Friday, November 30, 2007

Cardinal Sins (Again)

The Drug Enforcement Administration (DEA) just suspended the Federal Controlled Substance registration of Cardinal Health’s (CAH) Auburn, WA, branch. According to the DEA news release:

“In spite of being warned by DEA about the characteristics of rogue internet pharmacies, Cardinal Health’s Auburn branch distributed nearly 18 million dosage units of hydrocodone to retail pharmacies between January 1, 2007 and September 30, 2007. Horen’s Drug Store purchased 605,000 dosage units of hydrocodone from Cardinal Health between March 1, 2007 and September 30, 2007.”

Sadly, diversion via retail and online pharmacies is now a major danger point for patients, especially those seeking controlled substances without prescriptions. (Just ask Al Gore III where he got his Vicodin.) Pedigree, RFID, and other more exotic security measures will do nothing to protect stupid people from unscrupulous sellers. Hopefully, these new systems will improve a manufacturer's ability to detect diversion and better monitor the behavior of wholesalers and pharmacies.

Cardinal is not alone is being hoodwinked by shady pharmacy customers. AmerisourceBergen (ABC) had its DEA license suspended in April at its Orlando site. At the time, the DEA claimed that AmerisourceBergen did not maintain effective controls against diversion of controlled substances (hydrocodone again!) to four internet pharmacies.

Faithful readers of Drug Channels will surely recall that Cardinal Health signed an Assurance of Discontinuance with the New York State Attorney’s office last December. (See Cardinal's Sins for details.) One aspect of the agreement required Cardinal to gather, monitor, and analyze customer sales data to detect instances of possible diversion of prescription pharmaceuticals.

I can't find any public statements from Cardinal about customer monitoring since their NY agreement was announced 11 months ago. However, the DEA's statements indicates that the company doesn't have a viable system in place yet.

The DEA’s move is also personally dispiriting because Mark Parrish, former CEO of Cardinal Health's distribution division, was a very public proponent of industry-wide initiatives to improve the safety of the medicine supply chain.

As Auric Goldfinger once said: "Once is happenstance. Twice is coincidence. The third time it's enemy action." Let's hope that Cardinal Health gets things under control soon.


  1. I'm at a wholesaler - not big 3. Why should I have to track my customers? We follow all the laws in selling to pharmacies, but there's just no way my customers want me to monitor what they do in there business. My margins keep goiong down -- how am i supposed to pay for this?

  2. Dr. Fein,

    One of our wholesalers, Bellco, asked us for sales data. It was quite insulting to us because some of the data they were asking us was for financially vialble #'s about our business. What enraged us even more is that they were asking for this because we wanted to order 3 bottles of Tramadol in the 1000 count, a NON controlled substance. The only reason we wanted to order the 3 bottles is because the wholesaler was advertising a very cheap price per bottle if you ordered 3. I don't know if my partner still has the request sheet they asked us to fill out. If we find it, would you like to see it?

  3. Wholesalers do not want to monitor customers and they will not supply the data so that manufacturers can monitor. Cake and eat it too, it seems. Obviously something needs to change and FFS agreements are forcing the issue.


  4. This isn't an issue of monitoring your customers or pushing data back to the manufacturers.

    This is simply reading the first line of your sales reports (or reviewing the A/R reports or glancing at your logistics plan or strolling through the warehouse or...). It shouldn't take much experience to realize Horen's Drug Store is an unlikely candidate for your "largest purchaser of hydrocodone."

    I am sure even the dock guys were shaking their heads as they loaded the trucks.

  5. "It shouldn't take much experience to realize Horen's Drug Store is an unlikely candidate for your 'largest purchaser of hydrocodone.'"

    You may be right, but since when (in any industry) is it the wholesaler's job to police its customers?

    It seems like a very slippery slope to say, "Horen's drug store purchased x number of units of controlled substances, which accounts for x% of its total purchase and, therefore, is a drug diverter." What if the pharmacy is only using that wholesaler for a few products, all controlled substances? Does the wholesaler notify the DEA of abnormal purchasing patterns? Does the wholesaler stop conducting business with one of its customers because of abnormal purchasing patterns?

    Long ago I worked for a small independent pharmacy (not an internet pharmacy) in rural Southeast Missouri. Hydrocodone was by far the top drug dispensed in units. Was there drug diversion? Maybe. If there was, it was at a very small scale. The vast majority of the utilization was valid, legal, and fully auditable. The patient population was 95% Medicaid recipients (and, due to the demographics of that region, most people were far below the federal poverty level) and, as is typical with that population, they take A LOT of drugs. In particular, A LOT of hydrocodone. The pharmacy easily dispensed 9,000+ units per day of legitimate (written by a DEA licensed MD) hydrocodone scripts. (Average ~300 scripts per day, 3 scripts per patient, ~75% of the population on hydrocodone, average quantity per Rx of 120 [1 qid x30 days]).

