A couple of recent large-scale enforcement actions suggest that the U.S. Department of Justice (DOJ) may be placing increased emphasis on targeting black market prescription drug diversion. This is when pharmaceutical distributors and pharmacies sell prescription drugs to third parties with the knowledge that these drugs will end up (or are likely to end up) on the black market. In both cases, the DOJ filed multiple charges against the defendants involved, including not only diversion-related charges, but also charges for conspiracy to commit health care fraud by improperly billing Medicare for diverted drugs.
In light of these recent cases, pharmaceutical distributors, pharmacies, and other parties that may be at risk of facing diversion-related scrutiny need to give due consideration to the risks involved. In the event of a DOJ investigation or a raid conducted by the U.S. Drug Enforcement Administration (DEA), being thoroughly prepared will be critical for avoiding unnecessary consequences.
“DOJ enforcement actions targeting diversion of prescription drugs to the black market present substantial risks for all parties involved. In two recent enforcement actions, the DOJ has used conspiracy charges to target pharmacy owners, pharmaceutical distributors and sales representatives, and other ‘associates’ involved in alleged wide-ranging criminal enterprises.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
While combating drug diversion has long been among the DOJ’s top healthcare-related priorities, this specific focus on black market prescription drug diversion is relatively new. Whether the DOJ will continue to focus its efforts here in the years ahead remains to be seen. But due to the potential risks involved, for those who may be at risk, it will be well worth taking precautions should the DOJ or DEA launch an investigation.
What Are the Allegations?
In one recent case, the federal jury convicted a pharmacy owner and her associate with, “submitting false and fraudulent claims to Medicare and California Medicaid (Medi-Cal) for prescription drugs and engaging in a black market prescription drug diversion conspiracy.” According to a DOJ press release, the defendants worked together to use Medicare and Medi-Cal beneficiaries’ personal information to bill Medicare for prescription drugs that were provided to co-conspirators to sell on the black market. The DOJ’s press release also states that the California woman-pharmacy owner obtained fraudulent prescriptions from co-conspirators by “recommend[ing] the combinations of prescription drugs to be written and check[ing] the eligibility of the patients for reimbursement.”
In another recent case, the DOJ charged a total of 10 pharmaceutical distributors, sales representatives, and brokers with, “selling dangerous and addictive drugs to pill-mill pharmacies at above-market prices, knowing that the drugs would end up on the black market.” The DOJ’s press release further alleges that the defendants strategically sourced drugs from around the country for distribution to pill mills in Houston, TX, which the DOJ describes as, “a nationally recognized ‘hot zone’ for diversion of prescription opioids onto the black market.” The DOJ describes this as its largest criminal enforcement action targeting black market prescription drug diversion to date, with the diverted drugs having a total black market value of more than $1.3 billion.
Who is At Risk?
As noted above, the DOJ has targeted a wide range of individuals and entities in its enforcement actions involving alleged black market prescription drug diversion. Under the federal conspiracy statutes, the DOJ has the ability to pursue charges against just about anyone involved in the supply chain—from the doctors who write prescriptions used to divert medications to pharmaceutical distributors, sales representatives, pharmacy owners, and individual pharmacists and technicians.
This breadth of enforcement has been a key feature of many of the DOJ’s recent enforcement actions targeting drug diversion—not just those involving diversion to the black market. Along with the federal conspiracy statutes, many of the other statutes the DOJ uses in diversion cases are extremely broad as well; and, as discussed below, this can put all parties involved at risk for substantial penalties.
What Are the Potential Charges?
