DEA Compliance and Defense for Labs and Pharmacies: Importing Drugs from China

With approximately 97 percent of the United States’ antibiotics supply (and numerous other prescription medications) coming from China, labs and pharmacies have little choice but to rely on Chinese imports. However, the Chinese market is rife with counterfeits, and researchers, pharmacists, and pharmacy owners must be careful to avoid importing and dispensing illegitimate drugs.

As the Council on Foreign Relations reported in August 2019, “a Department of Commerce study that found that 97 percent of all antibiotics in the United States came from China.” In the midst of the novel coronavirus (COVID-19) pandemic, the United States’ reliance on prescription drugs manufactured in China came into focus once again, with two primary questions being raised:

  • How can patients be sure that medications they receive that are imported from China are legitimate?
  • What happens if China decides to cut off its supply of antibiotics and other medications to the United States?

Both of these questions are extremely important, and they both have significant implications for labs and pharmacies in the United States. In particular, as concerns over how to verify the legitimacy of Chinese medications linger, labs and pharmacies are increasingly finding themselves the targets of Federal Bureau of Investigation (FBI) and U.S. Drug Enforcement Administration (DEA) investigations.

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John W. Sellers

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Amanda Marshall

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Aaron L. Wiley

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Roger Bach
Roger Bach

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Gamal Abdel-Hafiz
Gamal Abdel-Hafiz

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Chris Quick
Chris Quick

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Kevin M. Sheridan
Kevin M. Sheridan

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Ray Yuen
Ray Yuen

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Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

Understanding Labs’ and Pharmacies’ Obligations Concerning Medications Imported from China

Laboratories, pharmacies, and other entities are subject to various rules and restrictions with regard to the importation of prescription medications from abroad. While these rules and restrictions apply generally, due to the United States’ heavy reliance on Chinese medications and confirmed concerns that a significant percentage of medications exported from China are illegitimate by U.S. federal standards, much of the government’s enforcement effort is focused on medications imported from China. In addition to import/export control laws and the anti-diversion provisions of the Controlled Substances Act (CSA), labs and pharmacies also have obligations arising under the Drug Supply Chain Security Act (DSCSA) – a relatively unknown law that Congress passed in 2013.

While the federal government is doing its best to monitor all prescription medications imported from China, and while labs’ and pharmacies’ legal obligations extend to all types of imported drugs, areas of particular concern right now are furanyl, fentanyl, synthetic drugs, and controlled substance analogues. Opioids in general have been high on the federal government’s radar as of late, with the U.S. Department of Justice (DOJ) establishing the Opioid Fraud and Abuse Detection Unit and Prescription Interdiction & Litigation (PIL) Task Force in recent years. Along with the FBI, DEA, and other agencies, the DOJ and its task forces are aggressively targeting all types of healthcare entities suspected of engaging in or facilitating opioid fraud or diversion.

This includes labs and pharmacies specifically, as these entities are both directly involved in the importation of Chinese medications and are on the front lines when it comes to protecting the public from illegitimate drugs.

But, although labs and pharmacies are generally facing the same level of scrutiny based on the same types of concerns, the specific issues for which they are facing scrutiny are different. For example, a major focus with regard to laboratories involves targeting allegations that labs are claiming to import drugs for research purposes and then selling them for commercial gain. For pharmacies, the primary risks involve non-compliance with the DSCSA and facilitating the diversion of dangerous opioid drugs.

At the same time, however, there are still similarities in how labs and pharmacies are being targeted. In particular, so-called “parallel importation” has become a major issue at the federal level. With parallel importation, medications are brought into the U.S. through a series of overseas transactions, allowing the true source and origin of these medications to be obfuscated. A drug that may be imported to the U.S. from Europe, for example, may have originally come from China. Not only do these types of transactions (of which labs and pharmacies are often unaware) implicate import/export control violations, but they also raise serious law enforcement risks – and potentially patient health risks – under the CSA and DSCSA as well.

How Can Laboratories and Pharmacies Maintain Compliance with Regard to Medications Imported from China?

With these types of concerns in mind, what can – and should – laboratories and pharmacies do in order to maintain federal compliance with regard to importing medications from China?

