Once again targeting one of the largest companies in the U.S. pharmaceutical supply chain, the Department of Justice (DOJ) has brought a civil suit against drug wholesale giant AmerisourceBergen and two subsidiaries, alleging that the firms contributed to the prescription opioid epidemic by committing “at least hundreds of thousands of violations” of the Controlled Substances Act (CSA) (United States v. AmerisourceBergen Corp., No. 2:22-cv-05209 (E.D. Pa.)).

On Dec. 29, 2022, the government alleged that AmerisourceBergen Corp., AmerisourceBergen Drug Corp. and Integrated Commercialization Solutions L.L.C. (ABC) violated their obligations under the CSA to monitor orders for controlled substances that they receive from customers and to report each suspicious order to the DEA.

In an 87-page complaint filed in the U.S. District Court for the Eastern District of Pennsylvania, the DOJ alleged that since 2014 ABC has failed to report “at least hundreds of thousands of suspicious orders of controlled substances to the DEA as required by law.” The company allegedly filled and failed to report “numerous orders from pharmacies that ABC knew were likely facilitating diversion of prescription opioids.”

Order Monitoring Systems

According to federal enforcement officials, the company “not only ignored red flags of diversion, but also relied on internal systems to monitor and identify suspicious orders that were deeply inadequate, both in design and implementation.”

The systems allegedly flagged “only a tiny fraction of suspicious orders, thereby enabling diversion and ABC’s failure to report orders it was legally obligated to identify to the DEA.”

The company had a history of “serious systemic defects that enabled significant CSA violations,” according to the complaint. In 2007, the DEA suspended ABC’s Orlando, Florida, distribution center after the agency determined that the firm had distributed more than 3.8 million dosage units of hydrocodone to “rogue” internet pharmacies that were diverting the drug. Before suspending the facility’s registration, the agency had warned ABC and other controlled substance distributors that they were required to report suspicious orders and to avoid filling suspicious orders for drugs that might be diverted.

As part of a June 2007 settlement that restored the distribution center’s registration, ABC committed to implementing new compliance programs for all its subsidiaries, including a suspicious order monitoring program and a “Know Your Customer” program supposedly designed to prevent the company from servicing customers engaged in suspicious practices.

ABC’s policies and representations to the DEA “gave the appearance of compliance,” the DOJ said, but its compliance programs “suffered from serious defects in practice,” causing the company to violate the CSA “on a massive scale.”

Alleged Underfunding of Compliance Programs

The complaint alleged that the company in fact had “grossly underfunded” its CSA compliance programs. In 2014, for example, ABC allegedly allocated only $4 million to fund its Corporate Security and Regulatory Affairs Department — “less than what ABC spent on taxicabs” — in a year when it sold more than 1 billion dosage units of oxycodone and more than 3 billion dosage units of hydrocodone.

Even though ABC’s compliance funding increased in subsequent years, the DOJ said, the department remained underfunded. “In 2019, for example,” it alleged in the complaint, “the combined salaries for Diversion Control employees totaled roughly $2.1 million … about 0.001% of the roughly $180 billion in revenue that ABC earned that year.”

ABC’s alleged failure to dedicate adequate resources to its compliance functions “was particularly unreasonable,” the government alleged in the complaint, “because of the ongoing opioid epidemic, which [ABC] knew was being fueled by the diversion of the same prescription [it] sold by the billions.”

The DOJ also criticized the ways in which its “Know Your Customer” policies were implemented. ABC allegedly allowed sales personnel rather than company compliance officials to conduct due diligence on prospective customers, despite the sales personnel’s incentives to recruit and retain customers. Moreover, the company allegedly did not obtain the diligence information needed to assess the risks associated with prospective customers, and it allegedly did not react when a customer’s ordering practices conflicted with the information gathered by ABC during the due diligence process.

Changes to Order Monitoring Systems

Moreover, the government alleged, “in the midst of the opioid epidemic, ABC intentionally altered its internal systems in a way that reduced the number of controlled substances reported as suspicious. Even for the small percentage of orders that ABC did identify as suspicious, the company routinely failed to report them to the DEA.”

For example, the DOJ alleged in the complaint, ABC set the monitoring threshold in one of its order monitoring programs so high that a customer’s orders “were not even reviewed, much less reported, unless the customer placed orders for controlled substances in a given drug family in an amount that was 300% more than its peers’ average orders.”

Moreover, ABC allegedly would raise a customer’s thresholds upon request — so that it shipped “even orders that dramatically exceeded the approximately 300% default threshold without review.”

As a result, the DOJ alleged, ABC shipped orders “regularly” to customers that its compliance personnel knew were likely facilitating the diversion of controlled substances, without any opportunity for compliance personnel to review or report the orders.

