Drug distributor pays record fine

McKesson Corp., one of the largest distributors of pharmaceuticals, agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA).

The nationwide settlement requires McKesson to suspend sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida for multiple years, Drug Enforcement Administration (DEA) said in a statement. “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,” DEA said.

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"This groundbreaking resolution is tough and appropriate and underscores our commitment to hold accountable all DEA registrants, including those who distribute controlled substances," said DEA Acting Administrator Chuck Rosenberg.  "DEA is committed to fighting the opioid epidemic with all of the tools at our disposal."

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. The suspicious orders were 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.

Even though McKesson developed a compliance program after the 2008 settlement, it did not fully implement or adhere to its own program, according to DEA. 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.

However, since 2013, McKesson has implemented “significant changes to its monitoring and reporting processes,” the company said in a statement.

“Pharmaceutical distributors play an important role in identifying and combating prescription drug diversion and abuse. McKesson, as one of the nation’s largest distributors, takes our role seriously. We continue to significantly enhance the procedures and safeguards across our distribution network to help curtail prescription drug diversion while ensuring patient access to needed medications,” said John H. Hammergren, chairman and CEO of McKesson.

In recent years, McKesson U.S. Pharmaceutical has put great effort into implementing significant enhancements to how it monitors and controls the distribution of controlled substances, referred to as the company’s Controlled Substance Monitoring Program (CSMP), according to the statement. “McKesson’s team includes numerous individuals with significant regulatory and anti-diversion expertise who play a lead role in its due diligence efforts, utilizing advanced analytical tools to closely monitor our customers’ purchases.”

In addition to the monetary penalties and suspensions, the government and McKesson agreed to enhanced compliance terms for the next five years. The distributor agreed to specific, rigorous staffing and organizational improvements; periodic auditing; and stipulated financial penalties for failing to adhere to the compliance terms.

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“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,” DEA said.McKesson Corp., one of the largest distributors of pharmaceuticals, agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA).

The nationwide settlement requires McKesson to suspend sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida for multiple years, Drug Enforcement Administration (DEA) said in a statement. “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,” DEA said.

"This groundbreaking resolution is tough and appropriate and underscores our commitment to hold accountable all DEA registrants, including those who distribute controlled substances," said DEA Acting Administrator Chuck Rosenberg.  "DEA is committed to fighting the opioid epidemic with all of the tools at our disposal."

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. The suspicious orders were 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.

Even though McKesson developed a compliance program after the 2008 settlement, it did not fully implement or adhere to its own program, according to DEA. 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.

However, since 2013, McKesson has implemented “significant changes to its monitoring and reporting processes,” the company said in a statement.

“Pharmaceutical distributors play an important role in identifying and combating prescription drug diversion and abuse. McKesson, as one of the nation’s largest distributors, takes our role seriously. We continue to significantly enhance the procedures and safeguards across our distribution network to help curtail prescription drug diversion while ensuring patient access to needed medications,” said John H. Hammergren, chairman and CEO of McKesson.

In recent years, McKesson U.S. Pharmaceutical has put great effort into implementing significant enhancements to how it monitors and controls the distribution of controlled substances, referred to as the company’s Controlled Substance Monitoring Program (CSMP), according to the statement. “McKesson’s team includes numerous individuals with significant regulatory and anti-diversion expertise who play a lead role in its due diligence efforts, utilizing advanced analytical tools to closely monitor our customers’ purchases.”

In addition to the monetary penalties and suspensions, the government and McKesson agreed to enhanced compliance terms for the next five years. The distributor 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,” DEA said.

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