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Justice News

Department of Justice
U.S. Attorney’s Office
Central District of California

FOR IMMEDIATE RELEASE
Tuesday, January 17, 2017

McKesson Agrees to Pay Record $150 Million Settlement for Failure to Report Suspicious Orders of Pharmaceutical Drugs

            LOS ANGELES – McKesson Corporation, one of the nation’s largest distributors of pharmaceutical drugs, has agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA), the Justice Department announced today.

            The nationwide settlement requires McKesson to suspend sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida for multiple years. The staged suspensions are among the most severe sanctions ever agreed to by a DEA-registered distributor. The settlement also imposes new and enhanced compliance obligations on McKesson’s distribution system.

            McKesson operates a distribution center in Santa Fe Springs.

            In 2008, McKesson agreed to a $13.25 million civil penalty and administrative agreement for similar violations. In the new case, the government alleged again that McKesson failed to design and implement an effective system to detect and report “suspicious orders” – orders that were unusual in their frequency, size or other patterns – for controlled substances distributed to its independent and small-chain pharmacy customers. From 2008 until 2013, McKesson supplied various U.S. pharmacies an increasing amount of oxycodone and hydrocodone, which are frequently misused products that are part of the current opioid epidemic.

            The government’s investigation developed evidence that even after designing a compliance program after the 2008 settlement, McKesson did not fully implement or adhere to its own program. In Colorado, for example, McKesson processed more than 1.6 million orders for controlled substances from June 2008 through May 2013, but reported just 16 orders as suspicious, and all of those were connected to one instance related to a recently terminated customer. 

            In addition to the monetary penalties and suspensions, the government and McKesson agreed to enhanced compliance terms for the next five years. Among other things, McKesson has agreed to specific, rigorous staffing and organizational improvements; periodic auditing; and stipulated financial penalties for failing to adhere to the compliance terms. Critically, the settlement will require McKesson to engage an independent monitor to assess compliance – the first independent monitor of its kind in a CSA civil penalty settlement.

            “The company’s practices resulted in dangerous drugs being diverted from legitimate uses into the black market and helped fuel the opioid epidemic that is causing so much damage across the nation,” said United States Attorney Eileen M. Decker. “This nationwide investigation will result in a landmark penalty, significant changes in the way that pharmaceutical drugs are distributed by the company, and the ability of the Department of Justice to monitor McKesson’s future conduct.”

            This case against McKesson is the product of a multi-district investigation that involved the DEA Field Divisions in Boston, Chicago, Denver, Detroit, Miami, Newark, San Francisco, St. Louis and Washington.

            The U.S. Attorney’s Office for the Central District of California participated in the case, along with U.S. Attorney’s Offices for the Eastern District of California, Colorado, the Middle District of Florida, the Eastern District of Kentucky, the Northern District of Illinois, Massachusetts, the Eastern District of Michigan, Nebraska, New Jersey, the Northern District of West Virginia, and the Western District of Wisconsin.

            U.S. Attorneys’ Offices for the District of Colorado and the Northern District of West Virginia, along with DEA Office of Chief Counsel and Diversion Control Division, led the civil settlement negotiations. DEA’s Denver, Detroit and Miami Field Divisions, and its Washington Division Office led the administrative and civil investigation. The Criminal Division’s Narcotic and Dangerous Drug Section (NDDS) also coordinated and assisted in negotiating certain portions of the settlement. Assistant United States Attorneys Amanda Rocque (Colorado) and Alan McGonigal (NDWV) represented the United States in the civil penalty investigations and negotiations.  Associate Chief Counsel Lee Reeves and Senior Attorneys Dedra Curteman, Dana Hill and Krista Tongring represented DEA in the investigations and negotiations. Trial Attorneys Harry Matz and Kirtland Marsh were involved for NDDS.

Press Release Number: 
17-009
Updated January 19, 2017