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
The Rise of Wall Street Thievery
How corporations and their apologists blew up the New Deal order and pillaged the middle class.
A merica 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.
Transaction Man: The Rise of the Deal and the Decline of the American Dream
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.
T oward 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 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.
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.
As Big Pharma internationalized its operation, so did the drug cartels. And while they both established their decentralized networks, government continued to spread its giant web of Weberian intervention, fostering dependency, smothering society in regulatory verbiage and depriving us of input into how Washington policies impact the health of local communities.
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 AMA)
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.
Demolition in rural Indiana
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
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 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
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
“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.
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.
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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
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.
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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.
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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