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Press Release

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

For Immediate Release
U.S. Attorney's Office, Eastern District of California
Investigation Involved 12 Federal Districts and 9 DEA Field Divisions

SACRAMENTO, Calif. — McKesson Corporation, one of the nation’s largest distributors of pharmaceutical drugs, agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA). The settlement resolves allegations that McKesson failed to design and implement an effective system to detect and report “suspicious orders” for controlled substances distributed to its independent and small chain pharmacy customers.

The nationwide settlement was announced today by U.S. Attorney Phillip A. Talbert, Drug Enforcement Administration Special Agent in Charge John J. Martin and the U.S. Attorneys for 11 other federal districts.

“The abuse of prescription painkillers has become an epidemic,” said United States Attorney Talbert. “The Controlled Substances Act is a tool to assist the DEA with monitoring the movement of prescription drugs and prevent the diversion of powerful drugs to unintended users who may be injured by them. Our office will continue to work with our law enforcement partners to investigate these cases and enforce federal law.”

“Accountability is key for all DEA registrants who distribute controlled substances; detecting and reporting suspicious orders is part of the equation,” said DEA Special Agent in Charge John J. Martin. “DEA is committed to utilizing a variety of tools, which include implementing new methods for accountability, to combat the prescription drug epidemic.”

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.

In 2008, McKesson agreed to a $13.25 million civil penalty and administrative agreement for similar violations. In this case, the government alleged again that McKesson failed to design and implement an effective system to detect and report “suspicious orders” for controlled substances distributed to its independent and small chain pharmacy customers — i.e., orders that are unusual in their frequency, size, or other patterns. From 2008 until 2013, McKesson supplied various U.S. pharmacies an increasing amount of oxycodone and hydrocodone pills, 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, all 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.

This was a multidistrict investigation that involved the following DEA Field Divisions: Boston Field Division, Chicago Field Division, Denver Field Division, Detroit Field Division, Miami Field Division, Newark Field Division, San Francisco Field Division, St. Louis Field Division, and Washington District Office. In addition to the Eastern District of California, the following U.S. Attorney’s Offices participated in the case: Central District of California, District of Colorado, Middle District of Florida, Eastern District of Kentucky, Northern District of Illinois, District of Massachusetts, Eastern District of Michigan, District of Nebraska, District of New Jersey, Northern District of West Virginia, and 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. McKesson has a branch in Sacramento. Assistant U.S. Attorneys Kelli L. Taylor and Kurt Didier handled the matter for the Eastern District of California.

Updated January 17, 2017

Prescription Drugs