Chapter 11
South Florida, 2011
The bodies were piling up in the Sunshine State. By the summer of 2011, eleven people were dying every day from drug overdoses. Between 2005 and 2010, Florida had recorded a staggering 346 percent increase in fatalities, most of them from pain pills, and the numbers kept climbing.
It was clear from the DEA’s pill-tracking ARCOS database that a handful of drug distribution companies based in Jim Geldhof’s region were responsible for fueling the Florida death toll.
Geldhof saw that one of the worst offenders was Masters Pharmaceutical, a midsized drug distribution company with outsized ambition based in Forest Park, Ohio, eighteen miles north of Cincinnati. Between 2007 and 2011, the company distributed 86 million tablets of oxycodone 30mg pills to Florida.
Masters was already well known within the DEA. In 2009, the agency had fined the company $500,000 for shipping “extraordinarily large amounts” of hydrocodone to rogue internet pharmacies. Masters signed a settlement agreement with the DEA that year, promising to monitor drug orders and report them to the agency. But it was clear to Geldhof that the company was reneging on its commitments.
Geldhof’s go-to investigator in Detroit, James Rafalski, began to dig into Masters. Poring over documents the DEA had collected on the company, Rafalski spotted a common thread that tied Masters to another much larger entity already on his radar: Mallinckrodt. The drug maker was selling massive amounts of its 15mg and 30mg tablets of oxycodone to Masters as well as Harvard Drug, KeySource, and Sunrise Wholesale in Florida. All of them were shipping to clients in South Florida, many of them doctors and pharmacists working for the booming pill-mill industry. Rafalski recognized another name in the documents: Victor Borelli. As Mallinckrodt’s national sales manager, Borelli was involved in many of the oxycodone sales to the distributors. They were among his most loyal customers and a reason why he continued to receive six-figure bonuses.
In April 2011, Rafalski served a subpoena on Mallinckrodt, demanding corporate emails, sales order forms, and thousands of other internal records relating to the manufacturer’s business relationship with Masters. Rafalski knew the subpoena would rattle Mallinckrodt. He wasn’t surprised to hear a month later that the company had reached out to his superiors at DEA headquarters, frantically trying to arrange a meeting. Rafalski suspected that Mallinckrodt was attempting to get ahead of the investigation, but he was confident in the strength of his case. He thought he had the company cold.
Rafalski’s sleuthing paid off. He discovered that between 2009 and 2010, Mallinckrodt manufactured more than one billion oxycodone 30mg tablets—the highly sought-after “blues”—and nearly half of them went to pharmacies in Florida. He also examined how many of the pills went directly from distributors to doctors, a warning sign that those doses might end up on the black market. He found that there were 409 physicians in the entire country who ordered Mallinckrodt-made 30mg oxycodone. Ninety-four percent of them—383—were based in Florida. Together, they had received twenty-seven million tablets. Rafalski also determined that many of those doctors worked for the pill mills, like the ones run by the George brothers in Palm Beach and Broward counties. He looked up their DEA registration numbers and traced their pill orders directly back to the distributors and Mallinckrodt.
While the numbers were damning, Rafalski and the DEA had another powerful piece of information: the existence of the sales rebate program at Mallinckrodt. The DEA now knew that the company had the ability to trace the path of every one of its pills to individual pharmacies and doctors’ offices through the chargeback rebate program it had set up with its network of drug distributors.
On August 23, 2011, Rafalski and a team of DEA supervisors and investigators met with Mallinckrodt executives at the agency’s headquarters in Arlington. They filed into a windowless sixth-floor conference room and took their seats. Patricia Duft, Mallinckrodt’s legal counsel, led the presentation on behalf of the company. Accompanied by compliance managers and company investigators, she told the DEA team that Mallinckrodt also was concerned about some of its drug distribution customers. She said the company had set up a system to flag suspicious orders and promised to be more vigilant in the future. Still, she believed Mallinckrodt was not responsible for what happened to its pills once they went to the drug distributors.
Barbara Boockholdt, chief of the DEA’s regulatory division, walked the Mallinckrodt executives through their legal responsibilities and what she and Rafalski had seen in the ARCOS database. “Fifty percent of your product is going to Florida,” she told them. Mallinckrodt executives said they would cut their production of oxycodone and stop shipping the drug to Masters. Rafalski sat in silence. He knew Mallinckrodt was in serious legal trouble. Regardless of whether they cut production or stopped sending oxycodone to certain distributors, the damage had been done. The DEA was sitting on file folders full of evidence. They’re in for an ass whooping, he thought to himself.
After the meeting, Rafalski and the other DEA team members rode an elevator up to Boockholdt’s tenth-floor office, where they were joined by Leslie Wizner, an assistant U.S. attorney in Detroit assigned to the Mallinckrodt investigation. As they discussed the meeting and plotted their next moves against Mallinckrodt, including hitting the company with another, much more expansive subpoena, the building began to shake and sway.
“Holy cow, did you feel that?” Wizner asked.
It was a rare 5.8-magnitude earthquake in the mid-Atlantic region, the epicenter a hundred miles southwest of Arlington. It cracked the marble and granite blocks of the Washington Monument and broke off three of the four spires that soar above the Washington Cathedral. It was felt as far north as Quebec and as far south as Atlanta. DEA headquarters, like so many buildings in the Washington region, was evacuated. Standing outside, Rafalski tried to lighten the mood. “Maybe it’s because we finally made a decision on Mallinckrodt,” he said.
Three weeks later, Mallinckrodt notified forty-three of its distributors that they would no longer receive rebates from the company if they continued to supply certain pharmacies whose orders appeared to be suspiciously large. But by then, the DEA and Wizner had decided to intensify their investigation. On November 30, 2011, the DEA served another subpoena on Mallinckrodt, demanding documents relating to sixteen of the largest distributors of the company’s oxycodone pills to Florida. The list included Harvard, KeySource, and Masters. It also included the Big Three distributors: McKesson, Cardinal, and AmerisourceBergen.
The subpoena delivered a gold mine of information. Buried in the hundreds of thousands of memos, sales orders, and emails was the “Doritos” exchange between Steve Cochrane at KeySource and Borelli at Mallinckrodt. Rafalski was sickened. He tucked a printout of the email into his jacket. He showed a copy to Wizner and Geldhof.
“No way,” Wizner exclaimed.
“This is game, set, match,” Geldhof said.