Thursday, June 17, 2010

The DEA Nabs Another Wholesaler

6/21/10 Update: See Harvard Drug Fights the DEA...and Wins

On Tuesday, the Drug Enforcement Administration (DEA) announced that it had suspended Harvard Drug Group’s license to distribute controlled substances. See Michigan Pharmaceutical Supplier’s DEA License Suspended.

Harvard Drug Group is a generics-focused pharmaceutical distributor with over $450 million in annual sales. What’s less well-known is that the company was acquired in April by private equity firm Court Square Capital. The transaction was led by none other than Court Square investment professional Kurt Hilzinger, former President and Chief operating Officer of AmerisourceBergen (NYSE:ABC). Kurt told me that he only has a Director position at the company.

Once again, the DEA seems intent on holding drug wholesalers accountable for diversion of controlled substances by the wholesaler’s pharmacy customers. See The DEA's Anti-Diversion Strategy for some historical perspective from the Drug Channels archives.

According to the DEA press release:
“Harvard Drug Group, LLC, based in Livonia, Michigan, has been the subject of a DEA investigation that alleges the company was selling large quantities of controlled substances to pharmacies, primarily in Florida. The investigation has revealed that several of Harvard’s largest purchasers of oxycodone were engaged in schemes to dispense controlled substances based on prescriptions that were written for other than legitimate medical purposes. The investigation revealed that Harvard Drug Group, LLC, distributed over 13 million dosage units of oxycodone products to customers in the two year time frame between March 2008 and March 2010.”
Cardinal Health (NYSE:CAH) was punished hard in late 2007 when the DEA suspended Cardinal’s licenses at three distribution centers. Cardinal resolved its license suspension by entering into a settlement agreement with the DEA in October 2008 (Cardinal: The Once and Future Wholesaler) and has been trying to rebuild sales with independent pharmacies ever since. (See pages 55-57 of my new wholesaler economic report.) Cardinal had to apologize for their zeal in stopping shipments to legitimate customers.

Would you like to know more? The Columbus Dispatch—Cardinal’s hometown paper—ran a fascinating six-part expose/overview about the diversion and sale of controlled substances. See the aptly-named blog post Great Series from the Columbus Dispatch.

3 comments:

  1. AnonymousJune 17, 2010

    Bad advice by Kurt. Either he didn't do his homework or maybe his commiss structure was a little too bold.

    Sucks for Court Square....and it's no wonder why Harvard was so anxious to sell for pennies.

    ReplyDelete
  2. AnonymousJune 17, 2010

    I am glad to see the DEA hold companies accountable for promoting behavior that leads to the diversion of controlled substances that eventually find their way to the streets.

    ReplyDelete
  3. Here's something you don't see every day. Harvard Drug Group challenged the DEA and got a partial reversal.

    See Harvard Drug Group Gains Injunctive Relief From DEA.

    I wonder if the executives at Cardinal are kicking themselves for not trying this approach back in 2007!

    Adam

    ReplyDelete

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