McKesson Corporation Agrees to Pay over $13 Million To Settle Claims That it Failed to Report Suspicious Sales Of Prescription Medications

May 2, 2008

Baltimore, Maryland - McKesson Corporation, a national distributor of branded and generic prescription medications, has agreed to settle allegations that it violated federal reporting provisions relating to the sale of certain prescription medications regulated by the Drug Enforcement Administration, announced United States Attorney Rod J. Rosenstein. Under the agreement between the company and six United States Attorney’s Offices, including the District of Maryland, McKesson has agreed to pay $13,250,000 in civil penalties, $2 million of which relates to conduct allegedly occurring at McKesson’s Landover, Maryland facility. In addition, McKesson has entered an administrative agreement with DEA in which it agrees to implement new policies and procedures to detect and prevent drug diversion beyond those currently required by federal regulation.

United States Attorney Rod J. Rosenstein said, “Prescription drug abuse is a growing crisis in Maryland and throughout the nation, and it is one of our most important drug enforcement challenges. That is why it is critical that distributors of prescription medication comply with federal regulations requiring accurate reporting of suspicious sales of drugs to retail pharmacies.”

“Large corporations like McKesson are not above the law. Rules and regulations are meant to be followed," stated Carl J. Kotowski, Assistant Special Agent in Charge of the Drug Enforcement Administration, Baltimore District Office. Investigators from the Baltimore DEA Diversion Investigative Group vigorously investigate companies that do not live up to their legal responsibilities to report suspicious orders of pharmaceuticals. "Although this investigation does not involve drugs that we hear about everyday like heroin and cocaine, (abuse of pharmaceuticals is twice that of heroin and cocaine) this investigation exemplifies our commitment to uphold the Controlled Substance Act and keep our communities safe from of all types of drug abuse," stated Kotowski.

The Maryland claims centered on McKesson’s sale of hydrocodone to NewCare Pharmacy in East Baltimore and its sale of phentermine based products to Smeeta Pharmacy in Highland, Maryland. Specifically, the settlement alleges that from January 2005 through October 2006, McKesson-Landover sold approximately 3 million dosage units of hydrocodone to NewCare, and failed to report these sales as suspicious orders to DEA, as required by the Controlled Substances Act. It further alleges that from August 2006 to February 2007, McKesson-Landover sold large quantities of phentermine based products to Smeeta and failed to report those sales as suspicious orders to DEA. Similar claims were made by United States Attorney’s for the Middle District of Florida, District of Colorado, Southern District of Texas and District of Utah, with a fifth office, the Eastern District of California, claiming that McKesson failed to report the theft or loss of controlled substances to DEA.

The Controlled Substances Act is the primary federal law regulating the flow of controlled substances into the marketplace for medical purposes. Among other requirements, the Act requires that distributors, registered with DEA to sell controlled substances to retail pharmacies, report suspicious orders of controlled substances to DEA. Suspicious orders include orders of unusual size, orders deviating substantially from a normal pattern and orders of unusual frequency. The Act authorizes the imposition of up to a $10,000 civil penalty for each violation of the reporting requirement.

NewCare Pharmacy owners Steven Sodipo and Callixtus Nwaehiri have been charged by federal indictment in the District of Maryland with illegally selling over 9.9 million dosage units of hydrocodone from 2005 through 2006 through a nationwide conspiracy to sell controlled substances over the internet. Hydrocodone is an addictive painkiller, typically prescribed in limited quantities to combat acute pain over a short period of time. The indictment alleges that NewCare received hydrocodone prescriptions through the internet and, knowing that these prescriptions were not valid, mailed hydrocone to customers across the country, many of whom were drug addicts. Trial in the NewCare Pharmacy case has been scheduled for May 19, 2008. An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

The settlement agreement is neither an admission of liability by McKesson nor a concession by the United States that its claims are not well founded.

United States Attorney Rod J. Rosenstein commended the investigative work performed by the Drug Enforcement Administration Office of Diversion Control as well as its Diversion and Regulatory Litigation Section Mr. Rosenstein also thanked Assistant U.S. Attorney Michael A. DiPietro, who handled the case for the District of Maryland.



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