Department of Justice Closes Two Pharmacies In Connection With Opioid FCA Investigation

DOJ recently took the unusual step of obtaining a temporary restraining order (“TRO”) to shut down two healthcare providers in conjunction with the filing of a False Claims Act lawsuit based on the dispensing of medically unnecessary prescriptions.

On October 26, 2017, the Secretary of the Department of Health and Human Services (“HHS”) declared the opioid epidemic a national public health emergency.  As further detailed in the Complaint, according to the Center for Disease Control and Prevention (“CDC”), retail opioid prescriptions were dispensed in 2017 at a national rate of 58.7 prescriptions per 100 persons, and Tennessee’s dispense rate is nearly double the national rate, according to the United States.  See Complaint, at ¶15.  In Clay County, in particular, the United States contends that opioids were dispensed “at a rate sufficient for every man, woman, and child in the county to get their own prescription – twice.”  See Complaint, at ¶16.

On February 7, 2019, the United States filed a Complaint and an ex parte motion for a TRO, seeking injunctive relief and civil monetary penalties against two Clay County pharmacies, Oakley Pharmacy, Inc., doing business as retail pharmacy Dale Hollow Pharmacy (“Dale Hollow”) and Xpress Pharmacy of Clay County, LLC (“Xpress”), among others.  The Complaint alleged that the pharmacies violated the Controlled Substances Act by knowingly dispensing controlled substances without a valid prescription in violation of 21 U.S.C. § 842(a)(1), and knowingly and intentionally distributing and dispensing controlled substances outside the usual course of the pharmacy professional practice. The United States also alleged violations of the False Claims Act in connection with funds paid by Medicare for the controlled substances that were dispensed. The United States further alleged that within the last 26 months, the pharmacies unlawfully dispensed controlled substances that have been tied to the deaths of several individuals and that at least five customers of Xpress and seven customers of Dale Hollow, all of whom were Medicare beneficiaries, have been treated for drug overdoses at hospitals and some admitted for more than one overdose.  In addition to seeking civil monetary penalties, the United States sought a preliminary injunction against the pharmacies, permanently enjoining the Defendants, and those acting in concert with them, from continuing to unlawfully dispense controlled substances.

The judge issued the TRO, finding that advance notice would result in immediate and irreparable injury, loss, or damage to the pharmacies’ customers if the pharmacies continued the distribution and dispensation of controlled substances and the potential destruction of evidence related to alleged Controlled Substances Act violations.  The Court also temporarily restrained and enjoined the pharmacies from, directly or indirectly, distributing, dispensing, or possessing with the intent to distribute or dispense, any controlled substances as defined and identified in 21 U.S.C. §§ 802(6) and 812, and 21 C.F.R. §§ 1308.11-1308.15, required them to surrender all controlled substances in their possession, custody, or control upon service of the Order, and prohibited them from altering, deleting, destroying, mutilating, or transferring any record relating to the distribution or dispensation of controlled substances.

The issuance of the ex parte restraining order in this case illustrates the Department of Justice’s strong stance in fighting the war against the opioid crisis and opioid-related prescription abuses and the tools DOJ will use to accomplish this goal.  This enforcement priority, including the use of the Controlled Substances Act, was outlined at the annual Food and Drug Law Institute Conference on December 13, 2018, by James Burnham, Deputy Assistant Attorney General for the Consumer Protection Branch, and further discussed here. This is also a clear sign to pharmacies that they may be temporarily shut down by DOJ at the beginning of the investigation, instead of months after an investigation has commenced, if they do not sufficiently monitor opioid prescriptions.  A copy of the Complaint, Ex Parte Motion for Temporary Restraining Order and Preliminary Injunction, and Temporary Restraining Order in United States v. Oakley Pharmacy, Inc. d/b/a Dale Hollow Pharmacy, et al., No. 2:19-cv-00009 (M.D. Tenn. Feb. 7, 2019), can be accessed here.