DoJ Launches Nationwide Lawsuit Against Walmart for Opioids Violations

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

Last Tuesday, the Department of Justice (DoJ) filed a civil lawsuit against Walmart alleging that the company “unlawfully dispensed controlled substances from pharmacies it operated across the country and unlawfully distributed controlled substances to those pharmacies throughout the height of the prescription opioid crisis.”

According to the DoJ:

The complaint alleges that this unlawful conduct resulted in hundreds of thousands of violations of the Controlled Substances Act (CSA). The Justice Department seeks civil penalties, which could total in the billions of dollars, and injunctive relief.

….

The result of a multi-year investigation by the department’s Prescription Interdiction & Litigation (PIL) Task Force, the complaint filed in the U.S. District Court for the District of Delaware alleges that Walmart violated the CSA in multiple ways as the operator of its pharmacies and wholesale drug distribution centers. The complaint alleges that, as the operator of its pharmacies, Walmart knowingly filled thousands of controlled substance prescriptions that were not issued for legitimate medical purposes or in the usual course of medical practice, and that it filled prescriptions outside the ordinary course of pharmacy practice. The complaint also alleges that, as the operator of its distribution centers, which ceased distributing controlled substances in 2018, Walmart received hundreds of thousands of suspicious orders that it failed to report as required to by the DEA. Together, the complaint alleges, these actions helped to fuel the prescription opioid crisis.

Walmart faces significant civil penalties, but no criminal charges. According to the DoJ:

If Walmart is found liable for violating the CSA, it could face civil penalties of up to $67,627 for each unlawful prescription filled and $15,691 for each suspicious order not reported. The court also may award injunctive relief to prevent Walmart from committing further CSA violations.

Trump DoJ Eschews Criminal Corporate Charges, Following Predecessor’s Policy

Wait a minute. I thought the penalty for drug pushing, particularly for controlled substances, was jail time. Not just big fines. But apparently, I’m mistaken. Beginning in earnest under Trump’s predecessor, the DoJ largely stopped bringing criminal charges against corporations and their officers for most of the alleged wrongs they commit, confining its charges to civil ones alone. Now the Trump DoJ has continued to follow a similarly relaxed approach, even to corporate drug pushing policies.

The misguided policy first put forward by Obama Attorney General Eric Holder – the so-called ‘Holder Doctrine’ – eschewed criminal charges against corporations and their officers, The Obamamometer’s Toxic Legacy: The Rule of Lawlessness. As regular readers are well aware, the erosion in the rule of law in these United States thus well predates Trump, as I wrote in that 2016 post summarizing the Holder Doctrine and its consequences:

Federal prosecutors, and regulatory agencies, have turned into toothless tigers when it comes to prosecuting C-suite types, and pursuing corporations seriously, for economic crimes. Both financial institutions and their management got virtually a free pass for their activities that led to the Great Recession. And not only for those, but for subsequent foreclosure abuses, LIBOR and other market manipulations, money laundering, tax scams, and doing business contrary to US sanctions policy. Yet to date, not a single C-suite type has been indicted.

It’s not just financial institutions that’ve received a free pass. Big Pharma, for example, has also been lucky, as have companies that have engaged in creative tax minimization strategies (Apple, anyone?). And if looked at from the perspective of legal topics, rather than corporate actors, entire areas of law– antitrust, for example– are not really relevant anymore.

You don’t have to take my word for it. No less a source than the NY Times’ DealBook column– not a venue, incidentally, renowned for its trenchant, timely critiques of either Wall Street or other corporate behavior– in September lamented, Law Enforcement ‘Not Winning’ War on White Collar Crime. I wrote about this article in a September post and so won’t rehash all the arguments I made then here. But a few points are in order.

The lack of enforcement not only means that the guilty don’t pay. It also determines what corporate strategies get pursued, which business models are developed or rejected, what attitudes corporations take to risk, and how resources get allocated to name just a few consequences. And as I’ll discuss below, it also shapes how attorneys practice law, and the impact their advice carries in deterring certain types of corporate behavior.

