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McKesson to pay $150 million in DEA, DOJ settlement

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SAN FRANCISCO — McKesson Corp. has agreed to pay $150 million in a settlement with the Drug Enforcement Administration (DEA) and Department of Justice (DOJ) involving its monitoring and reporting of suspicious controlled substance orders.

McKesson said late Tuesday that under the administrative and civil settlements the DEA will suspend the company’s DEA registrations to distribute certain controlled substances from four of its U.S. drug distribution centers on a staggered basis for limited time periods. Also under the agreement, McKesson and the DEA plan to meet regularly over the next five years to ensure ongoing compliance.

McKesson HQ building SF_WEBThe company noted that the settlements were previously disclosed in an 8-K filing with the Securities and Exchange Commission on April 30, 2015, and an accrual for the anticipated settlement payment was reflected in its 2015 fiscal year results.

According to the SEC filing, DEA registrations are slated to be suspended at McKesson’s distribution centers in Aurora, Colo., for all controlled substances for three years; Livonia, Mich., for all controlled substances for two years; Lakeland, Fla., for hydromorphone products for one year; and Washington Courthouse, Ohio, for all controlled substances for two years after the Livonia suspension.

“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,” McKesson chairman and chief executive officer John Hammergren said in a statement on the DEA-DOJ settlement.

The accord with the DEA and DOJ stems from 2008, when McKesson agreed to pay $13.25 million in a settlement regarding claims that it didn’t deploy an effective system for detecting and reporting suspicious orders for controlled substances — namely opioid painkillers — distributed to independent and small chain pharmacies.

From 2008 until 2013, McKesson supplied pharmacies an increasing amount of oxycodone and hydrocodone pills, the DOJ said, noting that it had evidence that the company didn’t fully implement or adhere to the compliance program it designed after the 2008 settlement. For example, in Colorado, McKesson processed over 1.6 million orders for controlled substances from June 2008 to May 2013 but reported only 16 orders as suspicious, all connected to one instance related to a recently terminated customer, according to the DOJ.

The DOJ on Tuesday said the $150 million that McKesson agreed to pay was a record civil penalty for alleged violations of the Controlled Substances Act. The department also called the staged suspensions of the distribution centers “among the most severe sanctions ever agreed to by a Drug Enforcement Administration-registered distributor.”

McKesson said that in recent years its U.S. Pharmaceutical unit “has put great effort” into enhancing its Controlled Substance Monitoring Program (CSMP). The company noted that its team is led by people with significant regulatory and anti-diversion expertise and uses advanced analytical tools to track customers’ drug purchases.

Fighting prescription drug abuse and diversion, McKesson added, requires a comprehensive approach that addresses the patients who become addicted, the doctors who write the prescriptions, the pharmacists who fill the scripts, the distributors who fulfill and deliver pharmacies’ orders, the manufacturers who make and promote the products, and the regulators who license these activities and determine supply.

“We are committed to tackling this multifaceted problem,” Hammergren stated, “in collaboration with all parties in the supply chain that share the responsibility for the distribution of opioid medications.”

McKesson is the latest of the nation’s “big three” drug wholesalers to reach settlements regarding distribution of controlled substances.

Earlier this month, Cardinal Health Inc. and AmerisourceBergen Corp. agreed to pay West Virginia $20 million and $16 million, respectively, to settle claims by the state that the companies had ineffective oversight of controlled substance distribution.

And in late December, Cardinal Health agreed to pay $44 million to the DOJ to resolve the civil penalty portion of its 2012 administrative settlement with the DEA. Cardinal’s 2012 settlement with the DEA resulted in a two-year suspension of company’s registration to distribute controlled substances from its Lakeland, Fla., distribution center, but didn’t settle the government’s civil penalty claims.


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