From Toilet Paper to Prescription Drugs: When Hoarding Becomes Fraud

Government Enforcement Update

Client Alert


With a COVID-19 vaccine months away, practitioners and patients alike are increasingly desperate for viable treatment options. Now, new allegations suggest that some medical practitioners are fraudulently prescribing drugs for themselves and family members. These allegations have already prompted action by state regulators and pharmacy boards. The ripple effect of such actions has the potential to attract the scrutiny of government prosecutors, potentially triggering fraud investigations and subsequent civil and criminal proceedings. As such, those in the healthcare industry should be mindful of the increasing scrutiny attached to prescribing and dispensing these high-alert drugs.

Traditional Uses and New Clinical Trials

The drugs at issue here are chloroquine and hydroxychloroquine. Although traditionally used to treat malaria, lupus, and rheumatoid arthritis, recent studies suggest that these drugs may be used to treat the coronavirus. Several clinical trials are underway to gather more information about the drugs’ efficacy against COVID-19.  

President Trump’s latest endorsement of the drugs as a promising treatment for COVID-19 has also generated increased demand for the medications. While the U.S. Food and Drug Administration has not yet approved the drugs to treat COVID-19, it has now issued an Emergency Use Authorization (EUA) to allow hydroxychloroquine sulfate and chloroquine phosphate to be prescribed to patients hospitalized with COVID-19.

Ramifications of Increased Demand

Amidst this increased demand, reports have emerged of medical professionals prescribing and hoarding these drugs for individuals who do not have an immediate need, including family members, friends, coworkers, and themselves. Pharmacies in Florida, Virginia, Texas, New York, Illinois, Massachusetts, and California have reported receiving orders for unprecedented amounts of these drugs. And, due to the consequential shortage, lupus patients have found it difficult to fill their existing prescriptions.

Because lupus and rheumatoid arthritis are autoimmune diseases, the reduced availability of these drugs endangers immunocompromised individuals. The specter of patient harm is likely to spur close inquiries and could lead to civil or even criminal penalties under federal and state law. For example, charges are conceivable under the federal False Claims Act or healthcare fraud statutes, as the prescription of medically unnecessary drugs could constitute making and submitting false statements or claims. In addition, regulatory consequences — such as the suspension of medical licenses or exclusion from government healthcare programs — are likely to follow.  

Enforcement to Date

Pharmacists have raised concerns about suspected hoarding practices. Some have refused to fill suspicious orders, flagging prescriptions for first-time users and from practitioners who do not typically treat patients with conditions such as lupus, rheumatoid arthritis, or malaria. In the most obvious cases, dentists and ophthalmologists have been reported prescribing the drugs.

In response, pharmacy boards in North Carolina, West Virginia, Idaho, Kentucky, Ohio, Nevada, and Oklahoma have issued emergency restrictions and guidelines concerning how and under what circumstances the drugs may be dispensed. The practice of hoarding these medications has also been condemned publicly by the American Medical Association and the Lupus Foundation of America, which recently issued a statement requesting that the White House Coronavirus Task Force act to preserve supplies for patients already taking the drugs for approved uses.

On the regulatory side, New Jersey’s Division of Consumer Affairs, Texas, and Ohio have placed restrictions on prescriptions of the drugs. Virginia’s state health commissioner, as well Michigan, have also warned doctors against hoarding the drugs for themselves.

Best Practices to Avoid Surprise Enforcement Actions

Fortunately, drug manufacturers have increased production and decreased prices. Nonetheless, several red flags — already reported by pharmacists, state pharmacy boards, and state regulators — are almost certain to elicit the attention of government enforcers. To avoid surprise enforcement actions, medical professionals should take heed of the following best practices when prescribing chloroquine and hydroxychloroquine:

  • Be mindful of prescriptions written for first-time users and by atypical prescribers — i.e., where the treatment of malaria, lupus, and rheumatoid arthritis does not fall within the prescriber’s scope of practice.
  • Appropriately document diagnoses for conditions that the drugs are proven to treat, which should be sufficiently supported by the patient’s medical record.
  • Appropriately document medical necessity for the treatment of COVID-19 in hospitalized patients.
  • Unless otherwise approved by an appropriate medical authority, restrict prescriptions for the treatment of COVID-19 in an outpatient setting to individuals who have tested positive.
  • In treating COVID-19 with these drugs, exercise professional judgment in limiting the initial supply volume and refills.
  • Exercise caution in writing prescriptions for individuals with whom there is no prior physician-patient relationship — i.e., family members and friends.

While inquiries by government prosecutors may not yet have fully materialized — at least publicly — announcement of enforcement efforts does not usually occur until cases have already been built. For this reason, healthcare practitioners and institutions alike would be wise to implement compliance initiatives now to detect, correct, and put an end to such practices before they find themselves faced with adverse enforcement and regulatory proceedings.