OBAMA AND HIS BANKSTERS:
And
it all got much, much worse after 2008, when the schemes collapsed and, as
Lemann points out, Barack Obama did not aggressively rein in Wall Street as
Roosevelt had done, instead restoring the status quo ante even when it meant
ignoring a staggering white-collar crime spree. RYAN COOPER
CALIFORNIA: now a colony of Mexico
WHO WANTS OPEN BORDERS:
MEXICO, THE DEMOCRAT PARTY, EMPLOYERS OF “CHEAP” LABOR, U.S.
CHAMBER OF COMMERCE FRONTING FOR WALL STREET, ALL BILLIONAIRES INCLUDING ZUCKERBERG,
GATES, BLOOMBERG AND THE FASCIST KOCH BROTHERS!
CALIFORNIA: now a colony of Mexico
WHO WANTS OPEN BORDERS:
MEXICO, THE DEMOCRAT PARTY, EMPLOYERS OF “CHEAP” LABOR, U.S.
CHAMBER OF COMMERCE FRONTING FOR WALL STREET, ALL BILLIONAIRES INCLUDING ZUCKERBERG,
GATES, BLOOMBERG AND THE FASCIST KOCH BROTHERS!
The Rise of Wall Street Thievery
How corporations and their apologists blew up the New
Deal order and pillaged the middle class.
America has long had a suspicious streak toward business,
from the Populists and trustbusters to Bernie Sanders and Elizabeth Warren.
It’s a tendency that has increased over the last few decades. In 1973, 36
percent of respondents told Gallup they had only “some” confidence in big
business, while 20 percent had “very little.” But in 2019, those numbers
were 41 and 32 percent—near the highs registered during the financial crisis.
Clearly, something has
happened to make us sour on the American corporation. What was once a stable source of
long-term employment and at least a modicum of paternalistic benefits has
become an unstable, predatory engine of inequality. Exactly what went wrong is well documented in Nicholas
Lemann’s excellent new book, Transaction Man. The title is a
reference to The Organization Man, an influential 1956 book on the
corporate culture and management of that era. Lemann, a New
Yorker staff writer and Columbia journalism professor (as well as
a Washington Monthly contributing editor), details the
development of the “Organization” style through the career of Adolf Berle, a
member of Franklin D. Roosevelt’s brain trust. Berle argued convincingly that
despite most of the nation’s capital being represented by the biggest 200 or so
corporations, the ostensible owners of these firms—that is, their
shareholders—had little to no influence on their daily operations. Control
resided instead with corporate managers and executives.
Berle was alarmed by the wealth
of these mega-corporations and the political power it generated, but also
believed that bigness was a necessary concomitant of economic progress. He thus
argued that corporations should be tamed, not broken up. The key was to harness
the corporate monstrosities, putting them to work on behalf of the citizenry.
Berle exerted major influence
on the New Deal political economy, but he did not get his way every time. He
was a fervent supporter of the National Industrial Recovery Act, an effort to
directly control corporate prices and production, which mostly flopped before
it was declared unconstitutional. Felix Frankfurter, an FDR adviser and a
disciple of the great anti-monopolist Louis Brandeis, used that opportunity to
build significant Brandeisian elements into New Deal structures. The New Deal
social contract thus ended up being a somewhat incoherent mash-up of Brandeis’s
and Berle’s ideas. On the one hand, antitrust did get a major focus; on the
other, corporations were expected to play a major role delivering basic public
goods like health insurance and pensions.
Lemann then turns to his major
subject, the rise and fall of the Transaction Man. The New Deal order inspired
furious resistance from the start. Conservative businessmen and ideologues
argued for a return to 1920s policies and provided major funding for a new
ideological project spearheaded by economists like Milton Friedman, who
famously wrote an article titled “The Social Responsibility of Business Is to
Increase Its Profits.” Lemann focuses on a lesser-known economist named Michael
Jensen, whose 1976 article “Theory of the Firm,” he writes, “prepared the
ground for blowing up that [New Deal] social order.”
