Danny Hakim, William K. Rashbaum and Roni Caryn Rabin

But the daunting financial muscle that has driven the spread of prescription opioids in the United States comes from the distributors — companies that act as middlemen, trucking medications of all kinds from vast warehouses to hospitals, clinics and drugstores.

The industry’s giants, Cardinal Health, McKesson and AmerisourceBergen, are all among the 15 largest American companies by revenue. Together, they distribute more than 90 percent of the nation’s drug and medical supplies.

New civil suits from the attorneys general in New York, Vermont and Washington state accuse distributors of brazenly devising systems to evade regulators. They allege that the companies warned many pharmacies at risk of being reported to the Drug Enforcement Administration, helped others to increase and circumvent limits on how many opioids they were allowed to buy, and often gave advance notice on the rare occasions they performed audits.

Three-fourths of prescriptions at a New York City pharmacy supplied by Amerisource were written by doctors who were later indicted or convicted, the New York complaint said. For more than five years, Cardinal shipped to a pharmacy with the highest oxycodone volume in Suffolk County, New York, despite continually flagging its orders as suspicious. McKesson kept shipping to two pharmacies six years after learning that they had been filling prescriptions from doctors who were likely engaging in crimes. The shipments stopped only last year, after the doctors were indicted.

“How do the CEOs of these companies sleep at night?” Bob Ferguson, Washington’s attorney general, said at a recent news conference.

Now, in what could be a test case, the U.S. attorney’s office for the Southern District of New York and the DEA are wrapping up an investigation that appears likely to result in the first criminal case involving a major opioid distributor, Rochester Drug Cooperative, one of the 10 largest, people familiar with the matter said. The investigation began with an examination of possible crimes including wire and mail fraud and various drug violations, according to three people with knowledge of a federal grand jury subpoena served on Rochester in 2017, but it remains unclear what charges might be brought.

The state lawsuits also present evidence that government at all levels has been ineffective at policing the distributors. For the first decade of the crisis, the three largest companies did not even have meaningful programs to monitor suspicious orders, despite being required by federal law to track narcotics and to look out for spikes in orders and cash payments. Since then they have failed to build robust systems to prevent widespread opioid abuse.

The distributors rebutted the new allegations.

“We reject the state’s suggestion that our employees circumvented safeguards to increase sales,” Kristin Chasen, a spokeswoman for McKesson, said in a statement. Cardinal, in its statement, said it had “developed and implemented a constantly adaptive and rigorous system to combat controlled substance diversion.”

Amerisource put the onus on the DEA, which it said receives data on all orders shipped and notifications of suspicious ones. “It defies common sense for distributors such as AmerisourceBergen to be singled out,” the company said in a statement.

In the two decades since OxyContin was introduced in 1996, there have been nearly 218,000 overdose deaths related to prescription opioids, according to the Centers for Disease Control and Prevention. While overdose deaths continue to rise, the number of opioid prescriptions has been falling since 2012.

But that is mostly because of a classification change that made drugs like Vicodin (which mix opioids with milder drugs) Schedule II narcotics, which placed more restrictions on prescribing them. Oxycodone, the powerful narcotic that is the main ingredient in OxyContin, was already a Schedule II drug and its sales have continued to rise, according to figures compiled by Iqvia, a health data provider.

The three largest distributors sold 1.6 billion oxycodone pills in New York alone between 2010 and 2018. It was distributors, said the office of Attorney General Letitia James of New York, who “jammed open the floodgates.”

A Lack of Deterrence

In 2017, after years of allegedly flouting legal requirements to monitor suspicious orders of opioids, McKesson agreed to a $150 million settlement with the Justice Department, a record for a distributor.

For most businesses, $150 million would be a lot of money. At McKesson, it was less than the $159 million retirement package the company granted its longtime chief executive, John H. Hammergren, in 2013. (After a public backlash, the company later reduced the package to $114 million.)

