DOJ Brings Nationwide False Claims Act Lawsuit Against CVS for Alleged Violations of Controlled Substances Act

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On December 13, the U.S. Department of Justice (DOJ) intervened in a False Claims Act (FCA) lawsuit alleging that CVS Pharmacy Inc. and its subsidiaries improperly sought federal reimbursement for prescriptions filled in violation of the Controlled Substances Act (CSA).

The government alleges that CVS caused its pharmacists to routinely fill opioid and other controlled substance prescriptions despite “red flags” indicating that the prescriptions were invalid, medically inappropriate, and/or dangerous. The government contends that CVS violated the FCA when it sought reimbursement for these prescriptions from federal healthcare programs.

This is the second high-profile FCA action that DOJ has pursued recently against a pharmacy for non-compliance with the CSA. Earlier this year, DOJ settled a similar CSA-based FCA case against Rite Aid for nearly $410 million. As the Rite Aid settlement demonstrates, the significant damages that attach to FCA violations—treble damages plus per-claim civil penalties—greatly magnify the monetary exposure DEA registrants face for alleged CSA non-compliance.

These and other government enforcement actions highlight that CSA compliance should be a top-line priority for all DEA registrants.

Importance of Corresponding Responsibility

The government alleges that CVS violated the CSA by failing to exercise its duty of corresponding responsibility. DEA regulations impose a “responsibility for the proper prescribing and dispensing of controlled substances” on “the prescribing practitioner.” But they also impose “a corresponding responsibility” on “the pharmacist who fills the prescription.” 21 C.F.R. § 1306.04(a). As DOJ alleges in its complaint against CVS, the government considers pharmacists to be the “last line of defense” against the improper dispensing of controlled substances.

The federal government contends that, in practice, exercising corresponding responsibility means pharmacists must investigate and resolve all “red flags” before dispensing prescriptions for controlled substances.

However, DEA has not published a definitive list of red flags. Instead, DEA insists that red flags are circumstance-dependent. Some pharmacies may justifiably feel this leaves them open to allegations of wrongdoing based on 20/20 hindsight.

Allegations Against CVS

The government alleges that CVS’s corporate policies incentivized pharmacists to fail to exercise corresponding responsibility, resulting in the filling of a large number of invalid and unlawful prescriptions. The complaint highlights the following alleged failures in CVS’s corporate compliance program:

  • Unrealistic labor expectations created unsafe staffing levels. Bonus structures improperly incentivized pharmacists to fill prescriptions quickly and sacrifice the proper exercise of corresponding responsibility.
  • CVS failed to adopt methods to track and share with pharmacists at other CVS pharmacies instances where pharmacists refused to fill prescriptions due to unresolvable red flags.
  • Corporate management intentionally failed to provide pharmacists with available data to adequately exercise corresponding responsibility.
  • Complaints about patient and employee safety raised through the CVS ethics line and employee interviews were repeatedly ignored by corporate management.

Increased Government Enforcement of Controlled Substances Act

The government shows no signs of slowing its enforcement of alleged CSA violations. In fact, the case against CVS is one of many recent examples of the government increasing its enforcement and pursuing novel theories of liability against actors at all stages of the distribution chain.

  • In a novel use of DEA’s administrative forfeiture power, in February, distributor Morris & Dickson Co. agreed to forfeit $19 million to resolve a DEA administrative action over alleged failure to report suspicious controlled substances orders and failure to maintain adequate controls.
  • In June, mail-order pharmacy OptumRx agreed to pay $20 million to DOJ to resolve allegations that one of its pharmacies improperly filled “trinity” prescriptions (an opioid, a benzodiazepine, and a muscle relaxant).
  • In July, Rite Aid agreed to pay DOJ $7.5 million and allowed DOJ to obtain a general unsecured claim of $401.8 million in its bankruptcy proceedings as a result of alleged FCA violations for failure to satisfy corresponding responsibility and ignoring red flags when filling opioid prescriptions.
  • The government has also brought enforcement actions based on corresponding responsibility for the dispensing of other drugs. The recent indictments of Done Global Inc. executives, for example, involved the exercise of corresponding responsibility when dispensing stimulants like Adderall.

Takeaways

Government enforcement activity related to alleged CSA violations is only increasing. DEA registrants should consider recent government enforcement actions when assessing their policies and procedures for corresponding responsibility and CSA compliance.

Please contact the authors or reference our Controlled Substances Enforcement & Diversion Practice capabilities if you have questions about how the CVS lawsuit may impact your compliance program.

