U.S. GOVERNMENT PUBLISHING OFFICE

31–601 PDF WASHINGTON : 2019

COMBATING THE OPIOID EPIDEMIC: EXAMINING 

CONCERNS ABOUT DISTRIBUTION AND DIVERSION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

MAY 8, 2018 

Serial No. 115–124 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

GREG WALDEN, Oregon 

Chairman 

JOE BARTON, Texas 

Vice Chairman 

FRED UPTON, Michigan 

JOHN SHIMKUS, Illinois 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

TIM WALBERG, Michigan 

MIMI WALTERS, California 

RYAN A. COSTELLO, Pennsylvania 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

JEFF DUNCAN, South Carolina 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

RAUL RUIZ, California 

SCOTT H. PETERS, California 

DEBBIE DINGELL, Michigan 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

GREGG HARPER, Mississippi 

Chairman 

H. MORGAN GRIFFITH, Virginia 

Vice Chairman 

JOE BARTON, Texas 

MICHAEL C. BURGESS, Texas 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

TIM WALBERG, Michigan 

MIMI WALTERS, California 

RYAN A. COSTELLO, Pennsylvania 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GREG WALDEN, Oregon (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

KATHY CASTOR, Florida 

PAUL TONKO, New York 

YVETTE D. CLARKE, New York 

RAUL RUIZ, California 

SCOTT H. PETERS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Gregg Harper, a Representative in Congress from the State of Mississippi, opening statement ................................................................................. 2 

Prepared statement .......................................................................................... 3 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 4 

Prepared statement .......................................................................................... 6 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

opening statement ................................................................................................ 7 

Prepared statement .......................................................................................... 9 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 10 

Prepared statement .......................................................................................... 11 

WITNESSES

Joseph R. Mastandrea, D.O., Chairman, Miami-Luken, Inc. ............................... 13 

Prepared statement .......................................................................................... 16 

Answers to submitted questions ...................................................................... 124 

John Hammergren, Chairman, President, and Chief Executive Officer, 

McKesson Corp. .................................................................................................... 20 

Prepared statement .......................................................................................... 22 

Answers to submitted questions ...................................................................... 131 

George S. Barrett, Executive Chairman, Cardinal Health .................................. 31 

Prepared statement .......................................................................................... 33 

Answers to submitted questions ...................................................................... 165 

Steven H. Collis, Chairman, President, and Chief Executive Officer, 

AmerisourceBergen Corp. .................................................................................... 43 

Prepared statement .......................................................................................... 45 

Answers to submitted questions ...................................................................... 173 

James Christopher Smith, Former President and Chief Executive Officer, 

H.D. Smith, LLC .................................................................................................. 57 

Prepared statement .......................................................................................... 59 

Answers to submitted questions ...................................................................... 187 

SUBMITTED MATERIAL

Subcommittee document binder 1

Slide, ‘‘Fatal Prescription Opioid Overdose 2017,’’ Virginia Department of 

Health, submitted by Mr. Griffith ...................................................................... 78 

Subcommittee memorandum .................................................................................. 107 

Reports, chief executive officer salaries and compensation, submitted by Ms. 

Castor .................................................................................................................... 116 

1The information has been retained in committee files and also is available 

at https://docs.house.gov/Committee/Calendar/ 

ByEvent.aspx?EventID=108260. 

(1) 

COMBATING THE OPIOID EPIDEMIC: EXAMINING CONCERNS ABOUT DISTRIBUTION 

AND DIVERSION 

TUESDAY, MAY 8, 2018 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2123, Rayburn House Office Building, Hon. Gregg Harper (chairman of the subcommittee) presiding. 

Members present: Representatives Harper, Griffith, Burgess, 

Brooks, Collins, Barton, Walberg, Walters, Costello, Carter, Walden 

(ex officio), DeGette, Schakowsky, Castor, Tonko, Ruiz, Pallone (ex 

officio). 

Also present: Representatives Blackburn, Bilirakis, McKinley, 

Johnson, Guthrie, Lance, and Welch. 

Staff present: Jennifer Barblan, Chief Counsel, Oversight and Investigations; Mike Bloomquist, Staff Director; Karen Christian, 

General Counsel; Jordan Davis, Director of Policy and External Affairs; David DeMarco, Deputy IT Director; Adam Fromm, Director 

of Outreach and Coalitions; Ali Fulling, Legislative Clerk, Oversight and Investigations, Digital Commerce and Consumer Protection; Theresa Gambo, Human Resources and Office Administrator; 

Brittany Havens, Professional Staff, Oversight and Investigations; 

Zach Hunter, Communications Director; Perry Lusk, Minority GAO 

Detailee; Christopher Santini, Counsel, Oversight and Investigations; Jennifer Sherman, Press Secretary; Alan Slobodin, Chief Investigative Counsel, Oversight and Investigations; Hamlin Wade, 

Special Advisor for External Affairs; Christina Calce, Minority 

Counsel; Jeff Carroll, Minority Staff Director; Tiffany Guarascio, 

Minority Deputy Staff Director and Chief Health Advisor; Christopher Knauer, Minority Oversight Staff Director; Miles Lichtman, 

Minority Policy Analyst; Perry Lusk, Minority GAO Detailee; Kevin 

McAloon, Minority Professional Staff Member; Andrew Souvall, Minority Director of Communications; and C.J. Young, Minority Press 

Secretary. 

2 

OPENING STATEMENT OF HON. GREGG HARPER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSISSIPPI 

Mr. HARPER. I now call to order this hearing on ‘‘Combating the 

Opioid Epidemic: Examining Concerns About Distribution and Diversion.’’ 

One year ago today, on May the 8th, 2017, the committee opened 

a bipartisan investigation into the distribution of prescription 

opioids by wholesale drug distributors with a specific focus on unusually large opioid shipments to small pharmacies in West Virginia. The launch of this investigation was spurred by press reports 

of astonishing levels of opioid distribution to pharmacies in small, 

rural West Virginia towns. 

Between 2007 and 2012, distributors sent more than 700 million 

hydrocodone and oxycodone pills to the State, or 433 pills for every 

man, woman, and child in the State. In that timeframe, 1,728 West 

Virginians fatally overdosed on these two drugs. 

The numbers were eye-opening. The Sav-Rite pharmacy in 

Kermit, West Virginia, population around 400, received nearly 9 

million opioids in a 2-year period. Another pharmacy, in nearby 

Oceana, West Virginia, received 600 times as many oxycodone pills 

as the Rite Aid drugstore just eight blocks away. 

This led the committee, on a bipartisan basis, to request information from the Drug Enforcement Administration and the so-called 

Big Three drug distributors: McKesson, Cardinal Health, and 

AmerisourceBergen. These distributors delivered more than 500 

million opioids to West Virginia between 2007 and 2012, with Cardinal shipping 241 million opioids, AmerisourceBergen shipping 

about 119 million opioids, and McKesson shipping more than 150 

million opioids. 

Later in the investigation the committee also sent letters to two 

regional distributors with a major presence in West Virginia, 

Miami-Luken and H.D. Smith. We found that the stunning numbers that led us to start this investigation were much more common than we had hoped. 

Among our discoveries are a single pharmacy in Mount GayShamrock, West Virginia, population 1,779, that received more 

than 16.5 million hydrocodone and oxycodone pills between 2006 

and 2016. In nearby Williamson, West Virginia, population 2,900, 

distributors sent almost 21 million opioids to two pharmacies during the same period. And this is just within the targeted areas that 

we reviewed. 

We have learned much from the investigation but still have 

many questions. For example, why did the distributors repeatedly 

fail to report suspicious orders of opioids or exercise effective controls against diversion? 

By 2005, internet pharmacies had transformed the DEA regulatory paradigm with unprecedented large volumes of controlled 

substances being shipped to individual pharmacies. Pill mill doctors and pharmacies began to proliferate. The agency needed help, 

and given their position in the supply chain and their legal obligations to identify and report suspicious orders, identified the distributors as a main line of defense against diversion. 

3 

Through meetings and letters over a period of years, the DEA 

educated and coached the distributors on their responsibilities. The 

distributors have contended that the DEA provided insufficient 

communication and guidance. Distributors have also said that only 

the DEA can see the full picture with respect to pharmacy volume 

and that distributors are simply privy to their own data. 

But were distributors’ capabilities that limited? Distributors conduct due diligence, site visits, and can obtain market data. They 

can request and analyze a pharmacy’s dispensing data, which provides the distributors with the ability to see all the controlled substances being dispensed by a pharmacy and the prescribers over a 

given period of time. 

In some cases, such as what we have seen in West Virginia, the 

volume of controlled substances a distributor sends on its own 

should be cause for concern. 

Distributors also contend that they do not set demand and simply satisfy orders for prescriptions written by licensed doctors and 

filled by licensed pharmacists. But what about the distributor’s 

legal responsibility to know their customer and perform due diligence? 

And what does our work mean for the rest of the country? West 

Virginia is far from the only State heavily impacted by the opioid 

epidemic. It has hit every State, and everyone in this room has 

been affected in some way. 

How many other communities across the country have received 

millions more opioids than their communities could reasonably sustain? How many other times did a distributor miss the red flags 

of their own distribution, let alone what could be found with due 

diligence? How many other Kermits and Williamsons are out there? 

It is my hope that we will see some answers today as to how the 

drug distributors seemingly missed the red flags of diversion. 

I want to welcome the witnesses and thank each of you for your 

participation to help us in this important investigation. 

I also thank my colleagues from across the aisle for all of their 

hard work on this bipartisan investigation. 

And I now recognize the ranking member of the subcommittee, 

Ms. DeGette. 

[The prepared statement of Mr. Harper follows:] 

PREPARED STATEMENT OF HON. GREGG HARPER

One year ago today, May 8, 2017, the committee opened a bipartisan investigation 

into the distribution of prescription opioids by wholesale drug distributors, with a 

specific focus on unusually large opioid shipments to small pharmacies in West Virginia. 

The launch of this investigation was spurred by press reports of astonishing levels 

of opioid distribution to pharmacies in small, rural West Virginia towns. Between 

2007 and 2012, distributors sent more than 780 million hydrocodone and oxycodone 

pills to the State—or 433 pills for every man, woman, and child in the State. In 

that timeframe, 1,728 West Virginians fatally overdosed on those two drugs. 

The numbers were eye-opening. The Sav-Rite pharmacy in Kermit, West Virginia—population around 400—received nearly 9 million opioids in a 2-year period. 

Another pharmacy in nearby Oceana, West Virginia, received 600 times as many 

oxycodone pills as the Rite Aid drugstore just eight blocks away. 

This led the committee on a bipartisan basis to request information from the Drug 

Enforcement Administration, and the so-called Big Three drug distributors: 

McKesson, Cardinal Health, and AmerisourceBergen. These distributors delivered 

more than 500 million opioids to West Virginia between 2007 and 2012, with CarVerDate Mar 15 2010 14:59 Dec 20, 2018 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 I:\115THCONGRESS\115X124OPIOIDDISTRIBUTION\115X124OPIOIDDISTRIBUTIONWOR
4 

dinal shipping 241 million opioids, AmerisourceBergen shipping about 119 million 

opioids, and McKesson shipping more than 150 million opioids. Later in the investigation, the committee also sent letters to two regional distributors with a major 

presence in West Virginia: Miami-Luken and H.D. Smith. 

We found that the stunning numbers that led us to start this investigation were 

more common than hoped. 

Among our discoveries are a single pharmacy in Mount Gay-Shamrock, West Virginia-population 1,779-that received more than 16.5 million hydrocodone and 

oxycodone pills between 2006 and 2016. In nearby Williamson, West Virginia—population 2,900-distributors sent almost 21 million opioids to two pharmacies during 

the same period. And this is just within the targeted areas that we reviewed. 

We have learned much from the investigation, but still have many questions. For 

example, why did the distributors repeatedly fail to report suspicious orders of 

opioids or exercise effective controls against diversion? By 2005, Internet pharmacies had transformed the DEA regulatory paradigm, with unprecedented large 

volumes of controlled substances being shipped to individual pharmacies. Pill mill 

doctors and pharmacies began to proliferate. The agency needed help, and, given 

their position in the supply chain and their legal obligations to identify and report 

suspicious orders, identified the distributors as a main line of defense against diversion. Through meetings and letters over a period of years, the DEA educated and 

coached the distributors on their responsibilities. 

The distributors have contended that the DEA provided insufficient communication and guidance. Distributors have also said that only the DEA can see the full 

picture with respect to pharmacy volume and that distributors are simply privy to 

their own data. 

But were distributors’ capabilities that limited? Distributors conduct due diligence, site visits, and can obtain market data. They can request and analyze a pharmacy’s dispensing data, which provides the distributors with the ability to see all 

the controlled substances being dispensed by a pharmacy and the prescribers over 

a given period of time. In some cases, such as what we have seen in West Virginia, 

the volume of controlled substances a distributor sends on its own should be cause 

for concern. 

Distributors also contend that they do not set demand, and simply satisfy orders 

for prescriptions written by licensed doctors and filled by licensed pharmacies. But 

what about the distributors’ legal responsibility to ‘‘know their customer’’ and perform due diligence? 

And what does our work mean for the rest of the country? West Virginia is far 

from the only State heavily impacted by the opioid epidemic. It has hit every State, 

and every one of us in the room has been affected in some way. How many other 

communities across the country have received millions more opioids than their communities could reasonably sustain? How many other times did a distributor miss the 

red flags of their own distribution—let alone what could be found with due diligence? How many other Kermits and Williamsons are out there? 

It’s my hope that we will get some answers today as to how the drug distributors 

seemingly missed the ‘‘red flags’’ of diversion. 

I welcome the witnesses and thank you for your participation. I also thank my 

colleagues across the aisle for all of their hard work on this investigation and now 

recognize the ranking member of the subcommittee, Ms. DeGette. 

Mr. HARPER. And I now recognize the ranking member of the 

subcommittee, Ms. DeGette. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you so much, Mr. Chairman. 

This investigation has been bipartisan. And as you mentioned, it 

was a year ago today when we sent our first letters to three of the 

drug wholesale distributors before us today. Those letters described 

the devastation of the opioid crisis, and they referenced a report 

that, over 6 years, distributors showered the State with 780 million 

hydrocodone and oxycodone pills while 1,728 West Virginians fatally overdosed on those two painkillers. 

5 

Over the last year, we learned a lot more about the full scope of 

the epidemic in West Virginia. As the chairman said, we obtained 

data showing that pharmacies in tiny towns received millions of 

pills in just a few years. 

But our work is not finished. We want to know what these companies knew about the rise of the opioid epidemic, when they knew 

it, and whether it informed their distribution practices. 

In fact, over a decade ago the DEA sent letters to all registered 

distributors informing them that, quote, ‘‘The abuse of controlled 

prescription drugs is a serious and growing health problem in this 

country,’’ end quote. 

In 2007, CDC reported that drug overdose deaths nationwide increased by 276 percent between 1999 and 2014, and in West Virginia, drug overdose deaths were up by 550 percent. 

A well-publicized 2008 JAMA study specifically implicated prescription opioids in the rise of overdose deaths. 

In 2010, the New England Journal of Medicine article, ‘‘A Flood 

of Opioids, a Rising Tide of Deaths,’’ showed that the prescription 

opioids death toll continued to rise, particularly in West Virginia. 

In 2011, the Charleston Gazette published a major story describing how residents began calling the town of Williamson, quote, 

‘‘Pilliamson,’’ because so many opioids had flooded that town. 

And this is just a small sampling of the articles that highlighted 

the rise of this epidemic. 

So yet, even as this information was coming out, it appears that, 

over 3 years, distributors sent more than 11 million pills to one 

pharmacy in a town of 400 and more than 12 million total pills to 

two pharmacies in a town of 3,000. I mean, come on. 

I know we are going to hear from the distributors that they had 

systems in place and that they only fill orders by pharmacies that 

hold valid DEA licenses. At the end the day, however, I think we 

can all agree, whatever systems were in place did not prevent damage to these communities caused by what appears to be the excessive supply of opioid pills. 

Some of the counties that have been the focus of the investigation have the highest death and overdose rates in the Nation. The 

epidemic has devastated families throughout that State, and it has 

placed huge burdens on the State’s healthcare system, its child 

welfare program, and its economy as a whole. 

Now, we need to understand the root causes of how we let this 

happen and why distributors apparently supplied so many opioids 

to certain small town pharmacies. For example, how did the tiny 

town of Kermit, with a population of 400, receive 9 million pills in 

just 2 years? Shouldn’t the distributors’ suspicious order systems 

have immediately flagged and halted shipment of this magnitude? 

And shouldn’t the distributors have examined them more closely to 

determine the appropriateness for shipping them? 

I also want to understand why major drug companies failed to 

have adequate suspicious order reporting programs in place and 

were forced to have to settle with the DOJ and the DEA not once, 

but twice during this epidemic. Do the distributors believe that any 

of their suspicious order reporting system failed? And if so, how? 

6 

I hope what we learn today will help us inform investigations all 

across the country, including in Colorado, which has had similar 

concerns raised about overdistribution. 

Mr. Chairman, let me conclude by saying we agree it is critical 

that we understand what happened and how the Nation has found 

itself in the grip of this opioid crisis. But at the same time, I think 

that the overall committee needs to make sure that we have adequate resources available to help those in need and to get people 

like those in the hard-hit places we will be talking about today the 

recovery that they need. 

As we look back on what happened, we cannot turn our backs on 

those who were devastated by this crisis. 

Thank you, and I yield back. 

[The prepared statement of Ms. DeGette follows:] 

PREPARED STATEMENT OF HON. DIANA DEGETTE

Exactly 1 year ago today, this committee sent our first letters to three of the drug 

wholesale distributors before us today. Our letters described the devastation of the 

opioid crisis, and referenced a report that over 6 years, distributors ‘‘showered the 

State with 780 million hydrocodone and oxycodone pills, while 1,728 West Virginians fatally overdosed on those two painkillers.’’ 

Over the past year, we have learned more about the full scope of this epidemic 

in West Virginia. We have obtained data showing that pharmacies in tiny towns received millions of pills in just a few years. 

But Mr. Chairman, our work is not finished. I want to know what these companies knew about the rise of the opioid epidemic, when they knew it, and whether 

it informed their distribution practices. 

In fact, over a decade ago, DEA sent letters to all registered distributors, informing them that ‘‘the abuse of controlled prescription drugs is a serious and growing 

health problem in this country.’’ 

In 2007, CDC reported that drug overdose deaths nationwide increased by 276 

percent between 1999 and 2004, and that in West Virginia, drug overdose deaths 

were up by 550 percent. 

A well-publicized 2008 JAMA study specifically implicated prescription opioids in 

the rise in overdose deaths. 

In 2010, the New England Journal of Medicine article ‘‘A Flood of Opioids, a Rising Tide of Deaths,’’ showed that the prescription opioids death toll continued to 

rise, particularly in West Virginia. 

In 2011, the Charleston Gazette published a major story describing how residents 

began calling the town of Williamson [quote], ‘‘Pill-iamson,’’ because so many opioids 

had flooded that town. 

And this is just a small sample of the articles highlighting the rise of this epidemic. 

And yet, even as all of this information was coming out, it appears that over 3 

years, distributors sent more than 11 million pills to one pharmacy in a town of 400, 

and more than 12 million total pills to two pharmacies in a town of 3,000. 

I know that we will hear from the distributors that they had systems in place and 

that they only fill orders by pharmacies that hold valid DEA licenses. At the end 

of the day, however, whatever systems were in place did not prevent the damage 

to these communities caused by what appears to be the excessive supply of opioid 

pills. 

Some of the counties that have been the focus of our investigation have the highest death and overdose rates in the Nation. The epidemic has devastated families 

throughout that State and it has placed huge burdens on the State’s health care 

system, its child welfare program, and its economy as a whole. 

We need to understand the root causes of how this happened, and why distributors apparently supplied so many opioids to certain small-town pharmacies. 

For example, how did the tiny town of Kermit with a population of 400 hundred 

receive 9 million pills in just 2 years? Should the distributors’ suspicious order systems have immediately flagged and halted shipments of this magnitude, and examined them more closely to determine their appropriateness before shipping them? 

I also want to understand why major drug companies failed to have adequate suspicious order reporting programs in place and were forced to settle with DOJ and 

7 

DEA not once, but twice during this epidemic. Do these distributors believe that any 

of their suspicious order reporting systems failed, and if so, how? 

I hope that what we learn today will inform investigations in other States, including Colorado, which has had similar concerns raised concerning over distribution, 

going forward. 

Mr. Chairman, let me conclude by saying that it is critical that we understand 

what happened and how the Nation has found itself in the grip of this ongoing 

opioid crisis. But at the same time, I also believe we commit to making adequate 

resources available to help those in need, and get people, such as those in the hard 

hit places we will be talking about today, the recovery help they need. As we look 

back at what happened, we cannot turn our backs on those who have been devastated by this crisis. 

Thank you. 

Mr. HARPER. The gentlewoman yields back. 

The Chair now recognizes the chairman of the full commitment, 

Mr. Walden, for the purposes of an opening statement. 

OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. WALDEN. Thank you, Mr. Chairman. 

Over the last few years, the Energy and Commerce Committee 

has conducted multiple investigations, enacted major bipartisan 

legislation, and helped authorize historic levels of funding to help 

those battling this epidemic in our communities all across America. 

But clearly we have much more work to do, including two important hearings and a full committee markup this week on this issue. 

Our efforts continue on two tracks. One is to provide new legislative solutions, new laws, new programs to combat the crisis. And 

the second track is to continue our yearlong investigation into its 

causes. 

As you have heard before, today’s hearing marks a 1-year anniversary since we first asked the Drug Enforcement Administration 

and the Nation’s largest distributors of opioids for information 

about the overwhelming amount of prescription opiates that flooded 

into countless communities all across the United States. 

After hearing from the DEA in March, it is important that today 

we hear from the executives who lead the most influential pharmaceutical distribution companies in America. We have tough questions for you today. You know that. But we ask you these questions 

in order for all of us to find solutions. 

Today, a thousand people will go into emergency rooms overdosing on opioids. Today in America, 115 people will die from 

opioid addiction and overdose. This is why we are moving forward. 

A decade ago, the DEA realized that its enforcement strategy 

had to change to fight the rising tide of internet pharmacies, internet pharmacies and pill mills. With more than a million DEA registrants, the DEA simply could not fight this only at an individual 

doctor and pharmacy level. 

So to more effectively and efficiently combat this emerging law 

enforcement challenge, the DEA asked the drug distributors to play 

a more proactive role in identifying, analyzing, and reporting and 

blocking suspicious orders of controlled substances. 

In 2005, the DEA started the Distributor Initiative Program. 

That program had a goal of educating registrants on maintaining 

effective controls against diversion and monitoring for and reporting suspicious orders. DEA held individual meetings in 2005 and 

8 

2006 with McKesson, with Cardinal Health, and 

AmerisourceBergen, and instructed companies on how to identify 

and submit reports of suspicious orders. 

In 2006 and 2007, the DEA sent three letters to all DEA-registered distributors to put them on notice about their legal obligations. However, soon after the start of this initiative, each of these 

three companies faced enforcement actions, in 2007 and 2008, for 

failures to maintain effective controls against the diversion of controlled substances. Cardinal Health and McKesson each paid civil 

penalties totaling millions of dollars. 

Meanwhile, the opioid crisis worsened over the next decade, especially in ravaged communities like we have heard about this morning and in our investigations in small towns in West Virginia. 

Even after the 2008 settlements, while concerns rose over the 

opioid epidemic, some distributors were still failing to exercise effective controls against diversion. This led to more enforcement actions and more settlements, including a record-setting $150 million 

civil penalty by McKesson in 2017. It remains an open question 

today whether the distributors have finally achieved effective DEA 

compliance programs. 

Since the 1970s, distributors have had a statutory responsibility 

under the Controlled Substances Act to exercise due diligence to report and avoid filling suspicious orders. This responsibility is due 

to their unique position in the marketplace. They are the 

chokepoints in the U.S. prescription drug supply chain. 

Three of those that are before us today, McKesson, Cardinal 

Health, and AmerisourceBergen, account for about 85 percent of 

the drug supply. So it is not sufficient just to blame the DEA, although we have our own issues with the DEA’s role in this. You 

have a unique set of resources and tools at your disposal and a 

shared responsibility in flagging suspicious activity and diversion. 

You are on the front lines of the defense in this crisis. 

Instead, the information uncovered by the investigation over the 

last year is stunning. There is no logical explanation that we can 

find for why a town of approximately 400 people would receive 9 

million opioid pills in 2 years or why a single pharmacy in a town 

of 1,800 people would receive nearly 17 million opioid pills in a decade. Then there are two pharmacies in a nearby town of 2,900 people which received nearly 21 million opioids in the same timeframe. 

No matter how you cut these data, behind each of these numbers 

was a pill mill, and they proliferated for far too long. 

So given what we know about the volume of opioid shipments to 

small towns in West Virginia and the associated pill mills and diversion schemes in those areas, it is difficult not to be troubled by 

the compliance efforts by our Nation’s distributors. 

So we look forward to getting a better understanding of the facts 

and to finally have this necessary and frank conversation. We owe 

it to the 115 Americans who will die today and every day from 

opioid overdoses and to their loved ones to understand what led to 

this crisis and to identify solutions to stem the tide. 

With that, Mr. Chairman, I yield back. 

[The prepared statement of Mr. Walden follows:] 

9 

PREPARED STATEMENT OF HON. GREG WALDEN

Mr. Chairman, thank you for holding this hearing. I also want to thank you and 

Ranking Member DeGette for your work in this bipartisan investigation. 

This Energy and Commerce Committee is leading the national fight to combat the 

opioid crisis. Over the past few years we’ve conducted multiple investigations, enacted major bipartisan legislation, and helped authorize historic levels of funding— 

to help those battling this epidemic in communities across the country. But clearly 

we have more work ahead of us, including two important hearings and a full committee markup this week. Our efforts continue on two-tracks, providing new legislative solutions to combat the crisis and conducting thorough investigations into its 

causes. 

Today’s hearing marks 1 year to the day since we first asked the DEA and the 

Nation’s largest opioid distributors for information about the overwhelming amount 

of prescription opiates that flooded countless communities. After hearing from the 

DEA in March, it’s important that today we hear from the executives who lead the 

most influential pharmaceutical distributors in the country. We have tough questions for you today, but we ask you these questions in order for us all to find solutions. 

More than one decade ago, the DEA realized that its enforcement strategy had 

to change to fight the rising tide of internet pharmacies and pill mills. With more 

than one million DEA registrants, the DEA simply could not fight this only at an 

individual doctor and pharmacy level. To more effectively and efficiently combat this 

emerging law enforcement challenge, the DEA asked the drug distributors to play 

a more proactive role in identifying, analyzing, reporting, and blocking suspicious 

orders of controlled substances. 

In 2005, the DEA started the ‘‘Distributor Initiative Program,’’ with the goal of 

educating registrants on maintaining effective controls against diversion, and monitoring for and reporting suspicious orders. DEA held individual meetings in 2005 

and 2006 with McKesson, Cardinal Health, and Amerisource Bergen, and instructed 

the companies on how to identify and submit reports of suspicious orders. In 2006 

and 2007, the DEA sent three letters to all DEA-registered distributors to put them 

on notice about their legal obligations. 

However, soon after the start of this initiative, each of these three companies 

faced enforcement actions in 2007 and 2008 for failures to maintain effective controls against diversion of controlled substances. Cardinal Health and McKesson each 

paid civil penalties totaling millions of dollars. 

Meanwhile, the opioid crisis worsened over the next decade, especially in ravaged 

communities like the small towns in rural West Virginia. 

Even after the 2008 settlements, while concerns rose over the opioid epidemic, 

some distributors were still failing to exercise effective controls against diversion. 

This led to more enforcement actions, and more settlements, including a record-setting $150 million civil penalty by McKesson in January 2017. It remains an open 

question today whether the distributors have finally achieved effective DEA compliance programs. 

Since the 1970s, you have had a statutory responsibility under the Controlled 

Substances Act to exercise due diligence to report and avoid filling suspicious orders. This responsibility is due to your unique position in the marketplace. You are 

the chokepoints in the U.S. prescription drug supply chain. Three of you— 

McKesson, Cardinal Health, and AmerisourceBergen—account for about 85 percent 

of the drug supply. 

It is not sufficient to simply blame the DEA. You have a unique set of resources 

and tools at your disposal, and a shared responsibility in flagging suspicious activity 

and diversion. You are supposed to be one of the first lines of defense in this crisis. 

Instead, the information uncovered by this investigation over the last year is stunning. There is no logical explanation for why a town of approximately 400 people 

would receive 9 million opioid pills in 2 years. Or why a single pharmacy in a town 

of about 1,800 people would receive nearly 17 million opioid pills in a decade. Then 

there are the two pharmacies in a nearby town of 2,900 people which received nearly 21 million opioids in the same time frame. No matter how you cut this data, behind each of these numbers was a pill mill. And they proliferated for far too long. 

Given what we know about the volume of opioid shipments to small towns in 

West Virginia, and the associated pill mills and diversion schemes in those areas— 

it is difficult to not be troubled by your compliance efforts and the part you have 

played in our Nation’s opioid crisis. 

We look forward to getting a better understanding of the facts, and to finally have 

this necessary and frank conversation. We owe it to the 115 Americans who die 

10 

every day from opioid overdoses, and their loved ones, to understand what led to 

this crisis and to identify solutions to stem the tide. 

Mr. HARPER. The chairman yields back. 

The Chair will now recognize the ranking member for the full 

committee, Mr. Pallone. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman. 

The opioid epidemic continues to devastate this country, and virtually no community in America has been left untouched. West Virginia in particular has been severely affected. For the last several 

years, West Virginia has had the highest overdose death rate in 

the country. 

This committee’s investigation has uncovered some very troubling information about seemingly large shipments of opioids from 

drug distributors to rural pharmacies in West Virginia over the 

course of several years. 

And I think it is important for us to understand what went 

wrong and why, but we must also understand what needs to 

change so that we do not ever find ourselves in this situation 

again. For example, there is simply no excuse for distributors sending more than 13 million doses of opioids to a single pharmacy in 

a town of just over 400 people over a 6-year period. 

Some of the distributors who supplied high amounts of pills to 

this pharmacy appear not to have submitted suspicious order reports to DEA even though the law requires them to do so. In addition, some of the distributor’s files are either sparse or unavailable, 

raising additional questions about whether they investigated the 

risk of diversion before shipping these pills. 

In the end, Federal authorities raided and shut down this pharmacy, and its owner went to jail. And we must understand what 

went wrong here so that we can be sure that no town is ever again 

flooded with pills. 

In another case, two doctors in the town of Williamson prescribed 

more opiates than entire hospitals did, according to a Justice Department press release, and these doctors were in fact the highest 

opioid prescribers in the entire State and were widely known to be 

running pill mills. One of these doctors ultimately went to jail; the 

other fled overseas. 

It appears that certain distributor systems failed to detect the 

volume of prescriptions these pharmacies were filling for these doctors, which may have led to oversupply and diversion of pills. 

It is the distributors’ responsibility to know their customers, 

monitor orders, refuse suspicious orders, and report those orders to 

DEA. Distributors must perform these functions particularly when 

pharmacies order high volumes of opioids. But our investigation 

has shown that this did not always happen. 

In fact, some of these distributors paid large fines to DOJ because their systems failed and because they did not report suspicious orders to DEA as required. And these distributors promised 

to clean up their act, but just a few years later, they were again 

hit with multimillion-dollar fines for the very same shortcomings. 

11 

So I want to know how we can be confident that distributors 

have sufficiently improved their systems now so that going forward 

we will not miss key indicators that may help uncover diversion in 

other situations. 

For example, one distributor told us that, with the benefit of 

hindsight, they wished they had asked different questions of at 

least two of the pharmacies we have examined. And I would like 

to know what kind of questions they believe will make the process 

more effective and reduce the possibility of diversion. 

Mr. Chairman, this is a nationwide concern. The problems we 

found in West Virginia have broader lessons for the rest of the 

county. 

I also want point out that this investigation focused on the role 

the distributors played in this crisis, but we know that there are 

many causes of this epidemic. This includes the role of some manufacturers in manufacturing these drugs, the role of some rogue physicians in overprescribing them, and the failure of regulators at the 

State and Federal level to adequately oversee the opioid supply 

chain. 

But let me also highlight another important aspect of this committee’s work which I hope will not be lost as we look as how 

events unfolded in the past, because this crisis is far from over. 

Right now countless Americans, including those in the hard-hit 

areas of West Virginia, still need to access quality healthcare to 

help them recover from the opioid crisis. 

In the past month, we have marked up a substantial number of 

opioid-related bills, and I am still concerned that we have made 

this push without taking the time to make sure we get it right 

without much of an emphasis on treatment. It is not enough to 

only look backwards at this crisis. We must take the necessary 

steps to actually help those who are suffering by providing comprehensive treatment to individuals and communities in need. 

Unless someone wants my minute, I will yield it back. 

Thank you. 

[The prepared statement of Mr. Pallone follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

The opioid epidemic continues to devastate this country, and virtually no community in America has been left untouched. West Virginia in particular has been severely affected. For the last several years, the State has had the highest overdose 

death rate in the country. 

This committee’s investigation has uncovered some very troubling information 

about seemingly large shipments of opioids from drug distributors to rural pharmacies in West Virginia over the course of several years. 

I think it is important for us to understand what went wrong and why, but we 

must also understand what needs to change so that we do not ever find ourselves 

in this situation again. 

For example, there is simply no excuse for distributors sending more than 13 million doses of opioids to a single pharmacy in a town of just 400 people over a 6- 

year period. 

Some of the distributors who supplied high amounts of pills to this pharmacy appear not to have submitted suspicious order reports to DEA, even though the law 

requires them to do so. In addition, some of the distributors’ files are either sparse 

or unavailable, raising additional questions about whether they investigated the 

risks of diversion before shipping these pills. In the end, Federal authorities raided 

and shut down this pharmacy and its owner went to jail. We must understand what 

went wrong here so that we can be sure no town is ever again flooded with pills. 

12 

In another case, two doctors in the town of Williamson prescribed more opioids 

than entire hospitals did, according to a Justice Department press release. These 

doctors were in fact the highest opioid prescribers in the entire State, and were 

widely known to be running ‘‘pill mills.’’ One of these doctors ultimately went to jail; 

the other fled overseas. It appears that certain distributors’ systems failed to detect 

the volume of prescriptions these pharmacies were filling for these doctors, which 

may have led to oversupply and diversion of pills. 

It is the distributors’ responsibility to know their customers, monitor orders, 

refuse suspicious orders, and report those orders to DEA. Distributors must perform 

these functions, particularly when pharmacies order high volumes of opioids. But 

our investigation has shown that this did not always happen. 

In fact, some of these distributors paid large fines to DOJ because their systems 

failed and because they did not report suspicious orders to DEA as required. These 

distributors promised to clean up their act. But just a few years later, they were 

again hit with multi-million dollar fines for the very same shortcomings. 

I want to know how we can be confident that distributors have sufficiently improved their systems now, so that going forward we will not miss key indicators that 

may help uncover diversion in other situations. For example, one distributor told us 

that, with the benefit of hindsight, they wish they had asked different questions of 

at least two of the pharmacies we have examined. I would like to know what kind 

of questions they believe will make the process more effective and reduce the possibility of diversion. 

This is a nationwide concern, and the problems we have found in West Virginia 

have broader lessons for the rest of the country. 

I also want to point out that this investigation focused on the role that distributors played in this crisis, but we know that there are many causes of this epidemic. 

This includes the role of some manufacturers in marketing these drugs, the role of 

some rogue physicians in overprescribing them, and the failures of regulators at the 

State and Federal level to adequately oversee the opioid supply chain. 

But let me also highlight another important aspect of this committee’s work, 

which I hope will not be lost as we look at how events unfolded in the past, because 

this crisis is far from over. 

Right now, countless Americans, including those in the hard-hit areas of West 

Virginia, still need access to quality health care to help them recover from the opioid 

crisis. In the past month, we have marked up a substantial number of opioid-related 

bills. I am concerned that we have made this push without taking the time to make 

sure we get it right or without much of an emphasis on treatment. 

It is not enough to only look backwards at this crisis. We must take the necessary 

steps to actually help those who are suffering by providing comprehensive treatment 

to individuals and communities in need. I yield back. 

Mr. HARPER. The gentleman yields back. 

I ask unanimous consent that the Members’ written opening 

statements be made a part of the record. Without objection, it will 

be entered into the record. 

Additionally, I ask unanimous consent that Energy and Commerce members not on the Subcommittee on Oversight and Investigations be permitted to participate in today’s hearing. Without 

objection, so ordered. 

I would now like to introduce our witnesses for today’s hearing. 

First today we have Dr. Joseph Mastandrea, chairman of the 

board at Miami-Luken; John Hammergren, chairman, president, 

and CEO of McKesson Corporation; George Barrett, executive 

chairman of the board at Cardinal Health; Steven Collis, chairman, 

president, and CEO of AmerisourceBergen Corporation; and finally, 

J. Christopher Smith, former president and CEO, H.D. Smith 

Wholesale Drug Company. 

You are aware that the committee is holding an investigative 

hearing. And when doing so, we have the practice of taking testimony under oath. 

Do any of you have any objection to testifying under oath? 

13 

Seeing none, the Chair then advises you that, under the rules of 

the House and the rules of the committee, you are entitled to be 

accompanied by counsel. 

Do you wish to be accompanied by counsel during your testimony 

today? 

Seeing none, in that case, if you would please rise. Raise your 

right hand, and I’ll swear you in. 

[Witnesses sworn.] 

Mr. HARPER. Each of you are now under oath and subject to the 

penalties set forth in Title 18, Section 1001 of the United States 

Code. 

You may now give a 5-minute summary of your written statement. We will begin first hearing from Dr. Joseph Mastandrea. 

You are recognized for 5 minutes. 

I ask that everyone pull your microphone close to you, make sure 

it’s on. 

And you’re recognized for 5 minutes, Dr. Mastandrea. 

STATEMENTS OF JOSEPH R. MASTANDREA, D.O., CHAIRMAN, 

MIAMI–LUKEN, INC.; JOHN HAMMERGREN, CHAIRMAN, 

PRESIDENT, AND CHIEF EXECUTIVE OFFICER, MCKESSON 

CORP.; GEORGE S. BARRETT, EXECUTIVE CHAIRMAN, CARDINAL HEALTH; STEVEN H. COLLIS, CHAIRMAN, PRESIDENT, 

AND CHIEF EXECUTIVE OFFICER, AMERISOURCEBERGEN 

CORP.; AND JAMES CHRISTOPHER SMITH, FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER, H.D. SMITH, LLC 

STATEMENT OF JOSEPH R. MASTANDREA 

Dr. MASTANDREA. Good morning, Committee Chairman Walden, 

Subcommittee Chairman Harper, Ranking Members Pallone and 

DeGette, and distinguished members of the subcommittee. Thank 

you for the invitation to testify before you today, and thank you for 

your tireless efforts to address our Nation’s ongoing opioid epidemic. 

I would like to share some background about Miami-Luken with 

you. The company was originally cofounded by my father, Robert 

E. Mastandrea, in 1962 as the Miami Valley Wholesale Drug Company in Dayton, Ohio. Nine years later, in 1971, the acquired the 

A.G. Luken Drug Company of Richmond, Indiana. It was then that 

the company Miami-Luken was born. 

Since then, the company has made additional acquisitions in 

Ohio and West Virginia, yet has always remained a relatively 

small regional distributors. 

I first started working for the company at the age of 14 working 

in the warehouse. After graduating college, I worked a short time 

with my father learning the day-to-day operations of the business 

where I was involved in making sales calls, deliveries, and various 

warehouse duties. 

