• Thu. May 30th, 2024

Major U.S. Pharmaceutical Drugs Distributor Forced to Pay Record $150 Million Settlement for Violating CSA

ByGeorge Bao

Jan 18, 2017

LOS ANGELES – McKesson Corporation, one of the largest distributors of pharmaceutical drugs in the United States, has agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA), the U.S. Justice Department announced Tuesday.

McKesson is the oldest and largest health care company in the U.S., serving more than 50% of U.S. hospitals, 20% of physicians and 96% of the top 25 health plans. It delivers one-third of all medications used daily in North America.

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.

McKesson operates a distribution center in Santa Fe Springs, California.

In 2008, McKesson agreed to a $13.25 million civil penalty and administrative agreement for similar violations. In the new case, the government alleged again that McKesson failed to design and implement an effective system to detect and report “suspicious orders” – orders that were unusual in their frequency, size or other patterns – for controlled substances distributed to its independent and small-chain pharmacy customers.

From 2008 until 2013, McKesson supplied various U.S. pharmacies an increasing amount of oxycodone and hydrocodone, which are 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, and all of those were connected to one instance related to a recently terminated customer. 

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.

“The company’s practices resulted in dangerous drugs being diverted from legitimate uses into the black market and helped fuel the opioid epidemic that is causing so much damage across the nation,” said United States Attorney Eileen M. Decker.

“This nationwide investigation will result in a landmark penalty, significant changes in the way that pharmaceutical drugs are distributed by the company, and the ability of the Department of Justice to monitor McKesson’s future conduct.”

This case against McKesson is the product of a multi-district investigation that involved the DEA Field Divisions in Boston, Chicago, Denver, Detroit, Miami, Newark, San Francisco, St. Louis and Washington.


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