Practice Fusion, Chan's Replicas, and Bank NDAs
|Colin Sholes||Feb 7|
Practice Makes Perfect
It will be years before we learn about all the fraudulent and outright criminal behavior that created and fueled the American opioid crisis. Very few people will be charged criminally, despite billions of dollars in financial settlements from drug manufacturers. Individual doctors and pharmacists are the people most likely to spend time behind bars for their behavior, but they couldn’t have done any of it without the billions from the drug companies.
The most cartoonishly evil of the opioid manufacturers are the Sackler family. They are synonymous with all the worst abuses, the most criminally negligent behavior, and they’re currently attempting to hide their billions in offshore trusts as they dismantle their painkiller empire. These half-dozen or so assholes have caused so much human misery it’s impossible to calculate the harm done. Our government keeps trying, the only way it knows how - with half-assed civil and criminal settlements.
This time it’s a company called Practice Fusion, who made software to help doctors plan pain treatments for their patients:
A pop-up would appear, asking about a patient’s level of pain. Then, a drop-down menu would list treatments ranging from a referral to a pain specialist to a prescription for an opioid painkiller.
Click a button, and the program would create a treatment plan. From 2016 to spring 2019, the alert went off about 230 million times.
The tool existed thanks to a secret deal. Its maker, a software company called Practice Fusion, was paid by a major opioid manufacturer to design it in an effort to boost prescriptions for addictive pain pills
Imagine me getting up from my desk, climbing to the roof of my office building, cupping my hands around my mouth, and shouting “OF COURSE IT WAS” into the troposphere. Aaaaaand:
Practice Fusion agreed to pay $145 million to resolve civil and criminal cases, according to documents filed in a Vermont federal court. Practice Fusion admitted to the scheme with an unnamed opioid maker, though the details of the government case closely match a public research partnership between Practice Fusion and Purdue Pharma Inc., which makes OxyContin.
At this point, naming Purdue Pharma in any legal settlement has to be about as low stakes as it gets for the government. They are the main villain the epidemic! Everyone hates them! Do they have defenders anywhere in the government? A Pro-Overdose Caucus in Congress? Now, I concede that perhaps they’re planning on dropping some huge case on Purdue in the near future, which, good. But, like, come on man. All other signs are pointing to a one-time cash settlement with the government, which Purdue has been working on since September, when it filed for bankruptcy protection. Somehow Allscripts, the company who bought Practice Fusion while they were still doing the pill fraud is skating on this too. Whatever.
Practice Fusion started out as a “free, ad-supported health-records software” company for independent doctors. I…don’t really know what that means, but it seems like the sort of thing you don’t want to run ads on? Looking at their website in 2020, they could pass for any vaporware Silicon Valley tech firm. Lots of buzzwords! The Wayback Machine shows us how they were advertising themselves in 2007, a couple years after their founding:
Join the Revolution! Shift the paradigms! Web-based, hosted medical record software was probably fairly cutting edge 13 years ago, and the FREE price tag likely appealed to a lot of doctors. A decade later, how were they to know it was pushing them to prescribe insane doses of Oxycontin because they had a back door deal with Purdue?
Practice Fusion allegedly only got $1 million as a kickback for almost 5 years’ worth of pushing dangerous painkillers on potentially millions of unsuspecting patients, which seems like a pretty paltry deal for them, considering the Sacklers were raking in billions. I realize that the best tool state attorneys general or the Department of Justice may have in these cases is to fine the companies involved, but realistically shouldn’t the people who knew full well what they were doing be somehow liable also? There is clearly no deterrence in fining wealthy companies a small percentage of their earnings. The thing these rich corporate assholes are afraid of is going to jail, or being personally bankrupted. And yet?
In 2013, the opioid epidemic was in full swing, there was no possible deniability for anyone involved. Purdue entered into this agreement with Practice specifically to boost flagging sales of Oxycontin, because people had caught on to the harm it was causing and it wasn’t being prescribed as often. The thought that no one who was involved in these negotiations is going to be charged just makes me sick. Don’t tell my doctor, though. I might end up on Oxycontin.
Live By the Source, Die by the Source
A few weeks ago I wrote about replica sneakers. It’s a fascinating world, and seems to only be growing. There was one story I left out of my piece, because I wanted to write about it all on its own. It features a college student, Reddit, and the phrase “1:1 succ”:
So as a speaker of Chinese, English, and sneakerhead lingo, Chan figured he had a unique opportunity: He could serve as the middleman between hungry reddit hypebeasts and the bewildered Chinese factory bosses who make the replica sneakers.
Essentially what happened is that Chan, the story’s protagonist, found it difficult to source “reps”, or replica sneakers, on Reddit, and decided he would try his hand at sourcing the shoes himself. He would craft designs with manufacturers in Putian - the “center” of the Chinese sneaker world - and have them drop-shipped to customers around the world.
Reddit users quickly embraced Chan and his new business, signing up by the thousands:
Satisfied that there was a viable market, Chan set up his own subreddit, r/chanzhfsneakers. While most subreddits focus on a hobby or interest, this one was wholly dedicated to funneling potential buyers to Chan’s business — and it was more popular than he ever imagined.
“We just posted our Skype username, and people started adding us on Skype and asking us, ‘Hey, I'd like to buy some replica sneakers,’” Chain said. “Suddenly, we were getting 500 queries a day from people asking about shoes.”
Chan catered to his clientele, offering good customer service, high quality photos, and - most importantly - well-made replicas. Everything was going great! The market for replicas was huge, and online shoppers desperate for a reputable source finally had one.
