Kusserow’s Corner: Department of Justice Once Again Takes Action on Improper Distribution of Prescription Drugs

Fraud and abuse in the prescription arena continues to receive federal enforcement attention.  For the second time in ten days, the Department of Justice (DOJ) announced taking action against improper distribution of prescription drugs.   On June 11, 2013, the DOJ and the Drug Enforcement Administration (DEA) announced a settlement of $80 million with Walgreens in order to resolve allegations that the Walgreens Jupiter Distribution Center and six of its retail pharmacies in Florida repeatedly violated the Controlled Substances Act in negligently allowing controlled substances listed in Schedules II–V of the Act, such as oxycodone and other prescription pain killers, to be diverted for abuse and illegal black market sales.

On June 20, 2013, the DOJ announced that it filed suit in the U.S. District Court for the Western District of Louisiana.  This time it was not on behalf of DEA, but the Food and Drug Administration (FDA).  It filed against Sage Pharmaceuticals, Inc. (Sage), its president, Dr. Jivn-Ren Chen, and its Director of Corporate Quality, Charles L. Thomas, all of Shreveport, Louisiana.  According to the Complaint, the defendants violated the Federal Food, Drug, and Cosmetic Act (FDCA) by manufacturing and distributing unapproved and misbranded drug products. Under the FDCA, before a company can sell a new drug product to consumers, it must submit and receive approval of a new drug application from the FDA. The purpose of this approval process is to ensure that drugs manufactured and distributed to consumers are safe and effective for their intended uses. Furthermore, the FDA requires all drug-labeling to have adequate directions for use.

The DOJ noted that this was the second injunctive case that the government has brought against Sage alleging the distribution of unapproved new drugs. In 2000, the government obtained an injunction against the company banning the manufacture and distribution of two unapproved new drugs. Since that time, FDA inspections revealed that defendants continue to manufacture and distribute other drug products—including prescription pain relievers, over-the-counter (OTC) cough and cold remedies, and OTC wound cleansers—without first obtaining the requisite FDA approvals. As a result, the defendants’ products are unapproved new drugs and misbranded drugs under the FDCA, and potentially unsafe and ineffective.

Richard P. Kusserow served 11 years as the DHHS Inspector General and currently is CEO of the Compliance Resource Center (CRC), including Sanction Screening Services (S³), which provides sanction screening tools and also provides full outsourcing of sanction screening.  For more information, he can be contacted at rkusserow@strategicm.co.

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