The recent crackdowns by state attorneys general and the U.S. Department of Justice on higher-level participants in the manufacture and distribution of opioid-based medications have increasingly affected how health care clients operate in that space. Specifically, as set out in recent indictments, it is no longer enough for manufacturers and distributors to have compliance and procedure controls in place, rather, entities and their individual executives and compliance officers are now being held personally liable for failure to enforce or otherwise implement those policies.

Health care and white-collar criminal attorneys must broaden their scope of work and become increasingly more involved in everyday operations, including supervising and overseeing compliance controls so that companies and their executives comply with their own policies as well as all relevant statutes and regulations. Attorneys who handle representation of such individual executives, compliance officers and related entities, are now tasked with providing legal advice that conforms to the increased vigilance and enforcement actions by the respective government agencies. As a particularly instructive example, we have recently been directing our clients to the unsealed criminal charges filed against  individual executives of Rochester Drug Co-Operative, Inc. (RDC) and the company itself. See, United States of America v. Doud, 19-CR-285, USDC, SDNY, United States of America v. Pietruszewski,19-CR-282, USDC, SDNY and United States of America v. Rochester Drug Co-Operative, 19-CV-3568, USDC, SDNY. Laurence Doud, Rochester's chief executive officer, is charged with “knowingly and intentionally” violating federal narcotics laws “by distributing dangerous, highly addictive opioids to pharmacy customers that it knew were being sold and used illicitly.” William Pietruszewski and RDC were charged separately with the same conduct. RDC has entered into a deferred prosecution agreement with the United States and Pietruszewski has already pleaded guilty. According to the U.S. Attorney for the Southern District of New York, Geoffrey Berman: “This prosecution is the first of its kind: executives of a pharmaceutical distributor and the distributor itself have been charged with drug trafficking.”

Specifically, Doud is charged with ignoring warnings from RDC's own employees, who told Doud and RDC's director of compliance, Pietruszewski, that some of the company's customers were “very suspicious,” and went so far as to describe some pharmacy clients as a “DEA investigation in the making.” The indictment goes on to outline a series of express decisions by Doud and others to ignore RDC's own internal controls, supplying “tens of millions of oxycodone, fentanyl and other dangerous opioids to pharmacy customers that the company knew were dispensing those drugs to individuals who had no legitimate medical need for them.” Those decisions, the indictment alleges, were made to maximize profits and the executives' own compensation.

The language emanating from law enforcement, and, specifically the language in the Doud indictment, necessitates that clients, including for the first time individual executives, become more vigilant in creating and implementing effective compliance and reporting programs. Their failure to do so may now subject them to criminal prosecution for decisions that they have made for their companies. Now is the time for companies and individual executives to conduct an examination and internal audit of their policies, and, just as important, how those policies are implemented and enforced. In addition, they should identify who within the company, is tasked with overseeing communications with customers (in most instances, pharmacies who fill individual prescriptions at the consumer level), making sure that these pharmacies are also implementing policies to avoid filling prescriptions that appear to be of questionable medical need. Additionally, entities should maintain an open line of communication with law enforcement, so that orders that would tend to raise the red flags set out in their own policies (and detailed in the indictment) are reported regularly.

Notwithstanding the concerns raised by the recent crackdowns, there are certainly patients in need of these medications in addition to businesses, including smaller pharmacies, which operate within the bounds of the law to provide them. Accordingly, health care and business attorneys should strike the right balance between advising clients how to legally and responsibly maximize their profits, while at the same time assisting them in placing proper boundaries on their operations, so that they do not become the next RDC or Laurence Doud. The key, as always, is consistency, transparency and proper documentation. Effective compliance and reporting programs serve no purpose if they are not properly administered and monitored.

Aram C. Bloom and David S. Weinstein are partners with Hinshaw & Culbertson in Coral Gables. Bloom is a health care attorney, and Weinstein is a white-collar criminal defense attorney.