Chapter 4
Arlington, Virginia, 2007
Four miles from DEA headquarters in northern Virginia stands a nondescript beige concrete-and-glass office building that is home to one of Washington’s powerful trade associations. The Healthcare Distribution Alliance was the nerve center for the nation’s opioid distributors, the institution that made sure Congress and regulators did not mess with the profitable nexus between the drug makers and the pharmacies. The Alliance, as it was called, served as their lobbyist, crisis manager, and legal adviser. Few people beyond the boardrooms of the drug companies and the corridors of Capitol Hill knew that The Alliance even existed.
Top corporate officers from each of the Big Three distributors—McKesson, Cardinal, and AmerisourceBergen—formed its executive council, each company paying $1 million in annual dues. Midsized and smaller drug distribution companies also belonged to The Alliance, a nonprofit organization. They worked with the manufacturers and chain pharmacies. Even though many of the companies were fierce competitors, the raids had given them a common purpose, and a common enemy—Joe Rannazzisi and the DEA. Their profits and stock prices were being threatened. So was their ability to distribute prescription pain pills without more aggressive oversight by government agencies that could no longer ignore the magnitude of the companies’ misdeeds following Joe’s raids. To settle the cases with the DEA, the companies would have to pay fines and install costly systems to identify and stop dubious orders of pills.
Joe viewed The Alliance with deep suspicion—a well-financed shield for illegal behavior. In Joe’s mind, the members of The Alliance didn’t want to obey the law. “They just want to do what they want to do,” he liked to tell his staff, “and what they want to do is make money.” He thought that their zeal for massive profits had made them willing to dismiss any concern for the human costs of the drugs they were peddling.
With Joe’s raid teams fanning out across the country, serving warrants and seizing company records, members of The Alliance were becoming increasingly alarmed. They began to exchange a flurry of urgent emails. On September 25, 2007, a senior Alliance director, Anita T. Ducca, alerted her colleagues in a confidential memo that the DEA was threatening their multibillion-dollar business.
Ducca urged The Alliance’s members to craft a “comprehensive DEA strategy” and explore all options to protect their businesses from further enforcement actions. Ducca knew her way around Washington. Before joining The Alliance five years earlier, she had served on the staff of the FDA, which has oversight over the pharmaceutical industry. She also worked for the White House’s Office of Management and Budget and the Environmental Protection Agency.
“Develop a strategy for outreach to appropriate decision makers, such as DEA staff, the Hill, other federal agencies who may be supportive, e.g., OMB or the Small Business Administration,” Ducca wrote to her colleagues. “What, if any, legal options do we have?”
Two and a half weeks earlier, Ducca, accompanied by the general counsel for The Alliance and a veteran outside attorney who specialized in DEA regulatory matters, met with the DEA. Four DEA staffers from Joe’s team walked them through the same PowerPoint that had been provided earlier to drug company executives. The DEA staffers stressed that the companies were required under federal law to maintain “effective controls” over the narcotics they distributed, and they needed to set up systems to detect and stop enormous and clearly illicit orders of pain pills. They also demanded that the distributors “know their customers” and be on the lookout for telltale signs that pills were being diverted to the streets through illegal channels, such as pharmacies filling prescriptions from patients who lived in different parts of the country.
“DEA’s expectations are clearly heightened,” Ducca and the two attorneys noted in an internal memo. Their concerns were echoed by one of The Alliance’s key members, Cardinal Health. Stephen J. Reardon, a vice president of the company, wrote to his team in a confidential email following The Alliance’s meeting with the DEA. Reardon said he was worried by the agency’s aggressiveness. He noted that AmerisourceBergen had already set up a suspicious order monitoring system to try to avoid losing its DEA registration, and the agency was now calling that system “the new industry standard.” Reardon wrote that he had learned McKesson executives were working on a similar system as part of a settlement it was negotiating with the DEA.
Under AmerisourceBergen’s system, orders of unusual size or frequency needed to be red-flagged, stopped, and examined. The company promised to conduct “due diligence” investigations to figure out why a customer had ordered so many pills. If the company couldn’t resolve the red flag, the shipment was to be canceled and reported to the DEA. AmerisourceBergen also agreed to install a computer system that would flag giant orders that exceeded thresholds of pills each of its customers was allowed to order every month.
As head of quality and regulatory affairs for Cardinal, Reardon was responsible for ensuring that there were no interruptions in the supply chain. He warned his colleagues about the costs of setting up a more sophisticated system similar to the one at AmerisourceBergen. That system, he told them, “is not customer friendly.” If put into place at Cardinal, he said, it would delay the “delivery of controlled substance orders to the customer.”
On December 7, three months after the Alliance meeting with the DEA, Jack Crowley, a former DEA supervisor who had joined Purdue Pharma as executive director of compliance, wrote an email to one of his counterparts at Cardinal to commiserate about the agency’s enforcement actions.
For nearly thirty-one years, Crowley was with the DEA, working his way up to head its international drug unit before becoming a supervisory investigator handling pharmaceutical cases. A rotund man with a jovial manner and intimate knowledge of the inner workings of the DEA, Crowley was widely respected by his colleagues at the agency—until he switched allegiances and accepted the post at Purdue in 2003. He was one of many DEA officials to leave the agency for high-paying jobs with the companies they once regulated, or with the Washington, D.C., law firms that did the companies’ bidding.
“I see our friends are at it again. I wanted to say hello and I’m sorry that DEA is being so aggressive with this Suspicious Orders stuff,” Crowley wrote. “I wish there was something I could do to help in this situation—we are all in the same boat.”
The DEA, in other words, was bad for business.