1. Understanding Your Lab’s or Pharmacy’s Compliance Obligations

First, lab and pharmacy owners need to have a clear understanding of their compliance obligations. As mentioned above, with regard to importing prescription medications from China, import/export laws, the CSA and DSCSA, and various other federal laws apply. In order to be effective in terms of preventing compliance violations and providing a strong foundation for defending against allegations in a DEA or FBI inquiry, a compliance program needs to address all pertinent obligations, without exception.

2. Developing a Comprehensive and Custom-Tailored Compliance Program

Second, with a clear understanding of what compliance measures are necessary, labs and pharmacies must develop comprehensive and custom-tailored compliance programs. Both of these attributes are equally important.

A compliance program that is not comprehensive will leave gaps exposed, and a program that is not custom-tailored will not serve to adequately protect the lab or pharmacy in light of its unique business and operational needs. For labs and pharmacies that have existing compliance programs that do not specifically address the legal risks associated with importing drugs from China, the necessary policies and procedures can be incorporated into their existing compliance program.

3. Implementing Compliance Measures and Following Protocols for Ongoing Compliance

Third, with the necessary compliance documentation prepared, labs and pharmacies can then implement their newly-developed compliance measures. From drug quarantine and investigation protocols to reviewing tracing information and ensuring lawful transfer and dispensing of imported prescription drugs, compliance will involve several affirmative steps on a day-to-day basis. All pertinent personnel should receive thorough training, and protocols should also be implemented to monitor compliance on an ongoing basis.

For additional information about laboratories’ and pharmacies’ federal compliance needs, you can read:

What Should Lab and Pharmacy Owners Do if They are Contacted by the DEA or FBI?

Ideally, adopting a comprehensive and custom-tailored compliance program would provide complete protection against facing inquiries from the DEA and FBI. However, these (and other) federal agencies are tasked with protecting the nation’s borders and keeping dangerous drugs out of the U.S. marketplace, and this means that they have a duty to audit, inspect, and investigate labs, pharmacies, and other entities that have direct involvement in the importation and dispensing of foreign prescription medications.

In short, as a lab or pharmacy owner, it is likely only a matter of time until you receive an inquiry from the DEA or FBI. Even if your facility or practice is fully compliant, federal agents will not know this for sure until they take a look for themselves. That said, even if you are confident in your lab’s or pharmacy’s compliance program, you must still take any federal inquiry seriously, and you must approach the inquiry from a defensive posture.

Why? The answer is simple: Mistakes happen. Lab and pharmacy personnel can make mistakes that amount to compliance violations, and federal agents can overlook or misinterpret information resulting in a misguided finding of culpability. If either of these occur during a DEA or FBI inquiry, the consequences could be severe.

Typically, minor technical violations are not prosecuted. For example, if the DEA uncovers a simple recordkeeping violation, it may simply issue a Letter of Admonishment. Additionally, in many cases, labs and pharmacies can achieve favorable results without any formal legal action with the help of experienced federal defense counsel. However, violations of federal import/export laws, the CSA and DSCSA, and other federal statutes can also lead to civil or criminal charges. This is particularly true in cases involving the importation and dispensing of medications that are illegal in the United States.

So, what should you do?

  • Engage experienced federal defense counsel. If your lab or pharmacy is facing a federal audit, inspection, or investigation, it is imperative that you engage defense counsel promptly.
  • Conduct an internal assessment. If mistakes have been made, you need to know about them as soon as possible.
  • Develop a defense strategy. Based on the information you uncover, develop a defense strategy focused on the facts at hand and the specific issue(s) targeted in the DEA’s or FBI’s inquiry.
  • Take a proactive approach. Through your lab’s or pharmacy’s defense counsel, you should engage with the investigating agents and seek to take control of the investigative process.
  • Steer the inquiry toward a favorable result. By taking a proactive approach and responding to the inquiry as soon as possible, you can steer the inquiry toward a favorable result that avoids civil or criminal liability.

Contact the Federal Defense Lawyers and Consultants at Oberheiden P.C.

Our firm is comprised of senior attorneys and consultants, many of whom are former DOJ prosecutors and former agents with the DEA, FBI, and other agencies. If your lab or pharmacy needs compliance representation, or if you are facing an audit or investigation, we encourage you to contact us immediately. For a free and confidential consultation, call 888-680-1745 or inquire online now.

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