$44 Million Penalty Suggests Pharma Distributors Complicit in Overprescribing

In New York City, the Drug Enforcement Administration has just announced civil penalties against a Queens pharmaceutical distributor and its parent company. Kinray, LLC will be paying a $10 million penalty and parent company Cardinal will be yielding an additional $34 million to the DEA. The reason for the fines? Failing to notify the DEA of excessive orders of controlled substances like oxycodone, hydrocodone or benzodiazepines like Xanax or Vicodin.

A pharmacist’s hands count out pills.

Pharmaceutical distributors are responsible for red-flagging drugstores or medical facilities that order suspicious quantities of controlled substances—meaning they order far more than similar businesses in their areas. If excessive orders are detected, they should be reported to the DEA for further investigation.

When one pharmacy in a town orders ten times the oxycodone of any other pharmacy, it’s a good bet that most of those drugs are being diverted to the illicit market. The DEA has the ability and responsibility to investigate and revoke the licenses of any pharmacies abetting this fraudulent and criminal activity.

In Kinray’s case, the distributor was accused of shipping controlled substances to twenty New York City pharmacies with histories of excessive prescribing. During that time, they reported no one to the DEA.

A Closer Look at the Parent Company, Cardinal

This isn’t the first time Cardinal has been penalized by the DEA.

Hydrocodone pills

In 2007, Cardinal’s licenses to ship pharmaceutical products from warehouses in Washington, Florida and New Jersey were revoked by the DEA for failure to report excessive shipments of controlled drugs. They invested $20 million in expanded training, a new electronic system to detect suspicious orders and enhanced staffing and expertise to its distribution compliance team. By 2008, the company had satisfied the requirements of the DEA and announced the resumption of shipping from these three warehouses, also announcing a $34 million payment in penalties.

Apparently, these improvements weren’t enough or were ignored because nine years later, Cardinal is being penalized another $34 million.

According to a report from the Washington Post, Cardinal is one of three massive pharmaceutical distribution companies, along with McKesson and AmerisourceBergen. These three companies account for 85% of all drug shipments in the U.S. and collect about $400 billion in annual revenues. Your corner drugstore as well as your local hospital are probably supplied by one of these three companies.

Should Pharmaceutical Manufacturers Also Be Held Accountable?

An investigative report from the Los Angeles Times revealed that Purdue Pharma, owner of the patent for OxyContin, also failed to report suspicious shipments to pharmacies. Despite the computerized ability to single out these telltale shipments, Purdue never stopped shipments to any pharmacies and reported very few of these businesses to the DEA.

Purdue Pharma was fined $634.5 million in 2007 after admitting misleading marketing tactics that convinced doctors and other prescribers that their new formulation of OxyContin was not likely to be abused and was unlikely to be addictive. This marketing launched a wave of increased prescribing that contributed to this country’s epidemic of opioid addiction and overdose deaths.

Why must pharmaceutical distributors and manufacturers be held accountable? Anyone in law enforcement knows that trying to arrest drug dealers will not end our problem with opioids and there are not enough rehab facilities at the moment to enable everyone to enter treatment. The final answer to high levels of addiction must involve every player in this field—legislators, agencies like the DEA, pharmaceutical manufacturers and distributors, prescribers, community activists, social workers, rehabilitation organizations and families. Only with a shoulder-to-shoulder effort can we overcome this national tragedy.


Karen Hadley

For more than a decade, Karen has been researching and writing about drug trafficking, drug abuse, addiction and recovery. She has also studied and written about policy issues related to drug treatment.