It was a wonderful place to work, and I was proud of my father 

and what he had achieved. He was born in Italy and came to this 

country at the age of 13. He subsequently graduated from college 

and began a business career that would lead to the formation of 

Miami-Luken. Through my father’s leadership, the company’s culture was more like a family than just a place to work. 

14 

I entered medical school in 1979 and after my residency embarked on a full-time career as a physician in Dayton. Several 

years later I was asked to serve on the board of directors of MiamiLuken, which I accepted. Some years later, I became the chairman 

of the board and have held that position since that time. 

Management of the company remained pretty much the same 

until 2007 when a new president was appointed by the board. This 

individual had extensive managerial experience in both the wholesale drug business and the wholesale grocery business and was 

more than qualified to lead the company. He was knowledgeable, 

confident, and well-liked by the company’s employees. 

It was not until several years later, in 2013, after the board 

learned that the DEA had issued a number of subpoenas to the 

company, that we realized the Government had concerns with the 

company’s compliance efforts. 

In response, we retained the services of a prominent attorney 

here in Washington who used to work for the DEA. This attorney 

worked with management to assist the company in fulfilling its 

DEA compliance obligations. We also instructed the company’s 

president to purchase a computer program to better identify suspicious orders from customers, which he did. 

When we subsequently learned that management was having difficulties with the computer system they purchased, it was apparent 

to us that we needed someone more capable in that position. The 

board immediately began looking for a replacement and after considering several individuals hired the company’s current president 

and CEO, Michael Faul. 

In addition to hiring Mr. Faul, the company hired a new director 

of compliance and security who worked with Mr. Faul to implement 

a number of significant changes in the company’s compliance program. 

These included more frequent and robust customer visits by compliance staff, greater scrutiny of requests from customers to increase purchase quantities, increased facility and transportation security, implementation of compliance training, purchase of the 

NTIS database, enhancing the controlled substance profile that 

customers are required to complete during the on-boarding process, 

and the complete overhaul of Miami-Luken’s standard operating 

procedures regarding DEA compliance. 

The compliance director also worked with the software vendor to 

recalibrate the company’s computerized suspicious orders notification system, improved its effectiveness in identifying suspicious orders on a daily basis, and started the process of uploading all relevant data on shared computer drives providing employees and 

DEA investigators easier access to information pertaining to individual customers. 

He also hired additional staff to assist the company in its compliance efforts and created a new analytical tool on an Excel spreadsheet to assist in conducting due diligence on current and prospective customers. In fact, the compliance director last year was recognized by the National Association of Drug Diversion Investigators 

for his outstanding work in drug diversion prevention. 

As a result of new management’s enhanced compliance efforts, 

Miami-Luken terminated its relationship with multiple customers, 

15 

many of whom are still in business purchasing from other sources. 

Since 2014, we have reduced the sale of oxycodone by approximately two-thirds and the sale of hydrocodone by a similar margin. 

It is our understanding that former management took what they 

believed to be sufficient steps at the time, believing that the State 

medical boards and State pharmacy boards were in a strong position to monitor the physicians and pharmacists they licensed. 

Former management also believed that since Miami-Luken regularly provided the DEA with sales data for all its customers, the 

Government would have advised us if they had any concerns with 

sales to specific parties. 

Unfortunately, we know that is not enough. And as you know 

from the materials we have provided this committee last year, 

Miami-Luken has taken aggressive action going back several years 

to strengthen its compliance efforts and suspicious order monitoring system and reporting. And as I sit here now, I can assure 

you that our company employs a compliance program that is second 

to none. 

In closing, I welcome any questions you have and will answer 

them to the best of my ability. Thank you again for this opportunity and for all your efforts. 

[The prepared statement of Dr. Mastandrea follows:] 

16 


Joseph R. Mastandrea, D.O. 

Chairman, Miami-Luken, Inc. 

MayS, 2018 

Good morning. Committee Chairman Walden, Subcommittee Chairman Harper, 

Ranking Members Pallone and DeGette, and distinguished members of the 

subcommittee, thank you for your invitation to testify before you today, and thank 

you for your tireless efforts to address our nation's ongoing opioid epidemic. 

I would like to share some background about Miami-Luken with you. The company 

was originally co-founded by my father, Robert E. Mastandrea, in 1962 as the Miami 

Valley Wholesale Drug Company, in Dayton, Ohio. Nine years later in 1971, the 

company acquired the A. G. Luken Drug Company of Richmond, Indiana. It was then 

that the company Miami-Luken was born. Since then, the company has made 

additional acquisitions in Ohio and West Virginia, yet has always remained a 

relatively small regional distributor. 

I first started working for the company at the age of fourteen, working in the 

warehouse. After graduating college, I worked a short time with my father, learning 

the day to day operations of the business where I was involved in making sales calls, 

deliveries and various warehouse duties. It was a wonderful place to work and I 

was proud of my father and what he had achieved. He was born in Italy and came to 

this country at the age of thirteen. He subsequently graduated from college and 

began a business career that would lead to the formation of Miami-Luken. Through 

{7384471:} 1 
17 


my father's leadership, the company's culture was more like a family than just a 

place to work. 

I entered medical school in 1979 and after my residency, embarked on my full time 

career as a physician in Dayton. Several years later, I was asked to serve on the 

Board of Directors of Miami-Luken, which I accepted. Some years later l became the 

Chairman of the Board and have held that position since that time. 

Management of the company remained pretty much the same until 2007 when a 

new president was appointed by the Board. This individual had extensive 

managerial experience in both the wholesale drug business and the wholesale 

grocery business and was more than qualified to lead the company. He was 

knowledgeable, confident and well-liked by the company's employees. 

It was not until several years later in 2013, after the Board learned that the DEA had 

issued a number of subpoenas to the company, that we realized the government had 

concerns with the company's compliance efforts. In response, we retained the 

services of a prominent attorney here in Washington D.C. who used to work for the 

DEA. This attorney worked with management to assist the company in fulfilling its 

DEA compliance obligations. We also instructed the company's president to 

purchase a computer program to better identify suspicious orders from customers, 

which he did. 

(7384471:} 2 
18 


When we subsequently learned that management was having difficulties with the 

computer system they purchased, it was apparent to us that we needed someone more 

capable in that position. The Board immediately began looking for a replacement and 

after considering several individuals, hired the company's current president and CEO, 

Michael Faul. 

In addition to hiring Mr. Faul, the company hired a new Director of Compliance and 

Security, Benjamin Mink, who worked with Mr. Faul to implement a number of 

significant changes to the company's compliance program. These included more 

frequent and robust customer visits by compliance staff; greater scrutiny of requests from 

customers to increase purchase quantities; increased facility and transportation security; 

implementation of compliance training; purchase of the NTIS database; enhancing the 

controlled substance profile that customers are required to complete during the 

on boarding process; and a complete overhaul of Miami-Luken's standard operation 

procedures regarding DEA compliance. Mr. Mink also worked with the software vendor 

to rc-calibrate the company's computerized suspicious orders notification system, 

improve its effectiveness in identifying suspicious orders on a daily basis; and started the 

process of uploading all relevant data on shared computer drives, providing employees 

and DEA investigators easier access to information pertaining to individual customers. 

He also hired additional staff to assist in the company's compliance efforts and created a 

new analytical Excel spreadsheet program to assist in conducting due diligence on current 

and prospective customers. In fact, Mr. Mink last year was recognized by the National 

{7384471:} 3 
19 


Association of Drug Diversion Investigators for his outstanding work in drug diversion 

prevention. 

As a result of new management's enhanced compliance efforts, Miami-Luken terminated 

its relationship with multiple customers, many of whom are still in business purchasing 

from other sources. Since 2014, we have reduced the sale of Oxycodone by 61 percent, 

and the sale ofHydrocodone by 50 percent. 

It is our understanding that former management took what they believed to be sufficient 

steps at the time, believing that State Medical Boards and Pharmacy Boards were in a 

stronger position to monitor the physicians and pharmacists they licensed. Former 

management also believed that since Miami-Luken regularly provided the DEA with 

sales data for all its customers, the government would have advised them if they had 

concerns with sales to specific parties. Unfortunately, we now know that that is not 

enough, and as you know from the materials we provided this Committee last year, 

Miami-Luken has taken aggressive actions going back several years to strengthen its 

compliance efforts and suspicious order monitoring system. And as I sit here now, I can 

assure you that our company employs a compliance program that is second to none. 

In closing, I welcome any questions you have and will answer them to the best of my 

ability. Thank you again for this opportunity and for all your efforts. 

{7384471:} 4 
20 

Mr. HARPER. Thank you, Dr. Mastandrea. 

The Chair will now recognize John Hammergren, chairman, 

president, and CEO of McKesson Corporation, for 5 minutes. 

STATEMENT OF JOHN HAMMERGREN 

Mr. HAMMERGREN. Mr. Chairman, Ranking Member DeGette, 

and members of the subcommittee, my name is John Hammergren, 

and for almost two decades I’ve had the privilege to serve as the 

chief executive officer of McKesson Corporation. 

The impact the opioid epidemic has had on our Nation is devastating. Millions of Americans have been affected, including employees of McKesson and their families. We recognize the importance of this committee’s investigation, and I appreciate the opportunity to appear before you today to help the committee address 

this crisis. I will also explain the steps that we ourselves are taking. 

Our company has over 70,000 employees worldwide. Our distribution business receives 275,000 orders every day, serving 

40,000 pharmacies and hospitals. Like all distributors, we have two 

critical priorities: to deliver medicines to pharmacies and hospitals 

when and where they need them and to help the protect the integrity of the supply chain. 

As a distributor, we don’t manufacture prescription drugs, we 

don’t market them to doctors or patients, nor do we market any 

particular category of drugs, such as opioids, to pharmacists. Distributors respond to pharmacy orders, which are based on doctor’s 

prescriptions. 

For years we have reported every controlled substance transaction that we have made in West Virginia and across the country 

to the DEA. Other distributors provide similar information so that 

only the DEA has an overall view of opioids distributed in this 

country. 

Distributing controlled substances represents a small share of 

McKesson’s total business. The two schedules of controlled substances that include the most commonly abused prescription 

opioids constitute approximately 3 to 4 percent of our total revenue. 

The committee has highlighted a large volume of opioids distributed to pharmacies in West Virginia by McKesson and other distributors. Over a 6-year period addressed by the committee, 

McKesson distributed approximately 151 million doses of oxycodone 

and hydrocodone there. 

To put that into some perspective, if you look at all prescription 

drugs of any kind that McKesson distributed, the total number was 

nearly 2 billion doses in West Virginia during the same period. 

There is no question that a key driver of the crisis, as the CDC 

has said, is the overprescribing of opioids by doctors across the 

country. At the same time, there clearly were certain pharmacies 

in West Virginia that were bad actors that McKesson itself terminated. In hindsight, I would have liked to have seen us move much 

more quickly to identify the issues with these pharmacies. 

We learned important lessons, so let me tell you how we’re applying those lessons today. 

21 

Over the last 5 years, we have successfully used the latest technology and the best available expertise to strengthen controls. We 

have invested millions of dollars in enhancing our controlled substance monitoring program, or CSMP. A key part of that is sophisticated data analytics designed by outside experts which harness 

the power of advanced statistical models to set caps on sales to individual pharmacies. And then we block sales that exceed those 

caps, which are constantly monitored and fine-tuned. 

Our CSMP team is independent of the business and has unilateral authority to deny a customer access to controlled substances. 

Our team includes former DEA agents with more than 240 years 

of collective DEA enforcement experience. 

And the CSMP is working. In fact, over the last decade, we 

blocked and reported to the DEA over 1 million suspicious orders 

nationwide. 

With a strong program in place today to monitor sales of opioids, 

we are extremely focused on advancing solutions to the country’s 

opioid crisis more broadly. 

First, we are moving forward with the development of a prescription safety alert system. This would be an electronic system to provide doctors and pharmacies with real-time red flags based on a patient’s nationwide prescription history. Congress and the FDA can 

help make this a reality. 

Second, we are requiring our customers to accept electronic prescriptions in 2019. Handwritten prescriptions are more prone to 

fraud. 

Third, we’re pushing for opioid manufacturers to use limited dose 

packaging, such as blister packs, to facilitate smaller prescription 

sizes. 

And fourth, we’ve announced the formation of a foundation to 

fight the opioid epidemic and committed $100 million dollars to 

launch its mission. 

McKesson and I personally fully understand the gravity of this 

crisis and our essential role in helping to address it. 

Thank you again for the opportunity to testify today. I would be 

happy to address your questions. 

[The prepared statement of Mr. Hammergren follows:] 

22 


M~KESSON 

Testimony of 

John Hammergren 

Chairman, President, and Chief Executive Officer 

McKesson Corporation 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

United States House of Representatives 

May 8, 2018 

Mr. Chairman, Ranking Member DeGette, and members of the Subcommittee, my name 

is John Hammergren. For almost two decades, I have had the privilege to serve as Chief 

Executive Officer for McKesson Corporation. I appreciate the opportunity to appear before you 

today to describe our efforts to respond to the nationwide opioid crisis. In particular, I will 

address the ways in which we have significantly enhanced our monitoring systems and 

procedures, so that we can quickly identify and block suspicious orders, and cut off bad actors' 

access to controlled substances. I will also address other steps the company is taking to help 

proactively combat the crisis. We recognize the impottance of, and understand the reasons for, 

the Committee's investigation, and we appreciate the opportunity to respond. 

The impact the opioid epidemic has had on our nation is devastating. Millions of 

Americans have been affected, including employees of McKesson and their family members. 

This epidemic's human costs are felt by us directly, and all of us at McKesson are committed to 

doing what we can to respond to this complex public health challenge. We are actively engaged 

in a range of initiatives that address our responsibility to help protect the integrity of the 

pharmaceutical supply chain and that also contribute to finding solutions to the cycle of addiction 

that so many American families are struggling with. I have personally learned about those 

struggles in conversations with McKesson employees and others whose lives have been impacted 

by the opioid addiction epidemic. 

Over the last five years in particular, McKesson has successfully used the latest 

technology and the best available internal and external expertise to strengthen controls and to 

help reduce the risk that opioids and other controlled substances could be diverted to abuse or 

other illegitimate uses. And since 2008, McKesson has blocked the shipment of over a million 

orders for controlled substances nationwide. 

Before explaining the steps we have taken, let me first provide you with some 

background about McKesson. We arc a company with a long history. In 1833, to help meet the 

growing demand for medicine, John McKesson and Charles Olcott opened a small drug and 

chemical shop in New York City's wholesale district. Throughout the company's I 85 years in 

business, McKesson has contributed to building a safe, secure pharmaceutical supply chain, 

including with technological innovation recognized by the Smithsonian. Over more than a 
23 


century, McKesson expanded and improved the nation's infrastructure for distributing drugs and 

other medical products to a far-flung network of pharmacies and health care providers, Today, 

we have over 70,000 employees around the world, including nearly 23,000 employees in the 

United States, with distribution centers located in 26 states. 

One of McKesson's primary missions is to help ensure that medicines prescribed by 

licensed doctors are delivered to licensed pharmacies so they are available for patients who need 

them, when they need them, where they need them. Our U.S. Pharmaceutical business does that 

by responding rapidly to 275,000 orders that we receive daily from pharmacies and hospitals 

across the country at our 28 distribution centers. In the case of controlled substances 

particularly, we have to balance our mission to deliver medicines to pharmacies and hospitals 

when and where they need them against our important efforts to prevent and detect illegal 

diversion of those drugs. This is a constant balancing act for all pharmaceutical distributors. 

McKesson supplies branded, generic, and over-the-counter pharmaceuticals to more than 

40,000 customers, including retail pharmacy chains, independent pharmacies, hospitals, health 

systems, integrated delivery networks, and long-term care providers. We enable the American 

health care system to deploy medicines very rapidly to patients who need them and to protect 

against dangerous shortages of critical drugs. In many cases, McKesson is able to accomplish 

delivery of prescription drugs to pharmacies across the country within a matter of hours, in both 

urban and rural areas. 

Distributing controlled substances represents a small share of our overall business. The 

two schedules of controlled substances that include the most commonly abused prescription 

opioids constitute approximately three to four percent of McKesson's total revenue. The bulk of 

our business involves the distribution of non-controlled prescription drugs, along with over-the 

counter products and other health care related lines of business. For example, we provide a 

range of medical-surgical supplies and equipment to physicians' offices, home care agencies, and 

surgery centers. In addition to distribution, McKesson has a robust technology and connectivity 

business, and we use Six Sigma to help health care organizations strengthen their businesses, 

control costs, work more efficiently, and improve quality. 

Distribution of Controlled Substances to West Virginia Pharmacies 

As a distributor, McKesson does not manufacture prescription drugs, and we do not 

market them to doctors or patients. Nor do we market any particular category of drugs, such as 

opioids, to pharmacies. Distributors respond to pharmacies' orders, which in turn are placed 

based on doctors' prescriptions. McKesson does not supply prescription drugs in amounts 

greater than pharmacies order, and we do not ship to a particular state or pharmacy without an 

order from a Drug Enforcement Administration ("DEA")-registered and state-licensed phannacy. 

No single distributor knows the total volume of any drug distributed in a particular state 

or region, let alone to a particular pharmacy. That information is known to DEA, however. 

McKesson for years has reported every controlled substance transaction in West Virginia and 

across the country to DEA, and DEA gathers similar information from other distributors, in a 

proprietary DEA database called Automation of Reports and Consolidated Orders System 

2 
24 


("ARCOS"). Neither McKesson nor the other distributors have access to ARCOS. Only DEA 

has visibility over the entire landscape and can track and analyze aggregate data on the 

distribution of controlled substances in particular jurisdictions. 

The Committee has highlighted the large volume of opioids distributed to certain 

pharmacies in West Virginia by McKesson and other distributors. For example, over a six year 

period addressed by the Committee, from 2007 through 2012, McKesson distributed 

approximately !51 million doses of oxycodone and hydrocodone in West Virginia. While that is 

a very large number, it's important to put that data in context. During the same six-year period 

of time, McKesson distributed nearly 2 billion doses of all prescription drugs in West Virginia. 

Put another way, West Virginia pharmacies overall were, and continue to be, very high volume 

customers for prescription drugs generally. 

There is no question that beginning more than a dozen years ago, and continuing to this 

day, physicians have prescribed large numbers of opioids to millions of Americans for a wide 

range of conditions. In 2014 alone, according to the New England Journal of Medicine, doctors 

wrote 245 million prescriptions for opioids in the United States. 1 As the Director of the Centers 

for Disease Control and Prevention ("CDC") noted in 2016, "[o]verprescribing opioids-largely 

for chronic pain-is a key driver of America's drug-overdose epidemic." 2 

The total volume of opioid shipments is sometimes compared to the population of a 

particular county in West Virginia, resulting in disturbingly large figures for the number of 

prescription opioid pills in a given county on a per-resident basis. These comparisons can be 

misleading, for several reasons. 

First, these figures generally have been aggregated over a long period oftime, often five 

or six years, or even longer. Over a sufficiently long time period, any per capita calculation of 

the number of opioid pills sold will appear high. This is all the more misleading if the figure for 

opioid orders is not considered in the context of total sales of prescription non-controlled 

substances during the same period of time. 

Second, calculations based on population do not include any comparative baseline for the 

number of persons in the geographic area who have a legitimate need for opioids. Without such 

a baseline to compare against, it is not always clear whether shipments are "too high" relative to 

the legitimate need. 

Third, these figures imply that town and county lines define the customer base for a 

particular pharmacy. That is often not the case. Pharmacies located in areas that are not densely 

populated, and especially in areas that border one or more other counties or states, may serve a 

much larger customer population than the population of the specific town or county in which tbe 

1 Nora D. Volkow and A. Thomas McLellan, OpioidAbuse in Chronic Pain Misconceptions 

and Mitigation Strategies, 374 NEW ENG. J. MED. 1253, 1253 (2016). 

2 CDC Director Tom Frieden, Mar. 5, 2016 (quoted in "CDC Releases Guideline for Prescribing 

Opioids for Chronic Pain") available at https;//www.cdc.gov/media/releascs/20 16/p0315-

prescribing-opioids-guidelines.html (visited on Apr. 29, 20 18). 

3 
25 


pharmacy is located. A small West Virginia town near the Kentucky border docs not serve only 

the few hundred town residents any more than a pharmacy in Manhattan serves the millions of 

people who live and work in New York City. Comparing the number of units sold for a 

particular drug to the number of people in the town or county in which a pharmacy sits is not a 

meaningful way to assess whether drugs are being diverted to illegitimate uses. 

A more refined calculation can account for some of these limitations. We can do this by 

calculating pills per capita on a monthly basis-instead of over a long period of time-for all 

counties in a particular area or on a statewide basis. And we can estimate the typical monthly 

number of pills for patients who receive opioid prescriptions from their physician by using public 

information and CDC surveys. 

For example, if we look at data from January 2006 to November 2017, McKesson 

shipped a total of 342.8 million oxycodone and hydrocodone pills into West Virginia over that 

nearly 12-year period. The state had a population of 1.85 million (1.47 million adults) as of the 

2010 census, so in per capita terms, McKesson could be said to have shipped approximately 185 

pills of oxycodone or hydrocodone for each resident of West Virginia. Though this figure is 

significant, for meaningful analysis it should be compared to other data that reflect the 

prevalence of lawful opioid prescriptions and the volume of pills that physicians typically 

prescribe for a patient being treated with opioids. 

If we take that same data and calculate per capita pills per month, the result is 1.6 pills 

per adult, per month. As an average, this figure is still subject to misinterpretation. It is certainly 

not the case that every adult in West Virginia received 1.6 pills each month. Studies suggest an 

average patient whose doctor prescribes oxycodone or hydrocodone is prescribed between two 

and three pills per day, or between 60 and 90 pills per month. Based on this range, a volume of 

1.6 pills per adult per month works out to enough to fill legitimate prescriptions for roughly 1.8% 

to 2.7% of the adult population of West Virginia. While that is certainly not an insignificant 

share of the population by any means, to put it in context, CDC data from 2011-2012 reported 

that 6. 9% of adults nationwide were prescribed opioids in any given month, and research 

suggests this means about 5% of adults were prescribed oxycodone or hydrocodone in any given 

month. 

So while the large figures that are often highlighted in the media for the number of opioid 

pills prescribed and sold by pharmacies in West Virginia are significant, on a statewide basis, 

they reflect a volume of pharmacy opioid orders supplied by McKesson that is not inconsistent 

with the rate at which opioids were being prescribed by doctors and sold by pharmacies 

nationwide. Again, McKesson does not know at any given time how much is being shipped by 

other distributors, as we do not have access to DEA's ARCOS database that would shed light on 

the bigger picture. Finding a way to give all distributors access to that data, so that we can track 

how orders we receive relate to the total volume of controlled substances ordered by particular 

pharmacies or in particular geographic regions, is an important step that Congress and the states 

can take to help distributors conduct effective monitoring. 

The data l summarized above is another way of saying that in recent years, doctors have 

been prescribing a tremendous volume of opioids to patients with a wide range of conditions, 

4 
26 


both in West Virginia and across the country. As the Committee is well aware, and has 

investigated extensively, this is part of a major public health crisis in this country, a root cause of 

which is the over-prescribing of opioids. That trend recently has begun to recede, though opioid 

prescription volumes remain high nationwide, including in West Virginia. 

We recognize that even if statewide volumes of orders for opioids seem consistent with 

national trends, particular counties or regions could have been outliers, with higher levels of 

orders relative to regional populations, though there are a variety of possible reasons for those 

variances across jurisdictional lines. 

In its letters to McKesson, the Committee focused particularly on a pharmacy called 

"Sav-Rite No. 1." Kermit, the small town in which Sav-Rite No. I was located, is in Mingo 

County, but it sits near the intersection of Mingo County, Wayne County, and Martin County, 

KY, which have a combined population of over 80,000 people. The Committee also referred to 

Family Discount Pharmacies, with locations in Mount Gay-Shamrock and Stollings, West 

Virginia. Logan County, where both Family Discount Pharmacies are located, has a population 

of about 35,000, putting it near the top quarter of West Virginia counties by population. 

To be clear, while a simple comparison of the volume of opioid sales to the local town or 

county's population is not by itself a reliable way of identifying suspicious orders, the volume of 

sales certainly is relevant to identifying suspicious orders. And in fact, in the specific case of 

Sav-Rite No. 1, McKesson did in November of2007, more than a decade ago, terminate SavRite No. 1 's access to controlled substances because of what we deemed to be a pattern of 

suspicious orders from that pharmacy. 

Likewise, in 2014, McKesson terminated the Mount-Gay-Shamrock pharmacy's 

controlled substance access after observing a suspicious volume ofhydrocodone and alprazolam 

ordered by the pharmacy and because of concerns about some of the physicians whose 

prescriptions the pharmacy was continuing to fill. It also appears that several years before that, 

we had for a period of time cut off sales of controlled substances to that same pharmacy. 

In hindsight, I would have liked to have seen us move more quickly to identify issues 

with those pharmacies and terminate their access to controlled substances, and we have learned 

lessons from that experience, which inform our approach today. As described below, with the 

benefit of sophisticated data analytics tools that are available today, over the last five years we 

have implemented a more robust and more heavily resourced system to survey and analyze large 

volumes of data, in order to quickly identify bad actors. 

McKesson's Controlled Substance Monitoring Program 

Over the last five years, McKesson has invested millions of dollars in enhancing our 

Controlled Substance Monitoring Program ("CSMP"), which provides ongoing review and 

monitoring of the pharmacies and hospitals that purchase from us to help mitigate the risk that 

controlled substances, including opioids, are diverted to abuse and other inappropriate uses. In 

2014, we began working with an outside consulting tlrm to design sophisticated data analytics 

for the CSMP. Among other enhancements, these analytics enable us to identify patterns in 

5 
27 


pharmacy orders for controlled substances and to set thresholds for each pharmacy based on 

better statistical methods and computer-assisted analytics than we ever had available in the past. 

Our CSMP is a nationwide program and it applies to all independent pharmacies, including those 

that operate in West Virginia. We provided an overview of these enhancements to DEA in 2016. 

Advanced analytics capabilities. McKesson has implemented a cutting-edge controlled 

substances threshold management program, using complex data analytics to set and manage 

individual customer thresholds for controlled substances. Our model analyzes each pharmacy's 

and hospital's order against established monthly thresholds to determine whether that order 

should be filled. If an order exceeds the monthly threshold, that order is blocked and not filled. 

McKesson reports each blocked order to DEA, and to state agencies when required. The 

thresholds are detennined based on computer analysis of controlled substance orders by 

pharmacies of similar size in a broader geographic region (though not just the same town or 

county, for reasons explained above) and the pharmacy's own past pattern of controlled 

substance orders compared to non-controlled prescription orders. 

Expanded Compliance Team. In order to further enhance its compliance program, 

McKesson has added a number of subject matter experts to its CSMP team. In addition to hiring 

former DEA Special Agents and Diversion Investigators, McKesson has hired industry experts 

with experience in the retail pharmacy industry, experience as state and board of pharmacy 

investigators, experience with pharmaceutical manufacturers, and experience with data analytics. 

McKesson's team now includes individuals with more than 240 years of collective DEA 

enforcement experience. Moreover, the team leading our CSMP is independent of our sales 

function and has unilateral authority to terminate a pharmacy or hospital's access to controlled 

substances and to reject the onboarding of new pharmacies and hospitals. 

Due diligence. McKesson performs comprehensive due diligence on prospective 

pharmacy customers before agreeing to supply controlled substances. We require all prospective 

customers to complete a detailed questionnaire, provide three months of dispensing data for 

analysis, undergo a site visit, and provide copies of all licenses. We also proactively monitor 

pharmacies' and hospitals' purchasing patterns and external events that might indicate a need to 

review that location more closely. For example, on many occasions, McKesson has performed a 

complete diligence review when a pharmacy or hospital requests an increase in its monthly 

threshold for a controlled substance. In addition, McKesson often performs a complete review 

when we receive a subpoena for information about a particular pharmacy or when we otherwise 

become aware of adverse information about a pharmacy. For example, in 2017, we terminated a 

West Virginia pharmacy's ability to purchase controlled substances after becoming aware that 

the West Virginia Attorney General had filed a lawsuit against the pharmacy related to its 

controlled substances dispensing practices. 

Education. McKesson has been proactive with respect to educating the pharmacies and 

hospitals that purchase from us about the importance of compliance with DEA and state agency 

regulations. McKesson educates them and provides them with literature on how to identify the 

warning signs of prescription abuse and diversion. Similarly, McKesson has trained hundreds of 

our own employees on the company's regulatory obligations, including CSMP-specific training 

sessions at annual meetings. 

6 
28 


As a result of these ongoing efforts, from 2008 through 2017, we blocked and reported to 

DEA over one million suspicious orders nationwide. 

Additional Steps McKesson Is Taking To Address The Opioid Crisis 

We are also looking ahead to find innovative ways to fight the opioid crisis more broadly, 

both through our company activities and through a foundation we recently formed to address 

opioid abuse. 

We are working to develop an innovative solution contemplated by the leading not-forprofit standards setting organization in the healthcare solutions space, the National Council for 

Prescription Drug Programs ("NCPDP"), and now being advocated by the Health lT Now Opioid 

Safety Alliance. Such a prescription safety alert system, which other technology vendors could 

also develop, would help provide doctors and pharmacies with real-time red flags based on a 

patient's nationwide prescription history, so that they can more easily identify prescriptions that 

may indicate potential abuse or misuse, such as doctor or pharmacy shopping. Today, when a 

patient fills an opioid prescription, the pharmacist may be unaware that the patient has recently 

filled other opioid prescriptions at other pharmacies, or that he or she has received multiple 

opioid prescriptions from multiple doctors. Our shared vision is that a pharmacy would receive a 

real-time clinical alert based on a patient's prescription history. This information would allow 

the pharmacist to gather more information prior to dispensing the prescription, such as 

conducting a check with the prescribing clinician or reviewing the information from the state's 

prescription drug monitoring program. Such a prescription safety alert system would work 

across state lines to encompass all prescriptions and all pharmacies, including failed attempts to 

fill prescriptions and transactions conducted in cash. 

We are moving forward with the development of this innovative solution, which is in line 

with President Trump's proposal for a nationwide prescription drug monitoring program. We 

understand from the pharmacy community that the system would meet a critical need. To 

maximize success, a truly effective solution must have access to data from all entities dispensing 

covered controlled substances. Thus, effective implementation would require support from the 

Food and Drug Administration ("FDA") or Congress and require all pharmacies and providers to 

participate. 

We believe that e-prescribing (electronically-delivered prescriptions) can also help 

prevent diversion. That is why, in 2019, McKesson will stop filling opioid prescriptions at 

pharmacies that are unable to accept e-prescriptions. Handwritten prescriptions can be forged, 

altered, or otherwise divetied to enable illegal access to opioids. All 50 states currently allow for 

e-prescribing, but only a handful of states require it. We aim to bring those pharmacists who are 

unable to accept e-prescriptions up to date with that ability, and move the industry toward an eprescription-only opioids system. Congress and state legislatures could help by mandating eprescribing by providers, in order to supplement industry efforts. 

Because over-prescribing of opioids has played such a large role in the crisis, we also 

suppoti providing opioids in limited-dose packaging. FDA could help by requiring that opioids 

be distributed in limited-dose packaging, usually "blister packs" and specially designed bottles. 

We plan to proactively engage with opioid manufacturers to develop plans to use limited-dose 

7 
29 


packaging, with the goal of providing only what is needed and making it easier to do so for 

everyone involved. FDA Commissioner Dr. Scott Gottlieb has indicated his suppmt for a move 

toward limited-dose packaging. 

Additionally, as a distributor, McKesson plays a key role in getting those drugs 

manufactured by others into pharmacies and to patients quickly. We will work with 

manufacturing partners to put new non-opioid pain relievers into the hands of pharmacists and 

hospitals as soon as possible. We are often able to get new drugs to pharmacists within less than 

twelve hours of their availability-·a tool we used, for example, to help the CDC distribute the 

HlNl flu vaccine during that crisis. We understand that some new non-opioid pain relievers are 

under FDA review. 

Pharmacist training is another key tool in preventing opioid abuse and overdose deaths. 

McKesson is committed to providing pharmacists with free training on how to identify patients 

who may be at risk of overdose and may potentially benefit from the use of naloxone or other 

overdose reversal medications. These trainings have been independently developed by the 

Accreditation Council for Pharmacy Education, an accredited continuing education program 

from the Pharmacist's Letter. Members of our HealthMart network, which services 5,000 

independently owned pharmacies, all now have access to the HealthMart Operations Toolkit, 

which offers: (1) opioid education and training courses; (2) drug abuse prevention solutions; (3) 

best practices to prevent drug abuse when filling prescriptions; and (4) community outreach 

resources with strategies to promote drug abuse prevention at the local leveL 

McKesson also provides funding and support to the Healthcare Distribution Alliance's 

Allied Against Opioid Abuse initiative, which is a national education and awareness initiative to 

help prevent the abuse and misuse of opioids. And we arc working with the Community AntiDrug Coalitions of America (CADCA) to launch a substance abuse prevention pilot program 

tailored specifically to veterans. 

Among our other efforts, we have partnered with the Pennsylvania Attorney General to 

help combat opioid abuse by delivering 300,000 drug deactivation pouches to local communities 

in 12 counties, in order to reduce diversion. 

Finally, McKesson has set up a new foundation dedicated to fighting the opioid epidemic 

and committed $100 million to support the foundation's mission. The standalone foundation will 

have independent subject matter experts on its Board of Directors. We expect foundation funds 

to support, among other things, educating providers on evidence-based clinical best practices in 

the treatment of pain, prevention and intervention initiatives and education on the dangers of 

opioid use, and increasing access to opioid treatments, including medication-assisted therapy and 

life-saving overdose reversal drugs. 

Policy Solutions 

ln addition to the steps McKesson itself is taking, we support public policy changes to 

discourage opioid abuse and to help those battling opioid use disorder. We appreciate the 

Committee's efforts to date and pledge our continued collaboration in the development of 

8 
30 


effective legislation. We are particularly supportive of legislative efforts the Health 

Subcommittee recently passed that would promote greater use of electronic prescribing; 

standardize electronic prior authorization; encourage prescriber, dispenser, and patient education 

around the risks of opioid use; and establish programs for the return and destruction of unneeded 

opioids. We also support the President's declaration of the opioid crisis as a national emergency, 

and we provided the President's Commission on Combating Drug Addiction and the Opioid 

Crisis with our recommendations to consider for its final report, some of which were included. 

Since 2015, our McKesson Opioid Task Force---composed of clinical, operations, 

regulatory, and policy experts-has been working on identifying and developing real world 

policy solutions to the crisis, issuing two white papers on the topic. The most recent, "Call to 

Action: Execute Solutions Today to Combat the Opioid Crisis," recommends incentivizing 

implementation of opioid stewardship or similar clinical excellence programs; ensuring proper 

patient education on opioids and their alternatives; requiring e-prescribing of controlled 

substances; requiring electronic prior authorization by payers to ensure that prescriptions are 

medically necessary; piloting pharmacist-led opioid care management programs; and 

implementing a prescription safety ale It system, a concept initially conceived by NCPDP. 

We encourage Congress to prioritize a prescription safety alert system to ensure that all 

stakeholders who have been impacted by opioid abuse, especially patients and their loved ones, 

can benefit from this promising solution. Further, we urge Congress to require use of electronic 

prior authorization to better align prescribing with best clinical practices, prevent misuse, and 

ensure access to patients with legitimate need. 

* * * 

McKesson, like DEA and the other key players in the pharmaceutical supply chain, has 

learned important lessons as we have responded to the opioid crisis. We are acting on those 

lessons, and I believe we have significantly enhanced our capability to identify problematic 

pharmacies and quickly cut off their access to opioids and other controlled substances. We fully 

understand the gravity of this crisis, and our essential role in helping to address it. 

Thank you again for the opportunity to testify today. I would be happy to answer your 

questions. 

9 
31 

Mr. HARPER. Thank you, Mr. Hammergren. 

The Chair will now recognize George Barrett, executive chairman 

of the board at Cardinal Health. 

Thank you. 

STATEMENT OF GEORGE S. BARRETT 

Mr. BARRETT. Chairman Harper, Ranking Member DeGette, and 

members of the subcommittee, Chairman Walden, Ranking Member Pallone, and other members of the full committee, thank you 

for the opportunity to be here today. I also want to extend my 

thanks to your staff for their professionalism and courtesy. 

My name is George Barrett, and I have committed my professional career to healthcare in a wide range of roles for over three 

decades. Between 2009 and 2017, I was privileged to serve as CEO 

and chairman of Cardinal Health, which today is composed of more 

than 50,000 dedicated men and women. 

We simply cannot look at the impact of opioid abuse on so many 

lives and not feel sorrow. I speak for the entire Cardinal Health 

team when I say that we care deeply about the devastation that 

opioid abuse is causing families and communities around our country. We are resolved to be a constructive part of the effort to alleviate this complex national public health crisis. 

Some of the issues we will discuss today involve the healthcare 

system in our neighboring State of West Virginia where hundreds 

of our employees live and work. The people of West Virginia are 

not just the recipients of the medicine and the medical products we 

distribute to hospitals and pharmacies, they are our coworkers, 

friends, neighbors, and family members. 

I have visited the State to hear firsthand about the challenges 

of opioid abuse and how Cardinal Health can play a constructive 

role in addressing these challenges. 

To the people of West Virginia, I want to express my personal 

regret for judgments that we’d make differently today with regard 

to two pharmacies that have been a particular focus of this subcommittee. With the benefit of hindsight, I wish we had moved 

faster and asked a different set of questions. I’m deeply sorry that 

we did not. 

Today I’m confident that we would reach different conclusions 

about opioid orders from those two pharmacies. We’ve taken responsibility with our regulators. Cardinal Health has not distributed oxycodone or hydrocodone to either of these two pharmacies 

for years. 

We understand that no antidiversion program is perfect, which 

is why we are so focused on continuous improvement. We are at 

the table focused on alleviating this critical national health problem. We are committed to working with Congress, regulators, and 

others in the healthcare system to combat this crisis and address 

its effects. 

There is no single root cause of the crisis, and addressing it requires that all healthcare participants work together, and we have 

to do it now. 

We recognize the challenge posed by lawful yet high-volume prescribing of opioids. On the one hand, we know there are many individuals who rely on these medications to address suffering associVerDate Mar 15 2010 14:59 Dec 20, 2018 Jkt 037690 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 I:\115THCONGRESS\115X124OPIOIDDISTRIBUTION\115X124OPIOIDDISTRIBUTIONWOR
32 

ated with terminal illnesses, painful neurological conditions, severe 

injuries, and other medical conditions. 

On the other hand, we share the recent judgments of policymakers, including senior leadership at HHS, the FDA, the surgeon 

general, the CDC, and others, that there have been too many prescriptions for too many pills. 

As a pharmaceutical wholesale distributor, we have a dual responsibility: to ensure that prescription medications are available 

for healthcare providers and their patients when needed while 

working to limit the potential for those prescription medicines to 

fall into the wrong hands. 

Pharmaceutical wholesale distributors do not and should not 

have visibility into the medical judgment or the patients for whom 

prescriptions are written. However, we can play a role by raising 

awareness of the dangers of overprescribing, which we are doing. 

Our antidiversion tools are built around a core commitment to 

spot, stop, and report potential diversion. Our program is supported by a dedicated antidiversion team of investigators, auditors, 

analysts, former law enforcement officers, compliance officers, and 

pharmacists deployed nationwide and augmented by substantial 

external resources and technology. 

