Headline News

McKesson Board Exonerates Execs from Opioid Crisis, But The Teamsters Cry Foul

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By Ed Silverman
STAT News
4.26.18

Following an internal investigation, the McKesson (MCK) board absolved senior management of any failures to oversee the distribution of opioid painkillers, an issue that has haunted several wholesalers as the opioid crisis in the U.S. worsens.

Notably, the probe found that senior managers “worked in earnest” to meet Drug Enforcement Agency requirements, such as reporting suspicious orders to pharmacies, and had oversight procedures in place for a monitoring program and distribution facilities.

Consequently, the board declared McKesson executives acted in “good faith” to meet the obligations of a 2008 settlement with the DEA, which was reached because the wholesaler failed to report suspicious orders, according to this statement. As part of the deal, McKesson paid $13 million to resolve the civil charges.

But the findings were dismissed by the International Brotherhood of Teamsters, which has accused the wholesaler of exacerbating the opioid crisis and late last year pushed the board to conduct the probe.

The Teamsters maintained the investigation was inconsequential because the board failed to identify executives responsible for instances in which the company did not adequately track opioid shipments. Last year, for instance, McKesson paid a $150 million fine for failing to report suspicious orders and the DEA described the penalty as among the “most severe sanctions” ever to involve a drug distributor.

And earlier this year, the House Energy and Commerce Committee noted that McKesson was one of two distributors that shipped 12.3 million doses of opioid painkillers to a single pharmacy in a tiny West Virginia town between 2006 and 2014.

“The conclusions drawn from the Board’s review underscore just how far the country’s largest opioid distributor has yet to go,” said Ken Hall, general secretary and treasurer for the Teamsters, which claims to have “substantial holdings” in the wholesaler.

“This investigation failed to assign any responsibility for weaknesses in the company’s monitoring program, reporting systems, and internal audits that allowed millions of doses of prescription opioids to flood communities and fuel this crisis,” he said in his statement.

A source familiar with the matter told us the union was concerned that the board committee and the outside law firm hired to help with the probe decided not to review suspicious order reports and potential diversion by pharmacies, doctors, or patients dating back to 2009. Specifically, the Teamsters wanted McKesson to gather and analyze shipment data for all states.

“You have to determine what happened before you know if people responded appropriately, otherwise you don’t know what went wrong or how people dropped the ball,” explained this source. “Look at the sheer numbers in West Virginia. What about the rest of the country? We need to know how they came to distribute so many drugs and whether management had the right sense of urgency and oversight.”

In its report, the board committee explained that it did not investigate or make any conclusions about potentially suspicious orders or particular customers because the “committee did not believe that analysis was relevant for purposes of evaluating the conduct of, and potential claims against, senior management and/or the board.”

Why? In a footnote, the board explained that “a pharmacy-level review from 2009 to the present” of any suspicious order report or potential diversion “would require extraordinary resources and time.” The board also pointed to the more recent settlement with the federal government requires an independent organization review its compliance program. And this would “select pharmacy-level data.” (see the bottom of page 7).

The union has been sparring with various wholesalers over their role in the opioid crisis, which has been blamed for fueling addiction and crime, and serving as a bridge to a growing heroin trade. Every day, more than 40 Americans die from overdoses of opioid painkillers, according to the Centers for Disease Control and Prevention. And each year, 2 million people abuse or misuse the drugs.

Last year, the Teamsters sponsored a resolution that convinced McKesson shareholders to reject an executive compensation plan. The union argued the pay package given chief executive officer John Hammergren was “excessive,” because McKesson has been “a central figure” in the opioid crisis. The effort had the support of state treasurers from West Virginia, Illinois, and Pennsylvania as well as two of the largest proxy advisors in the U.S. — Institutional Shareholder Services and Glass Lewis.

McKesson and other wholesalers, such as Cardinal Health (CAH) and AmerisourceBergen (ABC), were also sued in federal court for contributing to the crisis. And last year, a bipartisan group of 41 attorneys general demanded information and documents from several distributors as part of a large-scale probe into the role these companies may have played in the opioid epidemic.