Jensen and his colleagues
embodied that particular brand of jaw-droppingly stupid that only intelligent
people can achieve. Only a few decades removed from a crisis of unregulated
capitalism that had sparked the worst war in history and nearly destroyed the
United States, they argued that all the careful New Deal regulations that had
prevented financial crises for decades and underpinned the greatest economic
boom in U.S. history should be burned to the ground. They were outraged by the
lack of control shareholders had over the firms they supposedly owned, and
argued for greater market discipline to remove this “principal-agent
problem”—econ-speak for businesses spending too much on irrelevant luxuries
like worker pay and investment instead of dividends and share buybacks. When
that argument unleashed hell, they doubled down: “To Jensen the answer was
clear: make the market for corporate control even more active, powerful, and
all-encompassing,” Lemann writes.
The best part of the book is
the connection Lemann draws between Washington policymaking and the
on-the-ground effects of those decisions. There was much to criticize about the
New Deal social contract—especially its relative blindness to racism—but it
underpinned a functioning society that delivered a tolerable level of
inequality and a decent standard of living to a critical mass of citizens.
Lemann tells this story through the lens of a thriving close-knit neighborhood
called Chicago Lawn. Despite how much of its culture “was intensely provincial
and based on personal, family, and ethnic ties,” he writes, Chicago Lawn
“worked because it was connected to the big organizations that dominated
American culture.” In other words, it was a functioning democratic political
economy.
Then came
the 1980s. Lemann paints a visceral picture of what it was like at street level
as Wall Street buccaneers were freed from the chains of regulation and
proceeded to tear up the New Deal social contract. Cities hemorrhaged population and tax revenue as their
factories were shipped overseas. Whole businesses were eviscerated or even
destroyed by huge debt loads from hostile takeovers. Jobs vanished by the
hundreds of thousands.
And it all got much, much
worse after 2008, when the schemes collapsed and, as Lemann points out, Barack
Obama did not aggressively rein in Wall Street as Roosevelt had done, instead
restoring the status quo ante even when it meant ignoring a staggering
white-collar crime spree. Neighborhoods
drowned under waves of foreclosures and crime as far-off financial derivatives
imploded. Car dealerships that had sheltered under the General Motors umbrella
for decades were abruptly cut loose. Bewildered Chicago Lawn residents
desperately mobilized to defend themselves, but with little success. “What they
were struggling against was a set of conditions that had been made by faraway
government officials—not one that had sprung up naturally,” Lemann writes.
Toward the end of the book, however, Lemann starts to run
out of steam. He investigates a possible rising “Network Man” in the form of
top Silicon Valley executives, who have largely maintained control over their
companies instead of serving as a sort of esophagus for disgorging their
companies’ bank accounts into the Wall Street maw. But they turn out to be,
at bottom, the same combination of blinkered and predatory as the Transaction
Men. Google and Facebook, for instance, have grown over the last few years by
devouring virtually the entire online ad market, strangling the journalism
industry as a result. And they directly employ far too few people to serve as
the kind of broad social anchor that the car industry once did.
In his final chapter, Lemann
argues for a return to “pluralism,” a “messy, contentious system that can’t be
subordinated to one conception of the common good. It refuses to designate good
guys and bad guys. It distributes, rather than concentrates, economic and
political power.”
This is a peculiar
conclusion for someone who has just finished Lemann’s book, which is full to
bursting with profoundly bad people—men and women who
knowingly harmed their fellow citizens by the millions for their own private
profit. In his day, Roosevelt was not
shy about lambasting rich people who “had begun to consider the government of
the United States as a mere appendage to their own affairs,” as he put it in a
1936 speech in which he also declared, “We know now that government by
organized money is just as dangerous as government by organized mob.”
If concentrated economic power
is a bad thing, then the corporate form is simply a poor basis for a truly
strong and equal society. Placing it as one of the social foundation stones
makes its workers dependent on the unreliable goodwill and business acumen of
management on the one hand and the broader marketplace on the other. All it
takes is a few ruthless Transaction Men to undermine the entire corporate
social model by outcompeting the more generous businesses. And even at the high
tide of the New Deal, far too many people were left out, especially African
Americans.
