By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently working on a book about textile artisans.
It’s not just the banksters who got a get out of jail free card, who are too big to prosecute. Following two years of inquiry, involving nine US attorneys, Drug Enforcement Agency (DEA) officials were foiled in their attempts to hold McKesson, the largest US drugs distributor, appropriately accountable for its role in the opioids crisis. 60 Minutes and the Washington Post and yesterday reported on the results of their joint bombshell investigation into these efforts.
Please take 10 minutes of your time to read the full 60 Minutes transcript here (or if you prefer, watch the video that’s embedded within that link). Alternatively, read the Washington Post account, ‘We feel like our system was hijacked’: DEA agents say a huge opioid case ended in a whimper.
This reporting validates criticisms been made about how the Department of Justice (DoJ) became a paper tiger on corporate crime first under Attorney General Eric Holder and then under his successor Loretta Lynch, as I discussed in November 2016 in The Obamamometer’s Toxic Legacy: The Rule of Lawlessness.
The findings of this joint investigation will of course come as no surprise to Naked Capitalism readers, although I’ll admit I was shocked by some of its revelations. And the cynic in me wonders why, since much of the activity documented in this reporting occurred in 2014 and 2015 (and before), it’s only now that 60 Minutes and the Washington Post are bringing this to the public’s attention. But that’s a quibble, that’s delaying getting to the meat of this post.
Making an Example Could Have Alleviated the Opioids Crisis, But the Justice Department Blinked
The core of the 60 Minutes report is an interview 60 Minutes correspondent Bill Whitaker conducted with David Schiller, a thirty-year DEA veteran who headed the team investigating McKesson, the 5th largest US corporation and a major opioids distributor. McKesson has 76,000 employees, annual revenues of almost $200 billion a year– roughly the equivalent of Exxon Mobil– and since the 1990s, earned billions from distributing addictive opioids, according to 60 Minutes
In order to keep the length of this post manageable, I won’t discuss the huge increase in opioids shipments that Schiller says the company should have examined, and put a stop to (further detail is included in either the 60 Minutes or Washington Post links included above).
Schiller believes that McKesson fueled the opioids epidemic:
Bill Whitaker: One of the Former D.E.A. Administrators said that the McKesson Corporation has fueled the explosive prescription drug abuse problem in this country. Do you agree with that?
David Schiller: 100%. If they woulda stayed in compliance with their authority and held those that they’re supplying the pills to, the epidemic would be nowhere near where it is right now. Nowhere near.
And Schiller insists that government should have pursued the company aggressively for its role in the opioid epidemic:
David Schiller: This is the best case we’ve ever had against a major distributor in the history of the Drug Enforcement Administration. How do we not go after the number one organization? In the height of the epidemic, when people are dying everywhere, doesn’t somebody have to be held accountable? McKesson needs to be held accountable.
Yet Schiller discovered that a company of McKesson’s size and influence was just too big to prosecute by the Holder/Lynch DoJ. I hope these excerpts from the 60 Minutes transcript will entice readers to read the full account:
David Schiller: I mean the president declared a public health emergency. It’s on the front lines of everybody’s dinner table conversation. There’s not a bigger problem we have in the United States. And who led to the problem? McKesson was at the forefront.
With the opioid epidemic getting worse year by year, special agent Schiller and his team wanted to send a message to the pharmaceutical industry by hitting McKesson hard. They wanted to fine the company more than a billion dollars, revoke registrations to distribute controlled substances, and, more than anything, put a McKesson executive behind bars. But Schiller says, attorneys for the DEA and the Department of Justice retreated at the thought of going against McKesson and its high-powered legal team.
I find it unfortunate that 60 Minutes didn’t focus a bit more on teasing out why the DEA and DoJ favored taking a softer approach to the pharma industry (even though I have a very good idea what the reason is). I know, I know, this is television, and it’s not a good medium for doing deep dives into why. The Washington Post account includes a pro forma reaction from the DEA and a refusal to comment from the DoJ. And artful remarks by Geoffrey E. Hobart, former federal prosecutor, now partner at Covington & Burning, the white shoe Washington firm where Eric Holder also returned to his partnership after serving his stint as Attorney General, hint at just why clients pay Hobart the big bucks. These comments made me giggle, as I bet he kept a straight face when he told the Washington Post:
“If the lawyers for the government believed there was criminal conduct here, they would have told me about it,” Hobart added. “That would have increased the leverage they had, and that never happened.”
Yet even though it’s a bit lax on the why, 60 Minutes makes clear that the feds rolled over with respect to McKesson:
This was at the time whistleblower Joe Ranazzisi, the DEA’s then deputy assistant administrator, was sounding alarms that the DEA and Congress were bending to the will of the pharmaceutical industry. In [60 Minutes’ October 2017 report], he told us Justice Department attorneys were pressing him and his investigators to take a softer approach toward the industry.
Bill Whitaker: The summer of 2014 — you get a request to play nice with the pharmaceutical industry.
Joe Ranazzisi: Yes.
Bill Whitaker: What do you think of that?
Joe Ranazzisi: I didn’t think it was appropriate. We told ’em what they need to do. We told ’em what compliance is and how to comply with the act. We met these people over and over again. The time for meetings and reports are over. You either comply or you lose your registration.