I never thought I’d be nostalgic for President George W. Bush’s Department of Justice (DoJ). Now, I’m well aware of the scandal that ensued over Attorney General Alberto Gonzales imposing ideological litmus tests on assistant US attornies. Nonetheless, in the wake of the collapse of the dotcom bubble, the Bush DoJ actually enforced the law. It prosecuted cases and claimed scalps. Companies such as Adelphi, Enron and WorldCom all saw top-level management prosecuted, and malefactors sent to jail.

Alas, you’d never know this if you relied on the mainstream media to parse the Trump record – particularly its record relative to its predecessor. So, in a discussion of three possible candidates for Attorney General, the Washington Post, As Biden zeroes in on attorney general pick, some worry one contender is too moderate on criminal justice issue, sees the task:” As President-elect Joe Biden seeks an attorney general who can restore public faith in the Justice Department as an independent law enforcement institution while boosting internal morale, federal appeals court judge Merrick Garland has consistently found himself on the shortlist.” Jerri-Lynn here (my emphasis):

Garland is among three people, all former federal prosecutors, who remain under consideration by Biden for the attorney general job, according to people familiar with the discussions. The others are Sen. Doug Jones (D-Ala.), who lost his reelection bid, and former deputy attorney general Sally Yates.

Note that the Post piece focuses on criminal justice reform and sentencing, and to the  extent it mentions Holder, emphasizes those elements of his record. The article is silent on the approach Biden prosecutors will pursue on prosecuting corporations and how aggressive they will be.

Ongoing Opioids Litigation

I want to mention in passing the status of other significant opioids litigation, where the Trump DoJ has pursued some lawsuits as part of its overall opioids policy. Alas, the COVID-19 pandemic has delayed the trial of the most significant of these, one of the largest civil cases ever brought in U.S. courts, according to the Washington Post, Coronavirus stalls long-awaited day in court for historic opioid lawsuit:

More than 3,000 cities, towns, Native American tribes and other groups have spent years preparing for trials against the nation’s largest drug manufacturers, distributors and pharmacies, alleging that the companies flooded their communities with prescription pills that fueled the opioid epidemic. But the pandemic has stalled their long-awaited day in court: Since the beginning of December, two federal trials have been delayed — a May 2021 trial in Cleveland against pharmacy chains was pushed to next October and a January trial in West Virginia was put off with no rescheduled date.

“The concept of a speedy trial or the right to a trial, we’ve lost that,” Joe Rice, one of the lead attorneys for the plaintiffs, said the day Cleveland’s trial was postponed.

That pushes off resolution of the dispute. And with the trial delayed, the defendants have little incentive to press for settlement. According to the Post:

The pandemic has delayed a resolution of the legal dispute by at least a year, Rice estimates, adding that other delays could push the next trial to late spring or early summer of 2021. Meanwhile, the pandemic has worsened the opioid crisis, which has caused more than 400,000 overdose deaths in the past two decades. More than 81,000 people died of drug overdoses in the 12 months ending in May 2020, a record high, the Centers for Disease Control and Prevention reported Dec. 17.

It is unlikely that the firms being sued will push for a settlement while there is no pending trial, the plaintiffs and legal experts following the litigation predict. A $260 million settlement between two Ohio counties and four drug companies put off the first federal trial in October 2019 when the agreement was reached hours before opening arguments were scheduled to begin.

The Bottom Line

Dealing with the opioid crisis now becomes the responsibility of the Biden DoJ. Given how badly the Democrats muddled U.S. policy towards corporate prosecutions – particularly the issue of bringing corporate charges – I have little confidence that we’ll see any significant tightening in this regard. And that’s likely good news for Walmart. Wouldn’t do for prosecutors to take the same approach to their drug pushing that the NYPD took to the petty dealers in my neighborhood in the late 90s before it gentrified.

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48 comments

      1. IdahoSpud

        It’s always best to punish unwitting shareholders. It would be unseemly to hold some some suit in headquarters accountable!

        Reply
  1. timbers

    “…hundreds of thousands of violations…”

    How does a person even get to be able to do anything hundreds of thousands times?

    Does three times you’re out apply here? And since we now know that Walmart Inc. is a person, will it serve life imprisonment? If not, who will in her place?

    Reply
    1. Keith

      Well, considering the problem that Walmart was not reporting these to the DEA, you never know, although the DEA may go after those prescribing these drugs, instead. A big fine for Walmart and a couple of doctors being prosecuted could be just the chilling effect needed to get Americans to stop being a pill popping nation. Although, some may ask if the cure is worse than the condition.

