Practice of Medicine
Physicians Beware of Prescription Drugs and Devices from Foreign Sources
By Scott R. Grubman, Esq. Chilivis Cochran Larkins & Bever, LLP Atlanta, GA
May 5, 2017
Recent enforcement actions by the US Food and Drug Administration (FDA) and the US Department of Justice (DOJ) highlight ongoing government scrutiny regarding the sources of prescription drugs and medical devices dispensed by healthcare providers. Importantly, this scrutiny is not limited to distributors: federal regulators have pursued criminal and civil actions against physicians and physician practices that receive drugs and devices from unauthorized sources. Accordingly, healthcare providers should take proactive steps to avoid obtaining drugs and devices from unauthorized sources, particularly foreign entities (e.g., online retail pharmacies based in foreign countries).
Regulation of the Supply Chain of Drugs and Devices from Foreign Sources
The FDA regulates the supply chain of prescription drugs through the Drug Supply Chain Security Act (DSCSA), which requires dispensers (including physicians), to purchase drugs from “authorized trading partners,” such as manufacturers registered with the FDA, wholesale distributors licensed by the states where they conduct business, or other trading partners registered with or licensed by the appropriate state or federal entity. While the DSCSA does not apply to devices (including viscosupplements, which are classified as devices) other regulations require foreign device manufacturers and importers/exporters to register with the FDA before distributing a device in the United States.
Potential Civil Liability for Receiving Unapproved Drugs or Devices
Physicians who receive unauthorized drugs or devices – including those that have been imported or re-imported in violation of the Food, Drug, and Cosmetic Act (FDCA) – and seek reimbursement from federal healthcare programs for treating patients with such drugs or devices face potential liability under the False Claims Act (FCA). For example, in January 2014, the DOJ reached a settlement with two orthopedic practices in Tennessee and Virginia involving re-imported viscosupplements. These clinics agreed to pay a combined $1.85 million to resolve allegations that they purchased re-imported viscosupplements at extremely reduced prices, and then sought reimbursement from state and federal healthcare programs. Similarly, in October 2016, three clinics in California and Nevada agreed to pay $2.39 million to resolve allegations that they knowingly billed federal and state healthcare programs for unapproved viscosupplements.
Potential Criminal Liability for Receiving Unapproved Drugs or Devices
In addition to potential civil liability under the FCA, providers who purchase unapproved drugs or devices also face the threat of potential criminal liability because such items may be considered “misbranded.” Under the FDCA, a drug or device is misbranded if it was manufactured, prepared, propagated, compounded or processed in an establishment not duly registered by the FDA. The FDCA’s misbranding provisions apply to both products imported from unapproved foreign entities, as well as products re-imported via unapproved parties. A “re-imported drug” is one that was originally manufactured domestically, exported out of the United States, and then imported back into the country.
The FDA has consistently taken the position that drugs and devices can be misbranded for the mere fact that the items have been handled by an unregistered source. The FDA has also taken the position that drugs and devices can be misbranded even if they are completely safe, effective, and in every way identical in composition to a drug or device that was properly labeled and delivered through properly registered links in the supply chain. In other words, a drug or device does not have to be “counterfeit” in order to be considered “misbranded.”
It is a misdemeanor offense to receive a misbranded drug or device in interstate commerce. Importantly, this misdemeanor is “strict liability” in nature, meaning that it does not matter whether or not the provider knew that it was receiving a misbranded drug or device. Further, where an entity has received a misbranded drug or device, any “responsible corporate officer” can be held criminally liable, even if that person had no actual involvement in, or knowledge of, such receipt. There are multiple examples of physicians pleading guilty to misdemeanor violations of the FDCA. For example, in December 2013, a Texas oncologist pled guilty to a misdemeanor for ordering cancer drugs from Canada. In January 2014, federal prosecutors charged seven physicians, all of whom eventually pled guilty, to causing the shipment of misbranded drugs into the United States.
FDA Guidance for Providers
In April 2016, the FDA issued warning letters to over 300 providers across the United States who may have purchased prescription products from unapproved foreign suppliers. Those warning letters contained the following guidance regarding the purchasing of prescription drugs:
- Ensure you receive FDA-approved drugs by buying directly from the manufacturer or from a wholesale distributor that is licensed in your state. Though not mentioned in the guidance, device distributors do not need a state license, but the device’s manufacturer and importer must be registered with the FDA;
- Beware of offers “too good to be true” (e.g., aggressive marketing tactics and deep discounts);
- Check for the following signs that a drug may be unsafe, ineffective or fake:
- The label is not in English;
- The packaging looks slightly different from the FDA-approved product;
- The product name differs from the name of the FDA-approved product;
- The dosing recommendations are unfamiliar;
- Safety information or warnings are missing; or
- The dosage forms or administration is different
- Pay close attention to patient feedback
Healthcare providers should be mindful of these issues and, where appropriate, seek proactive legal advice to help ensure compliance with all the FDA’s requirements when purchasing prescription drugs and medical devices. The potential for liability under the FDCA and FCA is significant, and federal authorities have demonstrated their ongoing interest in pursuing providers who purchase drugs and devices from unapproved sources, even where those providers had no knowledge of the violation.
Scott Grubman is a partner with the law firm of Chilivis Cochran in Atlanta. He can be contacted at firstname.lastname@example.org or (404) 262-6505.
 Violations that involve actual intent to defraud or mislead can result in a felony conviction.
The information provided in this resource does not constitute legal, medical or any other professional advice, nor does it establish a standard of care. This resource has been created as an aid to you in your practice. The ultimate decision on how to use the information provided rests solely with you, the PolicyOwner.