Agenda - 01-23-2018 4-b - Presentation on Opioids and Legal Issues

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20 For instance, any pharmacy order which exceeds 10% of the prior month's order would be considered a "suspicious order." 5 The information in the ARCOS database is confidential. The public has never seen the data related to the volume of prescription opiates distributed in each community. That changed when a journalist from the Charleston Gazette gained access to records sealed in a lawsuit filed by the West Virginia Attorney General against the wholesale distributors. The data revealed that 780 million prescription opiates were distributed in West Virginia (population 1.8 million) during a six -year window of time. The journalist, Eric Eyre, recently won the Pulitzer Prize for his investigative journalism. Cities and counties have the ability through local law enforcement and cooperation with the DEA to seek and obtain historical ARCOS data. Because this information contains a record of every order filled by each pharmaceutical distributor, a review of those orders would allow for a determination of how many suspicious orders were not flagged by the distributors. This lack of real -time monitoring and reporting by the distributors stripped cities, counties and the DEA of their ability to timely identify, investigate, and prevent the diversion of the highly addictive drugs at issue. E. The Duty to Report Suspicious Orders Extends to Opioid Manufacturers In July of this year, the DEA for the first time sanctioned an opioid manufacturer for failing to report suspicious opioid orders. Pursuant to a memorandum of understanding between manufacturer Mallinckrodt and the DEA, Mallinckrodt paid a $35 million civil penalty for violating federal laws that mandate suspicious order reporting. Specifically, Mallinckrodt was operating what is known in the industry as a "chargeback" system. Mallinckrodt sold opioids to a wholesale distributor at a higher than usual price, and then offered the distributor a substantial rebate in exchange for the distributor's downstream customer sales information or "chargeback data ". This chargeback data allows manufacturers, like Mallinckrodt, to obtain knowledge of suspicious opioid orders. Manufacturers of controlled substances are under the same legal obligations as distributors to prevent drug diversion and are similarly required to notify DEA of suspicious orders received from their customers. The Mallinckrodt -DEA agreement requires that manufacturers review chargebacks and other data and report suspicious orders in underlying sales from distributors to downstream customers. The "chargeback" system is not unique to Mallinckrodt. Our investigation has discovered that this practice is widespread throughout the industry, and that manufacturers have embraced shipping suspicious orders of opioids as an integral part of their business model. Therefore, 5 See Southwood Pharmaceuticals, Inc., 72 FR 36487 (2007); Cardinal Health, Inc. v. Holder, 846 F. Supp. 2d 203 (D.D.C. 2012). 5