      Reply
      1. Harry

        Yes, although why exactly didn’t that happen 20 years ago?

        Which I think is the point of the prosecution. Failing to taking obvious steps to prevent unlawful transactions when failing to take those steps was in the financial interest of the party, seems to me worth prosecuting as willful non-compliance.

        Reply
  2. Anonymous

    What a country! Its economic system is designed to exploit and oppress the non-rich and then it virtue signals by outlawing pain relief!

    There’s a word for that and it’s called hypocrisy.

    Shorter: A just economic system would produce little demand for drugs in order to escape reality.

    Reply
    1. Yves Smith

      This is called straw manning, which is a violation of our written site Policies. Or have you been asleep for the past 2 years plus as the press has chronicled relentlessly how Purdue Pharma and other opioid makers set out to create addicts?

      Oh and a big part of that effort was the setting up and funding various astroturf pain organizations. You sound like you come right out of them, save for the new spin, “The economically oppressed have a right to make their bad situation worse by getting hooked.”

      Reply
        1. Anonymous

          Thanks for the link.

          Also this:

          Give strong drink to him who is perishing,
          And wine to him whose life is bitter.
          Let him drink and forget his poverty
          And remember his trouble no more.

          Open your mouth for the mute,
          For the rights of all the unfortunate.
          Open your mouth, judge righteously,
          And defend the rights of the afflicted and needy.
          Proverbs 31:6-9

          Poverty in the Bible is a disgrace (cf. Deuteronomy 15:4-5) but if we insist on it via disobedience then denying the victims some escape is to be doubly sinful and a hypocrite.

          Reply
  3. Count Zero

    ‘White Hot Harlots’

    I was wondering if the name of the site alludes to any specific HR University Department?

    Reply
    1. Upwithfiat

      Especially a bank.

      And btw, corporations are the most so-called “credit worthy” of what is, in essence due to government privilege, the public’s credit but for private gain.

      So to the extent people support privileges for the banks they also support corporate abuse since otherwise corporations would be more broadly owned and thus more democratic.

      Reply
      1. amit chokshi

        fwiw, to me it seems doj is trying to go after all related parties in opioids with deep pockets.

        they have a potential deal with JNJ and the three distributors mckesson, amerisourcebergen, and cardinal for 26B for a nationwide framework.

        i think walgreens fought back, henry schein settled.

        this has been since 2019 for the october trial, so i wonder if they don’t want i lose face by trying even if on a weak civil approach to go after wmt.

        doj going after TEVA as well which was the largest opioid producer through actavis but teva could be in position to just provide suboxone and $260mm.

        Reply
    1. Larry

      The death penalty is not the way to go. I would prefer criminal cases to fines that are essentially the tax on the gains from wrong doing.

      Reply
      1. nycTerrierist

        I would like to see enough of a penalty to scare the crap out of other greedsters —

        clawback the ill-gotten gains, plus damages.

        Reply
        1. Procopius

          I’m not a fan of the death penalty for most crimes, mainly on the grounds that it does not deter people who are in the grip of great passion. However, I feel it might be a deterrent to crimes that require more reflection and planning, i.e., white collar crimes. The Chinese, of course, have an entirely different legal philosophy, starting from the assumption that people are innately bad and will only obey authority if threatened with harsh, even brutal, punishments. Anyway, perhaps we could think of expanding the meaning of “treason.” For the last four years I’ve seen people calling all kinds of things, that I consider pretty trivial, “treason,” and demanding death, preferably by torture. As I understand it, “treason” started out as endangering or threatening the king. Then it progressed to acting against the king’s interests, then, I believe, it even reached the level of doing anything the king didn’t like. That was why our founders circumscribed its definition so much. Of course, we would have to pass a constitutional amendment to change the definition, and that’s pretty hard, but if we carefully expanded it to include serious financial fraud, it might deter some of the worst. Doesn’t seem to work much for the Chinese, though, because people keep on doing the same things that other people have been executed for.

          Reply
      2. HotFlash

        as per Larry
        December 27, 2020 at 4:35 pm

        The death penalty is not the way to go. I would prefer criminal cases to fines that are essentially the tax on the gains from wrong doing.