From 2008 to the present, we have stopped suspicious orders for 

the shipment of hundreds of millions of opioids. We will not ship 

an order for hydrocodone or oxycodone to pharmacies that do not 

meet our standards. We have refused to onboard pharmacies that 

cannot pass our rigorous screening, and we have cut off existing 

customers that do not have effective controls. 

But with a problem as large and complex as opioid addiction, we 

know there is always room to do better, and we will never stop 

working to continuously improve and refine our systems. 

For over a decade, we have funded education and prevention programs that have been used in every State and more than 100 colleges and pharmacies. We have also launched an opioid action program including the free distribution of opioid reversal medication 

to law enforcement and first responders beginning in four of the 

Nation’s hardest-hit States across Appalachia. 

As I indicated earlier, Cardinal Health is at the table and intends to be here for as long as the problem persists. Today I’ll do 

my best to answer your specific questions and hope that our dialogue will continue. 

Thank you. 

[The prepared statement of Mr. Barrett follows:] 

33 


~-

CardinaiHealth 

Cardinal Health 

7000 Cardinal Place 

Dublin, Ohio 43017 

cardina!health.com 

HEARING BEFORE THE UNITED STATES HOUSE OF REPRESENTATIVES 

COMMITTEE ON ENERGY AND COMMERCE, SUBCOMMITTEE ON OVERSIGHT 

AND INVESTIGATIONS 

I. INTRODUCTION 

May 8, 2018 

Testimony of GeorgeS. Barrett 

Executive Chairman, Cardinal Health 

Chairman Harper, Ranking Member DeGette, and Members of the Subcommittee, 

Chainnan Walden, Ranking Member Pallone, and other Members of the full Committee: thank 

you for the opportunity to be here for today's hearing on "Combating the Opioid Epidemic: 

Examining Concerns About Distribution and Diversion." 

My name is George Barrett, and from 2009 to 2017, I was privileged to serve as CEO and 

Chairman of Cardinal Health, which today is composed of more than 50,000 dedicated men and 

women. I have devoted a career to healthcare in a wide range of roles for over three decades, 

and I appreciate the oppmtunity to share my perspective with you today. 

The people of Cardinal Health are deeply committed to serving the American healthcare 

system. Although this hearing is focused on one aspect of our pharmaceutical wholesale 

distribution business, Cardinalllealth is a global, integrated healthcarc company, providing 

customized solutions for hospitals, healthcarc systems, pharmacies, ambulatory surgery centers, 

clinical laboratories, and physician offices worldwide. Our pharmaceutical wholesale 

distribution business delivers thousands of products from hundreds of manufacturers and 

suppliers. Each year, we process in excess of 400 million orders. The overwhelming majority of 
34 


medications we distribute are non-opiate medicines such as antibiotics, or treatments for cancer, 

heart disease, diabetes, and other chronic conditions. With respect to all our distribution, our 

objective is simple: to enable the hcalthcare providers we serve to use these products to bring 

health and healing to their patients. We also recognize that in our role as a pharmaceutical 

wholesale distributor we have a dual responsibility-to ensure that prescription medications are 

available for prescribers and their patients when needed, while working to limit the potential for 

those prescription medications to fall into the wrong hands. 

To meet our responsibilities, Cardinal Health has developed and implemented a 

constantly adaptive and rigorous system to combat controlled substance diversion. Despite the 

development of a quality system, we have not always gotten every decision right, and in the past 

we have entered into settlements with regulators to address aspects of our anti-diversion 

program. We have learned from our settlements and experience, and our anti-diversion program 

today is stronger and more effective as a result. While no program can ever be perfect given the 

evolving threats we face and the realities of human error and judgments, our goal is always to get 

it right, and we have stopped suspicious orders for the shipment of hundreds of millions of 

dosage units of controlled substances over the last decade. 

At the end of last year, I passed on my duties as CEO to my successor, and l currently 

serve as the Executive Chairman of Cardinal Health's Board of Directors. All of us at Cardinal 

Health are acutely aware of the devastation that opioid abuse is causing families and 

communities around our country, including some within our own company. We simply cannot 

look at the impact of opioid abuse on so many lives and not feel sorrow. And on behalf of the 

entire Cardinal Health community, we are resolved to be a constructive part of the effort to 

alleviate this complex national public health crisis. We are engaged and at the table. There is no 

single root cause of the crisis and addressing it requires that everyone work together. 

One of the key public policy issues we must address is the challenge posed by lawful yet 

high-volume prescribing of opioids. On the one hand, we know there are many individuals who 

2 
35 


rely on these medications to address suffering associated with terminal illnesses, painful 

neurological conditions, severe injuries, and other medical conditions. On the other hand, we 

share the recent judgment of policymakers, including senior leadership at the Department of 

Health and Human Services, the Food and Drug Administration, the Surgeon General, the 

Centers for Disease Control and Prevention, and others, that there have been too many 

prescriptions for too many pills. 

Pharmaceutical wholesale distributors do not and should not have visibility into clinical 

prescribing decisions or the patients for whom prescriptions arc written. However, there are 

other steps we can take, and are taking, to raise awareness of the dangers of over-prescribing. 

We also have made available Narcan, an opioid overdose reversal medication, free-of-charge to 

first responders and law enforcement. Through these efforts and other elements of our Opioid 

Action Program, Cardinal Health is seeking to make a meaningful difference, focusing initially 

on some of the nation's hardest-hit states. We arc also continuously focused on enhancing our 

own anti-diversion programs in collaboration with our regulators and others in our industry. 

II. CARDINAL HEAL Til- WHAT WE DO 

As discussed above, Cardinal Health is a global, integrated healthcare services and 

products company. In our role as a pharmaceutical wholesale distributor, we serve more than 

24,000 pharmacies and are in nearly 85% of U.S. hospitals. We make available nearly 400,000 

unique products that ultimately support patients across the full continuum of care. We have been 

privileged to be able to assist in some of the most acute crises this country has faced. For 

example, in the aftermath of Hurricanes Harvey, Irma, and Maria, the men and women of 

Cardinal Health worked tirelessly to fulfill the needs of hospitals, phannacies, critical care 

centers, and shelters so they could aid those in need. We did far more than simply move 

products from manufacturers to pharmacies. Our team went to extraordinary lengths to secure 

diesel fuel, high-water vehicles, planes, and helicopter support for the transport of products to 

critical locations, and on the ground worked under difficult conditions, putting the welfare of 
36 


patients ahead of their families' personal needs to ensure critical life-saving drugs and medical 

supplies were delivered to local hospitals. The level of commitment reflected in our team's 

actions during those crises is matched day in and day out as they perform their regular jobs, 

ranging from logistics management to anti-diversion monitoring and analysis. This is who we 

are. 

Cardinal Health, in its role as a pharmaceutical wholesale distributor, does not 

manufacture medications or market them to patients, nor does it diagnose medical conditions, 

write prescriptions, or otherwise practice medicine. Opioid prescriptions, like any other 

prescription medications, are written by healthcare providers for their patients, who take those 

prescriptions to licensed pharmacies to be filled. These licensed pharmacies in turn place 

inventory fulfillment requests with pharmaceutical wholesale distributors. As an intermediary in 

the pharmaceutical supply chain, Cardinal Health does not ultimately control either the supply of 

or the demand for opioids. Our role is to provide a secure channel to deliver medications of all 

kinds, from the hundreds of manufacturers who make them, to the thousands of hospitals and 

pharmacies that dispense them. We help ensure that pharmacies, hospitals, and the patients they 

treat receive medication-when and where they need them. At the same time, we also work 

diligently and with a sense of purpose to prevent the diversion of pain medications. We have 

developed and implemented robust suspicious-order monitoring and reporting systems, and we 

continuously strive to improve and adapt to address the ever-changing methods of drug diversion 

and abuse. 

III. CARDINAL HEALTH'S ANTI-DIVERSION EFFORTS 

Our anti-diversion program is rigorous, and over the last decade, we have invested tens of 

millions in continually upgrading our program to make sure it continues to be robust and 

effective in the face of evolving risks. Our goal is to spot, stop, and report the suspected 

diversion of medications out of the clinical setting for improper use. Our program has three key 

components, each of which is outlined in greater detail below. The program is supported by a 

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37 


dedicated anti-diversion team that consists of nearly a hundred trained individuals, including 

investigators, statistical auditors and data analysts, former law enforcement officers, pharmacists, 

and compliance officers deployed on-site at our pharmaceutical distribution centers, in the field, 

and at our corporate headquatters, augmented by substantial external resources. 

Over time, we have continued to enhance our anti-diversion program and have entered 

into settlements with the DEA and the state of West Virginia. We have learned and improved 

from each of them. From 2008 to the present, we have stopped suspicious orders for the 

shipment of hundreds of millions of dosage units of controlled substances. We also have 

terminated or refused to distribute controlled substances to over a thousand pharmacies. On our 

own initiative and in response to regulators. we have increased the size of our anti-diversion 

team, including bringing in personnel with additional regulatory, pharmaceutical, and law 

enforcement experience to further enhance the anti-diversion program. We have developed an 

analytical model to evaluate customers, assigned threshold ordering volumes, created a 

centralized database to store and track data on customers and orders, and designed new policies 

and procedures for anti-diversion personnel. Over the years, we have also trained thousands of 

our people on anti-diversion practices. 

Know Your Customer. Know Your Customer is the ongoing process by which we learn 

about pharmacies to, among other things, better understand the range of legitimate requirements 

for controlled substances and establish distribution thresholds on a customer-specific basis using 

objective, statistical data and other criteria. Cardinalllealth uses a multi-factor process to 

evaluate customers, even before they can be accepted as a Cardinal Health customer. These 

factors include verifying the customer is licensed by the Drug Enforcement Administration 

(DEA), and evaluating the product mix dispensed by the customer within cettain drug families, 

as well as the location and business model of the pharmacy, the historic volume of controlled 

substances dispensed, and the ratio of controlled to non-controlled substances. Cardinal Health 

uses an escalation process through management to evaluate higher volume customers which 

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38 


includes two-person approval for certain threshold levels and regular review of higher volume 

customers by a committee of anti-diversion management and specialists. 

Electronic Monitoring. All Cardinal Health customers are subject to electronic 

monitoring, which occurs prior to order fulfillment. Threshold limits arc established by the antidiversion team for over 120 families of controlled substances, including oxycodone and 

hydrocodone, for each pharmacy or other healthcare provider. The thresholds are based on 

various factors specific to the customer and analysis of third-party data detailing dispensing 

volumes of customers nationwide. Through electronic monitoring, Cardinal Health monitors 

dosage units for each controlled substance drug family, as well as certain strengths of specific 

drugs known to be more frequently misused (e.g., oxycodone 15mg and 30mg products). When 

a customer's accrued orders hit the established threshold, the order is held and, outside of a rare 

occurrence, the order is cancelled. Cancelled orders are reported to the DEA and any required 

state regulators. 

Site Visits. Cardinal Health conducts regular site visits to its customers across the 

country as part of its anti-diversion program. Site visits may be announced or unannounced. In 

2017, Cardinal Heath representatives conducted over 48,000 on-site inspections nationwide. 

These representatives look for any visible signs of diversion, such as long lines, a high volume of 

customers from out-of-state, lack of product diversity in non-prescription products offered for 

sale, or groups of people traveling together to fill prescriptions. As warranted by the 

circumstances, the teams also speak with the pharmacist-in-charge and/or other staff and review 

aggregate pharmacy dispensing data to identify any risk of diversion. The data reviewed 

includes aggregate prescription volume, percentage of cash business, ratio of controlled to noncontrolled substance dispensing, and information about the pharmacy's customer base (e.g., 

hospice, orthopedics, oncology, pain clinics, etc.). However, it is important to note that privacy 

laws, such as HIPAA and other laws, prohibit Cardinal Health representatives from reviewing 

patient-specific prescriptions. 

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39 


IV. LEARNING FROM OUR WEST VIRGINIA EXPERIENCE 

Given the questions that have been raised by the Subcommittee and others, I would like 

to directly address our work in the state of West Virginia over the past decade and, in particular, 

the volume of opioid medications that Cardinal Health distributed in response to orders from 

DEA-licensed pharmacies. 

As I noted previously, we share the judgment ofpolicymakers that there have been too 

many prescriptions for too many pills across the country over the past decade. With regard to 

two of the pharmacies that have been a particular focus for the Subcommittee, Family Discount 

ofMt. Gay and Hurley Drug Company, we reached decisions at the time based in part on the 

demographics of the surrounding area, the characteristics of the individual pharmacy, and the 

views of our internal staff. Those decisions allowed the two pharmacies to continue to receive 

certain volumes of hydrocodone and oxycodone from Cardinal Health for longer than 1 think 

they should have based on what I have since learned about the circumstances surrounding those 

pharmacies. With the benefit of hindsight, I wish we had moved faster and asked a different set 

of questions. lam deeply sorry we did not. Today, I am confident we would reach different 

conclusions about those two pharmacies. Although both pharmacies continue to maintain active 

and valid DEA registrations and West Virginia Board of Pharmacy licenses, Cardinal Health has 

not distributed oxycodone or hydrocodone to Family Discount ofMt. Gay since 2012, or to 

Hurley Drug Company since 2014. We have also taken responsible actions by instituting 

improvements in our anti-diversion program and reaching settlements with our regulators, 

including the state of West Virginia. We understand no program is perfect, which is why we are 

so focused on continuous improvement. And we are at the table now, focused on alleviating this 

critical national health problem. 

There are a variety of other factors that informed our historical decisions about our 

overall distribution volumes in West Virginia, including the fact that Cardinal Health's 

distributions of oxycodone and hydrocodonc to West Virginia reflected only a small portion of 

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40 


the company's total distributions of prescription medications in the state. For example, in 2008 

oxycodone and hydrocodone constituted only around 7% of the prescription medications that 

Cardinal Health distributed to independent retail pharmacies in West Virginia. In addition, our 

distributions were made against the backdrop of what the Centers for Disease Control and 

Prevention has now chronicled as then widely accepted and publicized medical norms guiding 

physicians' prescribing practices. During that time period, those norms favored broader opioid 

treatments for longer periods of time with higher potency. 

V. THEPATHFORWARD 

Improving our anti-diversion program has been our primary focus. Yet, our commitment 

to alleviating the national problem of opioid abuse and misuse does not end there. For over a 

decade, we have funded education and prevention programs in communities across the country 

through Generation Rx, which the Cardinal Health Foundation developed in partnership with the 

Ohio State University School of Pharmacy. Generation Rx is a national prescription drug misuse 

prevention program that has been used in every state, at more than 100 colleges of pharmacy, 

and has provided more than a million people with tools and educational resources to prevent and 

address the issues that drive opioid abuse. 

More recently, we launched our Opioid Action Program (OAP). We piloted OAP in four 

of the nation's hardest-hit states across Appalachia-Ohio, Kentucky, Tennessee, and West 

Virginia-to alleviate the opioid epidemic. !t has four elements, each of which has been cited by 

leading experts as essential to the fight to reduce opioid abuse and casualties: 

I. Narcan. We have distributed Narcan, an overdose reversal medication, free-of-charge to 

first responders and law enforcement. To date, we have distributed nearly 80,000 

dosages. 

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41 


2. Drug take-back events. We have sponsored drug take-back events in various 

communities, including sponsoring 39 drug take-back events across these four states 

during the DEA's National Prescription Drug Take Back Day in the past two weeks. 

3. Student and prescriber education. We have successfully funded millions in expanded 

grants focused on youth prevention education, prescriber opioid awareness and reduction 

efforts, and community responses to the epidemic. 

4. Medical school training. We have partnered with a leading school of medicine to refine 

and share medical school curricula that address opioid abuse and treatment through a 

collaboration with over 20 medical schools nationwide. 

In addition, our employees have volunteered thousands of hours to community service to 

support drug take-back days and community awareness and education efforts at schools, senior 

centers, and elsewhere. 

We also support practical reforms to alleviate the opioid crisis, including the creation of a 

national prescription drug monitoring program through collaboration with industry participants 

and state and federal regulators. And we support appropriate prescribing limits on opioids and 

legislation that would require prescriptions to be issued electronically. While none of these is a 

complete fix or a substitute for collaborative efforts by participants across the system, each 

would be an important step in the right direction. 

VI. CONCLUSION 

I believe the steps I have outlined above can make a genuine difference in our ability to 

combat the diversion of opioid medications. The men and women at Cardinal Health know there 

is much more to be done, and that we, as a country, have a long way to go. We at Cardinal 

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42 


Health are committed to doing our part to alleviate this national challenge and welcome the 

opportunity to continue the search for solutions with the Subcommittee. 

Thank you for the opportunity to be here. I look forward to your questions. 

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43 

Mr. HARPER. Thank you, Mr. Barrett. 

The Chair will now recognize Steven Collis, chairman, president, 

and CEO of AmerisourceBergen Corporation. 

Mr. Collis. 

STATEMENT OF STEVEN H. COLLIS 

Mr. COLLIS. Thank you. Thank you, Chairman Walden, Subcommittee Chairman Harper, Ranking Member Pallone, Ranking 

Member DeGette, and distinguished members of the committee. On 

behalf of AmerisourceBergen’s over 21,000 associates, thank you 

for the opportunity to be here today. We are committed to working 

with you and all stakeholders to help combat the tragic opioid 

abuse epidemic. 

I will begin today by sharing three distinct perspectives that 

have shaped my thinking on this urgent issue. 

First, like so many others, I have been touched and saddened by 

the excruciating stories that demonstrate the destruction wrought 

by the disease of addiction, many shared by your colleagues as they 

relayed the devastation that opioids have left in their States. Some 

time ago, a Member shared a story of a mother who overdosed, 

leaving her two children starving and unattended for several days. 

Stories like this, and sadly so many that tell similar tragic tales, 

are always on my mind. 

Second, I have seen friends, family, and those in my community 

fight through uncontrolled pain and have experienced firsthand the 

sad necessity of pain medications. This topic is frequently brought 

up in my conversations with doctors and healthcare professionals 

and was the focus of a recent discussion I had with the CEO of a 

world-class cancer treatment center in which he articulated his 

concern that the reaction to the opioid crisis would prevent his 

team from providing necessary and appropriate end-of-life care. 

Lastly, I have spent the majority of my 30-plus-year career in 

healthcare providing services surrounding the pharmaceutical industry with a focus on working to enable patient access to the 

medications they need. 

As you all know, AmerisourceBergen’s role in regard to prescription opioid medications is one of a logistics provider and distributor. We are responsible for getting FDA-approved drugs from 

pharmaceutical manufacturers to DEA-registered pharmacies that 

dispense them based on prescriptions by licensed healthcare providers. 

We have no ability and no desire to encourage the prescribing or 

dispensing of pain medication. We do not manufacture or promote 

the prescribing of these medications. And we are not qualified to 

interfere with the very personal clinical decisions made between 

patients and their physicians. 

Here are some things that AmerisourceBergen does do. For more 

than a decade, we’ve reported every opioid order we distribute on 

a daily basis to the DEA. So every order, every shipment, every 

day. We use statistical-based algorithms and data analytics tools to 

monitor and assess every order we receive in an effort to identify, 

stop, and report suspicious orders. 

Just as importantly, we continuously focus on enhancing our diversion control efforts. And our best-in-class diversion-control team 

44 

endeavors to track patterns and behaviors beyond just individual 

suspicious orders that have led us to refuse service or terminate 

service to pharmacies we’ve identified as problematic, including 

several of the pharmacies we have all heard about today in West 

Virginia. 

And we collaborate with and support others who are also working hard to address the crisis, partnering with others across the 

country to provide drug deactivation and disposal resources, and 

with our customers, not-for-profits, and innovators to support takeback programs and advance ideas that could help combat the opioid 

abuse epidemic. 

We believe we’ve taken meaningful action, but this epidemic cannot be solved unless we improve the ways we work together. Communication and technology between the DEA and pharmaceutical 

distributors should be enhanced. Specifically, the sharing of the 

DEA’s comprehensive data of all opioid sales to all pharmacies on 

a de-identified basis would alert distributors if pharmacies are receiving controlled substances from other DEA registrants. 

Beyond improved data sharing, additional DEA guidelines for 

distributors with uniform standards for suspicious ordering monitoring programs would create a more consistent approach across 

the more than 900 registered distributors in the industry and, in 

turn, more actionable input for law enforcement professionals. 

We also support a number of solutions that are not specific to 

distributors, including revising prescriber guidelines, mandatory eprescribing for controlled substances, enhanced prescription drug 

monitoring programs to enable physicians and regulators to determine if patients are obtaining prescriptions in more than one State, 

and a number of the proposals the subcommittee considered just 

last week. 

Our work to play a role in combating abuse while supporting 

clinically appropriate access will never be complete. We always 

strive to be better. I join you today with an open mind and a sincere desire for additional guidance and ideas from this committee. 

Thank you. 

[The prepared statement of Mr. Collis follows:] 

45 


AmerisourceBergen Corporation 

WRITTEN STATEMENT 

OF STEVEN H. COLLIS 

CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER 

AMERISOURCEBERGEN CORPORATION 

BEFORE THE 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

COMMITTEE ON ENERGY AND COMMERCE 

U.S. HOUSE OF REPRESENTATIVES 

PRESENTED 

MAY 8, 2018 
46 


Written Statement of Steven H. Collis 

Chairman, }>resident, and Chief Executive Officer 

AmerisourceBergen Corporation 

Before the Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

May 8, 2018 

I am Steven H. Collis, Chairman, President, and Chief Executive Officer of 

AmerisourceBergen Corporation ("AmerisourccBergen" or "the Company"). f thank the 

Committee for the opportunity to express my concern, and the Company's concern, about the 

tragic epidemic of opioid abuse, as well as our desire to be part of much-needed, and 

unquestionably multi-faceted, solutions to address this public health crisis. 

The epidemic raises many complex problems. AmerisourceBergen associates and I see 

firsthand the struggles of individuals impacted by the opioid epidemic. Like so many others, the 

AmerisourceBergen family is impacted by opioid addiction in many ways. We have seen our 

families and friends struggle with addiction and we have been touched personally by harrowing 

stories of the devastation it has caused in communities throughout this country. But we also 

know that FDA-approved opioid medications play an important role for many Americans who 

struggle with debilitating pain and severe sickness, such as cancer. We cannot forget that 

opioids are approved as safe and effective treatments to ease the pain and suffering of many 

patients who need them, and they can be vital in end-of-life care. Opioids also allow others to 

function in spite of medical conditions and pain that would otherwise make 1 ife unbearable. 

The critical challenge we face lies in finding the appropriate balance: preventing the 

abuse of these treatments, while providing clinically appropriate access to the medications that 

many patients need. AmerisourceBergen Drug Corporation is a distributor- a logistics provider 

that purchases pharmaceutical products from manufacturers and supplies Drug Enforcement 

Administration- ("DEA") and state-licensed pharmacies, hospitals, and clinics that dispense to 

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47 


patients based on prescriptions written by board-certified physicians. Our place in the supply 

chain provides AmerisourceBcrgen Drug Corporation with neither the information nor the 

expertise to override clinical decisions by trained doctors and pharmacists or to determine the 

appropriate supply of medications. While we believe it is important to recognize our limited but 

vital role in the supply chain, we are committed to working with the Committee and all 

stakeholders on ways that all distributors, and AmerisourceBergen in particular, can leverage our 

expertise and position in the supply chain to help address this crisis. We welcome an ongoing 

dialogue on how to move forward expeditiously and effectively. 

AmerisourceBergen Drug Corporation Is a Logistics Provider That Distributes Legal, 

FDA-Approved Products to DEA-Licensed Customers 

The wholesale pharmaceutical distribution business is not well known to the American 

public. The lack of awareness and understanding of a distributor's limited but vital role in the 

healthcare supply chain has led to significant misunderstandings about what AmerisourceBergen 

Drug Corporation docs and does not do. 

AmerisourceBergen Drug Corporation facilities do not manufacture pharmaceuticals. 

We are a wholesaler that plays a critical role in ensuring the safety and security of America's 

pharmaceutical supply chain. We purchase some 15 million innovative brand and generic 

medicines, the vast majority of which are non-controlled substances, directly from 

manufacturers. We arc responsible for getting those medicines to tens of thousands of sites of 

care every day, including pharmacies, hospitals, and clinics, which administer or dispense the 

medicines on prescriptions written by licensed health care providers. By acting in this logistics 

role, AmcrisourceBergen Drug Corporation contributes to a secure supply chain and an efficient 

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48 


distribution system that has been estimated to save the United States health care system $42 

billion a year. 1 

AmerisourceBcrgen Drug Corporation's distribution role in the system is vital, yet 

limited in many ways. Prescription opioids represent less than 2% of AmerisourceBergen's 

annual revenue. AmerisourceBergen Drug Corporation delivers the products that our customers 

order from us, but does not promote the prescribing or use of medications, including opioids. 

We do not offer our sales representatives special compensation or incentives of any kind that 

target opioid orders in particular. We have no ability, and no desire, to encourage the prescribing 

or dispensing of pain medicines. 

Further, as a wholesale distributor, AmerisourceBcrgen Drug Corporation does not 

control how any medications we deliver are prescribed, dispensed, or ultimately used. Strict 

statutory privacy requirements (including HIPAA) prevent us from obtaining information about 

the particular patients for whom medicines are prescribed, the specific medical purpose for 

which medicines are prescribed, or how they are used by the patients. This is true for all 

medicines AmerisourccBergen Drug Corporation distributes, including opioids. 

AmerisourceBergen Drug Corporation has absolutely no role in the clinical decisions made 

between a doctor and a patient. 

The number of opioids shipped by AmerisourceBergen Drug Corporation was and is 

driven by the number of pills ordered by our customers. Until very recently, AmcrisourceBergen 

Drug Corporation has never known (unless a customer discloses that information voluntarily) 

whether a pharmacy customer buys opioids from other distributors. Even with the DEA's new 

rules for sharing information on a pharmacy's other distributors, AmerisourccBergen Drug 

See Center for Healthcare Supply Chain Research, The Role of Distributors in the U.S. Health care 

Industry: A 2011 study prepared by Booz & Company. Arlington, VA: The Center, 20 II. 

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Corporation does not know what types of opioids or how many opioids its customers order from 

other distributors. AmerisourceBergen Drug Corporation only has access to its own distribution 

data. This is in fact why we have been a vocal advocate for increased data transparency across 

the supply chain, including the sharing of scrubbed ARCOS (Automation of Reports and 

Consolidated Order System) data. Such data, which is only visible to the DEA, would allow us 

to make more informed decisions when evaluating orders of controlled substances as well as the 

customers who are placing those orders. 

All Participants in the Supply Chain of Prescription Opioids Are Closely Regulated by the 

DEA and Must Safeguard Against Diversion, Within the Areas They Control 

Federal law regulates prescription opioids at every link in the closed system of 

distribution. All prescription medicines, including opioids, are evaluated and approved as safe 

and effective by the FDA based on their ability to effectively and safely treat a medical 

condition, such as cancer, diabetes, high cholesterol or chronic pain. The DEA sets annual 

quotas for the manufacture of opioids, based on the anticipated legitimate medical need, which is 

informed in part by the number of prescriptions written the previous year. AmerisourceBergen 

has never had any involvement in the evaluation and determination of these quotas. All 

participants in the closed system of distribution of prescription opioids and other controlled 

substances (other than the end user/patient) must be registered with the DE A. All participantsmanufacturers, distributors, pharmacies, hospitals, and physicians have different roles and 

responsibilities within the closed system and must safeguard against diversion and abuse in the 

areas within their control. 

Physicians and other authorized practitioners must be licensed by their state board of 

pharmacy and the DEA in order to prescribe opioids. Any prescriptions they write for opioids 

must be issued for a legitimate medical purpose and in the usual course of their professional 

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50 


practice. Most states (including West Virginia) operate Prescription Drug Monitoring Programs 

("PDMPs'') that require physicians to provide information to a state-run database about the 

prescriptions they write for opioids. Unlike distributors, physicians have the right (and state law 

may require them) to search the PUMP database to determine if a patient has "doctor-shopped" 

and sought opioids from multiple sources. 

Pharmacists also play a critical gatekeeping role in ensuring that opioids are prescribed 

for a legitimate medical purpose. A pharmacy may dispense opioids only if it is registered with 

the DEA and has a valid state license to dispense controlled substances. The pharmacy may 

dispense opioids only pursuant to a prescription from a licensed medical practitioner who is 

registered with the DEA. Pharmacists arc prohibited from dispensing opioids based on illegal or 

falsified prescriptions, and must act diligently in determining whether a prescription is issued for 

a legitimate medical purpose based on their education and training. Unlike distributors, 

pharmacists are required to know the practitioner who issued the prescription, the number of 

other prescriptions the practitioner wrote that the pharmacy filled, and whether the patient has 

presented prescriptions obtained from more than one doctor. Pharmacists can also observe the 

demeanor of the patient who presents the prescription. 

Like physicians and pharmacists, distributors have duties to help prevent diversion, 

within the areas in which we have some visibility and control. We must maintain the physical 

security of controlled substances in our possession, distribute controlled substances only to 

DEA-registered customers, and report all opioid sales to the DEA. Distributors must also design 

and implement systems to detect the "suspicious orders" we receive and report those suspicious 

orders to the DEA. 

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AmerisourceBergen Drug Corporation's Rigorous Anti-Diversion Controls 

AmerisourceBergen Drug Corporation's obligation to safeguard controlled substances 

and prevent their diversion is one we take very seriously. AmerisourceBergen Drug Corporation 

has refused to service and has terminated service to hundreds of pharmacies that it identified as 

problematic, including some of the pharmacies in West Virginia that news reports have claimed 

were diverting opioids. We are licensed with the DEA to buy, possess, and distribute controlled 

substances. We have invested heavily in physical security to ensure that our facilities have the 

best possible protocols and technology to minimize the risk of theft or diversion of any 

controlled substances from the time they enter AmerisourceBergen Drug Corporation facilities to 

the time they are delivered to our customers. We also devote significant resources to our antidiversion program. AmcrisourceBergcn Drug Corporation employs a team of diversion-control 

experts who perform the many aspects of its diversion control program. 

AmerisourceBergen Drug Corporation's diversion control team performs due diligence to 

determine whether prospective new customers are suitable purchasers of controlled substances. 

The procedure to review prospective customers has varied over time but since 2007 has generally 

included the following elements: the completion of a Retail Customer Questionnaire; site visits; 

verit!cation of the pharmacy's DEA registration and state licensure; review of the pharmacyprovided information; and online investigation (including internet licensing and disciplinary 

searches) for the identified pharmacy, owner, and pharmacist-in-charge. The questions on the 

questionnaire are based on guidance from the DEA. 

Since at least the 1980s, AmerisourceBergen Drug Corporation has had in place a system 

to monitor the orders it receives (the "Order Monitoring Program," or "OMP"). We worked with 

the DEA to enhance the system in 1998, and again in 2007, and have continually reviewed and 

improved it, including a comprehensive 2015 revision to build on current data, respond to trends 

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52 


in prescription drug abuse, and adopt improved technological capabilities, including data-driven 

analytical tools. The OMP's innovative program uses sophisticated technology to test every 

order of controlled substances that AmerisourceBergen Drug Corporation receives. Orders that 

the system identifies as "of interest" are held electronically and investigated, and shipment is 

automatically blocked until the investigation is complete and the order is determined to be 

appropriate. If the order is deemed suspicious after that review, the order is reported to the DEA 

and is not shipped. Using the OMP, AmerisourceBergen Drug Corporation reported and refused 

to ship more than 800 such orders for oxycodone and hydrocodone from West Virginia from 

2008 to 2016. AmerisourceBergen Drug Corporation ends relationships with customers that it 

determines have an increased potential for diversion. In addition, the AmerisourccBergen Drug 

Corporation maintains a "Do Not Ship" list, which includes customers that the diversion control 

program has identified through its order monitoring program and other ongoing diversion control 

efforts. 

On a daily basis, for every order of opioid-based medication we ship, AmerisourceBergcn 

Drug Corporation provides the DEA with detailed information about the order, including the 

type of opioid, quantity, and the recipient. On a monthly basis, AmerisourceBergen Drug 

Corporation also reports to the DEA's Automation of Reports and Consolidated Orders System 

("ARCOS") all sales of Schedule II and reportable Schedule III controlled substances. 

AmerisourceBcrgen Drug Corporation uses analytical tools to review aggregate purchase data 

for trends that are not captured in the review of flagged individual orders. AmerisourccBergen 

Drug Corporation conducts on-site investigations of customers when issues or concerns are 

identified by its monitoring activities, the OMP, personnel at its distribution centers throughout 

the country, or external bodies such as the DEA or state agencies. AmerisourceBergen Drug 

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53 


Corporation also provides substantial training in diversion control: It trains its dedicated 

diversion-control teams, all associates in compliance-sensitive positions at its distribution centers 

throughout the country, and its sales associates, and also offers anti-diversion training to its 

pharmacy customers. 

AmerisourceBergen Is Committed to Fighting the Opioid Crisis 

AmerisourceBergen is and has been committed to ensuring a pharmaceutical supply 

system that is safe, secure, and marked by integrity. As such, we want to be part of the solution 

to the opioid crisis, which we believe can be conquered while keeping opioids available for 

patients who legitimately need them. But in order to conquer this problem, it is imperative that 

the DEA come to the table and work with all stakeholders in the supply chain in a more 

cooperative and collaborative manner. The Controlled Substances Aet ("CSA") under which the 

DEA operates was enacted and the regulations promulgated in 1970. We would recommend 

updating the regulations and guidance implementing this important law to standardize suspicious 

order monitoring programs across the 900+ distributors that arc regulated under this system to 

ensure the highest standards across the board for all distributors' suspicious order programs. 

In addition, AmerisourceBergen Drug Corporation reports all opioid orders daily, submits 

ARCOS data monthly, and reports suspicious orders to the DEA. If the DEA could utilize this 

data to alert those of us in the supply chain who have no "real time" visibility to customers that 

may be receiving shipments from multiple sources, this could help prevent what has occurred in 

West Virginia from happening in the future. AmerisourceBergen supports a number of other 

proposed solutions including revision of prescribing guidelines, which will likely reduce the 

number of opioids prescribed. Indeed, AmerisourceBergen funded a grant to the Health Care 

Improvement Fund to support prescriber education for post-surgical procedures. 

AmerisourceBergen also supports mandatory e-prescribing, which would generate real-time 

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54 


infonnation on opioid use and reduce the number of opioids obtained through fraudulent 

prescriptions or doctor shopping. We support policies to make state PDMPs interoperable, 

which would allow physicians and regulators to determine if patients are obtaining prescriptions 

from physicians in more than one state. We are also the only distributor member of the 

Collaborative for Effective Prescription Opioid Policies ("CEPOP"), which supports policies to 

reduce prescription opioid abuse and promote treatment options. 

AmerisourccBergen is also eager to collaborate with policymakers and stakeholders 

throughout the pharmaceutical supply chain to improve distributors' ability to assess and act on 

possibly suspicious orders of prescription opioids. As part of the National Association of Drug 

Diversion Investigators, AmerisourceBergen has presented on effectively combatting drug 

diversion at the distribution level and collaborating with law enforcement. AmcrisourceBergen 

also supports increased fees for DEA registration to help support such enhanced data capabilities. 

AmerisourceBergen believes that education about opioids and the safe storage and 

disposal of opioids are equally critical to resolving the opioid crisis. To this end, 

AmerisourceBergen participates in, and funds, numerous industry, non-profit and policy group 

initiatives that support the fight against opioid abuse. For example: 

• AmerisourceBergen Foundation has partnered with The Prevention Action 

Alliance and Everfi to launch the Prescription Drug Safety Network, an 

interactive online educational platform designed to teach high school students to 

make informed decisions about prescription medications. 

• AmerisourceBcrgen is a member of the Anti-Diversion Industry Working Group 

which, working with the National Association of Boards ofPham1acy, funded 

production of the "Red Flags of Diversion" educational video that many state 

10 
55 


pharmacy boards, including West Virginia's, use to educate pharmacies about 

diversion controL 

• AmerisourceBergen has partnered with Walgreens, Pfizer, Prime Therapeutics 

and Blue Cross Blue Shield to install safe disposal kiosks for medication in 

hundreds ofWalgreens stores across the country and near military bases and other 

areas where the opioid epidemic has challenged communities. This partnership 

has already collected 155 tons of unused medications and is expected to collect an 

additional 300 tons. 

• AmerisourceBergen Foundation launched a Municipal Support program that has 

provided drug deactivation pouches to l 7 municipalities and non-profit 

organizations in six states, and also sent resources to Americares, a health-focused 

relief and development organization that responds to people affected by poverty 

or disaster. Americares distributes the deactivation pouches to free clinics and 

community health centers nationwide that serve low-income and uninsured 

patients in need. To date more than 60,000 pouches that allow consumers to 

dispose of unused medications at home, safely and in an environmentally friendly 

manner, have been distributed. 

• AmerisourceBcrgen Foundation provided a grant to The Moyer Foundation to 

support community programs that serve youth who have been affected by a family 

member's substance abuse. 

• AmerisourceBergen recently launched the AmerisourceBergcn Foundation Opioid 

Resource Grant Program, which will provide funding to efforts to address opioid 

abuse with direction from an external advisory council. 

11 
56 


• AmerisourceBergen Foundation announced a grant to Thomas Jefferson 

University to hold a substance abuse symposium. 

Conclusion 

I and AmerisourccBergen share Congress's concern, and indeed the entire nation's 

concern, about the tragic abuse of opioids. AmerisourceBergen is committed to the continuous 

analysis and ongoing improvement of our programs and policies. W c look forward to additional 

ideas and guidance from this Committee, industry regulators, and other experts about how we 

can continue to improve our efforts and help alleviate the crisis while supporting clinically 

appropriate access to opioid medications for legitimate medical needs. On behalf of 

AmerisourceBergen, I thank the Committee for this opportunity to share more information, our 

views and our eagerness to help address this crisis. 

12 
57 

Mr. HARPER. Thank you, Mr. Collis. 

The Chair will now recognize J. Christopher Smith, former president and CEO of H.D. Smith Wholesale Drug Company. 

Mr. Smith. 

STATEMENT OF JAMES CHRISTOPHER SMITH 

Mr. SMITH. Good morning, Chairman Walden, Chairman Harper, 

Ranking Member DeGette, and members of the subcommittee. 

Thank you for inviting me here today. 

I would like to start by telling you a little bit about H.D. Smith, 

how it began, and the vision that guided it from the very beginning. 

My grandfather, who was a pharmacist, had the idea for it. And 

with that idea from his own father, my father founded H.D. Smith 

in Springfield, Illinois, in 1954, because he saw that there was a 

true need for a wholesale drug distributor that would commit to 

serving small town and rural independently owned mom-and-pop 

pharmacies and downstate hospitals as there was no other wholesale drug distributor like that in Springfield. 

My father’s vision in starting the company was to make certain 

that a wholesale drug distributor would not only commit to serving 

these underserved communities, but he did so with the mission 

that patient care should never be disrupted because a rural small 

town pharmacy, hospital, or later, inner-city pharmacy, could not 

quickly and reliably supply the medicines that the patients in these 

communities needed right when they needed them. 

This is the mission and vision he taught to me and my brother 

as we later joined the company and rose through its ranks over 

time. As a child, I sometimes accompanied my father when he, 

himself, would make emergency deliveries at night or over weekends. And as an employee of H.D. Smith, I did the same as well, 

along with many others. That is and always was our legacy. 

I first began working for H.D. Smith full-time in 1980 as a buyer 

and gradually moved my way up through the ranks over the years. 

In September 2007, I was appointed president and COO. In March 

2015, I became president and CEO. 

In January 2018, H.D. Smith was acquired by 

AmerisourceBergen, and I no longer hold any office, position, or 

employment with H.D. Smith. 

