US Pharm. 2012;37(4):61-62.
In late February 2012, the Department of Justice (DOJ)
charged Cardinal Health, Inc. and CVS Caremark Corporation with landmark
violations of Drug Enforcement Administration (DEA) controlled
substances (CS) statutes and regulations for excessive shipments and
distribution of oxycodone.1 Take note that these charges are
against the corporations, not just individuals, and most importantly,
not just against the pharmacists involved with dispensing the alleged
large number of medication doses.
Until relatively recently, a CS violation action against a
drug-distribution and/or a drug-dispensing corporation would have been
rare, if not unheard of. Civil and criminal cases against corporate
agencies are on the rise as are charges against individual corporate
officers and managers.2 The concept is generally known as corporate social responsibility and is rapidly becoming a more common form of prosecution.3
The cases involving Cardinal Health and CVS are considered to be among
the latest example of the DEA’s strategy of targeting large corporations
in its efforts to tame the nation’s prescription drug abuse problem.
Corporate Social Responsibility
Briefly, corporate social responsibility (CSR) is
defined as an obligation of an organization to pursue long-term goals
that are good for society. This requires a commitment to behave
ethically and contribute to economic development while improving the
quality of life of the workforce and their families as well as that of
the local community and society at large. The CSR concept also
incorporates the idea of conducting business in an ethical way and in
the interests of the wider community, responding positively to emerging
societal priorities and expectations, a willingness to act ahead of
regulatory confrontation, balancing shareholder interests against the
interests of the wider community, and being a good citizen.4
Turning the ethical ideas of CSR into legal commitments that incorporate
disciplinary accountability is a challenge the federal government has
embraced of late.
The Cardinal Health-CVS Case
To illustrate this point, the government is seeking to
revoke the CS registrations of Cardinal Health’s Florida warehouse
facility and those of the pharmacies, which will, if the withdrawal
action is granted, effectively close the entire operations at those
locations. Cardinal is the nation’s second largest drug distributor with
more than $100 billion in revenue in 2011. It has denied any wrongdoing
and sought a temporary injunction to keep its Florida facility open and
distributing controlled substances to the 2,700 physicians, pharmacies,
hospitals, and other facilities serviced from its Lakeland distribution
center. CVS has also obtained a temporary injunction permitting its two
pharmacies in Sanford, Florida, to continue operations. Both CVS
Sanford pharmacies have voluntarily quit dispensing oxycodone
prescriptions, and sales of oxycodone fell by 86% after the corporation
instructed its pharmacists not to fill narcotics prescriptions from a
“small” number of area physicians. Two independent pharmacies also
involved voluntarily surrendered their DEA CS registrations and their
state pharmacy licenses.5
On February 29, 2012, a federal judge entered an order
allowing the DEA to suspend Cardinal’s registration to distribute CS
drugs from its Lakeland facility. After initially granting Cardinal’s
stay of execution of the suspension order, on reconsideration the judge
stated that after getting more information from the DEA, “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.” The judge also explained that he did not believe
Cardinal would suffer “irreparable harm” because of the suspension, as
it had recovered its business after a previous suspension of Lakeland in
On March 2, 2012, the U.S. Court of Appeals for the
District of Columbia Circuit issued an order temporarily lifting the
suspension pending further proceedings. The court ordered Cardinal to
file its emergency motion by March 14th and the DEA to file its response
by March 16th, according to the court docket.7 On March 16,
2012, the Court of Appeals reversed the stay, meaning that the Lakeland
Cardinal facility is not allowed to distribute controlled substances
until the DEA makes a final determination.8
The allegations included charges that Cardinal repeatedly
ignored escalating orders for oxycodone from the two CVS stores. The DEA
closely monitors production, distribution, dispensing, and sales of the
drug using its Automation of Reports and Consolidated Orders System
(ARCOS) because oxycodone is highly addictive and abused extensively.9
Cardinal was also charged with frequently distributing more doses of
the drug to CVS and two other nearby independent pharmacies than allowed
by its own policies.
The allegations claim that Cardinal approved a ninefold
increase in oxycodone from one store in 2009 and that orders increased
another 63% to over two million doses in 2010. For a one-year period
ending in November 2010, Cardinal adjusted the thresholds for oxycodone
orders five times for the two CVS stores, increasing the monthly dose
limit from 112,000 in 2009 to 319,000 at the end of the investigatory
period. Cardinal admitted that it supplied other customers served from
the Lakeland facility “about half the amount” of the painkillers
purchased by the average Florida pharmacy. The DEA has claimed that over
three million doses had been ordered by the four pharmacies, while an
“average” order volume would be about 69,000 annually.1
Oxycodone is used nearly 400% more than cocaine
considering the number of people involved and number of doses consumed.
