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Imported Drugs and Medical Devices: Physicians Face Significant Liability for Purchasing Imported Drugs and Medical Devices

A recent trend has been the increasing number of civil settlements and criminal convictions against physician practices that purchased foreign prescription drugs and medical devices that have not been approved by the FDA for use in the United States. Another common scenario is that a clinic may purchase drugs or medical devices from a local supplier who had sold the clinic non-FDA approved drugs from another company. 

Specifically, recent civil False Claims Act (FCA) settlements by orthopedic clinics in Tennessee and Virginia by the U.S. Department of Justice (DOJ), guilty pleas by oncologists in Missouri and California, and enforcement by the FDA Office of Criminal Investigations highlight the significant liability physicians may have from purchasing non-FDA approved drugs from Canada and other countries, or from unauthorized suppliers. 

The clear message from these enforcement actions, as well as recent changes to federal and state law, is that physicians are ultimately responsible for knowing the source of the drugs and medical devices they purchase for their patients. Physicians must also ensure that they are purchasing drugs and medical devices from an approved supplier in their state. 

This article describes aspects of these recent government settlements, criminal cases, and other enforcement actions. Physicians should consider them into their compliance with federal and state laws. 

Background: How it Works

Physician offices and clinics are often contacted through mass advertising campaigns via blast faxes, phone calls, direct mail, and online marketing. These distributors often pursue clinics and hospitals with offers to sell physician-administered drugs, including injectable drugs. 

Often, a company will use false names to sell foreign pharmaceutical products throughout the U.S. Large shipments may be broken down into multiple small shipments in order to smuggle pharmaceuticals across the U.S. border. These shipments may then be sent to addresses in multiple states and locations under different false names. Custom forms may falsely state the contents and value of the shipments. Local companies, referred to as drop shippers, in the U.S., receive the packages, remove indicia that they were from abroad, and then re-ship them to doctors and clinics in the U.S. so that the packages would have an U.S.-based return address. According to the FDA, these drop shippers store the drugs and medical devices in the basements of their private residences, often in violation of safety regulations requiring that pharmaceuticals be stored at cool temperatures. 

In some cases, foreign non-FDA approved drugs and medical devices are delivered directly to physician clinics from pharmaceutical companies or suppliers in another country. A local drop shipper will generally have UPS pick up this package from a clinic and re-package the drugs or medical devices in a box that does not contain any post mark or return address of another country, and have it re-delivered to the clinic. 

Recently, several companies and individuals have pleaded guilty to smuggling and selling misbranded prescription drugs and unlicensed (non-FDA approved) drugs to local suppliers and physician clinics in the U.S. Apparently, the FDA Office of Criminal Investigations is investigating local suppliers or drop shippers and physicians who may have purchased prescription drugs and devices from these companies. 

Beginning Jan. 1, 2015, the Drug Supply Chain and Security Act requires all healthcare providers who dispense or administer prescription drugs to patients must purchase these products only from authorized trading partners (also commonly referred to as approved suppliers) licensed by or registered with the state or federal government. Authorized "trading partners" includes wholesale distributors, manufacturers, re-packagers, and dispensers. In short, healthcare providers, inlcuding physicians, are responsible for assuring that their immediate or local suppliers are "authorized," which means licensed by the appropriate federal or state agency. 

The False Claims Act settlements discussed below include several aspects of the packaging that would alert physician practices that the drugs or medical devices may be from a foreign country, and not FDA-approved. 

False Claims Act Settlements

On Jan. 24, 3014, the DOJ announced that two orthopedic practices would pay a combined $1.85 million to resolve state and federal False Claims Act allegations that they knowingly billed state and federal healthcare programs for osteoarthritis medications known as viscosupplements that were distributed in foreign markets and then reimported to the U.S. The two settlements involved orthopedic clinics in Tennessee and Virginia. 

Viscosupplements are substances injected into a joint to treat arthritic knee pain. The products are distributed under brand names such as Synvisc, Hyalgan, Orthovisc, and Supartz and are approved by the FDA as injectable Class III medical devices to treat osteoarthritic knee pain. Viscosupplements are reimbursed by Medicare, Medicaid and other federal health care programs.

The government alleged that the clinics knowingly purchased deeply discounted viscosupplements that were reimported from foreign countries, and then billed the state and federal health care programs when such reimported viscosupplements are not reimbursable by those programs. The government contended that the reimported products contained labeling in foreign languages and in English for additional uses not approved in the U.S. This demonstrated that the products were reimported, and thus there was no reassurance they were safe or had not been tampered with or stored appropriately. 

The complaint against the Tennessee and Virginia clinics was filed in 2012 under the whistleblower provisions of the civil False Claims Act by a representative for a pharmaceutical manufacturer of one of the viscosupplements. An interesting aspect was that the whistleblower was retained by the pharmaceutical manufacturer to educate medical providers about the use of Synvisc. According to the DOJ, the reimported viscosupplements contained labeling and packaging that were not approved by the FDA, including labeling in foreign languages as well as labeling for uses that were not approved in the U.S.

Buying  and Selling Misbranded Prescription Drugs

Several companies and individuals have recently plead guilty to smuggling and selling misbranded prescription drugs, as well as the unlicensed wholesaling of prescription drugs in the U.S. Physicians who purchased these drugs have also pleaded guilty to buying and selling, as well as dispensing foreign, misbranded drugs to their patients. 

Government allegations that prescription drugs and devices were misbranded have been based in part on the following: (a) they were not in possession of a person who regularly engages in the storage or wholesale distribution of prescription drugs or devices; (b) there was not a label that contained required language limiting their use to prescription only; (c) prescription drugs failed to have the FDA-approved labeling and/or the "Rx Only" symbol; and (d) the drugs and devices were misbranded in some cases because they did not have certain language required by the Food, Drug and Cosmetic Act (FDCA) in English. 

According to the FDA, a drug may be considered misbranded even if it is identical in composition to an FDA-approved drug made by the same manufacturer in the same facility. It is important to keep in mind that misbranding is a strict liability offense under the FDCA. Anyone who participates in a violation can be convicted of a crime even if there is no intent to violate the law. 

On March 30, 2015, a Joplin, Missouri, oncologist pleaded guilty in federal court to dispensing foreign, misbranded drugs to his cancer patients. The oncologist had ordered prescription cancer drugs from a company based in Winnipeg, Canada. This Canadian-based company had sold drugs to the oncologist that had been obtained from foreign sources and which had not been approved by the FDA for use in the US. 

According to the DOJ, the labeling for the prescription drugs the oncologist purchased was different from the versions the FDA had approved for distribution in the U.S. For example, the DOJ stated that the drugs did not have labels bearing the symbol "Rx Only," and the labeling for some of the drugs was in one or more foreign languages. Some of the prescription drugs lacked mixing and use instructions in English. 

The oncologist submitted reimbursement claims for these drugs and their administration to Medicare and Medicaid, Tricare, and private health insurance programs. The oncologist paid $971,854,000 in restitution to Medicare, Tricare, Missouri Medicaid, and Oklahoma Medicaid and Kansas Medicaid programs. 

On Jan. 29, 2014, the U.S. Attorney's Office of the Northern District of Ohio announced that seven Ohio oncologists were ordered to pay $2.6 million after pleading guilty to misdemeanor charges of causing the shipment of misbranded drugs in violation of the FDCA. These drugs from Canada were not approved by the FDA for introduction to the U.S. Each physician was required to pay fines and restitution, ranging from $158,418 to $1,139,532, and was sentenced to probation. The seven oncologists were charged with purchasing cancer drugs from Canada, including Zometa, Kytril, Taxotere, Gemzar, and Eloxatin, and providing the drugs to thier patients. 

In December 2013, the DOJ announced the guilty plea of a Texas oncologist for introducing misbranded cancer drugs into the U.S. from Canada. According to the government, the drugs were not approved for distribution or use in the U.S. and did not satisfy labeling requirements. The oncologist used the drugs interchangeably with FDA-approved versions on his patients and filed claims with federal and state health care programs, including Texas Medicaid, Medicare, and Blue Cross and Blue Shield. The physician agreed to repay over $1,000,000 for the reimbursements that he received, and is awaiting sentencing that could result in up to one year in prison and up to $100,000 in fines and penalties. 

Purchasing Unapproved Prescription Drugs

On June 28, 2013, the U.S. Attorney for the Southern District of California announced that a La Jolla oncology practice was sentenced to pay a $500,000 fine, forfeit $1.2 million and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing the federal prgram. The practice admitted that it purchased $3.4 million of a foreign cancer drug, knowing that the drug had not been approved by the FDA. 

The practice admitted that it was aware the drugs were not approved by the FDA for use in the U.S. because: (a) the packaging and shipping documents indicated that drugs were shipped to the office from outside the U.S.; (b) many of the invoices identified the origin of the drugs and intended markets for the drugs as countries other than the U.S.; (c) the labels did not bear the "Rx Only" language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) detained because the drugs were unapproved. 

