Historical Stock Chart
3 Months : From Oct 2019 to Jan 2020
Prosecutors are using laws typically applied to drug dealers; inquiry covers at least six firms
By Corinne Ramey
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 27, 2019).
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.
A Teva spokeswoman said the company was cooperating with the subpoena and was confident in its monitoring practices.
Representatives for McKesson and Amneal didn't respond to requests for comment. Representatives for AmerisourceBergen 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 couldn't be learned whether 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 27, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.