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Drug Companies’ Role in Opioid Epidemic Scrutinized by Prosecutors
The
companies, including Johnson & Johnson and McKesson Corporation, received
subpoenas from Brooklyn prosecutors.
Prosecutors
asked the companies to hand over documents related to the marketing and sale of
opioids. Credit... Spencer Platt/Getty Images
By Nicole Hong
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Nov. 27, 2019
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Federal prosecutors in Brooklyn have opened a criminal
investigation into whether several large drug companies intentionally skirted
regulations in order to promote the sale of addictive opioids, according to
corporate filings and a person familiar with the matter.
The investigation is part of a heightened law enforcement
scrutiny around the country into companies that make and distribute
prescription painkillers. Drug companies have faced criminal probes and
multibillion-dollar lawsuits for their alleged role in the opioid epidemic.
This year, federal prosecutors in Manhattan and Cincinnati
have brought novel cases against companies that distributed opioids to
pharmacies, using criminal conspiracy charges typically deployed against drug
dealers.
At least six companies
disclosed in recent regulatory filings that they received grand jury subpoenas
from federal prosecutors in Brooklyn: Johnson & Johnson, Teva
Pharmaceutical Industries Ltd., Mallinckrodt PLC, Amneal Pharmaceuticals Inc.,
AmerisourceBergen Corporation and McKesson Corporation.
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Prosecutors from the Eastern District of New York asked the
companies to hand over documents related to the marketing and sale of opioids,
the filings said. The subpoenas also sought information about the companies’
internal programs and policies to stop the abuse of opioid medications.
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Prosecutors are examining whether the companies violated the
federal Controlled Substances Act, a broad statute that regulates drug
distribution and possession, according to corporate filings and a person
familiar with the investigation. The law has been used to impose penalties
against pharmacies that failed to adequately control prescription painkillers
from reaching the black market.
To bring criminal charges under the statute, the government
must prove that the companies or their executives intentionally avoided
complying with regulations that require them to flag suspicious orders of
opioid medications.
A spokesman for Johnson
& Johnson said the company’s procedures for distributing opioid medications
complied with the law, adding that monitoring data showed the
company’s opioids were rarely abused.
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A spokeswoman for Teva said the company was cooperating with
the subpoena and was confident in its monitoring policies.
A spokesman for Mallinckrodt declined to comment. Officials at
AmerisourceBergen, McKesson and Amneal did not respond to requests for comment.
As deaths from opioid overdoses have surged in the past few
years, law enforcement officials across the country have sought to use criminal
prosecution against corporate executives accused of contributing to the
epidemic. Last year, the Justice Department created a task force to pursue makers and distributors of
prescription opioids.
“We will use criminal penalties,” said the United States
attorney general at the time, Jeff Sessions. “We will use civil penalties. We
will use whatever tools we have to hold people accountable for breaking our
laws.”
Opioid cases have become such a priority for the government
that the United States attorney for the Eastern District, Richard P. Donoghue,
has asked every prosecutor in his criminal division to take on an
opioid-related case, according to people familiar with the office.
Earlier this year, for the first time, federal prosecutors in
Manhattan brought felony drug-trafficking charges
against a major pharmaceutical distributor and two of its former executives. Prosecutors said the
former executives at the company, Rochester Drug Cooperative, or RDC, ignored
red flags and shipped tens of millions of oxycodone pills and fentanyl products
to pharmacies they knew were distributing the drugs illegally.
One of the former
executives pleaded guilty to three criminal counts, including intentionally
failing to report suspicious bulk orders of fentanyl and other opioids. He is
cooperating with prosecutors. The other former executive has pleaded not
guilty.
As part of the case, the company agreed to a deal in which it
would avoid criminal charges as long as it pays a $20 million fine, complies
with the controlled substances law and submits to five years of supervision by
an independent monitor.
The company admitted in court papers that it intentionally
violated federal narcotics laws by shipping opioids to pharmacies, knowing that
the prescription medicines were being sold and used illicitly.
In a similar case in Cincinnati, federal prosecutors this year
brought criminal charges against a pharmaceutical distributor, Miami-Luken Inc.,
saying the company ignored “obvious signs of abuse.” Among other allegations,
the government said the company had distributed more than 2.3 million oxycodone
pills to a pharmacy in a town of approximately 1,400 people.
The company, which closed, was charged alongside two of its
former officials and two pharmacists. All have pleaded not guilty.
Lawsuits around the country have also accused big opioid
makers and distributors of using misleading marketing and playing down how
addictive the painkillers were in order to increase sales.