It was among a string of settlements, and others came far cheaper.

In 2008, McKesson, which supplies Walmart, paid $13.25 million and Cardinal, the main CVS supplier, paid $34 million to settle federal claims that they had been filling suspicious orders.

Before 2007, only two of Cardinal’s 40,000 employees were dedicated to addressing the problem, according to court filings. One McKesson compliance officer complained that asking for resources was like “asking for a Ferrari,” according to New York’s lawsuit.

More settlements followed, but little changed. Cardinal paid a total of $64 million in settlements with the Justice Department in 2012, 2016 and 2017, with similar agreements struck by its rivals.

The policing of opioid sales continued to be largely delegated by law to the distributors.

The companies created order volume thresholds for different drugs that would trigger reporting to the DEA, but some were so lofty that they resulted in few such reports, the complaints said.

Or they worked around them. In one industry practice, known as “cutting,” Cardinal canceled pharmacy orders “that exceeded a threshold” and allowed “a subsequent, often smaller order,” Vermont’s complaint said.

Brandi Martin, a Cardinal spokeswoman, said that “cut orders are reported to the DEA” and were not “a tactic to avoid reporting.”

Egregious moves spurred limited responses, according to the complaints. McKesson allowed one pharmacy a fivefold oxycodone increase over six months, then refused another request for an 80 percent increase. The company continued shipping to the pharmacy anyway, even after a rival stopped.

McKesson, in its statement, said it was continuing “to enhance and evolve” compliance efforts.

By last year, executives were summoned by Congress. Both Hammergren, of McKesson, and George Barrett, the executive chairman of Cardinal at the time and its former chief executive, played down their roles in the supply chain.

During the hearings, Rep. Kathy Castor, D-Fla., picked out a drugstore in rural West Virginia that had been swamped with opioids — 4,000 pills a day at one point from Cardinal, 5,000 from McKesson.

“Don’t you take responsibility?” she asked, adding, “You saw that paying the penalties on your settlement agreements was a cost worth paying because you were making so much money?”

“I wish we had moved earlier to stop shipping to that pharmacy,” Barrett said at the hearing. Hammergren echoed that, saying, “I would have liked to have made a decision faster.”

Castor was not satisfied. “This was the opposite of due diligence,” she said.

A Criminal Inquiry

There was little enthusiasm for policing opioids at Rochester Drug Cooperative, New York’s complaint alleges.

For years, only two people at Rochester were assigned to compliance, and one had other responsibilities. Amid discussions about hiring a compliance consultant, Laurence F. Doud III wrote in an email when he was the company’s chief executive that it was “making me ill as to how much this is going to cost.”

Doud is now suing Rochester, claiming wrongful termination and contending it conspired to blame him for conduct that the DEA and federal prosecutors in New York are investigating. (His suit was previously reported by The Democrat and Chronicle of the city of Rochester.) The current chief executive, Joseph Brennan, is on leave.

Rochester is a cooperative of pharmacies, so monitoring suspicious orders meant monitoring its own members. But it had practices that were similar to those of its larger rivals. Rochester’s upper limits on how many pills pharmacies could buy were “invariably so high that customers could not reach them unless their order volumes tripled from their historical purchasing patterns, rendering the system virtually useless,” New York alleges.

Sales were brisk. Between 2010 and 2018, Rochester sold 143 million oxycodone pills in New York.

The company added a Queens pharmacy with numerous cash buyers as a customer in 2016. The pharmacy was also filling prescriptions from out-of-state doctors and one who had been arrested over oxycodone prescribing practices, the complaint says.

In 2013, Rochester continued shipping to a pharmacy run by a pediatrician who had surfaced in headlines as running a pill mill, according to the complaint. In an email, one Rochester consultant called the situation “a stick of dynamite waiting for the DEA to light the fuse.” The shipments continued.

