GPOS fear action against Cardinal
Will Cardinal ruling reinvent roles, DEA strategy?
Ajudge’s ruling that Cardinal Health is responsible for self-policing drug diversion activities may have a broader impact on the extent to which a wholesale drug distributor is responsible for detecting suspected diversion.
The Feb. 29 ruling allowed the Drug Enforcement Administration to suspend Cardinal Health’s drug distribution license at its facility in Lakeland, Fla., a decision that Cardinal Health said it plans to appeal.
The DEA had filed the immediate suspension order in February, alleging that the Dublin, Ohio-based distributor failed to maintain effective controls against drug diversion and that it failed to conduct due diligence in the delivery of high volumes of oxycodone to four pharmacies in Florida.
Cardinal Health had won a temporary restraining order that lifted the suspension until a judge in U.S. District Court in Washington issued last week’s ruling.
“I think DEA is correct that companies have an obligation to police themselves ... and to be proactive in assessing whether diversion (of controlled substances) is taking place,” Judge Reggie Walton said in court, according to Reuters.
The case addresses the DEA’S approach to fighting prescription-drug abuse by identifying deficiencies within the healthcare supply chain, notably by pursuing large distributors and pharmacy retailers for the roles they play in monitoring drug diversion. It also raises questions about a distributor’s degree of responsibility in combating the issue.
“We have genuine respect for the work of the DEA, but effectively addressing prescription-drug abuse requires a very different approach than does the war on illicit drugs,” according to a Cardinal Health statement responding to the ruling.
At a House subcommittee hearing last week about prescription drug diversion, DEA Deputy Assistant Administrator Joseph Rannazzisi said distributors are not monitoring customers as closely as they should. “If everybody within that supply chain would police each other, we wouldn’t have that problem,” he said.
Lee Perlman, president of GNYHA Ventures, the group purchasing organization for the Greater New York Hospital Association, said there is concern the case could lead some companies to exit the distribution business, which could negatively affect patients. “It sets a standard of reinventing what the business of supply chain is,” he said. “It redefines what a distributor is responsible for.”
Documents Cardinal Health filed in the case argue that the company is proactive in its
efforts to detect and prevent drug diversion. The company said it has suspended shipments of controlled substances to at least 375 customers, including 180 pharmacies in Florida, since January 2007.
Cardinal Health, as well as AmerisourceBergen and Mckesson Corp., has been more aggressive in monitoring signs of drug diversion in recent years, said Thomas Gallucci, an analyst with Lazard Capital Markets. The three companies make up about 90% of the drug distribution market in the U.S.
Even with policies in place, the ruling raises technical questions about what constitutes a red flag and how quickly a distributor is expected to respond to instances of suspected drug diversion, Gallucci said.
According to Cardinal Health, the DEA’S immediate suspension order in the current case “relies primarily” on the high-volume orders of controlled substances made by the pharmacies.
“The government suggests that the volume of the order gave way to a duty of due diligence,” said Barbara Ryland, a lawyer in Crowell & Moring’s Washington office. Ryland also noted that it may be easier for the government to pursue bigger targets rather than individual providers or patients.
The DEA also issued suspension orders to two Cvs/pharmacy facilities in Sanford, Fla., both of which are customers of Cardinal Health. The pharmacies ordered about 3 mil- lion oxycodone dosage units in 2011. The average pharmacy in the U.S. ordered about 69,000 dosage units last year.
Cvs/pharmacy, which was granted a temporary restraining order, said in a statement that is “is unwavering in its compliance with and support of the measures taken by federal and state law enforcement officials to prevent drug abuse and keep controlled substances out of the wrong hands,” and that the two pharmacies voluntarily offered to not fill prescriptions for some controlled substances until further resolution of the case.
Factors such as volumes of certain controlled substances or the percentage of cash transactions may indicate diversion, although highvolume orders for controlled substances can also be explained by proximity to oncology clinics and regional demographics, Cardinal Health said in a post to its website regarding the situation in Florida. The DEA takes a “one-size-fitsall” approach to volume averages but the agency has not set volume limits on registrations they grant to pharmacies, the company said.
The impact of the ruling is not yet clear. The DEA is scheduled to hold an administrative hearing April 3, which will lead to a final ruling from the DEA administrator.
DEA agents in February raided one of two Cvs/pharmacy facilities in Florida. This is the first time drug enforcers have targeted a major chain, DEA officials say.