In a related False Claims Act lawsuit filed by the U.S., the physician-owner of this oncology practice paid in excess of $2.2 million to settle allegations of submitting false claims to the Medicare program. (Medicare does not cover prescription non-FDA approved drugs.)

FDA Warning Letters to Physicians


Prior to the FCA settlements and guilty pleas by physicians, FDA had sent the physicians warning about the risks of purchasing medications from foreign manufacturers or local unlicensed suppliers (drop shippers). Generally, subsequent to a guilty plea or conviction of a pharmaceutical company or its distributor in the U.S. for selling misbranded and unapproved drugs from these companies or their suppliers. 

For example, the FDA sent a warning letter to certain physicians the agency belived had purchased unapproved foreign drugs or unapproved injectable devices distributed by Gallant Pharma International, Inc. Among the 12 individuals convicted at Gallant: a doctor and an office manager, for their roles in distributing drugs and devices that had not been approved by the FDA for use in the U.S. The FDA letter to physicians listed 39 drugs, primarily unapproved chemotherapy and injectable cosmetic drugs, which Gallant had sold in the U.S.

In March 2016, the FDA sent letters to physicians who the FDA believes may have purchased counterfeit Botox and viscosupplements, such as Orthovisc and Synvisc from an unlicensed supplier, TC Medical. Thise unlicensed supplier pleaded guilty last May to smuggling and selling misbranded prescription drugs in the U.S.

In that warning letter to physicians, the FDA stated, "receiving misbranded drugs and devices in interstate commerce and delivery or offering to deliver these drugs and devices for use on others violates federal law."

FDA Guidance for Physicians

The FDA also included the following recommendations to "help physicians safely purchase drugs and devices from pharmaceutical distributors: 

  • Buy directly from the manufacturer or a wholesale drug distributor licensed in your state.
  • Beware of offers too good to be true, including aggressive marketing tactics and deep discounts, on prescription drugs.
  • Buy only from state-licensed wholesale drug distributors.
  • Check for the following signs that a prescription drug may be unsafe, ineffective or fake: 
    • label is not in English
    • packaging looks slightly different from the FDA-approved product
    • product name differs from the name of the FDA-approved drug
    • dosing recommendations are unfamiliar
    • safety information or warnings are missing
    • dosage forms or administration is different
  • Pay close attention to patient feedback
In addition to potential prison time and fines for misbranding or other violations of federal and state law, the potential consequences for physicians of purchasing medical devices or drugs through unauthorized distribution channels can include criminal and civil false claims liability, repayment obligations, exclusion from federal health care programs, liability to patients, and loss of professional licenses or hospital privileges. 

Physicians should stay in front of these issues and adopt compliance practices to ensure they are purchasing drugs and medical devices from authorized suppliers. In the event they later discover that they may have purchased unapproved drugs or medical devices, physicians should consider self-disclosure or other reporting route to the applicable governmental agency.  

Imported Drugs and Medical Devices: Physicians Face Significant Liability for Purchasing Imported Drugs and Medical Devices

A recent trend has been the increasing number of civil settlements and criminal convictions against physician practices that purchased foreign prescription drugs and medical devices that have not been approved by the FDA for use in the United States. Another common scenario is that a clinic may purchase drugs or medical devices from a local supplier who had sold the clinic non-FDA approved drugs from another company. 

Specifically, recent civil False Claims Act (FCA) settlements by orthopedic clinics in Tennessee and Virginia by the U.S. Department of Justice (DOJ), guilty pleas by oncologists in Missouri and California, and enforcement by the FDA Office of Criminal Investigations highlight the significant liability physicians may have from purchasing non-FDA approved drugs from Canada and other countries, or from unauthorized suppliers. 

The clear message from these enforcement actions, as well as recent changes to federal and state law, is that physicians are ultimately responsible for knowing the source of the drugs and medical devices they purchase for their patients. Physicians must also ensure that they are purchasing drugs and medical devices from an approved supplier in their state. 

This article describes aspects of these recent government settlements, criminal cases, and other enforcement actions. Physicians should consider them into their compliance with federal and state laws. 

Background: How it Works

Physician offices and clinics are often contacted through mass advertising campaigns via blast faxes, phone calls, direct mail, and online marketing. These distributors often pursue clinics and hospitals with offers to sell physician-administered drugs, including injectable drugs. 

Often, a company will use false names to sell foreign pharmaceutical products throughout the U.S. Large shipments may be broken down into multiple small shipments in order to smuggle pharmaceuticals across the U.S. border. These shipments may then be sent to addresses in multiple states and locations under different false names. Custom forms may falsely state the contents and value of the shipments. Local companies, referred to as drop shippers, in the U.S., receive the packages, remove indicia that they were from abroad, and then re-ship them to doctors and clinics in the U.S. so that the packages would have an U.S.-based return address. According to the FDA, these drop shippers store the drugs and medical devices in the basements of their private residences, often in violation of safety regulations requiring that pharmaceuticals be stored at cool temperatures. 

In some cases, foreign non-FDA approved drugs and medical devices are delivered directly to physician clinics from pharmaceutical companies or suppliers in another country. A local drop shipper will generally have UPS pick up this package from a clinic and re-package the drugs or medical devices in a box that does not contain any post mark or return address of another country, and have it re-delivered to the clinic. 

Recently, several companies and individuals have pleaded guilty to smuggling and selling misbranded prescription drugs and unlicensed (non-FDA approved) drugs to local suppliers and physician clinics in the U.S. Apparently, the FDA Office of Criminal Investigations is investigating local suppliers or drop shippers and physicians who may have purchased prescription drugs and devices from these companies. 

Beginning Jan. 1, 2015, the Drug Supply Chain and Security Act requires all healthcare providers who dispense or administer prescription drugs to patients must purchase these products only from authorized trading partners (also commonly referred to as approved suppliers) licensed by or registered with the state or federal government. Authorized "trading partners" includes wholesale distributors, manufacturers, re-packagers, and dispensers. In short, healthcare providers, inlcuding physicians, are responsible for assuring that their immediate or local suppliers are "authorized," which means licensed by the appropriate federal or state agency. 

The False Claims Act settlements discussed below include several aspects of the packaging that would alert physician practices that the drugs or medical devices may be from a foreign country, and not FDA-approved. 

False Claims Act Settlements

On Jan. 24, 3014, the DOJ announced that two orthopedic practices would pay a combined $1.85 million to resolve state and federal False Claims Act allegations that they knowingly billed state and federal healthcare programs for osteoarthritis medications known as viscosupplements that were distributed in foreign markets and then reimported to the U.S. The two settlements involved orthopedic clinics in Tennessee and Virginia. 

Viscosupplements are substances injected into a joint to treat arthritic knee pain. The products are distributed under brand names such as Synvisc, Hyalgan, Orthovisc, and Supartz and are approved by the FDA as injectable Class III medical devices to treat osteoarthritic knee pain. Viscosupplements are reimbursed by Medicare, Medicaid and other federal health care programs.

The government alleged that the clinics knowingly purchased deeply discounted viscosupplements that were reimported from foreign countries, and then billed the state and federal health care programs when such reimported viscosupplements are not reimbursable by those programs. The government contended that the reimported products contained labeling in foreign languages and in English for additional uses not approved in the U.S. This demonstrated that the products were reimported, and thus there was no reassurance they were safe or had not been tampered with or stored appropriately. 

The complaint against the Tennessee and Virginia clinics was filed in 2012 under the whistleblower provisions of the civil False Claims Act by a representative for a pharmaceutical manufacturer of one of the viscosupplements. An interesting aspect was that the whistleblower was retained by the pharmaceutical manufacturer to educate medical providers about the use of Synvisc. According to the DOJ, the reimported viscosupplements contained labeling and packaging that were not approved by the FDA, including labeling in foreign languages as well as labeling for uses that were not approved in the U.S.

Buying  and Selling Misbranded Prescription Drugs

Several companies and individuals have recently plead guilty to smuggling and selling misbranded prescription drugs, as well as the unlicensed wholesaling of prescription drugs in the U.S. Physicians who purchased these drugs have also pleaded guilty to buying and selling, as well as dispensing foreign, misbranded drugs to their patients. 

Government allegations that prescription drugs and devices were misbranded have been based in part on the following: (a) they were not in possession of a person who regularly engages in the storage or wholesale distribution of prescription drugs or devices; (b) there was not a label that contained required language limiting their use to prescription only; (c) prescription drugs failed to have the FDA-approved labeling and/or the "Rx Only" symbol; and (d) the drugs and devices were misbranded in some cases because they did not have certain language required by the Food, Drug and Cosmetic Act (FDCA) in English. 