In a $360,000 settlement in 2015, Rochester admitted it had failed to report thousands of opioid transactions over five years. The subsequent criminal inquiry sought records including loans and lines of credit that Rochester had extended to its customers, according to people with knowledge of the 2017 subpoena.

Criminal charges are soon expected, with the company and current and former executives under scrutiny, the three people familiar with the matter said. They, like those with knowledge of the subpoena, spoke on the condition of anonymity because of the developing investigation. Such a prosecution would appear to be the first time a major distributor has been held criminally responsible in connection with opioids.

The DEA and the office of Geoffrey S. Berman, U.S. attorney for the Southern District of New York, declined to comment on the inquiry.

Jeff Eller, a Rochester spokesman, declined to answer specific questions, citing the investigation, but he said that Rochester’s compliance department is more than six times larger than it was in 2013 and that the company “will continue to make a significant investment.”

A Failure to Regulate

Louis Crisafi’s opioid of choice was Actiq, a powerful fentanyl lollipop.

He allegedly left wrappers around the office, which was a bad idea, since he was a senior investigator for the Bureau of Narcotics Enforcement, a branch of the New York state Department of Health that monitors opioid sales.

Crisafi’s fentanyl use was noticed at work by other investigators and was among the topics of a 2008 report issued by the state inspector general that raised concerns about the bureau, where many investigators reported to a pharmacist. (Crisafi, who left the bureau, said he had a legal prescription and never used opioids on the job.)

States have had trouble policing opioid use — even among their own. Like similar agencies elsewhere, the New York narcotics bureau was ill-equipped, with fewer than 20 investigators overseeing distributors and manufacturers, along with the state’s 5,586 pharmacies and more than 120,000 prescribers.

Kenneth Post, a former director of the bureau, said it does not belong in the Health Department, which has close ties with health care providers.

“They’re policing their own, and it doesn’t work,” said Post, who left the agency in 2010. The Health Department called him a “disgruntled former employee.”

A 2012 audit by the state Comptroller’s Office found that the bureau had overlooked hundreds of thousands of flawed opioid prescriptions over two years.

The Health Department said in a statement that the bureau had only “limited investigatory” power, deflecting responsibility “to federal, state and local law enforcement.”

At the federal level, the DEA does not closely monitor the millions of transactions involving controlled substances, said Paul T. Farrell, a lawyer who represents municipalities in lawsuits against drugmakers.

“The DEA is not the TSA, which is responsible for looking at every passenger going through and screening out those who are threats,” he said, referring to the Transportation Security Administration. Instead, he said that “once a tip is made,” the DEA will “reconstruct what actually happened.”

In a statement, the DEA said investigations are presented to federal prosecutors, who choose “the appropriate litigation strategy.”

Distributors have marshaled lobbyists, contributing $1.5 million to sponsors and co-sponsors of a 2016 law thwarting the DEA’s efforts to freeze suspicious drug shipments.

Distributors have also lined up lobbyists with ties to Gov. Andrew M. Cuomo of New York, where lawmakers included $100 million in opioid taxes or surcharges in two consecutive budgets, though last year’s measure is tied up in court. They have hired two firms founded or co-founded by onetime aides to former Gov. Mario M. Cuomo as well as Mercury Group, whose executives include former advisers to the current governor.

For now, distributors remain largely in control.

“It’s not a good system,” said Dr. Andrew Kolodny, an addiction expert. “It’s the fox guarding the henhouse.”

This article originally appeared in <a id="a3c290ab-fdb9-3d9b-a7f7-184f2b82b8b5" href="https://www.nytimes.com/2019/04/22/health/opioids-lawsuits-distributors.html">The New York Times</a>.

The giants at the heart of the opioid crisis

There are the Sacklers, the family that controls Purdue Pharma, the maker of OxyContin. There are the doctors who ran pill mills, and the rogue pharmacists who churned out opioid orders by the thousands.

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Danny Hakim, William K. Rashbaum and Roni Caryn Rabin

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The giants at the heart of the opioid crisis