But it is important to remember that since its founding in 1954 

until its acquisition in 2018, H.D. Smith always remained a familyowned business, which I am very proud to have served. I am certain, absolutely certain, that H.D. Smith’s new management will 

observe my family’s guiding principles just as loyally as I tried so 

hard to do myself. 

I share the committee’s grave concern about the opioid crisis and 

am committed to doing all we can to address it. We always took 

seriously our responsibilities to distribute controlled substances appropriately. We had a DEA license. We sold only to DEA- and 

State-licensed pharmacies and hospitals. We followed DEA regulations in handling controlled substances. We reported all our purchases and sales of controlled substances to the DEA. 

My company distributed all kinds of pharmaceutical products. 

Only a small percentage were controlled substances, including pain 

58 

medication. We didn’t advertise or promote the medication or do 

anything else to encourage doctors to prescribe them or pharmacies 

to dispense them. Our job as a distributor was to fill orders that 

pharmacies sent us. 

In fact, as a distributor, we could only see part of the distribution 

chain—the pharmacy that we supply. We didn’t see the prescriptions the pharmacy filled or know the doctors who wrote them or 

have any contact with knowledge of the patients. 

As a distributor, we had to manage to the twin imperatives of 

ensuring that we distributed pharmaceuticals appropriately, for legitimate purposes, and ensuring the pharmacies that they had the 

products they needed when the patient arrived with a prescription 

so as to ensure undisrupted patient care. 

To meet this challenge, we created strong diversion control systems and continually improved them overtime. We always did our 

very best to make sure that all orders we shipped went to pharmacies that dispensed medications only on legitimate prescriptions 

for legitimate medical reasons. 

I am certain AmerisourceBergen will continue my company’s 

proud tradition and do everything that can be done to help with 

the solutions to the opioid crisis in this country. 

Thank you. 

[The prepared statement of Mr. Smith follows:] 

59 


WRITTEN STATEMENT OF .JAM.:S CHRISTOPHER SMITH 

FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER, H.n. SMITH LLC 

BEFORE THE 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

COMMITTEE ON ENERGY AND COMMERCE 

U.S. HOUSE OF REPRESENTATIVES 

PRESENTED 

MAY 8, 2018 
60 


Written Statement of James Christopher Smith 

Before The Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

May 8, 2018 

H.D. Smith was a family-owned wholesaler for more than 60 years. We began by and 

grew serving an under-served segment of the market local, independently owned, mostly momand-pop pharmacies and rural hospitals in small towns, rural communities, and later in inner 

cities, taking pride in providing excellent customer service. We recently were acquired by 

AmerisourceBergen Corporation ("AmcrisourceBergen"). I thank the Committee for the 

opportunity to share my concern about the opioid epidemic plaguing our country, and to explain 

what H.D. Smith did to prevent diversion during my tenure. 

At all times, H.D. Smith has been committed to doing its very best to balance the needs 

of patients for prescription mediations with our efforts to prevent diversion. Fighting the opioid 

epidemic is unlike fighting other drug abuse. While preventing the abuse of these powerful 

drugs, we cannot lose sight of ensuring that suffering patients have access to the prescription 

medications they need when they need them. But H.D. Smith was only one part of a complex 

supply chain, and we could not see all the information up and down the chain that could flag a 

potential problem. As a wholesale distributor, H. D. Smith could not second-guess physicians' 

prescribing decisions, and could not itself assess the medical needs of the patients of those 

prescribing physicians. There are difficult policy and medical decisions that arc needed to 

balance access against diversion and we did the very best we could with the limited information 

to which we had access. 

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61 


H.D. Smith's Role as a Middleman That Purchased Medicines from Manufacturers and 

Filled Orders from Licensed Pharmacies 

H.D. Smith was a wholesaler. We purchased prescription and generic medicines directly 

from manufacturers, and distributed them to the licensed pharmacies that ordered them for 

patients with prescriptions. As a wholesale distributor, H.D. Smith did not interact directly with 

patients, nor were we in a position to make or second-guess clinical decisions. We also had no 

way of knowing whether or to what extent our customers were purchasing medicines, including 

opioids, from other distributors, unless this information was voluntarily disclosed. 

H.D. Smith did not manufacture, market or otherwise promote medications, including 

opioids, to customers, patients or their physicians. W c had no control over or involvement with 

controlled substance manufacturing quotas, which are set by the DEA in consultation with other 

federal regulators and manufacturers, and which were routinely and significantly increased over 

the years until recently. The distribution of prescription opioids comprised only a small fraction 

of our annual revenue. 

H.D. Smith's Robust Diversion Control Efforts 

B.D. Smith has always strived to do what we could to prevent the diversion of controlled 

substances, and I am confident it will continue to do so under its new ownership. I can tell you 

what H.D. Smith did to prevent diversion during my tenure. In addition to taking physical 

security measures to safeguard against theft and diversion of opioids and other medicines, H.D. 

Smith developed and maintained a robust anti-diversion program, which was designed to identify 

potentially suspicious orders. That program came to include, among other components, a 

controlled substance order monitoring program, focused investigations conducted by an 

experienced group of former law enforcement and drug diversion investigators, and 

comprehensive customer and sales force anti-diversion training. We also performed extensive 

3 
62 


due diligence on prospective new customers before allowing them to purchase controlled 

substances, and those due diligence measures continued to evolve over time and continued 

throughout our relationships with customers. 

Before 2006, as was consistent with the DEA's expectations communicated to wholesale 

drug distributors, 1-!.D. Smith reviewed customer orders manually to detect suspicious orders and 

to then report them to the DEA. As the DEA's expectations changed, in May of2008, we 

implemented an electronic controlled substance order monitoring program (the "CSOMP"), and 

provided extensive training to our personnel in how best to reliably utilize that system, just as we 

trained our sales representatives to be alert to any signs of diversion or irregularities at the 

individual pharmacies we served. 1-!.D. Smith's CSOMP used sales volume data-based 

algorithms to test orders of controlled substances and blocked the shipment of orders flagged by 

the system, along with any additional orders for any drug within the same family by that 

customer. The flagged orders would be placed on the daily CSOMP report, and reviewed by 

members of the Corporate Compliance and Security Department team. 1-!.D. Smith maintained 

an ongoing dialogue with the DEA throughout its development of its CSOMP to ensure that the 

system complied with the DEA's expectations. 

For some time after the rollout ofCSOMP, B.D. Smith reported to the DEA all orders 

automatically tlagged and blocked- even if only temporarily blocked by the system as 

"suspicious." Then, in 2009, H. D. Smith changed our reporting practices upon learning from the 

DEA that we were over-reporting and that orders were not "suspicious" simply because they 

were flagged for initial review by the company's electronic anti-diversion CSOMP. After this 

time, B.D. Smith reported orders to the DEA only if we determined after further review and due 

4 
63 


diligence that the order was indeed "suspicious" and should be rejected. H.D. Smith also 

reported a number of physicians and pharmacies to the DEA when concerns arose. 

H.D. Smith worked to adjust its CSOMP to meet what we understood to be changing 

instructions from the DEA, including the DEA's complaints that H.D. Smith was reporting too 

many orders as suspicious because they exceeded the ordering limitations imposed on a 

particular customer. H. D. Smith invested substantial resources in improving the program, 

including by hiring additional personnel for its Corporate Compliance and Security Department. 

The elements and robustness of our anti-diversion program continued to evolve and improve 

over time. We experienced some frustration in working with the DEA, however; during some 

periods oftime, the DEA rebuffed the industry and refused to give guidance to help distributors 

in their efforts to detect suspicious orders. Regardless, I can say with confidence that H.D. Smith 

used its best efforts to safeguard against diversion. 

Combating the Opioid Abuse Crisis Will Require the Cooperation of All Participants in the 

Supply Chain 

Wholesale distributors have statutory and regulatory obligations including to design a 

system to identify and report suspicious orders to the DEA, but these obligations are, of course, 

limited by their role in the supply chain. In order to obtain a DEA registration number to sell 

controlled substances, distributors must report sales of opioids to the DEA, keep the opioids in 

their possession physically secure, implement a system to detect "suspicious orders," and report 

such orders to the DEA. However, distributors are but one link in the heavily federally regulated 

supply chain. All participants, including manufacturers, pharmacies, and physicians, must fulfili 

their respective duties to prevent the diversion of controlled substances in the areas within their 

control. 

5 
64 


Physicians are the first line of defense against diversion and abuse, as it is a crime to 

obtain or dispense prescription opioids without a prescription. Physicians must he state-licensed 

and DEA-registcrcd and may only prescribe opioids for a legitimate medical purpose and in the 

usual course of their professional practice. Pharmacists similarly must be duly registered and 

may only dispense opioids pursuant to legitimate prescriptions. And unlike distributors, 

pharmacists have access to, and indeed may have the duty to consider, prescription-level 

information, including the identity and location of the patient and physician, the frequency at 

which that physician writes prescriptions for controlled substances, and the number of 

prescriptions presented by the patient. 

Additionally, the Prescription Drug Monitoring Programs (PDMPs) in many states 

require physicians and pharmacists to provide patient and prescription information to state-nm 

databases about the prescriptions they write or fill for opioids. In West Virginia in particular, the 

DEA and other federal and State law enforcement agencies have immediate and unlimited access 

to this database, as do various professional licensing boards, but notably distributors do not. 

Thus, in addition to the ARCOS data that is automatically reported by manufacturers and 

distributors to the DEA, the DEA has access all the way down to prescriber-specific, pharmacyspecific, and patient-specific data on each and every opioid prescription written and filled and 

the patient to whom each opioid was dispensed. Wholesale drug distributors, however, cannot 

access this data. 

Conclusion 

We fully trust that H.D. Smith's new owner, AmerisourceBcrgen, will handle its business 

responsibly. We also strongly believe that the DEA can help distributors be part of the solution 

to the opioid crisis by collaborating more and sharing information with the industry. Without 

help from the DEA, and particularly guidance about the reporting of suspicious orders, 

6 
65 


distributors cannot make complete assessments about pharmacies' purchasing habits, and are, 

therefore, limited in their ability to detect suspicious orders. I again thank the Committee for the 

opportunity to contribute to this important conversation. 

7 
66 

1The information has been retained in committee files and also is available at https:// 

docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=108260. 

Mr. HARPER. Thank you, Mr. Smith. 

I ask unanimous consent that the contents of the document binder be introduced into the record and to authorize staff to make any 

appropriate redactions. Without objections, the documents will be 

entered into the record with any redactions that staff determines 

are appropriate.1

At this point, each Member will have the opportunity to ask 

questions, and I will recognize myself first for 5 minutes. 

I want to thank you all for participating in today’s very important hearing. As the subcommittee closely examines this very serious opioid crisis, I think it would be helpful at the outset to help 

establish a baseline of understanding. And I would like for each of 

you to answer each question that I am going to ask now. 

First, do you believe that the actions that you or your company 

took contributed to the opioid epidemic? 

Mr. Barrett. 

Mr. BARRETT. Thank you, Mr. Chairman. 

Mr. HARPER. We’re really looking here, because I’ve got a lot of 

questions, ‘‘yes’’ or ‘‘no.’’ And if it is not either one—— 

Mr. BARRETT. No. No, sir, I do not believe that we contributed 

to the opioid crisis. 

Mr. HARPER. We’ll come back to you then. 

Dr. Mastandrea. 

Dr. MASTANDREA. Yes. 

Mr. HARPER. Mr. Hammergren. 

Mr. HAMMERGREN. No. 

Mr. HARPER. Mr. Smith. 

Mr. SMITH. I believe H.D. Smith conducted itself responsibly and 

discharged its obligations. 

Mr. HARPER. Is that a no? 

Mr. SMITH. That is a no. 

Mr. HARPER. OK. 

Mr. Collis. 

Mr. COLLIS. No. I believe we—it’s a no for AmerisourceBergen. 

Mr. HARPER. Do you acknowledge—another question for each of 

you—do you acknowledge that your company had past failings in 

maintaining effective controls to prevent the diversion of opioids? 

Mr. Barrett. 

Mr. BARRETT. I believe that our organization understood the responsibilities and conducted them as best they could with the understanding at that time. I have no reason to challenge the good 

faith of the decisions made by people many years ago. But I can 

say that the decisions, as I mentioned in my commentary today, 

that we might have made on some of those pharmacies would look 

differently today. 

Mr. HARPER. Is that a no? 

My question was, do you acknowledge that your company had 

past failings in maintaining effective controls to prevent the diversion of opioids? 

Mr. BARRETT. I think our organization understood its obligations. 

We did resolve with regulators where we had areas where we 

67 

thought we could have done better, and I think those resolutions 

satisfied the right balance of serving patients and satisfying those 

controls, sir. 

Mr. HARPER. So is that a yes, it’s now a no? I’m trying—I mean, 

I’m a little—— 

Mr. BARRETT. I am looking back on history. And what I’m describing is an organization that I believe did its job at the time understanding its responsibilities to address the responsibilities of 

controlled drugs. 

Mr. HARPER. Dr. Mastandrea, the question is, do you acknowledge that your company had past failings in maintaining effective 

controls to prevent the diversion of opioids? 

Dr. MASTANDREA. Yes. 

Mr. HARPER. Mr. Hammergren. 

Mr. HAMMERGREN. Our organization has worked for decades to 

try to meet our obligations under the DEA regulations. And we 

continue to work today to evolve our processes to understand what 

they’re asking us to do and make sure that we have state-of-theart capabilities in place. 

Mr. HARPER. It seems like a pretty simple question. Do you acknowledge that your company had past failings in maintaining effective controls to prevent the diversion of opioids? 

Mr. HAMMERGREN. In the past we’ve had challenges understanding the expectations that our regulator would like us to follow. 

Mr. HARPER. Mr. Smith. 

Mr. SMITH. Again, I believe H.D. Smith has acted responsibly. So 

the answer would be no. 

Mr. HARPER. Mr. Collis. 

Mr. COLLIS. I believe we’ve always discharged our duties effectively and responsibly and have maintained an adequate diversion 

program. 

Mr. HARPER. The number of opioids shipped to pharmacies in 

small towns of West Virginia has been astonishing: nearly 800 million opioids in total distributed to West Virginia in just a 5-year 

period, 20.8 million opioids to Williamson, and nearly 17 million 

opioids to a single pharmacy in Mount Gay-Shamrock over a decade, 9 million opioids in just 2 years to Kermit. 

Do the extraordinary volume of opioid shipments to pharmacies 

in small towns of West Virginia indicate a breakdown in the suspicious order monitoring system? 

Mr. Barrett. 

Mr. BARRETT. Mr. Chairman, it is a very important question. I 

don’t believe that the volume in relation to the size of the population is a determining factor. We often know that there’s a small 

population, a town, which serves a large service area that may 

have a medical center or a cancer institute in the nearby area. 

I have said, and I said in my statements, and I repeat here, that 

I think some of the decisions on particular pharmacies in West Virginia, knowing what we know today, we would have made different 

decisions, sir. 

Mr. HARPER. Dr. Mastandrea. 

Dr. MASTANDREA. Yes. 

Mr. HARPER. Mr. Hammergren. 

68 

Mr. HAMMERGREN. We had a pharmacy in Kermit, West Virginia, 

called Sav-Rite that we actually terminated in that period of time. 

What I can say is that, knowing what we know today, in hindsight, we wish we would have terminated that relationship sooner. 

Mr. HARPER. Mr. Smith. 

Mr. SMITH. Can you repeat the question? 

Mr. HARPER. The question is, do the extraordinary volume of 

opioid shipments to pharmacies in small towns of West Virginia indicate a breakdown in the suspicious order monitoring system? 

Mr. SMITH. I don’t believe we had a breakdown in our system. 

Mr. HARPER. Mr. Collis. 

Mr. COLLIS. If you’re talking specifically about 

AmerisourceBergen, we didn’t ship to any of those pharmacies. If 

you’re talking about the industry, I believe it probably did. 

Mr. HARPER. My time has expired. 

The Chair will now recognize the ranking member of the subcommittee, Ms. DeGette, for 5 minutes. 

Ms. DEGETTE. Thank you, Mr. Chairman. 

Gentlemen, each of you in your own way spent time very carefully telling this committee what your companies do not do in 

terms of prescribing or things like that. But in fact each of your 

companies, under the Controlled Substances Act, has a duty to 

make sure that that controlled substances are distributed correctly. 

Would you agree with that statement, Mr. Barrett, yes or no? 

Mr. BARRETT. Yes, we do. 

Ms. DEGETTE. And, Dr. Mastandrea. 

Dr. MASTANDREA. Yes. 

Ms. DEGETTE. Mr. Hammergren. 

Mr. HAMMERGREN. We have a duty to support—— 

Ms. DEGETTE. ‘‘Yes’’ or ‘‘no’’ will work. 

Mr. HAMMERGREN. We have a duty to support the—— 

Ms. DEGETTE. You have a duty to make sure that controlled substances are distributed appropriately, correct? 

Mr. HAMMERGREN. We have a responsibility to—— 

Ms. DEGETTE. OK. 

Mr. Smith. 

Mr. SMITH. Yes, we have a responsibility. 

Ms. DEGETTE. Mr. Collis. 

Mr. COLLIS. Yes, we have a responsibility. 

Ms. DEGETTE. And in fact I would direct your gentlemen’s attention to exhibit 59 in the binder, which was a letter dated September 27, 2006, which was sent to every commercial entity in the 

United States registered with the DEA to distribute controlled substances. 

And on page 3 of that letter, it lists an entire panoply of things 

that your companies are supposed to do. The letter was then followed up on two times in 2007. 

I want to start with you, Dr. Mastandrea, and I want to ask you, 

Federal regulations require you to design and operate a system to 

disclose Federal operators from pharmacies. Is that correct? 

Dr. MASTANDREA. I’m sorry. I really don’t understand—— 

Ms. DEGETTE. Federal regulations require you to design and operate a system to disclose suspicious orders from pharmacies. 

Dr. MASTANDREA. Yes, I believe that to be correct. 

69 

Ms. DEGETTE. Yes, they do. OK. 

And according to—and I want to focus a little bit on Kermit, 

which is a town of 600—I’m sorry, 400. 

According to data that Miami-Luken provided to the committee, 

in 2007 your company supplied Sav-Rite pharmacy in Kermit with 

nearly 1.5 doses of opioids. Is that correct? 

Dr. MASTANDREA. I believe so. 

Ms. DEGETTE. In 2008 your company supplied Sav-Rite with 

nearly 2 million doses of opioids. Is that correct? 

Dr. MASTANDREA. It’s my understanding that is correct. 

Ms. DEGETTE. And then in 2009 you supplied Sav-Rite with another 800,000 pills. Is that correct? 

Dr. MASTANDREA. I believe so. 

Ms. DEGETTE. Now, in fact you continued supplying Sav-Rite 

until 2011 even though the pharmacy was actually raided by Federal authorities in early 2009. Is that correct? 

Dr. MASTANDREA. I believe so. 

Ms. DEGETTE. Now, Dr. Mastandrea, we asked Miami-Luken to 

provide us with its entire due diligence file on the Sav-Rite pharmacy, and this is what we got from you. 

Do you recognize these documents? 

Dr. MASTANDREA. No. 

Ms. DEGETTE. OK. We can have somebody hand them to you, but 

I will assure you it’s about 15 pages of purchase orders and sales 

orders. 

Do you think this is a sufficient due diligence file for all of the 

number of opioids that you were sending to this one Sav-Rite pharmacy in Kermit, West Virginia? 

Dr. MASTANDREA. No. 

Ms. DEGETTE. OK. Thank you. And you know what, thank you 

for your honesty today. I appreciate it. 

I want to ask you now, Mr. Hammergren, a question. Now, in 

2006, McKesson supplied Sav-Rite pharmacy with nearly 2.3 opioid 

pills, which is more than 190,000 a month. Is that correct? 

Mr. HAMMERGREN. I believe so. 

Ms. DEGETTE. And in 2007, McKesson again supplied Sav-Rite 

with over 2.6 million opioid pills, or more than 222,000 pills per 

month. Is that correct? 

Mr. HAMMERGREN. I believe so. 

Ms. DEGETTE. Now, in your written testimony, Mr. Hammergren, 

you put a lot of thought into using population statistics and other 

arguments to justify your shipments to Sav-Rite and other pharmacies. We just heard Mr. Barrett talking about that, too. But 

when the committee asked you to provide McKesson’s due diligence 

file for Sav-Rite, you gave us a single document from 2007. 

Do you recognize this document, sir? 

Mr. HAMMERGREN. No, I don’t. 

Ms. DEGETTE. OK. It’s exhibit 3 in the binder. 

Do you recognize that document now? You don’t. 

Mr. HAMMERGREN. This is first time I’ve seen this document. 

Ms. DEGETTE. OK. Well, I will tell you for the record that this 

document, which says, ‘‘Declaration of Controlled Substances Purchases,’’ which is a two-page document, is the only documentation 

70 

that McKesson gave to this committee when we asked for the due 

diligence file for Sav-Rite. 

Do you think that this fulfills the requirements of the DEA that 

your company do due diligence for distribution of opioids to this 

city? 

Mr. HAMMERGREN. I believe our relationship with Sav-Rite 

should have been terminated immediately. 

Ms. DEGETTE. Yes or no, do you think this is sufficient documentation to show compliance with the rules of the DEA? 

Mr. HAMMERGREN. We continue to evolve our diligence—— 

Ms. DEGETTE. ‘‘Yes’’ or ‘‘no’’ will work, sir. 

Mr. HAMMERGREN. I’ve not reviewed the document. I can’t provide an answer to that. 

Ms. DEGETTE. OK. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. HARPER. At this time, the Chair will recognize Chairman 

Walden, chair of the full Committee for Energy and Commerce, for 

5 minutes. 

Mr. WALDEN. Thank you, Mr. Chairman. 

And I appreciated the opportunity I had yesterday to meet with 

several of you and talk about how we work together going forward 

as a country to prevent this kind of disaster from continuing or 

ever happening again. 

Mr. Hammergren, between 2006 and 2007 McKesson supplied 

Sav-Rite pharmacy in Kermit, as you’ve heard, a town of 400, 5.6 

million opioids. Our research has indicated this pharmacy was 

fueled by prescriptions from a pill mill. This was widely known in 

the community. 

In fact, our investigators have uncovered that the pill mill was 

widely known, and there were reports even in the media over years 

that indicated customers were selling pills in the parking lot, and 

that the cash drawer was so full it could not be shut. 

Now, McKesson started a program in 2007, I think you called it 

the Lifestyle Drug Monitoring Program, under which McKesson reviewed every single customer for high-volume orders for certain 

drugs. Is that correct? 

Mr. HAMMERGREN. That’s correct. 

Mr. WALDEN. Including hydrocodone and oxycodone. I think we 

referenced that in tab 1 in the binder. 

So the initial threshold, as I understand it, set by McKesson was 

8,000 pills a month. The document indicates that you picked that 

number as a reasonable monthly threshold, correct? 

Mr. HAMMERGREN. That’s correct. 

Mr. WALDEN. And so do you know the average number of 

hydrocodone dosage units or pills McKesson distributed to that 

Sav-Rite pharmacy that you terminated a relationship with back in 

2007? 

Mr. HAMMERGREN. I do not. 

Mr. WALDEN. So we did some research. It appears it’s 9,650 pills 

a day, which averages to 289,500 hydrocodone pills in a 30-day 

month, which is more than 36 times the initial monthly threshold 

set by the program. 

71 

The program required distribution centers to review any order in 

excess of the threshold and document why orders above the threshold were shipped. 

Now, according to a document produced by McKesson, all customers had been reviewed by June 12, 2007. This clearly should 

have identified Sav-Rite, considering your own distribution was 36 

times higher than the threshold you set. I think that document’s 

in tab 2. 

So did this program identify the Sav-Rite pharmacy? 

Mr. HAMMERGREN. It did not, sir. It should have been terminated 

sooner. 

Mr. WALDEN. And if so, on what basis did McKesson decide to 

continue supplying hydrocodone far above your own threshold? 

This is what we’re trying to figure out. 

Mr. HAMMERGREN. Our systems at the time were not automated 

enough, certainly, and we didn’t flag it fast enough and get it fast 

enough. 

Mr. WALDEN. So are there any documents justifying the continued distribution to Sav-Rite? 

Mr. HAMMERGREN. I don’t know, sir. But, as I’ve testified, we terminated that relationship as soon as we became aware that the 

purchases were as you described. 

Mr. WALDEN. In your testimony you note that the large distribution figures highlighted by the press in this investigation reflect a 

volume of opioid orders ‘‘not inconsistent’’ with the rate at which 

opioids were prescribed. 

If this is the case and 9,600 pills a day distributed by McKesson 

to Sav-Rite in 2007 is reasonable, then why set the initial monthly 

limit at 8,000 per month? Or is this something you just—the system did not catch? 

Mr. HAMMERGREN. We did not properly manage that Sav-Rite relationship and certainly didn’t do it soon enough. 

Mr. WALDEN. I see. So what we’re trying to figure out is, are 

there other Sav-Rites out there today? And this would apply to everybody on the panel. What is it in the systems you have or the 

DEA have that allowed this to happen then, and are they in place 

today to prevent this from happening? How do we shut down these 

pill mills? 

Mr. HAMMERGREN. We certainly learned, Mr. Chairman, from 

that experience at Sav-Rite, and we realized that we needed automated systems that don’t allow any order to ship out of our facilities that are past those thresholds. 

So today Sav-Rite pharmacy wouldn’t get a single order from 

McKesson. Our systems block those orders as they’re inbound. And 

if they want to have that order shipped, we have to go out and do 

an investigation at that pharmacy to justify any increase. 

So if they open—if a pharmacy somewhere was going to open a 

new relationship with a hospice, our people would go out and view 

that and understand whether that is a legitimate business reason, 

exactly for your purpose. 

Mr. WALDEN. And are your systems in place today that would 

identify an overprescribing physician or facility that is driving too 

many pills? How does that work? 

72 

Mr. HAMMERGREN. That’s one of the challenges, frankly, with the 

systems that McKesson has. We don’t see the prescribing systems 

that are reported out of the pharmacy. So the way we have to manage it is to determine a suspicious order based primarily on quantities compared to average pharmacies that are similar. 

And clearly, the challenge in that is that suspicious is really an 

isolated individual customer-by-customer evaluation that isn’t informed by the physician population, the prescribing habits, et 

cetera. 

Mr. WALDEN. Unfortunately, my time has expired. I’m sure we’ll 

have questions for the record. I’d appreciate the feedback from all 

of you on that topic, because we’re trying to find solutions here. 

Thank you, Mr. Chairman. 

Mr. HARPER. Thank you, Chairman Walden. 

The Chair will now recognize the ranking member of the full 

committee, Mr. Pallone, for 5 minutes. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I’m trying to run through this quickly, so I may have to try to 

have you summarize. 

This committee’s investigation has uncovered a number of shortcomings in the way that some distributors handled the distribution 

of opioids as this horrible epidemic unfolded. But what I really 

want to know is, moving forward, how do we ensure that adequate 

systems are in place to detect the kinds of problems that have 

clearly led to the oversupply and diversion problems we’ve seen in 

West Virginia? 

For example, in Kermit, population 400, several distributors each 

sent millions of pills to a single pharmacy, and it’s hard to understand why certain distributors didn’t have systems to flag and prevent some of these shipments. 

Another example, Miami-Luken alone sent almost 1.5 million 

pills to Sav-Rite in 2007 and almost 2 million pills in 2008, and on 

its face these levels seem ridiculous. At the end of the day, this 

pharmacy was raided and its owner was sentenced to prison. 

So let me start with Dr. Mastandrea. 

Have you made changes to your system to compare the number 

of pills you send a pharmacy against the population of that region 

to catch something like this before it gets out of control? Quickly, 

because I have more questions. 

Dr. MASTANDREA. Thank you, Congressman. 

Yes, we have made changes. We’ve made significant changes. We 

have a full-time compliance officer that monitors all—we’re not 

that big, so it’s not that hard to monitor our opioid distribution. 

We have purchased a commercial algorithm-based system that 

stops the suspicious order in real time, is reported to the DEA in 

real time. We have site visits. We have an investigator that makes 

site visits. We review the accuracy and timeliness—— 

Mr. PALLONE. I’m going to have to cut you off, only because I 

want to ask Mr. Barrett a question. 

Cardinal provided two pharmacies, Hurley Drug and Family Discount, which filled prescriptions for Dr. Katherine Hoover, and her 

clinic was widely known as the pill mill and Federal authorities 

closed it in 2010. Dr. Hoover was the number one prescriber in the 

73 

entire State, yet she seemed to be able to write scripts for local 

pharmacies for years before her clinic was shut down. 

One of your fellow distributors reported that Dr. Hoover alone 

was responsible at one time for 69 percent of the hydrocodone prescriptions at Hurley Drugstore in Williamson and more than half 

of the hydrocodone prescriptions at Family Discount. 

So, Mr. Barrett, are there lessons that you believe can be taken 

from what happened with Dr. Hoover that will change how you 

conduct due diligence going forward? 

Mr. BARRETT. Ranking Member Pallone, thank you. And the answer is yes, I think we would do things very differently today. That 

kind of order volume would have been picked up and stopped just 

statistically by our algorithms. 

I think the subjectivity of judgment of whether a pharmacy is legitimate or not legitimate today is really not the question. We look 

at data, and if the data tells us there is an aberrant pattern, we 

simply stop. 

In this case, as it turned out, there was a bad actor in the area, 

a doctor, which we later found out, which is why we shopped shipment. But today’s systems would simply stop that. 

Mr. PALLONE. All right. Let me go to McKesson. 

McKesson has reached two settlements with DOJ about alleged 

failures to monitor for suspicious orders. 

So, Mr. Hammergren, how will it be different this time? What serious changes have you made to your systems to flag suspicious orders? 

Mr. HAMMERGREN. We certainly have learned lessons from our 

experience in the past. And our systems today are automated and 

not subjective. As Mr. Barrett just said, we shut those orders off 

inbound in the door. 

We also have hired very experienced, DEA experienced people to 

come out and help us investigate facilities before we bring them online and to make sure that we’ve not brought a bad actor on at any 

point in the process. 

I think the thing that would continue to help us is if we can put 

physicians in a place where they have more information when 

they’re prescribing, and certainly at the pharmacy level help the 

pharmacies understand red flags of patients that may be getting 

multiple doses in different directions. 

So I think there’s more that we can do as an industry. Blocking 

the orders is certainly important, but you can imagine every time 

we block an order, there are legitimate patients in some of those 

pharmacies looking for their medications. So it’s a little bit of a 

blunt force. 

Mr. PALLONE. Last question, going back to Mr. Barrett. 

Cardinal also reached two settlements with DOJ over these same 

issues, and it’s only fair I ask you the same question. How will this 

time be different? How can you assure us that you’ve addressed the 

issues raised in the settlement agreements? What specific enhancements have you made to your system? 

Mr. BARRETT. Thank you for the question. 

The settlement in 2008 reflected the rising of what was internet 

pharmacy. Our organization I think was doing what it thought was 

right to adapt to that. 

74 

At the same time, we saw emergence over the next few years of 

pain clinics, many of which were legitimate, by the way, but as it 

turns out some were not. 

And I think we had to learn during that process of the shift of 

this crisis. I think we’ve learned that and our systems today reflect 

that learning. 

Mr. PALLONE. Thank you. 

Thank you, Mr. Chairman. 

Mr. HARPER. The Chair will now recognize Mr. Barton for 5 minutes. 

Mr. BARTON. Thank you, Mr. Chairman. 

And thank each of you for attending voluntarily. We didn’t have 

to subpoena you. We appreciate that. 

And, Mr. Collis, I understand that you forego back surgery to appear today, so we really appreciate you. I noticed you stood up a 

little bit ago and walked. Dr. Burgess will prescribe an opioid if 

you don’t make it through the hearing. 

This is an unusual hearing because each of you provides a muchneeded list of products that are legal, and all of you represent corporations that have generally had a very positive record in your industry. And yet, we have a huge problem, 115 people a day are 

dying of opioid overdoses, and most of those are from legally prescribed opioids. 

I’m an industrial engineer. I’m kind of a simplistic person. Our 

system that we’re looking at starts with the patient and the doctor 

relationship. The doctor prescribes an opioid. It’s sent to a pharmacy. The pharmacy accumulates orders and sends to a wholesale 

distributor, which is one of your companies in most cases. You get 

your drugs from a manufacturer. 

The whole system is overseen by the DEA and is a part of a culture which has evolved that pain is something that should be addressed in any way possible. And at the time the epidemic really 

took off, there wasn’t a huge public outcry over opioid prescriptions. 

It’s different today. The culture today is looking at the problem differently than it did 10 years ago or 15 years ago. 

My first question, since you folks are part of the legal distribution system, is the overuse of legal opioids a solvable problem, yes 

or no? Legal opioids. 

Let’s start with the gentleman down at the end and work our 

way down. 

Mr. BARRETT. Yes, Congressman. Thank you for the question. 

I think the practice of medicine is evolving, and I think that we 

know more than we did today. And I think, in fact, the prescribing 

of legal opioids, high-potency opioids, is declining. 

Mr. BARTON. I really just need—— 

Mr. BARRETT. I think the answer is yes, it can be solved. 

Mr. BARTON. Yes or no? 

Dr. MASTANDREA. Yes, sir. 

Mr. HAMMERGREN. Yes, better informed physicians will solve the 

problem, I think. 

Mr. BARTON. Mr. Smith. 

Mr. SMITH. The use of drugs always come with a risk-return 

tradeoff. So I think there will always be some risk-return tradeoff 

75 

to this category of drugs and any other. So I’m not exactly sure 

what you mean by solve. 

Mr. BARTON. Well, I think ‘‘solve’’ is a pretty common term. 

Mr. SMITH. But I think we can greatly improve the situation. 

Mr. BARTON. You know, fixed. 

Mr. SMITH. I think that we can bring it back into much more acceptable levels. 

Mr. BARTON. I’ve got a minute and a half left. 

Mr. COLLIS. There are already significant changes in prescription 

trends for legal opioids, but I think it can be vastly improved. I 

don’t know if completely solved. 

Mr. BARTON. Generically, everybody said yes, with some modification. I think it can be, too. 

Now, this is a little bit trickier question. What percent responsibility do you believe your part of the chain of the industry have in 

solving the problem, from zero percent, we have no responsibility, 

to 100 percent, it’s all our responsibility? 

You just all said that it is solvable. Now, what percent of responsibility do you think the distribution, wholesale distribution system 

has in solving the problem? 

Again, we’ll just start at one end and go to the other. 

Mr. BARRETT. Congressman, I don’t feel qualified to give a percentage of responsibility. I think all of us in the healthcare system 

have to work together to address this, and I think we should. 

Mr. BARTON. Do you agree that you have some responsibility? 

Mr. BARRETT. I believe that we’ve got a role in an integrated 

healthcare system. 

Mr. BARTON. So you have some responsibility. 

Dr. MASTANDREA. Congressman, I believe that it’s a shared responsibility among many different players, physicians, pharmacists, State medical boards, State pharmacy boards, DEA. 

Mr. BARTON. But you agree you have some responsibility? 

Dr. MASTANDREA. I have said that, yes. 

Mr. BARTON. Your company, your industry, not you personally. 

Dr. MASTANDREA. The percentage is shared. 

Mr. HAMMERGREN. We have a role to play, Congressman, certainly. And in your example, one of the most important roles we 

play is to make sure we find suspicious customers and suspicious 

orders and cut off the supply to those customers. 

Mr. BARTON. My time has expired, but I’ll let each of you two. 

Mr. SMITH. Well, I would just say that H.D. Smith had its role 

as a distributor to play and did so. 

Mr. COLLIS. I get the benefit of going last, so I just would say 

it’s very difficult to ascribe a percentage, given the shared responsibility. 

Mr. BARTON. Well, I think you do have a responsibility, I think 

it’s a significant responsibility, but I don’t think you have a majority of the responsibility. And hopefully, by the time we end these 

hearings, we’ll get all the players in here. 

Thank you, Mr. Chairman. 

Mr. HARPER. The Chair now recognizes the gentlewoman from 

Florida, Ms. Castor, for 5 minutes. 

Ms. CASTOR. Well, thank you, Mr. Chairman. 

76 

This committee’s investigation has made plain that drug wholesale distributors flooded areas of West Virginia and other parts of 

the country with massive amounts of opioids. This has fed into the 

public health epidemic that is costing us at least $8 billion per year 

nationwide and costing lives, 116 deaths every day. We focused on 

West Virginia because it has the highest opioid death rate in the 

country. 

Mr. Barrett, your company Cardinal shipped 1.5 million opioid 

pills each year from 2009 to 2011 to a single pharmacy, Family 

Discount, in the small town of Mount Gay. That is an average of 

about 4,000 pills per day. 

At the subcommittee’s March 20 hearing, DEA testified that that 

amount shipped to that single pharmacy was, indeed, excessive. 

And this was after Cardinal had been sanctioned by the DOJ 

through a settlement agreement for not following the law. 

Mr. Barrett, you’ve said that the wholesalers don’t control demand, but clearly you have a responsibility under the law to highlight and flag these suspicious orders. How did Cardinal estimate 

what was appropriate for a given pharmacy? 

Mr. BARRETT. Congresswoman, thank you for your question. 

I think our organization recognizes it as a dual responsibility. 

One is to provide medicine to a system requiring it as prescribed, 

and the other is to do what we can to prevent those from falling 

in the wrong hands. 

We’ve evolved over the years. We’ve become more attuned to the 

changes. I think today—— 

Ms. CASTOR. But this kept happening even after DOJ had 

warned you and you had accepted responsibility and said you 

would do a better job. 

In more recent years, this pharmacy’s total purchases of these 

drugs declined dramatically. In 2015 and 2016, it was down to 

about 500,000 pills. And that wasn’t just from Cardinal, that was 

from everyone, from all distributors. That was but a fraction of 

what Cardinal alone had shipped them in earlier years. 

So isn’t this a clear reflection that that was not the medical need 

in the community? The amount being shipped didn’t reflect what 

could have been appropriately used in rural West Virginia, especially after DOJ had already warned you. 

Mr. BARRETT. Congresswoman, let me make two points about 

that, if I may. 

One is, I’ve acknowledged earlier that I had wished that we had 

moved earlier to stop shipping to that pharmacy, which we have 

many years ago. 

Second, I think the evolution was of our looking at a system that 

was focused on the legitimacy of a pharmacy—which, by the way, 

is still in business—and the awareness of something happening in 

the system, which was a bad doctor. And we should have moved 

more quickly on that. 

Ms. CASTOR. I’d now like to turn to McKesson. 

Mr. Hammergren, your company McKesson distributed over 1.8 

million opioid pills each year in 2006 and 2007 to Family Discount 

Pharmacy. That’s an average of about 5,000 pills per day in this 

rural small town. Based upon a figure cited by DEA, McKesson 

shipped Family Discount roughly six times the amount of 

77 

hydrocodone that an average pharmacy in rural West Virginia 

would have received during those years. 

So a similar question to you. McKesson delivered millions of pills 

to the single pharmacy. Clearly, that’s not reasonable and you 

should have flagged that and stopped that right away. Why didn’t 

you? 

Mr. HAMMERGREN. We did terminate the relationship with that 

pharmacy. And like Mr. Barrett, I would have liked us to have 

made a decision faster. That’s the answer. We caught a bad pharmacy and shut it down. 

Ms. CASTOR. And as I mentioned, this pharmacy’s total purchases of oxycodone and hydrocodone dropped dramatically, but 

that wasn’t until 2015, 2016. And that means the amount of 

opioids your company alone shipped back in 2006 was over three 

times as much as the pharmacy got from all distributors in 2016. 

