McKesson Corp. allegedly concealed security flaws in its supply chain, which fueled the opioid epidemic, according to a recently unsealed whistleblower case.
Former employees at the wholesale drug distribution giant claim that McKesson would hide the extent of its security issues from the federal government and falsely represented that it would comply with two settlement agreements. Millions of the addictive pain pills were diverted to the black market as a result, according to the lawsuit.
Those actions violate the False Claims Act, the whistleblowers argue, and the company's alleged negligence and overt malpractice stoked one of the largest public health crises in history.
"McKesson could easily tighten security to significantly reduce the illegal diversion of opioids, but McKesson refuses to take these necessary measures because doing so would adversely impact McKesson's profitability," the amended complaint reads.
The government declined to intervene in the case. McKesson did not reply to requests for comment.
The lawsuit describes a "corporate culture that flouted the law," one that allegedly relied on secrecy and misdirection.
According to the complaint, McKesson hired a security expert in 2006 who could easily access opioid storage areas in its distribution centers. Alleged vulnerabilities in its IT system allowed external access to corporate financial accounts and diminished the accuracy of its inventory accounting.
Managers allegedly hid security breaches and operated "internal compliance teams" with insufficient funds and oversight. According to the lawsuit, McKesson simply reshipped orders when products were not received or were incorrectly labeled and did not investigate or report the problem.
Similar allegations are being made in related lawsuits from thousands of municipalities, although using the False Claims Act is a curious move, legal experts said.
While these alleged regulatory violations could be material to McKesson's licensing and Drug Enforcement Administration registration, framing them as false claims is a stretch, said Mark Silberman, a partner in Benesch's healthcare and life science group.
"It doesn't seem material to the government's payment decisions," he said.
The Food and Drug Administration sent McKesson a warning letter on Feb. 7 that detailed several violations. McKesson failed to mitigate mislabeled prescriptions sent to Rite Aid and GlaxoSmithKline. Three Rite Aid pharmacies received bottles labeled as containing 100 oxycodone pills that were broken and had been replaced with other drugs. McKesson's internal investigation revealed that the tampering occurred while the drugs were in its possession, but the company did not identify all of the illegitimate product, notify its clients or alert authorities, according to the letter.
Investigators also cited several cases where Albertsons pharmacies reported shipments of divalproex and losartan that did not have a lot number or expiration date. But McKesson did not quarantine suspect product, notify its distributions centers or document the situation.
Meanwhile, a multibillion-dollar settlement is looming related to more than 2,300 lawsuits against distributors, drugmakers and pharmacies. Virtually every state and thousands of local municipalities and Native American tribes claim that the aggressive marketing of the addictive painkillers and lax oversight of their distribution significantly damaged their communities' health and finances. That places an estimated $78.5 billion economic burden on the U.S. a year.
More than 76 billion oxycodone and hydrocodone pills were shipped to U.S. pharmacies from 2006 to 2012, according to federal data released as part of the ongoing litigation.
More than 130 people die every day from opioid overdose, which claimed 47,000 lives in 2017, according to the National Institute of Health. From 2010 through 2015, the largest drug distributors sold more than 290 million opioids in Cincinnati's Hamilton County alone, leading to an average of four overdoses a day in the city and totaling 174 heroin overdoses over six days in August 2016, according to a suit filed by Cincinnati authorities.
Distributors maintain that the lawsuits are misguided because the companies don't manufacture the drugs or promote or prescribe prescription medications to the public and actively combat the diversion of opioids.
The DEA has tried to limit opioid distribution by curbing its quota system, but that has only had a limited effect. Between 1993 and 2015, the agency allowed production of oxycodone to increase 39-fold as the number of opioid prescriptions jumped from 76 million in 1991 to more than 245 million prescriptions in 2014, according to a letter to the DEA signed by 16 senators.