This story doesn’t end like most of the stories I write about - there was no FBI sting, no police raid, no lawsuit from Nike. Chan simply made a bad decision. He tried to copy a particular shoe, and things went wrong.
In October 2017, after a year of work, Chan had created what he thought would be a popular new cash cow. He’d sourced the necessary materials. He was pleased with the quality of the stitching, and the colors were nearly indistinguishable from the original. Everything looked great, and his customers seemed excited to buy. He started taking orders and began to ship the shoes out.
Let’s pause for a second to appreciate that this young entrepreneur spent a year sourcing components and building a high quality replica of a very rare sneaker. He (allegedly) spent tens of thousands of dollars having them produced. I am not qualified to assess whether the end product was good or not, but you have to admire the commitment!
His customers did not admire the commitment:
Then, one customer complained. The holes on the mesh were too big, they said. The shape of the shoe was different from the original. The color was off.
Chan tried to reassure them that these were the best-quality replicas possible. But the customer insisted that the shoes were terrible — and then posted about it on Reddit. This public complaint set off a chain reaction. Other customers started complaining too, and soon Chan’s employees were inundated with so many refund requests that they couldn’t keep up.
I’ve written about the power of online reviews but a forum like Reddit can take issues like these to the next level - posts can be easily amplified by a crowd effect. Despite Chan’s early success, and his best efforts to make his customers happy, he had been done in by some early bad reviews and was now branded as a scammer. His business all but dried up.
As the article notes, this may have been good for him! He flamed out quickly, before he could become the target of a criminal investigation, which usually takes months or years to develop. He didn’t stop selling shoes entirely, but he did pivot to a product line I can’t say I was expecting:
Chan figures suitcases are a safer market. The margins are better, and luggage is a lot easier to replicate.
Now I have to research counterfeit luggage. It never ends!
Keep it to Yourself
It is difficult to pin down the number of people who fall victim to scams each year, in large part because many of those victims do not come forward. This is chalked up by some researchers as a “shame” effect. In many cases, the fraudsters are in other countries, or the money has been sent in a way that makes it difficult to trace or recover, so people give up on being made whole.
In other cases, their bank has them sign confidentiality agreements so they can’t talk about the case. Wait, what?
Bank of America Corp. told a 92-year-old customer it would attempt to recover nearly $40,000 he lost to a phone scam—but only after the man signed legal papers promising not to discuss the fraud or sue the bank.
The bank couldn’t guarantee it would recoup any of the money, but under the terms of the agreement, if the elderly man is asked about the funds he sent scammers or efforts to recover it he must say “the matter has been resolved,” according to a copy of the document reviewed by The Wall Street Journal.
So, in exchange for maybe recovering their money, the bank effectively muzzles their customers so they don’t get any bad press? Awesome.
Some banks take it even farther and block their customers from cooperating with other investigations without a subpoena:
A Regions Financial Corp. agreement, reviewed by the Journal, required a scam victim to keep the agreement and the underlying situation confidential. The contract bars the customer, who was reimbursed $2,700 in losses, from cooperating with any organization or testifying unless they are subpoenaed.
What do the banks have to be afraid of? Well, let’s take a look at the case of the elderly scam victim from the article:
Mr. Feldman’s father said he didn’t have a relationship with that security service and during the course of the call gave the fraudster his bank information so that they could refund him. When he checked the account, the scammer appeared to have deposited $39,920.
The elderly man offered to return the excess money he saw in his account and went to his local Bank of America branch to complete the transaction. The teller asked him if he knew the person he was sending the money to. He said he didn’t, but trusted the person.
His wire transfer was processed. Later that night the man couldn’t sleep and realized he had fallen for a scam. The scammer’s initial deposit into his account had been cancelled. Instead of returning an errant deposit, he had transferred nearly $40,000 of his own savings.
There are a few things to unpack here. An old man, who I am going to guess does not regularly receive $40,000 wire transfers, receives a deposit to his account, which the bank lets through with no scrutiny. That same day, he walks in to a branch and initiates a wire transfer for $39,000 to a person he admits to a teller he does not know, and they push that through. Huh?
Commercial banks have a base level of “KYC” or know your customer rules. They spend millions of dollars developing risk and fraud algorithms designed to prevent the very sort of thing that happened to this customer. There are humans at the branches, who are supposed to be trained to stop 92-year-old men from sending tens of thousands of dollars to overseas scammers. All of those systems appear to have failed in this case, and the best Bank of America can do is have the customer sign an NDA and tell him they might be able to recover some of his money, maybe? Ugh.
The other option available to victims of scams is the police, and they are ill-equipped to deal with these sorts of crimes. They still need banks to cooperate with them to provide details, and when perpetrators are overseas, they have no jurisdiction to go after them. As digital fraudsters get more sophisticated, and the American population ages, it’s only going to get worse. It’s simply inexcusable for a major bank in the year 2019 to facilitate obvious frauds of this nature. Maybe some bank executives need to read my newsletter. My consulting rate is very reasonable, compared to their salaries!
Wired - “"Go through the attached document on safety measures regarding the spreading of corona virus," reads the message, which purports to come from a virologist. "This little measure can save you."”
(Abolish) ICE - “The seizures were part of Operation Team Player, an ongoing effort developed by the HSI-led Intellectual Property Rights (IPR) Center to target the illegal importation and distribution of counterfeit sports merchandise”
Business Insider - “On Monday, the singer tweeted that he had finalized an agreement to build a 2,000-acre "Akon City" in the West African country, which he has said will be like a "real life Wakanda,"”
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