Menendez Friend Melgen Is Medicare’s $20 Million Man

by Alec Nixon
What makes Salomon run? His attorney says it’s good clean medical work.

Senator Robert Menendez’s long, close friendship with a Florida eye doctor took another strange turn on Wednesday, when it was revealed that the New Jersey Democrat’s physician pal got more than $20 million from the taxpayers in one year.

Data released by the Centers for Medicare and Medicaid Services (CMS) show Dr. Salomon Melgen, an ophthalmologist in southern Florida, received nearly $21 million in Medicare reimbursements in 2012.

That fortune places Melgen at the top of a small club of roughly 350 doctors who earned a total of +$350 million in Medicare reimbursements in that year.

Melgen, a native of the Dominican Republic who works out of a pink office building along the sun-washed Metro Centre Boulevard in West Palm Beach, Florida, heads up the Melgen Vitreo Retinal Eye Center, which has four locations throughout South Florida. Seventy percent of the eye center’s patients are on Medicare.

“I am always asked what sets me apart from most other doctors, and I would have to say that I do not consider myself to be a ‘cookbook’ physician,” Melgen states on the biography page of his practice’s website. “I try to look at all the data at hand and extrapolate the best treatment instead of solely adhering to what the current ‘standard’ of treatment may be.”

Melgen seems to abide by this statement. According to the data, he billed Medicare mostly for the very expensive drug Lucentis, which treats macular degeneration, even when less expensive options were available.

Genentech, the developer of Lucentis, markets the drug at $2,000 per dose. The company also markets Avastin, a cheaper alternative, at $50 per dose. According to the Journal of American Academy of Ophthalmology, in medical trials, Avastin performed as well as Lucentis in treating macular degeneration in the elderly.

According to a New York Times article in 2010, Genentech paid “secret rebates” to doctors who prescribed Lucentis to patients, which reached into the tens of thousands of dollars. Doctors had to sign a confidentiality agreement and rebates continued only if usage of the drug increased month-over-month.

In an interview with the Palm Beach Post, Melgen’s attorney, Kirk Ogrosky, said he did not know whether Melgen had received “discounts or rebates” from the company, but said they would have been above board, not “under the table.”

According to the records, Melgen injected Lucentis a total of 37,075 times into the eyes of 645 different patients. The government reimbursed him on average $320 for each procedure.

The cost of the drugs was $11.778 million. Other costs included $6.1 million for overhead and $2.5 million for labor.

Melgen couldn’t be reached for comment but his lawyer responded to inquiries.

“At all times, Dr. Melgen billed in conformity with Medicare rules” Ogrosky tells National Review Online in an email. “The facts are that doctors receive six percent above what they pay for drugs, the amount billed by physicians is set by law, and drug companies set the price of drugs, not doctors.”

According to Ogrosky, Dr. Melgen uses Avastin along with Lucentis. He says the cheaper drug isn’t in the breakdown of payments because Avastin is not labeled to treat macular degeneration. Ogrosky says he assumes Melgen included the cost of the drug in another category when reporting the charges to Medicare. Such use of the drug is not illegal, nor is it prohibited by the FDA.

Last year, federal agents raided Melgen’s West Palm Beach office when regulators discovered he was using one vial of Lucentis to treat several patients. Medicare rules permit only one vial per patient. Melgen repaid the government $9 million.

That wasn’t the end of the matter, however. Melgen then sued the Department of Health and Human Services, claiming that he had not overbilled and, perhaps more importantly, did not hide from Medicare the fact that he had treated multiple patients with one vial.

His lawsuit is still pending, and for a time HHS suspended all Medicare payments to Melgen’s practice. But that suspension has since been reversed.

Melgen owns a private jet, a residence in a West Palm Beach gated community, and a house in the Dominican Republic.

He is also a regular contributor to Menendez and the Democratic party. Although he is not Menendez’s top donor, Melgen and his family members have donated $33,700 to Menendez since 1992, according to OpenSecrets.org. They donated another $60,400 to the Democratic Senatorial Campaign Committee, which Menendez chaired from 2009 to 2011.

The senator also flew to the Dominican Republic on the doctor’s private jet and stayed at Melgen’s home there. The Senate Ethics Committee forced Menendez to pay $58,000 in reimbursements.

The Melgens also donated another $63,000 to the Democratic National Committee.

Multiple calls to Senator Menendez’s office went to a voicemail saying all lines were busy.

According to the Miami Herald, Menendez has in turn been a good friend to the high-rolling doctor:

In 2009 and again in 2012, Menendez complained to top Medicare officials that it was unfair to penalize the doctor because the billing rules for administering Lucentis were ambiguous, the senator’s aides told the Washington Post after it broke the story in February.

When Melgen, who has invested in a variety of businesses outside his medical practice, needed help with a port security contract in the Dominican Republic last year, he turned to Menendez. The senator tried to get the State Department to revive the long-stalled, multimillion-dollar agreement at the Santo Domingo port with a company of which Melgen is part-owner.

Menendez’s official actions on behalf of his longtime friend came to light after federal agents raided Melgen’s clinic and two other South Florida offices in late January, which sent shockwaves from the Dominican Republic to New Jersey to Washington. Published reports noted that the doctor had donated more than $700,000 in 2012 to Menendez’s reelection campaign and those of other Senate Democrats.

Politicians aren’t the only ones receiving cash from Melgen. He also has quite an investment portfolio.

According to the Palm Beach Post, Melgen was a seed investor and co-founder of Seisint, a data-mining company that attempts to help law enforcement track down terrorists. LexisNexis purchased Seisint in 2004 for $775 million.

It is unclear how much Dr. Melgen initially invested into Seisint or how much of the payout he received.

Melgen also has an ownership stake in a port-security company called ICSSI, which has a long-dormant contract with the Dominican Republic to provide port security at an estimated value of $500 million. According to the Post, Menendez spoke to the State Department last year about reviving the contract.

While some of Melgen’s investments have done well, others have not been so rewarding.

In a 2011 federal suit, Melgen, his wife, and the Melgen-controlled SFM Holdings say they lost more than $32 million on investments in Citigroup stock after relying on what they called false and misleading public disclosures from the company between 2007 and 2009. The suit is ongoing.

Melgen also fought with the Aquarius Condominium association over installing the Ukrainian actress Svitlana Buchyk in an oceanfront condo Melgen was leasing in Riviera Beach.

Melgen, according to his attorney, does it all for his patients. “The [CMS] data is merely a reflection of Medicare’s spending for pharmaceuticals that are improving the lives of countless patients,” Ogrosky says.

– Alec Nixon is an Agostinelli Fellow at National Review.