Specialty Pharmaceutical Distribution Company Pays $10.5M and Enters into a Deferred Prosecution Agreement with the Mass. U.S. Attorney’s Office Over Illegal HGH DistributionSeptember 25, 2007
Specialty Distribution Services (“SDS”), a corporate subsidiary of Express Scripts, Inc., has admitted to violations of FDC Act § 303(e) and agreed to pay $10.5M as part of a 36-month deferred prosecution agreement with the U.S. Attorney’s Office for the District of Massachusetts in connection with the company’s non-medical distribution of human growth hormone (“HGH”). FDC Act § 303(e) states, in relevant part:
[W]hoever knowingly distributes, or possesses with intent to distribute, [HGH] for any use in humans other than the treatment of a disease or other recognized medical condition, where such use has been authorized by the Secretary of Health and Human Services under section 505 and pursuant to the order of a physician, is guilty of an offense punishable by not more than 5 years in prison, such fines as are authorized by title 18, United States Code, or both.
A healthcare fraud settlement out of the Massachusetts U.S. Attorney’s Office is nothing out of the ordinary these days, and SDS’s $10.5M settlement is small compared to “big” cases out of that office — for example the Schering-Plough $435M global settlement in August 2006 or the Serono $704M global settlement in October 2005. Similarly, a deferred prosecution agreement is increasingly common fare. KPMG, Bristol-Myers Squibb, and Computer Associates have all entered into deferred prosecution agreements in recent years. A prosecution under FDC Act § 303(e) and the ancillary buzz of professional athletes using HGH to gain a performance edge make this resolution somewhat more notable, however.
Congress enacted the present FDC Act § 303(e) in the late 1980s and amended the statute in the late 1990s to crack down on illegal trafficking of HGH. Unlike most felony prosecutions under the FDC Act, a felony charge under § 303(e) does not require proof of “intent to defraud and mislead.” (Compare 21 U.S.C. § 333(e) with § 333(a)(2).)
Until the Massachusetts U.S. Attorney’s Office announcement last week, another investigation into HGH distribution had been mostly making news in the sports section of the paper. In a seemingly unrelated investigation, the District Attorney for Albany County, New York, David Soares, has investigated and charged Specialty Pharmacy of Orlando, Florida, and top officials at Specialty Pharmacy, with illegally dispensing a controlled substance and insurance fraud. District Attorney Soares and his office have made sports headlines and have met with National Football League and Major League Baseball representatives. While the NFL has taken disciplinary action, Mr. Soares’ office has stated that it is not focusing on professional athletes.
It is less clear whether the federal investigation might have consequences for professional athletes linked to SDS. The agreed statement of facts to the deferred prosecution agreement states that “[o]n or about January 2, 2003 and October 24, 2003, SDS distributed [HGH] . . . to a well-known professional athlete in Massachusetts.” Additionally, the deferred prosecution agreement commits SDS to “providing testimony and other information deemed necessary by the USAO or the court . . . in any criminal case or other proceeding by the USAO.” At a minimum, these state and federal investigations into non-medical use of HGH will likely lead to more revelations about athletes using performance enhancing drugs. Whether such revelations will be accompanied by any legal sanctions remains to be seen.
By JP Ellison