McKesson, a distributor of pharmaceutical drugs, has agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act, the Justice Department announced today. The settlement also imposes new and enhanced compliance obligations, as well as an independent monitor—the first independent monitor of its kind in a CSA civil penalty settlement.

The nationwide settlement requires McKesson to suspend sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida for multiple years. The staged suspensions are among the most severe sanctions ever agreed to by a Drug Enforcement Administration (DEA) registered distributor. 

In 2008, McKesson agreed to a $13.25 million civil penalty and administrative agreement for similar violations. In this case, the government alleged again 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.

Even after designing a compliance program after the 2008 settlement, McKesson did not fully implement or adhere to its own program, according to evidence gathered by the government’s investigation. 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 stated. 

Enhanced compliance terms. In addition to the monetary penalties and suspensions, the government and McKesson agreed to enhanced compliance terms for the next five years. Among other things, McKesson has agreed to specific, rigorous staffing and organizational improvements; periodic auditing; and stipulated financial penalties for failing to adhere to the compliance terms.

The settlement also will require McKesson to engage an independent monitor to assess compliance—the first independent monitor of its kind in a CSA civil penalty settlement, the Justice Department said.

McKesson response

In response to the settlement, McKesson said that in recent years McKesson U.S. Pharmaceutical has made significant enhancements into how it monitors and controls the distribution of controlled substances, referred to as the company’s Controlled Substance Monitoring Program (CSMP). McKesson said its team includes numerous individuals with significant regulatory and anti-diversion expertise who play a lead role in its due diligence efforts, utilizing advanced analytical tools to closely monitor customers’ purchases.

“Pharmaceutical distributors play an important role in identifying and combating prescription drug diversion and abuse,” McKesson Chief Executive Officer John Hammergren said in a statement. “McKesson, as one of the nation’s largest distributors, takes our role seriously. We continue to significantly enhance the procedures and safeguards across our distribution network to help curtail prescription drug diversion while ensuring patient access to needed medications.”

McKesson said it is committed to working with the DEA on an ongoing basis to identify new ways to prevent misuse of controlled substances. As part of the settlement agreement reached, McKesson and the DEA plan to meet regularly over the next five years to ensure ongoing alignment. “This new level of partnership with regulators, and the enhancements McKesson has made to its CSMP, strengthens McKesson’s ability to partner with all participants in the prescription drug supply chain to help prevent diversion while ensuring services to meet patient needs,” the company stated.