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Violations of the Controlled Substance Act — including staff who divert patient medications for themselves — may open providers up to additional False Claims Act liability, warn a group of attorneys who have been monitoring the federal government’s shifting take on enforcement.

“When controlled substance diversion is discovered at a healthcare organization, the federal government no longer takes the view that it should simply focus on the potential prosecution of a diverting employee,” said Lisa S. Rivera, co-chair of the Controlled Substances Enforcement & Diversion Practice and a member of the Healthcare Fraud & Abuse Task Force at Bass, Berry & Sims law firm.

“Instead, the government is demanding answers about how the diversion could have occurred, and when it should have been discovered, focusing on the organization’s record keeping, security and reporting practices,” Rivera said in conjunction with the release of the firm’s Healthcare Fraud & Abuse Review 2023 last week. 

And prosecutors aren’t necessarily waiting to find out about diversions, she added. Regulators are focusing on pharmacy audits to pursue administrative resolutions or other types of enforcement. In the right circumstances, drug compliance failures also could be connected to False Claims allegations and become even more costly for providers.

Skilled nursing providers and their pharmacists must meet strict standards about securing controlled substances. Drug diversion cases in nursing homes are typically one-off, with an individual who has access to medications taking the drugs for personal use or resale. 

But they aren’t rare, especially in the opioid era.

A study last year reviewed 107 reported diversions at long-term care facilities in Minnesota alone. The authors called the theft of controlled substances by staff members “a largely overlooked form of elder mistreatment” that needs more attention. Researchers found that an average of more than 30 tablets per resident were stolen, most commonly oxycodone, hydrocodone, tramadol, hydromorphone and morphine. 

The Review cites a “paradigm shift” in how those diversions will be handled moving forward. It’s one that makes the provider or practitioner who employed the drug diverter a party to the enforcement action — rather than a wronged partner supporting the prosecution.

Millions at stake?

In addition to a thief being jailed or fined for taking patient medications, providers are under increasing threat of being sued for hundreds of thousands or even millions of dollars for failing to follow regulations that allow them to bill the Medicare and Medicaid programs.

The risk has grown with the introduction of medication techs in more states, possibly increasing the number of staff who have access to a building’s medication supply.

“This may lead to more opportunities for diversion,” said attorney Brian Irving, who co-chairs Bass, Berry & Sims’ Controlled Substances Enforcement & Diversion Practice. “We often work with providers to ensure that the appropriate safeguards are in place and access to controlled substances is limited to that needed. But providers can also monitor and audit their safeguards to ensure they are being followed and remain sufficient. Providers that are proactive about controlled substances compliance will be in the best position to withstand inevitable government scrutiny. 

“The government has significant discretion in how it seeks to resolve potential violations of the Controlled Substances Act,” Irving added. “Providers that take controlled substance compliance seriously — and can demonstrate those efforts to the government — will be in a much better position with respect to the government.” 

Major diversion cases are moving closer to the skilled nursing sector. The Review highlights the August 2023 case against Clarest, a pharmacy chain that serves long-term care, skilled nursing, assisted living and rehab facilities in the Northeast and Midwest. The company paid nearly $500,000 and entered into a three-year corrective action plan to settle allegations that it violated the Controlled Substance Act.

At the time, law enforcement officials said Clarest, doing business as ProCare LTC New England LTC and ProCare LTC Pharmacy, violated civil provisions by improperly filling facilities’ “emergency” medication boxes and failing to record required Drug Enforcement Agency forms to include numbers of containers furnished and DEA registration numbers.

That case, taken in combination with others in which the government has intervened, showed growing concern over the intersection of controlled substances and False Claims allegations.

Also in 2023, the government alleged that Rite Aid had filled questionable controlled substance prescriptions and their pharmacists failed to satisfy their responsibility to ensure proper dispensing. Because of these alleged CSA violations, the Review explained, the government claimed that Rite Aid falsely certified to federal healthcare programs that the prescriptions it dispensed were valid and that in dispensing the medications it had complied with federal and state laws. After government intervention and the filing of a motion to dismiss, Rite Aid filed for bankruptcy.

“The opioid crisis has prompted changes in the way the federal government seeks to enforce the Controlled Substances Act, which has been in effect for more than 50 years,” the Review noted. “The government’s decision to pursue action against Rite Aid raises the question of whether providers can expect to see more FCA lawsuits based on alleged violations of the CSA.”