McKesson agrees to pay record $150 million settlement for failure to report suspicious orders of pharmaceutical drugs

WASHINGTON, DC – McKesson Corporation (McKesson), one of the nation’s largest distributors of pharmaceutical drugs, agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA), the U.S. Drug Enforcement Administration (DEA) announced today.

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.

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– i.e. orders that are 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.

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, all connected to one instance related to a recently terminated customer.

“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 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.

This was a multi-district investigation that involved the following DEA Field Divisions from around the country.

In recent years, McKesson U.S. Pharmaceutical says it 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). 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. McKesson is proud of its CSMP and will continue its efforts to be an industry leader in the fight against prescription drug diversion.

“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 chief executive officer, McKesson.

McKesson sees prescription drug diversion and abuse as an issue that needs to be addressed through a comprehensive approach that includes the patients who become addicted, doctors who write the prescriptions, the pharmacists who fill them, the distributors who fulfill and deliver pharmacies’ orders, the manufacturers who make and promote the products, and the regulators who license the above activities and determine supply.

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

McKesson is committed to working with the DEA on an ongoing basis to identify new ways to prevent misuse of controlled substances. As part of the settlement agreement reached, McKesson and the DEA plan to meet regularly over the next five years to ensure ongoing alignment. This new level of partnership with regulators, and the enhancements McKesson has made to its CSMP, strengthens McKesson’s ability to partner with all participants in the prescription drug supply chain to help prevent diversion while ensuring services to meet patient needs.