Pharmacy Owners Charged With Drug Diversion.

At its simplest level, pharmacy diversion is any unauthorized use or redistribution of legally obtained controlled medications. In the pharmacy industry, the federal government generally defines this as ““Drug diversion” refers to various ways in which prescription drugs are removed from lawful channels of distribution and then reintroduced into the marketplace for sale to consumers.” and it specifically includes the following six activities:

• Inventory theft
• Falsified records
• Fraudulent distribution
• Dispensing fraudulent prescriptions
• Dispensing prescriptions with intent to defraud a pharmacy
• Dispensing controlled substances without sufficient proof of authorization

Can Federal Prosecutors Charge Pharmacy Owners and Owners’ Family Members Without Proof of Their Direct Personal Involvement?

Unfortunately, yes, they often do. When it comes to drug diversion, federal prosecutors don’t need to show that the owners personally dispensed the controlled substance(s) at issue; instead, they may attempt to hold owners responsible based on their role in ownership or management, alleging oversight liability or knowledge (or willful ignorance) under the law.

Does Simply Owning a Pharmacy Constitute Knowledge or Intent for Federal Charges?

No. At this stage, simply owning a pharmacy does not automatically establish the knowledge or intent required for a successful federal prosecution. To avoid liability, pharmacy owners should be able to clearly distinguish themselves from the specific acts of diversion in question, demonstrating that they were not involved in and did not authorize the illicit activities they are being accused of.

Does the Law Require Conduct-Specific Proof Against Pharmacy Owners?

Yes, and this is a key defense strategy for many owners. While federal prosecutors will target owners and owners’ family members in drug diversion cases, their case must be backed by conduct-specific proof, not just proof of ownership or employee misconduct.

Does the “Corresponding Responsibility” Requirement Establish Pharmacy Owner Liability in Federal Drug Diversion Cases?

No. The “corresponding responsibility” standard requires pharmacists to be aware of the validity of a prescription; however, it does not automatically extend to pharmacy owners. In fact, in most instances, the corresponding responsibility standard applies only to the individuals who fill and dispense prescriptions, which does not necessarily include the owner (unless the owner is also a pharmacist).

Which federal charges fit the alleged pharmacy diversion conduct?

Which Federal Law Prohibits Pharmacies from Dispensing Controlled Substances?

Under Section 841 of the Controlled Substances Act (CSA), specifically 21 U.S.C. § 841, it is prohibited for any individual or entity (including pharmacies) to manufacture, distribute, or dispense “a controlled substance except as authorized by this subchapter.” Section 843 also prohibits pharmacies from fraudulently acquiring controlled substances. When pursuing charges under Section 841, federal prosecutors must be able to establish their case beyond a reasonable doubt, and we are able to work with the owners of pharmacies that are under investigation to build defenses that are tailored to the facts at hand.

Which Federal Law Prohibits Pharmacies from Misusing Their DEA Registration and Other Privileges?

Section 843 (21 U.S.C. § 843) is another federal drug diversion statute under the CSA that gives the government a wide range of enforcement authority. Section 843 prohibits knowingly or intentionally using, in connection with controlled substances, a DEA registration number that is fictitious, revoked, suspended, expired, or issued to another person, and it prohibits acquiring controlled substances by misrepresentation, fraud, forgery, deception, or subterfuge.

Under Section 843, federal prosecutors may seek to prove that pharmacists failed to maintain sufficient records, pharmacists filled scripts that were not valid, or pharmacies issued prescriptions without proper authorization. The pharmacist’s corresponding responsibility for ensuring that the prescription is valid under 21 C.F.R. § 1306.04 (as discussed below) is also relevant in cases brought under Section 843.

When are Pharmacy Owners or Employees Guilty of Criminal Conspiracy for Diversion?

Under Section 846 (21 U.S.C. § 846), federal prosecutors may seek to hold two or more individuals (including pharmacy owners and employees) criminally liable for drug diversion when they “conspire to commit any offense” under the Controlled Substances Act. This allows the government to hold defendants collectively responsible for participating in an unlawful scheme.

How is Fraud in the Pharmacy World Related to Drug Diversion?

Fraud tied to drug diversion is often a separate offense, though the two offenses frequently coexist in investigations targeting pharmacy owners and their employees. The federal healthcare fraud statute, 18 U.S.C. § 1347, prohibits anyone “knowingly and willfully” from executing or attempting to execute a scheme or artifice to defraud a health-care-benefit program or obtain its money or property by means of false or fraudulent pretenses, representations, or promises. This charge is particularly difficult for federal prosecutors to bring because it involves proving criminal intent.

Do Pharmacy Owners and Employees Have Responsibilities with Regard to Controlled-Substance Prescriptions?