Jan
Hoffman contributed reporting.
The Giants at the Heart of the
Opioid Crisis
The headquarters of McKesson
Corporation, the drug distributing giant, in San Francisco. Credit... Anastasiia
Sapon for The New York Times
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April 22, 2019
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There are the Sacklers, the family that controls Purdue
Pharma, the maker of OxyContin. There are the doctors who ran pill mills, and
the rogue pharmacists who churned out opioid orders by the thousands.
But the daunting financial muscle that has driven the spread
of prescription opioids in the United States comes from the distributors —
companies that act as middlemen, trucking medications of all kinds from vast
warehouses to hospitals, clinics and drugstores.
The industry’s giants, Cardinal Health, McKesson and
AmerisourceBergen, are all among the 15 largest American companies by revenue. Together, they distribute
more than 90 percent of the nation’s drug and medical supplies.
New civil suits from the
attorneys general in New
York , Vermont and Washington
State accuse
distributors of brazenly devising systems to evade regulators. They allege that
the companies warned many pharmacies at risk of being reported to the Drug
Enforcement Administration, helped others to increase and circumvent limits on
how many opioids they were allowed to buy, and often gave advance notice on the
rare occasions they performed audits.
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Three-fourths of prescriptions at a Queens pharmacy supplied
by Amerisource were written by doctors who were later indicted or convicted,
the New York complaint said. For more than five years, Cardinal shipped to a
pharmacy with the highest oxycodone volume in Suffolk County, N.Y., despite
continually flagging its orders as suspicious. McKesson kept shipping to two
pharmacies six years after learning that they had been filling prescriptions
from doctors who were likely engaging in crimes. The shipments stopped only
last year, after the doctors were indicted.
“How do the C.E.O.s of
these companies sleep at night?” Bob Ferguson, Washington’s attorney general,
said at a recent
news conference .
Image
Executives of drug distribution
companies testified before a House hearing on the opioid crisis in May 2018.
From left, George Barrett of Cardinal Health; Dr. Joseph Mastandrea of
Miami-Luken Inc.; John Hammergren of McKesson; J. Christopher Smith of H.D.
Smith Wholesale Drug Company; and Steven Collis of AmerisourceBergen
Corporation. Credit... Alex Brandon/Associated Press
Now, in what could be a test case, the United States
attorney’s office for the Southern District of New York and the D.E.A. are
wrapping up an investigation that appears likely to result in the first
criminal case involving a major opioid distributor, Rochester Drug Cooperative,
one of the 10 largest, people familiar with the matter said. The investigation
began with an examination of possible crimes including wire and mail fraud and
various drug violations, according to three people with knowledge of a federal
grand jury subpoena served on Rochester in 2017, but it remains unclear what
charges might be brought.
The state lawsuits also
present evidence that government at all levels has been ineffective at policing
the distributors. For the first decade of the crisis, the three largest
companies did not even have meaningful programs to monitor suspicious orders,
despite being required by federal law to track narcotics and to look out
for spikes in orders and cash payments. Since then they have promised and
failed to build robust systems to prevent widespread opioid abuse.
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The distributors rebutted the new allegations.
“We reject the state’s suggestion that our employees
circumvented safeguards to increase sales,” Kristin Chasen, a spokeswoman for
McKesson, said in a statement. Cardinal, in its statement, said it had
“developed and implemented a constantly adaptive and rigorous system to combat
controlled substance diversion.”
Amerisource put the onus on the D.E.A., which it said receives
data on all orders shipped and notifications of suspicious ones. “It defies
common sense for distributors such as AmerisourceBergen to be singled out,” the
company said in a statement.
In the two decades since OxyContin was introduced in 1996,
there have been nearly 218,000 overdose deaths related to prescription opioids,
according to the Centers for Disease Control and Prevention. While overdose
deaths continue to rise, the number of opioid prescriptions has been falling
since 2012.
But that is mostly because of a classification change that made
drugs like Vicodin (which mix opioids with milder drugs) Schedule II narcotics,
which placed more restrictions on prescribing them. Oxycodone, the powerful
narcotic that is the main ingredient in OxyContin, was already a Schedule II
drug and its sales have continued to rise, according to figures compiled by
Iqvia, a health data provider.
The three largest
distributors sold 1.6 billion oxycodone pills in New York alone between 2010
and 2018. It was distributors, said the office of Attorney General Letitia
James of New York, who “jammed open the floodgates.”
Image
A page from the complaint filed
by the New York attorney general’s office.
