Selling a COVID-19 "Cure"
In cities across the country, healthcare and other essential workers have been greeted in the evenings with cheers and clanging 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 that 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 issued 90 warning letters (so far) to entities "for selling fraudulent products with claims to prevent, treat, mitigate, diagnose or cure" the disease. In April, the FDA issued one such letter to Genesis II Church for allegedly marketing a bleaching agent as a COVID-19 cure, and the federal government sued the church and its founders and won a preliminary injunction against their distribution of the product. Then, on June 30, DOJ filed a criminal complaint charging the church's founders with conspiring to defraud the United States and to deliver misbranded drugs, and for criminal contempt for allegedly violating the preliminary injunction.
The government has many tools to combat fraud in the healthcare and pharmaceutical spaces, from harsh regulatory penalties, including suspension or exclusion from the lists of authorized Medicare providers, to civil and criminal penalties under the Food, Drug, and Cosmetic Act, False Claims Act, Anti-Kickback Statute, and criminal fraud statutes. Some alleged schemes may appear more straightforward than others. 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, penalizes only "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 general conspiracy statute, 18 U.S.C. § 371, that offense is typically read to require proof that a defendant "willfully" joined the conspiracy's unlawful plan. Similarly, while the mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, do not use the word "willfully," 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 all of these charges.
These nuances matter. One recent federal criminal complaint charges a Southern California physician, Jennings Ryan Staley, with mail fraud for allegedly promoting and selling hydroxychloroquine as a "100%" cure for COVID-19. Press interviews with the prosecution and defense teams, as well as recent defense discovery requests, suggest that good faith will be a hotly contested issue at trial. As quoted by the New York Times, Dr. Staley's attorney 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 doctor supposedly told patients "that what he's offering is a 100 percent cure and it confers temporary immunity." This debate has continued as the parties argue over the appropriate scope of pretrial discovery. The defense filed a discovery notice requesting (among other things) records of DOJ's own recent purchases of hydroxychloroquine, iting the fact that the drug was "repeatedly touted by the executive branch" and news reports that the Bureau of Prisons bought $60,000 of the drug in March 2020. DOJ opposed the discovery requests as "fishing expeditions," and quoted the defendant's supposed statements to FBI investigators that it would be "foolish" to tell patients that hydroxychloroquine was a "100% effective cure" for COVID-19.
From the US Attorney General on down, government officials are urging the public to report COVID-19-related fraud. This widespread scrutiny and the ongoing medical uncertainty surrounding the disease itself make it especially important for healthcare providers—even those who are simply trying to provide the best care possible under the circumstances—to be able to demonstrate their good faith in trying to follow complex and fast-evolving rules of the road. Working with properly trained billing personnel, developing strong compliance protocols and programs, and consulting with outside counsel as needed can all potentially go a long way to establishing good faith.
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.