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Opioid epidemic’s impact on pharmacy sector

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The United States is battling what the Centers for Disease Control and Prevention (CDC) has labeled an epidemic of prescription drug abuse.

According to CDC data, drug overdose deaths more than doubled between 2002 and 2015 (the latest year for which information is available). In 2015, drug overdose deaths exceeded 50,000 — which is more than the number of deaths resulting from motor vehicle accidents. Approximately 60% of drug overdose deaths involved an opioid.

As a result, there is increasing pressure on the entire pharmacy industry, including pharmaceutical manufacturers, distributors and pharmacies, to combat controlled substance diversion and abuse.

Shannon Cox_Stephen Cummings_King & Spalding

Shannon Cox & Stephen Cummings, King & Spalding

Increased regulatory scrutiny

The continued increase in pain medication abuse and diversion has resulted in significantly stronger regulatory enforcement by the Drug Enforcement Administration as well as state regulators and even local law enforcement authorities.

In the past year, there have been a number of high-profile matters in which retail pharmacies have paid large civil penalties to resolve cases involving alleged violations of the Controlled Substances Act, including cases involving charges that retail pharmacies dispensed controlled substances based on prescriptions that were incomplete, contained invalid prescriber DEA registration numbers, or were beyond the prescriber’s scope of registration. In many of these cases, regulators and prosecutors have explicitly asserted that the alleged violations are linked to prescription drug abuse.

Recently, the U.S. Court of Appeals for the District of Columbia Circuit upheld the revocation of a distributor’s DEA registration for failure to identify suspicious orders of controlled substances. In support of its finding against Masters Pharmaceutical Inc., the Court quoted statements by the government to the effect that “DEA has been battling a steep increase in prescription opioid abuse — a problem that DEA views as an ‘epidemic.’ The Department of Health and Human Services (HHS), too, sees the rising abuse of prescription opioids as ‘a serious and challenging’ public health issue.”

DEA regulations require distributors to identify and report suspicious orders of controlled substances as part of their security obligations. Although an administrative law judge initially found in favor of Masters Pharmaceutical, holding that the distributor had substantially complied with its security obligations, the DEA acting administrator overruled the administrative law judge and found that Masters Pharmaceutical had violated the suspicious order reporting requirements.

In support of the decision to revoke the distributor’s registration, the DEA acting administrator set forth a number of factors that a controlled substance registrant should use in evaluating whether a controlled substance order is suspicious.

Masters Pharmaceutical argued that some of the factors cited by DEA had not previously been set forth in DEA regulations or guidance, but DEA and ultimately the D.C. Circuit rejected this argument. As a result, it is important that controlled substance distributors familiarize themselves not only with the DEA regulations and guidance but also with the DEA acting administrator’s opinion to ensure that their suspicious order monitoring programs take into account all of the factors set forth in the DEA acting administrator’s opinion. Moreover, the Masters Pharmaceuticals decision demonstrates to all types of entities that regulators are looking beyond specific regulatory requirements and prior guidance in evaluating ­compliance.

Civil litigation

In addition to regulatory enforcement actions, the pharmacy industry has recently faced an increase in other types of civil litigation relating to prescription drug abuse.

A number of cases have been filed against pharmaceutical manufacturers by governmental entities including the states of Ohio, Oklahoma, Missouri and Mississippi and counties in a number of other states. These lawsuits generally are based on consumer protection laws and allege that the manufacturers engaged in deceptive marketing by overstating the benefits and understating the risks associated with opioid pain medications. Because state Medicaid programs often pay for prescription drug claims, some of the lawsuits also allege False Claims Act violations. In many instances, the government entities are represented by private plaintiffs’ counsel.

There are indications that government entities may be expanding their litigation targets and strategies. In March 2017, several counties in West Virginia filed lawsuits against major drug distributors and pharmacy retailers alleging that the companies played a role in enabling the serious prescription drug abuse problem in the area. The counties have invoked a public nuisance statute originally designed to permit the demolition of derelict buildings and accused the companies of creating a hazard to public health and safety by distributing and dispensing high quantities of opioids. The lawsuits seek damages as compensation for the economic costs incurred by the counties as a result of prescription drug abuse.

In April 2017, the Cherokee Nation filed a lawsuit in tribal court against a number of pharmaceutical distributors and retail pharmacies claiming that the companies “contributed to an epidemic of prescription opioid abuse” within the tribe by turning a blind eye to red flags and failing to take steps to stop the dispensing of illegally prescribed opioids.

Specifically, the complaint alleges that the distributors and pharmacies violated the Controlled Substances Act and DEA regulations by filling suspicious or invalid orders at the wholesale and retail level, failing to maintain effective controls against opioid diversion, failing to operate effective systems to identify and report suspicious orders of controlled substances, failing to maintain proper records of controlled substance transactions, and filling questionable or invalid prescriptions. The tribe asserts that each controlled substance violation constitutes a separate violation of the Cherokee Nation Uniform Deceptive Trade Practices Act. The tribe is seeking “hundreds of millions of dollars” in damages as compensation for the costs of addiction treatment, treatment of infants born addicted to opioids, welfare costs associated with the care of children whose addicted parents are unable to support them, and costs of law enforcement efforts relating to prescription drug abuse.

Pending legislation

Just as there has been an increased focus by regulators, law enforcement and plaintiffs’ attorneys, so too has there been an increase in scrutiny from federal and state legislators.

Recently, as part of the negotiations for replacing the Affordable Care Act, there have been news reports that members of Congress are considering increasing funding to fight opioid abuse by $45 billion.

State legislators are also considering ways to combat the abuse and diversion of pain medications. For example, in Louisiana a law was passed in June that intends to limit pain medication prescriptions and prevent doctor shopping. Similarly, last month a committee of legislators in North Carolina proposed a bill to modify the rules for prescribing and dispensing of pain medications. New legislative developments at the federal and state level seem likely as elected officials attempt to find new ways to address prescription drug abuse and diversion.

Given the scope of the prescription drug abuse epidemic, pharmacy distributors, retail pharmacies and others in the health care industry need to be particularly focused on controlled substance compliance and aware that they are facing increased scrutiny. They need to take a proactive approach to compliance issues and keep close tabs on regulatory enforcement trends, litigation developments and legislative initiatives.

Shannon Cox and Stephen Cummings are counsel in the Atlanta office of King & Spalding, an international law firm. Both regularly advise clients with regard to controlled substance and pharmacy regulatory issues. They can be contacted at scox@kslaw.com and scummings@kslaw.com.


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