Chapter 1
DEA Headquarters, 2006
Joseph T. Rannazzisi was furious, his anger teetering toward rage as he stepped into a DEA conference room to meet with several executives from the McKesson Corporation, the largest drug distribution company in America. For months, he and his team of investigators on the sixth floor of the agency’s headquarters in Arlington had been demanding that the company follow the law. A bear of a man at six foot two and 205 pounds, Joe quickly commanded attention. It was January 3, 2006, and time for a come-to-Jesus.
Headquartered in San Francisco, with seventy-six thousand employees around the world, McKesson had $93 billion in annual revenues, making it the eighteenth-largest corporation in the country. The firm had been shipping copious amounts of hydrocodone—a highly addictive opioid laced into the popular pill commonly known as Vicodin—to just six pharmacies in Tampa, Florida. Between October 10 and October 21, 2005, McKesson distributed more than two million doses of hydrocodone to those drugstore clients. The pharmacies then sold the pills over the internet to just about anyone with a credit card.
As the chief of the DEA’s Office of Diversion Control, the unit responsible for policing the pharmaceutical industry, Joe saw prescription opioids as a threat far more deadly than the crack and meth epidemics of the 1980s and ’90s. Euphoria-inducing, heroin-like pain pills such as Vicodin and OxyContin and their generic cousins, hydrocodone and oxycodone, were killing ten to fifteen thousand people a year—almost as many as the U.S. military lost in Vietnam in 1968, the bloodiest year of the war. Joe’s job was to make sure prescription drugs were not diverted from the legitimate supply chain to the black market.
Joe couldn’t blame transnational cartels for smuggling the drugs into the country, like he did when he was a special agent based in Detroit battling heroin, cocaine, and crystal meth. He didn’t hold the Playboy Gangster Crips or the Black Mafia Family or MS-13 responsible for selling them on the street. He faced a far more formidable foe: the executives who ran some of the nation’s most respected Fortune 500 corporations—the drug manufacturers, the pharmacies, and the little-known distributors that serve as the middlemen in the supply chain of prescription pain pills. Three distributors—companies that purchase the pills from manufacturers wholesale and ship them to their pharmacy clients on the retail level—transport nearly 95 percent of all pharmaceuticals in the United States: Cardinal Health, Inc., AmerisourceBergen Corp., and McKesson, the last the focus of Joe’s fury on this first Tuesday of 2006.
Joe had summoned the executives to Arlington to make good on a threat. The shipments to Tampa were clearly suspicious. Why would six small drugstores need two million tablets of hydrocodone over eleven days? The DEA had already warned McKesson that the outlets were pushing pain pills to the internet; the agency had shown McKesson’s executives paperwork cataloging the vast quantities of pills the stores had been requesting and demanded that the corporation stop filling the orders. Under the law—the Controlled Substances Act of 1970—Joe told the executives that it was up to them to figure out why the stores wanted so many doses. If McKesson didn’t get a plausible explanation, the company was obligated to stop the shipments and report the pharmacies to the DEA. Instead, McKesson had been shipping the pills to its drugstore customers without saying a word—a practice it continued after the DEA warnings.
Joe and his team sat down at the conference table across from three McKesson executives and their lawyer from a Washington law firm, Hyman, Phelps & McNamara, which specialized in representing drug industry clients. One of the executives was McKesson’s leader of Six Sigma, an elite business training program. Another held dual undergraduate degrees in biology and pre-med. The third held an MBA from Carnegie Mellon. The lawyer from Hyman had worked as an attorney in Joe’s division at the DEA before going into private practice to represent drug industry clients.