Now, you in your testimony, you pointed to, well, overprescribing 

by doctors, maybe the DEA should have done more, pharmacy bad 

actors. But you can’t reasonably claim that this pharmacy’s dispensing filled the medical need. I mean, it took you years to respond. Why was that? 

Mr. HAMMERGREN. I can’t comment on the medical need, Congresswoman. What I can say is that today in our systems, any 

shipment that was outside those boundaries would never have happened. It would have been shut down and reported immediately. 

Ms. CASTOR. Why didn’t you address—given that this community 

was ravaged by opioid deaths and addiction, and the town of 

Williamson was even nicknamed Pilliamson, don’t you take responsibility for what was happening back then? Was it the profit motive 

simply overcame the—you saw that paying the penalties under settlement agreements was a cost worth paying because you were 

making so much money? 

Mr. HAMMERGREN. Congresswoman, we take all of these matters 

very seriously. Any settlement with a regulator we take very seriously. Our systems have evolved, and we continue to invest heavily 

to make sure that situations like that don’t happen again. 

Ms. CASTOR. I think this was the opposite of due diligence that 

was required under the law, and we’re going to be looking for 

greater accountability. 

Thank you, and I yield back. 

Mr. HARPER. The Chair now recognizes the vice chairman of the 

subcommittee, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Mr. Hammergren, in the limited time I have, I’m going to ask 

you a series of yes/no questions. But first, as background, my district borders southern West Virginia. McKesson was a major supplier of pharmacies there, as were some of the others, distributing 

millions of pills, most into West Virginia in towns that were between 30 and 60 miles from my district. 

And last week, I was at an opioid conference, and look at this 

map that they gave us. 

[Slide follows.] 

79 

Mr. GRIFFITH. That dark brown area are the deaths per capita 

in the Commonwealth of Virginia, and you will note there’s a correlation with the dark brown areas most common to the border 

with West Virginia. 

And so, gentlemen, when you say that, you know, you’re not sure 

that you have a role—not all of you have said that—it flies in the 

face of that map and the people of my district. 

So, Mr. Hammergren, in May of 2008 McKesson Corporation and 

the Justice Department and DEA entered into a memorandum 

agreement, tab 4 in the binder there. You signed on behalf of 

McKesson Corporation on page 10 of the settlement and release 

agreement and page 7 of the settlement agreement. 

Do you recall signing the document, yes or no? 

Mr. HAMMERGREN. Yes. 

Mr. GRIFFITH. The conduct at issue in this first settlement with 

the DEA was that the DEA believed certain McKesson distribution 

centers did not report suspicious orders and did not have effective 

controls against diversion. Because of the serious commitments 

that McKesson made to the U.S. Government and the $13.25 million civil penalty—you recall that, don’t you? 

Mr. HAMMERGREN. I do. 

Mr. GRIFFITH. Two months later, you presided over a July 23, 

2008, board of directors meeting. And according to the board minutes at tab 12 in the binder, public policy issues were discussed affecting the corporation. In an accompanying slide at tab 13, DEA 

suspicious orders, defined as orders of unusual size, orders deviating substantially from a normal pattern, and orders of unusual frequency were categorized as high, in terms of the degree of political 

urgency, and impact to, and the level of engagement of the corporation. 

The urgency of the DEA suspicious orders issue was tied to the 

May 2008 settlement, wasn’t it, yes or no? 

Mr. HAMMERGREN. We certainly took the settlement, Congressman, very seriously. 

Mr. GRIFFITH. The corporation’s high level of engagement meant 

McKesson management would put in a high level of effort to carry 

out the promises made in your 2008 memorandum of agreement. 

Isn’t that correct? 

Mr. HAMMERGREN. It is correct that it was a top priority for us. 

Mr. GRIFFITH. In your experience as an executive at McKesson 

Corporation, when the company makes a legal commitment, especially one with a high level of engagement, the corporate leadership 

gives a directive and the appropriate personnel carry it out. Isn’t 

that correct? 

Mr. HAMMERGREN. Congressman—— 

Mr. GRIFFITH. Yes, correct? 

Mr. HAMMERGREN. Congressman, we took it very seriously. 

Mr. GRIFFITH. Yes. However, according to media reports, from 

2008 to 2013, the McKesson Aurora, Colorado, warehouse filled 1.6 

million orders, but only reported 16 suspicious orders. The Landover, Maryland, warehouse, which supplied West Virginia, routinely failed to report and fulfilled suspicious orders placed by numerous pharmacies in West Virginia. 

80 

While the Landover facility was closed in 2012, the serious lack 

of suspicious order reporting does not show a high level of engagement by McKesson, does it, yes or no? 

Mr. HAMMERGREN. We took our responsibilities very seriously. 

Mr. GRIFFITH. Yes or no? Failing to live up to the 2008 agreement does not show a high level of commitment, does it? 

Mr. HAMMERGREN. That’s not true. We had a high level of commitment, Congressman. 

Mr. GRIFFITH. And you failed. The DEA alleged that McKesson 

distribution centers ignored thresholds and supplied pharmacies 

volumes of controlled substances that exceeded their assigned 

amount without a proper review. That also does not show a high 

level of engagement, does it, yes or no? 

Mr. HAMMERGREN. Congressman, we had a high level of engagement. 

Mr. GRIFFITH. Were any McKesson personnel fired in connection 

with any of the failures noted in the 2017 memorandum of agreement? That’s at tab 5. 

Mr. HAMMERGREN. Congressman, the people involved today in 

the CSMP are vastly different than the people in 2008. 

Mr. GRIFFITH. Was anybody fired? 

Mr. HAMMERGREN. Congressman, the people are different today. 

Many of them have left the corporation. 

Mr. GRIFFITH. But they weren’t fired. 

Mr. HAMMERGREN. We don’t talk about specific—— 

Mr. GRIFFITH. I’m not asking you to talk about specifics. I’m asking you to tell me if anybody got fired. Did you hold anybody personally responsible for what was happening in West Virginia and 

in Colorado and other parts of the country? 

Mr. HAMMERGREN. Congressman, everybody at the company is 

accountable to do what’s right. 

Mr. GRIFFITH. But no one was fired. All right. 

In January 2017, McKesson Corporation and the Justice Department and the DEA entered into another memorandum of agreement, because you didn’t live up to 2008. As a result of this agreement, McKesson paid a record-setting $150 million fine. 

In this memorandum of agreement, in section 2, acceptance of responsibility, McKesson acknowledged it failed to identify or report 

to DEA certain orders by certain pharmacies which should have 

been detected by McKesson as suspicious. This involved 12 out of 

30 McKesson distribution centers. More than a third of your distribution centers were involved in these failures. 

That is a widespread systemic failure. Wouldn’t you agree? 

Mr. HAMMERGREN. Congressman, our organization in 2008 was 

working closely with the DEA. 

Mr. GRIFFITH. This is 2017. 

Mr. HAMMERGREN. I understand. And we have created a program 

that really we believe is meeting their needs, focused on suspicious 

customers and knowing our customers. 

Mr. GRIFFITH. And a third of them were out of compliance. 

Mr. Chairman, I yield back. 

Mr. HARPER. The gentleman yields back. 

Before I recognize the next person, Mr. Hammergren, it seems 

like a pretty easy question to answer if anyone was fired in reVerDate Mar 15 2010 14:59 Dec 20, 2018 Jkt 037690 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 I:\115THCONGRESS\115X124OPIOIDDISTRIBUTION\115X124OPIOIDDISTRIBUTIONWOR
81 

sponse to Mr. Griffith’s question. And the answer is yes, no, I don’t 

know, or I refuse to answer. What is your answer? 

Mr. HAMMERGREN. Yes, people were fired as a result of this. 

Mr. HARPER. Thank you very much, Mr. Hammergren. 

I’ll now recognize the gentlewoman from Illinois, Ms. Schakowsky, for 5 minutes. 

Ms. SCHAKOWSKY. I have to say that I’m pleased that you’re all 

with us today to discuss the role your companies played in supplying the opioid epidemic, but I have to also say that this reluctance even to answer that simple question, or reluctance, always 

qualifying your responsibility—clearly, you had a responsibility. 

And, Mr. Hammergren, you acknowledge that you wish you had 

terminated your relationship with Sav-Rite earlier and that you did 

end that relationship. But why did you then—why did you ship 5 

million pills before you shut it down? 

Mr. HAMMERGREN. Congresswoman, thank you for the question. 

Certainly, we’ve learned from our experience during the 2006, 

2007, over a decade ago, and today’s systems are much more robust 

than they were then. Our orders actually aren’t even processed 

today if they’re above thresholds. In those early phases of 12 years 

ago, our systems weren’t as automated as they are today. 

Ms. SCHAKOWSKY. You know, all of you, I hope, will acknowledge 

that since 1971, your companies are required by Federal law to 

halt and report suspicious orders of prescription opioids. 

Did you, before all of this broke, have a process to do that, if I 

could just go down, to obey the 1971 law? 

Mr. BARRETT. Yes. Our organization, Congresswoman, has had a 

clear sense of the Controlled Substance Act and reported all orders 

to the DEA of narcotics. 

Ms. SCHAKOWSKY. OK. 

Mr. Mastandrea? 

Dr. MASTANDREA. Yes, we did have a system in place, Congresswoman. 

Mr. HAMMERGREN. Congresswoman, we also reported all orders 

required. 

Ms. SCHAKOWSKY. Mr. Smith. 

Mr. SMITH. At different points in time, the expectations of the 

DEA were different. 

Ms. SCHAKOWSKY. Microphone, please. 

Mr. SMITH. At different points in time, the expectations of the 

DEA were different. Up till about 2007, the DEA expectation was 

for us to report suspicious orders after the fact with monthly reporting, and we did so. 

It was in 2007 that the DEA expressed a very different expectation concerning controlled substance orders and that if it was suspicious they asked that we develop a system to hold those orders 

at the time they were received. 

Ms. SCHAKOWSKY. OK, I’m going to move on. 

Mr. SMITH. We implemented that system in 2008. 

Ms. SCHAKOWSKY. Sir. 

Mr. COLLIS. Congresswoman, AmerisourceBergen didn’t exist. 

There were many predecessor companies. I’m not aware of any of 

them that weren’t committed to compliance with all Federal statutes. 

82 

Ms. SCHAKOWSKY. I just think it’s really important to put on the 

record that this is not a new requirement, that yes, maybe there 

wasn’t the kind of enforcement, but nonetheless, your companies 

had a responsibility. 

I also want not only to look back and see what went wrong, but 

also to look forward to see how to do better. And it is apparent now 

that pharmaceutical corporations are taking advantage of the 

opioid epidemic by spiking the price of life-saving drugs like 

naloxone, and that that, in my view, is unacceptable. Pharmaceutical corporations can’t start this epidemic with irresponsible 

and reckless on day—recklessness one day—and then turn around 

and profit the next. 

So I wanted to again ask Mr. Hammergren, McKesson distrib- utes Evzio, which has raised its price from $690 to $4,500. So what 

does McKessonearn net per unit for Evzio? 

Mr. HAMMERGREN. I can’t answer that question, Ms. Congresswoman. I would say that we don’t set the prices for branded drugs. 

Those are set by the manufacturers. 

Ms. SCHAKOWSKY. And how much does McKesson net annually 

for the distribution of Evzio? 

Mr. HAMMERGREN. Congresswoman, I don’t have that information. I’d be happy to get it for you. 

Ms. SCHAKOWSKY. McKesson also distributes Narcan. What does 

McKesson earn net per unit for Narcan? 

Mr. HAMMERGREN. Congresswoman, I don’t know the answer to 

that question. 

Ms. SCHAKOWSKY. And how much does McKesson earn net annually for its distribution of Narcan? 

Mr. HAMMERGREN. I don’t know that question. 

Ms. SCHAKOWSKY. So I would expect that we’ll put that in writing and that we’d get this information. Because, you know, you 

can’t have it both ways, fellas. You know, the opioid epidemic is 

there, and now for life-saving drugs those prices are going through 

the roof. 

And I yield back. 

Mr. GRIFFITH [presiding]. I thank the gentlelady and now recognize the gentleman from Texas, Dr. Burgess. 

Mr. BURGESS. Thank you, and thanks for having the hearing. 

Mr. Hammergren, let me just continue on that line for a moment, 

because I think this is an important point. You as a distributor do 

not set the list price of the compounds that you were being questioned about. Is that correct? 

Mr. HAMMERGREN. I don’t believe so. If they’re branded patented 

drugs, we don’t set the price. 

Mr. BURGESS. So you receive an order and you fill an order. 

You’re agnostic as far as the price. That is set by the person selling 

the product. Is that correct? 

Mr. HAMMERGREN. Congressman, the manufacturer sets those 

prices, to the best of my understanding. 

Mr. BURGESS. Mr. Collis, you mentioned—it was almost an offhanded mention, but it is important—one of the first hearings that 

I sat through in this subcommittee in 2005 was a hearing on why 

don’t doctors prescribe enough pain medicine. And you referenced 

that there are some people who are watching this debate who are 

83 

concerned are they going to be able to get the medicines for the 

treatments for which they are being treated. 

And I think that is a legitimate concern and we do need to be 

mindful. We cannot overlook the fact that there are serious, serious 

problems that need to be fixed. But I thank you for bringing that 

up, because that is an important reference point that we sometimes 

overlook. 

Mr. Smith, let me just ask you, we’ve actually heard some backand-forth, and I think there was a question on the other side dealing with a document or a letter from Mr. Rannazzisi at the DEA, 

Drug Enforcement Administration, that said, don’t just report to us 

the total sales. 

Mr. Collis, I think you said, we just report, we’re not making a 

judgment whether it’s suspicious, this is what we deliver to place 

A, B, or C. Is that correct? 

Mr. COLLIS. We do report every day, and we also report on a 

monthly basis all cost data, but we do make determinations of 

what is a suspicious order and we hold them. 

Mr. BURGESS. Sure, and I appreciate that. This is what is so 

frustrating to me for an all-hands-on-deck situation. The DEA says, 

don’t just report your raw data. But you have algorithms. The DEA 

should have algorithms. I think the Center for Medicare and Medicaid Services probably should have algorithms in their database so 

that they can identify who are the outliers. 

Not saying that someone is doing something wrong, it may be a 

pain clinic, it may be a cancer clinic, but let’s afford some extra 

scrutiny if this is the amount of product that’s going out so we 

don’t end up with a situation such as in Kermit. 

Now, Mr. Smith, let me ask you, your company, and I think you 

testified to this, your company reports suspicious orders. What does 

the DEA do with that information when you report it? 

Mr. SMITH. I don’t really know. 

Mr. BURGESS. You’ve sold your company, I understand that. 

Mr. SMITH. But I don’t really know. And the DEA, as we talk 

about the DEA, the DEA has not been the same in their outlook, 

attitude, and interaction with the industry over my career. For 

most of my career, the interactions with the DEA were very collaborative and very purposeful, in terms of working with them to 

try to control controlled substance distribution. 

Back about 10 years ago, with the advent of this expectation of 

holding orders, it became very, very difficult to interact with the 

DEA and to get feedback. They were, in fact, as evasive as possible 

in the midst of this crisis to us, in terms of giving us guidance. 

More recently, that attitude has been changing and improved. 

Now, as you point out, as of 2018, I was pretty much out of the 

picture. I can only hope that the DEA will continue to work collaboratively with the industry going forward. 

Mr. BURGESS. And what you have just related is information that 

independently I and my staff have acquired, that the number of administrative actions against registrants by the DEA—now I’m 

merely talking about doctors, because that was my focus when I 

began this—but when you look at the numbers in the committee’s 

memo, how things have just been going up through the roof, the 

number of administrative actions, I’m not talking about for West 

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Virginia, I’m talking about for the whole country, 21 in 2014, at the 

same point that point in the graph was probably at its apex. 

I’ve got to believe that the DEA—I’m not saying that everything 

that you’ve reported—I want you to do your job, but I want the 

DEA to do their job, and it doesn’t look like they have been. And 

I’ll just share with you, they’ve been very, very difficult to get information out of the agency. 

I hope you’re right, Mr. Smith, I hope it is changing. But we cannot fix this problem if the agency required to be in charge simply 

is insensitive to our requests for information. 

I thank all of you for being here today. 

Mr. Chairman, I yield back. 

Mr. GRIFFITH. I thank the gentleman, and now recognize the 

gentleman from New York, Mr. Tonko, for 5 minutes. 

I understand you have a UC request. 

Mr. TONKO. I’ll yield to Ms. Castor. 

Ms. CASTOR. Thank you, Mr. Chairman. 

I’d like to ask unanimous consent to submit for the record information relating to the salaries of the CEOs of the Big Three drug 

wholesalers, including the McKesson CEO, who made over $692 

million in the 10 years leading up to 2017. 

Mr. HARPER [presiding]. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Ms. CASTOR. I yield back. 

Mr. TONKO. Thank you, Mr. Chair. 

Mr. Barrett, I asked about Cardinal’s sales to pharmacies that 

filled prescriptions written by two doctors, Katherine Hoover and 

Diane Shafer. Federal law enforcement put both of these doctors 

out of business around 2010. 

Dr. Shafer was sentenced to 6 months in prison after she admitted to writing illegal opioid prescriptions. According to the United 

States Attorney’s Office for the Southern District of West Virginia, 

she wrote more prescriptions than entire hospitals did between 

2003 and 2010. 

Dr. Hoover was the single largest prescriber of controlled substances in West Virginia between 2002 and 2010. When her clinic 

was raided, she fled to the Bahamas. 

Cardinal served two pharmacies, Hurley Drug and Family Discount, which filled prescriptions from Dr. Hoover. In September 

2008, a Cardinal employee raised an alarm about Hurley Drug in 

a memo, which noted that Hurley filled prescriptions from Dr. 

Katherine Hoover even though other pharmacies refused to fill her 

prescriptions. 

According to this document, another pharmacist stated that he 

would not fill Hoover’s prescriptions because, quote, ‘‘He had ridden 

by the office of Dr. Hoover and there are lines of people standing 

outside waiting to get into the office,’’ close quote. 

In fact, according to a 2011 news report in the late 2000s, quote, 

‘‘Crowds of people filled the lot outside Dr. Hoover’s clinic,’’ and it 

was, in quote, ‘‘an open secret that it was essentially a pill mill.’’ 

Is that accurate? And did your employee observe the lines of people outside that office as early as 2008, which could indicate a possible pill mill? 

Mr. BARRETT. Congressman, I’ve been briefed on those memos. 

85 

Mr. TONKO. Pardon me? 

Mr. BARRETT. Yes, I’ve been briefed on that report. 

Mr. TONKO. OK. So your employee’s memo appears in Cardinal’s 

due diligence file for Hurley, but it is unclear what actions Cardinal took based on it. For example, Cardinal continued to supply 

Hurley for another 6 years. 

So why? Do you know whether Cardinal ever followed up on this 

memo? 

Mr. BARRETT. So we’ve not shipped that company high-potency 

opioids for many years. I mentioned earlier that based on what I’ve 

seen, I wish we had taken action earlier. I think we had a system 

that allowed for too much subjectivity about the legitimacy of a 

pharmacy. 

Today’s system simply would have taken the data, seen outlier 

data, and shut it off. And, as I said earlier, I’ve seen enough to 

know that I wish we would have acted earlier. 

Mr. TONKO. Cardinal also supplied Family Discount Pharmacy, 

sending it more than 5.5 million pills from 2009 to 2012, after 

which you ended your relationship with them. 

According to a document in another distributor’s files, in 2009, 

51 percent of Family Discount’s hydrocodone prescriptions came 

from Dr. Hoover. That distributor also reported to the committee 

that Dr. Hoover was responsible for 69 percent of Hurley Drug’s 

hydrocodone orders, which the distributor considered a, quote, 

‘‘cause of concern.’’ 

Mr. Barrett, in your written testimony, you say you wish you had 

asked a different set of questions before distributing to this pharmacy. It appears that Cardinal may have missed the red flags connecting Dr. Hoover to both Hurley Drug and Family Discount. So 

I’d like to know how this will be fixed going forward. 

Mr. BARRETT. Congressman, it is a great question. It is fixed 

going forward. As I mentioned earlier, I think both of the pharmacies to which you referred were influenced by this same doctor 

who, as it turns out, was a bad doc. 

Today’s systems would not allow subjectivity. Today’s systems 

would simply say, we set thresholds or limits, based on certain criteria, primarily relationship between controlled drugs and on other 

drugs and the nature of the community. And if it crossed those 

thresholds, we simply would shut the order down, and that’s what 

we do today. 

Mr. TONKO. So is it your belief that these two situations would 

have been caught much earlier? 

Mr. BARRETT. In today’s system, absolutely. 

Mr. TONKO. It’s unbelievable that these numbers of pills were 

being sold and that this pill mill was getting away with activity. 

I just hope that all of the distributors before us have much more 

rigorous due diligence standards in place today that can help them 

spot these red flags. 

And with that, Mr. Chair, I yield back. 

Mr. HARPER. The gentleman yields back. 

The Chair will now recognize Mrs. Brooks for 5 minutes. 

Mrs. BROOKS. Thank you, Mr. Chairman. 

Mr. Smith, I’d like to talk about Family Discount Pharmacy that 

has been mentioned here already. Your company terminated FamVerDate Mar 15 2010 14:59 Dec 20, 2018 Jkt 037690 PO 00000 Frm 00089 Fmt 6633 Sfmt 6633 I:\115THCONGRESS\115X124OPIOIDDISTRIBUTION\115X124OPIOIDDISTRIBUTIONWOR
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ily Discount Pharmacy’s ability to purchase controlled substances 

in 2011. Is that correct? 

Mr. SMITH. I believe that we discontinued selling them anything 

at that—around that time. 

Mrs. BROOKS. Correct, in 2011. But prior to that, was H.D. Smith 

aware of the prescriber we’ve heard about, Dr. Katherine Hoover, 

who was responsible for providing over 262,000 hydrocodone prescriptions to Family Discount Pharmacy as well as other nearby 

pharmacies in February of 2008? Was H.D. Smith aware of the Dr. 

Hoover problem? 

Mr. SMITH. I am not aware of the specific timing of when our due 

diligence team became aware of that issue. I do know that with 

Family Discount that when we implemented our controlled substance ordering monitoring program, we began to limit the controlled substances that we sent and—— 

Mrs. BROOKS. Excuse me. Did Dominic Grant work for you. 

Mr. SMITH. I beg your pardon? 

Mrs. BROOKS. Did Dominic Grant for you? Did George Euson 

work for you? 

Mr. SMITH. George Euson worked for me. 

Mrs. BROOKS. In 2008? 

Mr. SMITH. Uh-huh. 

Mrs. BROOKS. Where I have an email indicating that Dr. Hoover 

had prescribed, had filled over 262,000. 

Mr. SMITH. OK. 

Mrs. BROOKS. So I do believe that your director of corporate security was aware of that. 

Mr. SMITH. Thank you. 

Mrs. BROOKS. If you turn to tab 16 you’ll see that over a year 

later H.D. Smith noted in a November 12, 2009, report—2009— 

that Dr. Katherine Hoover was responsible for 51 percent of the 

hydrocodone scripts being filled by Family Discount. 

Now, knowing that, was Family Discount Pharmacy—had that 

become a concern for your company in November of 2009? 

Mr. SMITH. It appears that it was at that time. 

Mrs. BROOKS. And did H.D. Smith report this to the DEA? 

Mr. SMITH. I’m not sure what the timing of what we would have 

reported to the DEA was. 

Mrs. BROOKS. Well, in fact, we know that Family Discount did 

make some reports to the DEA between May of 2008 and May of 

2009, but not at this time, in November of 2009. 

In April of 2015 then, interestingly, did H.D. Smith—so you then 

terminated with Family Discount in 2011, but then, going to April 

of 2015, did H.D. Smith make the decision to resume its business 

relationship with Family Discount Pharmacy? 

Mr. SMITH. That’s possible. We have a robust program, and that 

includes reviewing new data that comes along. It is possible that 

we could reopen an account if we saw that there were indications 

that the situation was different. 

On the other hand, that doesn’t end our robust due diligence. We 

can continue to do that and can decide to close it again. 

Mrs. BROOKS. Let’s talk about the due diligence. Were you aware 

that Family Discount had been dropped by some of the other disVerDate Mar 15 2010 14:59 Dec 20, 2018 Jkt 037690 PO 00000 Frm 00090 Fmt 6633 Sfmt 6633 I:\115THCONGRESS\115X124OPIOIDDISTRIBUTION\115X124OPIOIDDISTRIBUTIONWOR
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tributors here at the table when you renewed your relationship? 

Were you aware of that? 

Mr. SMITH. No, I was not aware. 

Mrs. BROOKS. So please turn to tab 19, speaking of due diligence. 

An email was sent by an H.D. Smith employee in January of 2016 

expressing concern that the company was providing controlled substances to Family Discount’s other location, located just 3 miles 

away, despite the fact the company, your company, had never performed any new customer due diligence on that pharmacy. Were 

you aware of that? 

Mr. SMITH. No. 

Mrs. BROOKS. The employee’s email also noted that this pharmacy had reached its hydrocodone threshold only 12 days into a 

month. Were you aware of that? 

Mr. SMITH. No. 

Mrs. BROOKS. And did you report the suspicious activity to DEA? 

Mr. SMITH. I do not know. 

Mrs. BROOKS. I would assume you did not. 

Following the January 2016 correspondence, did either Family 

Discount location continue to place controlled substance orders that 

exceeded the monthly thresholds established by H.D. Smith, this 

new amazing system you put in place? 

Mr. SMITH. I do not know. 

Mrs. BROOKS. Well, you might want to take a look at emails in 

June and October of 2016 showing that Family Discount had 

placed orders in excess of established thresholds, that, in fact, one 

of your employees indicated that the justification was to meet our 

guideline to obtain our monthly discount. What monthly discount? 

Mr. SMITH. I’m not sure what that refers to. 

Mrs. BROOKS. A monthly discount with the manufacturer? 

Mr. SMITH. No. 

Mrs. BROOKS. Monthly discount—no idea what monthly—what 

deals were being cut? 

Mr. SMITH. I’m not sure what that refers to. 

Mrs. BROOKS. H.D. Smith then blocked Family—H.D. Smith 

block Family Discount’s ability to purchase controlled substances 

on February 16 of 2018. Were you in charge at that time of the 

company? 

Mr. SMITH. No. My managerial responsibilities ended at the acquisition of H.D. Smith in January of 2018. 

Mrs. BROOKS. In January of 2018. Well, I will say that according 

to a document we received, the committee, the company cited its 

reason for taking this action and finally terminating the relationship with Family Discount was due to reference negative news articles. 

With that, I yield back. 

Mr. HARPER. The Chair will now recognize Mr. Ruiz for 5 minutes. 

Mr. RUIZ. Thank you, Mr. Chairman. 

This crisis continues to overwhelm our healthcare system, and as 

an emergency physician I have been involved in the front lines taking care of opioid-addicted and overdosed patients way before it 

made national headlines. Doctors struggle with treating pain adequately and identifying drug seekers. 

88 

Hospitals in my district are seeing an increase in uncompensated 

care, because they are seeing more and more patients with chronic 

opioid-related kidney, heart, and lung complications, not to mention overdoses. 

It is good that more funds are going to fight the opioid epidemic. 

I agree with that. I encourage that. But if you eliminate mental 

health coverage, emergency care coverage as an essential health 

benefit, or if you repeal Medicaid expansion, then you actually are 

taking 1 step forward and 10 steps back and are actually hurting 

patients and making the problem worse. 

Moving forward, I think it is critical that the various players— 

DEA, hospitals, physicians, pharmacists, manufacturers, and distributors—work together to identify and implement systems and 

processes that move us forward to identify and implement solutions. 

I understand that as this crisis has continued to escalate, many 

of you have put internal systems in place to increase accountability, but we have been told that before and it turned out to be 

untrue. And there’s a difference between what you have on paper 

and what you are actually implementing. 

At our March 20 hearing, members of this committee described 

the quantity of opioid pills sent to particular pharmacies in this region and asked DEA Administrator Patterson whether those 

amounts were excessive and whether the distributors failed to adequately exercise due diligence. The DEA agreed on both counts. 

So I’d like to quickly go down the line and find out whether the 

problems that led to this overdistribution have been fixed. 

Dr. Mastandrea, Miami-Luken distributed substantial quantities 

of pills to certain places in West Virginia. For example, your company sent Sav-Rite pharmacy in Kermit, a population of only 400, 

nearly 2 million pills in just 1 year. 

Would Miami-Luken’s current system discover these large shipments and more closely examine them to determine if such a large 

volume was appropriate and not going to a rogue operation, such 

as a pill mill? 

Dr. MASTANDREA. Yes, sir. 

Mr. RUIZ. And how can you guarantee us that that system will 

be implemented? 

Dr. MASTANDREA. It’s already implemented. 

Mr. RUIZ. So you’re saying that there’s no mistakes currently 

being done that you know of? There’s no way of—what is your system to find and review in case you do make a mistake? 

Dr. MASTANDREA. Each order is reviewed by our—we purchased 

a Buzzeo system. It’s a computer algorithm that tells us whether 

or not the order deviates from frequency, pattern, size. And we stop 

it in real time if it does. We pend the order. If the order is adjudicated to be an appropriate order, then we release it. If it’s not, 

then we report it. 

Mr. RUIZ. The DEA data indicate that McKesson also supplied 

the Sav-Rite in Kermit, population of 400, with almost 5 million 

opioids over a 2-year period. 

So, Mr. Hammergren, if a pharmacy serving a comparable population placed those large orders today, particularly in an area hard 

hit by opioid diversion, would McKesson’s monitoring systems be 

89 

capable of flagging these orders for further review to make sure 

that they are not affiliated with a pill mill? 

Mr. HAMMERGREN. Congressman, that’s a good question. We 

would not ship to Sav-Rite today. 

Mr. RUIZ. OK. So, in terms of your system, if this happened to 

another comparable city, do you have a system in place to flag? The 

first question. 

Mr. HAMMERGREN. We have a system in place that would block 

the order if it was a pharmacy that was outside of a boundary, a 

threshold being set. 

Mr. RUIZ. So why hasn’t that happened? Why did you have another settlement in 2017, when you told us this exact same thing 

in 2008? 

Mr. HAMMERGREN. We had a system in place from 2008 to block 

suspicious orders. Our settlement in 2017 was really related to our 

reporting of suspicious orders. 

Mr. RUIZ. And so the implementation of those reporting and also 

the shipping of orders. 

So I think it’s very important that we also identify, which we see 

on multiple scenarios where corporations and agencies will hold up 

their policy on paper, but then the actual implementation of those 

are either not enforced or they’re not transparent to determine 

what’s working and what’s not working. 

Mr. Collis, since you are now responsible for H.D. Smith’s customers as well as your own, this question is for you. Without debating the merits of the West Virginia litigation that’s currently undergoing, do you now have a way to assess orders for high volumes 

of pills against the populations receiving them? 

Mr. COLLIS. I believe we do. I believe we have a robust system 

and we’ve always had one. 

Mr. RUIZ. OK. I yield back my time. 

Mr. HARPER. The Chair will now recognize the gentleman from 

Michigan, Mr. Walberg, for 5 minutes. 

Mr. WALBERG. Thank you, Mr. Chairman. And thank you for 

having these hearings. 

As we look at the various players—and today, of course, we have 

distributors—we had the opportunity to have DEA in front of us, 

and that was an amazing time of testimony as well with amazing 

failings that went on in DEA also. 

But this epidemic knows no boundaries. When we talk of losing 

115 Americans every day to the opioid epidemic, these are people 

that are our neighbors, our friends, our fathers, our family members, our sons, our daughters, our mothers. It knows no bounds. 

But the sheer number of opioids dumped into small town America 

is simply baffling and incomprehensible to me. 

Many of us have tragic stories of pill mills in our district. And 

my district in Michigan is, unfortunately, no different. In Monroe 

County, one doctor alone was able to get his hands and prescribe 

over 2 million pain killers in just two short years. 

I, for one, am interested to have the distributors here today to 

tell us exactly how and why this type of thing happens and to hear 

the steps that they have or will take. 

Mr. Collis, you wrote in an editorial last year that 

AmerisourceBergen has, and I quote, ‘‘reported and stopped tens of 

90 

thousands of suspicious orders since 2007,’’ end quote. If a specific 

pharmacy is reported for suspicious orders multiple times during a 

short period, would that trigger a heightened investigation of that 

customer? 

Mr. COLLIS. I believe it absolutely would. I wouldn’t say we don’t 

make mistakes, but I will tell you one of pharmacies that’s been 

mentioned several times, we had them on service for 38 days, and 

we reported them 36 of the 38 days. And on the 38th day we 

stopped servicing them. 

Mr. WALBERG. In the editorial, you also noted that 

AmerisourceBergen uses, and I quote, ‘‘complex algorithms to identify and stop orders that are deemed to be suspicious.’’ From 2012 

to 2015, AmerisourceBergen reported 394 suspicious orders for a 

single West Virginia pharmacy, Beckley Pharmacy. 

If the company opens an investigation of a pharmacy like Beckley, the investigators would want to know the percent of controlled 

substance prescriptions the pharmacy filled, correct? 

Mr. COLLIS. That’s correct. 

Mr. WALBERG. Whether there are signs of drug activity around 

the pharmacy. Is that correct? 

Mr. COLLIS. We would review the type of business that they are 

servicing. Some of my colleagues on the panel here have talked 

about the type of business. If they service a hospice account or pain 

management clinic, we would investigate that. 

Mr. WALBERG. If there are any known pill mill doctors writing 

prescriptions, you would want to note that, correct? 

Mr. COLLIS. If we knew that they were servicing a pill mill doctor, by your description, we would not service that pharmacy. If 

their business was designed around that, we would not service 

that. 

Mr. WALBERG. AmerisourceBergen reported 199 of its suspicious 

orders for Beckley Pharmacy between 2013 and March of 2014. But 

documents your company provided to the committee indicate that 

Amerisource didn’t investigate the pharmacy until February 2015. 

Please, if you would, turn to tab 46 to see the investigator’s February 2015 report, which found, and I’ll read that: 

The pharmacist said that 50 percent of prescriptions he filled 

were for controlled substances and that customers told him other 

pharmacies wouldn’t fill their prescriptions. Some of the pharmacies top 10 prescribers were among the top hydrocodone prescribers in the State, and the pharmacy security guard referred to 

customers as drug addicts and drug dealers and said he witnessed 

numerous drug deals in the parking lot after customers filled 

oxycodone prescriptions. 

Amerisource didn’t stop doing business with that pharmacy until 

November 2015, 10 months after the investigator’s report, which 

itself came only after your company filled hundreds of suspicious 

orders. The company is supposed to use, and I quote, ‘‘complex algorithms’’ to identify problems pharmacies have. 

So why did it take so long? 

Mr. COLLIS. I have a team, some them are behind me. We trust 

them. I think that we—I have never heard of this pharmacy before. 

But we’re committed to continuous learning. And if we made misVerDate Mar 15 2010 14:59 Dec 20, 2018 Jkt 037690 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 I:\115THCONGRESS\115X124OPIOIDDISTRIBUTION\115X124OPIOIDDISTRIBUTIONWOR
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takes, hopefully we’ll rectify them and they won’t happen in the future. 

Mr. WALBERG. Well, if we could get the response to that question, since you’re not aware of it. It comes from your reports and 

the reports that we have in front of us. 

Mr. COLLIS. We ship 100,000 orders a day. It’s not feasible that 

I would know about all the orders. 

Mr. WALBERG. Well, we’ll appreciate the response to that. 

Mr. Chairman, I have other questions I’ll have included in the 

record. 

Mr. HARPER. Certainly. Each of the witnesses will be aware, you 

may be getting written questions following this. We’d ask for your 

response to those as quickly as possible, including an answer to 

that question, Mr. Collis, at your earliest convenience. 

At this time, the Chair will recognize the gentlewoman from 

California, Mrs. Walters, for 5 minutes. 

Mrs. WALTERS. Thank you, Mr. Chairman. 

And, Mr. Barrett, these questions will be asked of you. 

When Cardinal began setting threshold limits for pharmacies in 

2008, the company set Family Discount’s hydrocodone threshold at 

27,000 doses a month. In a little over a year, Cardinal adjusted the 

pharmacy’s threshold 14 times. And by August 2009, it was cleared 

to receive 110,000 hydrocodone pills a month. 

The pharmacy’s threshold for hydrocodone reached a peak of 

150,000 dosages a month in January 2010, a level it remained at 

for a year and a half before Cardinal officials reviewed and reduced 

it. 

Mr. Barrett, when a pharmacy goes over its monthly drug 

threshold, does Cardinal inquire about the reason for the higher 

drug order? 

Mr. BARRETT. Thank you, Congresswoman. 

Today, if an order reaches its threshold, it simply stops. So the 

process is the threshold is set, and the threshold is set based on 

a number of factors, the size of the community it serves, not just 

the population but the community it serves. Other factors. Does it 

serve a hospice center, a surgical center, et cetera. If an order 

reaches that threshold, that limit, it simply stops. 

Mrs. WALTERS. But in the past, did it question it, before today? 

Mr. BARRETT. So as I look back at some of the historical documents, I think the thresholds probably should have been set with 

a different set of eyes. I’ve mentioned this notion of asking different 

questions. And I think today we’d probably set those quite differently. 

But I think at the time of those pharmacies you referred to, 

thresholds probably should have been adjusted down more quickly. 

Mrs. WALTERS. Did they—did Cardinal make an assessment as 

to whether the explanation for increasing its threshold made sense 

and verified it in any way? 

Mr. BARRETT. It’s hard for me to answer that fully. Again, this 

is part of the history. I have no reason to question the good intent 

of those doing that kind of assessment. They were professionals. I 

think they were looking at the incoming order of prescribing. 

92 

I think now we know some of that prescribing was driven by 

some behavior that we would have liked to have caught in the physician world. And today that simply could not happen. 

Mrs. WALTERS. OK. In Family Discount’s case, the pharmacy 

gave several explanations as to why it needed higher drug threshold. But in April 2009, the pharmacy said its hydrocodone volumes 

increased because of the closure of a nearby pharmacy called SavRite pharmacy. 

Mr. Barrett, do you know why Sav-Rite closed in 2009? 

Mr. BARRETT. I’m sorry, Congresswoman, I don’t. 

Mrs. WALTERS. OK. Well, it closed because it was raided by the 

DEA as part of a crackdown on prescription drug diversion. 

Sav-Rite, which is located about 30 miles away from Family Discount, closed after it was raided by the DEA, as I just mentioned. 

And the raid was covered in the local media at the time, but due 

diligence files Cardinal provided the committee do not indicate that 

the company knew about this event. Is that something Cardinal 

should have investigated or known? 

Mr. BARRETT. I think today under our procedures in our, essentially, know your customer model, we try to take into account what 

factors that we can that are fact. Those weigh into the judgment 

along with various analytical tools that relate to the nature of the 

community of practices that a pharmacy serves. So very likely 

today that would have been a factor that would have been—it 

would have been caught in the system. 

Mrs. WALTERS. OK. Cardinal’s policies indicate that, as of 2016, 

two people must now sign off on the decision to raise certain drug 

threshold levels above 20,000 and above 40,000 a month. Before 

that policy was adopted, was Cardinal failing to properly vet 

threshold level adjustments? 

Mr. BARRETT. I’m not sure, Congresswoman, that I could say that 

we were failing to reflect that. I think we were using the tools of 

the moment. And it was probably much more subjective judgment 

than what would happen today. Today it is a much more rigorous, 

evidence-based, data-based decision, and it doesn’t have the same 

kind of subjectively I think that was present at that moment. 

