Enforcement Scrutiny of Those Selling a COVID-19 "Cure"
In cities across the country, healthcare and other essential workers are greeted each evening with cheers and clanging of pots and pans as they return home from working tirelessly to combat the global pandemic that has changed life as we know it. As these heroes rush to and from the front lines saving lives, government prosecutors and agencies are turning their attention to companies and individuals who are supposedly rushing to promote false treatments for Covid-19. For example, the Department of Justice has announced various fraud charges against doctors and others while the US Food & Drug Administration has announced that it is now "issuing warning letters to firms for selling fraudulent products with claims to prevent, treat, mitigate, diagnose or cure" the disease.
The government has many tools to combat fraud in the healthcare space, from harsh regulatory penalties, including suspension or exclusion from the lists of authorized Medicare providers, to civil and criminal penalties under the False Claims Act, Anti-Kickback Statute, and criminal fraud statutes. But for issues at the cutting edge of science and medicine, it can often be unclear whether certain behavior violates the law. For example, the criminal healthcare fraud statute, 18 U.S.C. § 1347, only penalizes "willfully" trying to execute a scheme to defraud certain healthcare benefit programs—meaning that violations require proof that defendants acted with knowledge that their conduct was generally unlawful. And while the word "willfully" is not used by the mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, those offenses (like healthcare fraud) require proof of specific intent to defraud. "Good faith"—shown, for example, by attempts to comply with the law or rely on the advice of counsel—can potentially be a defense to these charges.
These nuances matter. One recent federal criminal complaint charges a Southern California physician with mail fraud for allegedly promoting a "100%" cure for Covid-19, and press interviews with the prosecution and defense teams suggest that good faith will be a hotly contested issue at trial. As quoted by the New York Times, the defense attorney has cast the case as "a dispute about what a physician feels is in the best interests of his patients," while the line prosecutor brushed aside any debate over medical judgment, insisting instead that the case turns on whether the defendant supposedly told patients "that what he's offering is a 100 percent cure and it confers temporary immunity."
From the US Attorney General on down, government officials are urging the public to report COVID-19-related fraud. Given this widespread scrutiny, as well as the ongoing medical uncertainty surrounding the disease itself, strong compliance programs can help healthcare providers demonstrate their good faith in trying to follow complex and fast-evolving rules of the road.
Of course, healthcare fraud isn't the only type of enforcement likely to increase as a result of the COVID-19 crisis. For those interested in learning about broader white collar and regulatory enforcement of the Coronavirus Aid, Relief, and Economic Security Act (the CARES ACT), you can find a recent Arnold & Porter Advisory on the subject here.
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© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.