According to the FDA, a drug may be considered misbranded even if it is identical in composition to an FDA-approved drug made by the same manufacturer in the same facility. It is important to keep in mind that misbranding is a strict liability offense under the FDCA. Anyone who participates in a violation can be convicted of a crime even if there is no intent to violate the law. 

On March 30, 2015, a Joplin, Missouri, oncologist pleaded guilty in federal court to dispensing foreign, misbranded drugs to his cancer patients. The oncologist had ordered prescription cancer drugs from a company based in Winnipeg, Canada. This Canadian-based company had sold drugs to the oncologist that had been obtained from foreign sources and which had not been approved by the FDA for use in the US. 

According to the DOJ, the labeling for the prescription drugs the oncologist purchased was different from the versions the FDA had approved for distribution in the U.S. For example, the DOJ stated that the drugs did not have labels bearing the symbol "Rx Only," and the labeling for some of the drugs was in one or more foreign languages. Some of the prescription drugs lacked mixing and use instructions in English. 

The oncologist submitted reimbursement claims for these drugs and their administration to Medicare and Medicaid, Tricare, and private health insurance programs. The oncologist paid $971,854,000 in restitution to Medicare, Tricare, Missouri Medicaid, and Oklahoma Medicaid and Kansas Medicaid programs. 

On Jan. 29, 2014, the U.S. Attorney's Office of the Northern District of Ohio announced that seven Ohio oncologists were ordered to pay $2.6 million after pleading guilty to misdemeanor charges of causing the shipment of misbranded drugs in violation of the FDCA. These drugs from Canada were not approved by the FDA for introduction to the U.S. Each physician was required to pay fines and restitution, ranging from $158,418 to $1,139,532, and was sentenced to probation. The seven oncologists were charged with purchasing cancer drugs from Canada, including Zometa, Kytril, Taxotere, Gemzar, and Eloxatin, and providing the drugs to thier patients. 

In December 2013, the DOJ announced the guilty plea of a Texas oncologist for introducing misbranded cancer drugs into the U.S. from Canada. According to the government, the drugs were not approved for distribution or use in the U.S. and did not satisfy labeling requirements. The oncologist used the drugs interchangeably with FDA-approved versions on his patients and filed claims with federal and state health care programs, including Texas Medicaid, Medicare, and Blue Cross and Blue Shield. The physician agreed to repay over $1,000,000 for the reimbursements that he received, and is awaiting sentencing that could result in up to one year in prison and up to $100,000 in fines and penalties. 

Purchasing Unapproved Prescription Drugs

On June 28, 2013, the U.S. Attorney for the Southern District of California announced that a La Jolla oncology practice was sentenced to pay a $500,000 fine, forfeit $1.2 million and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing the federal prgram. The practice admitted that it purchased $3.4 million of a foreign cancer drug, knowing that the drug had not been approved by the FDA. 

The practice admitted that it was aware the drugs were not approved by the FDA for use in the U.S. because: (a) the packaging and shipping documents indicated that drugs were shipped to the office from outside the U.S.; (b) many of the invoices identified the origin of the drugs and intended markets for the drugs as countries other than the U.S.; (c) the labels did not bear the "Rx Only" language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) detained because the drugs were unapproved. 

In a related False Claims Act lawsuit filed by the U.S., the physician-owner of this oncology practice paid in excess of $2.2 million to settle allegations of submitting false claims to the Medicare program. (Medicare does not cover prescription non-FDA approved drugs.)

FDA Warning Letters to Physicians


Prior to the FCA settlements and guilty pleas by physicians, FDA had sent the physicians warning about the risks of purchasing medications from foreign manufacturers or local unlicensed suppliers (drop shippers). Generally, subsequent to a guilty plea or conviction of a pharmaceutical company or its distributor in the U.S. for selling misbranded and unapproved drugs from these companies or their suppliers. 

For example, the FDA sent a warning letter to certain physicians the agency belived had purchased unapproved foreign drugs or unapproved injectable devices distributed by Gallant Pharma International, Inc. Among the 12 individuals convicted at Gallant: a doctor and an office manager, for their roles in distributing drugs and devices that had not been approved by the FDA for use in the U.S. The FDA letter to physicians listed 39 drugs, primarily unapproved chemotherapy and injectable cosmetic drugs, which Gallant had sold in the U.S.

In March 2016, the FDA sent letters to physicians who the FDA believes may have purchased counterfeit Botox and viscosupplements, such as Orthovisc and Synvisc from an unlicensed supplier, TC Medical. Thise unlicensed supplier pleaded guilty last May to smuggling and selling misbranded prescription drugs in the U.S.

In that warning letter to physicians, the FDA stated, "receiving misbranded drugs and devices in interstate commerce and delivery or offering to deliver these drugs and devices for use on others violates federal law."

FDA Guidance for Physicians

The FDA also included the following recommendations to "help physicians safely purchase drugs and devices from pharmaceutical distributors: 

  • Buy directly from the manufacturer or a wholesale drug distributor licensed in your state.
  • Beware of offers too good to be true, including aggressive marketing tactics and deep discounts, on prescription drugs.
  • Buy only from state-licensed wholesale drug distributors.
  • Check for the following signs that a prescription drug may be unsafe, ineffective or fake: 
    • label is not in English
    • packaging looks slightly different from the FDA-approved product
    • product name differs from the name of the FDA-approved drug
    • dosing recommendations are unfamiliar
    • safety information or warnings are missing
    • dosage forms or administration is different
  • Pay close attention to patient feedback
In addition to potential prison time and fines for misbranding or other violations of federal and state law, the potential consequences for physicians of purchasing medical devices or drugs through unauthorized distribution channels can include criminal and civil false claims liability, repayment obligations, exclusion from federal health care programs, liability to patients, and loss of professional licenses or hospital privileges. 

Physicians should stay in front of these issues and adopt compliance practices to ensure they are purchasing drugs and medical devices from authorized suppliers. In the event they later discover that they may have purchased unapproved drugs or medical devices, physicians should consider self-disclosure or other reporting route to the applicable governmental agency.  

Imported Drugs and Medical Devices: Physicians Face Significant Liability for Purchasing Imported Drugs and Medical Devices

A recent trend has been the increasing number of civil settlements and criminal convictions against physician practices that purchased foreign prescription drugs and medical devices that have not been approved by the FDA for use in the United States. Another common scenario is that a clinic may purchase drugs or medical devices from a local supplier who had sold the clinic non-FDA approved drugs from another company. 

Specifically, recent civil False Claims Act (FCA) settlements by orthopedic clinics in Tennessee and Virginia by the U.S. Department of Justice (DOJ), guilty pleas by oncologists in Missouri and California, and enforcement by the FDA Office of Criminal Investigations highlight the significant liability physicians may have from purchasing non-FDA approved drugs from Canada and other countries, or from unauthorized suppliers. 

The clear message from these enforcement actions, as well as recent changes to federal and state law, is that physicians are ultimately responsible for knowing the source of the drugs and medical devices they purchase for their patients. Physicians must also ensure that they are purchasing drugs and medical devices from an approved supplier in their state. 

This article describes aspects of these recent government settlements, criminal cases, and other enforcement actions. Physicians should consider them into their compliance with federal and state laws. 

Background: How it Works

Physician offices and clinics are often contacted through mass advertising campaigns via blast faxes, phone calls, direct mail, and online marketing. These distributors often pursue clinics and hospitals with offers to sell physician-administered drugs, including injectable drugs. 

Often, a company will use false names to sell foreign pharmaceutical products throughout the U.S. Large shipments may be broken down into multiple small shipments in order to smuggle pharmaceuticals across the U.S. border. These shipments may then be sent to addresses in multiple states and locations under different false names. Custom forms may falsely state the contents and value of the shipments. Local companies, referred to as drop shippers, in the U.S., receive the packages, remove indicia that they were from abroad, and then re-ship them to doctors and clinics in the U.S. so that the packages would have an U.S.-based return address. According to the FDA, these drop shippers store the drugs and medical devices in the basements of their private residences, often in violation of safety regulations requiring that pharmaceuticals be stored at cool temperatures. 

In some cases, foreign non-FDA approved drugs and medical devices are delivered directly to physician clinics from pharmaceutical companies or suppliers in another country. A local drop shipper will generally have UPS pick up this package from a clinic and re-package the drugs or medical devices in a box that does not contain any post mark or return address of another country, and have it re-delivered to the clinic. 

Recently, several companies and individuals have pleaded guilty to smuggling and selling misbranded prescription drugs and unlicensed (non-FDA approved) drugs to local suppliers and physician clinics in the U.S. Apparently, the FDA Office of Criminal Investigations is investigating local suppliers or drop shippers and physicians who may have purchased prescription drugs and devices from these companies. 

