Drug Wholesaler’s Criminal Prosecution Provides Case-Study for Compliance Do’s and Don’ts

Rochester Drug Cooperative (RDC) recently entered into a plea with the federal government in which it admitted wrongdoing and agreed to pay $20 million in fines, receiving a prosecution deferral subject to a three-year monitoring period by an independent compliance official. Moreover, the government brought criminal charges against former CEO Laurence F. Doud III and William Pietruszewski, the former chief of compliance. Pietruszewski has reportedly entered a plea and is cooperating with the government.

RDC is the sixth largest pharmaceutical distributor in the U.S. with annual revenue estimated between $1-2 billion. As a cooperative of independent pharmacies, its structure may have led to its oversight failures. Whatever the cause, according to court documents:

  • Several of RDC’s largest pharmacy customers exhibited patterns indicating that they were illegally diverting opioids — disproportionate cash purchases and high percentage of sales consisting of opioids, for example — but RDC did not alert DEA, as required.
  • Issues were raised by RDC compliance specialists yet federal authorities were not notified.
  • RDC routinely raised the threshold number of opioid prescriptions for “high-volume” customers, acting against its own policies and DEA reporting requirements.
  • RDC “made the deliberate decision not to investigate, monitor, and report to the DEA pharmacy customers that it knew were diverting controlled substances for illegitimate use” according to court filings.

As for Doud, he allegedly directed RDC officials to open multiple new accounts without conducting due diligence and without regard for prescribing numbers, pharmacies’ customers, or the doctors for whom they filled, and his yearly bonus was tied directly to company profits.

The takeaway here is that company Standard Operating Procedures (SOP) and compliance cannot be ignored in pursuit of profits or the interests of cooperative members. The threat of personal criminal liability against corporate officers appears to be a signal the government intends to prosecute corporate officers when it comes to particularly egregious behavior.

Frier Levitt represents drug wholesalers with healthcare fraud prosecution and compliance issues. If you have questions regarding DEA reporting guidelines, need guidance regarding when to investigate internally or need assistance with compliance matters, contact Frier Levitt today to speak to an attorney.