Cardinal reaches settlement on controlled-substances charge
DUBLIN, Ohio Resolving a major legal impasse that had threatened both its own business and that of some of its retail pharmacy customers, Cardinal Health has settled a wide-ranging series of charges that it violated federal reporting requirements in its handling of controlled substances. The agreement will allow the drug wholesaling and health services giant to resume shipments of controlled substances at all affected distribution centers.
Under terms of the legal pact, Cardinal will pay a total of $34 million in civil penalties to the U.S. Drug Enforcement Administration and seven U.S. attorneys’ offices to resolve the charges. The settlement “will result in reinstated licenses to distribute controlled substances from the company’s Auburn, Wash., Lakeland, Fla., and Swedesboro, N.J. distribution centers,” noted the company.
The charges were serious, and they had hampered Cardinal’s operations at those three facilities. According to the DEA, the violations led to large-scale diversion of controlled drugs.
“Cardinal Health, which operates 27 DEA-registered distribution facilities, failed to report to DEA suspicious orders of hydrocodone that it then distributed to pharmacies that filled illegitimate prescriptions originating from rogue Internet pharmacy Web sites,” noted the DEA in a statement. “These prescriptions violated applicable federal and state law because they were not issued for a legitimate medical purpose by physicians acting within the usual course of professional practice.
“Cardinal’s conduct allowed the ‘diversion’ of millions of dosage units of hydrocodone from legitimate to non-legitimate channels,” the agency reported.
Without admitting any wrongdoing, Cardinal agreed both to pay the fines and alter some of its practices to prevent any possibility of diverted products. “Specifically, the company has expanded its training, implemented new processes, introduced an electronic system that identifies and blocks potentially suspicious orders pending further investigation, and enhanced the expertise and overall staffing of its pharmaceutical distribution compliance team,” Cardinal reported. In addition, “to strengthen its overall compliance practices,” the company noted that it has hired former acting deputy U.S. attorney general Craig Morford to an expanded role as chief compliance officer.
“Protecting the integrity of the pharmaceutical supply chain is a responsibility we take very seriously, and preventing prescription drug abuse is a public policy goal that Cardinal Health fully supports,” said R. Kerry Clark, chairman and chief executive officer. “We settled this matter so that we could quickly resume the distribution of these vital medicines to our valued customers, and we will continue to work with the DEA and other supply chain partners to take all necessary steps to keep these powerful drugs out of the wrong hands.”
Cardinal spokesperson Tara Schumacher said the company was working to restore normal supply operations at the three affected DCs by the end of November. “As you can imagine, these license suspensions have caused challenges for some of our customers, particularly retail independents in the affected service areas,” she told Drug Store News today. “We worked diligently with the DEA to address its concerns, agreed to pay $34 million to settle the matter, and have invested more than $20 million to enhance our controls against diversion.”
Cardinal’s goal, said Schumacher, is “resolving this matter quickly so we could resume shipments to our valued customers, who need these medicines to in turn serve their patients.”