Beginning Jan. 1, 2015, the Drug Supply Chain and Security Act requires all healthcare providers who dispense or administer prescription drugs to patients must purchase these products only from authorized trading partners (also commonly referred to as approved suppliers) licensed by or registered with the state or federal government. Authorized "trading partners" includes wholesale distributors, manufacturers, re-packagers, and dispensers. In short, healthcare providers, inlcuding physicians, are responsible for assuring that their immediate or local suppliers are "authorized," which means licensed by the appropriate federal or state agency. 

The False Claims Act settlements discussed below include several aspects of the packaging that would alert physician practices that the drugs or medical devices may be from a foreign country, and not FDA-approved. 

False Claims Act Settlements

On Jan. 24, 3014, the DOJ announced that two orthopedic practices would pay a combined $1.85 million to resolve state and federal False Claims Act allegations that they knowingly billed state and federal healthcare programs for osteoarthritis medications known as viscosupplements that were distributed in foreign markets and then reimported to the U.S. The two settlements involved orthopedic clinics in Tennessee and Virginia. 

Viscosupplements are substances injected into a joint to treat arthritic knee pain. The products are distributed under brand names such as Synvisc, Hyalgan, Orthovisc, and Supartz and are approved by the FDA as injectable Class III medical devices to treat osteoarthritic knee pain. Viscosupplements are reimbursed by Medicare, Medicaid and other federal health care programs.

The government alleged that the clinics knowingly purchased deeply discounted viscosupplements that were reimported from foreign countries, and then billed the state and federal health care programs when such reimported viscosupplements are not reimbursable by those programs. The government contended that the reimported products contained labeling in foreign languages and in English for additional uses not approved in the U.S. This demonstrated that the products were reimported, and thus there was no reassurance they were safe or had not been tampered with or stored appropriately. 

The complaint against the Tennessee and Virginia clinics was filed in 2012 under the whistleblower provisions of the civil False Claims Act by a representative for a pharmaceutical manufacturer of one of the viscosupplements. An interesting aspect was that the whistleblower was retained by the pharmaceutical manufacturer to educate medical providers about the use of Synvisc. According to the DOJ, the reimported viscosupplements contained labeling and packaging that were not approved by the FDA, including labeling in foreign languages as well as labeling for uses that were not approved in the U.S.

Buying  and Selling Misbranded Prescription Drugs

Several companies and individuals have recently plead guilty to smuggling and selling misbranded prescription drugs, as well as the unlicensed wholesaling of prescription drugs in the U.S. Physicians who purchased these drugs have also pleaded guilty to buying and selling, as well as dispensing foreign, misbranded drugs to their patients. 

Government allegations that prescription drugs and devices were misbranded have been based in part on the following: (a) they were not in possession of a person who regularly engages in the storage or wholesale distribution of prescription drugs or devices; (b) there was not a label that contained required language limiting their use to prescription only; (c) prescription drugs failed to have the FDA-approved labeling and/or the "Rx Only" symbol; and (d) the drugs and devices were misbranded in some cases because they did not have certain language required by the Food, Drug and Cosmetic Act (FDCA) in English. 

According to the FDA, a drug may be considered misbranded even if it is identical in composition to an FDA-approved drug made by the same manufacturer in the same facility. It is important to keep in mind that misbranding is a strict liability offense under the FDCA. Anyone who participates in a violation can be convicted of a crime even if there is no intent to violate the law. 

On March 30, 2015, a Joplin, Missouri, oncologist pleaded guilty in federal court to dispensing foreign, misbranded drugs to his cancer patients. The oncologist had ordered prescription cancer drugs from a company based in Winnipeg, Canada. This Canadian-based company had sold drugs to the oncologist that had been obtained from foreign sources and which had not been approved by the FDA for use in the US. 

According to the DOJ, the labeling for the prescription drugs the oncologist purchased was different from the versions the FDA had approved for distribution in the U.S. For example, the DOJ stated that the drugs did not have labels bearing the symbol "Rx Only," and the labeling for some of the drugs was in one or more foreign languages. Some of the prescription drugs lacked mixing and use instructions in English. 

The oncologist submitted reimbursement claims for these drugs and their administration to Medicare and Medicaid, Tricare, and private health insurance programs. The oncologist paid $971,854,000 in restitution to Medicare, Tricare, Missouri Medicaid, and Oklahoma Medicaid and Kansas Medicaid programs. 

On Jan. 29, 2014, the U.S. Attorney's Office of the Northern District of Ohio announced that seven Ohio oncologists were ordered to pay $2.6 million after pleading guilty to misdemeanor charges of causing the shipment of misbranded drugs in violation of the FDCA. These drugs from Canada were not approved by the FDA for introduction to the U.S. Each physician was required to pay fines and restitution, ranging from $158,418 to $1,139,532, and was sentenced to probation. The seven oncologists were charged with purchasing cancer drugs from Canada, including Zometa, Kytril, Taxotere, Gemzar, and Eloxatin, and providing the drugs to thier patients. 

In December 2013, the DOJ announced the guilty plea of a Texas oncologist for introducing misbranded cancer drugs into the U.S. from Canada. According to the government, the drugs were not approved for distribution or use in the U.S. and did not satisfy labeling requirements. The oncologist used the drugs interchangeably with FDA-approved versions on his patients and filed claims with federal and state health care programs, including Texas Medicaid, Medicare, and Blue Cross and Blue Shield. The physician agreed to repay over $1,000,000 for the reimbursements that he received, and is awaiting sentencing that could result in up to one year in prison and up to $100,000 in fines and penalties. 

Purchasing Unapproved Prescription Drugs

On June 28, 2013, the U.S. Attorney for the Southern District of California announced that a La Jolla oncology practice was sentenced to pay a $500,000 fine, forfeit $1.2 million and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing the federal prgram. The practice admitted that it purchased $3.4 million of a foreign cancer drug, knowing that the drug had not been approved by the FDA. 

The practice admitted that it was aware the drugs were not approved by the FDA for use in the U.S. because: (a) the packaging and shipping documents indicated that drugs were shipped to the office from outside the U.S.; (b) many of the invoices identified the origin of the drugs and intended markets for the drugs as countries other than the U.S.; (c) the labels did not bear the "Rx Only" language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) detained because the drugs were unapproved. 

In a related False Claims Act lawsuit filed by the U.S., the physician-owner of this oncology practice paid in excess of $2.2 million to settle allegations of submitting false claims to the Medicare program. (Medicare does not cover prescription non-FDA approved drugs.)

FDA Warning Letters to Physicians


Prior to the FCA settlements and guilty pleas by physicians, FDA had sent the physicians warning about the risks of purchasing medications from foreign manufacturers or local unlicensed suppliers (drop shippers). Generally, subsequent to a guilty plea or conviction of a pharmaceutical company or its distributor in the U.S. for selling misbranded and unapproved drugs from these companies or their suppliers. 

For example, the FDA sent a warning letter to certain physicians the agency belived had purchased unapproved foreign drugs or unapproved injectable devices distributed by Gallant Pharma International, Inc. Among the 12 individuals convicted at Gallant: a doctor and an office manager, for their roles in distributing drugs and devices that had not been approved by the FDA for use in the U.S. The FDA letter to physicians listed 39 drugs, primarily unapproved chemotherapy and injectable cosmetic drugs, which Gallant had sold in the U.S.

In March 2016, the FDA sent letters to physicians who the FDA believes may have purchased counterfeit Botox and viscosupplements, such as Orthovisc and Synvisc from an unlicensed supplier, TC Medical. Thise unlicensed supplier pleaded guilty last May to smuggling and selling misbranded prescription drugs in the U.S.

In that warning letter to physicians, the FDA stated, "receiving misbranded drugs and devices in interstate commerce and delivery or offering to deliver these drugs and devices for use on others violates federal law."

FDA Guidance for Physicians

The FDA also included the following recommendations to "help physicians safely purchase drugs and devices from pharmaceutical distributors: 

  • Buy directly from the manufacturer or a wholesale drug distributor licensed in your state.
  • Beware of offers too good to be true, including aggressive marketing tactics and deep discounts, on prescription drugs.
  • Buy only from state-licensed wholesale drug distributors.
  • Check for the following signs that a prescription drug may be unsafe, ineffective or fake: 
    • label is not in English
    • packaging looks slightly different from the FDA-approved product
    • product name differs from the name of the FDA-approved drug
    • dosing recommendations are unfamiliar
    • safety information or warnings are missing
    • dosage forms or administration is different
  • Pay close attention to patient feedback
In addition to potential prison time and fines for misbranding or other violations of federal and state law, the potential consequences for physicians of purchasing medical devices or drugs through unauthorized distribution channels can include criminal and civil false claims liability, repayment obligations, exclusion from federal health care programs, liability to patients, and loss of professional licenses or hospital privileges. 

Physicians should stay in front of these issues and adopt compliance practices to ensure they are purchasing drugs and medical devices from authorized suppliers. In the event they later discover that they may have purchased unapproved drugs or medical devices, physicians should consider self-disclosure or other reporting route to the applicable governmental agency.  

