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Summer 2022: Key Trends in Pharmacy Enforcement Actions

Pharmacies have long been a focus of enforcement actions brought by the Department of Justice (DOJ) and Department of Health and Human Services Office of Inspector General (OIG).  This summer has been no exception, with DOJ and OIG bringing a number of fraud cases against pharmacies and pharmacists. Although many enforcement actions under the False Claims Act (FCA) continue to focus on illegal kickback arrangements, this summer we observed substantial developments in the enforcement landscape concerning over-prescribing of opioids and Controlled Substances Act (CSA) prosecutions. We also saw enforcement actions brought against pharmacies for allegedly falsifying prior authorization information and providing more insulin than the pharmacy billed to payors. This post summarizes some of these and other key pharmacy enforcement trends this summer.

PillPack Insulin Overdispensing Settlement

The summer began with online retail pharmacy PillPack, LLC (an subsidiary) reaching a civil settlement to resolve fraud allegations  regarding the under-reporting of days-of-supply of insulin pens that led to fraudulent billing of government healthcare programs. Through the agreement, PillPack agreed to pay approximately $5.79M to the government and certain states that were allegedly overbilled for insulin.

According to the Stipulation of Settlement, PillPack fraudulently reported lower days-of-supplies of insulin than it was actually dispensing to patients. This alleged underreporting often led to PillPack pharmacists dispensing insulin pen refills to patients earlier than was necessary based on their current prescriptions. In addition to government healthcare programs approving of and paying for claims they would not have otherwise approved if PillPack had reported the days-of-supply based on the standard pharmacy billing formula used by government programs, patients allegedly received multiple extra pens they did not need based on their prescriptions.

Falsifying Prior Authorizations and Waiver Copayments

In July, Solera Specialty Pharmacy entered into a deferred prosecution agreement and paid $1.3M in civil penalties to resolve allegations that it submitted false claims for Evzio, an anti-overdose drug manufactured by kaléo Inc. (kaléo). Solera admitted to falsifying clinical information on prior authorization forms and signing the prior authorization forms in the place of the prescribing physicians. The pharmacy also waived Medicare copayments without determining whether the patient had a financial hardship. 

Interestingly, this settlement comes eight months after kaléo paid $12.7M to resolve FCA allegations arising from the same FCA claims as Solera. Specifically, as discussed in our Health Care Enforcement Year In Review & 2022 Outlook report, the government alleged that kaléo directed doctors to send Evzio prescriptions to certain preferred pharmacies that in turn (1) submitted false prior authorization requests for Evzio; and (2) dispensed Evzio without collecting or attempting to collect co-payments from government beneficiaries.

As a result, there may be similar cases against pharmacies announced in the coming months.

CSA Convictions Require Proving Subjective Criminal Intent

In Ruan v. United States, the Supreme Court held that the CSA requires the government to prove, beyond a reasonable doubt, that a prescribing medical professional knowingly and intentionally prescribed a controlled substance with no legitimate medical purpose. In other words, Ruan requires the government to prove criminal intent to secure a criminal conviction under the CSA. Because the two doctors’ convictions at issue in Ruan were based on jury instructions with an objective, rather than subjective, intent standard, the convictions were reversed.

Ruan raises the bar for the government to secure CSA convictions because a prescriber’s subjective intent can be difficult to prove. Typically, this element turns on circumstantial evidence (e.g., ignoring red flags of abuse and diversion) and the specific facts in a given case. For that reason, the impact of Ruan will be greatest seen at the margins—where the government aggressively brings criminal CSA charges against prescribers or physicians whose practices may deviate from established norms, but arguably fall within the outer limits of care for a legitimate medical purpose. While Ruan represents a setback for DOJ’s enforcement priorities, we expect the government will continue to charge prescribers, pharmacists and pharmacies for opioid-related prescribing under the CSA.

Controlled Substances Enforcement Actions

Notwithstanding the intent standard clarified by Ruan, there were multiple judgments and settlements this summer involving dispensing of opioids and violations of the CSA. The conduct at issue in the settlements ranged from dispensing Schedule II controlled substances without a valid prescription to conspiracies to distribute oxycodone by both pharmacies and prescribers.  Below are examples of these enforcement actions:

  • Verree Pharmacy Settlement: Mitchell Spivack, owner of Verree Pharmacy in the Philadelphia, Pennsylvania area, was originally charged civilly and criminally by the United States Attorney’s Office for the Eastern District of Pennsylvania and the Pennsylvania Office of Attorney General with conspiracy to distribute controlled substances and healthcare fraud in June. Spivack allegedly filled prescriptions for large quantities of high-dose oxycodone and other dangerous opioids with no legitimate medical purpose and fraudulently submitted claims to health care benefit programs without actually dispensing the drugs. Subject to court approval, Spivack recently agreed to settle $4.1M in civil damages and penalties under the FCA, CSA, and in civil forfeiture. Spivack had previously agreed to pay $500,000 in criminal restitution and criminal forfeiture.

  • Rosen Settlement: Norman Rosen, medical director and part-owner of Rosen-Hoffberg Rehabilitation and Pain Management Associates, P.A., pleaded guilty to conspiracy to distribute and dispense oxycodone to the United States Attorney's Office for the District of Maryland. Rosen, among other offenses, allegedly prescribed high individual doses of oxycodone to patients who did not need such high quantities or may have been experiencing substance use disorder.

DOJ also continues to marshal its resources toward opioid-related enforcement. For example, on June 29, 2022, just two days after Ruan was decided, DOJ’s Criminal Division announced the creation of the New England Prescription Opioid Strike Force, which has been charged with investigating health care fraud scheme in New England and criminally prosecuting the illegal distribution of prescription opioids and other controlled substances. We expect the strike force will follow the path set by DOJ’s Appalachian Regional Prescription Opioid Strike Force, which has charged over 100 defendants since its creation three years ago.

Illegal Kickback Schemes

DOJ continued to prosecute illegal kickback schemes carried out by pharmacies, prescribers and manufacturers.  In August, Dunn Meadow LLC (Dunn Meadow), a New Jersey pharmacy, pleaded guilty to a one-count information for illegally distributing prescription fentanyl and providing kickbacks to healthcare providers. In addition to the guilty plea, Dunn Meadow (and its parent Allegheny Pharma LLC), entered into a civil settlement resolving FCA and CSA liability, which revenue-based contingent payment which could be as high as $50 million. The charged conduct giving rise to criminal and civil liability involved Dunn Meadow receipt of remuneration from at least one pharmaceutical manufacturer in the form of payments for “shipping fees,” although the pharmacy routinely shipped medications without manufacturer payment. Dunn Meadow also provided meals and entertainment to prescribers and pharmaceutical sales representatives.

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Lauren M. Moldawer is an attorney who advises pharmacies, PBMs, managed care organizations, and other payors for Mintz. She provides guidance on transactional, regulatory, and fraud and abuse matters. Lauren draws upon her experience working for the Federal Coordinated Health Care Office.
Grady R. Campion is a Mintz attorney who focuses his practice on complex commercial litigation and white collar matters. He represents clients in a variety of industries, including financial services.
Pat G. Ouellette is an attorney at Mintz and a Certified Information Privacy Professional–US (CIPP–US). He focuses his practice on advising health care organizations on regulatory, compliance, data privacy, and transactional matters.