Lemann writes that in the 1940s
the United States “chose not to become a full-dress welfare state on the
European model.” But there is actually great variation among the European
welfare states. States like Germany and Switzerland went much farther on the
corporatist road than the U.S. ever did, but they do considerably worse on
metrics like inequality, poverty, and political polarization than the Nordic
social democracies, the real welfare kings.
Conversely, for how threadbare
it is, the U.S. welfare state still delivers a great deal of vital income to
the American people. The analyst Matt Bruenig recently calculated that American
welfare eliminates two-thirds of the “poverty gap,” which is how far families
are below the poverty line before government transfers are factored in. (This
happens mainly through Social Security.) Imagine how much worse this country
would be without those programs! And though it proved rather easy for Wall
Street pirates to torch the New Deal corporatist social model without many
people noticing, attempts to cut welfare are typically very obvious, and hence
unpopular.
Still, Lemann’s book is more
than worth the price of admission for the perceptive history and excellent
writing. It’s a splendid and beautifully written illustration of the tremendous
importance public policy has for the daily lives of ordinary people.
Ryan Cooper
Ryan Cooper is a national correspondent at the Week. His
work has appeared in the Washington Post, the New Republic, and the Nation. He
was an editor at the Washington Monthly from 2012 to 2014.
"Those
most affected were non-Hispanic white men, aged 18 to 34 years, who experienced
a staggering increase of 20.1 deaths per 100,000 individuals five years after a
plant closure. The second-most affected group was non-Hispanic white men aged
35 to 65 years, who experienced an increase of 12.8 deaths per 100,000
individuals. However, virtually every demographic was affected to some
degree."
The Cost of the Opioid
Crisis
Although mortality from drug overdose tragically afflicts all
sections of the population, there have been numerous media articles
highlighting the disproportionate toll this scourge is inflicting on the white American male population.
If a young man grows up being told by the Left’s education mill
that he is despised for his patriarchal power (though he has none), that he is
a rapist at heart (though he may even be shy with women), that he must yield
priority to girls, women, non-white men and LGBT+, because they are morally
superior – what can he think? If his father is a flawed role model, then those
accusations by the ranting Left are not countermanded. If he loses his
job, has not graduated from college and does not belong to a “successful”
family or community, he feels the scorn of a culture obsessed with frivolous,
material possessions and swaggering ostentation. And if his family
does not withstand the Left’s attack on God, then he is without spiritual
guidance. Any one of these factors can pre-dispose a human to protest, “Stop
the world. I want to get off.” In combination, they have precipitated a
vulnerability, that has given ingress to criminal exploitation, moral
subversion and premature death.
The grim despair of males today has been documented and
meticulously analyzed by scholars such as philosopher and psychologist Jordan Peterson and anti-radical feminist professor
Janice Fiamengo.
White males -- the supposed beneficiaries of the Great American
Dream -- have become canaries in the coal mine. It is not only the pernicious
orthodoxy of the Left that has despoiled them of significance and
dignity. There has
been a bizarre shift in the shape of society over the last several decades that
has spawned an undergrowth of human throwaways -- the people of no consequence,
preyed upon by maggoty, flyblown drug thugs who drive their flashy,
death-delivery cars, unafraid of arrest. Clearly, without high-level
protection, the illegal drug industry could not survive.
Consequently, both public and private sectors have joined forces
in mutual collusion. The political administration and the shadowy, narcotic
labyrinth intersect at every point. As financial expert Catherine Austin Fitts concludes, the laundering of drug money is one of
the world’s most lucrative industries and there seems scarcely a major bank or financial institution or governmental
agency that has
not been enmeshed.
We used to believe these were “lone wolf” aberrations, but now we
understand, from the recent exposure of governmental corruption, that moral
corrosion is endemic. In fact, the global economy depends on the
narco-dollar.