Mrs. WALTERS. OK. Cardinal Health has advised the committee 

staff that, starting in 2012, your corporation implemented stronger 

compliance systems. However, I would note that, in March 2017, 

the California State Board of Pharmacy filed a complaint against 

Cardinal’s Valencia, California, facility for shipping suspicious orders, including hydrocodone, during 2012 to 2015, to Pacific Plaza 

Pharmacy. 

I would further note that the conduct of the Cardinal Valencia 

facility figured in the 2008 $34 million settlement with the Justice 

Department and DEA. The shipments to Pacific Plaza involved 

sharp increases in the volume of controlled substances over a period of time. There were also orders of significant amounts of the 

highest available strength of drug compared to lower strengths, a 

red flag for illegitimate pharmacy dispensing. 

I understand Cardinal is contesting the complaint. But, Mr. Barrett, shouldn’t Cardinal Health’s stronger compliance system have 

been able to detect and to prevent these transactions? 

93 

Mr. BARRETT. Congresswoman, if I’m responding, I think, to the 

case that you referred to, and, again, this is important, we ship to 

a pharmacy that had an employee that stole a product. We were 

then criticized for shipping to the pharmacy and not being able to 

detect that internal theft. 

Again, I think this in some ways highlights part of the challenge. 

We ship to hospitals and pharmacies all over this country. There 

are things that may happen inside their watch. 

If the volumes are not things that would normally hit our thresholds that are happening at a much lower level, and this can happen, that is something we probably would not somebody detect. 

And so, again, this may or may not be the situation you’re referring to. If it is, and I think it may be, that’s essentially what the 

issue is. 

But for us today, we are driven by strict thresholds, and those 

are limits on the amount of certain products, 120 categories of 

drugs that can go to certain pharmacies. 

Mrs. WALTERS. OK. Thank you. 

I’m out of time. 

Mr. HARPER. The Chair now recognizes the gentleman from 

Georgia, Mr. Carter, for 5 minutes. 

Mr. CARTER. Thank you, Mr. Chairman. 

And thank all of you for being here today. We appreciate this 

very much. 

I have to say that I’m pleased thus far that my colleagues have 

not made this a witch hunt. But instead, I think they’ve asked 

some great questions and very fair questions. 

What I’ve heard, and I’ve been kind of in and out, but what I’ve 

heard is that you’ve acknowledged that you have a responsibility 

here and that you understand that. What I think I’ve also heard 

is that if you knew back then what you know now, you’d do things 

differently. And I think that’s true for all of us in this profession. 

And I say that having practiced pharmacy for over 30 years. 

I’m going to ask you all to be very, very honest with me right 

now, because I’m concerned, as Dr. Burgess mentioned, about the 

role of the DEA. 

Now, we’ve already had the DEA before this committee, and I 

think we had—I think we kind of had it backwards. I wish I could 

have another shot at them, to be quite honest with you, to ask 

them some questions. 

But let me—I just ask any of you. I assume all of you are compliant to ARCOS, that you’re reporting. What does DEA do with that 

information? Do you know? And if you can be brief, because I’ve got 

a bunch of questions. 

I ask you, Mr. Hammergren. Do you have any idea what DEA 

does with that information? 

Mr. HAMMERGREN. No, I don’t, sir. 

I would also say, Congressman, some of this testimony, you see 

these pharmacies switch wholesalers back and forth. 

Mr. CARTER. Absolutely. 

Mr. HAMMERGREN. We don’t see it before that happens. 

Mr. CARTER. OK. 

Mr. Collis, do you have any idea what the DEA does with this? 

94 

Mr. COLLIS. No. No. We would like more feedback. We’d also like 

[off mic] the rules, for example, on what constitutes a suspicious 

order. 

Mr. CARTER. OK. 

Mr. COLLIS. Very, very helpful. I know one of the gentlemen and 

I think we would be very interested in complying with the rules. 

Mr. CARTER. Let me ask any of you. Has the DEA ever come to 

you and said do not send opioids to that pharmacy or to that clinic 

or to that hospital? Has anybody ever been told that by the DEA? 

Mr. COLLIS. Not to my knowledge. 

Mr. CARTER. Have they ever given you any kind of directions or 

guidelines? You know, I get it if they’re outside of the rim, you 

know, and obviously there’s something going on. But, I mean, aside 

from that. 

Mr. Collis. 

Mr. COLLIS. Well in 2007, we had a lot of discussion with them, 

and we developed our current controlled substance order monitoring program and with the understanding that this was where 

they wanted the industry to go to. 

So I would say we do have regular consultation with them. We 

have worked with them on training programs. 

I wouldn’t say it’s—I would say, like all relationships, it can be 

improved and worked upon. 

Mr. CARTER. Right. Right. 

Mr. COLLIS. But it’s not totally without communication and collaboration. 

Mr. CARTER. Let me ask you this. Obviously, you know the difference in a schedule two drug and a schedule three drug. The 

DEA schedules those depending on the tendency for addiction. 

When did hydrocodone become a C two drug? 

Mr. COLLIS. I do not know. 

Mr. CARTER. I will tell you. It became a C two drug in 2014. 

Why did it take so long, do you think, for the DEA to reclassify 

hydrocodone from a C three to a C two drug? Do you treat C two 

drugs differently from C three drugs? 

I know you do, because when I get them from you, or when I 

used to get them from you, I had to sign different documents that 

came in a different box. They came sealed. 

Now, we’re talking about all these pills that came here, and they 

weren’t sealed, they weren’t on a different invoice or anything else. 

I’m just wondering, and, again, I wish I could ask the DEA this, 

why did it take so long to reschedule hydrocodone? 

The last thing I will say is this. Mr. Smith, you were involved 

in the situation in West Virginia. And I’m not taking up for you 

guys. You guys have a responsibility, and I believe you take that 

responsibility very seriously. And what I said earlier, I believe. I 

believe that if you had it to do to over again, you’d do some things 

differently. 

Mr. Smith, there was a doctor, a Dr. Katherine Hoover, who accounted for 69 percent of all the prescriptions that were written 

during that timeframe in this town in West Virginia. Do you know 

whatever came about with Dr. Hoover? Do you know where she is 

today? 

95 

Mr. SMITH. I believe they referred to her earlier, and that she’s 

either—oh, I’m sorry. 

Thanks, Steve. 

I believe she was referred to earlier and that there’s either been 

disciplinary action taken with her or she’s left—— 

Mr. CARTER. She fled to the Bahamas. She bought an island. 

Twenty-one doctors, Dr. Burgess pointed out, 21 doctors in the 

whole Nation. 

Now, when you’re sending drugs to a pharmacy, and it’s out of 

control, there’s one of two things happening. Either that pharmacy 

is out of control and they’re selling drugs out the back door, or 

there’s a doctor who’s out of control in that area. 

Has the DEA ever come to you asking you about a particular doctor? 

Mr. COLLIS. Not to the best of my knowledge. 

Mr. CARTER. Nobody has. 

Dr. MASTANDREA. We have received subpoenas regarding physicians. 

Mr. CARTER. Good. Thank you. I’m glad to hear that. And I hope 

that we will hear that. 

I’m sorry. I’m out of time. But, again, we all have responsibility 

in this. All of us. There is no one solution to the opioid epidemic. 

All of us. Pharmacists, distributors, manufacturers, physicians, all 

of us have a responsibility. 

And I appreciate your role in that responsibility and you accepting that role in that responsibility. This is very important. You can 

help, and I hope that you are committed to helping. I believe that 

you are. 

Thank you, Mr. Chairman, and I yield back. 

Mr. HARPER. The gentleman yields back. 

The Chair will now recognize the gentleman from Pennsylvania, 

Mr. Costello, for 5 minutes. 

Mr. COSTELLO. Thank you, Mr. Chairman. 

Mr. Barrett, the committee asked Cardinal Health how it assessed whether the 6.5 million opioid pills distributed to Family 

Discount Pharmacy over a 5-year period was an appropriate number to send to a town of less than 2,000 people. The company’s response was that Family Discount in Mount Gay-Shamrock was a 

large pharmacy that served the broader Logan County, which has 

a population of 35,000 people. 

When Cardinal investigators reviewed several high-volume purchases of controlled substances in 2008, they did not cite the county population in their investigation. They instead cited the population within a 35-mile radius of the pharmacy as 2,600 people. I 

know which figure looks better for the company, but why is the 

company now relying on the county population data when it cited 

a more limited area in its investigation of this pharmacy? 

Mr. BARRETT. Mr. Congressman, let me start by saying, and I 

have mentioned earlier, if we looked at that pharmacy today and 

those patterns, we would have come to different conclusions. So I 

can only observe what I see in the documents back then. 

I think the pharmacy is—its volumes are not necessarily dictated 

by the size of the community. It’s dictated by the nature of the cusVerDate Mar 15 2010 14:59 Dec 20, 2018 Jkt 037690 PO 00000 Frm 00099 Fmt 6633 Sfmt 6633 I:\115THCONGRESS\115X124OPIOIDDISTRIBUTION\115X124OPIOIDDISTRIBUTIONWOR
96 

tomers that it serves: hospitals, clinics, surgery centers, regional 

centers. 

So in some cases, rural centers—excuse me—rural pharmacies, 

which have small populations, search a large area. So I think that 

may have been part of the judgment. 

What is important for me today is looking at it with today’s eyes. 

And with today’s eyes, I still think we would have made a different 

decision. 

Mr. COSTELLO. Thank you. 

Cardinal also told the committee that when assessing pharmacy 

drug orders it doesn’t have the full picture of how many pills are 

being sent to a pharmacy or the surrounding area by other distributors. That’s because the company does not have the ARCOS 

data collected by the DEA. But this argument that the distributor 

has to see the full picture to recognize issues with its own distribution is nevertheless problematic, I think. 

Using ARCOS data, the committee was able to determine how 

many opioids Cardinal alone dispensed to pharmacies in ZIP Codes 

surrounding Family Discount. The company sent over 16 million 

hydrocodone and oxycodone pills to that West Virginia region between 2006 and 2016. Family Discount received 6.7 million of those 

pills and its Stollings location received another 1 million. 

Mr. McKinley, I apologize if I pronounced Stollings wrong. I 

think I got it right, but if I did. 

Cardinal could see that 46 percent of its own distribution of opiates to the region was going to two related pharmacies. 

Mr. Barrett, can you really tell me that Cardinal needed to know 

what other companies were distributing in order to raise a red 

flag? I understand what you just said about hospitals in the region, 

but I’m trying to dig a little bit deeper here. 

Mr. BARRETT. So again, I can only repeat what I’ve said about 

this. I’ve seen enough in reviewing this file to say that we should 

have seen patterns earlier. But I think the comment that was in 

our document is generally true about how we do assessment of 

pharmacies, that there are many factors that go beyond simply the 

size of the community. 

Mr. COSTELLO. Right. But you did cut off Family Discount in 

2012. Why is that? 

Mr. BARRETT. Again, I think our team had enough data at that 

point in that moment at that time to say we are not comfortable 

with these levels of hydrocodone and oxycodone and at that point 

made a decision to cut off those pharmacies. 

Mr. COSTELLO. But that data did not yield conclusions as to other 

pharmacies at that moment in time? Presumably not if you didn’t 

stop. 

Mr. BARRETT. I really can’t answer that. I’m sorry. I just don’t 

know the answer to that, sir. 

Mr. COSTELLO. In addition to knowing what Cardinal itself distributes to a pharmacy, the company can also ask a pharmacy to 

produce a drug dispensing report. Is that correct? 

Mr. BARRETT. I’m sorry. Could you repeat one more time 

Mr. COSTELLO. In addition to knowing what Cardinal itself distributes to a pharmacy, the company can also ask a pharmacy to 

produce a drug dispensing report. Is that correct? 

97 

Mr. BARRETT. I think that may occur from time to time, yes. 

Mr. COSTELLO. In the case of Family Discount, Cardinal asked 

for and received drug dispensing reports, an example of which can 

be found on tab 55, tab 55 in the document binder. Dispensing reports contain information about all the prescriptions and drugs a 

pharmacy sends out the door, not just the drugs that Cardinal supplied. Is that correct? 

Mr. BARRETT. I think that’s correct, sir. 

Mr. COSTELLO. And for Family Discount, investigators requested 

drug dispensing reports multiple times as they reviewed high orders for controlled substances. Isn’t that right? 

Mr. BARRETT. Sir, I believe all this is in the documents. But I 

believe that’s correct. 

Mr. COSTELLO. Very good. 

I will yield back the balance of my time. 

Mr. HARPER. The Chair will now recognize the gentlewoman 

from Tennessee, Mrs. Blackburn, for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

Thank you all for being here today. We appreciate this. 

And I think probably what you’re hearing from us on each side 

of this dais is enough is enough. And you all have faced penalties. 

You have had settlements. You have had memorandums. We have 

covered every bit of that. 

And just as we are doing more at this committee to get our arms 

around this issue, legislation that we are moving forward with, we 

expect you all to do more also. 

And I have spent a lot of my time since I was in the senate in 

Tennessee, the Tennessee State Senate, doing roundtables, visiting 

treatment centers, sitting down with families, law enforcement, 

hearing their stories. And what we know is that the opioid crisis 

is different. The detox, the treatment, the recovery is different. And 

this is going to have to be a concerted effort to end this crisis. 

And Senator Portman has CARA 2.0 in the Senate. I have it 

along with Congressman Ryan here in the House. It’s totally bipartisan. Another billion dollars to go toward addressing this crisis. So 

we do expect you all to work with us on this. 

And I have got kind of a different set of questions I want to run 

through fairly quickly, and this will be a yes or no. And I’m going 

to start with you, Mr. Barrett, straight down the list. 

Have any of you personally met with families who have lost loved 

ones or survivors, individuals who are in recovery? Just yes or no 

right down the line. 

Mr. BARRETT. Yes, ma’am. 

Dr. MASTANDREA. Yes. 

Mr. HAMMERGREN. Yes. 

Mr. SMITH. I have not. 

Mrs. BLACKBURN. You have not? 

Mr. COLLIS. Yes. 

Mrs. BLACKBURN. OK. So four of you have. 

Now, let me ask you this. Do you have employees who are in 

treatment or recovery for opioid addiction, and does your insurance 

cover that treatment for these employees? Because what I understand is it takes about a year to a year and a half for someone to 

rewire their brain. Yes or no, straight down the line. 

98 

Mr. BARRETT. I believe our coverage does cover behavioral health 

issues. 

Dr. MASTANDREA. Yes, we do have employees who have had substance abuse problems, and we do cover substance abuse treatment. 

Mr. HAMMERGREN. Sadly, Congresswoman, I’ve had employees as 

well that are in treatment. And in addition to the insurance, we’ve 

also got a fund that helps them anytime it’s outside of the treatment from insurance to cover those costs. 

Mr. SMITH. I was generally not told about any health conditions 

of any employees, so I can’t speak to that. But I do believe that 

during my tenure that would have been covered. 

Mrs. BLACKBURN. Yes or no is fine. 

Mr. Collis. 

Mr. COLLIS. I’m not aware. I do not know. 

Mrs. BLACKBURN. You do not know. 

Well, let me ask you this. When you started distributing the 

opioids, were you aware of the addictive nature of this drug? Yes 

or no, straight down the line. 

Mr. BARRETT. Our company’s been distributing opioids—— 

Mrs. BLACKBURN. Yes or no. 

Mr. BARRETT [continuing]. For as long as it’s been in business. 

I would assume that we know that all drugs have side effects. 

Mrs. BLACKBURN. OK. 

Yes or no. 

Dr. MASTANDREA. Yes. 

Mrs. BLACKBURN. You were. 

Dr. MASTANDREA. We know the requirements of the DEA schedules. 

Mrs. BLACKBURN. OK. 

Mr. Smith. 

Mr. SMITH. We know there’s a tradeoff with every drug. 

Mrs. BLACKBURN. OK. All right. 

Mr. COLLIS. It’s done in a pure clinical decision. 

Mrs. BLACKBURN. All right. 

OK. We’ve talked a little bit about your algorithms and the way 

you’ve changed your protocols, moving to more of an evidence-based 

database, a platform less subjective. And we hope that that helps 

with the distribution. 

I want to know from each of you, how many pharmacies have you 

removed from your distribution list? 

Straight down the line. You can say—give me the number or ‘‘I 

don’t know.’’ And then you’ll submit it for the record. 

Mr. COLLIS. We have 800. 

Mrs. BLACKBURN. I’ll get to you in a minute. 

Mr. Barrett. 

Mr. BARRETT. We have cut off or refused to do business with a 

thousand or more. 

Mrs. BLACKBURN. A thousand. 

You don’t know? Please submit for the record. 

Mr. HAMMERGREN. Hundreds. 

Mrs. BLACKBURN. Hundreds? I’d like an exact, please. 

Mr. SMITH. What time period are you asking for? 

99 

Mrs. BLACKBURN. Well, through the history of your company. 

How many of—— 

Mr. SMITH. I wouldn’t be able to give an exact number, but hundreds. 

Mrs. BLACKBURN. OK, find a number and let us know. 

Mr. COLLIS. We have a robust list that we have 800 pharmacies. 

Mrs. BLACKBURN. I would to know—800. That you’ve cut off or 

that you distribute to? 

Mr. COLLIS. That we do not ship to. 

Mrs. BLACKBURN. Eight hundred. OK. That is wonderful. 

And how often does your algorithm flag a—and you all can submit this, because I’m out of time and there are others who want 

questions. 

I want to know, how often does your system flag a bad pharmacy? And then what is your threshold? You have mentioned 

thresholds several times, but you have not given a specific as to 

what that threshold is that kicks a pharmacy out. And if each of 

you will submit that in writing, I’d appreciate it. 

Thank you. I yield back. 

Mr. HARPER. The Chair will now recognize the gentleman from 

New Jersey, Mr. Lance, for 5 minutes. 

Mr. LANCE. Thank you very much, Mr. Chairman. 

Dr. Mastandrea, Miami-Luken noted that in June of 2015, following a review of Westside Pharmacy’s dispensing data, the company identified concerns with two of the pharmacy’s top prescribing 

physicians of oxycodone, Dr. David Morgan and Dr. Sanjay Mehta. 

The company has said that you expressed your concerns to the 

pharmacy’s owner who assured you the pharmacy would no longer 

fill their prescriptions effective June 30 of 2015. 

However, as I understand it, in October of that year, MiamiLuken learned that Drs. Morgan and Mehta continued to be among 

the pharmacy’s top prescribing physicians. 

When Miami-Luken learned that Westside pharmacy had not 

been truthful by continuing to fill prescriptions written by these 

doctors, did you drop the pharmacy as a customer? 

Dr. MASTANDREA. We probably dropped that customer within 30 

days of finding out that she was not cooperating with us. 

Mr. LANCE. On November 4, 2015, your director of compliance 

performed a site evaluation at Westside Pharmacy. You will find 

this evaluation in the binder at tab 33. Shouldn’t your site investigators have investigated the pharmacy’s falsehoods instead of ignoring them? 

Dr. MASTANDREA. I’m sorry. The question was shouldn’t the investigators have done what? 

Mr. LANCE. Shouldn’t your site investigators have investigated 

the pharmacy’s falsehoods instead of apparently ignoring them? 

Dr. MASTANDREA. I think that they should have investigated the 

pharmacy in totality. 

Mr. LANCE. After you knew the pharmacy wasn’t telling you the 

truth by continuing to fill prescriptions written by Drs. Morgan and 

Mehta, did Miami-Luken agree to increase Westside Pharmacy’s 

oxycodone threshold in November 2015? 

Dr. MASTANDREA. I am not aware of that. 

100 

Mr. LANCE. I request that you review the situation and give the 

committee an answer, yes or no. Not being aware of that is not sufficient, and please report back to the committee with the answer. 

Dr. MASTANDREA. My counsel will do so. 

Mr. LANCE. Thank you. 

Given that the DEA cited Miami-Luken’s relationship with 

Westside Pharmacy in its order to show cause, doesn’t that raise 

a question in your mind about your company’s due diligent efforts 

with respect to this pharmacy? 

Dr. MASTANDREA. Congressman, we were in the process of vetting that particular customer at the time we received the order to 

show cause. We had already terminated—I believe there were 13 

different customers that were on the order to show cause and we 

terminated, prior to receiving the order to show cause, all of them 

with the exception of Westside Pharmacy, which we were in the 

process of vetting at the time. When we found that they were on 

the order to show cause, enough was enough, and we terminated 

the relationship. 

Mr. LANCE. It’s my belief that the relationship was terminated 

at a point well beyond when it should have been terminated. 

I realize that monitoring for and reporting suspicious records is 

often complicated. Therefore, I take this opportunity to discuss a 

proposal that may enable distributors and the DEA to use the data 

that is available to them in a more effective way. And this is for 

the entire panel. 

Technology today that didn’t exist when ARCOS was put into 

place is able to deliver information that would allow the DEA to 

stop a suspicious order before it is filled. I, along with colleagues 

in the Senate, I am working on a proposal that would create a new 

data platform for the DEA to utilize moving forward so that this 

situation is ameliorated to the greatest extent possible. 

To the entire panel, will you commit to working with me and 

other Members of Congress—and this will be completely bipartisan, 

I assure you—to create a system that can effectively ensure that 

we are ready to police suspicious orders in a way that is truly effective? And as Congresswoman Blackburn suggested, going down the 

line. 

Gentlemen. 

Mr. BARRETT. I would support any technology that would help us 

do this job better, yes. 

Dr. MASTANDREA. Yes. 

Mr. HAMMERGREN. I look forward to working with you. 

Mr. SMITH. I am no longer employed in the industry, but I wish 

you the best of luck. 

Mr. LANCE. Yes, we will need more than luck. 

Mr. COLLIS. Yes. Absolutely. 

Mr. LANCE. Thank you. 

I yield back the balance of my time, Mr. Chairman. 

Mr. HARPER. The gentleman yields back. 

And I would like to clarify for the record that Miami-Luken did 

increase the threshold, as Mr. Lance described. The Chair will 

now—and also would like to put into the record a letter so signifying. 

101 

1The letter appears in the document binder, which has been retained in committee files and 

also is available at https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=108260. 

Without objection.1

Mr. HARPER. Now the Chair will recognize the gentleman from 

West Virginia, Mr. McKinley, for 5 minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman. And thank you, because I’m not a member of this committee, for the opportunity to 

address the panel and carry on. 

I’m from West Virginia we’ve been hearing about all day today. 

The fury inside me right now is bubbling over with how we’re going 

to address this problem. And for several of you to say you had no 

role whatsoever in this, I find it particularly offensive when we’ve 

had over 900 people a year dying in West Virginia because of lack 

of attention on your algorithm and your operation. And deflecting 

responsibility saying, ‘‘I just had to fill the order,’’ no, you had a 

role. You had a role. 

So let me just—Mr. Hammergren, if I could focus on you. You 

said you have notified the DEA of suspicious activity—suspicious 

orders. But between years 2001 and 2014, did any of those suspicious orders involve West Virginia? 

Mr. HAMMERGREN. I can’t be certain, Congressman. We’ve reported between 2000—in that period of time, around a million orders to the DEA as suspicious. 

Mr. MCKINLEY. Well, I just want to, for all of you, between 2001 

and 2014, none of you were complying with State law. State law 

says if there is a suspicious order that you file with the DEA, 

you’re supposed to send a copy of that order to the West Virginia 

Board of Pharmacy, and none of you have done it between those 

time periods. Not only a suspicious order, but at the end of every 

month, you’re supposed to file a report that says, during the past 

month, they give you 15 to the end of—after 15 days, you’re supposed to file a report with the Board of West Virginia Pharmacy 

saying no suspicious orders took place in West Virginia. 

But you didn’t do it. And that was some of the heart. That was 

the genesis. That’s when this disease really took hold in West Virginia. And you weren’t complying. But yet you said the same thing. 

You said: We’re not responsible. 

I think you very much were responsible. 

So, Mr. Hammergren, again, do you agree that a person like Dr. 

Hoover should be held accountable for her actions and perhaps pay 

more than a fine for her actions? 

Mr. HAMMERGREN. Congressman, I don’t know Dr. Hoover, and 

I don’t know the situation of her case. 

Mr. MCKINLEY. Do you just think in general doctors that spread 

this poison, writing 40,000, 50,000, 100,000 of prescriptions on 

opioids, should pay a penalty? 

Mr. HAMMERGREN. Absolutely, Congressman. 

Mr. MCKINLEY. OK. What about pharmacies, pharmacies that 

are following that order? The one that we have in particular, SavRite pharmacy. Should that pharmacy, should that pharmacist be 

held accountable for what he’s done? 

Mr. HAMMERGREN. In fact, I think that pharmacy was closed, per 

some earlier—— 

102 

Mr. MCKINLEY. What about—no, no. It may have been closed. He 

may have lost his job. But what about him or her who filled the 

order? Should she have been held accountable? 

Mr. HAMMERGREN. I don’t know the specifics. I can’t comment on 

it. 

Mr. MCKINLEY. OK. I’m coming back. I’m setting this up. I want 

to know whether you all should be held accountable. Because if the 

doctors and the pharmacies are being held accountable, I sure as 

the dickens would think you all have a role in this thing, too. 

So if I could, I want to go back again, Mr. Hammergren, to you. 

Let me try again with another. Do you regret any role that your 

company has played in this crisis? 

Mr. HAMMERGREN. Congressman, I don’t know how you could 

look at this crisis and not feel terrible about what’s going on in this 

country. And I certainly believe in situations like the Sav-Rite 

pharmacy and—— 

Mr. MCKINLEY. So you do regret—— 

Mr. HAMMERGREN. I feel terrible about this—— 

Mr. MCKINLEY [continuing]. That what McKesson did in participating in this scourge that’s ravaged this country, you regret it? 

Mr. HAMMERGREN. I feel terrible about this crisis. 

Mr. MCKINLEY. So what’s the proper accountability? What’s the 

punishment? It’s just a slap on the wrist of maybe 100th of 1 percent of the revenue? What’s the accountability, what’s the punishment that fits this crime when 900 people in West Virginia lose 

their life or 115 people lose their lives across this country? Just a 

slap on the wrist? A financial penalty? Or should there be time 

spent for participating in this? 

So I just want you to feel shame about your roles, respectively, 

in all of this, how we’re going to get through this. 

So apparently I have run out of time, but—let me just leave it 

at that. I am so frustrated for the people in West Virginia and 

across this country that you all have not played and stepped up, 

took more responsibility for this. 

I yield back my time. 

Mr. HARPER. The Chair now recognizes the gentleman from Ohio, 

Mr. Johnson, for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

And, gentlemen, thank you for being here today. 

I have listened with interest to today’s testimony and the questions that you have responded to. It’s a very tough subject. Eastern 

and southeastern Ohio sits at the epicenter of the opioid epidemic. 

I hear about it every day that I’m out and about in my district. 

And I don’t know if you’ve heard this yet today, but I’m glad you 

folks are at the table. And part of my questioning is going to be, 

where do we go from here? What are the solutions to this problem 

that you folks have been looking at and maybe some things that 

you’re looking at down the road? 

Let me start out with Dr. Mastandrea. Do I have that pronounced right? And I apologize 

Dr. MASTANDREA. Yes, sir. 

Mr. JOHNSON. OK. 

As I mentioned, I represent eastern and southeastern Ohio. It includes the town of Wheelersburg in Scioto County. In 2008 Scioto 

103 

County had an overdose death rate of more than 27 times the national average. 

For several years, 2005 through 2011, Dr. Margy Temponeras 

owned and operated the Unique Pain Management Clinic there in 

Wheelersburg. This clinic was a pill mill. Temponeras saw more 

than 20 patients per day who paid cash, starting at $200 for each 

appointment, and received monthly prescriptions for similar combinations of medications such as 120 to 150 pills of oxycodone and 

90 pills of Xanax. 

In April of 2017, Dr. Temponeras pleaded guilty in U.S. District 

Court to conspiracy to distribute a controlled substance, which she 

did through a pain clinic and dispensary. 

Between November 2008 and August 2010, Miami-Luken supplied the Unique Pain Management Clinic with controlled substances, including oxycodone. 

So my first question. According to the DEA, December of 2008 

was the first full month that Miami-Luken began shipping to Dr. 

Temponeras. In that month’s shipment, 97 percent of the total dosage units were controlled substances and 84 percent of the controlled substances ordered, totaling 71,100 dosage units, were 

oxycodone. 

Do those numbers seem unusually high to you? 

Dr. MASTANDREA. Congressman, I find it to be unusual that we 

would sell directly to a physician. I find it unusual that she would 

be a dispensing physician. By doing that, she bypassed all of the 

checks and balances that were in place. 

Mr. JOHNSON. OK. But I’m not talking about what she did. I’m 

talking about what you guys did. Did those numbers—— 

Dr. MASTANDREA. That’s right. And what we should not have 

done, we never should have supplied to a dispensing physician. 

Mr. JOHNSON. All right. Given that, should those orders be investigated, do you think? 

Dr. MASTANDREA. Those orders should have never been shipped. 

Mr. JOHNSON. But should they be investigated? 

Dr. MASTANDREA. How so? 

Mr. JOHNSON. Well, I think, if my facts are correct, Miami-Luken 

claims to have investigated Dr. Temponeras and the clinic. You, 

yourself, stated that in November 2008 one of the company’s salesmen conducted an inspection. However, according to the DEA, that 

inspection was cursory at best and it failed to take into account the 

area’s prescription drug problem. 

Then, in 2009, Miami-Luken CEO Tony Rattini and compliance 

manager Jim Barclay showed up to investigate on a day when the 

facility was closed and never returned to visit when it was open. 

So I guess my question to you is, looking back in retrospect, are 

those instances, in your opinion, adequate due diligence? I mean, 

you express outrage now that it never should have happened. But 

was due diligence supplied, do you think, when the opportunity 

presented itself? 

Dr. MASTANDREA. Due diligence was attempted in that particular 

situation. 

Mr. JOHNSON. When they showed up and didn’t show back up, 

the alarm bells didn’t go off? 

Dr. MASTANDREA. I said it was attempted. 

104 

Mr. JOHNSON. OK. All right. 

My time has expired. But I do appreciate you folks being here. 

And I know that—I know there’s a lot of emotion around this issue. 

There certainly is in my district. And I want to thank you for any 

work that you are doing and continue to do to help us get a handle 

on this, 115 people dying per day. We need your engagement at 

your level to get this problem resolved. 

Mr. Chair, I yield back. 

Mr. HARPER. The Chair now recognizes the gentleman from Florida, Mr. Bilirakis, for 5 minutes. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. 

And I appreciate you all being here. This is something we need 

to focus on. It’s an epidemic, and we need your engagement, as my 

colleagues said. 

So I’m glad to hear that the drug distributors acted in recent 

years to reform the policies and tighten controls on the distribution 

of opioid pain pains. But I’m surprised to hear, why did it take so 

long? 

And Florida was awash in pain— I represent the State of Florida, the Tampa Bay area, as you know, and the Tampa Bay area, 

in particular, but the whole State of Florida was awash in pain 

pills back in 2010. And it’s taken significant efforts by law enforcement and Florida lawmakers, the local lawmakers, to battle the 

prescription drug epidemic in recent years. 

On the part of the distributors, I’m concerned that you may not 

be on the same page. For instance, Mr. Barrett, Cardinal was the 

subject of a DEA administration action in Florida several times 

over the years. The DEA took enforcement action against Cardinal’s Lakeland, Florida, distribution center in 2007 for failure to 

maintain effective controls against the diversion of hydrocodone 

and again for similar allegations involving oxycodone in 2012. 

In court documents involving the 2012 action, the company made 

an interesting point. Cardinal said between 2009 and 2012 it 

stopped distributing controlled substances to 149 Florida pharmacies. But the company noted that 113 of those Florida pharmacies still had DEA registrations as of 2012. That means even 

though Cardinal had cut off pharmacies it suspected of drug diversion, other drug distributors were still doing business with them. 

I understand the committee’s investigation turned up numerous 

examples in West Virginia of one distributor dropping a pharmacy 

due to diversion concerns only for another distributor to immediately start doing business with the pharmacy. I mean, that’s very 

concerning again. 

So for all the witnesses, starting over here, I’d like all your companies to address two questions, please. 

First, when your company is considering bringing on a new pharmacy as a customer, do you verify whether that particular pharmacy was cut off from another distributor for suspected diversion? 

Please begin. 

Mr. BARRETT. Congressman, I don’t think we can know for sure. 

Actually, we don’t have access to that information that another 

company has necessarily cut off a pharmacy. We may, but there’s 

nothing in the mechanics of the regulatory process that makes that 

happen. 

105 

Mr. BILIRAKIS. All right. Next, please. 

Dr. MASTANDREA. We ask them whether or not—why they are 

coming to us and whether or not they were with another distributor and why they left that distributor. 

Mr. BILIRAKIS. And you take their word for it? 

Dr. MASTANDREA. We do as much due diligence investigation as 

we possibly can, but it’s, unfortunately, a trade. 

Mr. BILIRAKIS. Next, please. 

Mr. HAMMERGREN. It’s difficult for us to get accurate information 

on that. 

Mr. BILIRAKIS. Next, please. 

Mr. SMITH. In my experience at H.D. Smith, that was something 

that we sought from the customer, an explanation, if they were 

leaving another wholesaler. But, no, we didn’t talk to the other 

wholesaler about it. 

Mr. BILIRAKIS. Next. 

Mr. COLLIS. I agree with the previous comments. That information would be very helpful, Congressman. 

Mr. BILIRAKIS. OK. Next question. And second, what safeguards 

do you have in place to ensure your company is not bringing on a 

bad actor as a customer after they were dropped by one of your 

competitors? 

Let’s start again from you. 

Mr. BARRETT. So, Congressman, given the observation I made 

earlier, which is you don’t know for certain, we try to take, in this 

know-your-customer program of ours, any information that will 

help us dictate the nature of that pharmacy, who it serves, what 

its customers are, and whether or not there are any red flags. 

Mr. BILIRAKIS. So what safeguards do you have? 

Mr. BARRETT. I’m sorry? 

Mr. BILIRAKIS. What safeguards do you have in place, any particular safeguards? Name a few safeguards. 

Mr. BARRETT. Well, as I mentioned today, we have either not 

taken on or shut off a thousand pharmacies over these last 7 or 8 

years. So we literally put in place—— 

Mr. BILIRAKIS. What kind of process? 

Mr. BARRETT. If they won’t qualify, they don’t get products from 

us. 

Mr. BILIRAKIS. Do you have any kind of a process that you go 

through? 

Mr. BARRETT. Yes, a very rigorous process, sir. 

Mr. BILIRAKIS. All right. Go next, because I don’t have a lot of 

time. Next, sir, please. 

Dr. MASTANDREA. We ask for drug utilization reviews from every 

new customer. 

Mr. BILIRAKIS. All right. Next, please. 

Mr. HAMMERGREN. We certainly—first, we’ll check with the regulatory agencies, the DEA and the State boards of pharmacy, make 

sure the licensing is all done. That would be a baseline check. 

So certainly if there was a problem that was reported to the DEA 

and the DEA reported it to us, or a State pharmacy board, that 

would be the end of the decision relative to that pharmacy. 

Mr. BILIRAKIS. Do you do that as well, sir? 

106 

Mr. SMITH. We had a due diligence process that included all the 

elements I think that you’ve heard from the other wholesalers. 

Mr. BILIRAKIS. OK. Yes, please. 

Mr. COLLIS. If we did bring on a new customer, we would have 

extensive monitoring requirements and look at—in our suspicious 

order program, we’d be looking at what is the content of the orders 

that we receive from that pharmacy. 

Mr. BILIRAKIS. Would you also—for the first two—would you also 

check with the regulatory agencies as well. 

Mr. BARRETT. Yes. We can’t onboard a pharmacy without the 

proper authorization from the regulatory agencies. 

Mr. BILIRAKIS. That’s a common practice for you as well? 

Mr. BARRETT. It’s a standard practice. 

Mr. BILIRAKIS. OK. Standard practice. 

OK. Thank you very much. I appreciate it. 

I yield back, Mr. Chairman. 

Mr. HARPER. The gentleman yields back. 

Certainly, I think each of you recognize and would agree that the 

distributors are the first line of defense against diversion of opioids. 

And I know we’ve spent a lot of time on West Virginia. Is it been 

on the front line of the opioid epidemic. That’s why we use apportions of the State as a case study in this investigation. But it leads 

us to wonder are there other hot spots across the country that 

there are problems that maybe we haven’t really seen enough of 

that information yet. 

So given what you’ve heard today, will each of you commit to 

look for communities across the country where the volume of 

opioids that your company distributed appear far in excess of what 

the community can sustain? 

Mr. BARRETT. Sir, we will and we do. 

Dr. MASTANDREA. Absolutely. 

Mr. HAMMERGREN. Absolutely. 

Mr. SMITH. I’m not in a position to do that. 

Mr. COLLIS. We will. And, unfortunately, you know, opioids seem 

to thrive in communities where there often is, you know, hardship. 

And so we feel particularly concerned about that. 

Mr. HARPER. I want to thank each of you for taking your valuable time to help us on this very important matter. I know everyone recognizes the seriousness of this. We’re going to have to look 

at every aspect of what goes on. But we do appreciate the time. 

I want to remind Members that they have 10 business days to 

submit questions for the record. And I ask that the witnesses agree 

to respond promptly to those questions. 

Mr. HARPER. With that, the subcommittee is adjourned. 

[Whereupon, at 12:50 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

107 


U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON ENERGY AND COMMERCE £ST. 1'195 

May4, 2018 

TO: Members, Subcommittee on Oversight and Investigations 

FROM: Committee Majority Staff 

RE: Hearing entitled "Combating the Opioid Epidemic: Examining Concerns About 

Distribution and Diversion." 

The Subcommittee on Oversight and Investigations will hold a hearing on Tuesday, May 

8, 2018, at 10:00 a.m. in 2123 Rayburn House Office Building. The hearing is entitled 

"Combating the Opioid Epidemic: Examining Concerns About Distribution and Diversion." 

The purpose of this hearing is to investigate the role of wholesale drug distribution and 

diversion in the opioid epidemic in the U.S. Specifically, the hearing will examine whether any 

breakdowns occurred in the closed system for controlled substance distribution, established 

under the Controlled Substances Act (CSA), resulting in massive amounts of prescription opioids 

being shipped to small-town pharmacies in rural West Virginia while the opioid crisis continued 

to worsen throughout the U.S., but particularly in West Virginia. 

I. WITNESSES 

• GeorgeS. Barrett, Executive Chairman of the Board, Cardinall-lealth, Inc.; 

• Steven 1-1. Collis, Chairman, President and Chief Executive Officer, AmerisourceBergen 

Corporation; 

John H. Hammergren, Chairman, President and Chief Executive Officer, McKesson 

Corporation; 

• Dr. Joseph Mastandrea, Chairman of the Board, Miami-Luken, Inc.; and 

• J. Christopher Smith, Former President and Chief Executive Officer, I-I.D. Smith 

Wholesale Drug Co. 

