A federal investigation into a Rochester-area drug cooperatives lax distribution of prescription opioids has led to a $20 million settlement and charges against two former officials.
“Todays indictment includes the first-ever criminal charges against drug company executives for diversion of opioids,” federal prosecutors said in a news release.
The Rochester Drug Cooperative, or RDC, has been in business since 1905, and is one of the largest prescription drug wholesalers in the country, with an estimated annual annual revenue of more than $1 billion.
“Todays Indictment includes the first-ever criminal charges against drug company executives for diversion of opioids,” federal prosecutors said in a news release.
RDC “made the deliberate decision not to investigate, monitor, and report to the DEA pharmacy customers that it knew were diverting controlled substances for illegitimate use,” according to court papers. “Because it knew that reporting these pharmacies would likely result in the DEA investigating and shutting down its customers, Rochester Drug Cooperatives senior management directed the companys compliance department not to report them, and instead to continue supplying those customers with dangerous controlled substances that the company knew were being dispensed and used for illicit purposes.”
This is the first federal criminal prosecution of a pharmaceutical distributor. RDC agreed to a $20 million settlement to resolve a civil case from federal authorities. The criminal prosecution continues.
Two former RDC officials — Laurence F. Doud III, who had served as chief executive, and William Pietruszewski, the former chief of compliance — were criminally charged as part of the investigation.
The indictment against Doud alleges that, for at least five years, RDC distributed highly addictive substances to pharmacies and senior management, including Doud, knew those substances were being sold and used illicitly.
Among other things, and under the direction of Doud, RDC supplied tens of millions of oxycodone, fentanyl, and other dangerous opiods to pharmacy customers that its own compliance personnel determined, and reported to Doud, was dispensing these drugs to individuals who had no legitimate medical need for them, the indictment read.
Doud then directed the company to continue supplying those substances in order to maximize the companys revenues and Douds compensation, the indictment read.
The cooperative violated CSA and RDC policy in an effort to conceal the alleged illicit distribution, and deliberately avoiding monitoring or investigating those pharmacies they knew were distributing drugs for illicit use, the document alleged.
Federal authorities allege — and RDC leaders agree in the civil settlement — that the company did not impose necessary safeguards to ensure the drugs werent being spread illicitly from pharmacies.
We made mistakes, said Jeff Eller, spokesperson for RDC, …and RDC understands that these mistakes, directed by former management, have serious consequences.
This is the second time in four years that the federal Drug Enforcement Administration, or DEA, found significant problems with the RDC monitoring system. In 2015 RDC settled a civil lawsuit from the U.S. Attorneys Office by paying $360,000 in penalties, after admitting that it did not, as required, report “thousands of purchase orders from RDC” to DEA through an electronic reporting system.
This federal action follows a similar theme as the earlier civil lawsuit from federal prosecutors, alleging that RDCs oversights could have helped fuel the opioid epidemic.
RDC is a cooperative of pharmacies, and has been one of the fastest growing pharmaceutical distributors in the country. A popular industry publication shows that in 2016 pharmaceutical distributors were responsible for the handling of almost 96 percent of drugs on the market.
That same publication, from the Healthcare Distribution Alliance Research Foundation, says that U.S. pharmaceutical sales from distributors grew from $305 billion in 2013 to $408 billion in 2016 — a 34 percent increase.
The charges against the wholesaler, Rochester Drug Cooperative, and two of its former executives marked a new tactic for prosecutors in tackling the epidemic of addiction to prescription painkillers.
For the first time, a major pharmaceutical distributor is facing federal criminal charges over its role in the opioid crisis that has ravaged the United States.
The company, Rochester Drug Cooperative, which is the nations sixth-largest distributor, was charged on Tuesday with conspiring to distribute drugs and defrauding the federal government. Two former company officials were also charged in the case, which was brought by the United States attorneys office in Manhattan.
The criminal charges leveled at the drug distributor and its former executives marked a new tactic for the government in tackling the nations epidemic of addiction to prescription painkillers, like oxycodone.
Prosecutors applied the same criminal statutes to charge the distributor and its former executives as have been used against illicit street dealers and cartel chiefs who traffic in fentanyl and oxycodone.
The charges stem from a two-year investigation by the federal Drug Enforcement Administration that began after the company violated the terms of a civil settlement.
The company had admitted in the civil case that it had for years failed to report thousands of suspicious opioid orders from pharmacies, many of which flouted order limits and catered to doctors who ran pill mills.
In the last two decades, more than 200,000 people have died in the United States from overdoses involving prescription opioids, according to the Centers for Disease Control and Prevention. Roughly 200,000 more have died from overdoses involving illegal opioids like heroin.
Recent civil lawsuits brought by state attorneys general in New York, Vermont and Washington State have accused Rochester and the nations three largest distributors — Cardinal Health, McKesson and AmerisourceBergen — of brazenly devising systems to evade regulators.
John Kinney, the acting chief executive of the Rochester Drug Cooperative, or RDC, which operates in 10 states, appeared on behalf of the company at a brief court proceeding on Tuesday morning before Judge Naomi Reice Buchwald of United States District Court in Manhattan.
Mr. Kinney signed a deferred prosecution agreement, in which the company effectively admitted to committing the crimes. The agreement, along with a civil consent decree, were both approved by the judge.
Together, the agreement and the decree will allow the company to continue operating and set standards for its conduct, as well as providing for continued oversight, according to a court document.
We made mistakes, Jeff Eller, a spokesman for the company said in a statement, and RDC understands that these mistakes, directed by former management, have serious consequences.
State and federal authorities have struggled to hold the distributors accountable, and the lawsuits say that despite signing consent decrees and paying fines, the companies have continued to ship thousands of doses of opioids to troubled pharmacies.
The two former Rochester officials also charged in the case were Laurence F. Doud III, who had served as chief executive, and William Pietruszewski, the former chief of compliance, several people with knowledge of the matter said.
Mr. Doud was expected to surrender to D.E.A. agents and to appear in United States District Court in Manhattan later Tuesday.
Robert C. Gottlieb, a lawyer for Mr. Doud, said he would not comment until he had had a chance to review the charges against his client. Mr. Pietruszewskis lawyer could not immediately be reached for comment.
Geoffrey S. Berman, the United States attorney for the Southern District of New York, and Ray Donovan, the special agent in charge of the Drug Enforcement Administrations New York Field Division, were expected to formally announce the charges at a news conference later on Tuesday.
William K. Rashbaum is a senior writer on the Metro desk, where he covers political and municipal corruption, courts, terrorism and broader law enforcement topics. He was a part of the team awarded the 2009 Pulitzer Prize for breaking news. @WRashbaum • Facebook