The CDC estimates that there are 1.5 million cocaine abusers in the U.S.
Deaths from narcotics including oxycodone have quadrupled in the past
decade to nearly 15,000, surpassing the number of individuals who die
annually from the use of heroin and cocaine combined.1
With the intent to demonstrate that the company has
reformed itself, CVS has developed “strengthened and reinforced”
guidelines for its pharmacies in recent months on dispensing pain
medications and has improved its prescription-drug monitoring. According
to a spokesperson for CVS, the “allegations regarding past conduct do
not reflect the pharmacies’ practices today.” In a similar attempt at
rehabilitation of its legal image, Cardinal also said that it “can
adequately police itself,” adding that it has terminated more than 375
pharmacy customers—including more than 180 in Florida—since 2008.1
As to Cardinal, the allegations claim that had it
conducted site inspections of the involved pharmacies, it would have or
should have known that the oxycodone purchases were of a suspect nature.
As evidence, the DEA investigation disclosed that 58% of the oxycodone
prescriptions dispensed between January 2010 and mid-October 2011 at one
of the CVS stores were paid for by cash, including some that cost over
$200. This is more than eight times higher than the 6.9% of
prescriptions nationwide that are paid for in cash. The other CVS store
also sold 42% of its oxycodone prescriptions for cash. This is coupled
with evidence that every third pharmacy drive-through vehicle had a
prescription for oxycodone or hydrocodone.1
The DEA believes that the extraordinarily high number of
cash prescriptions for a CS Schedule II prescription drug is indicative
of diversion for nonmedical use. Supposedly, had Cardinal done onsite
inspections of the two CVS stores, it would have recognized the illegal
transactions and could have stopped distributions of the drug to these
two locations. According to the allegations, the DEA investigation of
the Cardinal facility “revealed a persistent failure to exercise due
diligence to ensure that controlled substances were not being diverted.”
Evidence includes an internal Cardinal e-mail stating that “a CVS
pharmacy corporate employee told the distributor that the rising
purchase orders for oxycodone were no cause for alarm. Soaring demand
for the painkiller, the CVS employee explained to Cardinal, stemmed from
Florida authorities’ crackdown on illicit suppliers, or ‘pill mills,’
leading to an increase in legitimate traffic at CVS.”1
One of the evidentiary problems with this logic is that
the DEA regulations do not generally require wholesalers to conduct
inspections of the sites to which CS drugs are distributed. Another
problem is that the DOJ is not charging that the drugs were
dispensed illegally; rather, it is claiming that both corporate entities
failed to adequately scrutinize the drug orders and monitor the
activities of the purchasers (i.e., CVS, not the ultimate users or
patients). Some wholesale distributors have complained that the DEA does
not clearly explain what it expects them to do to police pharmacies and
patients who request narcotic painkillers.
Nonetheless, the government is proceeding against the
organizations based on the corporate responsibility theory of liability.
Whether the courts will buy into this strategy in this case is a
Other CSR Cases
There have been a number of cases, not involving drugs or
pharmacies, where the CSR doctrine has been central to the liability
debate. One of the more notable cases involves British Petroleum’s (BP)
leased Deepwater Horizon offshore drilling rig, which caused one of the
worst oil spills ever in the continental U.S. According to one
commentator: “BP’s actions are facing unprecedented scrutiny, thanks to a
years-long history of legal and ethical violations that critics,
judges, and members of Congress say shows that the London-based company
has a penchant for putting profits ahead of just about everything else.
Over the past two decades, BP subsidiaries have been convicted three
times of environmental crimes in Alaska and Texas, including two
felonies. It remains on probation for two of them. It also has received
the biggest ever fine for willful work safety violations in U.S.