        So, are you saying that the penalty for crimes which, if commited by a human person would be punishable by lengthy imprisonment or even death, should be a tax? Does it follow that taxes are punishment for wrong-doing? I wish I could remember who said, “I will believe that corporations are people when Texas executes one.”

        Reply
  4. Wukchumni

    In my pre-op consultation about 10 days ago, I filled out maybe 25 pages of forms, it was almost never ending. I marked none as far as prescription drugs currently taken was concerned, and they’d left me 10 lines to better describe my fix, and when I handed it in, the woman in charge kept on quizzing me as to whether this could be true, somebody actually not hooked on prescription drugs, a miracle!

    Reply
  5. Tom Stone

    I got off the phone a few minutes ago with an old friend who wants Trump prosecuted for the crimes he committed in office, when I asked if he also thought Obama should be prosecuted for the crimes HE committed while in office, specifically the murder of Abdulrahman al awlaki and the 20 odd innocents who also died in that assassination things degenerated very quickly.
    The tribalism is astounding to me, so many well educated people I know are stuck in “D good, R Bad” or “R good, D bad” that there’s no way to break through.
    Mention that you think that the same laws should apply to everyone and the responses very quickly become personal attacks.

    Reply
    1. flora

      I wonder if your friend, (and many of mine), think that voting a certain way or professing a certain way will protect them from personal disaster in the absence of rule-of-law. I can only wonder why they seem so fearful that rule-of-law is in some danger of disappearing.

      Reply
    2. Molon labe

      “ Everyone appreciates your honesty, until you’re honest with them. Then you’re an asshole”—George Carlin

      Reply
    3. Molon labe

      Trying again without the offensive word (assuming that it why is did not clear moderation). “Everyone appreciates your honesty, until you’re honest with them. Then you’re an @$$#•!€”—George Carlin

      Reply
      1. Synoia

        At my military University, a Lt Colonel, mentioned to me once, “Oh, you are one of the people who believe honesty is the best policy.”

        He went on to become a Major General, the head of his Corps.

        And there is the aphorism: “Behind every great fortune, there is a great crime.”

        Reply
  6. flora

    Dealing with the opioid crisis now becomes the responsibility of the Biden DoJ. Given how badly the Democrats muddled U.S. policy towards corporate prosecutions – particularly the issue of bringing corporate charges – I have little confidence that we’ll see any significant tightening in this regard.

    There are T admin era DoJ charges of monopoly against Google, FB, et al, and now against Walmart for opioid drugs distribution. I will be very interested in whether or not the B admin essentially drops those charges or fails to aggressively pursue them once in office. My priors are the US DoJ 1998 antitrust case against Microsoft which Microsoft lost. (Yes, Judge Thomas Penfield Jackson is one of my personal heros). On appeal the Microsoft case was subsequently https://en.wikipedia.org/wiki/United_States_v._Microsoft_Corp.dismissed during the Bush admin in summer 2001.
    The DOJ announced on September 6, 2001 that it was no longer seeking to break up Microsoft and would instead seek a lesser antitrust penalty. Microsoft decided to draft a settlement proposal allowing PC manufacturers to adopt non-Microsoft software.[28] – above wiki link (ibid)

    So, I will be very interested in what the late T admin DoJ cases resolve into during the B admin; how strenuously will the B DoJ pursue these cased?

    Reply
    1. Geo

      “I don’t think 500 billionaires are the reason we’re in trouble. The folks at the top aren’t bad guys.” – Joe Biden

      They’ll get told to “cut it out” and then they’ll “cut” a check out for the DNC and all will be forgiven.

      Reply
  7. VietnamVet

    If corporate media mentions this, they call it white collar crime; not old fashion mob racketeering that it is. Healthcare is now 17.7% of the GDP. It is all corrupted except for health workers suffering to bring aid and solace to the ill. Like Banking, Big Medicine is too large to fail. But the simple fact is that a for-profit healthcare system is incapable of fighting the pandemic. It will kill all their profits to hire the personnel to test, contact trace, and safely isolate the infected in company funded shelters. What makes it even more costly and intractable is that asymptomatic people are contagious with COVID-19. There is yet to be a cheap approved daily antigen test to determine if a person is contagious that tells them to isolate.

