Fraud indictment shows the urgency of DSCSA traceability

June 30, 2023

On June 28, the U.S. Justice Department issued a press release announcing “a strategically coordinated, two-week nationwide law enforcement action” resulting in criminal charges against 78 defendants accused of health care fraud and opioid abuse schemes, totaling more than $2.5 billion in alleged fraud. The enforcement action, one of the largest of its kind in the department's history, includes allegations against 10 people in connection with prescription drug fraud, asserting that they were responsible for submissions of more than $370 million in fraudulent prescription drug claims.

One of the people charged owns a pharmaceutical wholesale company that allegedly purchased illegally diverted expensive prescription HIV medications, then falsely resold them as legitimate — which necessitated falsifying labeling and product tracing documentation. The drugs were then purchased by pharmacies, dispensed to patients, and billed to healthcare benefit programs.

An indictment from the District Court of New Jersey states that not only were the medications obtained unlawfully and supplied through unregulated channels, they were sometimes falsely resold as other drugs. The news is a critical reminder that compliance with DSCSA doesn't just mean new technology or new paperwork; traceability protects patients.

Fake drug traceability data enabled fraudulent sales

The indictment alleges that the fraudsters, having obtained wholesale drug distributor licenses in multiple states, purchased “large quantities of diverted prescription drugs, including HIV medication” at a steep discount on the medications’ regular prices, attempting to only buy bottles that looked new. Their suppliers had received the drugs through unlawful “buyback” schemes, where they paid patients in cash for previously dispensed prescription drug bottles. In some instances, the bottles were falsely labeled when they were redistributed.

They allegedly concealed the scheme by falsifying T3s (Transaction History, Transaction Information, and Transaction Statement) data “and other labeling” to indicate that the drugs had been properly acquired through “legitimate and regulated channels of distribution and from authorized distributors” and, in turn, that the distributors had acquired them directly from manufacturers – altogether, the information to which every dispenser and patient entrusts their safety.

Most interesting are the details on how those behind the fraud scheme attempted to present the appearance of legitimate data trails for product tracing. In addition to records of voice messages where the people involved discussed how to falsify this information, the indictment includes a text message from March 2021 where someone asks the defendant if he plans to disclose “the product and the issues to the manufacturer or fda?” to which he responds that he plans to “let everything just play out.”

The Justice Department believes that, between 2017 and 2021, the defendants “purchased, or caused to be purchased, at least $150 million of diverted prescription drugs.”

The urgency of EPCIS serialization and complete DSCSA compliance

The indictment makes for sad (though morbidly fascinating) reading, a potent example of the vulnerabilities and predatory behavior DSCSA was created to address. The urgency of compliance shouldn’t be solely driven by legal requirements and enforcement, but to protect patients from focused, coordinated real-world scams, carried out by people who hope to manipulate systems associated with lower standards of traceability for their own gain.

In short, all the work that goes into EPCIS onboarding, and other processes around DSCSA, will pay off in product security, trust in your trading partners, and the health of your patients. Learn how you can protect your business with comprehensive DSCSA compliance solutions today.