history.”10 While the court case on the massive number of
complaints was set to begin in late February, the trial was delayed
while the parties were entered into settlement discussions.11
Another sort of CSR case involves seizure of property that
has been used in a criminal transaction. This should get the attention
of the independent pharmacies as well as the big corporations. Recently,
a small, $59-per-night roadside motel in Massachusetts, which has been
owned and operated by the same family since 1950, was confiscated in an
assets-forfeiture action where the owner was not accused of any
wrongdoing or even knowledge of wrongdoing on the grounds of his
hostelry. Apparently, it was a well-known stopover for long-haul truck
operators, and a couple of “regular” guests had taken to transacting
illegal drug deals in several of the rooms that were far away from the
main office in a location impossible for the owner-operator of the motel
to see. With little explanation as to why this location was being
singled out for such harsh treatment, in 2009 the DOJ filed a complaint
in Massachusetts federal court seeking forfeiture on the grounds that
the motel was used in connection with illegal drug activities. The owner
acknowledged that out of the tens of thousands of customers he had
served over the years, he might have unknowingly rented rooms to
lawbreakers, but he would have had no way of knowing what went on behind
the doors of his guest rooms.12
Imagine extrapolating this case to the parking lot of a
pharmacy, where otherwise legitimate-looking prescription-drug patients
divert drugs illegally. The government could seek an injunction to close
down the facility and seize it and the parking lot all for alleged
illegal activities before a case goes to a hearing and criminal
charges are proved beyond a reasonable doubt. Unless the
pharmacist-owner has a pile of cash lying around, fighting these charges
might be impossible or, at the very least, impractical. Remember those
two independent pharmacies that just closed up and surrendered their
licenses without a fight in the Cardinal-CVS case? Without deep pockets,
individuals might not have the resources to challenge these types of
There seems to be a lack of due process in all of these cases—some sort of punishment is sought before
the cases go to trial in the name of protecting U.S. citizens from any
further wrongdoing by these alleged criminals. CSR might be a
well-intended concept that should have some legal consequences. But
putting the cart before the horse by seizing property and enjoining
alleged criminals from engaging in their business while awaiting trial
does not comport with notions of American justice.
1. Martin TW, Barrett D. CVS, Cardinal ignored red flags, DEA says. Wall Street Journal.
February 21, 2012.
Accessed February 27, 2012. The case is entitled Cardinal Health Inc. v. Justice Department et al and is pending in the U.S. Court of Appeals for the District of Columbia Circuit, Docket No. 12-5061.
2. Fields G, Emshwiller JR. Criminal code is overgrown, legal experts tell panel. Wall Street Journal.
December 14, 2011.
Accessed February 27, 2012.
3. Corporate social responsibility: the emergence of a new legal discipline. Nixon Peabody. October 1, 2005. www.nixonpeabody.com/publications_detail3.asp?ID=1195. Accessed February 29, 2012.
4. Corporate social responsibility. Tutor2u. http://tutor2u.net/business/strategy/corporate-social-responsibility-introduction.html. Accessed February 29, 2012.
5. Yukhananov A. CVS Florida stores can stay open: appeals court. Reuters. March 14, 2012. www.reuters.com/article/2012/03/14/us-florida-cvs-idUSBRE82D1A720120314. Accessed March 19, 2012.
6. Clarke T, Yukhananov A. Judge allows DEA to suspend Cardinal license. Reuters.
February 29, 2012.
Accessed March 12, 2012, 2012. This case bears the docket title Cardinal Health Inc. v. Holder, U.S. District Court, District of Columbia, No. 12-185.
7. Pelofsky J, Zimmerman D. Court blocks DEA’s Florida suspension of Cardinal. Reuters. March 5, 2012. www.reuters.com/article/2012/03/05/us-cardinal-dea-idUSTRE8240TO20120305. Accessed March 12, 2012.
8. Kamp J, Martin TW. Cardinal plant can’t ship pain pills. Wall Street Journal. March 17, 2012. http://online.wsj.com/article/SB10001424052702304459804577285811744633638.html. Accessed March 19, 2012.
9. ARCOS. Questions and answers. Office of Diversion Control. www.deadiversion.usdoj.gov/arcos/faq.htm. Accessed February 29, 2012.
10. Mauer R, Tinsley AM. Gulf oil spill: BP has a long record of legal, ethical violations. McClatchy Newspapers. May 8, 2010. www.mcclatchydc.com/2010/05/08/93779/bp-has-a-long-record-of-legal.html. Accessed February 29, 2012.
11. Canfield S. Settlement talks delay BP oil spill trial. Courthouse News Service. February 27, 2012. www.courthousenews.com/2012/02/27/44196.htm. Accessed February 29, 2012.
12. Emshwiller JR, Fields G, Levitz J. Motel is latest stopover in federal forfeiture battle. Wall Street Journal. October 18, 2011. http://online.wsj.com/article/SB10001424052970204450804576623404141904000.html. Accessed February 29, 2012.
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