We are fortunate to have in Donald Trump a President who is
hauling society back into recognizable shape. He publicly lashes the insanity
of the Left. He is trying to prevent drug cartels from crossing the border, and
he is bringing jobs back from overseas. Also, he is a staunch supporter of
Judeo-Christian values. The drug death epidemic has been a priority for his
administration from the very beginning. For this, he has been afflicted with a
storm of hatred from the vengeful Left and their criminal cronies.
But one man cannot break a juggernaut. Nor can the revolving-door
rehabilitation industry, despite some success, singlehandedly dry up the
nation’s suppurating ulcer. Nor can the good cops prevail when their superiors
subvert the rule of law. Nor can the window-dressing of government commissions
allay our fear that nothing will change. And every sad addict who wishes to
rehabilitate, nevertheless will not divulge his supplier, because he fears
reprisal.
No child in the USA was born to end as an addict. The dead
addict’s family and friends were not designed to suffer their life-sentences of
grief. All boys need to be given pride in their role and responsibility as
husbands and fathers, sons, brothers, workers, and friends. There is no reason
this cannot be accomplished at school if we can rid academia of the Left’s
rampant, invasive species of inhumane, grotesque indoctrination. At least that
would be a start.
Weeds, whether they be pernicious cartels or their cowardly rich
protectors, political and legal enablers, can only overrun an uncultivated,
abandoned garden.
New study shows link between auto plant closures and opioid deaths in
working class America
A scientific study published in the Journal of the American Medical
Association (JAMA) online
this week found a direct link between auto assembly plant closures and the
growing opioid epidemic in the United States.
The authors, led by Atheendar S.
Venkataramani of the University of
Pennsylvania, established a staggering 85
percent increase in opioid deaths above
expected levels within five years in counties
which experienced a plant closure.
The study represents an important contribution to an
understanding of the relationship between the economic devastation of former
industrial centers and the explosive growth of “deaths of despair” among the
American working class, including alcohol- and drug-related deaths and
suicides.
For years, health outcomes for American workers have been
steadily eroding. Life
expectancy in the US, the wealthiest nation in the
world, has fallen for three years in a row, due primarily to the dramatic
increase in deaths of working-age Americans aged 25–64 years, mainly from drug
overdoses, alcohol abuse, suicide and organ system diseases.
The fall in life expectancy is by design: the
ruling class is deliberately attempting to cut workers’ lives short in order to
cut labor costs so that more money can be funneled into the stock markets, the
banks and the military budget. Moreover, pharmaceutical companies flooded
working class communities devastated by the loss of manufacturing jobs with opioids from
2006–2012 under the Bush and Obama administrations, according to the Washington Post.
BLOG: IN AMERICA, NO LEGAL NEED APPLY!
However, according to the researchers, previous studies which
sought to establish a link between social conditions and opioid use had
produced mixed results because they used more general indices such as
unemployment rates.
“This lack of consensus may reflect the fact that standard
economic measures do not adequately capture the fundamental and sustained
decline in economic opportunity or the adverse socioeconomic and cultural
climate that follows” plant closures, the authors write.
The researchers decided to focus on auto assembly plants because
such closures “are often unexpected (to workers), discrete, and both culturally
and economically significant events.” Moreover, the authors argue, “automotive
plant closures have long been viewed as exemplars of the broader, gradual decline
in US manufacturing that has occurred during the last [two] decades.” In other
words, the dramatic decline in the social conditions of autoworkers is only the
most striking aspect of the decline among the American working class as a
whole.
The study examined public health records from 1999–2016 and used
death certificate data to calculate the number of opioid deaths by county in
the US. The researchers focused on the largest commuting areas with auto plants
in operation during that time period, then compiled a database of all auto
plants in the US and indicated the date of closure, if they closed.
The study sample focused only on the 112 US counties in commuter
zones with the highest proportion of workers employed in manufacturing. Thus,
those areas examined were almost exclusively small industrial cities and
semi-rural areas throughout the American Midwest and South. Of these, 29
counties in 10 commuting zones were “exposed” to factory closures.