II. BACKGROUND 

Opioid prescription drugs are used for pain management. In the U.S., about 6.9 percent 

of all adults have used an opioid analgesic during the last 30 days. 1 Opioid prescribing rates 

1 Kristen Kenan, Karin Mack. and Leonard Paulozzi, Trend') in prescriptions for oxycodone and other commonly 

used opioids in the United States, 2000-2010,6 Open Med.e4l (2012) available at 

https :1 /www. ncb i. nl m .n i h.gov/pmc/articles/PMC3659213/. 
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Majority Memorandum for May 8, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 2 

peaked in 2012 with more than 255 million prescriptions written in that year. In 2016, the 

number decreased to slightly more than 214 million.2 

The U.S. continues to experience an opioid epidemic, which has worsened over the last 

two decades. Opioid-involved overdose deaths arc the leading cause of injury death in the U.S. 

and take the lives of 115 Americans per day3 According to a recent report issued by the Centers 

for Disease Control and Prevention (CDC), prescription or illicit opioids were involved in nearly 

two-thirds of all drug overdose deaths in the U.S. during 2016 a 27.7 percent increase from 

2015.4 In total, more than 351,000 people have died since 1999 due to an opioid-involved 

2 Centers for Disease Control and Prevention, U.S. prescribing rate maps. Opioid overdose, updated July 31, 2017, 

available at https:/lwww.cdc.gov/drugoverdose/maps/rxrate-maps.html. 3 Centers for Disease Control and Prevention, Understanding the Epidemic, Opioid Overdose, Aug. 30, 2017, 

available at https://www.cdc.gov/drugoverdose/epidemiclindex.html. 4 Centers for Disease Control and Prevention, Vital Signs: Trends in Emergency Department Visits for Suspected 

Overdoses- United States, July 2016-September 2017, Mar. 9, 2018, available at 

https:llwww.cdc.gov/mmwr/volumesl67/wr/mm6709e l.htm. 
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Majority Memorandum for May 8, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 3 

overdose5 The crisis has become so severe that the average life expectancy declined in 2016 

from the previous year, largely because of opioid overdoses. 6 

Beginning in April2014, through numerous hearings, the Subcommittee on Oversight 

and Investigations has undertaken a comprehensive examination into the root causes of the 

opioid epidemic and explored possible solutions to enable greater access to effective, evidencebased treatment for substance use disorders. On May 8, 2017, the Committee launched an 

investigation into the distribution of prescription opioids, initially sending letters to the Drug 

Enforcement Administration (DEA) and the three largest wholesale drug distributors in the U.S., 

AmerisourceBergen, Cardinal Health, and McKesson 7 The Committee has since expanded its 

investigation to include regional wholesale distributors, H.D. Smith Drug Co} and MiamiLuken, Jnc 9 The Committee also sent follow-up letters to the three national distributors on 

February l 5, 2018. 10 The Committee sent a second letter to the DEA on October 13, 2017, 11 and 

held a hearing with the DEA 's Acting Administrator Robert Patterson on March 20, 2018, which 

examined DEA's etTorts to combat prescription drug diversion and the agency's response to the 

opioid epidemic. 12 

Role of the Wholesale Drug Distributors 

In general, the role that wholesale drug distributors play in the pharmaceutical supply 

chain is to purchase pharmaceuticals from manufacturers and distribute the drugs to downstream 

'Centers for Disease Control and Prevention, Data Brief294. Drug Overdose Deaths in the United States, 1999-

20 16, available at https:i /www.cdc.gov/nchs/data/databriefs/db294_ table.pdf#pagc=4. 6 Catherine Roberts, Opioid Overdoses Are Major Cause Behind Life Expectancy Decline, CDC Report Says, 

Consumer Reports, Dec. 21, 2017, available at https://www.consumerreports.org/drug-use/opioid-overdoses-lifeexpectancy-decline/. 

7 See H. Comm. on Energy & Commerce, Letters to Distributors and the DEA Regarding Alleged Pill Dumping in 

West Virginia, May 9, 2017, available at https://energycommerce.house.gov/news/lettcr/letters-distributors-and-dearegard i ng-alleged-pi I 1-d urn ping-west-virginia/. 8 On Nov. 21, 2017 Amcrisourcellergen announced its intention to acquire H.D. Smith for $815 million. See Press 

Release, AmerisourccBergen Corporation, AmerisourceBergen to Acquire HD Smith, Nov. 21,2017, available at 

https://www.amerisourcebergen.comiabcnew/newsroom/press-rcleases/amerisourcebergen-to-acquirc-hd-smith. 

AmerisourceBergen announced that it had completed its acquisition ofH.D. Smith on Jan. 3, 2018. See Press 

Release, AmerisourccBergen Corporation, AmerisourccBergen Completes Acquisition ofHD Smith, Jan. 3, 2018, 

available at https://www.amcrisourcebergen.com/abcnew/newsroom/press-re!eases/amerisourcebergen-completes~ 

acquisition-of-hd-smith. 

9 See H. Comm. on Energy & Commerce, Letters to Regional Distributors Expanding Alleged Pill Dumping 

Investigation, Jan 30, 2018, available at https://energycommerce.house.gov/news/lctter/letters-regional-distributorsexpanding-alleged-pill-dumping-investigation/ and H. Common Energy & Commerce, Letter to Miami-Luken 

Regarding Alleged Pill Dumping in Wesr Virginia, Sept. 26, 2017 available at 

https://energycommerce.house.govlnews/letter-miami-luken-regarding-alleged-pill-dumping-west-virginia!. 

10 See H. Comm. on Energy & Commerce, Follow-l,'p Letters to Distributors Regarding Ongoing Pill Dumping 

Investigation, Feb. 15, 2018, available at https://energycommerce.house.gov/news/follow-letters-distributorsregarding-ongoing-pill-dumping-investigation/. 

11 Letter from Hon. Greg Walden, Chairman, H. Comm. on Energy & Commerce, ct al. to Robert W. Patterson, 

Acting Adm 'r, L:.S. Drug Enforcement Admin., Oct. 13, 2017, available at https://energycommerce.house.gov/wpcontent/uploads/20 17/10/201710 13DEA.pdf. 12 71te Drug Enforcement Administration's Role in Combating the Opioid Ej1idemic· Hearing B~fore the H Comm 

on Energy & Commerce, Subcornm. on Oversight and Investigations, ll5th Con g., Mar. 20, 2018. 
110 


Majority Memorandum for May 8, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 4 

customers, such as pharmacies, where they are dispensed to patients. 13 Wholesale drug 

distributors engaged in interstate commerce are required, pursuant to regulations issued by U.S. 

Food and Drug Administration (FDA) and authorized under the Prescription Drug Marketing Act 

of 1987, 14 to be licensed by a state where the distributor has a presence. 15 FDA's regulations 

also established minimum federal requirements necessary for state licensure. 16 In addition, Title 

ll of the Drug Quality and Security Act, also referred to as the Drug Supply Chain Security Act, 

which was enacted on November 27, 2013, directed FDA to develop federal licensure standards 

for wholesale pharmaceutical distributors. 17 

It is common for wholesale drug distributors to purchase and distribute both controlled 

and non-controlled substances as part of their general course of business. However, distributors 

who engage in the purchase and distribution of controlled substances arc subject to additional 

legal obligations under the Controlled Substances Act (CSA). Wholesale drug distributors that 

distribute controlled substances must be registered with the DEA 18 and such registrations shall be 

granted so long as the DEA determines they arc in the public intcrest. 19 Currently, 947 entities 

are registered with the DEA to distribute controlled substances in the U.S.20 While there are a 

large number of registrants, McKesson, Cardinal Health, and AmerisourceBergen arc the 

predominant wholesale drug distributors in the U.S., accounting for approximately 85 percent to 

90 percent of domestic pharmaceutical wholesaling revenue. 21 

The CSA was designed to combat diversion by providing for a closed system of drug 

distribution, in which all legitimate handlers of controlled substances must obtain a DEA 

registration and, as a condition of maintaining such registration, must take reasonable steps to 

ensure their registration is not being used as a source of diversion. Prior to the establishment of 

the DEA, the Bureau ofNarcotics and Dangerous Drugs issued regulations in 1971 in 

accordance with the objectives of the CSA.22 These regulations, among other things, require 

distributors to "design and operate a system to disclose ... suspicious orders of controlled 

substances."23 The regulations also require distributors to report suspicious orders of controlled 

substances to the DEA when they arc discovered. 24 According to the regulations, suspicious 

13 21 C.F.R. § 203.3(cc). 14 Prescription Drug Marketing Act of 1987, Pub. L. No. I 00-293, I 02 Stat. 98 (1988). 

21 C.F.R. § 205.4. 

'" 21 C.P.R.§ 205.5. 17 21 U.S.C. § 360eee-2. 18 21 u.s.c. § 822. 

"21 u.s.c. § 823. 20 Registrant Population by Business Activity, U.S. Drug Enforcement Admin., available at 

https://apps.deadiversion.usdoj.gov/webforms/odrBusActReportSelect.do~sessionid~EA9E06C5D86689DF265FE8 

B8CCB8C39B, last visited Mav I, 2018. 21 Scott Higham and Lenny Be;nstein and Scott Higham, The Drug Industry's Triumph Over the DEA, WASH. 

POST, Oct. 15, 2017, available at https://www.washingtonpost.com/graphics/20 17/investigations/dea-drugindustry-congrcss/?utm term~.2608027cefa6. 

22 The DEA was established within the Department of Justice by Executive Order on July I, 1973, when various 

Executive Branch agencies were merged and the Attorney General was granted additional authority to coordinate 

federal efforts to combat illicit drug abuse. See Reorganization Plan No.2 of 1973,3 C.F.R. 785 (1971- 1975 

Comp.) reprinted at 21 U.S. C. § 80 I. 23 21 C.F.R. 1301.74(b). 

24 ld. 
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Majority Memorandum for May 8, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 5 

orders include orders of unusual size, orders deviating substantially from a normal pattern, and 

orders of unusual frequency. 25 

In addition to the regulatory requirements incumbent upon controlled substance 

distributors, the distributors also have a statutory responsibility to exercise due diligence to avoid 

filling suspicious orders that might be diverted to non-medical, scientific, or industrial 

channels26 The CSA also provides DEA with authority to deny, revoke, or suspend a 

distributor's registration if it determines the distributor's actions to be to be in violation of the 

mandates of the CSA or inconsistent with the public interest 27 A distributor's failure to exercise 

adequate due diligence could provide a statutory basis for revocation or suspension of the 

distributor's DEA rcgistration28 

Federal Efforts to Combat Illicit Prescription Drug Diversion 

Over the last 13 years, the DEA has undertaken numerous efforts to educate drug 

distributors, pharmacies, and doctors about their roles and responsibilities to prevent drug 

diversion. Amid a dramatic increase in the trafficking and abuse of prescription controlled 

substances, the DEA identified distributors as a chokepoint in the drug supply chain that could 

monitor and analyze orders of controlled substances and report orders as suspicious as defined in 

21 CFR 1301.74. Recognizing that wholesale distributors played a key role in the 

pharmaceutical supply chain, the DEA launched an industry-specific anti-diversion initiative in 

2005, called the ·'Distributor Initiative Program." According to the DEA, the goal of the 

initiative is to ''educate registrants on maintaining effective controls against diversion, and 

monitoring for and reporting suspicious orders. "29 DEA initially designed this program to 

educate drug distributors who were supplying controlled substances to rogue Internet pharmacies 

and, more recently, to diverting pain clinics and pharmacies. Through the program, the DEA 

"educates distributors about their obligations under the CSA, as well as provides registrants with 

current trends and 'red flags' that might indicate that an order is suspicious."30 The initiative 

remains active and as of September 2017, the DEA has briefed at least 99 firms that hold 309 

separate distributor registrations about concerns regarding illegal Internet pharmacy operations 

and rogue pain clinics 31 

In addition to the briefings, the DEA also sent letters in 2006 and 2007 to every DEAregistcred distributor to spell out their legal obligations. The initial letter, sent on September 27, 

2006, emphasized that, under the CSA, distributors have a responsibility not just to report all 

25 ld 26 21 U.S.C. § 823(b) and 21 U.S.C. § 823(e). 27 21 u.s.c. § 824. 28 21 U.S.C. § 823(b), 21 U.S.C. § 823(c), and 21 U.S.C. § 824(a). 29 Improving Predictability and 11-ansparency in DEA and FDA Regulation: Hearing Before H Common Energy & 

Commerce, Subcomm. on Health, !13th Cong., 2014, Statement of Joseph T. Rannazzisi, Deputy Assistant Adm 'r, 

Office of Diversion Control, U.S. Drug Enforcement Admin. 

30 ld 

·

11 DEA Trends & Updates- Connecticut/Rhode Island Pharmacy Diversion Awareness Conference, U.S. Drug 

Enforcement Admin., Sept. 24-25, 2017, available at 

https://www.deadiversion.usdoj.gov/mtgs/pharm _ awareness/conf20 17/sept_ 20 17/carrion.pdf#search · distributor% 

20initiative. 
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Majority Memorandum for May 8, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 6 

suspicious orders to the DEA hut also to exercise due diligence to avoid filling suspicious orders 

that might be diverted. In the letter, the DEA also provided examples of circumstances that 

might be indicative of controlled substance diversion and offered several suggested questions 

that distributors could ask pharmacy customers as they try to determine whether or not the 

customer is engaged in drug diversion. 32 These points were largely reiterated in the letter the 

DEA sent to distributors on February 7, 2007. 33 

The letter the DEA sent to distributors on, December 20, 2007, however, provided more 

specific guidance to wholesale distributors about their obligation to report suspicious orders 

under the CSA. The letter warned that it is the responsibility of the registrant to design and 

operate a suspicious order monitoring system and that suspicious orders must be reported to local 

DEA officers "when discovered by the registrant."34 Monthly reports submitted after orders 

were already filled and sent to customers would not meet the regulatory requirement, according 

to the DEA. Nor would providing daily, weekly, or monthly "excessive purchases" reports. 35 In 

the same letter, the DEA also specifically referred distributors to a July 3, 2007, final order 

issued by the DEA's Deputy Administrator that revoked the DEA registration of Southwood 

Pharmaceuticals Inc.36 The final order included discussion of distributors' obligations to 

maintain effective controls against diversion and required action when distributors discover a 

suspicious order. 

The DEA has also hosted several distributor conferences in the past, most recently in 

2016, that had the purpose of providing distributors with "an overview of federal laws and 

regulations that affect pharmaceutical and chemical distributors, such as recordkccping, 

Automation of Reports and Consolidated Orders System (ARCOS), and suspicious order 

reporting.''37 Despite receiving significant guidance from the agency, some wholesale 

distributors have been subject to enforcement actions initiated by the DEA, alleging the 

distributors failed to adhere to their legal obligations under the CSA. Some of the enforcement 

actions taken against wholesale distributors, and related settlement agreements, include: 

April 24, 2007, the DEA issued an Order to Show Cause and Immediate Suspension 

Order38 against the AmerisourceBergen Orlando, Florida distribution center alleging 

32 Letter from Joseph T. Rannazzisi. Deputy Assistant Adm'r, Office of Diversion Control, U.S. Drug Enforcement 

Admin. to DEA Registrants, Sept. 27, 2006, (On file with the Committee). 33 Letter from Joseph T. Rannazzisi, Deputy Assistant Adm'r, Office of Diversion Control, U.S. Drug Enforcement 

Admin. to DEA Registrants, feb. 7, 2007, (On file with the Committee). 3" Letter from Joseph T. Rannazzisi, Deputy Assistant Adm 'r, Office of Diversion Control, U.S. Drug Enforcement 

Admin. to DEA Registrants, Dec. 20, 2007, (On file with the Committee). 

J5 !d. 

36 See 72 Fed. Reg. 36,487, July 3, 2007. 

n Distributor Conference- May 10 & II, 20!6; Indianapolis, Indiana, U.S. Drug Enforcement Admin., 

https:llwww .deadiversion. usdoj .govlmtgsl distri butorl conf _ 20 16/index.htm I. 38 Immediate Suspension Orders (ISOs) and Orders to Show Cause (OTSCs) are administrative tools available to 

DEA to ensure compliance with the CSA, and to protect the public health and welfare. An OTSC requires a 

registrant to prove to the DEA Administrator why the registrant's DEA registration should not be revoked or 

suspended. See 21 U.S.C. § 824(c) and 21 C.P.R.§ l301.37(b). If, however, the DEA Administrator determines 

that a DEA registrant's activities constitute an imminent danger to the public health or safety, the Administrator may 

issue an ISO, which requires the immediate surrender of the registrant's DEA registration, pending the final 

resolution of an accompanying OTSC. See 21 U.S.C. § 824(d) and 21 C.P.R.§ 1301.36(e)(f). 
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Majority Memorandum for May 8, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 7 

failure to maintain effective controls against diversion of controlled substances. On June 

22, 2007, AmerisourceBergen entered into a settlement and release agreement with the 

DEA related to the allegations made by the agency;39 

• November 28, 2007, the DEA issued an Order to Show Cause and Immediate Suspension 

Order against the Cardinal Health Auburn, Washington Distribution Center for failure to 

maintain effective controls against diversion ofhydrocodone;40 

• December 5, 2007, the DEA issued an Order to Show Cause and Immediate Suspension 

Order against the Cardinal Health Lakeland, Florida Distribution Center for failure to 

maintain effective controls against diversion of hydrocodonc; 41 

• December 7, 2007, the DEA issued an Order to Show Cause and Immediate Suspension 

Order against the Cardinal Health Swedesboro, New Jersey Distribution Center for 

failure to maintain effective controls against diversion of hydrocodone;42 

January 30, 2008, the DEA issued an Order to Show Cause against the Cardinal Health 

Stafford, Texas Distribution Center for failure to maintain effective controls against 

diversion of hydrocodone;43 

• On September 30, 2008, Cardinal Health agreed to pay a $34 million civil penalty and 

entered into a Settlement and Release Agreement and Administrative Memorandum of 

Agreement (MOA) with the DEA related to its Auburn Facility, Lakeland Facility, 

Swedesboro Facility and Stafford Facility. The MOA also referenced allegations by the 

DEA that Cardinal failed to maintain effective controls against the diversion of controlled 

substances at its distribution facilities located in McDonough, Georgia, Valencia, 

California, and Denver, Colorado;44 

• May 2, 2008, McKesson Corporation agree to pay a $13 million civil penalty and entered 

into an Administrative MOA with the DEA which provided that McKesson would 

"maintain a compliance program designed to detect and prevent the diversion of 

controlled substances, inform DEA of suspicious orders required by 21 C.F.R. § 

130 1.74(b), and follow the procedures established by its Controlled Substance 

Monitoring Program;"45 

39 In re AmerisourceBergen, Settlement and Release Agreement (June 22, 2007) (On file with the Committee). 40 In re Cardinal Ffealth, Order lo Show Cause and Immediate Suspension of Registration, Nov. 28, 2007, (On file 

with the Committee). 41 In re Cardinal Health, Order to Show Cause and Immediate Suspension of Registration, Dec. 5, 2007, (On file 

with the Committee). 

In re Cardinal Health, Order to Show Cause and Immediate Suspension of Registration, Dec. 7, 2007, (On file 

with the Committee). 43 In re Cardinal Health, Order to Show Cause, Jan. 30, 2008, (On file with the Committee). 44ln re Cardinalllealth, Settlement and Release Agreement, Sept. 30, 2008, (On file with the Committee). 45 In re McKesson. Settlement and Release Agreement and Administrative Memorandum of Agreement, May 2. 

2008, (On file with the Committee). 
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Majority Memorandum for May 8, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 8 

• February 2, 2012, the DEA issued an Order to Show Cause and Immediate Suspension 

Order against the Cardinal Health Lakeland, Florida Distribution Center for failure to 

maintain effective controls against diversion of oxycodone;46 

• May 14,2012, Cardinal Health entered into an Administrative MOA with the DEA, 

which, among other things, stipulated that its compliance with the terms of the 2008 

MOA were inadequate in certain respects and that its Lakeland, Florida Distribution 

Center's DEA registration would be suspended for two years;47 

• November 23, 2015, DEA Issued an Order to Show Cause against Miami-Luken for 

failure to maintain effective controls against the diversion of controlled substances, 

particularly hydrocodone and oxycodone, between 2007 and 2015. This enforcement 

action remains pending with DEA;48 

• December 23, 2016, Cardinal Health agreed to pay a $34 million civil penalty to the DEA 

to resolve allegations that it failed to report suspicious orders and meet its obligations 

under the CSA in Florida, Maryland, New York, and Washington;49 and 

• January 5, 2017, McKesson Corporation entered into an Administrative MOA with the 

DEA wherein it agreed to pay a $150 million civil penalty for violation of the 2008 MOA 

as well as failure to identify and report suspicious orders at its facilities in Aurora, 

Colorado; Aurora, Illinois; Delran, New Jersey; LaCrosse, Wisconsin; Lakeland, Florida; 

Landover, Maryland; La Vista, Nebraska; Livonia, Michigan; Methuen, Massachusetts; 

Santa Fe Springs, California; Washington Courthouse, Ohio; and West Sacramento, 

California.50 

Prescription Opioid Distribution Investigation 

As noted, in May 20 I 7, the Committee opened an investigation into the distribution of 

prescription opioids by wholesale drug distributors, with a specific focus on unusually large 

opioid shipments to small pharmacies in West Virginia. Between2007 and 2012, distributors 

sent more than 780 million hydrocodone and oxycodone pills to the state or 433 doses per 

person. AmerisourceBergen, Cardinal Health, and McKesson delivered more than half of that 

amount, about 423 million pills 5 1 In that time frame, I ,728 West Virginians fatally overdosed on 

those two drugs. 52 

46 In re Cardina/!Jealth, Order to Show Cause and Immediate Suspension of Registration, Feb 2, 2012, (On file 

with the Committee). 47 In re Cardinal Health, Administrative Memorandum of Agreement, May 14,2012, (On file with the Committee). 48 ln re Miami- Luken, Order to Show Cause, Nov. 23,2015, (On file with the Committee). 49 Press Release, U.S. Dep't of Justice, United States Reaches $34 Million Settlement With Cardinal Health For 

Civil Penalties Under the Controlled Substances Act, Dec. 23,2016, available at https://www.justice.gov/usaomdil/pr/united-states-reaches-34-million-settlement-cardinal-health-civil-penalties-under. 

50 In re McKesson, Administrative Memorandum of Agreement, Jan. 5, 2017, (On file with the Committee). 51 Erie Eyre, Drug firms poured 780AI painkillers into WV amid rise of overdoses, Charleston Gazette-Mail, Dec. 

17, 2016, available at https://www.wvgazettemail.com/news/cops_and_ courts/drug-firms-poured-m-painkillersi nto-wv-am id-ri sc-of/ miicle 99026dad -8cd5-50 7 5-90 fa-adb906a3 6214 .html, 

"Id -
115 


Majority Memorandum for May 8, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 9 

While the investigation is still ongoing, the Committee has uncovered additional 

information that raises questions about the adequacy of due diligence performed by wholesale 

drug distributors, and the companies' adherence to the CSA's requirement that they implement a 

suspicious order monitoring program and report any suspicious orders to DEA. 53 The 

information also raises questions about the DEA's oversight of its registrants in West Virginia as 

the opioid crisis continued to worsen. 

Among the Committee's findings: a single pharmacy in Mount Gay-Shamrock, West 

Virginia-population 1,779-received more than 16.5 million hydrocodone and oxycodone pills 

between 2006 and 2016; distributors sent 20.8 million opioid pills to Williamson, West 

Virginia-population 2,900-during the same period; a pharmacy in Kermit, West Virginiapopulation 406-ranked 22nd in the entire country in 2006 in the overall number of hydrocodone 

pills it received, with a single distributor supplying 76 percent of its hydrocodone pills that year. 

Over a two-year period, distributors shipped approximately 9 million opioids to Kermit, West 

Virginia. 

III. ISSUES 

The following issues may be examined at the hearing: 

• The policies and procedures wholesale distributors had in place to mitigate controlled 

substance diversion amid the opioid epidemic and whether such policies and procedures 

were followed; 

• The actions taken by wholesale distributors when presented with "red flags" for possible 

diversion; and 

• The lessons wholesale distributors learned from past experiences in West Virginia that 

will enable them to safeguard against controlled substance diversion more effectively. 

IV. STAFFCONTACTS 

If you have any questions regarding this hearing, please contact Alan Slobodin, 

Christopher Santini, Brittany I lavens, or Andrea Noble of the Committee staff at (202) 225-

2927. 

53 See 21 C.F.R. § 1301.74. 
116 


Salary ofBig 3 Distributor CEOs 

John Hammergren, McKesson: $13! million, including $692 lllilliQ!l in the ten years leading up 

to 2017 

Steve Collis, AmerisourceBergen: $9.9 million total compensation for 20!7. 

George Barrett, Cardinal: $11 million compensation for 2017. 
117 


Steven H. Collis, Chairman, President, and CEO AmerisourceBergen Corporation 

• $9.9 million total compensation in 2017 

• $4,199,984 stock award value and $2.8 option award value in 2017 

George Barrett, Chairman of the Board, Cardinal Health Inc. 

• $11 million compensation in 2017 

• $6.33 million stock award value and $3.166 million option award value in 2017 

• Overall $64 million in stock options value 
118 


5/8/2018 St{lck Quotes & Company News ! Rawtars,com 

EDITION; UNI!E.O $TATES 

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AmeriscmrceBe!~~n 

R~la\flti Topit;$' STQCK$ STOCK SCREl!NER CONSUMER NONA::YCl!CAL$ ORUO RETAILERS 

OVERVIEW NEWS Kf!'fOEVElOPMENTS 

Change(%-~:hg) 

85.16uso 

Collis, Steven 

Total Annual Compensatlon, USD 

RastriCl<ild Steck Awards, USD 

Long-Termlncentl~teP!ans,USO 

AI!Otlwt,USD 

Fiscal Yaar Total, USO 

OPTIONS COM.PENSAilON 

Unexerc!sable 

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Rula\<i>d Topics: STOCKS STOCK SCREENER CONSUNIER NON.CYCLJCALS PRUG RETAiLERS 

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119 


5/8/2018 Compensation Information for Steven H. Collis , Chairman, President and Chief Executive Officer of AMER!SOURCEBERGEN CORP 1 Sa ... 

S!$ven H. Collis 

Executive Compensation 

As Chairman, Pmsldent and Chi&f Executive Offloor at AMERISOURCESERGEN CORP, Steven H. coma made $9,907,2741n total compeMation. Of 1his 1otal $1,240,000wa11 received as a salary. $1,339,883 was rocolved as a bont./3, $2,799,999 was re<:eived 

In 11tock options, $4,199,9ll4 was awarded as stock and $327,408 carM from other types of compensation. This Information Is 

nccordmgtoproxystalementslil&dlorth&2017flscalyoar, 

Chairman, President and Chief Executive Officer 

AMERISOURCEBERGEN CORP 

FiscaiYellrEndedinl0\7 

Vl~wi~BI$ndmltl<lf\al11vilr1!gll&ior 

salaries 

$9,907,274 Total Compensation 

ENTER AN EXECUTIVE OR COMPANY NAME 

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The chart on this page features e breakdoWn of lhe total annual pay for Steven H. Colli$, Chairman, Prnldent and Chief 

Exacut!ve Officer at AMERISOURCEBERGEN CORP as ftlported m their proxy r;latements. 

Total Cash Compensation informafion Is comprtsed of yearly Base Pay and Bonuses. AMERISOURCESERGEN CORP lncoma 

statemenls for execu~ve base pay and bonus are !lied yearly With the SEC In the ectgarflllng system. AMERISOURCEBERGEN 

CORP annual reports of execu!!ve compensation and pay are most commonly found In the Oaf 14a documents. 

Total Equity aggregates grant dale fair value of stock and optlan awerds end long term iMl.mti'ffls granted during the fiscal year, 

Other Compensation covers a!J compansatlon·§ke awards that don't Iii In My of these other standard categmles. Numbers reported 

do not include change m pension value and non..quaified deferred compensation earnings. 

Bonus"l'lnt:ent!veComp 

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Total Caah Compensation $2,579,863 

Location 

$6,999.983' 

Total other 

$327,408 

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Contact Us !Login 

Salaries Jobs Education Advice 

https:/fwww1 .salary.com/Steven-H-Co!lis-Salary-Bonus-Stock..Options-for-AMERISOURCEBERGENvCORP.html 112 
120 


5/8/2018 George S, Barrett: ExecuUve Profile & Blography- Bloomberg 

HEALTH CARE SECTOR » HEAt.TH CARE PROViDERS & SERVICES INDUSTRY » CAH 

Cardinal Health Inc (CAH:New York) 

CAH On Other Exchanges 

Snapshot News Chart$ Financials Earnings People Ownership Transactions Options 

Overview Board Members Committees 

Exec\ltlva Profile* 

George S. Barrett 

Execut1ve Chairman, Cardinal Health, Inc. 

Age Total Calculated Compensa1ion This person ls connected to 82 board members in 5 different 

62 $10,985,177 organizations across 9 different Industries. 

AsofFiscaiYear2017 See Board Relationships 

Background" 

Mr. GeorgeS. Barrett has been the Executive Chairman of Cardinal Health, Inc. since January 1, 2018. Mr. 

Barratt served as the Chairman and Chief Executive Officer of Cardinal Health, Inc., the holding company of 

Cardinal Health 414, LLC from August 31, 2009 to January 1, 2018. Mr. Barrett served as the Vice Chairman 

and Chief Executive Officer of Healthcare Supply Chain Services at Cardinal Health Inc. from January 2008 

to September 2009. He served as the President ... 

Read Full Background 

Corporate Headquarters* 

7000 Cardinal Place 

Dublin, Ohio 43017 

United States 

Phone: 614-757-5000 

Fax:--

Board Members Memberships* 

Chairman of Cardinal Health Inc and Chief 

Executive Officer of Cardinal Health Inc 

Cardinal Health 414, LLC 

Trustee 

The Conference Board, Inc. 

Director 

Nationwide Children's Hospital, Inc, 

2009-Present 

Executive Chairman 

Cardinal Health, Inc. 

Education* 

Bachelor's Degree 1977 

Annual Comptmsatlon"' 

S-alary 

Total Annual Compensation 

Stock Options'" 

Restricted Stock Awards 

A!! Other Compensation 

Exercised Options 

Exercised Options Value 

Exercisable Options 

Exercisable Options Value 

Unexerdsab!e Options 

Unexercisable Options Value 

Tote! Value of Options 

Total Number of Options 

Tota1 Compensation" 

Total Annual Cash Compensation 

Total Short Term Compensation 

Other Long Term Compensation 

Total Calculated Compensation 

https:/!www.bloomberg.com/research/stockslpeopla/person.asp?personld=4950498&privcapld=i72207 

$1,320,000 

$1,320,000 

$6,333,255 

$165,488 

685,989 

$32,061,337 

1,123,387 

$32,113,610 

386,518 

$458,674 

$64,633,621 

2,195,894 

$1,485,488 

$1,320,000 

$6,498,743 

$10,985,177 

1/2 
121 


5/8!2018 Compensation Information for GeorgeS" Barret!, Chairman and Chief Executive Officer of CARDINAL HEALTH INC I Sa!ary.com 

Enterprise !Smai!BusmessjPersonal 

Job title or Keyword Location 

George S. Barrett 

Executive Compensation 

As Chairman and Chief Executive Officer al CARDINAL HEAI..TH INC, GeorgeS, Barrett made $10,985,17711'1 total 

compensation. Of this total $1 ,320,MG was received aa a salary, $0 was received 1111 a bonus, $$,166,434 was received in stock 

OptiOJ13. $6,333,2:55 was awarded as stoclt and $16!1,48& came from other types of compensation. This lnforma!!on Is according to 

proxystatementsfiladfortha2017fiscatyear. 

Chairman and Chief EX$Cutive Officer 

CARDINAL HEALTH INC 

Vle'w1o.;al*ndMalh:matav~~:ragasfur 

ulerlil$ 

The chat! on \his page features a breakdown of 100 total aflnua! pay for GaQrge S. Barrett , Cha!nnan and Chtef Executive Offie&r 

at CARDINAL HEALTH INC 1111 reported ln their proxy statements. 

Total Cluoh Compensation Information Is wmprisell of yaarty Base Pay and Bcf\uses, CARDINAL HEALTH INC Income statements 

fnr(lxecutivo baoo pay and bonus are fi!ad yearly with the SEC !n the(ldg>lr fl!ing system, CARDINAL HEALTH INC annual reports of 

executive compensation and pay are most commonly found in 100 Oflf 14a documents. 

Total Equity aggrogatlll! grant date falr value o! stock and option awards and long term inc6ntlves granled durlng the fiscal year. 

Other Compensation covers all compensatloo-~ke awards lllat doo'l flt In any ofttwse other standa!d r..ategotias. Numbers reported 

donotlncludachange!npensloovalueandnon..quaUfieddeferredcomper~salionaaminga. 

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$1,320,000 

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Total Cash Compensation 

$1,320,000 

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$9,499JXl9 

Totalothflr 

$165.488 

https:/Jwww1.salary.com/George~S-Barrett..Sa!ary~Bonus~Stock·Optlons-for-CARD!NAL-HEAL TH-!NC.html 

Con!ac!Us!log!n 

Salaries Jobs Education Advice 

112 
122 


5/8/2018 CEO's pay is under fire amid opioid epidemic 

CEO's pay is under fire amid opioid 

epidemic 

by Julia Horowitz @juliakhorowltz 

McKesson CEO John Hammergren has earned $692 mi!!ion in the past 10 years. The Teamsters 

think that's too much. 

On Wednesday, the union plans to protest Hammergren's compensation at the drug distributor's 

annual shareholder meeting. They argue that McKesson. as a distributor of oxycodone and 

hydrocodone plUs, has played a role !n the u.s. opio!d epidemic. 

"For years. McKesson allowed opioids to flood into our communities, and despite the Irreparable 

harm and growing reputationa! and financial risks, the company has continued to reward 

[Hammergren] with ballooning bonuses and some of the most lucrative pay packages in the 

country,» Teamsters General Secretary-Treasurer Ken Hall sald in a statement. 

Pow'"red bv S<r'BnAssc.t.com 

Companies 

The union, which holds more than $30 million worth of 

McKesson shares, has also filed a shareholder proposal 

to install an independent board chairman who hasn't 

previously served as a top executive. 

Hammergren, who has been CEO of McKesson since 

2001. has served as chairman of the firm since 2002 as 

welL 

"We can't afford another decade of business as usual at 

McKesson," Hall said. 

Markets Tech Media 

http://money.cnn.CQmf2017/07/25/investing/mckesson-opioid·shareholder-mee!lng/index.html 

Investing 

Q. -

1/5 
123 


5{8/2018 

What Will Your 2017 

Tax Bill Look Like? 

Household Income 6 

$69,992 

the nation's oplo!d epidemic.~ 

CEO's pay is under fire amid opioid epidemic 

For its part, McKesson ls asking shareholders to approve 

Hammergren's compensation and oppose the 

Teamster's chairman proposal, and says it's working 

hard to address the oploid crisis. 

"We take our responsibility to help manage the safety 

and Integrity of the pharmaceutical supply chain 

extremely seriously and are committed to maintaining~­

and continuously Improving --strong programs designed 

to detect and prevent opioid diversion," the company 

said in a statement to CNNMoney. 

Related: The opioid epidemic is draining America of 

workers 

The state treasurers of West Virginia, Illinois and 

Pennsylvania backed the Idea of an Independent board 

chairman in a letter sent to McKesson on Monday. They 

also said McKessen should include a ~metric for senior 

executive compensation related to progress towards the 

fight against the opioid epidemic." 

McKesson shareholders. Including the Teamsters, worry 

about the company's financial exposure. 

In Its petition, tho union cites the "potential reputationa!. 

legal and regulatory risks McKesson faces over its role in 

In January, McKesson agreed to pay a $150 mHHon settlement and suspend sales of controlled 

substances from distribution centers in Colorado, Ohio, Michigan and Florida, according to 

Justice Department documents. The government said it concluded that the company had not 

properly identified pharmacy orders that should have been scrutinized due to their frequency 

and size. ln 2008, McKesson was fined $13.25 million for a similar problem, the department said. 

Many Teamsters also come from areas afflicted by the opioid epidemic ~- and for them. the 

subject of addiction hits home. 

At the 2016 Teamsters International convention Travis Bornstein, president of the Local 24 group 

in Akron, Ohio, spoke about his son Tyler, who died of a heroin overdose in 2014 at age 23. 

The Teamsters raised more than $1.4 mil!ion to fight addiction after he spoke, according to a 

union statement about the event. 

Hammergren's 10-year payout of $692 million includes his salary and bonus. as wen as the value 

of his vested shares and the money he made when he exerclsed his options, according to 

executive compensation data firm EquUar. 

Much of that value comes from the dramatic rise In the company's stock price. The value of 

shares has nearly tripled slnce mid-2007, Equilar said. 

McKesson says its board has appointed an independent committee to review the company's 

distribution of controlled substances, and that the company has Invested millions of dollars to 

revamp its system for monitoring the distribution of controlled substances. 

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124 


GREG WALDEN, OREGON 

CHA!f1MAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBEH 

QtongrcS'S' of tbc Wnitcb ~ta:tcs­

~om.ie of ~epresentati\.Jcs 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFicE BuiLDING 

WASHINGTON, DC 20515-6115 

Dr. Joseph Mastandrea 

Chairman of the Board 

MiamiMLuken~ Inc. 

265 South Pioneer Boulevard 

Springboro, OH 45066 

Dear Dr. Mastandrea: 

May 31,2018 

Thank you for appearing before the Subcommittee on Oversight and Investigations on May 8, 

2018, to testify at the hearing entitled "Combating the Opioid Epidemic: Examining Concerns About 

Distribution and Diversion." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the recordj which are 

attached. To facilitate the printing of the hearing record, please respond to these questions with a 

transmittal letter by the close of business on Thursday, June 14, 2018. Your responses should be mailed to 

i\li Fulling, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn !louse Office 

Building, Washington, DC 20515 and e-mailed in Word format to i\li.Fulling@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, 

6"?1 

Gregg 

Chairman 

Harper 

~ 

Subcommittee on Oversight and Investigations 

cc: The Honorable Diana DeGette, Ranking Member, Subcommittee on Oversight and Investigations 

Attachment 
125 


Direct Dial: 216.348.5839 

E-mail: rblake(tl'mcdonaldhopkins.com 

June 19,2018 

(Sent via Regular and Electronic Mail) 

Ali Fulling 

Legislative Clerk 

Committee on Energy and Commerce 

2125 Rayburn House Office Building 

Washington, DC 20515-6115 

Ali.Fulling@mail.house.gov 

Re: Dr .. Joseph Mastandrea- Miami-Luken, Inc. 

Dear Ms. Fulling: 

McDonald Hopkins LLC 

600 Superior Avenue, East 

Swte 2100 

Cleveland, OH 44114 

p 1.216.348.5400 

F 1.216.348.5474 

Please accept these responses pursuant to Congressman Harper's letter dated May 31, 

2018. Should you have additional questions, please direct them to my attention. 

The Honorable Gregg Harper 

I. Does your company request dispensing data from both prospective and existIng 

pharmacy customers as part of its due diligence efforts to mitigate controlled substance 

diversion? If so, at what frequency does your company request this information and how is 

the dispensing data utilized? If no, why not? 

Response: Miami-Luken no longer sells any controlled substances to retail 

customet·s. 

2. In its contracts with pharmacy customers, is your company able to require that a 

pharmacy produce dispensing data upon request? If so, does your company include such a 

requirement in the contracts it enters into with its pharmacy customers? If your company 

doesn't include such a requirement in its contracts, why not? 

Response: Miami-Luken no longer sells any controlled substances to retail 

customers. 

(7492688 } 

Chicago I Cleveland I Columbus I Detroit I Miami ] West Palm Beach 

www.mcclonaldhopkins.com 
126 


3. As part of your company's due diligence efforts related to prospective and existing 

customers, does your company review and maintain a list of the number of pharmacies that 

are located in the prospective/existing customer's service region? If so, how long has that 

been your company's practice and how does your company determine what a pharmacy's 

potential service region is? 

Response: Miami-Luken no longer sells any controlled substances to retail 

customers. 