In black market prescription drug diversion cases, the DOJ has the ability to pursue a wide range of charges. In the cases discussed above, the defendants faced specific charges including (but not limited to):
- Conspiracy to commit healthcare fraud
- Conspiracy to defraud the United States in connection with a scheme to unlawfully distribute and dispense for non-medical use
- Conspiracy to unlawfully distribute and dispense, and possess with intent to distribute and dispense, controlled substances
- Conspiracy to use a communications facility to further the commission of a drug felony
- Healthcare fraud
- Possession with intent to distribute hydrocodone and oxycodone
- Unlawfully distributing and dispensing controlled substances
- Unlicensed wholesale distribution of prescription drugs
These charges involve alleged violations of the following statutes:
- 18 U.S.C. Section 371 (Conspiracy to Commit Offense or to Defraud the United States)
- 18 U.S.C. Section 1347 (Healthcare Fraud (Including Medicare and Medicaid Billing Fraud))
- 18 U.S.C. Section 1349 (Attempt and Conspiracy Involving Healthcare-Related Offenses)
- 21 U.S.C. Section 841 (Distribution/Manufacturing/Possession with Intent to Distribute)
- 21 U.S.C. Section 843(a) (Obtaining Controlled Substances By Misrepresentation, Fraud, Forgery, or Other Unlawful Means)
- 21 U.S.C. Section 843(b) (Use of a Communication Facility to Facilitate Drug Felony)
- 21 U.S.C. Section 844 (Simple Possession of Controlled Substances)
- 21 U.S.C. Section 846 (Attempt and Conspiracy Involving Drug-Related Offenses)
Even these are just examples fo drug policies. The DOJ has a long history of targeting prescription drug diversion; and, over the years, it has amassed a substantial playbook for prosecuting both individuals and organizations in these cases. For those targeted in black market prescription drug diversion cases, gaining a clear and comprehensive understanding of all of the potential charges involved is a critical first step toward building and executing an informed defense strategy.
What Are the Potential Penalties?
All of the statutes listed above carry substantial penalties. Under 21 U.S.C. Section 841, for example, individuals face a maximum prison sentence of 20 years by default, but this can increase to a life sentence depending on the specific drug(s) and quantity(ies) involved. Mandatory five-year and ten-year minimum sentences apply in some cases as well. In terms of fines, Section 841 imposes up to a $10 million fine for individuals and a $50 million fine for organizations in most cases, though these increase to $20 million and $75 million, respectively, in cases involving serious bodily injury.
Under 18 U.S.C. Section 1347, billing Medicare for diverted prescription medications carries statutory fines and up to 10 years of federal imprisonment, or 20 years in cases involving serious bodily injury. In cases involving conspiracy charges under 18 U.S.C. Section 1349 or 21 U.S.C. Section 846, alleged co-conspirators can face the same penalties as those charged with perpetrating substantive offenses.
What Can Potential Targets Do to Protect Themselves?
With all of this in mind, what can (and should) potential targets do to protect themselves? While it may not be possible to undo what has already been done, individuals and organizations that are at risk of facing diversion-related investigations can take several steps to mitigate their risk going forward.
For example, any doctors, pharmacists, or other individuals who have concerns about potentially being implicated in a black market prescription drug diversion scheme should work with legal counsel to overhaul their controlled substance compliance programs and implement appropriate measures to detect and prevent potential diversion going forward. Even if you do not have direct or confirmed knowledge that drugs you have prescribed or dispensed are being diverted, this won’t necessarily be enough to protect you in the event of a DOJ enforcement action.
Additionally, regardless of their level of knowledge, all parties involved (or potentially involved) in black market prescription drug diversion schemes should prepare for the possibility of facing scrutiny from the DEA or DOJ. In the event of a federal law enforcement investigation, being as prepared as possible is critical. This includes having protocols in place to respond to raids, search warrants, and subpoenas, as well as developing a plan with your legal counsel to get them involved at a moment’s notice if necessary.
What Should You Do if Contacted by the DEA or DOJ?
Whether or not you have had time to plan ahead, being contacted by the DEA or DOJ requires an immediate response. This is a high-risk scenario, especially in cases involving potential criminal charges related to allegedly diverting prescription medications to the black market. Engaging experienced federal defense counsel immediately is critical, and you should rely on your legal counsel both to provide you with advice and to communicate with federal agents on your behalf.
Going forward, it remains to be seen whether the DOJ will continue to prioritize prescription drug diversion—and black market prescription drug diversion in particular—during the second Trump administration. However, in any case, the risk of facing serious criminal charges is not a risk that can be ignored. If you have questions or concerns, you should seek legal advice and representation promptly—and you should work with your legal counsel to ensure that you are as prepared as possible to respond effectively to any scrutiny from the DEA or DOJ.