Imported Drugs and Medical Devices: Physicians Face Significant Liability for Purchasing Imported Drugs and Medical Devices

A recent trend has been the increasing number of civil settlements and criminal convictions against physician practices that purchased foreign prescription drugs and medical devices that have not been approved by the FDA for use in the United States. Another common scenario is that a clinic may purchase drugs or medical devices from a local supplier who had sold the clinic non-FDA approved drugs from another company. 

Specifically, recent civil False Claims Act (FCA) settlements by orthopedic clinics in Tennessee and Virginia by the U.S. Department of Justice (DOJ), guilty pleas by oncologists in Missouri and California, and enforcement by the FDA Office of Criminal Investigations highlight the significant liability physicians may have from purchasing non-FDA approved drugs from Canada and other countries, or from unauthorized suppliers. 

The clear message from these enforcement actions, as well as recent changes to federal and state law, is that physicians are ultimately responsible for knowing the source of the drugs and medical devices they purchase for their patients. Physicians must also ensure that they are purchasing drugs and medical devices from an approved supplier in their state. 

This article describes aspects of these recent government settlements, criminal cases, and other enforcement actions. Physicians should consider them into their compliance with federal and state laws. 

Background: How it Works

Physician offices and clinics are often contacted through mass advertising campaigns via blast faxes, phone calls, direct mail, and online marketing. These distributors often pursue clinics and hospitals with offers to sell physician-administered drugs, including injectable drugs. 

Often, a company will use false names to sell foreign pharmaceutical products throughout the U.S. Large shipments may be broken down into multiple small shipments in order to smuggle pharmaceuticals across the U.S. border. These shipments may then be sent to addresses in multiple states and locations under different false names. Custom forms may falsely state the contents and value of the shipments. Local companies, referred to as drop shippers, in the U.S., receive the packages, remove indicia that they were from abroad, and then re-ship them to doctors and clinics in the U.S. so that the packages would have an U.S.-based return address. According to the FDA, these drop shippers store the drugs and medical devices in the basements of their private residences, often in violation of safety regulations requiring that pharmaceuticals be stored at cool temperatures. 

In some cases, foreign non-FDA approved drugs and medical devices are delivered directly to physician clinics from pharmaceutical companies or suppliers in another country. A local drop shipper will generally have UPS pick up this package from a clinic and re-package the drugs or medical devices in a box that does not contain any post mark or return address of another country, and have it re-delivered to the clinic. 

Recently, several companies and individuals have pleaded guilty to smuggling and selling misbranded prescription drugs and unlicensed (non-FDA approved) drugs to local suppliers and physician clinics in the U.S. Apparently, the FDA Office of Criminal Investigations is investigating local suppliers or drop shippers and physicians who may have purchased prescription drugs and devices from these companies. 

Beginning Jan. 1, 2015, the Drug Supply Chain and Security Act requires all healthcare providers who dispense or administer prescription drugs to patients must purchase these products only from authorized trading partners (also commonly referred to as approved suppliers) licensed by or registered with the state or federal government. Authorized "trading partners" includes wholesale distributors, manufacturers, re-packagers, and dispensers. In short, healthcare providers, inlcuding physicians, are responsible for assuring that their immediate or local suppliers are "authorized," which means licensed by the appropriate federal or state agency. 

The False Claims Act settlements discussed below include several aspects of the packaging that would alert physician practices that the drugs or medical devices may be from a foreign country, and not FDA-approved. 

False Claims Act Settlements

On Jan. 24, 3014, the DOJ announced that two orthopedic practices would pay a combined $1.85 million to resolve state and federal False Claims Act allegations that they knowingly billed state and federal healthcare programs for osteoarthritis medications known as viscosupplements that were distributed in foreign markets and then reimported to the U.S. The two settlements involved orthopedic clinics in Tennessee and Virginia. 

Viscosupplements are substances injected into a joint to treat arthritic knee pain. The products are distributed under brand names such as Synvisc, Hyalgan, Orthovisc, and Supartz and are approved by the FDA as injectable Class III medical devices to treat osteoarthritic knee pain. Viscosupplements are reimbursed by Medicare, Medicaid and other federal health care programs.

The government alleged that the clinics knowingly purchased deeply discounted viscosupplements that were reimported from foreign countries, and then billed the state and federal health care programs when such reimported viscosupplements are not reimbursable by those programs. The government contended that the reimported products contained labeling in foreign languages and in English for additional uses not approved in the U.S. This demonstrated that the products were reimported, and thus there was no reassurance they were safe or had not been tampered with or stored appropriately. 

The complaint against the Tennessee and Virginia clinics was filed in 2012 under the whistleblower provisions of the civil False Claims Act by a representative for a pharmaceutical manufacturer of one of the viscosupplements. An interesting aspect was that the whistleblower was retained by the pharmaceutical manufacturer to educate medical providers about the use of Synvisc. According to the DOJ, the reimported viscosupplements contained labeling and packaging that were not approved by the FDA, including labeling in foreign languages as well as labeling for uses that were not approved in the U.S.

Buying  and Selling Misbranded Prescription Drugs

Several companies and individuals have recently plead guilty to smuggling and selling misbranded prescription drugs, as well as the unlicensed wholesaling of prescription drugs in the U.S. Physicians who purchased these drugs have also pleaded guilty to buying and selling, as well as dispensing foreign, misbranded drugs to their patients. 

Government allegations that prescription drugs and devices were misbranded have been based in part on the following: (a) they were not in possession of a person who regularly engages in the storage or wholesale distribution of prescription drugs or devices; (b) there was not a label that contained required language limiting their use to prescription only; (c) prescription drugs failed to have the FDA-approved labeling and/or the "Rx Only" symbol; and (d) the drugs and devices were misbranded in some cases because they did not have certain language required by the Food, Drug and Cosmetic Act (FDCA) in English. 

According to the FDA, a drug may be considered misbranded even if it is identical in composition to an FDA-approved drug made by the same manufacturer in the same facility. It is important to keep in mind that misbranding is a strict liability offense under the FDCA. Anyone who participates in a violation can be convicted of a crime even if there is no intent to violate the law. 

On March 30, 2015, a Joplin, Missouri, oncologist pleaded guilty in federal court to dispensing foreign, misbranded drugs to his cancer patients. The oncologist had ordered prescription cancer drugs from a company based in Winnipeg, Canada. This Canadian-based company had sold drugs to the oncologist that had been obtained from foreign sources and which had not been approved by the FDA for use in the US. 

According to the DOJ, the labeling for the prescription drugs the oncologist purchased was different from the versions the FDA had approved for distribution in the U.S. For example, the DOJ stated that the drugs did not have labels bearing the symbol "Rx Only," and the labeling for some of the drugs was in one or more foreign languages. Some of the prescription drugs lacked mixing and use instructions in English. 

The oncologist submitted reimbursement claims for these drugs and their administration to Medicare and Medicaid, Tricare, and private health insurance programs. The oncologist paid $971,854,000 in restitution to Medicare, Tricare, Missouri Medicaid, and Oklahoma Medicaid and Kansas Medicaid programs. 

On Jan. 29, 2014, the U.S. Attorney's Office of the Northern District of Ohio announced that seven Ohio oncologists were ordered to pay $2.6 million after pleading guilty to misdemeanor charges of causing the shipment of misbranded drugs in violation of the FDCA. These drugs from Canada were not approved by the FDA for introduction to the U.S. Each physician was required to pay fines and restitution, ranging from $158,418 to $1,139,532, and was sentenced to probation. The seven oncologists were charged with purchasing cancer drugs from Canada, including Zometa, Kytril, Taxotere, Gemzar, and Eloxatin, and providing the drugs to thier patients. 

In December 2013, the DOJ announced the guilty plea of a Texas oncologist for introducing misbranded cancer drugs into the U.S. from Canada. According to the government, the drugs were not approved for distribution or use in the U.S. and did not satisfy labeling requirements. The oncologist used the drugs interchangeably with FDA-approved versions on his patients and filed claims with federal and state health care programs, including Texas Medicaid, Medicare, and Blue Cross and Blue Shield. The physician agreed to repay over $1,000,000 for the reimbursements that he received, and is awaiting sentencing that could result in up to one year in prison and up to $100,000 in fines and penalties. 

Purchasing Unapproved Prescription Drugs

On June 28, 2013, the U.S. Attorney for the Southern District of California announced that a La Jolla oncology practice was sentenced to pay a $500,000 fine, forfeit $1.2 million and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing the federal prgram. The practice admitted that it purchased $3.4 million of a foreign cancer drug, knowing that the drug had not been approved by the FDA. 

The practice admitted that it was aware the drugs were not approved by the FDA for use in the U.S. because: (a) the packaging and shipping documents indicated that drugs were shipped to the office from outside the U.S.; (b) many of the invoices identified the origin of the drugs and intended markets for the drugs as countries other than the U.S.; (c) the labels did not bear the "Rx Only" language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) detained because the drugs were unapproved. 

