DEA slams drug distributor executives with felony charges over opioid distribution

In an epic day reminiscent of earlier legal battles with organized crime, the Drug Enforcement Administration, following the instructions of the Southern District of New York federal court, arrested Laurence Doud, former CEO of Rochester Drug Cooperative, charging him with allegedly engaging in a conspiracy to willfully misrepresent RDC’s opioid distribution practices—and to illegally distribute controlled substances, essentially the same violation for which illegal drug traffickers are arrested. Simultaneously, it was revealed that RDC’s former chief compliance officer, William Pietruszewski, had pled guilty to related charges and is now a cooperating witness, and that RDC has entered into a deferred-prosecution consent decree (subject to court approval), and will pay a $20-million fine.

The announcement included a press briefing at the DoJ offices that garnered national network-news attention, and a perp walk of Doud, in handcuffs, being arrested in New York.

“Today’s charges should send shock waves throughout the pharmaceutical industry reminding them of their role as gatekeepers of prescription medication,” said Special Agent in Charge Ray Donovan. “DEA investigates DEA registrants who divert controlled pharmaceutical medication into the wrong hands for the wrong reason. This historic investigation unveiled a criminal element of denial in RDC’s compliance practices, and holds them accountable for their egregious non-compliance according to the law.”

According to DEA, from 2012 to 2016, RDC’s sales of oxycodone tablets rose 800%, to 42.2 million doses, and fentanyl sales grew 2,000%, to 1.3 million doses. During that time, it is alleged, Doud and Pietruszewski ignored employees’ warnings of suspicious ordering by pharmacies, and suppressed suspicious order reports to DEA.

RDC, according to press reports, is one of the top 10 drug distributors in the US, grossing over $1 billion annually and distributing to a network of independent pharmacies mostly in the Northeast. “We made mistakes,” said Jeff Eller, spokesperson for RDC, adding that “we accept responsibility for those mistakes. We can do better, we are doing better, and we will do better.” The company has hired new compliance officers, and is putting a “world class” compliance system in place. Its then-current CEO, Joe Brennan, resigned on April 16, replaced temporarily by its CFO, John Kinney.

Where was DEA?

The first-ever arrest of a distributor executive on drug-trafficking charges is certainly attention-getting; numerous civil settlements with many distributors over suspicious-order monitoring, going back over a decade, never went that far. Even so, DEA’s and DoJ’s, stance in prescription-opioid dispensing is curious. Unless RDC actually hid its distribution of controlled substances altogether, DEA could easily have tracked the 800- or 2,000% increases during the time period in question. (Manufacturers, distributors and pharmacies alike are required to file Form 222s to DEA; suspicious-order monitoring [SOM] is a next-level type of reporting.)

According to the New York Times, the criminal investigation started after a previous civil settlement with RDC was reviewed. Also, Doud, the former CEO, has filed suit last year for wrongful termination against RDC, suggesting that the criminal charges have been long in the works. Doud, it is said, will vigorously fight the federal charges. He'd better: if convicted, he faces a mandatory 10-year sentence.

The wave after wave of DEA charges against drug distributors (the industry is, arguably, in the third such wave dating back to the mid-2000s) over the continuing friction of SOM calls into question the legal structure of the Controlled Substances Act itself. The pattern has been, DEA files civil charges against a distributor or pharmacy (earlier this decade, it even went after FedEx, unsuccessfully); industry pays a fine and promises to operate an SOM system more rigorously; repeat. There has been a new level of cooperation promised, when DEA enabled some collaboration between its record-keeping systems and those of distributors, announced earlier this year; on the other hand, the RDC charges might indicate a new level of action against the industry.