Recently, Frier Levitt has seen increased activity from drug manufacturers as it relates to their so-called “exclusion lists,” which are internal, private designations that restrict or block shipments to a pharmacy the manufacturer deems to pose elevated diversion or compliance risk. These lists arise from anti-diversion programs that evaluate ordering behavior, dispensing patterns and due diligence findings, and they can immediately halt a pharmacy’s access to key products. These manufacturer-created lists are distinct from government lists, such as the federal Office of Inspector General (OIG) exclusion list, which prohibits participation in federal health programs and carries statutory consequences. Rather, manufacturer lists are rooted in supply relationships and compliance assessments, instead of formal regulatory sanctions, yet their operational impact can be just as acute for patient care.
One manufacturer that has been especially active with respect to its lists is Mallinckrodt. Mallinckrodt’s longstanding presence in certain Schedule II markets has gone hand in hand with strict anti-diversion controls, typically enforced through major wholesalers. Mallinckrodt is especially aggressive with its exclusion lists now, as the company has had significant financial and legal incentives to demonstrate compliance with federal law. Mallinckrodt was a major defendant in opioid-related litigation, including accusations that it failed to report “suspicious orders” of controlled substances under U.S. law. In 2017, it paid a $35 million settlement to resolve such allegations.
Based on this, pharmacies should expect manufacturers like Mallinckrodt to continuously review objective performance data and to closely examine the completeness and timeliness of red-flagged documentation.
Manufacturers and distributors registered under the Controlled Substances Act (CSA) must maintain effective controls against diversion, including suspicious order monitoring and customer due diligence. When an order is flagged and cannot be resolved through due diligence, shipment is expected to be withheld. Exclusions typically flow from either progressive risk escalation or sentinel events. Progressive escalation occurs when automated analytics detect abnormalities such as rapid growth in Schedule II orders, disproportionate volumes of certain high-risk National Drug Codes relative to peers, or repeated threshold overrides. These signals often trigger enhanced due diligence requests. If responses are delayed, incomplete, or unpersuasive, a do-not-ship status can follow. Sentinel events, such as licensing lapses, adverse board actions, law enforcement inquiries, or unresolved suspicious orders, can prompt immediate holds without graduated review. In both paths, speed and substance in the pharmacy’s response materially influence whether a temporary hold becomes a formal exclusion.
Upon notice of an exclusion, pharmacies should first stabilize operations by confirming the scope across manufacturers, distributors and affected products, and by planning for patient continuity where substitutes are clinically appropriate. Simultaneously, they should request the decision basis in writing and the specific remediation criteria that will be considered. Internally, a focused self-assessment should reconcile ordering and dispensing, test for prescriber or product outliers, and verify red-flag documentation. If genuine weaknesses are found, immediate interim controls and staff retraining demonstrate responsiveness even before formal submissions. A concise remediation plan should then be framed to the counterpart’s expectations.
Pharmacies should present updated, implemented standard operating procedures for controlled-substance handling and red-flag resolution; reconciled analytics linking orders to dispensing and patient need; and independent oversight such as external compliance reviews. Where specific concerns were raised—such as high-strength formulation concentrations or unusual geographic dispersion—responses should include clinical and operational explanations backed by contemporaneous records. Closing with a proposal for phased reinstatement, periodic check-ins, or targeted caps provides a risk-managed path forward.
Documentation quality often makes the difference. Pharmacies that can promptly produce reconciled purchase-to-dispense analytics, robust prescriber and patient due diligence records, and inventory controls aligned to written standard operating procedures are better positioned to rebut adverse inferences. Conversely, disorganized or inconsistent records, especially around red flag analyses or controlled-substance inventory counts, tend to validate manufacturers’ concerns and can extend ordering blocks.
Pharmacies should consider leveraging independent compliance consultants or third-party analytics firms to conduct objective, data-driven audits of ordering patterns, documentation practices, and diversion-prevention controls regarding manufacturer exclusion lists. Engaging an outside expert can help validate improvements, reconcile purchase-to-dispense data, and benchmark operations against industry expectations, providing persuasive, credible assurances that risk factors have been remediated. Combined with clear communication, timely submissions, and phased reinstatement proposals, third-party verification can reduce uncertainty and meaningfully improve the likelihood of reactivation while protecting sustained patient access to therapy.
How Frier Levitt Can Help
Frier Levitt can help diagnose the root causes of manufacturer exclusions, build targeted remediation packages, and negotiate reinstatement with manufacturers and distributors. Where negotiation stalls or decisions rest on materially inaccurate information, we evaluate and pursue appropriate legal remedies calibrated to the facts and contracts at issue. If your pharmacy has received a hold or exclusion notice, we can help you move quickly to protect patients, stabilize operations, and present the strongest possible case for reactivation. Contact us to speak with an attorney about any potential manufacturer exclusions.
