The Rochester Drug Co-operative charges show how corporate greed fueled the opioid crisis

This is the first time a pharmaceutical company and its executives have faced criminal charges for distributing drugs they knew were ending up in the hands of addicts.

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In a sign of the mounting legal pressure against the pharmaceutical industry over its role in America’s opioid epidemic, on 23 April the US Attorney for the Southern District of Manhattan, Geoffrey S. Berman, announced the first ever criminal charges against a pharmaceutical drug distribution company, and two of its top executives, for illegally distributing a controlled substance.

As part of a deferred prosecution agreement, Rochester Drug Co-operative (RDC), one of the ten largest pharmaceutical distributors in the country, agreed to pay a $20 million fine, submit to three years of independent compliance monitoring and accept responsibility for knowingly and intentionally distributing addictive opioids that it knew were being sold and used illegally.

The complaint filed by Berman alleges that between May 2012 and November 2016, the company fulfilled at least 2,000 suspicious orders. It knew that it was obligated to report all such orders to the Drug Enforcement Agency but reported only four. Meanwhile RDC’s revenues quadrupled and its former CEO, Laurence Doud III, earned millions of dollars in compensation.

Doud has been charged with conspiracy to distribute controlled substances and to defraud the United States, and could face a minimum of ten years in jail. His lawyer told The Associated Press that Doud intended to fight the charges.

As part of his co-operation agreement, William Pietruszewski, RDC’s former chief compliance officer, pleaded guilty to conspiracy to distribute controlled substances, conspiracy to defraud the United States and failure to file suspicious order reports to the Drug Enforcement Agency.

In 2017, there were more than 72,000 deaths from drug overdoses in the US. It is estimated that over two million Americans are dependent on prescription pain killers or illegal opioids. The opioid epidemic has ravaged communities and has caused American life expectancy to decline three years in a row – something that simply should not happen in a wealthy, developed nation.

The opioid crisis may be, as Andrew Sullivan eloquently argued in New York Magazine, an epidemic of despair: “a story of how the most ancient painkiller known to humanity has emerged to numb the agonies of the world’s most highly evolved liberal democracy.” But it’s one that was fueled by America’s rapacious healthcare and pharmaceutical industry: the aggressive and misleading marketing of addictive prescription opioids, the subsequent chronic over-prescription of painkillers, the willingness of drugs distributors to continue selling pills they knew were being abused and were flooding the black market.

While for years prosecutors have focused their efforts on street dealers and drug cartels, recent lawsuits point to a significant shift. Last month, New York sued the Sackler family, whose company Purdue Pharma created the popular opioid OxyContin, for their role in creating and profiting from the opioid epidemic. A spate of other lawsuits around the country are similarly going after pharmaceutical firms and distributors.

“Why did they do it?” Berman asked of Rochester Drugs Co-Operative executives at a news conference announcing the charges. “Greed.”

The court filings, which are worth reading in full, support that interpretation and outline the astonishing scope of the scheme. Between 2012 and 2016, RDC’s sales of oxycodone rose from 4.7 million pills to 42.2 million. Similarly, the company’s fentanyl sales rose from 63,000 doses to 1.3 million.

Despite fulfilling over 1.5 million drugs orders, RDC filed only four suspicious order reports. That’s even though several of its largest clients were pharmacies who displayed order patterns that should have raised red flags: they were ordering a disproportionate number of opioids, they were fulfilling prescriptions for far larger quantities than accepted medical standards, and many of their customers were out-of-towners, paying with cash rather than through insurance.

In an internal email, one compliance officer outlines one such pharmacy:

“They are a secondary account with us who went from on average for the last 6 months ordering 15380 units to ordering a staggering 28,600 units last month which makes my stomach sick. . . . They have multiple prescribers using inactive/not found/not belonging to them DEA registration numbers. They have multiple doctors on Watch list. Multiple doctors writing for high dosages of Oxy 30mg, Cocktail prescribing, some from 80 miles plus away. Few out of state doctors as well. Some under disciplinary review restricted from practicing medicine in NY State.”

Legally, RDC should have referred the pharmacy for investigation by the DEA. It didn’t.

Similarly, despite receiving over 7,800 “orders of interest” – the term used to describe an unusually high order for a particular drug – it neither investigated them internally nor referred them to the DEA.

The reason for the company-wide policy of not reporting to the DEA was its “desire to attract business and cater to its clients” the complaint alleges.

RDC frequently distributed drugs to pharmacies that had been cut off from other distributors over suspicious activity. When one compliance officer suggested they should not even visit a new potential client because it was “not even… on borderline in terms of proper compliance standards”, Doud instructed the compliance officer to visit the pharmacy anyway. He noted that “we are a knight in shining armor for [sic] Independents” and that RDC “should do all we can to support them”.

The company’s alarming disregard for compliance manifested in other ways, too. For a significant portion of the period under investigation, the company’s compliance officer was also responsible for managing its warehouse and inventory. When RDC did expand its compliance team, it hired people who were unqualified for the role – including the daughter of RDC’s general manager, who had never worked in the pharmaceutical industry.

The indictment against Doud alleges that he knew that he was selling opioids that were being used illegally, and that he knew how dangerous this was. It notes that he received a report in 2004 stating that the US “is in the midst of a prescription drug abuse epidemic as addiction, overdoses and deaths associated with medical drug use have risen dramatically”. Yet he continued to direct that RDC distribute drugs to pharmacies flagged as suspicious by the compliance department in order to “maximise RDC’s revenues and his personal compensation”. His pay, which was tied to sales, rose by 125% to $1.5 million.

The criminal charges filed against Doud, Pietruszewski and RDC may offer little solace to the hundreds of thousands of Americans who have lost relatives to the opioid crisis. But they point to a welcome shift in how the scourge of opioid addiction is being viewed: not as a failure of individual responsibility, not even just as a public health crisis – though it is certainly that – but also as a parable of the dangers of unrestricted corporate greed.

Sophie McBain is North America correspondent for the New Statesman. She was previously an assistant editor at the New Statesman.