But in the McKesson case, negotiations with company attorneys went on for more than two years. In the end, instead of the billion-dollar fine DEA investigators wanted, the company was fined $150 million. That was a record for the DEA, but Schiller called it a slap on the wrist for a fortune five company and a second-time offender.
David Schiller: There was backdoor deals being cut that we didn’t know about, I didn’t know about, and I was representing DEA nationally on the investigation at the highest level. How do you settle? How do you say it’s okay just, “Here, write this check this time and– and close this place for a little bit, sign this piece of paper.” How do you do that? No. Put ’em in jail. You put the people that are responsible for dealing drugs, for breaking the law, in jail. Nobody’s in jail. They wrote a check.
Bill Whitaker: Did you think McKesson was getting special treatment?
David Schiller: I don’t think — I know they were getting special treatment. They were getting treatment like I’d never seen in my 30-year career.
The result of this special treatment was a cratering of DEA morale, as Schiller told 60 Minutes, “There is not a man or woman in DEA today that’s happy with the settlement and morale has been broken because of it.”
When asked by Whitaker his motivation for appearing on 60 Minutes, Schiller replied:
I saw what’s happening to our country now with this epidemic. I saw the limitations being placed on it– on us by our own people and chief counsel fighting with our own agents and investigators. And I know I’m gonna make a lotta enemies, because people don’t like to hear the truth. I’m doing it because the truth needs to be told.
At least on present evidence, it looks like the DoJ under Jeff Sessions isn’t looking to restore respect for the DoJ, and its prosecutors, by taking an aggressive stance on corporate crime. Nor in particular does it appear he has any appetite for taking on pharma’s role in the opioids crisis. Lack of a credible federal corporate enforcement threat certainly skews the incentives against expecting any change in industry behavior anytime soon.
In the 60 Minutes segment, New Hampshire’s Senator Maggie Hassan said, “The pharmaceutical industry is doing everything it can to keep this epidemic going.” New Hampshire has been badly hit by the opioids crisis, with the second highest rate of drug overdose deaths among US states.
Hassan discussed the role state attorneys general might still play in holding pharma accountable, while noting at present the lack of sufficient current incentives to change their behaviour:
Maggie Hassan: Well, right now, they don’t have a lot of incentives and that’s something that has to be changed. This in many ways reminds me of the situation with big tobacco– and, you know, I think it’s one of the reasons you see attorneys general around the country–beginning to file lawsuits against the pharmaceutical industry–to hold them accountable for the cost of this terrible epidemic.
41 state attorneys general have banded together to sue the opioid industry. While at McKesson, John Hammergren begins his 18th year as CEO. This year, the board awarded him an additional $1.1 million performance bonus. A bonus based on ethics and accountability.
As I discussed in my June piece, States Launch New Joint Probe into Company Sales and Marketing Practices for Opioids, state attorneys general (AGs) have considerable authority to force major changes in an industry’s operations– the best example is tobacco.
In 1998, following many years of investigation and litigation, 46 state AGs entered into a Master Settlement Agreement with the four largest tobacco companies– Brown & Williamson, Lorillard, Philip Morris, and R.J. Reynolds. As part of that settlement, the companies agreed to pay out more than $200 billion over 25 years, as well as to make significant changes in the way they sold and marketed their products. They also agreed to disband their lobbying organizations, to fund anti-smoking efforts, and to make public information provided during the discovery process.
And I want to reiterate what I wrote in June:
… the game is not completely lost, even if the DoJ follows in the ignominious footsteps of its immediate predecessor, and it and other agencies focus on arbitrary regulatory rollback, to the exclusion of other pressing priorities.
I note that these state AG efforts continue. Just Friday, Jurist reported another lawsuit filed by Lorain County, Ohio, against 25 pharma companies and opioid distributors for deceptive and misleading marketing practives:
Loraine County joins a growing list of municipalities filing suit against drug companies for the opioid crisis, including the city of Lorain, Ohio’s Lake County and Cuyahoga County, as well as Ohio Attorney General Mike Dewine [JURIST report] earlier this year.
The complaint alleges that “the defendants knew — and had known for years — that with prolonged use, the effectiveness of opioids wanes, requiring increases in doses and markedly increasing the risk of significant side effects and addiction.”
The complaint lists ten causes of action, including corrupt practices, deceptive trade practices, public nuisance, fraud, unjust enrichment, among others. The county is seeking compensatory damages and punitive damages, as well as a jury trial.
The suit lists more than 20 drug manufacturers and distributors, including Purdue Pharma, the maker of the painkiller Oxycontin, Cephalon, Johnson & Johnson, Janssen Pharmaceuticals and Ends Pharmaceuticals, as well as several physicians.
I hope the 60 Minutes/Washington Post investigation galvanises some federal action.
Yet to that end, I’m not cheered by last week’s news that Trump has delegated to Kelly Anne Conway the task of co-ordinating policy to address the opioids crisis, as Stat reports in Kellyanne Conway leading an ‘opioids cabinet,’ as she assumes more active policy role. Somehow, I don’t think that prospect strikes fear in the heart of any pharma executive. I also note that funding for new initiatives to address the problem have stalled, as Stat reports in White House tamps down expectations of additional opioid funding this year.
The 60 Minutes/Washington Post joint investigation reminds us that it’s not the Trump administration’s faulty staffing, nor underfunding, that let the opioids crisis reach the current sorry state of affairs.