A lack of deterrence
In 2017, after years of
allegedly flouting legal requirements to monitor suspicious orders of opioids,
McKesson agreed to a $150 million settlement with the Justice Department, a
record for a distributor.
For most businesses, $150 million would be a lot of money. At
McKesson, it was less than the $159 million retirement package the company
granted its longtime chief executive, John H. Hammergren, in 2013. (After a
public backlash — a
Forbes headline asked
if it was “The World’s Most Outrageous Pension Deal?” — the company later
reduced the package
to $114 million.)
It was among a string of settlements, and others came far
cheaper.
In 2008, McKesson, which supplies Walmart, paid $13.25 million
and Cardinal, the main CVS supplier, paid
$34 million to settle
federal claims that they had been filling suspicious orders.
Before 2007, only two of Cardinal’s roughly 40,000 employees
were dedicated to addressing the problem, according to court filings. One
McKesson compliance officer complained that asking for resources was like
“asking for a Ferrari,” according to New York’s lawsuit.
More settlements followed, but little changed. Cardinal paid a
total of $64 million in settlements with the Justice Department in 2012, 2016
and 2017, with similar agreements struck by its rivals. The policing of opioid
sales continued to be largely delegated by law to the distributors.
The companies created order volume thresholds for different
drugs that would trigger reporting to the D.E.A., but some were so lofty that
they resulted in relatively few such reports, the complaints said.
Or they worked around them.
In one industry practice, known as “cutting,” Cardinal canceled pharmacy orders
“that exceeded a threshold” and allowed “a subsequent, often smaller order,”
Vermont’s complaint said.
Image
The headquarters of Rochester
Drug Cooperative in Rochester. Credit... Mustafa Hussain for The New York Times
Brandi Martin, a Cardinal
spokeswoman, said that “cut orders are reported to the D.E.A.” and were not “a
tactic to avoid reporting.”
Egregious moves spurred limited responses, according to the
complaints. McKesson allowed one pharmacy a fivefold oxycodone increase over
six months, then refused another request for an 80 percent increase. The
company continued shipping to the pharmacy anyway, even after a rival stopped.
McKesson, in its statement, said it was continuing “to enhance
and evolve” its compliance efforts.
By last year, executives were summoned by Congress. Both Mr.
Hammergren, of McKesson, and George Barrett, the executive chairman of Cardinal
at the time and its former chief executive, played down their roles in the
supply chain.
During the hearings, Representative Kathy Castor, a Florida
Democrat, picked out a single drugstore in rural West Virginia that had been swamped
with opioids — 4,000 pills a day at one point from Cardinal, 5,000 from
McKesson.
“Don’t you take responsibility?” she asked, adding, “You saw
that paying the penalties on your settlement agreements was a cost worth paying
because you were making so much money?”
“I wish we had moved earlier to stop shipping to that
pharmacy,” Mr. Barrett said at the hearing. Mr. Hammergren echoed that, saying,
“I would have liked to have made a decision faster.”
Ms. Castor was not satisfied. “This was the opposite of due
diligence,” she said.
A criminal inquiry
There was little enthusiasm
for policing opioids at Rochester Drug Cooperative, New York’s complaint
alleges.
Image
A Rochester Drug Cooperative
newsletter announced the retirement of its chief executive, Laurence Doud III.
Mr. Doud has sued the company for firing him and has alleged that it conspired
to blame him for a criminal investigation of the company.
For years, only two people at Rochester were assigned to
compliance, and one had other responsibilities. Amid discussions about hiring a
compliance consultant, Laurence F. Doud III wrote in an email when he was the
company’s chief executive that it was “making me ill as to how much this is
going to cost.”
Mr. Doud is now suing Rochester, claiming wrongful termination
and contending it conspired to blame him for conduct that the D.E.A. and
federal prosecutors in New York are investigating in the criminal inquiry. (His
suit was previously reported by The
Democrat and Chronicle of
the city of Rochester.) The current chief executive, Joseph Brennan, is on
leave.
Rochester is a cooperative of pharmacies, so monitoring
suspicious orders meant monitoring its own members. But it had practices that
were similar to those of its larger rivals. Rochester’s upper limits on how
many pills pharmacies could buy were “invariably so high that customers could
not reach them unless their order volumes tripled from their historical
purchasing patterns, rendering the system virtually useless,” New York alleges.
Sales were brisk. Between 2010 and 2018, Rochester sold 143
million oxycodone pills in New York.
