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DOJ Files FCA Complaint Against Major Pharmacy Retailer Based on Alleged Violations of Controlled Substances Act
Friday, March 17, 2023

Headlines that Matter for Companies and Executives in Regulated Industries.

DOJ Files FCA Complaint Against Major Pharmacy Retailer Based on Alleged Violations of Controlled Substances Act

On March 13, 2023, the Department of Justice (DOJ) announced that it filed a complaint in intervention against Rite Aid, one of the country’s largest pharmacy chains, and certain of its subsidiaries, under the False Claims Act (FCA) and Controlled Substances Act. The DOJ intervened in a lawsuit originally filed against Rite Aid by three “whistleblower” relators under the qui tam provisions of the FCA in October 2019.

According to DOJ’s press release, between May 2014 and June 2019, Rite Aid allegedly filled at least hundreds of thousands of prescriptions that did not have a legitimate medical purpose, were not for a medically accepted indication, or were not issued in the usual course of professional practice. The prescriptions allegedly included excessive quantities of opioids such as oxycodone and fentanyl. Some of the prescriptions had “obvious red flags,” and Rite Aid “intentionally deleted internal notes about suspicious prescribers,” DOJ alleged, and its practices “opened the floodgates for millions of opioid pills and other controlled substances to flow illegally out of Rite Aid’s stores.”

The government’s complaint in intervention comes on the heels of an announcement last week by Associate Attorney General Vanita Gupta of the creation of the Opioid Epidemic Civil Litigation Task Force, which aims to steer DOJ’s civil litigation efforts related to the opioid epidemic.

The case is captioned United States ex rel. White v. Rite Aid Corp., No. 1:21-cv-1239 (N.D. Ohio). The DOJ press release can be found here.

Home Health Staffing Executive Indicted for Conspiring to Fix Wages

On March 16, 2023, the DOJ announced that a federal grand jury in Las Vegas returned a one-count indictment charging a health care staffing executive with conspiring to fix the wages of Las Vegas nurses in violation of the Sherman Act. According to the indictment, the defendant held executive positions at three home health agencies, where he oversaw recruitment, hiring, retention, and assignments of nurses and other health care staff. Between March 2016 and May 2019, the defendant and other unnamed co-conspirators allegedly conspired to suppress and eliminate competition for the services of nurses. Assistant Attorney General Jonathan Kanter of the DOJ Antitrust Division stated, “[w]age fixing is a crime that deprives workers of hard-earned wages,” and “[t]he Antitrust Division will be vigilant in protecting workers.”

The DOJ press release can be found here.

SEC Charges Cannabis Company, Executive, and Others with Fraud

On March 16, 2023, the Securities and Exchange Commission (SEC) announced charges against American Patriot Brands Inc. (APB), a cannabis cultivation and distribution company, as well as its CEO and five other entities and individuals, for allegedly participating in a scheme to siphon millions of dollars in investment funds they raised from over a hundred investors in order to enrich themselves. According to the SEC, APB “and some of its senior executives fabricated business profits and prospects to entice investors with falsehoods that in the end left investors with essentially worthless securities.”

The SEC complaint alleges that APB funneled millions of dollars in investor proceeds into APB executives’ personal accounts.  It further alleges that APB spent tens of thousands on the executives’ personal expenses.  The complaint charges APB and the other defendants with violating the antifraud provisions of the federal securities laws and seeks injunctive relief, disgorgement with prejudgment interest, civil penalties, and officer and director bars against two individual defendants.

The SEC press release can be found here.

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