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Compliance, risk, and the opioid scandal

Tom Fox | July 24, 2017

The opioid epidemic has ravaged many lives in America. Now, the government is turning its focus on the pharmaceutical manufacturers themselves, not the addict or drug abuser.

Several states have filed lawsuits alleging that pharmaceutical companies help fuel the addiction crisis. Oklahoma Attorney General Mike Hunter in June filed a lawsuit against four leading manufacturers of opioid pain medication—Purdue Pharma, Allergan, Cephalon, and Janssen Pharmaceuticals—“claiming the effects of deceptive marketing campaigns over the last decade have fueled the state’s opioid epidemic.” Other states to file lawsuits include Mississippi, Ohio, and Missouri.

In some cases, the government has targed drug companies for failed internal controls. As Compliance Week has reported, Mallinckrodt Pharmaceuticals—a maker of generic oxycodone—on July 11 reached a $35 million settlement with the government to resolve allegations that the pharmaceutical manufacturer failed to report suspicious orders of pharmaceutical drugs, and for record-keeping violations. 

In another example, drug distributor McKesson in January paid a record $150 million civil penalty to settle Justice Department allegations that McKesson failed to design and implement an effective system to detect and report suspicious orders for controlled substances distributed to its independent and small-chain pharmacy customers (i.e., orders that are unusual in their frequency, size, or other patterns.) “From 2008 until 2013, McKesson supplied various U.S. pharmacies an increasing amount of oxycodone and hydrocodone pills, frequently misused products that are part of the current opioid epidemic,” the Justice Department said.

The failure was so systemic that in one distribution center in Colorado, for example, “McKesson processed more than 1.6 million orders for controlled substances from June 2008 through May 2013, but reported just 16 orders as suspicious, all connected to one instance related to a recently terminated customer,” the Justice Department said. 

For The Man From FCPA, the clear message in both of these stories is the lack of an effective compliance program and how that lack may cause negative reputational and financial consequences for the company. It also demonstrates how an effective compliance program consists of an interlocking series of actions which taken together, can help to not only protect a company but allow for detection and prevention before you get to the step of remediation.

Finally, the McKesson example drives home the requirement that each company must assess its own risks, as they will be different. If a major money maker for your company is a drug that is subject to abuse by its users, you need to have a risk management strategy in place to help mitigate and manage the risks going forward.