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Justice News

Department of Justice
U.S. Attorney’s Office
Western District of Wisconsin

Tuesday, January 17, 2017

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

MADISON, WIS. – McKesson Corporation (McKesson), 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), John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, and Assistant Special Agent in Charge Robert J. Bell of the Drug Enforcement Administration’s Milwaukee District Office announced today.


“Adherence to the procedures and reporting requirements regarding the distribution of controlled substances are critical to ensuring that these drugs do not further contribute to the problem of narcotic misuse and abuse,” said United States Attorney Vaudreuil. “This Agreement with McKesson hopefully will lead to improved compliance and reporting requirements to prevent a recurrence in the future.”


“This resolution is strong and fitting. It exemplifies our commitment to hold accountable those who manufacture, distribute, prescribe, or dispense controlled substances,” said Assistant Special Agent in Charge Bell. “DEA is committed to fighting the opioid epidemic with all available tools and resources.”


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 April 2013, DEA conducted an on-site inspection of McKesson’s distribution center in La Crosse, Wis. The DEA inspection resulted in similar findings as found by DEA in other distribution centers, including that the La Crosse distribution center filed zero suspicious order reports with DEA from 2008 up to the date of the 2013 inspection.


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 multi-district 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. 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, 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. In the Western District of Wisconsin, this matter was handled by Assistant Attorney Leslie K. Herje.


Prescription Drugs
Updated January 17, 2017