Pages Menu
Call Us! 844-INFINI-1
Categories Menu

Posted on Jan 19, 2017 in News

Wholesaler Settlements a Lesson for Supply Chain

InfiniTrak’s Denise Garcia Shares Insight on Latest Supply Chain News Making Headlines

This week, the announcement of McKesson’s jaw-dropping $150 million settlement with the Justice Department for alleged violations of the Controlled Substances Act is a consequential event worth studying from the perspective of the Drug Supply Chain Security Act (DSCSA).  This settlement follows on the heels of a similar DOJ settlement by Cardinal for $44 million last month and several wholesaler settlements for the same issues in West Virginia. Here are some important observations not just for wholesalers, not just for sellers of controlled substances, but for any trading partner complying with DSCSA.

 

Count on Joint Federal and State Enforcement.

The sophisticated collaboration between 11 state US Attorneys and 9 regional DEA offices in the case against McKesson will likely be the model used for enforcement of DSCSA. It is probable that West Virginia’s U.S. Attorney investigating the federal claims shared the information with the state Attorney General, leading to the recent parallel state enforcement actions against various wholesalers. FDA has held a 50-state Intergovernmental Meeting with the state boards of pharmacy to discuss the collaborative roadmap for DSCSA enforcement.  Expect a similar model for DSCSA going forward.

 

Suspect Products or Transactions Need to Be Reported. 

In this case, McKesson allegedly failed to enact adequate quality controls for reporting suspicious orders.  Justice department took issue with the fact that out of 1.6 million orders over a 5 year span, McKesson only reported 16 transactions as suspicious.  Under the Controlled Substances Act, “suspicious orders” include orders of unusual size, orders deviating substantially from a normal pattern, and orders of unusual frequency. Under DSCSA, a “suspect product” includes any product that is “the subject of a fraudulent transaction”. A pharmacy that knowingly fills a prescription ordered by a physician exhibiting unusual prescribing patterns or unusual strengths and dosages could potentially be enabling a fraudulent transaction. Failure to look into the matter and report a suspected “pill mill” to federal authorities may lead to violation of DSCSA.

 

Wholesaler Licensure Monitoring Needs Close Oversight.

As part of DOJ’s settlement with McKesson, several of McKesson’s regional distribution centers will have their controlled substance authority suspended for 3 years. Under DSCSA, a trading partner needs to ensure at all times that they are purchasing from a properly licensed and authorized trading partner. Any customers of McKesson will now need to make sure that they no longer receive certain products from unauthorized distribution centers or will inadvertently violate requirements under DSCSA. The regional suspensions may also affect McKesson’s state licensure status for the affected distribution centers.

 

Compliance Programs Have to be Real.

As difficult as it is to make time in a busy schedule for training and auditing business processes in the name of compliance, it is by far the best defense against violation of DSCSA. It’s not enough to have a program in name only, but routine business practices of defining and training staff on pharmacy standard operating procedures, and the routine documentation of such processes are critical. McKesson learned that lesson that hard way, and now the Justice Department has taken the unprecedented step of requiring oversight over McKesson compliance activities by an independent monitor.

Want to know more on the law? Download our DSCSA Pocket Guide HERE