Ebube Otuonye was convicted in 2019 on multiple charges after federal investigators found his Neighborhood Pharmacy was filling questionable controlled substance prescriptions from Dr. Steven Henson and billing Medicare and Medicaid for unnecessary non-narcotic medications under a "3:1 Policy" requiring three non-controlled prescriptions for each controlled substance. The pharmacy implemented this policy to keep controlled substances under 20% of total purchases to avoid wholesaler restrictions.
Circuit Judge Neil M. Gorsuch wrote that while defective Jury Instruction 16 led to vacatur of Otuonye's narcotics distribution convictions under Supreme Court precedent in Ruan v. United States, the fraud charges were legally and factually distinct. "Counts Three and Four are not related, legally or factually, to Counts One and Two," Gorsuch explained, noting the fraud charges focused on billing for medically unnecessary non-controlled prescriptions rather than unlawful distribution of narcotics. The court found "no reasonable probability" the jury would have failed to convict on fraud charges with a corrected instruction.
Otuonye had filed a Section 2255 motion challenging his convictions after Ruan held that narcotics distribution prosecutions require proof the defendant "knowingly or intentionally acted in an unauthorized manner." A Kansas federal judge granted relief on the distribution counts but denied it for the fraud charges, prompting Otuonye's appeal.
The ruling clarifies that healthcare fraud convictions can stand independently of related narcotics charges when based on separate evidence and legal theories. The decision comes as courts nationwide grapple with applying Ruan's heightened mens rea requirements to prosecutions involving prescription drugs, with the Tenth Circuit emphasizing that fraud charges require their own distinct proof of scienter.