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Enforcement against opioid drug makers and distributors escalates

Jaclyn Jaeger | November 7, 2017

Here’s a riddle: What’s the difference between drug dealers and prescription opioid pharmaceutical manufacturers and distributors?

The answer: nothing.

At least, that’s the loud and clear message coming from the Department of Justice, which has in recent weeks warned that it has its sights squarely on several pharmaceutical manufacturers and distributors for their role in the opioid epidemic that President Trump in October declared a national public health emergency.

The Department of Justice announced one of its most significant actions to date in September, when a bipartisan coalition of 41 state attorneys general from across the country served subpoenas to, and demanded information and documents from, several major prescription opioid drug manufacturers and distributors, as part of a multistate investigation into whether the companies engaged in any unlawful practices in the marketing and distribution of prescription opioids.

The pharmaceutical makers and their related entities that were served subpoenas are Endo International; Janssen Pharmaceuticals; Teva Pharmaceutical Industries/Cephalon; and Allergan. The attorneys general also served a supplemental investigative subpoena on Purdue Pharma, maker of Oxycotin and one of the most prominent legal targets of the opioid epidemic.

The attorneys general additionally demanded documents and information about distribution practices from three opioid distribution companies: AmerisourceBergen; Cardinal Health; and McKesson. According to the Department of Justice, these companies manage approximately 90 percent of the nation’s nearly $500 billion opioid distribution business.

The same pharmaceutical makers that received subpoenas from the Department of Justice already face dozens of lawsuits filed by states, cities, and counties. Among the states that have filed lawsuits include Missouri, Ohio, Mississippi, Oklahoma, and many others.

Each state’s complaint generally alleges the same—that these drug companies engaged in aggressive and fraudulent marketing, in which they deliberately misrepresented the addictive and dangerous risks of opioids to boost profits, fueling the deadly nationwide opioid epidemic. The states’ legal strategy—holding pharmaceutical manufacturers and distributors legally and financially responsible for their deceptive acts—is reminiscent of the successful, multibillion victories against the tobacco industry in the 1980s.

Deceptive sales and marketing. Purdue Pharma is the poster child of these claims, facing lawsuits filed by at least a dozen states—most recently, New Jersey and Alaska. Compliance, risk, and legal executives in the pharmaceutical and healthcare and industries should review the 109-page complaint, filed on Oct. 31, by Attorney General Christopher Porrino, as it points to the sort of deceptive sales and marketing practices that are the focus of U.S. enforcement authorities.

“In a campaign of almost inconceivable callousness and irresponsibility … Purdue has spent hundreds of millions of marketing dollars to downplay the addiction risk associated with taking opioids for chronic pain, all the while exaggerating the benefits of using these dangerous drugs,” Porrino said.

New Jersey’s investigation yielded evidence that each Purdue sales representative in the state was required to visit up to eight doctors per day, five days a week, to promote opioids. High-volume prescribers were given the title of “Super Core Prescribers” and received special attention from Purdue, according to the allegations.

Purdue compensated its sales representatives based on reaching their “Rx quota” for each drug. For OxyContin alone, the quotas were in the range of 500 to 700 prescriptions per month for each sales representative—amounting to quotas of up to 8,400 prescriptions per year for each sales representative.

“The sheer number of marketing visits made by Purdue sales representatives to New Jersey prescribers is staggering—and based on the number of prescriptions, the scheme clearly was a smashing success for the company,” Porrino said. Since the market debut of OxyContin in 1996, Purdue has generated more than $35 billion in overall sales.

“We must hold the industry and its leadership accountable—just as we would the cartels or a street-level drug dealer.”

William Weinreb, Acting U.S. Attorney, District of Massachusetts

The complaint further charges that Purdue, between 2007 and 2017, blanketed New Jersey with sales representatives “trained to emphasize the benefits of opioids, minimize their risks, deflect questions about addiction risks, and encourage doctors to consult unbranded websites and materials that did the same.”

Additionally, Purdue “funded and created ‘unbranded’ educational materials and Websites that never identified Purdue or its products by name because they were deceptively designed to look like the work of unaffiliated patient advocacy groups. These unbranded materials magnified and supported Purdue’s deceptive marketing scheme,” the allegations hold.

In an e-mailed response, Purdue said it shares concerns about the opioid crisis and is dedicated to being part of the solution. “We vigorously deny these allegations and look forward to the opportunity to present our defense,” the company stated.

Additionally, Purdue says it is taking “meaningful action” to help address the opioid crisis, including by “significantly limiting the promotion of our FDA-approved products, implementing rigorous compliance programs, and developing products with abuse-deterrent properties.”

Individual prosecutions

In another sign that the Department of Justice is ramping up its enforcement efforts in this area, the agency’s newly established pilot program, named the Opioid Fraud and Abuse Detection Unit, is already bearing fruit. Unlike the Justice Department’s typical prosecution of drug crimes, which largely focuses on street-level dealers and their suppliers, this new unit will squarely target physicians, pharmacists, and healthcare providers.