    They are called the Four Horseman of the Apocalypse for good reason. War, Conquest, Famine and Plague can only be fought by nations with strong borders and a united people. If the vaccines work perfectly, only the forced vaccinations of 75%-80% of the population will eradicate the virus. If the vaccines fail and coronavirus becomes endemic, secession of the heartland from the East and West Coasts is a given.

    The only alternative is the restoration of the national public health system in a functional government.

    Reply
      1. Yves Smith

        Please be more careful, since you just posted disinformation and we take a very dim view of that.

        You have could found the spreadsheet at CMS as easily as I did and it says the reverse.

        It includes the net cost of insurance as an administrative cost category.

        Government Administration and the Net Cost of Health Insurance

        This category includes the administrative costs of health care programs such as Medicare and Medicaid as well as the net cost of PHI. Net cost is the difference betweenprivate health insurance expenditures andbenefits incurred and includes administrative costs, additions to reserves, rate credits and dividends, premium taxesand fees, andnet underwriting gains orlosses. Net cost is estimated separately for various types of insurers.

        Health insurance

        This aggregated category is defined to include several specific insurance plans; PHI, Medicare, Medicaid, Children’s Health Insurance Program(CHIP), Department of Defense (DOD), and Department of Veterans Affairs (VA). These plans provide enrolleesand beneficiaries insurance against medical lossesas well as provide health care directly.Health insurance at the Health Consumption Expenditures level includes the PHC benefits plus the administration and net cost of providing insurance.

        Private Health Insurance Net Cost

        PHI expenditures are estimated as the sum of benefits and the net cost of PHI. Aggregate PHI spending is an estimate of total premium revenues, including payments made by employers on behalf of employeesfor health insurance,as well as the employee share of the employer-sponsored health insurance, and direct purchase health insurance. The net cost of insurance is the difference between benefits and total PHI expenditures. This difference includes administrative costs, and in some cases, additions to reserves, rate credits and dividends, premium taxesand fees, and net underwriting gains or losses. This difference is estimated separately for various types of insurers.

        https://www.cms.gov/files/document/definitions-sources-and-methods.pdf

        The discussion at CMS indirectly makes clear that a lot of the numbers that get rolled up into the total are approximate due to the fragmentation of data sources.

        On top of that, like it or not, ~85% of private insurance premiums go to health costs.

        Reply
      2. jonswift

        Last I heard, the 17.7 % of GDP includes all expenditures for healthcare in both private and public.
        Regardless, that’s about twice as much as the average for all countries. You don’t need to make it sound worse than it is–I doubt it could get any worse–but I wouldn’t count on it.

        Reply
    1. Procopius

      ??? “… restoration of the national public health system …”
      I’m so old the doctor came to our house when I had measles, and I have never seen a “public health system.”

      Reply
      1. VietnamVet

        Back in the day, County and Charity Hospitals, affordable doctors, the US Public Health Service treated the ill and tried to do no harm. I was in the USA all of 1968 and never realized that there was an Asian flu pandemic underway that killed 100,000 Americans mostly over 65. Hospital Systems were never reported being overwhelmed like NY or LA this year. But then Richard Nixon started the privatization of Healthcare when hospitals were allowed to make a profit.

        The goal now is more profit and bigger bonuses by extracting as much wealth from the customers as possible. The result is the Opioid Crisis, EpiPen and insulin extortion pricing, surprise billing, credit card debt, and collection agencies.

        With a real public option, Americans would no longer have declining life expectancy, no more medical debt, and socialize freely once more when the coronavirus pandemic is controlled.

        Reply
    2. Synoia

      The version of the 4 Horseman I recall was “War, Famine, Pestilence and Death.” I don’t recall conquest in the list.

      For example, some historians assert the fall of Rome in 410 AD, a conquest, was accomplished when the Citizens of Rome invited the barbarians into the City.

      Rome, in the form of the Vatican, gained tremendous power after that Conquest, by the spread of Roman Catholicism over western Europe.

      Reply
      1. VietnamVet

        According to Reddit only Death is explicitly named in the Bible. “War, Famine, Pestilence and Death” are what I remember too but I am too old to trust my memory. “Death, Famine, War, and Conquest” is listed by Wikipedia. I used it in Abraham Lincoln’s sense “that a house divided against itself, cannot stand”. Without a functional government and a united people, societies are conquered by war, pestilence and famine. That is what is happening now in the USA.