In a related False Claims Act lawsuit filed by the U.S., the physician-owner of this oncology practice paid in excess of $2.2 million to settle allegations of submitting false claims to the Medicare program. (Medicare does not cover prescription non-FDA approved drugs.)

FDA Warning Letters to Physicians


Prior to the FCA settlements and guilty pleas by physicians, FDA had sent the physicians warning about the risks of purchasing medications from foreign manufacturers or local unlicensed suppliers (drop shippers). Generally, subsequent to a guilty plea or conviction of a pharmaceutical company or its distributor in the U.S. for selling misbranded and unapproved drugs from these companies or their suppliers. 

For example, the FDA sent a warning letter to certain physicians the agency belived had purchased unapproved foreign drugs or unapproved injectable devices distributed by Gallant Pharma International, Inc. Among the 12 individuals convicted at Gallant: a doctor and an office manager, for their roles in distributing drugs and devices that had not been approved by the FDA for use in the U.S. The FDA letter to physicians listed 39 drugs, primarily unapproved chemotherapy and injectable cosmetic drugs, which Gallant had sold in the U.S.

In March 2016, the FDA sent letters to physicians who the FDA believes may have purchased counterfeit Botox and viscosupplements, such as Orthovisc and Synvisc from an unlicensed supplier, TC Medical. Thise unlicensed supplier pleaded guilty last May to smuggling and selling misbranded prescription drugs in the U.S.

In that warning letter to physicians, the FDA stated, "receiving misbranded drugs and devices in interstate commerce and delivery or offering to deliver these drugs and devices for use on others violates federal law."

FDA Guidance for Physicians

The FDA also included the following recommendations to "help physicians safely purchase drugs and devices from pharmaceutical distributors: 

  • Buy directly from the manufacturer or a wholesale drug distributor licensed in your state.
  • Beware of offers too good to be true, including aggressive marketing tactics and deep discounts, on prescription drugs.
  • Buy only from state-licensed wholesale drug distributors.
  • Check for the following signs that a prescription drug may be unsafe, ineffective or fake: 
    • label is not in English
    • packaging looks slightly different from the FDA-approved product
    • product name differs from the name of the FDA-approved drug
    • dosing recommendations are unfamiliar
    • safety information or warnings are missing
    • dosage forms or administration is different
  • Pay close attention to patient feedback
In addition to potential prison time and fines for misbranding or other violations of federal and state law, the potential consequences for physicians of purchasing medical devices or drugs through unauthorized distribution channels can include criminal and civil false claims liability, repayment obligations, exclusion from federal health care programs, liability to patients, and loss of professional licenses or hospital privileges. 

Physicians should stay in front of these issues and adopt compliance practices to ensure they are purchasing drugs and medical devices from authorized suppliers. In the event they later discover that they may have purchased unapproved drugs or medical devices, physicians should consider self-disclosure or other reporting route to the applicable governmental agency.  

Imported Drugs and Medical Devices: Physicians Face Significant Liability for Purchasing Imported Drugs and Medical Devices

A recent trend has been the increasing number of civil settlements and criminal convictions against physician practices that purchased foreign prescription drugs and medical devices that have not been approved by the FDA for use in the United States. Another common scenario is that a clinic may purchase drugs or medical devices from a local supplier who had sold the clinic non-FDA approved drugs from another company. 

Specifically, recent civil False Claims Act (FCA) settlements by orthopedic clinics in Tennessee and Virginia by the U.S. Department of Justice (DOJ), guilty pleas by oncologists in Missouri and California, and enforcement by the FDA Office of Criminal Investigations highlight the significant liability physicians may have from purchasing non-FDA approved drugs from Canada and other countries, or from unauthorized suppliers. 

The clear message from these enforcement actions, as well as recent changes to federal and state law, is that physicians are ultimately responsible for knowing the source of the drugs and medical devices they purchase for their patients. Physicians must also ensure that they are purchasing drugs and medical devices from an approved supplier in their state. 

This article describes aspects of these recent government settlements, criminal cases, and other enforcement actions. Physicians should consider them into their compliance with federal and state laws. 

Background: How it Works

Physician offices and clinics are often contacted through mass advertising campaigns via blast faxes, phone calls, direct mail, and online marketing. These distributors often pursue clinics and hospitals with offers to sell physician-administered drugs, including injectable drugs. 

Often, a company will use false names to sell foreign pharmaceutical products throughout the U.S. Large shipments may be broken down into multiple small shipments in order to smuggle pharmaceuticals across the U.S. border. These shipments may then be sent to addresses in multiple states and locations under different false names. Custom forms may falsely state the contents and value of the shipments. Local companies, referred to as drop shippers, in the U.S., receive the packages, remove indicia that they were from abroad, and then re-ship them to doctors and clinics in the U.S. so that the packages would have an U.S.-based return address. According to the FDA, these drop shippers store the drugs and medical devices in the basements of their private residences, often in violation of safety regulations requiring that pharmaceuticals be stored at cool temperatures. 

In some cases, foreign non-FDA approved drugs and medical devices are delivered directly to physician clinics from pharmaceutical companies or suppliers in another country. A local drop shipper will generally have UPS pick up this package from a clinic and re-package the drugs or medical devices in a box that does not contain any post mark or return address of another country, and have it re-delivered to the clinic. 

Recently, several companies and individuals have pleaded guilty to smuggling and selling misbranded prescription drugs and unlicensed (non-FDA approved) drugs to local suppliers and physician clinics in the U.S. Apparently, the FDA Office of Criminal Investigations is investigating local suppliers or drop shippers and physicians who may have purchased prescription drugs and devices from these companies. 

Beginning Jan. 1, 2015, the Drug Supply Chain and Security Act requires all healthcare providers who dispense or administer prescription drugs to patients must purchase these products only from authorized trading partners (also commonly referred to as approved suppliers) licensed by or registered with the state or federal government. Authorized "trading partners" includes wholesale distributors, manufacturers, re-packagers, and dispensers. In short, healthcare providers, inlcuding physicians, are responsible for assuring that their immediate or local suppliers are "authorized," which means licensed by the appropriate federal or state agency. 

The False Claims Act settlements discussed below include several aspects of the packaging that would alert physician practices that the drugs or medical devices may be from a foreign country, and not FDA-approved. 

False Claims Act Settlements

On Jan. 24, 3014, the DOJ announced that two orthopedic practices would pay a combined $1.85 million to resolve state and federal False Claims Act allegations that they knowingly billed state and federal healthcare programs for osteoarthritis medications known as viscosupplements that were distributed in foreign markets and then reimported to the U.S. The two settlements involved orthopedic clinics in Tennessee and Virginia. 

Viscosupplements are substances injected into a joint to treat arthritic knee pain. The products are distributed under brand names such as Synvisc, Hyalgan, Orthovisc, and Supartz and are approved by the FDA as injectable Class III medical devices to treat osteoarthritic knee pain. Viscosupplements are reimbursed by Medicare, Medicaid and other federal health care programs.

The government alleged that the clinics knowingly purchased deeply discounted viscosupplements that were reimported from foreign countries, and then billed the state and federal health care programs when such reimported viscosupplements are not reimbursable by those programs. The government contended that the reimported products contained labeling in foreign languages and in English for additional uses not approved in the U.S. This demonstrated that the products were reimported, and thus there was no reassurance they were safe or had not been tampered with or stored appropriately. 

The complaint against the Tennessee and Virginia clinics was filed in 2012 under the whistleblower provisions of the civil False Claims Act by a representative for a pharmaceutical manufacturer of one of the viscosupplements. An interesting aspect was that the whistleblower was retained by the pharmaceutical manufacturer to educate medical providers about the use of Synvisc. According to the DOJ, the reimported viscosupplements contained labeling and packaging that were not approved by the FDA, including labeling in foreign languages as well as labeling for uses that were not approved in the U.S.

Buying  and Selling Misbranded Prescription Drugs

Several companies and individuals have recently plead guilty to smuggling and selling misbranded prescription drugs, as well as the unlicensed wholesaling of prescription drugs in the U.S. Physicians who purchased these drugs have also pleaded guilty to buying and selling, as well as dispensing foreign, misbranded drugs to their patients. 

Government allegations that prescription drugs and devices were misbranded have been based in part on the following: (a) they were not in possession of a person who regularly engages in the storage or wholesale distribution of prescription drugs or devices; (b) there was not a label that contained required language limiting their use to prescription only; (c) prescription drugs failed to have the FDA-approved labeling and/or the "Rx Only" symbol; and (d) the drugs and devices were misbranded in some cases because they did not have certain language required by the Food, Drug and Cosmetic Act (FDCA) in English. 

