Chapter 15
E. Barrett Prettyman U.S. Courthouse, Washington, D.C., 2012
Joe Rannazzisi kept his word. The day after his meeting with Deputy Attorney General James Cole at the Justice Department, the DEA launched its most powerful weapon against Cardinal Health: an Immediate Suspension Order, halting all shipments of pain pills from the company’s warehouse in Lakeland. The DEA executed the same order against the two CVS stores in Sanford, along with the two independent pharmacies, barring them all from dispensing any more narcotics.
Just before Joe struck, Jamie Gorelick learned that an enforcement action was imminent, and she was livid. She sent a scathing email to Stuart Goldberg at the Justice Department on February 2, 2012, at 7:01 p.m., copying James Dinan, the other top aide to Cole. “Stu: I am stunned by the events of the past couple of days as we have tried to interact with the DEA to no avail,” Gorelick wrote after Joe’s meeting with Cole. “I don’t think I have ever seen anything like this.”
She gave Goldberg some advice if the DEA intended to shutter Cardinal’s warehouse. “I would ask that the Deputy’s Office assure itself that the [DEA’s] Chief Counsel has found a legal and factual basis for that drastic action,” Gorelick wrote.
The veiled warning changed nothing. The DEA was determined to move against Cardinal. Michele Leonhart, the agency’s administrator, had already signed off on a raid. On February 3, at 7:30 a.m., DEA agents and investigators descended on Cardinal’s warehouse in Lakeland. Wearing their DEA windbreakers, members of the team fanned out inside the warehouse, sealing up huge cages and vaults filled with bottles of pain pills with red-and-white adhesive tape emblazoned with the agency logo. Stunned employees, some of them driving forklifts or standing at their stations next to long conveyor belts that stretched to the truck bays, watched in silence as the DEA team locked up Cardinal’s inventory of opioids.
That afternoon, nine hundred miles to the north, Randolph Moss, the Justice Department official now representing Cardinal, rushed to the E. Barrett Prettyman U.S. Courthouse in Washington, D.C., for an emergency hearing before U.S. district judge Reggie B. Walton. Moss told the judge he tried to contact lawyers for the DEA but he had no luck. He argued that Cardinal’s conduct was not causing an “imminent danger” to the public, the legal standard the DEA needed to show before shutting down a distribution center. The DEA was the one causing the imminent danger. Hospitals, nursing homes, and thousands of patients in Florida served by Cardinal would soon be forced to go without “critically important” drugs if the order remained in place.
Moss said Cardinal had already stopped doing business with the two independent drugstores and suspended all shipments of oxycodone to the two CVS pharmacies in Sanford. How could there still be an “imminent danger” to the public if the pharmacies no longer had access to oxycodone? Moss asked Walton to issue a temporary restraining order, known as a TRO, to lift the DEA suspension until a full-blown court hearing could be held.
Walton, a former public defender, prosecutor, and D.C. judge before his appointment to the federal bench by George W. Bush, was skeptical. “These are extremely dangerous drugs,” the judge said. “And if they are not being appropriately disseminated and they go out into the public without the appropriate authorizations by medical personnel, obviously that can cause severe harm.”
“We agree entirely with that,” Moss replied. “This is a company that is extremely committed to doing what it can to avoid diversion of controlled substances.”
“Have there been any other allegations of inappropriate distribution by the plaintiff [Cardinal]?” Walton asked.
“There have never been any allegations today or previously of improper diversion by this company itself,” Moss said.
That was not accurate. The DEA had accused Cardinal of the same conduct in 2007 and the company paid a $34 million fine the following year to settle the case. As part of the settlement, Cardinal promised to prevent pain pills from reaching the black market by installing systems to red-flag dubious drug orders at its warehouses, including the one in Lakeland.
Without hearing from the DEA, Walton issued the TRO and scheduled another hearing.
After the ruling, Gorelick sent Goldberg a told-you-so email. “Stu—To keep you apprised re the Cardinal Health matter we discussed, here is the TRO issued by Judge Walton,” she wrote.
“Thanks Jamie for the information,” Goldberg replied.
That afternoon, the DEA agents and investigators were ordered back to the Lakeland warehouse to remove the tape from Cardinal’s drug vaults and cages. The company was free to ship pain pills from the warehouse for twenty-six days, until February 29, when lawyers from Cardinal, the DEA, and the Justice Department appeared in Walton’s courtroom.
The judge used the intervening period to read the DEA records detailing the amounts of pills Cardinal had sent to the four pharmacies. He also read the 2007 case the agency had filed against the company for sending similarly vast quantities of pills to the online pharmacies and the 2008 agreement it had signed to settle that case.
Walton began the hearing in the case—Cardinal Health, Inc. v. Eric H. Holder Jr.—by addressing Moss. Moss was accompanied by three other attorneys for Cardinal, including Craig Morford, the former deputy attorney general who had reached out to Leonhart the previous fall.
“Their position is that, well, there’s been a history of problems with your client in reference to diversion, or not having in place appropriate controls to make sure diversion isn’t taking place,” the judge told Moss. “Now, we’ve got a significant distribution of a large amount of this substance compared to what is being distributed by other companies.
“And we’ve got this major problem in this part of the world where this distribution is taking place,” the judge concluded, noting that the opioid black market was centered in Florida.
The order signed by Leonhart said Cardinal was in violation of that 2008 agreement, Walton noted, and that’s why the DEA was going after the company a second time. “She’s saying, I guess, that ‘We’ve got this history. We’ve got the current situation and therefore, under those circumstances, we believe immediate action has to be taken. Otherwise you’re going to have a significant problem as far as loss of life and significant addiction problems that we need to address immediately,’” Walton said.
