Individuals and entities in the opioid supply chain continue to be a top enforcement priority for the Department of Justice (DOJ) and other enforcement agencies, and we expect this trend will continue in 2023. Federal enforcement efforts this past year were a mixed bag: DOJ suffered a significant setback at the Supreme Court, devoted new resources to curb opioid-related criminal conduct by individuals, and further expanded its civil enforcement toolkit to limit opioid overprescribing by pharmacies and pharmacists. DOJ’s civil enforcement efforts will continue unabated in 2023 as well, as evidenced by the government’s newest lawsuit against a major distributor filed in the final days of 2022. Additionally, state governments and private plaintiffs procured massive civil settlements in the national opioid litigation involving three major pharmacies in 2022.
Ruan’s Heightened Intent Standard for CSA Convictions
Over the summer, the Supreme Court held that to obtain a conviction of a prescriber under the Controlled Substances Act (CSA) the government must prove, beyond a reasonable doubt, that the prescribing medical professional “knowingly and intentionally” prescribed a controlled substance with no legitimate medical purpose. The government therefore must demonstrate the prescriber’s actual subjective intent, which means that it can no longer rely on an objective (hypothetical) reasonable prescriber standard. As we previously noted, this higher bar represents a setback for DOJ’s opioid-focused criminal enforcement priorities.
Recent events suggest that Ruan has already had an impact in pending cases. Federal district courts have dismissed a number of defective indictments against individual prescribers—upon request by the government—where the evidence of intent was deemed insufficient. The government also dropped its charges against the remaining defendants in the Miami-Luken case, an aggressive prosecution of a pharmaceutical distributor and its executives that we discussed in last year’s report. Further, the Supreme Court has remanded other cases where the jury instructions used to secure a conviction did not comport with Ruan. While courts have not applied Ruan’s holding retroactively, the enforcement landscape has shifted substantially.
New England Strike Force
Just days after Ruan was decided, DOJ’s Criminal Division announced the creation of the New England Prescription Opioid (NEPO) Strike Force. The NEPO Strike Force’s mandate is to investigate and prosecute health care fraud schemes and illegal distribution of controlled substances in New England. Likely investigation targets include physicians, pharmacists, and other medical professionals. In October 2022, the NEPO Strike Force announced its first criminal charges: a Maine physician was charged with illegal distribution of opioids and other controlled substances in violation of the CSA. Given the resources DOJ continues to devote to criminal opioid enforcement, we expect to see more charges brought in the coming year.
Increased Use of TROs to Halt Overprescribing
Any civil litigator knows that a temporary restraining order (TRO) is a key tool to gain leverage at the outset of litigation. DOJ is applying that lesson in the opioid context, obtaining TROs against pharmacies and pharmacists to immediately stop prescriptions from being filled during the pendency of a new case. DOJ first used this approach in 2019, in connection with a civil complaint filed against two pharmacies and three pharmacists alleging violations of the CSA and the False Claims Act (FCA). In 2022 federal courts granted the government’s requests for TROs in at least three separate cases brought against pharmacies and pharmacies in the Tampa, Florida area. The impact of each of these orders is massive: once granted, the TRO essentially shuts down the pharmacy’s operations dispensing of controlled substances. Moving forward, and particularly given the new challenges Ruan poses for criminal prosecutions, DOJ likely will make greater use of TROs in civil matters to combat the opioid epidemic and to limit the unlawful distribution of opioids and other controlled substances.
DOJ’s Civil Suit Against AmerisourceBergen
In the final days of 2022, DOJ filed suit against AmerisourceBergen, a major drug distributor, asserting civil violations of the CSA arising from the company’s “deeply deficient” monitoring systems for opioid orders. Specifically, the complaint alleges that, from 2014 to present, AmerisourceBergen (and its subsidiaries) underfunded and improperly implemented its compliance programs, which resulted in defendants failing to report suspicious opioid orders placed at five different pharmacies. Given the hundreds of thousands of CSA violations alleged, defendants potentially face billions of dollars in liability. On the same day the suit was filed, AmerisourceBergen issued a press release stating that the handful of pharmacies identified in the complaint were “cherry picked” by DOJ from the thousands of pharmacies it supplies and arguing that responsibility for any monitoring failure lies with the Drug Enforcement Administration rather than the distributor.
In 2020, DOJ brought a civil CSA enforcement action against Walmart alleging similar theories of liability, which we discussed in our Health Care Enforcement 2020 Year in Review & 2021 Outlook, and additional suits may follow against other defendants. All distributors and pharmacies in the opioid supply chain should keep a close eye as these two suits progress in 2023.
Corporate Resolutions of State Actions
2021 was the year of distributor resolutions in national opioid litigation, and in 2022 state governments and private plaintiffs followed the same playbook, obtaining massive resolutions with three major pharmacies. The pharmacies allegedly contributed to the national opioid epidemic by failing to appropriately oversee and monitor opioid prescriptions filled at their pharmacies. The total value of the pharmacies’ settlement payments was $13.7 billion. The pharmacies made no admission of wrongdoing in the settlements.
The forward-looking aspects of the agreements are particularly noteworthy. They require each of the settling pharmacies to (1) implement a controlled substances compliance program; (2) appoint an independent compliance director and establish a compliance oversight committee; and (3) satisfy various reporting requirements to the settling state governments. These injunctive relief terms are consistent with DOJ’s recent announcements about the increased use of monitorships in corporate criminal resolutions. Clearly, both state and federal governments will be watching pharmacies closely in the coming years, particularly with respect to opioid prescription practices. Entities seeking to resolve investigations should expect that ongoing compliance obligations or monitorships to be a part of any negotiated agreement.