Date: 07-09-2015

Case Style: United States of America v. Rochester Drug Cooperative

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Court: United States District Court for the Southern District of New York (New York County

Plaintiff's Attorney: Louis A. Pellegrino

Defendant's Attorney: Manhattan U.S. Attorney Recovers $360,000 In Civil Penalties From A Rochester Pharmaceutical Company That Violated The Controlled Substances Act

Description: New York, New York Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (“DEA”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced that the United States has filed and settled a civil lawsuit against ROCHESTER DRUG COOPERATIVE, INC., (“RDC”), a Rochester, New York, pharmaceutical distributor of controlled substances. Under the settlement, RDC admitted and accepted responsibility for numerous violations of the Controlled Substances Act (the “CSA” or the “Act”), and agreed to pay $360,000 in penalties and to re-submit to DEA corrected record-keeping reports required by the CSA. The settlement agreement, in the form of a consent order, was approved today in Manhattan federal court by United States District Judge Ronnie Abrams.

Manhattan U.S. Attorney Preet Bharara stated: “Pharmaceutical distributors are supposed to be one of the first lines of defense in the growing oxycodone epidemic. Today’s consent order demonstrates that distributors that do not properly track and report the purchase and sale of drugs with a high potential for abuse will be held accountable.”

DEA Special Agent-in-Charge James J. Hunt said: “The Controlled Substances Act is the cornerstone of preventing prescription drug diversion and drug abuse. Today’s announcement has a dual purpose; to remind pharmaceutical distributors of their reporting requirements, and to reiterate law enforcement’s ongoing efforts to curtail opioid abuse throughout our nation.”

Commissioner William J. Bratton said: “The law mandates that pharmaceutical companies track their distribution of controlled substances, allowing law enforcement to investigate and stop the exploitation of highly addictive prescription drugs, especially those which have led to numerous opioid addictions and overdose deaths. The NYPD, along with our law enforcement partners, remain committed to stopping the distribution of illegal narcotics.”

According to the Complaint filed in federal court: The CSA creates a comprehensive distribution and monitoring system for those authorized to handle controlled substances, at the heart of which are registration and tracking requirements. The DEA tracks the commercial distribution of substances with a high potential for abuse through its Automation of Reports and Consolidated Orders System, or “ARCOS.” The Complaint alleges that, following an audit of various pharmacies in the New York City area, the DEA discovered that the pharmacies had reported thousands of purchase orders from RDC that RDC did not correspondingly report to the DEA through ARCOS. In response, in 2013, the DEA’s New York Field Division Tactical Diversion Squad conducted an on-site investigation and audit at RDC’s headquarters in Rochester, New York. The DEA’s audit confirmed that RDC’s ARCOS reporting system was underreporting many thousands of drug sales to pharmacies throughout the northeast region.

RDC responded that it expected to be able to resolve this issue through the pending acquisition of a new computer ordering system. But in 2014, DEA re-assessed RDC’s compliance, and discovered that RDC had not implemented the new order system. As a result, RDC’s failure to electronically report thousands of shipments of CSA-controlled substances, including Oxycodone and its variants, continued. During this time, the DEA also determined that RDC had failed to report the theft or significant loss of controlled substances in ARCOS, as required by the CSA and its implementing regulations.

In the settlement agreement, RDC admitted that between July 2013 and July 2014, it failed to report any electronic distribution transactions in its DEA ARCOS reports, and admitted that between July 2012 and July 2014, it failed to provide the required theft or significant loss reporting in ARCOS to the DEA. Under the Consent Order, RDC must pay $360,000 in civil penalties to the United States and reconstruct complete and correct historical ARCOS data for the last five years for submission to the DEA.

Mr. Bharara praised the DEA New York Division Tactical Diversion Squad for their invaluable work on this case. The DEA Tactical Diversion Squad comprises agents, investigators, and officers from the DEA, the New York City Police Department, the Orangetown Police Department, and the Westchester County Police Department.

Outcome: Manhattan U.S. Attorney Recovers $360,000 In Civil Penalties From A Rochester Pharmaceutical Company That Violated The Controlled Substances Act

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