Drug distributor faces federal charges for role in opioid crisis

Rochester Drug Cooperative (RDC), the nation’s sixth-largest pharmaceutical distributor, has become the first major distributor to face federal criminal charges in connection to the opioid crisis, authorities announced Tuesday.

The U.S. Attorney’s Office in Manhattan charged the Rochester, N.Y.-based distributor on Tuesday with failing to report thousands of suspicious orders of oxycodone, fentanyl and other controlled substances and defrauding the federal government, according to the complaint.

Former CEO Laurence Doud III and former chief of compliance William Pietruszewski were also charged.

{mosads}The company has entered into a non-prosecution consent decree under which RDC agreed to accept responsibility and pay a $20 million penalty while taking other actions, according to the Department of Justice (DOJ).

“RDC knowingly failed to operate an adequate system to detect, investigate, and report to the [Drug Enforcement Administration] DEA suspicious orders of controlled substances,” the complaint states, noting that between May 2012 and November 2016, RDC filled more than 1.5 million controlled substance orders from its pharmacy customers. During this period, the distributor only reported four orders as suspicious and failed to flag at least 2,000 suspicious orders, according to prosecutors.

The company also did not put enough resources into ensuring compliance, federal officials said, and maintained “a woefully inadequate due diligence program” to safeguard against diversion of controlled substances.

“When RDC started to expand its compliance unit, the company hired unqualified personnel who lacked necessary qualifications and relevant experience,” the complaint states.

The charges mark a new approach in federal authorities’ handling of the opioid crisis, invoking the same criminal statutes used against organized crime figures who traffic substances like fentanyl, according to The New York Times, which reported details of the charges earlier Tuesday.

The DEA has been investigating the distributor for two years, since it violated the terms of a civil settlement after admitting it failed to report thousands of suspicious opioid orders.

The distributor, along with others such as AmerisourceBergen, McKesson and Cardinal Health, has also been the subject of civil lawsuits by the attorneys general of New York, Vermont and Washington state, who claim the distributors have deliberately dodged regulations.

Acting CEO John Kinney appeared on behalf of the company in federal court in Manhattan and signed the deferred prosecution agreement, according to the Times.

“We made mistakes,” company spokesperson Jeff Eller said, according to the Times, “and RDC understands that these mistakes, directed by former management, have serious consequences.”

“We accept responsibility for those mistakes. We can do better, we are doing better, and we will do better,” Eller said in a statement. “Not only do we pledge to honor the letter and spirit of these agreements, we are also putting into place a world-class compliance program.”

Geoffrey Berman, the U.S. Attorney for the Southern District of New York, and Ray Donovan, the special agent in charge of the DEA’s New York Field Division, announced the charges.

“RDC was well aware that many of its largest pharmacy customers exhibited ‘red flags’ associated with the diversion of controlled substances, but failed to report these customers or their orders to the DEA as required,” federal authorities said in court documents.

RDC did not immediately respond to a request for comment from The Hill.

Updated: 2:45 p.m.