Apr 24 2019

The New Drug Cartels

A little upfront disclosure first. I’m generally inclined more to transparency and treatment than prohibition. I’ve taken drugs, lots of different ones, and some were good for my head and others not so much.

There are also drugs that are ridiculously dangerous, Fentanyl for example. Despite being overhyped prohibitionist propaganda, those stories you read about people overdosing simply by handling it unless they have an active Opioid tolerance are true. This is also a good reason to stay away from Street Opioids generally (in addition to all the other major health risks) because you reallly have to trust your dealer a lot not to use it as an active ingredient extender since it’s as cheap as it is powerful.

Which brings us to Staten Island Chicklets or Oxy as it is usually called. I can’t understand the attraction (I’ve taked about my medically supervised use before) but it’s very popular and very available and pushed by Big Pharma in the same way the CIA pushed Crack only with less plausible deniability.

And they make big bucks off it too- Billions.

I never thought any of the Kingpins would have a view with stripes and a Government issued jumpsuit but I am prepared to be pleasantly surprised.

Department of Justice Indicts Two Drug Company Executives Over Opioid Sales; More to Come?
by Yves Smith, Naked Capitalism
April 24, 2019

On Tuesday, the Southern District of New York and the Drug Enforcement Administration announced a series of indictments against one of the ten largest drug distributors in the US, Rochester Drug Co-Operative, and two former executives, the CEO and the chief compliance officer, and the latter has pled guilty and agreed to cooperate with prosecutors. The company has agreed to pay fines and has entered into a deferred prosecution agreement which includes a $20 million penalty. So the fish remaining to be fried is 74 year old former CEO Laurence Doud III, who could spend the rest of his life in prison.

As we’ll explain, it’s a welcome development to see the Department of Justice embrace the idea that executives should be held accountable, which can and should include criminal prosecution. However, the jury is out as to whether this action against Rochester Drug and Doud is a training-wheels case for the DoJ to get practice and refine its arguments before going after bigger targets, or whether this prosecution came about due to particularly bad conduct at a relatively small player.

Rochester Drug Co-Operative is privately held, with most shares in the hands of its customers. Even though it is a regional player with only about $1 billion in sales, RDC is one of the ten largest drug distributors in the US. Even though RDC and its executives are charged with particularly egregious behavior, the indictments have rattled industry executives.

In short form, the DEA has a strict compliance regime for Schedule II drugs like oxycodone and the implementation at RDC was a joke. The suit alleges RDC should have reported over 2000 suspicious cases to the DEA and actually sent in only four. The Doud filing describes, for instance, how “Pharmacy-1” showed implausibly rapid growth in oxycodone scrips and also became one of the biggest customers in the US for a fentanyl nasal spray. Pharmacy-1 was also ordering only controlled substances, another red flag.

Other alleged abuses include the failure to do required due diligence on new customers and continuing to supply pharmacies that were filling scrips to doctors under DEA investigation.

The result of this “see no evil” attitude toward opioid orders was a four-fold increase in sales from 2012 to 2016, which generated “millions of dollars” of CEO pay.

But why were RDC and its executives singled out for criminal charges when the three largest distributors, AmerisourceBergen, Cardinal Health, and McKesson, simply paid fines? A big difference was that RDC was a recidivist. It had been fined before and had to pay for a compliance monitor, yet flouted the requirement that it comply with the monitor’s recommendations. Doud complained about the agreement and refused to staff up the compliance department as outside counsel requested. RDC also kept selling drugs to pharmacies that other distributors had blacklisted.

But one nevertheless has to note that the SDNY is taking on a comparatively small actor. On the one hand, it makes sense to start out with a comparatively easy case in making a new type of prosecution. Even when a Federal agency appears to have a rock solid case, it’s difficult to prevail against a major corporation because they can afford to throw large amounts of legal ammo at the government. So it remains to be seen whether this prosecution is a one off, or whether the government prosecutes more opioid industry perps, including much more powerful targets.

Nevertheless, these indictments are a step in the right direction, even if a small one.

You can have your Superfly Lucas, Dudus Coke, El Loco Barrera, Godmother Griselda Blanco, Freeway Ross, Patrón de Patrones Arturo Beltrán Leyva, Cat Mitchell, Opium King Khun Sa, Lord of the Skies Fuentes, Pablo Escobar, and El Chapo Guzmán.

The biggest Drug Dealers of all wear suits and sit in Corporate Boardrooms.