DEA Investigation of Opioid Manufacturer Fails to Result in Criminal Punishment

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: May 21, 2017

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Opioids

A high-profile federal investigation into a drug company responsible for manufacturing opioids linked to illegal street use has ended with a low-profile settlement as officials were unable find evidence for serious criminal charges. 

The relatively uninspiring result to the ambitious federal investigation underscores the challenges facing government officials who are tasked with stemming the growing tide of prescription drug abuse.

DEA Investigates Drug Manufacturer Mallinckrodt for Florida Opioid Epidemic

A detailed report published recently by the Washington Post covered the recent multi-year investigation conducted by the DEA into Mallinckrodt Pharmaceuticals, one of the country’s largest oxycodone manufacturers. The DEA took interest in Mallinckrodt because between 2008 and 2012, Florida suppliers received roughly 500 million of the company’s oxycodone production — 66% of the pills in the state. Due to lax opioid laws and physicians willing to prescribe pain killers in exchange for extra money, Florida has become a hotbed for the nationwide opioid addiction, with thousands of suppliers distributing millions of pills on the street for billions of dollars in drug revenue.

As the illegal opioid market expanded in Florida and across the country, the federal government, largely through DEA regulations, began to probe legal avenues which allowed prosecutors to hold drug manufacturers accountable for the increased supply of painkillers.

This “distributor initiative” requires drug makers and distributors to “know your customer,” which translates to a requirement that large companies report suspiciously-sized orders of opioids which might indicate that the buyer is selling the drug illegally on the street. Under this mantra, the DEA ramped up its investigation into Mallinckrodt in 2011, which resulted in a government subpoena for records disclosing details of the company’s suspicious-order program put in place to combat opioid diversion into street sales.

According to investigators, the documents received from Mallinckrodt gave DEA agents and federal prosecutors reason to believe that the company “knowingly and intentionally” conspired with illegal drug distributors in Florida to sell billions of dollars of oxycodone. The DEA found more than 43,000 orders that it believed the company should have reported to government officials, which initially resulted in consideration of serious criminal charges.

Federal Investigation of Mallinckrodt Derails

When faced with accusations of supplying illegal opioid suppliers, Mallinckrodt responded that the company did its due diligence in vetting orders that left its buildings, and was not responsible for projecting its customer’s customer. With the illegal opioid sales occurring at least one entity apart from Mallinckrodt, the company argued that it was unreasonable to expect it, or any large drug manufacturer, to regularly conduct such a thorough review of thousands of orders to thousands of retail outlets which may, or may not, translate into illegal street sales. Although the company was linked to millions of pills which were sold by a buyer connected to a wide-scale illicit oxycodone operation, attorneys for Mallinckrodt claimed the company should not have been expected to detect the orders as suspicious.

Mallinckrodt also spent most of the investigation cooperating with federal officials and ramping up its suspicious-order detection program, and argued that the company could not take any more reasonable steps to ensure its pills were not sold illegally. As the investigation into Mallinckrodt failed to establish a more direct connection between the manufacturer and the illegal opioid market, federal prosecutors began to negotiate a financial settlement to close the case while still instituting some form of punishment. Prosecutors initially threatened fines of $2.3 billion and later $1.3 billion to account for all the oxycodone pills Mallinckrodt had distributed to Florida. However, the company continued to negotiate and it is reported that the final settlement is close to $35 million — far short of the government’s initial hopes when it undertook the sweeping investigation.

Mallinckrodt Investigation Underscores Opioid Enforcement Challenge

Despite the heavy flow of Mallinckrodt oxycodone into Florida — which caused the drug to earn the street name “M” in reference to the company’s logo emblazoned on all the pills — DEA officials and federal prosecutors were unable to produce fruitful results from their multi-year investigation into the company’s drug sales. 

The underwhelming result of this investigation likely can be attributed — at least in part — to the unique scope of its ambitions. No other case against a drug manufacturer was as widespread or as direct in its conclusion that the company knowingly contributed to an illicit drug trade, and in many ways the allegations outpaced the legislative support for the plans federal prosecutors had.

Although federal law and DEA policy is willing to hold manufacturers responsible for clearly suspicious opioid shipments, federal regulators are not able to build a case when a drug company is more removed from street sales. While other companies have been assessed billion dollar fines related to the opioid industry, those cases have turned on clearly suspicious promotion of off-label painkillers or focused on wholesalers rather than manufacturers.

Ultimately, the Mallinckrodt settlement, which does not require the company to pay an amount that will cause serious financial harm or admit criminal responsibility, shows that while the effort to stem the opioid tide may someday allow prosecutors to go after drug makers, federal officials currently face legal hurdles when they try to hold manufacturers accountable for the illicit drug trade.

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