For the first time ever, the U.S. DEA targeted a prescription drug manufacturer for their role in black market opioids and damages incurred. Mallinckrodt Pharmaceuticals, one of the largest national manufacturers of the highly addictive generic painkiller oxycodone, one of the leading drugs responsible for the more than 15,000 overdose deaths in 2015, was accused of shirking its responsibility to report suspicious drug orders.
Who’s to Blame For The Opioid Epidemic?
Created at Mallinckrodt’s Hobart, NY facility, oxycodone shipped via its distributor network, including KeySource, Sunrise Wholesale and Cardinal Health, who later supplied the pills to retailers, including pharmacies and hospitals accused of illegally diverting the drugs. Discovered in a 2009 Tennessee Drug Task Force sting and linked back to Mallinckrodt’s distributors Florida retailers, 2010-2011 DEA investigations uncovered large amounts of Mallinckrodt oxycodone – such as the 41 million KeySource Medical oxycodone tablets delivered to Florida retailers in 2010 – about 2.5 pills for every man, woman and child in the state. Accused of splitting orders to conceal shipment amounts, KeySource was ordered by the DEA to halt, later relinquishing its distribution license. Distributors Sunrise Wholesale and Cardinal Health likewise delivered vast quantities of Mallinckrodt’s oxycodone to pharmacies in Florida. 500 million Mallinckrodt pills ended up in Florida from 2008-2012 — 66% of state oxycodone sales. A 2011 subpoena following this the discovery further revealed, 6 weeks after the Tennessee task force alerted Mallinckrodt to the drugs found in the 2009 sting, Mallinckrodt shipped another 2.1 million tablets their Sunrise distributor, 92,400 tablets of which were sold to Dr. Barry Schultz, the Delray Beach doctor whose oxycodone was found in Tennessee. Schultz was later convicted of drug trafficking and manslaughter (for a related overdose death). In one day, he prescribed 1,000 tablets to a single patient. Ultimately, the DEA and federal prosecutors alleged Mallinckrodt ignored its responsibility to report suspicious orders, in violation of the Controlled Substances Act.
Under federal law and DEA policy, pharmaceutical companies are required to “know their customers,” monitoring amounts, frequencies, and patterns of drug orders, immediately notifying the DEA of suspicious activity – or risk losing their license to manufacture and sell controlled substances, as well as civil and criminal penalties. Though Mallinckrodt maintained publicly the company has worked hard to fight drug diversion, internal case summaries prepared by federal prosecutors indicated Mallinckrodt’s response was that ‘everyone knew what was going on in Florida but they had no duty to report it.’ Sources familiar with settlement talks indicated Mallinckrodt acknowledged its responsibility to report suspiciously large orders, but contended the DEA did not require manufacturers to know about (or be responsible for) ‘their customers’ customers,’ further pointing to conflicting DEA advice as to legal responsibilities. Prosecutors considered a whopping 43,991 unreported orders from distributors and retailers suspicious.
Appalled by the rising opioid death toll, the DEA’s push to hold drug manufacturers accountable was hoped to be a wake-up call, putting the industry on notice for its responsibilities in the diversion of drugs to the black market. Instead, after years of industry investigations spanning five states to build the massive case, the results mirrored the DEAs previous attempt to hold wholesale distributors accountable. The case stalled. Fierce company resistance and intense lobbying efforts may have played a role in the lack of legal action pursued. The case settled for $35 million in fines and no admission of wrongdoing.
The proposed settlement, a mere fraction of the 44,000 federal violations pointed to in the investigation which could have cost the company $2.3 billion in fines, amounts to small potatoes for a company that posted $3.4 billion in revenue and $489 million in profit in 2016. In a later February 2017 SEC filing, Mallinckrodt even noted the investigation “will not have a material adverse effect on its financial condition” because it had set aside the funds.
About the Author: Anthony Sambucini is a founding principal and the Chief Executive Officer of ANS Solutions. Anthony specializes in bridging the goals of clinical innovation and business strategy that have helped propel ANS Solutions into a national leader in Pharmacotherapy Review Services for workers’ comp insurers and ANS Pharmacotherapy Review Program is the most advanced, results-oriented drug utilization review program in the industry. As a consultant to insurance carriers and attorneys, Anthony customizes services based on the particular needs of the client and oversees all activities related to business development and company operations. For more information about ANS Solutions visit http://ans-solutions.com/.
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