Recent Purdue Pharma Criminal Plea Underscores Government’s Prosecution Efforts in Combatting Opioid Crisis

At a court hearing on November 24, 2020, a bankruptcy judge approved a settlement entered in late October between Purdue Pharma L.P. (“Purdue”) and the Department of Justice (“DOJ”), under which Purdue Pharma L.P. plead guilty in New Jersey to a three-count felony information (“Information”), which charged one count of conspiracy to defraud the United States and to violate the Food Drug and Cosmetic Act (“FDCA”) and two counts of conspiracy to violate the Federal Anti-Kickback Statute (“AKS”). Purdue will enter criminal guilty pleas, a federal settlement of more than $8 billion, and will dissolve a company to repurpose its assets entirely for the public’s benefit. The settlement will resolve both the DOJ’s civil and criminal investigations of Purdue as well as the civil investigation of the Sackler Family, the company’s founders. Although the Sackler Family will not be forced to plea and will not be admitting wrongdoing, it has agreed to forfeit $225MM of personal wealth in connection with the settlement.

Conspiracy to Defraud the United States and to Violate the Federal Food, Drug, and Cosmetic Act

The government alleged, and Purdue pled guilty to, impeding the lawful function of the Drug Enforcement Administration (“DEA”) by representing to the DEA that Purdue maintained an effective anti-diversion program when, in fact, Purdue continued to market its opioid products to more than 100 health care providers who Purdue knew or had good reason to believe were diverting opioids based on information received from a number of pharmacies and marketers. The Information further alleges that Purdue aided and abetted violations of the FDCA by facilitating the dispensing of its opioid products, including OxyContin, when it knew or should have known many of the prescribers writing these prescriptions had issued the prescriptions without a legitimate medical purpose. Pursuant to the FDCA, dispensing prescription drugs without a valid prescription from a licensed practitioner results in the “misbranding” of the drug.  A valid prescription means a prescription issued in the usual course of professional practice for a legitimate medical purpose. Given that numerous physicians were alleged to have been engaged in diversion, those prescription orders had no legitimate medical purpose and the drugs were thus misbranded.

In addition, the Information charges that Purdue artificially inflated the number of opioid medications permitted to be manufactured by the DEA’s quota system, as Purdue provided figures to the DEA that disguised prescriptions written by prescribers that Purdue knew or had reason to believe were engaged in diversion as legitimate.

Two Counts of Conspiracy to Violate the Anti-Kickback Statute

As to the first count of Conspiracy to Violate the Federal Anti-Kickback Statute, Purdue acknowledged making payments to physicians for the purposes of inducing prescribers to write prescriptions for Purdue’s opioid products. These kickbacks were made to prescribers as payments for “speaker fees.” Though the speaker programs were purported to be legitimate, the Information alleges that they were led by prescribers who were ineffective speakers as well as those who had been flagged as writing suspicious orders, as defined by the Controlled Substances Act (“CSA”).

As to the second count of Conspiracy to violate AKS, Purdue pled to making certain payments to Practice Fusion, Inc., an electronic health records (“EHR”) company. In exchange for such payments, Practice Fusion designed its EHR system to provide physicians with alerts that served to influence those providers to increase prescribing of Purdue’s opioid products. As part of its role, Practice Fusion faced separate criminal and civil charges and paid $145 Million to resolve these allegations.

Key Takeaways

The war against opioids has remained a government priority for several years. To reinforce the government’s message, Deputy Attorney General Rosen announced that the Purdue resolution “re-affirms that the Department of Justice will not relent in its multi-pronged efforts to combat the opioids crisis.” The outcomes of the Purdue prosecution specifically underscore that the government is ready, willing, and able to investigate and prosecute all stakeholders engaged in a scheme of misconduct, no matter how large a corporation is, and no matter where in the distribution chain stakeholders may lie. In particular, the FDCA-related charges against Purdue demonstrate that upstream entities may not use their degree of removal from the prescriber as a defense; if a manufacturer (or wholesaler) is involved in the impermissible prescribing of a product, the government will prosecute that inappropriate behavior. Even individual business owners can face personal liability, as demonstrated by the investigation of, and large forfeiture paid by, the Sackler family, the former owners of Purdue.

Additionally, the AKS charge pertaining to kickbacks made to an EHR vendor, as well as the separate settlement between the DOJ and the vendor, demonstrates that technology companies prosecuted. The Practice Fusion settlement is unique in that it targets a technology company for designing its software to increase orders of illegitimate prescriptions.

Finally, and importantly, the charges and pleas in this matter highlight that it is inappropriate to assume a company’s activities are sanctioned merely due to the size of that entity. Many small businesses believe that large stakeholders must have obtained legal opinions authorizing their activities, or, alternatively, that large companies set the standard for the industry and are immune to prosecution, regardless of the legality of their actions. However, the fact that a large or even publicly traded company is engaged in a particular practice does not equate to the conclusion that such a practice is permissible or should be relied upon as compliant. A thorough regulatory review of any health care arrangement must be performed by competent health care counsel.

How Frier Levitt Can Help

Frier Levitt has extensive experience advising healthcare providers and non-licensees to ensure compliance with the myriad of healthcare regulations affecting industry stakeholders. Our attorneys have developed many compliant programs that can withstand regulatory scrutiny, including marketing relationships and manufacturer sponsored speaking programs. In addition to proactively structuring arrangements in a compliant fashion, Frier Levitt represents individuals and entities already facing government investigations, whether it be at the civil or criminal level, or both. In representing clients in these investigations, Frier Levitt crafts thoughtful and well-rounded defenses by leveraging its experience and knowledge of the intricacies of the healthcare and life sciences sectors and the relationships of entities therein. Contact Frier Levitt for a thorough evaluation of the relationship between your practice or pharmacy and manufacturers.

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