The company added a Queens pharmacy with numerous cash buyers
as a customer in 2016. The pharmacy was also filling prescriptions from
out-of-state doctors and one who had been arrested over oxycodone prescribing
practices, the complaint says.
In 2013, Rochester continued shipping to a pharmacy run by a
pediatrician who had surfaced in headlines as running a pill mill, according to
the complaint. In an email, one Rochester consultant called the situation “a
stick of dynamite waiting for the D.E.A. to light the fuse.” The shipments
continued.
In a $360,000 settlement in
2015, Rochester admitted that it had failed to report thousands of opioid
transactions over five years. The subsequent criminal inquiry sought records
including loans and lines of credit that Rochester had extended to its
customers, according to people with knowledge of the 2017 subpoena.
Criminal charges are soon
expected, with the company and current and former executives under scrutiny,
the three people familiar with the matter said. They, like those with knowledge
of the subpoena, spoke on the condition of anonymity because of the developing
investigation. Such a prosecution would appear to be the first time a major
distributor has been held criminally responsible in connection with opioids.
Image
Attorney General Letitia James
of New York announcing the state’s lawsuit against opioid manufacturers, the
Sackler family and opioid distributors last month. Credit... Timothy
A. Clary/Agence France-Presse — Getty Images
The D.E.A. and the office of Geoffrey S. Berman, United States
attorney for the Southern District of New York, declined to comment on the
inquiry.
Jeff Eller, a Rochester spokesman, declined to answer specific
questions, citing the investigation, but he said that Rochester’s compliance
department is more than six times larger than it was in 2013 and that the
company “will continue to make a significant investment.”
A failure to regulate
Louis Crisafi’s opioid of choice was Actiq, a powerful
fentanyl lollipop.
He allegedly left wrappers around the office, which was a bad
idea, since he was a senior investigator for the Bureau of Narcotics
Enforcement, a branch of the New York State Department of Health that monitors
opioid sales.
Mr. Crisafi’s fentanyl use was noticed at work by several
other investigators and was among the topics of a 2008 report issued by the state inspector
general that raised
concerns about the bureau, where many investigators reported to a pharmacist.
(Mr. Crisafi, who left the bureau at the time, said he had a legal prescription
and never used opioids on the job.)
States have had trouble policing
opioid use — even among their own. Like similar agencies elsewhere, the New
York narcotics bureau was ill-equipped, with fewer than 20 investigators
overseeing distributors and manufacturers, along with the state’s 5,586
pharmacies and more than 120,000 prescribers.
Kenneth Post, a former director of the bureau, said it does
not belong in the Health Department, which has close ties with health care
providers.
“They’re policing their own, and it doesn’t work,” said Mr.
Post, who left the agency in 2010. The Health Department called him a
“disgruntled former employee.”
Image
Louis Crisafi, a senior
investigator at the Bureau of Narcotics Enforcement, removing the tarp from his
illegally parked Corvette in 2008. Mr. Crisafi’s fentanyl use was among the
topics of a state inspector general’s report that year. Credit... New
York State Inspector General
A 2012 audit by the state Comptroller’s Office found that the
bureau had overlooked hundreds of thousands of flawed opioid prescriptions over
two years.
The Health Department said in a statement that the bureau had
only “limited investigatory” power, deflecting responsibility “to federal,
state and local law enforcement.”
At the federal level, the D.E.A. does not closely monitor the
millions of transactions involving controlled substances, said Paul T. Farrell,
a lawyer who represents municipalities in lawsuits against drugmakers .
“The D.E.A. is not the
T.S.A., which is responsible for looking at every passenger going through and
screening out those who are threats,” he said, referring to the Transportation
Security Administration. Instead, he said that “once a tip is made,” the D.E.A.
will “reconstruct what actually happened.”
In a statement, the D.E.A. said investigations are presented
to federal prosecutors, who choose “the appropriate litigation strategy.”
Distributors have marshaled lobbyists, contributing $1.5
million to sponsors and co-sponsors of a 2016
law thwarting the
D.E.A.’s efforts to freeze suspicious drug shipments.
Distributors have also lined up lobbyists with ties to Gov.
Andrew M. Cuomo of New York, where lawmakers included $100 million in opioid
taxes or surcharges in two consecutive budgets, though last year’s measure is
tied up in court. They have hired two firms founded or co-founded by onetime
aides to former Gov. Mario M. Cuomo as well as Mercury Group, whose executives
include former advisers to the current governor.
For now, distributors remain largely in control.
“It’s not a good system,”
said Dr. Andrew Kolodny, an addiction expert. “It’s the fox guarding the
henhouse.”
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