        Reply
  8. Keith

    Law of unintended consequences- this will just cause pharmacies to second guess any Rx they get from a doctor calling for anything that may be addictive. After all, it is better to let an individual suffer than it is to risk a lawsuit or DOJ shakedown.

    I recall reading a couple of years ago about doctors getting cold feet about Rx’s for painkiller due to DEA harassment. By ignoring the culpability of those choosing to abuse these drugs, we just punish the rest of society who will have to pay higher prices due to increased scrutiny and jump through more hurdles to get the meds we may need.

    Reply
    1. Juneau

      True that. The majority of opioid overdose deaths at this point in time involve illicitly obtained and manufactured fentanyl. https://www.cdc.gov/drugoverdose/pubs/featured-topics/VS-overdose-deaths-illicit-drugs.html. Having said that I am not questioning the existence of the prescription pill crisis of the past, and it has been replaced by largely cheap street drugs. Any pharmacist or doctor who values their license will be even more afraid to prescribe ANY scheduled drug appropriately. Unintended consequence perhaps but punishing to some patients who actually need a scheduled medication. This will put the fear of God even into people who are doing the right thing. Perhaps that is one of the goals.

      Reply
      1. Geo

        “Unintended consequence perhaps but punishing to some patients who actually need a scheduled medication. This will put the fear of God even into people who are doing the right thing. Perhaps that is one of the goals.”

        I’m not getting your point here. Are you saying the secret goal of cracking down on opioid prescription abuse is to not sell more pharmaceuticals to patients? Because that seems like the opposite of our reality. Most talk on the subject is about how Americans are over-medicated and on too many prescription drugs.

        Sorry if I’ve misunderstood what you are saying but would appreciate clarification.

        Reply
    2. Geo

      The old “moral hazard for thee but not for me” argument we heard so often during the housing crash. It wasn’t the banks fault, it was those greedy homeowners!

      Pablo Escobar was a bad guy, no matter how many people “chose to abuse” his drugs, as you put it.

      Reply
      1. Keith

        I agree with that second point; people chose to consume the illegal drugs. He was meeting market demand in a black market manner. If we had a legal market, the bloodshed could have been avoided and addicts could be functional rather than being a blight on society.

        If people want to get high, they will. It is ultimately their body so it should be their choice.

        Reply
  9. The Rev Kev

    This is crazy this. It is like going after Walmart for selling bullets and ignoring the gun manufacturers. Would it be too much to expect the DoJ to go after the source of which the biggest is the Sackler family? With the drug dealers on the streets, it is not when you bust some guy trying to score a hit that things get better. It is when you go after the distributors, street sellers and the places that manufacture these drugs that you show some progress. But at least with opioids, you have their addresses and their table of organization up front. As for why they are going after Walmart, maybe it is a DoJ shakedown like Keith mentioned in his comment above.

    Reply
    1. Rudolf

      So why is the Sackler family getting off with a big fine while El Chapo Guzman is rotting in prison for basically running an identical “business?” This seems to be a deferential use of the law benefiting the grossly rich while targeting the “undesirables.” The Sacklers should be sharing the same cell with Guzman.

      Reply
  10. ambrit

    I suddenly had a “lightbulb moment” when reading the post.
    When Phyl was made to go to the ‘Pain Management Clinic’ for surcease of the pain of having a lower left leg surgically removed, she was asked at least twice if she wanted stronger pain medication. From the beginning, the pain med given her was oxycodone. The initial concentration was 5mg per pill. She never went to a stronger dose and weaned herself off of the substance in a matter of months. She got several calls from either the GP that recommended her to or the Pain Management Clinic itself asking if she was “experiencing pain that needed to be ‘dealt with.'” After the second call, Phyl became very insistent at each subsequent call that she did not need the substance any more.
    Were we being subjected to the “nudge protocol?”
    As cynical as I am now, even I did not entertain the thought that something was “rotten in Denmark.” Societally inculcated biases are pernicious things.
    Everyone stay safe!

    Reply
  11. Ep3

    Yves, u do understand that these opioid prosecutions and settlements are just ways to get funding to bankrupt city and state govts.

    Reply

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