This time around, Moss acknowledged that Cardinal had been in trouble with the DEA before. But he brushed it off. The past was the past. That case had nothing to do with this one. “The events from that period of time cannot possibly support today an imminent danger to the public,” Moss argued. “But indeed, back then when that occurred, that dealt with a circumstance in which the company stood up to it, recognized it had to do something about it and made very substantial changes.”
Walton pushed back. “If you had a distributor of pharmaceuticals and it was the only distributor in this particular area and you had a high death rate from that substance and a high addiction rate from that substance, I think those factors, coupled with volume, would be sufficient to show that there’s an imminent danger,” he said.
“Well, Your Honor, it would depend, I think, on what type of patients were in the area,” Moss offered. “Is there a hospital there? Is it, as is the case with respect to one of the examples there, is it something that is adjacent to a large medical complex with many, many, many doctors? Is it a circumstance where you’re near a large oncology center? Is it near a nursing home?”
The lawyer representing the government picked apart Moss’s arguments. Clifford Lee Reeves II, a career Justice Department attorney, was flanked by two other lawyers from the department, along with two attorneys from the DEA, including Larry P. Cote, who had taken over Linden Barber’s job when he left the agency to represent the drug industry.
Reeves told the judge that the DEA had already given Cardinal a chance to change its conduct. Instead, the company just kept shipping more pills. Cardinal, he said, rarely saw an order that was suspicious enough to stop. Most orders sailed through the Lakeland warehouse, saturating Florida with massive amounts of oxycodone. Cardinal’s own employees were sounding alarms, but those warnings were disregarded.
“In September 2010, Cardinal’s corporate offices expressed concern about Lakeland’s oxycodone shipment to the Sanford CVS stores,” Reeves told the judge. “So, Lakeland asked CVS 219 for data about its oxycodone sales, and according to Cardinal’s own internal emails, their own documents, CVS adamantly refused. It’s not in my words. Those are Cardinal’s words that appear in its own documents. Does Lakeland do the reasonable thing? Do they do the rational thing? Do they say, ‘You provide us this data or we’re cutting you off?’ No, they do not, Your Honor. They just keep shipping.”
“You’re saying the pharmacy refused to provide information to Cardinal?” the judge asked.
“Yes, furthermore, according to Cardinal documents, Cardinal contacted CVS chief pharmacist, Paras Priyadarshi, in January 2010 to find out why the oxycodone sales are so large at CVS 219. Mr. Priyadarshi says, quote, ‘They are the only pharmacy in the area,’ end quote, to carry oxycodone,” Reeves said. “It’s patently unbelievable that a pharmacist would say that we’re the only pharmacy to carry oxycodone. It’s like a pharmacist saying: ‘We’re the only pharmacy in the area to carry penicillin or Band-Aids.’ It’s just not believable. But setting the credibility aside, Cardinal knows this is false. Why? Because they supply other pharmacies in the area with oxycodone. Yet, faced with this obvious falsehood, they still keep shipping.”
Reeves also noted that Cardinal didn’t cut off the two independent pharmacies until the DEA executed search warrants the previous October. And Cardinal didn’t suspend the CVS stores until the DEA served them with the Immediate Suspension Orders earlier that month, on February 3.
Walton had heard enough. He rejected every one of Moss’s arguments: that the DEA action threatened to cripple its business; that its reputation would be badly tarnished; and that patients would be “irreparably harmed.” Moss didn’t “come close” to documenting significant financial harm to the company, the judge said, noting that Cardinal had posted $102 billion in revenue the previous year. He said the company failed to prove its reputation had suffered after the DEA shut its operations down in 2007, and it would likely not suffer this time around either. He called Cardinal’s arguments “exaggerated and uncorroborated.” He also ruled that the shutdown would not impact any patients because the pharmacies and hospitals in Florida could be supplied by one of Cardinal’s other warehouses in the region.
Noting that Cardinal continued to ship unchecked quantities of pills, he ruled that the company’s conduct did constitute an “imminent danger” to the health and safety of the public.
“If Cardinal had been engaging in the level of proactivity to make sure that diversion doesn’t occur, then they would have or at least should have become aware of the fact that there was a problem in reference to these particular pharmacies,” Walton said. “With that knowledge, [Cardinal] should have taken some steps, considering the volume that was being provided to those pharmacies. It should have taken some action, before it did, in making sure that diversion by these pharmacies was not, in fact, occurring.”
It was a stinging defeat, not only for Cardinal, but for the entire opioid drug industry. Cardinal quickly appealed Walton’s ruling. The Alliance, on behalf of its thirty-four members, including Cardinal, McKesson, and AmerisourceBergen, drafted a friend-of-the-court brief that argued the DEA had set an impossibly high bar for the industry to meet and failed to give the companies guidance on how to avoid the agency’s wrath.
But less than three months after Walton’s ruling, on May 15, Cardinal suddenly settled the case with the DEA, saying it wanted “to avoid the uncertainty and expense of litigation.” The company grudgingly admitted that its “due diligence efforts for some pharmacy customers,” along with its compliance with the 2008 settlement, “in certain respects, were inadequate.” Cardinal agreed to suspend shipments of narcotics from its Lakeland warehouse. It again promised to do a better job of flagging and stopping shipments of staggering amounts of pain pills and would ultimately pay a $44 million fine. CVS, headquartered in Woonsocket, Rhode Island, had also filed a legal challenge against the DEA. With seventy-four hundred pharmacies and $123 billion in revenues, CVS was the nation’s largest chain drugstore. Larry J. Merlo, its president and chief executive, made $20 million in 2012. The company eventually settled the case by paying slightly more than the equivalent of Merlo’s annual salary—$22 million.
“A pittance,” Joe said.
Cardinal and the drug industry couldn’t win by arguing the law. So at a meeting of drug industry reps at The Alliance’s headquarters, they decided to change it.