The overall mission of the Opioid Fraud and Abuse Detection Unit, created in August, is to use data analytics—such as prescriptions and billing records—to identify and prosecute individuals identified as contributing to the opioid epidemic. In public remarks, Attorney General Jeff Sessions explained that this data analytics team will be able to tell the Department of Justice important information about prescription opioids—like which physicians are writing opioid prescriptions at a rate that far exceeds their peers or which pharmacies are dispensing disproportionately large amounts of opioids.

In addition to using data analytics, the Department of Justice has assigned 12 assistant U.S. attorneys, serving three-year terms, to focus solely on investigating and prosecuting opioid-related health care fraud cases. These experienced prosecutors will work together with the Federal Bureau of Investigation, the Drug Enforcement Agency, the Department of Health and Human Services, and state and local agencies to target and prosecute doctors, pharmacies, and medical providers who are furthering the opioid epidemic.

Sessions said the pilot program will focus its efforts on the 12 districts hardest hit by the opioid epidemic. These include the Southern District of Ohio, the Eastern District of Kentucky, the Western District of Pennsylvania, and the Southern District of West Virginia.

In October, the Opioid Fraud and Abuse Detection Unit unsealed its first indictment, targeting a Pittsburgh-area physician, Andrzej Zielke, in a 14-count indictment on charges of conspiracy and unlawful distribution of controlled substances. The indictment alleges that Zielke wrote prescriptions for oxycodone, hydrocodone, and methadone at least 13 times that were “not for medical purposes” and that he charged patients $250 cash, many of whom traveled long distances for opioid prescriptions.

Mail and wire fraud charges. Compliance officers in the pharmaceutical and healthcare industry should also heed warning that mail and wire fraud charges can result when fraudulent means are used to illegally distribute opioids.

On Oct. 26, the Justice Department arrested and charged John Kapoor, founder and majority owner of Insys Therapeutics, with leading a nationwide conspiracy to bribe doctors and pharmacists to prescribe its fentanyl drug, “Subsys,” a highly addictive narcotic intended for cancer patients suffering pain.

In a statement, Acting U.S. Attorney William Weinreb said the arrest and charges “reflect our ongoing efforts to attack the opioid crisis from all angles. We must hold the industry and its leadership accountable—just as we would the cartels or a street-level drug dealer.”

Following announcement of the charges, Kapoor announced his resignation from the Insys board of directors, effective immediately. In a letter to board members, Kapoor stated: “I am confident that I have committed no crimes and believe I will be fully vindicated after trial. Nevertheless, I realize that my continued involvement with INSYS will only serve to draw unnecessary attention to the company and its employees, and distract the management team.”

The Justice Department’s superseding indictment includes additional allegations against several of the following former Insys executives and managers who were initially indicted in December 2016:

  • Michael Babich, CEO and president of Insys;
  • Alec Burlakoff, vice president of sales;
  • Michael Gurry, vice president of managed markets;
  • Richard Simon, national director of sales; and
  • Sunrise Lee and Joseph Rowan, both regional sales directors.

According to the Justice Department, these executives and managers conspired to bribe practitioners in various states, many of whom operated pain clinics, to get them to prescribe Subsys. In exchange for bribes and kickbacks, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer.

“As alleged, these executives created a corporate culture at Insys that utilized deception and bribery as an acceptable business practice, deceiving patients, and conspiring with doctors and insurers,” said Harold Shaw, special agent in charge of the FBI, Boston Field Division. “The FBI will vigorously investigate corrupt organizations with business practices that promote fraud with a total disregard for patient safety.”

Some of the most damning evidence against Insys came in September, when U.S. Senator Claire McCaskill (D-MO) announced the first round of findings, detailing systemic manipulation of the prior authorization process by Insys. Her report describes the emphasis Insys put on boosting approvals for Subsys, even for inappropriate, off-label uses, and details an audio recording in which an Insys sales representative misidentifies herself and uses language designed to circumvent the prior authorization process.

“This company has repeatedly gotten away with fines that amounted to a slap on the wrist for actions that helped fuel a nationwide epidemic that’s claimed hundreds of thousands of American lives. Anyone, including top executives, who potentially violated criminal law should be aggressively prosecuted,” McCaskill said.

In a statement, Insys said that it has been working with relevant authorities to resolve issues related to the misconduct mentioned above. “Accordingly, we have taken a series of major actions to prevent the mistakes of the past from happening in the future,” the company stated.

Additionally, Insys noted that it’s under new management and has replaced 90 percent of the original sales force and commercial organization. “It’s disingenuous to repeatedly demonize a company that has made a firm and sincere commitment and is taking all the necessary steps to conduct business according to high ethical standards. It’s also unfair to the company’s current employees, most of whom are new to Insys and had no involvement in the past misdeeds.”

From a broader legal and compliance perspective, the warning is loud and clear: Prescription opioid drug makers, distributors, their executives, and sales and marketing staff are now directly in the sights of prosecutors. That said, it may be a good time for pharmaceutical manufacturers, distributors, and healthcare providers to review a document published by the National Association of Boards of Pharmacy, discussing stakeholders’ challenges and red-flag warning signs related to prescribing and dispensing controlled substances.

Among the key points discussed in the paper is the need for more collaboration and education from those in the industry. It concludes that, “strengthening these areas will be critical to ensuring all those involved are provided with the information and tools necessary to support the appropriate use of controlled substance medications,” consequently mitigating legal and compliance risk.

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