On June 27, 2022, the United States Supreme Court, by a vote of 9-0, overturned the lower circuit courts’ rulings affirming the convictions of two physicians of the unlawful distribution of controlled substances. In Ruan v. United States (Case No. 20-1410), consolidated with Kahn v. United States (Case No. 21-5261), the Supreme Court was asked to determine whether a physician may be convicted of unlawful distribution of controlled substances under 21 U.S.C. § 841(a)(1) without regard to whether, in good faith, the physician “reasonably believed” or “subjectively intended” that his or her prescriptions fall within that course of professional practice. The Controlled Substances Act makes it unlawful for “any person knowingly or intentionally … to manufacture, distribute, or dispense” a controlled substance, “except as authorized.” A prescription is authorized when it is “issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.” 21 C.F.R. § 1306.04(a). The “vague and highly general regulatory language” left open the question of what conduct would fall under the statute’s exception and thus be considered legal.
opioid
Private Equity in Behavioral Health: Clinical Due Diligence Requires Consideration of EKRA, the New Anti-Kickback Law Applicable to All Payors
Recently enacted federal law expanding criminal liability for kickbacks related to all payors, and increased government enforcement activity in behavioral health (see press release), has heightened the importance of clinical due diligence for private equity investors targeting deals and acquisitions in the emerging behavioral health space. PE firms continue to target behavioral health opportunities as federal and commercial insurance coverage expands for mental health, including substance abuse treatment and telehealth services. Such commercial coverage will only become more commonplace after a federal court this month found United Behavioral Health improperly denied benefits for treatment of mental health and substance use disorders to plan participants because United’s guidelines did not comply with the terms of its own insurance plans and state law.[1] PE firms entering the behavioral health market, though, particularly opportunities related to substance abuse treatment and laboratory services, should carefully review a company’s compliance with the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”).