A settlement reached between the DEA and the pharmaceutical distributor Morris & Dickson Co. L.L.C. includes the company’s agreement to surrender one of its two DEA registrations and to acknowledge violations of the Controlled Substances Act (CSA) outlined in a May 2023 decision and order issued by the agency.

In addition, the distributor agreed to forfeit $19 million — the first administrative forfeiture for failure to report suspicious orders of opioids.

In the decision and order, the DEA had found “long-term, egregious failures” on the part of Morris & Dickson to fulfill “its responsibility as a distributor to maintain effective control against diversion of controlled substances.”

The five-year-long administrative procedure targeting the fourth-largest U.S. drug distributor had resulted in the revocation of the company’s two DEA registrations (88 Fed. Reg. 34523 (May 30, 2023)).

The company also agreed to maintain for five years a corporate compliance program with enhanced requirements for compliance reporting to the DEA.

Agency Findings

Specifically, the DEA noted in announcing the settlement Feb. 7, the agency had found that Morris & Dickson “failed to design and operate an adequate [suspicious order monitoring] system” and “to investigate or report potentially thousands of suspicious orders to DEA.”

Moreover, the agency said, the company had “violated DEA regulations over a lengthy time period — failing to report a multitude of suspicious orders to DEA and depriving DEA of valuable information about pharmacies and practitioners who might have been engaging in diversion or violating their obligations as DEA registrants, thus contributing to the country’s devastating prescription drug abuse problem.”

Between January 2014 and April 2018, the agency reported, Morris & Dickson “shipped potentially suspicious orders to customers without resolving red flags of diversion or reporting the orders to DEA.”

Moreover, the company allegedly “failed to adequately design and operate a system to alert DEA of suspicious orders of controlled substances and failed to report the suspicious orders.”

The CSA and its implementing regulations require registrants to develop and operate systems to detect and report suspicious orders of controlled substances (21 U.S.C. §832(a); 21 C.F.R. §1301.74(b)).

Morris & Dickson “has admitted to and accepted responsibility for its failures to effectively apply its due diligence in assessing orders of controlled substances, implement a suspicious order monitoring system consistent with best practices for compliance, and adequately resolve red flags on orders that it shipped,” the agency said.

Agency: Firm ‘Turned a Blind Eye’

The DEA called out the distributor for its noncompliant behavior during the U.S. opioid addiction epidemic.

“Drug distributors like Morris & Dickson have a responsibility to protect the safety and health of customers and maintain effective controls against diversion of highly addictive controlled substances,” said DEA spokesperson Katherine Pfaff. “At the height of the opioid crisis, Morris & Dickson failed to uphold that responsibility and turned a blind eye as thousands of unusually large orders for hydrocodone and oxycodone went out the door.”

“Today,” Pfaff added, “Morris & Dickson takes an important first step by admitting wrongdoing and paying for its misconduct, and today’s settlement will ensure that such irresponsible practices will not continue in the future.”

Appeal of Decision and Order

In May 2023, the distributor filed a petition for review of the DEA decision and order with the U.S. Court of Appeals for the Fifth Circuit (Morris & Dickson Co. v. U.S. Drug Enforcement Administration, No. 23-60284 (5th Cir.)).

In its petition and an accompanying motion to stay the DEA decision and order pending review, Morris & Dickson argued that the company was entitled to a new hearing “before a constitutional tribunal,” asserting that the DEA hearing had been conducted before an administrative law judge who was unconstitutionally insulated from removal and who had been retained by the agency in violation of the Appointments Clause of the Constitution.

The distributor also told the appeals court that the DEA order was arbitrary and capricious in violation of the Administrative Procedure Act, saying that the agency’s action was “entirely backward-looking” and “fail[ed] to meaningfully analyze whether Morris & Dickson’s current, reformed operations are inconsistent with the public interest going forward.”

In announcing the petition for review, the company said that it was continuing “to actively negotiate with DEA towards an agreement.”

In June 2023, the Fifth Circuit granted Morris & Dickson’s motion for a stay pending appeal.

In a statement, the distributor expressed its gratitude to the appeals court, saying that the DEA order had stemmed from “old issues that transpired between 2014 and 2018.”

“The law required that Morris & Dickson flag ‘suspicious orders’ for the DEA, but the DEA field office told the company it was not actually acting on those reports (a fact that the U.S. Inspector General verified in 2019 in a scathing report about DEA’s role in the opioid crisis),” the distributor asserted.

“Concerned about diversion, Morris & Dickson pivoted to finding customers with usual or erratic ordering patterns, terminating dozens and dozens of customers in that same period, and restricting or terminating access to opioids for many others,” the distributor said. “In addition, Morris & Dickson had $2.5 million in short-dated opioids, which it could have sold into the market but instead burned.”

“All this evidence shows the seriousness with which the company saw its responsibilities to help avoid diversion of opioids to addicts,” the company asserted. “It reported all this evidence to DEA. In issuing the revocation order, DEA ignored the exculpatory evidence, which is one of the main bases for Morris & Dickson’s appeal.”

Settlement Statement

Once it reached the settlement with the DEA, the company said in a Feb. 7 statement that it was “pleased to be able to bring closure to this matter with the DEA.”

“We take our responsibility to meet regulatory standards very seriously and are committed to ongoing efforts and future enhancements,” the company said.

“Morris & Dickson wants to thank the DEA for their recognition of our extensive efforts over the past five years to expand and improve our compliance system for suspicious order monitoring,” the distributor added. “We appreciate the DEA’s collaboration with us on our shared commitment to patient safety, and we are pleased that the DEA’s actions acknowledge both our current state-of-the-art compliance program and our commitment to continued enhancements into the future.”