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 2007.6

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 toss-up.

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 claims.

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. Accessed February 29, 2012.
4. Corporate social responsibility. Tutor2u. Accessed February 29, 2012.
5. Yukhananov A. CVS Florida stores can stay open: appeals court. Reuters. March 14, 2012. 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. Accessed March 12, 2012.
8. Kamp J, Martin TW. Cardinal plant can’t ship pain pills. Wall Street Journal. March 17, 2012. Accessed March 19, 2012.
9. ARCOS. Questions and answers. Office of Diversion Control. 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. Accessed February 29, 2012.
11. Canfield S. Settlement talks delay BP oil spill trial. Courthouse News Service. February 27, 2012. 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. Accessed February 29, 2012.

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