McKesson Agrees to Pay Record $150 Million Settlement for Failure to Report Suspicious Orders of Pharmaceutical Drugs
BOSTON – McKesson Corporation, one of the nation’s largest distributors of pharmaceutical drugs to pharmacies and other health care providers, agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA). The government alleges that, from 2009 forward, McKesson failed to maintain effective controls to prevent diversion of controlled substances, including opioids such as oxycodone, and that McKesson failed to fulfill its legal obligation to report suspicious orders of controlled substances to the Drug Enforcement Administration (DEA).
“The government has launched a multi-pronged attack on the opioid epidemic that is affecting people across the country, including in Massachusetts,” said Acting U.S. Attorney William D. Weinreb. “This settlement penalizes McKesson, which distributes millions of opioid pills every year, for lax oversight and imposes tough compliance measures to ensure that opioids are dispensed only for legitimate medical purposes.”
“The DEA is committed to ensuring that all registrants are in compliance with the required regulations, which are enforceable through the Controlled Substances Act (CSA),” said Special Agent in Charge Michael J. Ferguson. “In response to the ongoing opioid epidemic in Massachusetts and throughout this Nation, DEA’s obligation is to improve public safety and health. Today’s settlement demonstrates DEA’s pledge to work with our law enforcement and regulatory partners to ensure these rules and regulations are followed.”
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 from independent and small chain pharmacy customers – i.e., orders that were unusual in their frequency, size, or other patterns. 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. At its distribution center in Methuen, Mass., for example, McKesson processed thousands of oxycodone and hydrocodone orders that were more than 10 times the average size of a pharmacy order from May 2008 through April 2013, but McKesson never reported to the DEA that any of these orders was suspicious.
In addition to the $150 million fine, the nationwide settlement requires McKesson to suspend sales of controlled substances at certain distribution centers and imposes new and enhanced compliance obligations on McKesson’s distribution system. 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. Also, as part of the acceptance of responsibility provisions of the settlement, McKesson acknowledged that, at various times, it did not identify or report to the DEA orders placed by certain pharmacies that McKesson should have detected as suspicious.
In addition to the District of Massachusetts, the following U.S. Attorney’s Offices participated in the case: Central District of California, Eastern District of California, District of Colorado, Middle District of Florida, Eastern District of Kentucky, Northern District of Illinois, Eastern District of Michigan, District of Nebraska, District of New Jersey, Northern District of West Virginia and Western District of Wisconsin. This matter was investigated by the following DEA Field Divisions: Boston, Chicago, Denver, Detroit, Miami, Newark, San Francisco, and St. Louis Field Division and the Washington District Office.
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. In Massachusetts, this matter was handled by Assistant U.S. Attorney Gregg Shapiro.