McKesson agreed to pay a $150 million settlement for not reporting suspicious opioid orders and this case establishes a precedent that could ensnare other providers
In today’s world of the Internet-of-Things, it is becoming easier to collect data on every purchase made by individuals and companies. That ability to track the actions of consumers and commercial business has not escaped the notice of law enforcement and regulatory authorities. For example, at some future point, it could be that regulators would want to access data held by clinical laboratories on the test ordering patterns of their client physicians.
A recent ruling by the US Department of Justice (DOJ) in a case involving McKesson Corp. (NYSE:MCK), may set a precedent that could eventually be cause for concern for medical laboratories that work with physicians who may be ordering more tests than are considered medically necessary under current regulations.
McKesson is a retail distributor of pharmaceuticals, and provider of health information and care management technologies and medical supplies. In a settlement with the DOJ, McKesson agreed to pay a record $150 million in civil penalties, as well as a staggered suspension of sales of controlled substances for a period of time from distribution centers in Colorado, Ohio, Florida, and Michigan, for alleged violations of the Controlled Substances Act (CSA).
In addition, the company has agreed to what the DOJ calls “enhanced” compliance for the next five years, and to hire an outside entity to monitor compliance. According to the DOJ and the US Drug Enforcement Administration (DEA), McKesson failed to detect and report suspicious orders of controlled substances in several states. The penalties and sanctions are the most severe agreed to by a distributor of pharmaceutical drugs to date.
A History of Failing to Report Suspicious Orders
This is not the only time McKesson, which is based in San-Francisco, has run afoul of compliance regulations. In 2005, officials from the DEA met with representatives of the company to warn them they were fulfilling orders from pharmacies that were ordering prescriptions online illegally. According to a DOJ news release, “The United States Attorneys allege that the orders that McKesson received from these pharmacies were unusually large, unusually frequent, and/or deviated substantially from the normal pattern. As a result, millions of dosage units of controlled substances were diverted from legitimate channels of distribution.”
Six US attorneys’ offices from Middle District of Florida, District of Maryland, District of Colorado, Southern District of Texas, District of Utah, and Eastern District of California, reached an agreement with McKesson in 2008. In that agreement, McKesson agreed to pay $13,250,000 and to set up a system to detect and report suspicious orders.
A Deadly Problem
The opioid epidemic in the US is an enormous problem that affects people from every socioeconomic group. According to data from the Centers for Disease Control and Prevention (CDC), “More than three out of five drug overdose deaths involve an opioid” and the number of deaths per year due to opioid overdose has quadrupled since 1999. In 2014, more than 28,000 people died from opioid overdose.
Those startling statistics have brought attention to the opioid epidemic, which includes questions about the sources of the prescription drugs that end up in the possession of abusers. Many, though not all, are legal with a prescription. In places like West Virginia, which has been especially hard hit, the effects of opioid abuse paint a stark picture.
A two-part series published in the Charleston Gazette-Mail describes the “trail of painkillers,” which the writers claim “leads to West Virginia’s southern coalfields, to places like Kermit, population 392.” Kermit is in Mingo County, where one pharmacy ordered close to nine million hydrocodone pills over the course of two years. And it’s not just Mingo County. The Gazette-Mail article states, “In six years, drug wholesalers showered the state with 780 million hydrocodone and oxycodone pills.” That amounted, according to the report, “to 433 pain pills for every man, woman, and child in West Virginia.”
The Gazette-Mail quotes former Delegate and retired pharmacist Don Perdue as saying, “Distributors have fed their greed on human frailties and to criminal effect.”
Obviously, McKesson, and other drug distributors, disagree. The Gazette-Mail two-part report also quoted General Counsel to McKesson, John Saia, from a letter that had been previously released by the company: “The two roles that interface directly with the patient—the doctors who write the prescriptions and the pharmacists who fill them—are in a better position to identify and prevent abuse and diversion of potentially addictive controlled substance.”
However, Betsy C. Jividen, acting US Attorney in northern West Virginia agrees with the “criminal effect.” The San Francisco Mercury News reported her as saying, “In many instances, the suspicious orders placed by West Virginia pharmacies resulted in prescription narcotics being diverted for illegal use and abuse.”
Is This a Precedent That Might Eventually Ensnare Clinical Laboratories?
The entire McKesson saga creates an interesting precedent for all healthcare providers, including clinical laboratories. If a healthcare provider is purchasing (or ordering) an unusually high volume of medical products or services in a way that could be ruled medically-unnecessary, illegal, or enabling patients to otherwise violate the law, does the federal government now have the power to hold the entities that supplied that provider accountable?
Staying with the example of prescriptions for hydrocodone and oxycodone that were at the center of the McKesson case, could federal investigators use the precedent in the McKesson case to take action against a medical laboratory that was performing pain management tests as requested by physicians in a pain management clinic, and where the laboratory noticed a pattern of unusually high utilization of these tests, but did nothing?
If McKesson can be held responsible for the orders placed by pharmacies, could clinical laboratories also be held responsible for potentially unnecessary tests ordered by doctors? Only attorneys experienced in this area of law and regulation can assess the current level of risk for providers. Currently, the likelihood of this precedent being applied to other types of healthcare providers is low. But the point of this news analysis is to call attention to a new legal precedent that does have the potential to be applied in other situations.
Obviously, there’s a tremendous difference between prescriptions for opioids and medical tests used by physicians to monitor the appropriate use of opioid prescriptions by their patients. However, the precedent set by this settlement could show the direction the regulatory winds are blowing.