The McKesson executives worked for John H. Hammergren. At forty-seven, boyish and bespectacled, Hammergren was a quiet yet intensely ambitious businessman, the son of a traveling salesman, who rose through the ranks of McKesson to become one of the highest-compensated corporate executives in the United States. He owned a 23,000-square-foot mansion in Orinda, California, nestled in the hills east of Berkeley. The 3,100-square-foot Tudor-style carriage house on his nine-acre estate was filled with high-end sports cars, including a pair of Ferraris and a rare Ford GT40. He also owned a 3,456-square-foot summer home near Lake Winnipesaukee, not far from the White Mountains of New Hampshire. McKesson’s shareholders covered his $66,000 round-trip flights between California and New Hampshire aboard the company’s Dassault Falcon 900 jet.
Hammergren was a quarry far different from the targets Joe pursued in the early years of his career. Joe realized that his life was far less complicated when he was a special agent in Detroit. He missed the camaraderie of working the streets, the informants, the undercover buys, the all-night surveillance in “beater” cars that blended into the background. Street drug cases had a rhythm. Leads, interviews, wiretaps, controlled buys, court appearances, and if it all went well, convictions. There were good guys and bad guys, he believed, and not much in between.
A life in law enforcement was not an unexpected choice for Joe, but it strained his relationship with his father, who had hoped his son would take a different career path. Joe worked his way through college and had a pharmacy degree from Butler University in Indiana, and his father anticipated that would be a stepping-stone to medical school. Stephen Rannazzisi was a high school chemistry and biology teacher on Long Island, and he wanted Joe to rise above the family’s modest Victorian home in a working-class Freeport neighborhood on Long Island’s unfashionable South Shore.
Joe loved Freeport. During the 1960s, he lived an idyllic Wonder Years kind of life there, a tableau of minibikes and slot cars, baseball cards and go-carts. Cops and firefighters lived on every block, and Joe wanted to be one of them. They had a sense of purpose, and they knew how to have fun, drinking beers in the blue-collar bars and catching bands at the raucous Oak Beach Inn near Jones Beach.
Joe thought that med school was for the kids who grew up on the North Shore, the sons and daughters of doctors and lawyers, Wall Street traders and hedge fund managers. His father couldn’t understand why Joe studied pharmacology only to become a cop. But Joe longed for a job that would combine his fascination with science and law enforcement.
While attending Butler, Joe volunteered as a firefighter. He basked in the brotherhood. To stay in fighting form, he liked to box and jogged more than forty miles a week. A rock and roll fan, he played guitar and worshipped Neil Young. Weekends, he went to downtown cop bars, hanging with a law enforcement crowd. “Joe Rann,” as everyone called him, had found his second home.
His life choices bewildered his father. “Why are you spending all of this money to go to pharmacy school just to be a cop?” his father asked during a phone call in Joe’s senior year, his voice a mixture of anger and disappointment. “Why don’t you go to med school? Why are you wasting your time?”
“Well, that’s what I want to be,” Joe said. “It’s a noble profession and I can’t see myself doing pharmacy or doing medicine the rest of my life. I just can’t see it.”
What about a master’s degree? his father asked. What about a research position?
“Dad, I’m tired,” he replied. “I gotta go to sleep.”
The line went dead. His father had hung up. It would be a year before they spoke again.
After graduating, Joe joined the DEA in 1986 as a diversion investigator before becoming a special agent two years later in the Indianapolis field office and then in Detroit. With his educational background, passion for the work, and propensity to put in twelve- to fourteen-hour days, he was quickly seen as an agent with a big future. He won a promotion to supervise a task force of federal and local officers to solve drug-related murders, nicknamed Redrum, “murder” spelled backwards. He then became coordinator of the clandestine lab group in Detroit, knocking over meth labs in hazmat suits. In his spare time, he attended the Detroit College of Law at Michigan State University, adding a law degree to his qualifications in 1999.
By 2006, at age forty-five, Joe had secured a post at DEA headquarters as head of the Office of Diversion Control, where he managed a staff of 320. The office had long been derided as a backwater inside the agency, pursuing prescription pill cases—ridiculed as “kiddie dope” prosecutions—not prestige takedowns of the big drug rings that peddled cocaine and heroin. But now kiddie dope was killing tens of thousands of Americans, as much or more each year than heroin or cocaine.