    The “small independent“ pharmacy I worked for could have dispensed 605,000 units in 67 business days, almost 3 times the volume of Horen’s in a like period. Does that make it a candidate for contract suspension or termination? Does the volume of a particular controlled substance indicate the incidence of drug diversion? Even if there is a “pain clinic” involved in possible illegal prescribing activity, is it the pharmacy wholesalers’ responsibility to identify and/or control the dispensing pharmacies? (Rhetorical)

    Without specific laws on the books, or even guidance from any given federal, state, or local government agency, department, or branch, how can a wholesaler investigate and determine “at risk” status of a customer? If that kind of policing begins, I can see hundreds of class action suits alleging unfair treatment and discrimination of pharmacy customers and patients. That is a slippery slope.

  6. I am with one of the Big 3

    Diversion is diversion and it's against the law no matter how large or small the amount of diversion that is being practiced. Horen's Drug was an abuser of it according to the DEA.

    No wholesaler wants to be associated with supplying a "rogue" pharmacy especially in a time where patient safety and health are a priority in the drug wholesale industry. And by knowingly or unknowingly supplying such a pharmacy, Horen's, that clearly disregards the law by dispensing drugs without a legitimate prescription is not what a wholesaler wants to be associated with as it taints their credibility in the healthcare industry.

    (To the wholesaler that is not one of the Big 3: Sure margins are tight and continue to drop but by not doing your due diligence and if you get caught up in a diversion mess then you won't have to worry about margins because you'll be shut down!)

    FYI... CAH was Horen's Drug primary wholesaler and they were a stand alone independent pharmacy that filled fake prescriptions from fake internet pharmacies and mailed them to the end user/abuser.

    AmerisourceBergen(Bellco is a subsidiary of ABC) was the first to have a license suspended by the DEA with its Orlando Div in a state where diversion is huge with fake internet pharmacies. So they got to be the guinea pigs to put best practices in place to try and thwart the practice. They agreed to work with the DEA(so they could get their license back) by putting internal policies in place to monitor controlled drug purchases company wide at every division so their licenses will not be in jeopardy in the future. They perform a due diligence questionnaire for all new customers and current customers that show "abnormal" spikes in CII purchases to thwart potential diverters or not take on a new customer that may be diverting.

    To the Bellco customer: Yes it's a little insulting to have to answer some questions pertaining to your dispensing patterns but if a pharmacy owner has nothing to hide and is not a diverter then what's the problem? Answering the questions takes about a half hour(maybe a little longer)and then you're done with it. None of the data is shared with the manufaturers or PBMs. Why would't a pharmacy commend, rather than bash, a wholesaler for doing their part to thwart the ugly business of diversion? A pharmacy should want to say "Hey, I'm a legitimate business dealing with a legitimate wholesaler and we are both doing OUR due diligence to not be thrown into the class of those fraudulent offenders!"

    To answer pbmguru: yes, a wholesaler would notify the DEA of abnormal buying patterns IF after conducting their own due diligence investigation(by asking the difficult questions)and they find reason to if a customer cannot support their dispensing patterns(one of the questions is to ask for a doctor listing that prescribed the questionable drug). No, a wholesaler would not stop conducting business simply because of abnormal buying patterns especially if they are justified. Due diligence is performed before any action is taken. I believe a wholesaler has an obligation to take some responsibility to act on evidence of foul play and notify the DEA to take action.

    By implementing these best practices of due diligence it is more to do about working with the customer rather than policing. If the abnormal spikes occur it opens up communication as to what may be the case and if the dialogue concludes that a customer just picked up 500 beds or moved into a pain clinic then the monitoring levels will be adjusted so no red flags will be raised.

    I find it ridiculous that class action suits will result. If that was the case then suits would have already happened because when opening a new account pharmacies have to apply for credit and provide a lot of financial data and many are not credit worthy and get rejected a lot and accounts are not opened. Is that unfair treatment and discrimation based on credit worthiness?

    CAH on the other hand had no such practice in place and that is why many(3 and I hear and a forth is around the corner) of their DCs are getting suspended. But they'll get it right. I wouldn't be surprised if McKesson gets hit soon.

  7. Cardinal entered into an agreement with outgoing NYS AG Eliot Spitzer last year that was supposed to prevent diversion. The agreement requires the kind of "due diligence" under discussion here, and various other safeguards - and nationally, not just in NY State.

    Does anyone have an understanding of what's going on at CAH that they are selling to diverters yet have a legally binding agreement that's supposed to prevent such shenanigans?

  8. Anon,

    "Is that unfair treatment and discrimation based on credit worthiness?"

    I don't think it is likely that a court would rule on the side of a vendor with bad credit in such a situation, but I also don’t think it is improbable. I’ve seen stranger things.

    However, I do think it is likely that some type of class action discrimination suit would arise if a wholesaler (on its own accord) decides to suspend or terminate a customer because of abnormal purchasing patterns. I would foresee not only a class of independent pharmacy owners claiming unfair treatment, but also a class of individual patients residing in geographic (rural) areas where access to controlled substances was restricted. Pharmacy owners will be asking for punitive damages and individuals will be asking for pain and suffering.

    I expect that a wholesaler will think long and hard about voluntarily terminating a purchasing agreement because of suspected drug diversion. If it were me, I would report suspicious behavior to the DEA (after communicating with the customer) and wait for them to make a move.