Also, the government said, in 2014 ABC allegedly began to replace its order monitoring program with one using new algorithmic thresholds that would flag fewer controlled substance orders for review. By design, the DOJ alleged, the modified system would trigger orders for review if two order thresholds were exceeded, meaning that the system allowed orders that ABC’s own algorithms had identified as being of unusual size or deviating substantially from a normal pattern to ship without any review or any opportunity for reporting the orders to the DEA.

In addition, the modified system allegedly “included no automated mechanism that triggered review of orders with nonstatistical indicia of suspicion, such as orders that were suspicious based on the customer who placed them.”

ABC allegedly designed the modified system “fully recognizing that it would flag and report fewer orders” than its predecessor, and ABC’s vice president for corporate security and diversion control allegedly applauded the fact that the number of flagged orders “dropped significantly.”

‘Human Review Element’

In addition, the government alleged, the “human review element” of the new system “was grossly insufficient.”

For a while, ABC allegedly “tasked insufficiently trained distribution center personnel — not compliance personnel — with reviewing many suspicious orders, including opioid orders.” Even when compliance personnel reviewed orders that the system flagged, the DOJ said, the company “devoted inadequate resources toward that task, resulting in cursory, if not nonexistent, reviews.”

According to the complaint, at times only five or six employees were responsible for reviewing tens or hundreds of thousands of orders per year, and “even those employees were able to spend only a portion of each workday reviewing flagged orders.” The employees also allegedly did not have access to information and did not receive the training needed to conduct investigations into the flagged orders.

‘Refusing or Negligently Failing To Report Suspicious Orders’

As a result of the flaws in the design and implementation of its compliance programs, the government alleged, ABC violated the CSA “by refusing or negligently failing to report suspicious orders to DEA on numerous occasions.”

The violations fell into four “broad and nonexclusive” categories, according to the DOJ:

• failures to report orders that were suspicious because of indications that the customers placing the orders likely were facilitating the diversion of controlled substances;
• failures to report suspicious orders that breached ABC’s thresholds and were flagged for review, and which ABC’s reviewers rejected because they recognized that they could not dispel the suspicions raised by the orders;
• failures to report suspicious orders that breached ABC’s thresholds and were flagged for review, but which ABC cleared to be shipped and which were not reported without dispelling all suspicions; and
• failures to report other suspicious orders that ABC’s faulty algorithms did not flag.

Five Pharmacy Customers

The complaint outlined alleged violations by five of ABC’s pharmacy customers that placed suspicious orders that ABC knew were likely facilitating diversion.

For example, the DOJ said, ABC failed to conduct minimal due diligence of an independent Trenton, New Jersey, pharmacy that knowingly diverted ABC-supplied drugs to street-level dealers and cash-paying customers who did not have legitimate prescriptions.

The DEA suspended the pharmacy’s registration in 2017, and in May 2022 the pharmacy’s co-owner and pharmacist in charge was indicted for conspiracy to violate the CSA by illegally distributing oxycodone and other opioids.

ABC allegedly continued to sell controlled substances to the pharmacy even after an outside auditor conducted an investigation that revealed that the pharmacist did not appear to understand her legal obligations and that 50% of the pharmacy’s controlled substance sales were for oxycodone — “a serious red flag,” according to the complaint.

Moreover, ABC’s order monitoring systems allegedly had flagged many of the pharmacy’s orders for review, but the distributor’s reviewers allegedly “cleared dozens of those orders to be filled and not reported to DEA, despite the serious and unresolved issues with [the pharmacy’s] controlled substance practices.”

Other Allegations

Moreover, according to the complaint:

• ABC failed to report flagged suspicious orders that its reviewers confirmed were suspicious and therefore rejected; and
• it failed to report flagged suspicious orders for which suspicion was not dispelled, including orders falsely cleared as not subject to diversion or abuse, orders cleared as “typical,” and orders cleared without justification.

Because of the alleged violations of the CSA (21 U.S.C. §832(a)(3), 21 U.S.C. §842(a)(5) and/or 21 C.F.R. 1301.74(b)), the government asked the court to award civil penalties “up to the maximum amount allowed by law” — which the DOJ said potentially totaled billions of dollars. The department also asked the court to grant injunctive relief to address and restrain ABC’s alleged violations of the law.

In announcing the suit against ABC, Associate Attorney General Vanita Gupta said, “Companies distributing opioids are required to report suspicious orders to federal law enforcement. Our complaint alleges that AmerisourceBergen — which sold billions of units of prescription opioids over the past decade — repeatedly failed to comply with that requirement.”