Manhattan U.S. Attorney And DEA Announce Charges Against Rochester Drug Co-Operative And Two Executi

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https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-and-dea-announce-charges-against-rochester-drug-co-operative-and

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Tuesday, April 23, 2019

Manhattan U.S. Attorney And DEA Announce Charges Against Rochester Drug Co-Operative And Two Executives For Unlawfully Distributing Controlled Substances

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Ray Donovan, the Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), announced today criminal charges against Rochester Drug Co-Operative, Inc. (“RDC”), one of the 10 largest pharmaceutical distributors in the United States; Laurence F. Doud III, the company’s former chief executive officer; and William Pietruszewski, the company’s former chief compliance officer, for unlawfully distributing oxycodone and fentanyl, and conspiring to defraud the DEA. Mr. Berman’s Office also filed a lawsuit against RDC for its knowing failure to comply with its legal obligation to report thousands of suspicious orders of controlled substances to the DEA.

Mr. Berman also announced an agreement (the “Agreement”) and consent decree under which RDC agreed to accept responsibility for its conduct by making admissions and stipulating to the accuracy of an extensive Statement of Facts, pay a $20 million penalty, reform and enhance its Controlled Substances Act compliance program, and submit to supervision by an independent monitor. Assuming RDC’s continued compliance with the Agreement, the Government has agreed to defer prosecution for a period of five years, after which time the Government will seek to dismiss the charges. The consent decree is subject to final approval by the court.
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From 2012 through March 2017, as alleged, RDC knowingly and intentionally violated the federal narcotics laws by distributing dangerous, highly addictive opioids to pharmacy customers that it knew were being sold and used illicitly. At the direction of its senior management, including Doud and Pietruszewski, RDC supplied large quantities of oxycodone, fentanyl, and other dangerous opioids to pharmacy customers that its own compliance personnel determined were dispensing those drugs to individuals who had no legitimate medical need for them. RDC distributed controlled substances to those pharmacies even after identifying “red flags” of diversion, including dispensing highly abused controlled substances in large quantities; dispensing primarily controlled substances; dispensing quantities of controlled substances in amounts consistently higher than accepted medical standards; accepting a high percentage of cash for controlled substance prescriptions; dispensing to out-of-state patients; and filling controlled substances prescriptions issued by practitioners acting outside the scope of their medical practice, under investigation by law enforcement, or on RDC’s “watch list.” In addition, and at Doud’s direction, RDC frequently brought on pharmacy customers that had been terminated by other distributors.

RDC’s employees, including in conversations with Doud and Pietruszewski, described some of the company’s customers as “very suspicious,” and even characterized particular pharmacies as a “DEA investigation in the making” or “like a stick of dynamite waiting for [the] DEA to light the fuse.” Nonetheless, throughout the period in question, RDC, at the direction of Doud, increased its sales of oxycodone and fentanyl exponentially. From 2012 to 2016, RDC’s sales of oxycodone tablets grew from 4.7 million to 42.2 million – an increase of approximately 800 percent – and during the same period RDC’s fentanyl sales grew from approximately 63,000 dosages in 2012 to over 1.3 million in 2016 – an increase of approximately 2,000 percent. During that same time period, Doud’s compensation increased by over 125 percent, growing to over $1.5 million in 2016.

From 2012 through March 2017, as alleged, RDC took steps to conceal its illicit distribution of controlled substances from the DEA and other law enforcement authorities. Among other things, RDC made the deliberate decision not to investigate, monitor, or report to the DEA pharmacy customers that it knew were diverting controlled substances for illegitimate use. Because it knew that reporting these pharmacies would likely result in the DEA investigating and shutting down its customers, RDC’s senior management, including Doud, directed the company’s compliance department – and in particular Pietruszewski – not to report them, and instead to continue supplying those customers with dangerous controlled substances that the company knew were being dispensed and used for illicit purposes. Among other things, pursuant to Doud’s instructions, and contrary to the company’s representations to the DEA, RDC opened new customer accounts without conducting due diligence, and supplied those customers – some of whom had been terminated by other distributors – with dangerous controlled substances.

Additionally, RDC knowingly and willfully avoided filing suspicious order reports with the DEA as required by law. Between 2012 through 2016, the company identified approximately 8,300 potentially suspicious “orders of interest,” including thousands of oxycodone orders, but the company reported only four suspicious orders to the DEA. As alleged, RDC did not report suspicious orders in order to protect the profit being generated by customers dispensing large quantities of controlled substances. As a result, the DEA’s ability to identify and prevent the illicit dispensing of highly addictive controlled substances by several of RDC’s pharmacy customers was impeded.
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