2023 Is Set To Bring a Wave of COVID-19 Fraud Enforcement in Life Sciences

While COVID-19 may not be grabbing national headlines like it used to, the U.S. Food and Drug Administration (FDA) and U.S. Department of Justice (DOJ) have started seeking out bad actors that took advantage of government programs or misled consumers during the throes of the pandemic.

In fact, the DOJ recently established three strike force teams to enhance the department’s existing efforts to combat and prevent COVID-19-related fraud, a significant step the department typically only takes when it plans to focus extensively on a specific issue. These strike teams are intended to strengthen the efforts of the COVID-19 Fraud Task Force established by the Attorney General in May 2021. As of this January, the DOJ has seized more than $80 million in cash proceeds derived from CARES Act-related fraud schemes, as well as numerous real estate properties and luxury items purchased with such proceeds, and the government is showing no signs of slowing down.

FDA has also taken matters into its own hands by targeting organizations and individuals that knowingly misled consumers about their products throughout the pandemic. Specifically, the administration is issuing warning letters to companies for selling fraudulent products with claims to prevent, treat, mitigate, diagnose or cure COVID-19. FDA is leaning on its cybercrime unit to actively monitor and identify any companies marketing products with fraudulent COVID-19 prevention and treatment claims.

Ongoing vigilance and enforcement

These government agencies have already brought on numerous cases against a wide range of businesses in recent months. In October 2022, the DOJ alleged that a California-licensed naturopathic doctor developed a scheme to sell homeoprophylaxis “immunization pellets” and falsify COVID-19 vaccination cards by making it appear that customers had received FDA-authorized vaccines.

In December 2022, a federal grand jury indicted two individuals for allegedly making materially false and misleading representations about their biotech company’s investigation and development of a drug as a potential treatment for COVID-19. These individuals also allegedly knew that the drug’s clinical studies failed to produce the results necessary to receive any form of FDA approval for use as a treatment for COVID-19.

Just a few weeks ago, a U.S. attorney announced the results achieved by the Middle District of Florida’s ongoing efforts to combat fraud related to COVID-19—work which included the prosecution of dozens of individuals for fraud schemes designed to exploit several federal relief programs, including the Paycheck Protection Program (“PPP”).

These enforcement actions are not expected to stop any time soon. In fact, we anticipate this flurry of enforcement activity against COVID-19-related fraud will continue to ramp up in the coming months.

There are a few areas we expect the FDA and DOJ to focus on in particular:

1. Misappropriation of CARES Act funds: The federal government operates on a good faith basis and assumed that the applications it received for COVID-19-related financial assistance were accurate. However, countless individuals and businesses were granted aid based on falsified information. Many others used funds for unauthorized purchases, such as personal vehicles or vacations. Considering the sheer volume of aid given out, the DOJ has only scratched the surface in terms of identifying and prosecuting these bad actors. With so much potential funds left on the table to recover, we expect the DOJ to relentlessly target this type of fraud for many years.
2. COVID-19 product misinformation: With the pandemic in full swing, many individuals were desperate to find remedies that could protect themselves and their loved ones. This opened the doors for bad actors to make misleading claims about their products’ ability to treat and protect against COVID-19. Many of these bad actors are still making these false claims today that in the worst cases can even be dangerous to a person’s health when taken without proper physician oversight. The FDA has made it clear that it will do everything within its power to protect consumers from these products.
3. Distributors selling fraudulently marketed products: Despite being well-intentioned, enforcement agencies may begin targeting large drug stores and other distributors selling products to consumers that have been falsely marketed as COVID-19 remedies. It can be more difficult and less cost-effective for these enforcement agencies to target smaller individual actors. As such, they may turn their sights to those distributing these products to make a greater impact and collect more financial penalties.

Keeping a finger on the pulse

While the pandemic might be winding down in the eyes of many companies, the FDA and DOJ are just beginning to intensify their efforts against COVID-19-related fraud. These agencies are expected to continue targeting bad actors, making it essential for Life Sciences companies to anticipate potential scrutiny in an evolving regulatory environment. These efforts will only be exacerbated by the promise of Republicans, now controlling the U.S. House of Representatives, to conduct oversight investigations to fraud allegations and government spending related to COVID-19.

At Buchanan, our team of attorneys and government relations professionals are closely in tune with these enforcement agencies and their priorities. As the life sciences industry remains in the spotlight, our teams can help your business stay up to date with the latest enforcement actions and ensure your business is protected and compliant.

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