The carnage had to stop. DEA leadership expected Joe’s division to lead the charge. He began by targeting unscrupulous doctors and small-town pharmacies illegally selling massive quantities of opioids on the internet. But he soon realized that he needed to move higher up the chain and target the drug distribution companies to choke off the supply. Less than a year into his new job, Joe and his colleagues launched the “Distributor Initiative,” shifting the DEA’s focus to some of the biggest corporations in America, companies such as McKesson.
Joe didn’t care that the McKesson executives sitting across from him at the conference table had highly specialized training in the pharmaceutical world. To him, they were little more than drug dealers dressed in suits.
“How did this happen?” Joe erupted. “All of these kids are going on the internet and collecting hydrocodone like baseball cards.”
The executives seemed taken aback, but they shouldn’t have been. For months, Joe and his team had been warning McKesson and dozens of other drug companies that they were violating the law and in danger of losing their DEA registrations to sell controlled substances like hydrocodone. He had sent every drug company in the nation letters outlining their responsibilities to report unusually large orders of drugs from their customers and prevent them from being diverted to the streets. If a distributor receives an order from a pharmacy that is unusually large, unusually frequent, or deviates substantially from previous orders, the distributor is required under federal law to “maintain effective controls” to prevent the drugs from reaching the black market and to notify the DEA, he told them. The same rules apply to drug manufacturers who receive suspicious orders from drug distribution companies like McKesson.
Joe and his team had briefed seventy-six companies in total, warning them that they were breaking the law by funneling huge amounts of pain pills to online pharmacies that were nothing more than fronts for corrupt doctors and drug dealers.
Four months earlier, on September 1, 2005, McKesson had received one of those briefings. The DEA told the company about the proliferation of internet pharmacies that were selling—“diverting” in DEA parlance—prescription pain pills to the black market. The following month, a DEA investigator contacted the head of McKesson’s cavernous drug distribution center in Lakeland, Florida, warning him that the company was still filling large orders for suspicious customers in Tampa. Throughout the fall of 2005, Joe and his team monitored an internal DEA database that traces the path of every single pain pill sold in America. By the end of the year, when Joe saw that McKesson had sent another two million pills to the online pharmacies in Tampa in an eleven-day period, he blew up. “It’s like we never spoke to them,” he told his team.
Their audacity was part of what filled Joe with rage as he sat across from the McKesson executives at that conference table in Arlington. He glared at the executives. One smiled and tried to lighten the mood with a joke. “Well, I guess you got us,” he said. “Is there anything we can do to make this right?”
Joe had heard that question before, but never from a corporate executive. It usually came from a street drug trafficker who had been arrested and was looking for a deal. Joe glanced over at his second in command, Supervisory Special Agent Gary Boggs. Joe shook his head in disbelief.
The McKesson executives and their lawyer weren’t really interested in making it right. If the online drugstores were such a big problem, why didn’t the DEA shut them down, they countered? They argued that they were not in the enforcement business, that they were simply middlemen delivering a legitimate product legally prescribed by a doctor. They also said they didn’t have the same data as the DEA.
To Joe, the excuses were pathetic. People are becoming addicted, he thought, people are dying, and this is all they have to say? There are sixty-six thousand pharmacies in the United States and only three major drug distribution companies, he told the McKesson executives. His division couldn’t go after every dishonest pharmacy, but he could go after their company. Joe reiterated that the distribution companies are required to police or “know their customers” under federal law, and the data the DEA used to track the shipments had come from McKesson’s own sales reports.
“I would like you to surrender your registration,” Joe told them.
In the pharmaceutical world, to lose a DEA registration is equivalent to losing a business license. The revocation can cost a company like McKesson millions every day that one of its warehouses, some of them the size of Amazon fulfillment centers, is shut down. It can cost millions more in attorney’s fees to fight the DEA to reinstate the registration.
“I’m done here,” Joe said, rising from the table. “I don’t have time to fuck around. I gave you an opportunity to fix your issues and you just sent more drugs downstream.”