Yes, under 21 C.F.R. § 1306.04, the pharmacists and physicians involved in the drug diversion chain have significant responsibilities. As the regulation provides, “the responsibility for the proper prescribing and dispensing of controlled substances is upon the prescribing practitioner, but a corresponding responsibility rests with the pharmacist who fills the prescription.”

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How can prosecutors distinguish knowing diversion from a dispensing or recordkeeping error?

What Evidence Suggests That Prescription Dispensing or Recordkeeping Errors Are Not-in-Fact the Issue at Hand, But Rather Intentional Drug Diversion?

When looking for evidence of intentional drug diversion, investigators will seek “red flags” which, in the world of pharmacies, include filling paid-in-cash prescriptions, dispensingcontrolled substances on early refills, dispensing larger quantities of controlled substances than otherwise justified, and filling prescriptions for patients who reside outside the immediate geographic area. These indicators are frequently cited by investigators, though they do not automatic provide a basis for criminal charges. The volume of controlled substances dispensed and the frequency of dispensing early refills, in particular, are only indicators of criminal activity in the proper context. For example, chronic pain, oncology, palliative-care, and other specialty pharmacies will frequently dispense larger quantities of medications than typical. They may also fill early refills more frequently, particularly when treating patients with complex conditions. Again, this is just an example. In drug diversion investigations, the full context must be evaluated in order to properly differentiate an investigation into a procedural mistake from an investigation into criminal activity.

What Data Will Investigators Use to Evaluate the Potential For Drug Diversion?

In investigations into pharmacy diversion, investigators will examine various types of data, including:

• Prescription-monitoring data
• Controlled substance dispensing ratios
• Patient and customer geography
• Prescription refill timelines
• Relationships and interactions between the pharmacy and its prescribing physician(s)
• Medication disposal, disposal/destruction, waste, and spill documentation
• Pharmacy drug policies and procedures
• Security footage (including exterior/perimeter cameras)
• Pharmacy access logs and badge data
• Inventory custody records, including delivery logs and shipping logs

Can Electronic-Health-Record Data Be Used to Distinguish Pharmacy Diversion from Documentation or System Errors?

Yes, and this can be a crucial point of defense for pharmacies. When investigating a dispensing error in an e-prescription system (e.g. an e-prescription that does not contain the required DEA registration number), the electronic record of medication-dispensing can potentially identify either an employee who attempted to commit a pharmacy-diversion crime or an employee who was just trying to do the right thing. With this information at hand, investigators (and, if the case rises to a DEA inspection) can seek to address the specific problem and hold the individuals responsible for the violation culpable for doing so.

Can Pharmacy-related Inventories for Controlled-Substances be Different for Non-Drug-Diversion Reasons?

Yes, and this can be a tricky issue in drug diversion investigations. For example, inventories can also be inaccurate for several non-criminal reasons, such as:

• Procedural failures
• Errors related to medication dispensing automation
• Errors related to manual counting or inaccurate documentation

What can a diversion allegation do to the owner's criminal, licensing, DEA, and business status?

What Are the Potential Criminal Penalties for Federal Pharmacy Diversion Offenses?

Potential criminal penalties for federal pharmacy diversion offenses will depend on several factors, including the specific section(s) of the Controlled Substances Act (CSA) with which the owners and employees are charged, whether the drug(s) involved are Schedule II, III, IV, or V, the quantity of controlled substances involved, any relevant circumstances that may influence the penalty, and the owner’s and employee’s criminal histories.

Can Diversion Accusations Trigger Simultaneous Criminal, Licensing, DEA, and Employer Proceedings?

Yes, when substantial discrepancies in drug inventories arise or when other suspected diversion acts become apparent, this can potentially lead to simultaneous criminal, licensing, DEA, and employer proceedings. Each proceeding is a distinct legal process with the opportunity to intervene and provide an effective defense.

When will a Diversion Accusation Lead to a State License Revocation or Suspension?

A diversion accusation does not necessarily result in state license revocation or suspension. This depends on the specifics of the case, such as:

• The circumstances of the diversion and the specific nature of the allegations
• The pharmacy owner’s and/or employee’s licensing history
• The degree to which the diversion was intentional
• Any evidence in support of the pharmacy’s compliance with state and federal laws
• Any arguments raised in response to the licensing board’s allegations
• The possibility for effective and comprehensive rehabilitation
• The ability of the owners and employees to make informed and appropriate corrective actions moving forward
• Other factors that are pertinent to the specific case at hand

What Is the Impact of an Unjustified Loss of DEA Registration?

If pharmacy owners and employees unjustifiably lose DEA registration, they will no longer be authorized to legitimately acquire and dispense controlled substances. As a result, they may be unable to continue operating as a healthcare provider. As a result, they may no longer serve as a viable pharmacy and, by extension, as a provider for those patients that depend upon them.

If You Want Someone to Look at Your Case

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