[co-author: Edward Smith]

The United States Department of Justice (DOJ) recently announced the nation’s largest settlement involving allegations of drug diversion at a health care system. The settlement, totaling $7,750,000, came after a years-long investigation by the U.S. Drug Enforcement Administration (DEA) into McLaren Health Care Corporation (MHCC). The DEA concluded that MHCC’s handling of controlled substances violated the Controlled Substances Act (CSA), 21 U.S.C. §§ 801–904, and its implementing regulations. The government alleged that the health care system’s internal practices were deficient and, therefore, allowed for the diversion of drugs, including opioids.

The DEA’s investigation revealed several deficiencies in MHCC’s compliance practices and MHCC admitted to several deficiencies as part of the settlement. Such deficient practices included distributing Schedule II drugs without prescriptions, distributing controlled substances to an unregistered treatment facility, and failing to notify the DEA of certain thefts of controlled substances that occurred at MHCC locations. Significantly, MHCC retained several legacy policies following acquisitions with other corporate healthcare providers, and the government alleged that the system failed to revise such policies to ensure compliance with the CSA and its regulations.

Moreover, the government alleged that subsidiary pharmacies within the health care system were guilty of ignoring “red flags” that should have alerted the system to potential diversion. Such “red flags” included:

• pattern prescriptions for the same type of drugs, in the same quantities, from the same prescriber;
• prescriptions for excessive quantities of highly-addictive Schedule II drugs;
• repeated early prescription refills;
• significant outlier drug volumes for individual patients and prescribers;
• prescription entries in the names of fake patients; and
• discrepancies between the cash reported and cash collected for controlled substance prescriptions.

In addition to the nearly $7.8 million in civil fees, MHCC also entered into a three-year Memorandum of Agreement with the DEA that directs the system’s drug-handling responsibilities, external controlled substance audits, and internal educational programs focused on drug diversion prevention in the workplace.

In a statement released by the DOJ, the U.S. Attorney involved in the case said that our health care systems “carry broad[] public responsibilities as bulwarks against drug diversion” and warned that the U.S. Attorneys’ offices share a commitment to holding “even the largest providers accountable when they fall short of what the law demands.” This case stands as a stark reminder of the importance of routinely updating compliance policies and monitoring internal practices related to drug diversion.