug dispensing contract, the younger Drobot would make sure they were promptly paid. He also prodded doctors who underperformed to refer more patients to the hospital.

The younger Drobot also tracked referrals from some providers to ensure they were properly credited. And he worked with some providers receiving kickbacks to encourage them to refer patients to specific providers who agreed to perform surgeries at Pacific Hospital, according to his plea agreement.

In addition to California Pharmacy Management, the younger Drobot also operated Industrial Pharmacy Management. Both companies entered contracts with providers who agreed to receive the net monthly collection of the in-office dispensing program, or a fixed monthly amount.

Drobot’s companies typically advanced almost all costs associated with the dispensary, which included purchasing prescription drugs and paying for pharmacy technicians. But doctors were contractually liable for shortfalls if the amount collected was less than what was fronted.

In practice, however, CPM and IPM did not require doctors to cover any difference between the advance and actual collections. Instead, doctors who failed to write as many prescriptions as expected were encouraged to prescribe more drugs or more profitable drugs. If collections did not increase, the guaranteed monthly payments would be reduced, or Drobot would cancel the contracts.

“With respect to at least two doctors, defendant attempted to leverage the referral of potential spinal surgery patients for the benefit of the dispensary management companies, either by guaranteeing those referrals in return for a doctor’s agreement to engage the dispensary management companies, or by threatening to withdraw those referrals if the doctor terminated his contract with the dispensary management companies,” the plea agreement says.

The younger Drobot is scheduled to appear at a restitution hearing May 11, along with his father and the former chief financial officer of Pacific Hospital.

The older Drobot, who pleaded guilty to a conspiracy charge and a kickback charge in 2014, was sentenced to 63 months in prison in January. He was also fined $500,000 and ordered to forfeit $10 million in criminal proceeds.

James Canedo, former CFO of Pacific Hospital, was sentenced to 366 days and ordered to forfeit $633,091 in February. Canedo pleaded guilty in 2015 to a single conspiracy charge.

Dr. Mitchell Cohen is scheduled to be sentenced today. Cohen pleaded guilty in 2015 to filing a false tax return by not reporting as income $1.6 million he received in kickbacks for surgeries performed at Pacific Hospital. Cohen was ordered to forfeit $1.6 million on March 2 and faces up to three years in prison at today’s hearing.