Two former executives of a pharmaceutical distributor company are facing criminal drug trafficking charges on accusations of illegally distributing opioids and conspiring to defraud the US Drug Enforcement Administration, the first time distributors have been criminally charged with these crimes.
Federal prosecutors say that between 2012 and 2017, the Rochester Drug Co-Operative, which buys medicines directly from manufacturers and sells them wholesale to pharmacies, saw an 800% increase in demand for oxycodone and a 2,000% increase in demand for fentanyl from its customers.
Of nearly 1.5 million orders for narcotics placed between 2012 and 2016, the company flagged only four as suspicious, according to court documents. The DEA identified at least 2,000 orders that should have been flagged, some from pharmacies that exhibited red flags for suspicious activity: having customers who pay in cash, who travel long distances to pick up drugs from the pharmacies and who receive extremely high doses of potent narcotics, as well as the pharmacies themselves having an unusually large portion of orders involving narcotics.
The company was, in its former CEO’s own words, “the knight in shining armor for pharmacies that had been cut off by other distributors,” Geoffrey Berman, US attorney for the Southern District of New York, said Tuesday.
The former CEO, Laurence Doud, 75, was arrested Tuesday and charged with one count of conspiracy to distribute controlled substances and one count of conspiracy to defraud the United States. He faces 10 years to life in prison.
Doud’s attorney said his client will fight the charges.
“Mr. Doud is being framed, in no uncertain terms. The government has it all wrong and is being used by others to cover up their wrongdoing,” said his attorney, Robert Gottlieb. “Mr. Doud will fight these false charges to his last breath, and he will be vindicated.”
William Pietruszewski, 53, a former compliance officer for the Rochester Drug Co-Operative, was arrested and pleaded guilty on Friday to one count of conspiracy to distribute controlled substances, one count of conspiracy to defraud the United States and one count of willfully failing to file suspicious order reports with the DEA. His attorney had no comment.
Companies are required to report suspicious orders for controlled substances, including opioids, to the DEA.
The Rochester, New York-based company entered a “deferred prosecution agreement” Tuesday waiving its right to a criminal indictment and admitting to a pattern of conduct that violated federal narcotics laws and conspiracy to defraud the DEA. Authorities have agreed not to prosecute as long as changes are made and a fine is paid.
The company, which touts itself as a wholesale distributor of pharmaceutical products to small community retail pharmacies, will continue to operate. But it has agreed to accept responsibility for its actions, pay a $20 million fine, reform its controlled substances compliance program and allow itself to be supervised by an independent monitor, according to the prosecution agreement released by Berman’s office.
“We made mistakes … and RDC understands that these mistakes, directed by former management, have very serious consequences,” spokesman Jeff Eller said in a statement Tuesday. “One element of the opioid epidemic is a dramatic increase in the volume of prescriptions for opioids and all narcotics. With that dramatic volume increase came an increase in our business, resulting in an increase in orders we should have identified as suspicious orders, which we failed to report to the DEA.”
The Rochester Drug Co-Operative is the nation’s sixth largest distributor of pharmaceuticals, distributing to over 1,300 pharmacies and with over $1 billion in revenue, according to the agreement.
Investigators were tipped off to the alleged criminal activity in 2015, while conducting a civil investigation that involved the company.
Internal emails showed the company’s employees attempting to flag management about possible suspicious activity, according to court documents. One contractor who helped audit pharmacy activity emailed management in February 2013, saying that the amount of opioids being dispensed by two pharmacy customers were so high that they were “like a stick of dynamite waiting for the DEA to light the fuse.”
Another internal email from a compliance specialist in 2015 flagged a pharmacy that was filling prescriptions from physicians using inactive or incorrect DEA prescribing numbers and went from ordering 15,380 units of narcotics in a six-month period to 28,600 units in just one month. The employee wrote that the increase “makes my stomach sick.”
The company said in the statement that it did not have adequate systems in place to oversee the increased demand for narcotics but that it has been making improvements, including a new management team.
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Eller said that Doud left in April 2017 and Pietruszewski in July 2018.
Doud filed a defamation and wrongful termination suit against the most recent CEO, Joseph Brennan in 2018, alleging that he “engaged in a calculated campaign against Mr. Doud to tarnish his professional reputation and ultimately shift onto him the blame for a mounting federal criminal investigation into RDC.”
Brennan resigned from the company last week. His attorney declined to comment.