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Opioids crisis: Criminal charges against former New York drug firm execs first in nation

Gary Craig and Sarah Taddeo
A Rochester, New York-area drug company's lax distribution of prescription opioids led to a $20 million settlement and criminal charges.

A Rochester, New York-based pharmaceutical distribution company helped propel the deadly opioid epidemic by closing its eyes to pharmacy customers that wantonly and excessively pushed prescription painkillers, federal authorities say.

The federal criminal and civil investigations into the operations of Rochester Drug Cooperative Inc. on Tuesday led to the first criminal charges against "drug company executives for diversion of opioids," federal prosecutors said.

Rochester Drug Cooperative, or RDC, agreed to a $20 million settlement to partly resolve the accusations against it. RDC, now based in Gates, New York, just west of Rochester, also agreed to a strenuous monitoring program designed to ensure that it does not retreat into the lax oversight that has apparently plagued the company operations in recent years.

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The investigation, first reported on in August 2018, has been ongoing since 2017.

This is the second time in four years that the federal Drug Enforcement Administration, or DEA, found significant problems with the RDC monitoring system. In 2015 RDC settled a civil lawsuit from the U.S. Attorney's Office by paying $360,000 in penalties, after admitting that it did not, as required, report "thousands of purchase orders from RDC" to DEA through an electronic reporting system.

“We made mistakes, and RDC understands that these mistakes, directed by former management, have serious consequences," RDC spokesman Jeff Eller said in a statement Tuesday.

Two former RDC officials – Laurence F. Doud III, who had served as chief executive, and William Pietruszewski, the former chief of compliance – were criminally charged as part of the investigation.

Pietruszewski has pleaded guilty and is cooperating with authorities.

The indictment against Doud alleges that, for at least five years, RDC distributed highly addictive substances to pharmacies and senior management, including Doud, knew those substances were being “sold and used illicitly.”

Though largely unknown locally, RDC has swelled into the sixth largest pharmaceutical distributor in the country. Founded in 1905, the company has a large distribution operation in New Jersey, closer to the New York City region that is home to many of RDC's pharmacy customers.

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Rochester Drug Co-operative at 50 Jetview Drive Tuesday,

Estimates of RDC annual revenue run between $1 billion and $2 billion. The company is a cooperative of pharmacies, meaning its members are its very customers – a relationship that some authorities maintain can be dangerously incestuous and encourage the negligent oversight.

RDC sells pharmaceuticals and other health-related products to about 1,300 pharmacies.

What the court documents say 

According to court papers, RDC: 

• Several of RDC's largest pharmacy customers exhibited patterns indicating that they were illegally diverting opioids — disproportionate cash purchases and high percentage of sales consisting of oxycodone and fentanyl, for example —  but did not alert DEA, as required.

• Issues were occasionally raised by RDC compliance specialists — one who wrote of a "staggering" number of opioid purchases "which makes my stomach sick" —  yet federal authorities were not notified.

• Routinely raised threshold number of opioid prescriptions for "high-volume" customers, in turn "maximizing its sales and revenues above complying with its own policies and DEA reporting requirements."

RDC "made the deliberate decision not to investigate, monitor, and report to the DEA pharmacy customers that it knew were diverting controlled substances for illegitimate
use," according to court papers.

"Because it knew that reporting these pharmacies would likely result in the DEA investigating and shutting down its customers, Rochester Drug Cooperative's senior management directed the company’s compliance department not to report them, and instead to continue supplying those customers with dangerous controlled substances that the company knew were being dispensed and used for illicit purposes," authorities said in court papers.

"Why did they do it? The answer is greed," said Berman.

The criminal charges against former CEO Doud and former compliance officer Pietruszewski could be a precedent-setting move with the prosecution of drug company executives. To date, state and federal authorities have sought civil actions to try to slow the opioid crisis.

Last month, for instance, New York Attorney General Letitia James announced a lawsuit against major opioid manufacturers and distributors, including RDC.

Last year Doud, who had been ousted from the company, sued RDC. He claimed he was being scapegoated for the DEA investigation.

That suit is still pending in federal court in Rochester.

A popular industry publication shows that in 2016 pharmaceutical distributors were responsible for the handling of almost 96% of drugs on the market.

That same publication, from the Healthcare Distribution Alliance Research Foundation, says that U.S. pharmaceutical sales from distributors grew from $305 billion in 2013 to $408 billion in 2016 — a 34% increase.

“Our country is in midst of a persecution drug abuse epidemic," said Berman Tuesday. "Our office will do everything in its power to bring to justice anyone responsible for unlawfully fueling this epidemic, and that includes executives who illegally distribute drugs from their boardrooms."

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This article originally appeared on Rochester Democrat and Chronicle: Opioids crisis: Criminal charges against former New York drug firm execs first in nation