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Firm Publication

On December 13, the U.S. Department of Justice (DOJ) intervened in a False Claims Act (FCA) lawsuit alleging that CVS Pharmacy Inc. and its subsidiaries improperly sought federal reimbursement for prescriptions filled in violation of the Controlled Substances Act (CSA).

The government alleges that CVS caused its pharmacists to routinely fill opioid and other controlled substance prescriptions despite “red flags” indicating that the prescriptions were invalid, medically inappropriate, and/or dangerous. The government contends that CVS violated the FCA when it sought reimbursement for these prescriptions from federal healthcare programs.

This is the second high-profile FCA action that DOJ has pursued recently against a pharmacy for non-compliance with the CSA. Earlier this year, DOJ settled a similar CSA-based FCA case against Rite Aid for nearly $410 million. As the Rite Aid settlement demonstrates, the significant damages that attach to FCA violations—treble damages plus per-claim civil penalties—greatly magnify the monetary exposure DEA registrants face for alleged CSA non-compliance.

These and other government enforcement actions highlight that CSA compliance should be a top-line priority for all DEA registrants.

Importance of Corresponding Responsibility

The government alleges that CVS violated the CSA by failing to exercise its duty of corresponding responsibility. DEA regulations impose a “responsibility for the proper prescribing and dispensing of controlled substances” on “the prescribing practitioner.” But they also impose “a corresponding responsibility” on “the pharmacist who fills the prescription.” 21 C.F.R. § 1306.04(a). As DOJ alleges in its complaint against CVS, the government considers pharmacists to be the “last line of defense” against the improper dispensing of controlled substances.

The federal government contends that, in practice, exercising corresponding responsibility means pharmacists must investigate and resolve all “red flags” before dispensing prescriptions for controlled substances.

However, DEA has not published a definitive list of red flags. Instead, DEA insists that red flags are circumstance-dependent. Some pharmacies may justifiably feel this leaves them open to allegations of wrongdoing based on 20/20 hindsight.

Allegations Against CVS

The government alleges that CVS’s corporate policies incentivized pharmacists to fail to exercise corresponding responsibility, resulting in the filling of a large number of invalid and unlawful prescriptions. The complaint highlights the following alleged failures in CVS’s corporate compliance program:

  • Unrealistic labor expectations created unsafe staffing levels. Bonus structures improperly incentivized pharmacists to fill prescriptions quickly and sacrifice the proper exercise of corresponding responsibility.
  • CVS failed to adopt methods to track and share with pharmacists at other CVS pharmacies instances where pharmacists refused to fill prescriptions due to unresolvable red flags.
  • Corporate management intentionally failed to provide pharmacists with available data to adequately exercise corresponding responsibility.
  • Complaints about patient and employee safety raised through the CVS ethics line and employee interviews were repeatedly ignored by corporate management.

Increased Government Enforcement of Controlled Substances Act

The government shows no signs of slowing its enforcement of alleged CSA violations. In fact, the case against CVS is one of many recent examples of the government increasing its enforcement and pursuing novel theories of liability against actors at all stages of the distribution chain.

  • In a novel use of DEA’s administrative forfeiture power, in February, distributor Morris & Dickson Co. agreed to forfeit $19 million to resolve a DEA administrative action over alleged failure to report suspicious controlled substances orders and failure to maintain adequate controls.
  • In June, mail-order pharmacy OptumRx agreed to pay $20 million to DOJ to resolve allegations that one of its pharmacies improperly filled “trinity” prescriptions (an opioid, a benzodiazepine, and a muscle relaxant).
  • In July, Rite Aid agreed to pay DOJ $7.5 million and allowed DOJ to obtain a general unsecured claim of $401.8 million in its bankruptcy proceedings as a result of alleged FCA violations for failure to satisfy corresponding responsibility and ignoring red flags when filling opioid prescriptions.
  • The government has also brought enforcement actions based on corresponding responsibility for the dispensing of other drugs. The recent indictments of Done Global Inc. executives, for example, involved the exercise of corresponding responsibility when dispensing stimulants like Adderall.

Takeaways

Government enforcement activity related to alleged CSA violations is only increasing. DEA registrants should consider recent government enforcement actions when assessing their policies and procedures for corresponding responsibility and CSA compliance.

Please contact the authors or reference our Controlled Substances Enforcement & Diversion Practice capabilities if you have questions about how the CVS lawsuit may impact your compliance program.

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