According to the FDA, a drug may be considered misbranded even if it is identical in composition to an FDA-approved drug made by the same manufacturer in the same facility. It is important to keep in mind that misbranding is a strict liability offense under the FDCA. Anyone who participates in a violation can be convicted of a crime even if there is no intent to violate the law. 

On March 30, 2015, a Joplin, Missouri, oncologist pleaded guilty in federal court to dispensing foreign, misbranded drugs to his cancer patients. The oncologist had ordered prescription cancer drugs from a company based in Winnipeg, Canada. This Canadian-based company had sold drugs to the oncologist that had been obtained from foreign sources and which had not been approved by the FDA for use in the US. 

According to the DOJ, the labeling for the prescription drugs the oncologist purchased was different from the versions the FDA had approved for distribution in the U.S. For example, the DOJ stated that the drugs did not have labels bearing the symbol "Rx Only," and the labeling for some of the drugs was in one or more foreign languages. Some of the prescription drugs lacked mixing and use instructions in English. 

The oncologist submitted reimbursement claims for these drugs and their administration to Medicare and Medicaid, Tricare, and private health insurance programs. The oncologist paid $971,854,000 in restitution to Medicare, Tricare, Missouri Medicaid, and Oklahoma Medicaid and Kansas Medicaid programs. 

On Jan. 29, 2014, the U.S. Attorney's Office of the Northern District of Ohio announced that seven Ohio oncologists were ordered to pay $2.6 million after pleading guilty to misdemeanor charges of causing the shipment of misbranded drugs in violation of the FDCA. These drugs from Canada were not approved by the FDA for introduction to the U.S. Each physician was required to pay fines and restitution, ranging from $158,418 to $1,139,532, and was sentenced to probation. The seven oncologists were charged with purchasing cancer drugs from Canada, including Zometa, Kytril, Taxotere, Gemzar, and Eloxatin, and providing the drugs to thier patients. 

In December 2013, the DOJ announced the guilty plea of a Texas oncologist for introducing misbranded cancer drugs into the U.S. from Canada. According to the government, the drugs were not approved for distribution or use in the U.S. and did not satisfy labeling requirements. The oncologist used the drugs interchangeably with FDA-approved versions on his patients and filed claims with federal and state health care programs, including Texas Medicaid, Medicare, and Blue Cross and Blue Shield. The physician agreed to repay over $1,000,000 for the reimbursements that he received, and is awaiting sentencing that could result in up to one year in prison and up to $100,000 in fines and penalties. 

Purchasing Unapproved Prescription Drugs

On June 28, 2013, the U.S. Attorney for the Southern District of California announced that a La Jolla oncology practice was sentenced to pay a $500,000 fine, forfeit $1.2 million and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing the federal prgram. The practice admitted that it purchased $3.4 million of a foreign cancer drug, knowing that the drug had not been approved by the FDA. 

The practice admitted that it was aware the drugs were not approved by the FDA for use in the U.S. because: (a) the packaging and shipping documents indicated that drugs were shipped to the office from outside the U.S.; (b) many of the invoices identified the origin of the drugs and intended markets for the drugs as countries other than the U.S.; (c) the labels did not bear the "Rx Only" language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) detained because the drugs were unapproved. 

In a related False Claims Act lawsuit filed by the U.S., the physician-owner of this oncology practice paid in excess of $2.2 million to settle allegations of submitting false claims to the Medicare program. (Medicare does not cover prescription non-FDA approved drugs.)

FDA Warning Letters to Physicians


Prior to the FCA settlements and guilty pleas by physicians, FDA had sent the physicians warning about the risks of purchasing medications from foreign manufacturers or local unlicensed suppliers (drop shippers). Generally, subsequent to a guilty plea or conviction of a pharmaceutical company or its distributor in the U.S. for selling misbranded and unapproved drugs from these companies or their suppliers. 

For example, the FDA sent a warning letter to certain physicians the agency belived had purchased unapproved foreign drugs or unapproved injectable devices distributed by Gallant Pharma International, Inc. Among the 12 individuals convicted at Gallant: a doctor and an office manager, for their roles in distributing drugs and devices that had not been approved by the FDA for use in the U.S. The FDA letter to physicians listed 39 drugs, primarily unapproved chemotherapy and injectable cosmetic drugs, which Gallant had sold in the U.S.

In March 2016, the FDA sent letters to physicians who the FDA believes may have purchased counterfeit Botox and viscosupplements, such as Orthovisc and Synvisc from an unlicensed supplier, TC Medical. Thise unlicensed supplier pleaded guilty last May to smuggling and selling misbranded prescription drugs in the U.S.

In that warning letter to physicians, the FDA stated, "receiving misbranded drugs and devices in interstate commerce and delivery or offering to deliver these drugs and devices for use on others violates federal law."

FDA Guidance for Physicians

The FDA also included the following recommendations to "help physicians safely purchase drugs and devices from pharmaceutical distributors: 

  • Buy directly from the manufacturer or a wholesale drug distributor licensed in your state.
  • Beware of offers too good to be true, including aggressive marketing tactics and deep discounts, on prescription drugs.
  • Buy only from state-licensed wholesale drug distributors.
  • Check for the following signs that a prescription drug may be unsafe, ineffective or fake: 
    • label is not in English
    • packaging looks slightly different from the FDA-approved product
    • product name differs from the name of the FDA-approved drug
    • dosing recommendations are unfamiliar
    • safety information or warnings are missing
    • dosage forms or administration is different
  • Pay close attention to patient feedback
In addition to potential prison time and fines for misbranding or other violations of federal and state law, the potential consequences for physicians of purchasing medical devices or drugs through unauthorized distribution channels can include criminal and civil false claims liability, repayment obligations, exclusion from federal health care programs, liability to patients, and loss of professional licenses or hospital privileges. 

Physicians should stay in front of these issues and adopt compliance practices to ensure they are purchasing drugs and medical devices from authorized suppliers. In the event they later discover that they may have purchased unapproved drugs or medical devices, physicians should consider self-disclosure or other reporting route to the applicable governmental agency.  

Imported Drugs and Medical Devices: Physicians Face Significant Liability for Purchasing Imported Drugs and Medical Devices

A recent trend has been the increasing number of civil settlements and criminal convictions against physician practices that purchased foreign prescription drugs and medical devices that have not been approved by the FDA for use in the United States. Another common scenario is that a clinic may purchase drugs or medical devices from a local supplier who had sold the clinic non-FDA approved drugs from another company. 

Specifically, recent civil False Claims Act (FCA) settlements by orthopedic clinics in Tennessee and Virginia by the U.S. Department of Justice (DOJ), guilty pleas by oncologists in Missouri and California, and enforcement by the FDA Office of Criminal Investigations highlight the significant liability physicians may have from purchasing non-FDA approved drugs from Canada and other countries, or from unauthorized suppliers. 

The clear message from these enforcement actions, as well as recent changes to federal and state law, is that physicians are ultimately responsible for knowing the source of the drugs and medical devices they purchase for their patients. Physicians must also ensure that they are purchasing drugs and medical devices from an approved supplier in their state. 

This article describes aspects of these recent government settlements, criminal cases, and other enforcement actions. Physicians should consider them into their compliance with federal and state laws. 

Background: How it Works

Physician offices and clinics are often contacted through mass advertising campaigns via blast faxes, phone calls, direct mail, and online marketing. These distributors often pursue clinics and hospitals with offers to sell physician-administered drugs, including injectable drugs. 

Often, a company will use false names to sell foreign pharmaceutical products throughout the U.S. Large shipments may be broken down into multiple small shipments in order to smuggle pharmaceuticals across the U.S. border. These shipments may then be sent to addresses in multiple states and locations under different false names. Custom forms may falsely state the contents and value of the shipments. Local companies, referred to as drop shippers, in the U.S., receive the packages, remove indicia that they were from abroad, and then re-ship them to doctors and clinics in the U.S. so that the packages would have an U.S.-based return address. According to the FDA, these drop shippers store the drugs and medical devices in the basements of their private residences, often in violation of safety regulations requiring that pharmaceuticals be stored at cool temperatures. 

In some cases, foreign non-FDA approved drugs and medical devices are delivered directly to physician clinics from pharmaceutical companies or suppliers in another country. A local drop shipper will generally have UPS pick up this package from a clinic and re-package the drugs or medical devices in a box that does not contain any post mark or return address of another country, and have it re-delivered to the clinic. 

Recently, several companies and individuals have pleaded guilty to smuggling and selling misbranded prescription drugs and unlicensed (non-FDA approved) drugs to local suppliers and physician clinics in the U.S. Apparently, the FDA Office of Criminal Investigations is investigating local suppliers or drop shippers and physicians who may have purchased prescription drugs and devices from these companies. 