Researchers found that prior to plant closures, baseline opioid
overdose mortality rates in “exposed” counties were actually lower, on average, than
those in unexposed counties. But only two years after plant closures, according
to the authors, mortality rates in these counties were higher.
Those most affected were non-Hispanic white men, aged 18 to 34
years, who experienced a staggering increase of 20.1 deaths per 100,000
individuals five years after a plant closure. The second-most affected group
was non-Hispanic white men aged 35 to 65 years, who experienced an increase of
12.8 deaths per 100,000 individuals. However, virtually every demographic was
affected to some degree.
This explodes the reactionary myth of “white privilege,” which
is peddled by various Democratic Party-aligned corporate media outlets in order
to recenter political attention away from social class towards greatly
exaggerated notions of racial divisions. The most aggressive role in promoting
race theory has been played by the New
York Times, whose 1619
Project attempts to recast all of American history as the product
of racism, and American society as divided by an unbridgeable racial chasm.
In reality, the entire American working class, whether white,
black, Hispanic or any other race or ethnicity, has been devastated by decades
of rising social inequality and stagnant or declining wages.
The Times,
on the other hand, speaks for a
privileged layer of executives, financial
speculators and well-heeled professionals,
both white and black, who view the working
class with a combination of contempt and
fear. They are terrified in particular of the
growing wave of strikes and working-class
protests extending throughout the country,
including many of the states included in this
study, and internationally. This includes
opposition to plant closures was a key issue
for striking autoworkers.
A major responsibility for the social disaster afflicting former
industrial towns lies with the United Auto Workers (UAW) and the other American
trade unions. Long transformed into open agents of management, they have worked
hand in glove with the companies to sabotage any struggle by workers in defense
of their jobs and living standards. Since it joined the Chrysler board of
directors in 1979, the UAW has directly collaborated with the companies for
decades in the closures of dozens of plants.
The most disorienting and cynical lie employed by the unions is
the claim that plant closures in the US are the fault of foreign workers in
Latin America and Asia. Opposed to the unification of American workers with
their Mexican and Chinese brothers and sisters, the unions pit them against
each other by demanding plant closures take place overseas instead, while
arguing that cuts are necessary in order to keep product within the United
States. This bankrupt strategy, far from saving a single job, has allowed the
auto companies, up to now, to eliminate hundreds of thousands of jobs with
little organized opposition.
Trumbull County, Ohio, which was included in this study, will
now be considered an “exposed” county in future research. That is because it is
the home of the now-shuttered Lordstown Assembly Plant, one of four facilities
the UAW agreed to close as part of its sellout of the GM strike. The bribed
company agents which control the UAW will bear direct responsibility for the
social consequences.
Ford assembly workers who spoke to the World Socialist Web Site about
the crisis responded to the findings of the study with empathy.
“I haven’t even heard of these deaths or their connection to
auto plants closing,” one worker from the Chicago area said. “I do know of
people who are doing certain drugs to dull the pain of strenuous line work, but
even that is sad enough.”
Another worker commented, “Substantial mental health and
substance abuse treatment programs are [needed] for all workers. The automotive
companies control whose [mental health and substance abuse] claim and job is
saved based on the situation. There should be more alternative medical programs
to deal with work-related stress rather than turning workers to opioids.”
The study’s authors suggests a national strategy to combat the
crisis of opioid deaths in working class communities, including such measures
as community-based interventions, providing resources to medical clinicians to
“identify and address structural forces that may shape patient health,” and
“increasing engagement of community agencies and healthcare systems in
addressing key social determinants of health.”
But such measures are impossible within the framework of the
capitalist profit system. An expropriation of the wealth of the corporations by
the working class is the only way to address the crisis of job losses, lack of
funding for social programs and “deaths of despair” in the US and worldwide.
6 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
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.
The
subpoenas were sent out as recently as August, according to the filings. The
criminal investigation was first reported by The Wall
Street Journal.
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.
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.
Editors’ Picks
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
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.
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.
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.
Editors’ Picks
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.
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
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.
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.”
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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