What you need to know about the forces reshaping our industry.


April 25, 2019

In first, federal prosecutors file criminal charges against a major drug distributor

Daily Briefing

    The Department of Justice on Tuesday announced that federal prosecutors for the first time have filed criminal charges against a drug distributor and two of its former executives over their alleged involvement in fueling the U.S. opioid epidemic, Reuters reports.

    Your top resources for combatting the opioid epidemic in one place


    Until now, the Drug Enforcement Administration (DEA) and federal prosecutors had only brought civil charges against drug distributors over their alleged role in the opioid epidemic. The federal government used those charges in an effort to compel drug distributors to block and report suspicious opioid orders by pharmacies, the Washington Post reports. Federal law requires drug distributors to report suspicious orders, which serve as a sign that drugs potentially are being diverted to the black market.

    Since 2007, three of the United States' largest drug distributors—AmerisourceBergen, Cardinal Health, and McKesson, which control 90% of U.S. drug distribution—have settled civil charges with DEA related to opioid winding up in the hands of dealers. However, an investigation by the Post and "60 Minutes" found drug distributors still fail to report suspicious drug orders.

    As result, the U.S. government appears to be testing a new approach to hold drug distributors accountable, the Post reports.

    DEA, US Attorney file first criminal charges against drug distributor

    DEA and the U.S. Attorney's Office for the Southern District of New York on Tuesday filed criminal charges against Rochester Drug Cooperative (RDC), the nation's sixth-largest drug distributor, as well as Laurence Doud, RDC's former CEO, and William Pietruszewski, RDC's former operations manager.

    U.S. Attorney Geoffrey Berman said, "This prosecution is the first of its kind: Executives of a pharmaceutical distributor and the distributor itself have been charged with drug trafficking—trafficking the same drugs that are fueling the opioid epidemic that is ravaging this country."

    Federal prosecutors charged RDC and the former executives with crimes including conspiracy to distribute controlled narcotics for nonmedical reasons, which could result in the former executives facing 10 years to life in prison, the Post reports. The grand jury indictment alleges that, "[f]or at least half a decade, RDC distributed dangerous, highly addictive opioids to pharmacy customers that its senior management … knew were being sold and used illicitly."

    Federal prosecutors in the indictment accused Doud and other RDC executives of making a "deliberate decision not to investigate, monitor or report to the DEA pharmacy customers that they knew were diverting controlled substances for illegitimate use." The indictment states that RDC's distribution of:

    • Fentanyl grew from about 63,500 dosages in 2012 to about 2.4 million in 2015; and
    • Oxycodone grew from 4.7 million tablets in 2012 to 42.2 million in 2016.

    The indictment alleges that Doud and other executives at RDC continued to ship suspicious oxycodone and fentanyl orders to one pharmacy, despite concerns from employees that orders for the drugs were "gr[owing] exponentially." The indictment claims the orders continued in part because the pharmacy was one of RDC's best customers, and Doud received "a substantial bonus" based on the company's earnings.

    The indictment also notes that RCD paid dividends to the pharmacies buying the largest amounts of drugs from the company. For example, RCD in 2015 paid a $10.6 million dividend to one of its top buyers of a fentanyl spray.

    Overall, RCD between 2012 and 2016 generated about $1.2 billion in profits from the sales of controlled substances, the indictment states.

    RDC acknowledges it violated federal law regarding controlled substances

    RDC and Pietruszewski did not dispute the charges, the Post reports. RCD in a 30-page filing acknowledged the company made false statements to DEA about its program to prevent controlled substances from being diverted and violated federal law when it delivered oxycodone and fentanyl to pharmacies it knew dispensed the drugs for "illegitimate purposes," the Wall Street Journal reports.

    RDC agreed to pay a $20 million fine and enter a five-year deferred prosecution agreement to settle civil and criminal charges alleging the company failed to report suspicious orders of thousands of opioids as required under federal law.

    Jeff Eller, an RDC spokesperson, said, "We made mistakes. We accept responsibility for those mistakes." He noted that RDC established a new management team in April 2017 and has begun more closely monitoring its drug flow.

    According to the Journal, Pietruszewski has agreed to plead guilty to the charges and cooperate with prosecutors. William Hughes, Pietruszewski's attorney, declined to comment on the charges, the Post reports.

    Doud has not agreed to plead guilty to the charges, the Journal reports. According to the Journal, Doud's attorney, Robert Gottlieb of Gottlieb & Janey, said "Doud is being framed." Gottlieb added, "The government has it all wrong and is being used by others to cover up their own wrongdoing. Doud will fight these false charges to his last breath and he will be vindicated"  (Rashbaum, New York Times, 4/23; Stempel/Raymond, Reuters, 4/23; Bernstein, Washington Post, 4/23; Owens, "Vitals," Axios, 4/24; Hopkins, Wall Street Journal, 4/23).

    Access our resources on the opioid epidemic

    The opioid epidemic is a complex, multi-dimensional public health problem. Use this list of helpful resources on how hospitals and health systems can play a role to treat opioid addiction and prevent further increase in opioid abuse.

    Access our Opioid Resources Here

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.