Beginning Jan. 1, 2015, the Drug Supply Chain and Security Act requires all healthcare providers who dispense or administer prescription drugs to patients must purchase these products only from authorized trading partners (also commonly referred to as approved suppliers) licensed by or registered with the state or federal government. Authorized "trading partners" includes wholesale distributors, manufacturers, re-packagers, and dispensers. In short, healthcare providers, inlcuding physicians, are responsible for assuring that their immediate or local suppliers are "authorized," which means licensed by the appropriate federal or state agency. 

The False Claims Act settlements discussed below include several aspects of the packaging that would alert physician practices that the drugs or medical devices may be from a foreign country, and not FDA-approved. 

False Claims Act Settlements

On Jan. 24, 3014, the DOJ announced that two orthopedic practices would pay a combined $1.85 million to resolve state and federal False Claims Act allegations that they knowingly billed state and federal healthcare programs for osteoarthritis medications known as viscosupplements that were distributed in foreign markets and then reimported to the U.S. The two settlements involved orthopedic clinics in Tennessee and Virginia. 

Viscosupplements are substances injected into a joint to treat arthritic knee pain. The products are distributed under brand names such as Synvisc, Hyalgan, Orthovisc, and Supartz and are approved by the FDA as injectable Class III medical devices to treat osteoarthritic knee pain. Viscosupplements are reimbursed by Medicare, Medicaid and other federal health care programs.

The government alleged that the clinics knowingly purchased deeply discounted viscosupplements that were reimported from foreign countries, and then billed the state and federal health care programs when such reimported viscosupplements are not reimbursable by those programs. The government contended that the reimported products contained labeling in foreign languages and in English for additional uses not approved in the U.S. This demonstrated that the products were reimported, and thus there was no reassurance they were safe or had not been tampered with or stored appropriately. 

The complaint against the Tennessee and Virginia clinics was filed in 2012 under the whistleblower provisions of the civil False Claims Act by a representative for a pharmaceutical manufacturer of one of the viscosupplements. An interesting aspect was that the whistleblower was retained by the pharmaceutical manufacturer to educate medical providers about the use of Synvisc. According to the DOJ, the reimported viscosupplements contained labeling and packaging that were not approved by the FDA, including labeling in foreign languages as well as labeling for uses that were not approved in the U.S.

Buying  and Selling Misbranded Prescription Drugs

Several companies and individuals have recently plead guilty to smuggling and selling misbranded prescription drugs, as well as the unlicensed wholesaling of prescription drugs in the U.S. Physicians who purchased these drugs have also pleaded guilty to buying and selling, as well as dispensing foreign, misbranded drugs to their patients. 

Government allegations that prescription drugs and devices were misbranded have been based in part on the following: (a) they were not in possession of a person who regularly engages in the storage or wholesale distribution of prescription drugs or devices; (b) there was not a label that contained required language limiting their use to prescription only; (c) prescription drugs failed to have the FDA-approved labeling and/or the "Rx Only" symbol; and (d) the drugs and devices were misbranded in some cases because they did not have certain language required by the Food, Drug and Cosmetic Act (FDCA) in English. 

According to the FDA, a drug may be considered misbranded even if it is identical in composition to an FDA-approved drug made by the same manufacturer in the same facility. It is important to keep in mind that misbranding is a strict liability offense under the FDCA. Anyone who participates in a violation can be convicted of a crime even if there is no intent to violate the law. 

On March 30, 2015, a Joplin, Missouri, oncologist pleaded guilty in federal court to dispensing foreign, misbranded drugs to his cancer patients. The oncologist had ordered prescription cancer drugs from a company based in Winnipeg, Canada. This Canadian-based company had sold drugs to the oncologist that had been obtained from foreign sources and which had not been approved by the FDA for use in the US. 

According to the DOJ, the labeling for the prescription drugs the oncologist purchased was different from the versions the FDA had approved for distribution in the U.S. For example, the DOJ stated that the drugs did not have labels bearing the symbol "Rx Only," and the labeling for some of the drugs was in one or more foreign languages. Some of the prescription drugs lacked mixing and use instructions in English. 

The oncologist submitted reimbursement claims for these drugs and their administration to Medicare and Medicaid, Tricare, and private health insurance programs. The oncologist paid $971,854,000 in restitution to Medicare, Tricare, Missouri Medicaid, and Oklahoma Medicaid and Kansas Medicaid programs. 

On Jan. 29, 2014, the U.S. Attorney's Office of the Northern District of Ohio announced that seven Ohio oncologists were ordered to pay $2.6 million after pleading guilty to misdemeanor charges of causing the shipment of misbranded drugs in violation of the FDCA. These drugs from Canada were not approved by the FDA for introduction to the U.S. Each physician was required to pay fines and restitution, ranging from $158,418 to $1,139,532, and was sentenced to probation. The seven oncologists were charged with purchasing cancer drugs from Canada, including Zometa, Kytril, Taxotere, Gemzar, and Eloxatin, and providing the drugs to thier patients. 

In December 2013, the DOJ announced the guilty plea of a Texas oncologist for introducing misbranded cancer drugs into the U.S. from Canada. According to the government, the drugs were not approved for distribution or use in the U.S. and did not satisfy labeling requirements. The oncologist used the drugs interchangeably with FDA-approved versions on his patients and filed claims with federal and state health care programs, including Texas Medicaid, Medicare, and Blue Cross and Blue Shield. The physician agreed to repay over $1,000,000 for the reimbursements that he received, and is awaiting sentencing that could result in up to one year in prison and up to $100,000 in fines and penalties. 

Purchasing Unapproved Prescription Drugs

On June 28, 2013, the U.S. Attorney for the Southern District of California announced that a La Jolla oncology practice was sentenced to pay a $500,000 fine, forfeit $1.2 million and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing the federal prgram. The practice admitted that it purchased $3.4 million of a foreign cancer drug, knowing that the drug had not been approved by the FDA. 

The practice admitted that it was aware the drugs were not approved by the FDA for use in the U.S. because: (a) the packaging and shipping documents indicated that drugs were shipped to the office from outside the U.S.; (b) many of the invoices identified the origin of the drugs and intended markets for the drugs as countries other than the U.S.; (c) the labels did not bear the "Rx Only" language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) detained because the drugs were unapproved. 

In a related False Claims Act lawsuit filed by the U.S., the physician-owner of this oncology practice paid in excess of $2.2 million to settle allegations of submitting false claims to the Medicare program. (Medicare does not cover prescription non-FDA approved drugs.)

FDA Warning Letters to Physicians


Prior to the FCA settlements and guilty pleas by physicians, FDA had sent the physicians warning about the risks of purchasing medications from foreign manufacturers or local unlicensed suppliers (drop shippers). Generally, subsequent to a guilty plea or conviction of a pharmaceutical company or its distributor in the U.S. for selling misbranded and unapproved drugs from these companies or their suppliers. 

For example, the FDA sent a warning letter to certain physicians the agency belived had purchased unapproved foreign drugs or unapproved injectable devices distributed by Gallant Pharma International, Inc. Among the 12 individuals convicted at Gallant: a doctor and an office manager, for their roles in distributing drugs and devices that had not been approved by the FDA for use in the U.S. The FDA letter to physicians listed 39 drugs, primarily unapproved chemotherapy and injectable cosmetic drugs, which Gallant had sold in the U.S.

In March 2016, the FDA sent letters to physicians who the FDA believes may have purchased counterfeit Botox and viscosupplements, such as Orthovisc and Synvisc from an unlicensed supplier, TC Medical. Thise unlicensed supplier pleaded guilty last May to smuggling and selling misbranded prescription drugs in the U.S.

In that warning letter to physicians, the FDA stated, "receiving misbranded drugs and devices in interstate commerce and delivery or offering to deliver these drugs and devices for use on others violates federal law."

FDA Guidance for Physicians

The FDA also included the following recommendations to "help physicians safely purchase drugs and devices from pharmaceutical distributors: 

  • Buy directly from the manufacturer or a wholesale drug distributor licensed in your state.
  • Beware of offers too good to be true, including aggressive marketing tactics and deep discounts, on prescription drugs.
  • Buy only from state-licensed wholesale drug distributors.
  • Check for the following signs that a prescription drug may be unsafe, ineffective or fake: 
    • label is not in English
    • packaging looks slightly different from the FDA-approved product
    • product name differs from the name of the FDA-approved drug
    • dosing recommendations are unfamiliar
    • safety information or warnings are missing
    • dosage forms or administration is different
  • Pay close attention to patient feedback
In addition to potential prison time and fines for misbranding or other violations of federal and state law, the potential consequences for physicians of purchasing medical devices or drugs through unauthorized distribution channels can include criminal and civil false claims liability, repayment obligations, exclusion from federal health care programs, liability to patients, and loss of professional licenses or hospital privileges. 

Physicians should stay in front of these issues and adopt compliance practices to ensure they are purchasing drugs and medical devices from authorized suppliers. In the event they later discover that they may have purchased unapproved drugs or medical devices, physicians should consider self-disclosure or other reporting route to the applicable governmental agency.  
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