By Corinne Ramey
Federal prosecutors have opened a criminal investigation into
whether pharmaceutical companies intentionally allowed opioid
painkillers to flood communities, employing laws normally used to
go after drug dealers, according to people familiar with the
matter.
The investigation, if it results in criminal charges, could
become the largest prosecution yet of drug companies alleged to
have contributed to the opioid epidemic, escalating the legal
troubles of businesses that already face complex,
multibillion-dollar civil litigation in courts across the country.
Prosecutors are examining whether the companies violated the
federal Controlled Substances Act, a statute that federal
prosecutors have begun using against opioid makers and distributors
this year.
At least six companies have said in regulatory filings that they
received grand-jury subpoenas from the U.S. attorney's office in
the Eastern District of New York: drugmakers Teva Pharmaceutical
Industries Ltd., Mallinckrodt PLC, Johnson & Johnson and Amneal
Pharmaceuticals Inc. and distributors AmerisourceBergen Corp. and
McKesson Corp. People familiar with the matter said the subpoenas
were in connection with the Brooklyn federal probe.
A spokesman for Johnson & Johnson said the company
understood the subpoena was part of a broader industrywide
investigation. The spokesman said the company believes its policies
and procedures to stop opioid medications from being used for
nonmedical purposes complied with the law.
Representatives for McKesson, AmerisourceBergen and Amneal
didn't respond to requests for comment. Representatives for Teva
and Mallinckrodt declined to comment.
In response to state and local government lawsuits, these
companies have denied responsibility for the opioid crisis. They
have said they follow all laws around the manufacture and
distribution of prescription painkillers.
The probe is in its early stages and prosecutors are expected to
subpoena additional companies in the coming months, one of the
people said. It wasn't clear if other companies had received
subpoenas.
Under the Controlled Substances Act, companies are required to
monitor commonly abused drugs, including by reporting suspicious
orders, maintaining compliance programs and disclosing suspicious
pharmacy customers to the government.
Executives and companies can face civil charges under the
Controlled Substances Act for not reporting signs, like suspicious
orders, that could indicate drugs are being used for nonmedical
purposes. Criminal charges require prosecutors to prove an effort
to willfully and intentionally avoid such requirements, legal
experts said.
A spokesman for the Brooklyn U.S. attorney's office declined to
comment.
At least 400,000 people have died in the U.S. from overdoses of
legal and illegal opioids since 1999, according to federal data.
Cities, counties, states and federal prosecutors have in recent
years tried to hold drugmakers, distributors and pharmacies
accountable through lawsuits and prosecutions.
Virtually every state and more than 2,500 city and county
governments have filed lawsuits against players up down the opioid
supply chain, accusing them of marketing opioid painkillers too
aggressively and failing to stop excessive amounts of pills from
flooding into communities. Some of the companies are working with
attorneys general on a multibillion-dollar settlement to resolve
the entirety of the litigation.
The lawsuits have pushed one drugmaker, OxyContin-maker Purdue
Pharma LP, into bankruptcy. Purdue separately faces civil and
criminal probes from the U.S. attorneys offices in New Jersey,
Vermont and Connecticut and U.S. Justice Department in Washington
and has said that a proposed plan to turn over its operations to
creditors is contingent on resolving the federal
investigations.
Earlier this year, federal prosecutors filed major criminal
cases in Manhattan and Ohio that, for the first time, employed
criminal statutes that are more commonly applied to drug dealers,
legal experts say.
When prosecutors from the Southern District of New York
announced criminal charges against a pharmaceutical distributor and
two executives earlier this year, the Manhattan U.S. attorney's
office said the case was unusual.
"This prosecution is the first of its kind," Manhattan U.S.
Attorney Geoffrey Berman said in April, "executives of a
pharmaceutical distributor and the distributor itself have been
charged with drug trafficking."
Prosecutors charged Rochester Drug Cooperative Inc. with
violating federal narcotics laws. They said the company illegally
distributed prescription opioids to pharmacies it knew were
dispensing drugs to people without legitimate medical needs. Its
sales of oxycodone increased by 800% from 2012 to 2016, prosecutors
said.
The company entered into a deferred-prosecution agreement, under
which prosecutors will move to dismiss the charges in five years if
the company complies with conditions including changes to its
Controlled Substances Act compliance program. It also agreed to pay
a $20 million fine and admitted to misconduct.
A Rochester Drug spokesman said it made mistakes under former
leadership.
Prosecutors also charged two executives. Former Chief Compliance
Officer William Pietruszewski pleaded guilty to one count of
conspiracy to distribute controlled substances and cooperated with
the government. A lawyer for Mr. Pietruszewski declined to
comment.
Laurence Doud III, the company's former chief executive, was
charged with conspiracy to distribute controlled substances and
conspiracy to defraud the U.S. A federal judge scheduled his trial
for May.
Robert Gottlieb, a lawyer for Mr. Doud, pointed to a court
filing arguing to dismiss the narcotics-conspiracy count. Mr.
Doud's lawyers argued there was no legal basis to bring such a
charge against a distributor, who, unlike a pharmacist or doctor,
isn't directly linked to prescribing drugs.
In a similar case in Ohio, filed in July, federal prosecutors
charged now-defunct distributor Miami-Luken Inc., two former
officials and two pharmacists with conspiring to distribute
controlled substances. The defendants have all pleaded not
guilty.
--Sara Randazzo contributed to this article.
Write to Corinne Ramey at Corinne.Ramey@wsj.com
(END) Dow Jones Newswires
November 26, 2019 13:03 ET (18:03 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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