4. Does your company request dispensing data from both prospective and ex1stmg 

pharmacy customers as part of its due diligence efforts to mitigate controlled substance 

diversion? If so, at what frequency does your company request this information and how is 

the dispensing data utilized? If no, why not? 

Response: Miami-Luken no longer sells any controlled substances to retail 

customers. 

5. In its contracts with pharmacy customers, is your company able to require that a 

pharmacy produce dispensing data upon request? If so, does your company include such a 

requirement in the contracts it enters into with its pharmacy customers? If your company 

doesn't include such a requirement in its contracts, why not? 

Response: Miami-Luken no longer sells any controlled substances to retail 

customers. 

6. As part of your company's due diligence efforts related to prospective and existing 

customers, does your company review and maintain a list of the number of pharmacies that 

are located in the prospective/existing customer's service region? If so, how long has that 

been your company's practice and how does your company determine what a pharmacy's 

potential service region is? 

Response: Miami-Lnken no longer sells any controlled substances to retail 

customers. 

The Honorable Michael C. Burgess 

l. While your companies seem to have put forth effort to improve your system of 

flagging possible drug diversion, there remains work to be done. In February, the Drug 

Enforcement Administration announced that it would begin sharing select data it collects on 

contro lied substance prescriptions with drug distributors. Have your companies been able to 

access that data, and if so, has it been useful? 

Response: We have not been provided access to any data from the DEA. 

{7492688: l 

ChiCC!go I Cleveland I Columbus I Detroit I Miami I West Palm Beach 

www.mcdonoldhopkins.com 
127 


2. What is the largest hurdle you face as your companies scale up your diversion 

prevention on activities? Is data-sharing, or lack thereof, the primary challenge? 

Response: Miami-Luken no longer sells any controlled substances to retail 

customers. 

3. Throughout each of your written testimonies, you mentioned your efforts to report 

suspicious orders to the DEA, and in cases that exceed the volume threshold, you stop the 

orders entirely. Where is the line drawn between drug manufacturers and the DEA in 

responding to suspicious orders? Does the DEA take enforcement action after you report the 

suspicious order? 

Response: The DEA does not share its enforcement actions with us and therefore 

we are not privy to this information. 

4. Distributors and other pieces of the drug supply chain have a responsibility to help 

prevent diversion. What can Congress do legislatively to strengthen oversight of that supply 

chain? 

Response: Federal and state agencies need to work better with industry. We also 

need laws that are consistent from state to state and nniform enforcement of those 

laws. There also needs to be sharing of data in all states across the fnll supply chain. 

The Honorable David B. McKinley 

I. As a Wholesale Distributor of prescription opiates, do you agree that you owe a duty 

under federal law to monitor, detect, investigate, refuse and report suspicious orders? 2 1 

U.S.C. § 823,21 CFR 1301.74 

Response: Yes. 

2. Do you agree that the foreseeable harm of a breach of this duty is the diversion of 

prescription opiates for nonmedical purposes? 

Response: Not necessarily. 

3. In other words, if you ship a suspicious order, it is likely that prescription opiates will 

be d ivetied into the illicit market. Agree? 

Response: Not necessarily. 

{7492688 } 

Chicago I Cleveland J Columbus l Detroit I Miami l West Palm Beach 

www,mcdonaldhopkins.com 
128 


4. Do you concur that filling suspicious orders is a direct and proximate cause of 

prescription opiate abuse, addiction, morbidity and mortality? 

Response: Not necessarily. 

5. Do you agree the United States is in the midst of a prescription opiate epidemic? 

Response: Yes. 

6. Do you concur that filling suspicious orders is a direct and proximate cause of the 

prescription opiate epidemic plaguing our country? 

Response: It is a contributing factor. 

7. Do you believe the prescription opiate epidemic is an immediate hazard to public 

health and safety? 

Response: Yes. 

8. Do you believe the prescription opiate epidemic is a public nuisance? 

Response: Yes. 

9. Are you aware of your company's efforts to detect, address, and report suspiciously 

large orders in West Virginia? 

Response: Miami-Luken no longer sells any controlled substances to 

retail customers. 

I 0. Are you aware that for years your company never followed West Virginia's law by 

reporting all suspicious orders to the West Virginia Board of Pharmacy? 

Response: No, we are unaware of this. 

11. Did your company have a policy that orders had to be less than 50% controlled 

substances to be filled? 

Response: No, such a policy did not exist. 

(7492688: } 

Chicago I Cleveland I Columbus I Delroil I Miami I West Palm Beach 

www.mcdonaldhapkins.com 
129 


The Honorable Frank Pallone, Jr. 

1. The Committee asked Miami-Luken for copies of all suspicious order reports that 

MiamiLuken submitted to DEA since 2008. According to what your company provided, it 

docs not appear that Miami-Luken submitted any suspicious order reports to DEA earlier than 

2015. Miami-Luken also provided the Committee with its due d iligencc files for several 

pharmacies. These files show that Miami-Luken supplied the Sav-Rite pharmacy in Kermit, 

WV, population 400, with over 5.7 million opioids between 2005 and 2011. Why did MiamiLuken not submit any suspicious order reports for any of its sales to SavRite? 

Response: As Miami-Luken has previously informed the DEA and this 

Subcommittee, the company's prior management did not maintain an effective 

suspicious order monitoring system at that time. Although prior management did 

take steps to address suspicious orders and were instructed by the Board to do so, 

its efforts were not effective. 

2. You told the Committee that you wished Miami-Luken had had a suspicious order 

monitoring system in place sooner, and that your failure to do so resulted in high distribution 

to at least one pharmacy. However, DEA sent letters to all distributors in 2006 and 2007 

reminding them that federal regulations expressly require distributors to identify and report 

suspicious orders of controlled substances, and laying out examples about how to do so. After 

receiving letters from the DEA advising you to report suspicious orders, why did your 

company not have a robust program in place to make this happen, especially when it was well 

known that the opioid crisis was growing? 

Response: As Miami-Luken has previously informed the DEA and this 

Subcommittee, the company's prior management did not maintain an effective 

suspicious order monitoring system at that time. Although prior management did 

take steps to address suspicious orders and were instructed by the Board to do so, 

its efforts were not effective. 

The Honorable Jan Schakowsky 

I. Does your company buy the drugs from the manufacturers, take title and move pallets 

to and from your warehouse? Or are you like brokers, working on consignment, arranging 

sales to pharmacies and then taking a percentage of the sale price? 

Response: Miami-Luken purchases product from manufacturers and such product 

is moved to and from its warehouse. 

{7492688: ) 

Chicago I Cleveland I Columbus I Detroil I Miami I West Palm Beach 

www.mcdonaldhapkins.com 
130 


2. In setting prices to pharmacies. is your markup more like a flat rate (for example, selling 

$5 more than the price at which you bought), or is your markup more like a percentage (for 

example, selling for 5% higher than the price at which you bought)? 

Response: Branded products are generally sold at a discounted percentage to 

Wholesale Acquisition Cost, while generics are priced to market. 

3. Is it possible that even if your company pays a higher price to get those drugs in stock, 

you end up making more money on those sales where your acquisition prices are higher? And 

would the same be true for your consignment/broker sales? 

Response: No. Miami-Luken is a market price taker, uot a market price setter. 

Thank you again. 

Richard H. Blake 

{7492688: } 

Chicago I Cleveland I Columbus I Detroit I Miami I West Palm Beach 

www.rm:donaldhopkins.com 
131 


GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

<!Congress of tbe Wniteb $tates ;!'ou~>e of 31\eprc~>entatil.Je!> 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

Mr. John H, Hammergren 

Chairman, President, and CEO 

McKesson Corporation 

One Post Street 

San Francisco, CA, 94104 

Dear Mr. Hammcrgren: 

May 31,2018 

Thank you for appearing before the Subcommittee on Oversight and Investigations on May 8, 

20!8, to testifY at the hearing entitled "Combating the Opioid Epidemic: Examining Concerns About 

Distribution and Diversion." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which are 

attached, To facilitate the printing of the hearing record, please respond to these questions with a 

transmittal letter by the close of business on Thursday, June !4, 2018, Your responses should be mailed to 

Ali Fulling, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office 

Building, Washington, DC 20515 and e-mailed in Word format to Ali.Fulling@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, 

8~~ Gregg Harper 

Chairman 

Subcommittee on Oversight and Investigations 

cc: The Honorable Diana DeGcttc, Ranking Member, Subcommittee on Oversight and Investigations 

Attachment 
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COVINGTON 

BEIJING BRUSSELS DUBAI FRANKFURT JOHANNESBURG 

lONDON lOS ANGELES NEW YORK SAN FRANCISCO 

SEOUL SHANGHAI SlLICON VALLEY WASHINGTON 

The Honorable Gregg Harper 

Chairman 

Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

U.S. House of Representatives 

2125 Rayburn House Office Building 

Washington, D.C. 20515-6115 

The Honorable Diana DeGette 

Ranking Member 

Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

U.S. House of Representatives 

2125 Rayburn House Office Building 

Washington, D.C. 20515-6115 

Re: McKesson Corporation 

Dear Chairman Harper and Representative DeGette: 

Robert K. Kelner 

Covington & Burling LLP 

One CityCenlcr 

850 'rcnth Street, ~rw 

Washington, DC 200()1-4956 

T + 1 202 662 5503 

rkelncr@cov.com 

June 14, 2018 

On behalf of the McKesson Corporation, • please find below responses to the Committee's 

May 31, 2018 questions for the record related to the Committee's May 8, 2018 hearing regarding 

opioid distribution. 

The Honorable Gregg Harper 

1. Does your company request dispensing data from both prospective and 

existing pharmacy customers as part of its due diligence efforts to mitigate 

controlled substance diversion? If so, at what frequency does your company 

request this information and how is the dispensing data utilized? If no, why 

not? 

1 McKesson U.S. Pharmaceutical is the business unit of McKesson Corporation that is relevant to the 

requests contained in the Committee's letter. Accordingly, the responses contained in this letter are based 

on information provided by McKesson U.S. Pharmaceutical. Throughout the letter, McKesson U.S. 

Pharmaceutical is referred to as "McKesson" or the "Company." 
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McKesson requests dispensing data from both prospective and existing pharmacy 

customers, and this information is an integral part of the company's due diligence efforts to 

mitigate controlled substance diversion. The company normally reviews a prospective 

customer's dispensing data as part of its due diligence before bringing on the new customer. 

The company requests and analyzes dispensing data from current customers when the customer 

requests to modifY its controlled substance ordering thresholds. The company may also request 

dispensing data when it conducts a proactive or reactive review of an existing customer. This 

information allows McKesson to, for example, compare a customer's dispensing levels against 

its purchasing data, or to better understand a customer's business model. 

2. In its contracts with pharmacy customers, is your company able to require 

that a pharmacy produce dispensing data upon request? If so, does your 

company include such a requirement in the contracts it enters into with its 

pharmacy customers? If your company doesn't include such a requirement 

in its contracts, why not? 

As noted above, McKesson requires dispensing data of new customers as part of the 

on boarding process, and from current customers as part of various due diligence reviews. If a 

current customer refuses to provide dispensing data upon request, McKesson will generally not 

continue to supply the customer with controlled substances. If a prospective customer with a 

history of dispensing controlled substances refuses to provide dispensing data upon request, 

McKesson will generally not onboard the prospective customer until the data has been provided. 

McKesson's standard contract with independent and small- and medium-chain pharmacy 

customers reserves McKesson's right to terminate the relationship if the customer puts 

McKesson at risk of noncompliance with any law, regulation, or requirement involving 

controlled substances. McKesson can exercise that right when a customer refuses to provide 

dispensing data upon request. McKesson also may require those pharmacy customers to 

consent to sharing dispensing data in order to receive certain rebates based on purchasing. 

3· As part of your company's due diligence efforts related to prospective and 

existing customers, does your company review and maintain a list of the 

number of pharmacies that are located in the prospective/existing 

customer's service region? If so, how long has that been your com)>any's 

practice and how does your company determine what a pharmacy's 

potential service region is? 

McKesson has a tool that allows it to review a list of its current customers in the same 

city, state, zip code, or geographic radius as another of its customers. This tool also allows 

McKesson to compare available purchasing data for those customers. McKesson's on boarding 

process also asks prospective customers to define their service area. All of this information is 

available to McKesson when it conducts a review of a current or prospective customer. 

McKesson does not, however, assign its customers a set "service area." The retail pharmacy 

market is highly dynamic, with pharmacies opening, closing, andfor changing business models 

regularly. As a result, the "service region" of a pharmacy is an imprecise measurement that can 

expand and contract due to market factors. Additionally, a pharmacy's service area can be quite 

different than that of a neighboring pharmacy. 
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Page3 

4. Does your company request dispensing data from both prospective and 

existing pharmacy customers as part of its due diligence efforts to mitigate 

controlled substance diversion? If so, at what frequency does your company 

request this information and how is the dispensing data utilized? If no, why 

not? 

This question is a duplicate of Rep. Harper's Question #1. 

5· In its contracts with pharmacy customers, is your company able to require 

that a pharmacy produce dispensing data upon request? If so, does your 

company include such a requirement in the contracts it enters into with its 

pharmacy customers? If your company doesn't include such a requirement 

in its contracts, why not? 

This question is a duplicate of Rep. Harper's Question #2. 

6. As part of your company's due diligence efforts related to prospective and 

existing customers, does your company review and maintain a list of the 

number of pharmacies that are located in the prospective/existing 

customer's service region? If so, how long has that been your company's 

practice and how does your company determine what a pharmacy's 

potential service region is? 

This question is a duplicate of Rep. Harper's Question #3. 

The Honorable Michael C. Burgess 

1. While your companies seem to have put forth effort to improve your system 

of flagging possible drug diversion, there remains work to be done. In 

February, the Drug Enforcement Administration announced that it would 

begin sharing select data it collects on controlled substance prescriptions 

with drug distributors. Have your companies been able to access that data, 

and if so, has it been useful? 

This question appears to reference the Drug Enforcement Administration's ("DEA's") 

move to share a limited amount of its ARCOS database information via the Buyer Statistics 

Lookup tool on the DEA website. McKesson has been able to access that data. McKesson 

believes that this tool represents a start towards better data-sharing, but that including 

additional information would enhance the usefulness of the tool. 

The current tool allows McKesson to search for a DEA registrant to see whether the 

registrant has purchased certain broad "base codes" of controlled substances and, if so, how 

many distributors sold those base codes to the registrant within a limited timeframe. The tool 

does not allow McKesson to see the quantity of product purchased in that base code, nor does it 

identify the specific product purchased or the strength of the product purchased. The 

information also covers only a recent six-month period and has about a one-month lag period. 
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The Honorable Diana DeGette 

June 14, 2018 

Page4 

The usefulness of the data is also limited by what is contained in the ARCOS database 

and when data is reported to the DEA. ARCOS does not, as stated in the question, include data 

on "controlled substance prescriptions. • It includes information on the sale and redistribution 

of select controlled substances. Whether and how the substances are eventually prescribed to 

consumers, and whether those prescriptions are filled, is not information contained in the 

ARCOS system. ARCOS also does not include information on every opioid product. 

2. What is the largest hurdle you face as your companies scale up your 

diversion prevention activities? Is data-sharing, or lack thereof, the 

primary challenge? 

Data-sharing is certainly one of the major challenges to anti-diversion efforts, but it also 

represents an opportunity. Anti-diversion efforts of Controlled Substance Act registrants all 

along the supply chain, from manufacturers to distributors, providers, and pharmacists, would 

benefit from increased data sharing among one another and with the DEA. Programs such as a 

prescription safety alert system could provide information about a patient's nationwide 

prescribing history to identify abuse or misuse. As described above, more complete access to the 

DEA's ARCOS data could also be a valuable anti-diversion tool. Clearer definition of the roles, 

responsibilities, and expectations of each registrant could also generate better results. 

3. Throughout each of your written testimonies, you mentioned your efforts to 

report suspicious orders to the DEA, and in cases that exceed the volume 

threshold, you stop the orders entirely. Where is the line drawn between 

drug manufacturers and the DEA in responding to suspicious orders? Does 

the DEA take enforcement action after you report the suspicious order? 

Each registrant under the Controlled Substances Act has a role to play in preventing 

diversion, as does the DEA. McKesson's Controlled Substance Monitoring Program ("CSMP") 

can help to identify potentially suspicious orders. However, McKesson does not have full 

visibility into the actions of prescribers, pharmacies, patients, or the other distributors. DEA 

has the most complete information, and only DEA has the ability to conduct law enforcement 

investigations of reported suspicious ordering activity. McKesson supports the DEA in those 

efforts when asked. McKesson respectfully defers to the DEA on what the DEA does with the 

suspicious order information the company reports." 

4· Distributors and other pieces of the drug supply chain have a responsibility 

to help prevent diversion. What can Congress do legislatively to strengthen 

oversight of that supply chain? 

McKesson has released a comprehensive set of proposals that it believes would help 

address the opioid crisis. These are available at http:/ jwww.mckesson.com/aboutmckessonjfighting-opioid-abusejopioid-policy-recommendationsj. Enclosed with this letter 

2 McKesson assumes for purposes of this response that the question was intended to read, "Where is the 

line drawn between drug distributors and the DEA in responding to suspicious orders?" 
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The Honorable Gregg Harper 

The Honorable Diana DeGette 

June 14, 2018 

Pages 

are copies of McKesson's 2017 white paper, Combating the Opioid Abuse Epidemic: A Shared 

Responsibility that Requires Innovative Solutions, and McKesson's 2018 white paper, Call to 

Action: Execute Solutions Today to Combat the Opioid Crisis. 

The Honorable David B. McKinley 

1. As a Wholesale Distributor of prescription opiates, do you agree that you 

owe a duty under federal law to monitor, detect, investigate, refuse and 

report suspicious orders? 21 U.S.C. § 823, 21 CFR 1301.74 

DEA regulations require registrants to identify and report suspicious orders when 

discovered. McKesson complies with this regulation using complex data analytics to set and 

manage customer thresholds for controlled substances. McKesson's model analyzes each 

customer order against its applicable threshold to determine whether the order should be filled. 

If a customer's order exceeds the applicable monthly threshold, that order is blocked and not 

filled. McKesson reports all such orders to DEA pursuant to 21 C.F.R. § 1301. 74· 

2. Do you agree that the foreseeable harm of a breach of this duty is the 

diversion of prescription opiates for nonmedical purposes? 

No. McKesson only ships controlled substances to pharmacies that are registered with 

the DEA and licensed by their respective state to receive such products. As a distributor, 

McKesson does not have visibility into or control over the doctor·patient or pharmacist-patient 

relationships and is not involved in the healthcare decisions made for a particular patient, the 

decision by a prescriber to write a prescription for a particular controlled substance, the decision 

by a pharmacist to fill a prescription for a controlled substance, or the decision by a patient to 

use, misuse, or divert a prescription medication. Moreover, McKesson has no visibility into the 

medical needs of the patient who is prescribed an opioid product. 

3· In other words, if you ship a suspicious order, it is likely that prescription opiates will be diverted into the illicit market. Agree? 

No. As noted above, McKesson only ships controlled substances to pharmacies that are 

registered with the DEA and licensed by their respective state to receive such products. As a 

distributor, McKesson does not have visibility into or control over the doctor-patient or 

pharmacist-patient relationships and is not involved in the healthcare decisions made for a 

particular patient, the decision by a prescriber to write a prescription for a particular controlled 

substance, the decision by a pharmacist to fill a prescription for a controlled substance, or the 

decision by a patient to use, misuse, or divert a prescription medication. Moreover, McKesson 

has no visibility into the medical needs of the patient who is prescribed an opioid product. 

4· Do you concur that filling suspicious orders is a direct and proximate cause of prescription opiate abuse, addiction, morbidity and mortality? 

No. As stated previously, McKesson supplies controlled substances only to those 

pharmacies that are registered with DEA and licensed by their respective states. As a 
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The Honorable Diana DeGette 

June 14, 2018 

Page6 

distributor, McKesson does not have visibility into or control over the doctor-patient or 

pharmacist-patient relationships and is not involved in the healthcare decisions made for a 

particular patient, the decision by a prescriber to write a prescription for a particular controlled 

substance, the decision by a pharmacist to fill a prescription for a controlled substance, or the 

decision by a patient to use, misuse, or divert a prescription medication. Moreover, McKesson 

has no visibility into the medical needs of the patient who is prescribed an opioid product. 

5· Do you agree the United States is in the midst of a prescription opiate 

epidemic? 

McKesson agrees and believes that many players in the pharmaceutical supply chain, 

medical community, and government will be needed to help bring an end to prescription drug 

abuse. To that end, beyond its various CSMP activities and anti-diversion efforts, McKesson has 

published multiple white papers containing proposals aimed at combatting drug diversion. In 

addition, McKesson has established and committed $100 million to a new non-profit foundation 

dedicated to combatting the opioid crisis. 

6. Do you concur that filling suspicious orders is a direct and proximate cause 

of the prescription opiate epidemic plaguing our country? 

No. As stated previously, McKesson supplies controlled substances only to those 

pharmacies that are registered with DEA and licensed by their respective states. As a 

distributor, McKesson does not have visibility into or control over the doctor-patient or 

pharmacist-patient relationships and is not involved in the healthcare decisions made for a 

particular patient, the decision by a prescriber to write a prescription for a particular controlled 

substance, the decision by a pharmacist to fill a prescription for a controlled substance, or the 

decision by a patient to use, misuse, or divert a prescription medication. Moreover, McKesson 

has no visibility into the medical needs of the patient who is prescribed an opioid product. 

7. Do you believe the prescription opiate epidemic is an immediate hazard to 

public health and safety? 

The country is in the midst of a serious opioid abuse problem. It is a multi-faceted 

problem that must be addressed through a comprehensive approach. McKesson has published a 

range of public policy recommendations aimed at combatting the opioid abuse problem. 

8. Do you believe the prescription opiate epidemic is a public nuisance? 

The opioid epidemic is a terrible problem faced by many families and communities in 

this country. McKesson is committed to working with Congress and other stakeholders to find 

effective means to combat the problem of prescription drug abuse. But as a legal matter, the 

answer to your question is no. 

9· Are you aware of your company's efforts to detect, address, and report 

suspiciously large orders in West Virginia? 
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The Honorable Diana DeGette 

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Page7 

McKesson has devoted significant resources to make key enhancements to its CSMP, 

including strengthening our compliance team, customer diligence efforts, ongoing oversight, 

suspicious order reporting, and customer education efforts. McKesson has also devoted 

significant resources to the development and implementation of advanced analytics to monitor 

orders for controlled substances, including those placed by pharmacies in West Virginia. 

to. Are you aware that for years your company never followed West Virginia's 

law by reporting all suspicious orders to the West Virginia Board of 

Pharmacy? 

McKesson has made a number of enhancements to its CSMP and reporting practices, 

including its reporting practices with respect to the West Virginia Board of Pharmacy. If a 

customer order for a controlled substance exceeds established monthly thresholds, the order is 

blocked and reported to DEA and to the West Virginia Board of Pharmacy. 

11. Did your company have a policy that orders had to be less than so% 

controlled substances to be filled? 

McKesson's CSMP includes a tool that allows the company to analyze a pharmacy's 

controlled substance ordering ratio over time, and that information can be a data point in 

decisions about whether to bring on the pharmacy as a new customer or change the ordering 

thresholds for a current customer. Because each pharmacy's situation is unique, McKesson 

believes that the company's advanced analytics system is a more appropriate tool for identifying 

suspicious ordering activity than a fixed ratio.3 

The Honorable Frank Pallone. Jr. 

1. Prior to August 2013, McKesson was not regularly reporting suspicious 

order reports to DEA as reqnired. When DEA Administrator Robert 

Patterson testified before the Committee in March, he stated that when 

distributors fail to report suspicious orders to DEA, it is much harder for 

DEA to do its job. Do you agree that timely reporting of suspicious orders 

plays a key role in preventing diversion? 

McKesson has reported hundreds of thousands of controlled substance orders to DEA as 

suspicious pursuant to 21 C.F.R. § 1301.74. McKesson is not aware of evidence that those 

reports are used by DEA to generate investigative leads. McKesson has for many years reported 

orders to DEA through ARCOS. According to DEA's website, "ARCOS accumulates these 

transactions which are then summarized into reports which give investigators in Federal and 

3 As for a ratio requiring individual orders to be less than so% controlled substances, such a policy is not 

feasible. Federal regulations require that some orders containing controlled substances not include any 

non-controlled substances in the order. 
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PageS 

state government agencies information which can then be used to identify the diversion of 

controlled substances into illicit channels of distribution. The information on drug distribution 

is used throughout the United States (U.S.). [sic] by U.S. Attorneys and DEA investigators to 

strengthen criminal cases in the courts."4 

2. You testified that McKesson's order monitoring systems "determine a 

suspicious order based primarily on quantities compared to average 

pharmacies, pharmacies that are similar." However, McKesson shipped 

Sav-Rite pharmacy in Kermit, WV, population 400, 4.8 million hydrocodone 

pills in 2006 and 2007. According to data cited by DEA, that was 

approximately 8 times the amount ofhydrocodone that an average rural 

pharmacy in West Virginia would have expected to receive. What failed in 

McKesson's suspicious order monitoring system to allow such large 

quantities of opioids to ship to this pharmacy? 

McKesson's current CSMP utilizes a threshold management system to monitor orders of 

controlled substances and block and report all orders exceeding that threshold. McKesson's 

customer thresholds are set using complex analytics that take into account, among other factors, 

pharmacy size and a comparison to pharmacies of similar size. Orders that exceed monthly 

thresholds are blocked and not shipped. Those blocked orders are reported to DEA as 

suspicious pursuant to 21 C.F.R. § 1301.74. 

3· Considering the opioid crisis in West Virginia, what more could McKesson 

have done to monitor the opioid shipments it was sending to these 

communities? 

As described above, McKesson is firmly committed to having in place effective policies 

and procedures to monitor its distribution of controlled substances across the country, including 

West Virginia, and has continued to enhance its program. Moving forward, McKesson hopes 

that there will be greater coordination, cooperation, data sharing, and knowledge sharing among 

the industry, DEA, and state boards of pharmacy. 

4· When McKesson acquires a smaller wholesale distribution company, what 

type of due diligence does McKesson perform on the pharmacy customers 

previously served by the acquired distribution company? Is it McKesson's 

practice to perform a new customer intake examination of each pharmacy 

that has elected to use McKesson as its new wholesaler? If so, for how long 

has this been McKesson's policy? Does McKesson inspect the due diligence 

files maintained by the acquired wholesaler for each transferred pharmacy 

customer? If so, for how long has this been McKesson's policy? 

While this type of acquisition is infrequent and atypical, when McKesson acquires 

customers through the acquisition of another distributor, it validates the registration and 

4 See https:/ fwww.deadiversion.usdoj.gov/arcos/index.html (last visited June 6, 2018). 
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The Honorable Diana DeGette 

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Page9 

licensure status of each of the target company's pharmacy customers that will be supplied 

controlled substances after the acquisition. To the extent the newly acquired pharmacy 

customers will be supplied controlled substances, such distribution will be subject to the 

applicable requirements of McKesson's Controlled Substance Monitoring Program, including its 

system of monthly thresholds limiting the amount of controlled substances the pharmacy 

customer can purchase. 

The Honorable Jan Schakowslcy 

1. How much does McKesson net annually for its distribution ofEvzio? 

McKesson does not generally track profits by molecule for products in its branded and 

generic pharmaceutical units. 

2, McKesson also distributes Narcan. What does McKesson earn net per unit 

forNarcan? 

McKesson does not generally track profits by molecule for products in its branded and 

generic pharmaceutical units. 

3· How much does McKesson net annually for its distribution of N arcan? 

McKesson does not generally track profits by molecule for products in its branded and 

generic pharmaceutical units. 

4· As early as 2007, a CDC memorandum showed that West Virginia drug 

overdose deaths increased by 550 percent between 1999 and 2004. Despite 

these reports, McKesson was providing millions of opioid pills to a single 

pharmacy in Kermit, West Virginia. Did McKesson understand there was a 

serious diversion problem facing the state, and how could McKesson have 

improved its handling of controlled substances? 

As described in McKesson's written response to the Committee, in 2007 McKesson 

implemented a new controlled substance monitoring program, and further enhanced that 

program in 2008 following its settlement with DEA. McKesson is firmly committed to having in 

place effective policies and procedures to monitor its distributions of controlled substances 

across the country, including West Virginia. Moving forward, McKesson hopes that there will be 

greater coordination, cooperation, data sharing, and knowledge sharing among the industry, 

DEA, and state Boards of Pharmacy. 

5· Does your company buy the drugs from the manufacturers, take title and 

move pallets to and from your warehouse? Or are you like brokers, working 

on consignment, arranging sales to pharmacies and then taking a percentage of the sale price? 
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The Honorable Diana DeGette 

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Page 10 

In most instances, McKesson buys drugs from manufactures, takes title upon delivery to 

McKesson facilities, and transfers title upon delivery to the customer. 

6. In setting prices to pharmacies, is your markup more like a flat rate (for 

example, selling $5 more than the price at which you bought), or is your 

markup more like a percentage (for example, selling for 5% higher than the 

price at which you bought)? 

McKesson determines pricing for all pharmaceutical products, including controlled 

substances, on an individual customer basis determined by factors specific to that customer, 

including the customer's overall product mix. The system is not as simple as buying a product 

from a manufacturer and selling it to customers at a markup. Although the specifics vary by 

product, McKesson's business model involves purchasing product from the manufacturer; 

charging the manufacturer a fee for service on the product; earning rebates and similar benefits 

from the manufacturer based on product ordering; and charging the customer a percent of the 

original acquisition costs. Depending on the product, McKesson may charge the customer more 

or less than McKesson paid to acquire the product from the manufacturer. 

7· Is it possible that even if your company pays a higher price to get those 

drugs in stock, you end up making more money on those sales where your 

acquisition prices are higher? And would the same be true for your 

consignment/broker sales? 

AB described above, McKesson's sales model is not as simple as reselling products at a 

markup. McKesson may make either more or less when the acquisition price of a product 

increases. Put another way, McKesson does not benefit from every price increase by a 

manufacturer, and often is required to return to the manufacturer the benefit ofthe 

manufacturer's price increase. 

* * * 

McKesson appreciates this opportunity to respond to the Committee's questions. Please 

Jet us know if you require additional information. 

Encl. 
142 


\Vhilt.~ Papc1• 

March 2017 

Public Affairs 

McKt•ssotl Corporation 

PnblicAf'fairs@McKcsson.com 

M<;KESSON 
143 


The Crisis Our countly is in the midst of a serious opioid abuse epidemic, which is affecting every community in America. It has 

claimed victims from all races, ages, and socio-economic groups. According to the Centers for Disease Control & 

Prevention (CDC), from 2000 to 2014, nearly half a million Americans died from drug overdoses. • In 2015, more than 

15,000 people died from overdoses involving prescription opioids.' Additionally, each day over 1,000 people are 

treated in emergency departments for not using prescription opioids as directed.3 The Natiomillnstitnte on Drug 

Abuse (NIDA) has cited the increased volume of opioid prescriptions as a driving factor for the sevetity of the current 

crisis.4 

The opioid epidemic is a multi-faceted problem that cannot be solved by focusing on individual parts of the 

healthcare system. It must be addressed through a comprehensive approach that includes the doctors who write the 

prescriptions, the pharmacists who fill them, the distributors who fill and deliver pharmacies' orders, the 

manufacturers who make and promote the products, and the regulators who license the above activities and 

determine supply. 

McKesson is fully committed to working with all stakeholders to protect the supply chain and help 

prevent diversion while ensuring appropriate treatments are available to patients. With a 360-

degree view ofhealthcare and customers across industry and government, McKesson is uniquely 

positioned to advocate for a comprehensive set of policy and business solutions that will harness 

the power of technology to promote improved prescribing and dispensing. The implementation of 

these policy and business solutions could significantly slow the abuse and diversion of opioids, to 

the benefit of patients and their families. 

Current Initiatives and Proposals 

Policymakers, manufacturers, insurers, and other stakeholders have launched numerous initiatives and proposed a 

wide range of policies aimed at curbing misuse of opioids, including pill disposal requirements, product 

stewardship, enhanced provider and pharmacist education, Medicare beneficiary "lock in," and various pill 

limitation measures. 

In January 2016, the Centers for Medicare & Medicaid Services (CMS) released its opioid management 

strategy, which outlines the agency's plan to address the national opioid epidemic. The strategy features four key 

policy areass: (1) implementing more effective person-centered and population-based strategies to reduce the risk of 

opioid use disorders, overdoses, inappropriate prescribing, and drug diversion; (2) expanding naloxone (an 

overdose reversal drug) use, distribution, and access, when clinically appropriate; (3) expanding screening, 

diagnosis, and treatment of opioid use disorders, with an emphasis on increasing access to medication~assisted 

treatment; and (4) increasing the use of evidence-based practices for acute and chronic pain management. 

The Department ofVeterans Affairs (VA) has engaged in a comprehensive approach aimed at reducing the 

use of opioids among veterans using VA healthcare.• The VA's Opioid Safety Initiative (OS!) is an effort to improve 

the quality oflife for veterans suffering from chronic pain. The program features patient management initiatives 

including Pain Coach, which is a pain management application available for download by patients receiving pain 

management treatments, a Veterans' Health Library, a Patient/Family Management Toolkit, and resources for Pain 

Management on My HealtheVet. All of these applications allowed veterans to better manage their pain without the 

use of opioids.7 The VA has also been on the leading edge of PDMP interoperability, naloxone distribution, drug 

take back and opioid management programs. 

In July 2016, Congress passed the Comprehensive Addiction and Recovery Act of 2016 (CARA) with 

overwhelming bipartisan support. CARA focuses primarily on treatment, recovery, Jaw enforcement, criminal 

justice reform, and access to overdose reversal drugs. 

Also in July 2016, the National Governors Association (NGA), released a resource for state governments to 

address the opioid epidemic, titled Finding Solutions to the Prescription Opioid and Heroin Crisis: A Road Mop 

for States.• A Road Map for States is a thoughtful and comprehensive set of evidence-based public policy 

recommendations and public health strategies focused on prevention and response to opioid misuse and overdose. 

These are all thoughtful steps in taking meaningful action to combat the scourge of opioid abuse and diversion; and 

yet, there is more work to be done. 
144 


McKesson's Public Policy Recommendations Patients taking prescription opioids interact with the healthcare system at least twice in order to access their 

medications. The first interaction takes place when the prescriber writes a prescription, and the second interaction 

takes place at the pharmacy when the prescription is dispensed to the patient. There are significant opportunities 

to engage at both encounter points to ensure that opioids are being prescribed and dispensed in an appropriate 

manner. 

The proposals outlined below are aimed at establishing mechanisms to improve clinical treatment decisions by 

providing better information at the point of prescribing. Also included are a complementary set of policies that 

would similarly deliver actionable information to dispensing pharmacists. 

Section 1: Improve Prescribing Practices for Opioids In some instances, patients can obtain inappropriate access to prescription opioid medication by manipulating the 

prescription process. For example, some patients are able to interact with multiple doctors or pharmacies to 

acquire opioids that may not be clinically necessary. Multiple strategies can be deployed to improve opioid 

prescribing practices. Implementing e-prescribing requirements can limit opportunities for individuals to forge 

paper prescriptions for opioids. Providing comprehensive, accurate, and up-to-date information about a patient's 

prescription utilization history would significantly improve a physician's ability to identify instances where 

prescribing an opioid may be inappropriate. Additionally, improving and enhancing provider education about 

when and how to prescribe opioids, as well as recognizing any potential abuse, and the ability to carefully review a 

patient's prescription history- all would enhance the safety of prescribing practices. 

Recommendation 1: Require all payers and p••oviders to use opioid management programs 

Many public and private health plans, pharmacy benefit managers (PBMs), and hospital and physician 

organizations have adopted opioid management programs to curb overprescribing, misuse, and abuse. These 

programs often combine multiple strategies to improve decision-making when prescribing opioids and incorporate 

evidence-based clinical guidelines. A number of payers have adopted the CDC clinical guidelines for prescribing 

opioids, released in March of 2016. By the end of 2017, 21 states will use these guidelines for Medicaid fee-forservice and 11 states will require that Medicaid managed care organizations adopt them.• McKesson supports 

broader awareness and adoption of the CDC and other evidence-based clinical practice guidelines. We believe 

embedding these guidelines at the point of care (e.g., integration into e-prescribing, electronic health records, or 

other care management processes) can improve prescribing practices both in workflow and at the right time along 

the care continuum. 

Several opioid management programs have had promising results. The emerging model implemented by Blue Cross 

Blue Shield of Massachusetts (BCBS-MA) is reporting successful outcomes and can serve as a model for other 

stakeholders to consider. Over a three-year period, the BCBS-MA program reduced the risk of substance use 

disorders and other health issues related to long-term use of opioids. The program eliminated an estimated 21.5 

million doses of opioid-based medications in the communities served by its plans and reduced claims for longacting opioids by approximately 50 percent by switching patients to short-acting pain treatments.•• 

Key elements of the program include, but are not limited to: (1) a comprehensive treatment plan between doctor 

and patient that outlines the expectations of both parties and considers non-narcotic treatment options; (2) a 

clinical risk evaluation for addiction that is signed by the patient; (3) choosing a single pharmacy or pharmacy chain 

to be used for all opioid prescriptions; (4) a prior authorization requirement for all new short-acting opioid 

prescriptions for more than 30 days and for all new long-acting opioid prescriptions; and (5) a three-day supply of 

short-acting opioids if prior authorization isn't immediately available, allowing time for authorization. 

The BCBS-MA program features effective patient safety measures while ensuring access to care for patients in need. 

Cancer patients and terminally-ill patients are exempt from many of the authorization requirements, which is 

important for every opioid management program to contemplate since it is estimated that pain occurs in up to 70 

percent of patients with advanced cancer." Requiring a broader adoption of the key elements of BCBS-MA's opioid 

management programs could have a significant impact on the national opioid epidemic. 

Recommendation 2: Require e-prescribingfo•· all conh•o/lcd substances 

Traditional handwritten prescriptions can be forged, altered, or diverted and can enable illegal access to 

prescription opioids." Electronic prescribing (c-prescribing) allows prescriptions to be transmitted to pharmacies 

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secure1y without risk of alteration or diversion, and prescribers can be authenticated before dispensing of controlled 

substances and prescriptions. The American Journal of Pharmacy Benefits (AJPB) has recommended e-prescribing 

to help address the misuse and diversion of opioid medications.'' E-preseribing of controlled substances (EPCS) is 

currently permitted in all so states, yet is only required in New York, Maine, and Minnesota. There is significant 

variability across the states in terms of e-prescribing capabilities and behaviors, and not all pharmacies or 

physicians' offices are capable of transmitting prescriptions electronically.« For example, in 2015,82% of 

pharmacies in Nebraska were EPCS-enabled, along with 15% of prescribers.<s By contrast, for the same year in 

Florida, 74% of pharmacies were EPCS enabled along with only 2% of prescribers.•• Nationally, just 8% of 

physicians serve in practices that allow for the use of this technology to prescribe controlled substances like 

opioids." Research on EPCS has been scarce, but surveys have shown that prescribers are generally optimistic 

about the benefits of EPCS. •• A nationwide e-prescribing requirement for opioids could be a promising solution for 

reducing forged prescriptions and strengthening the efficacy of state prescription drug monitoring programs 

(PDMPs) across the country. 

Recommendation 3: Hantess FDA's Risk Eualuation and Mitigation St,.ategies (REJVIS) P1•ogram 

The Food and Drug Administration (FDA) recognizes that there are riska associated with the use of certain drugs or 

classes of drugs. In order to manage these riska, the FDA requires drug manufacturers to create risk evaluation and 

mitigation strategy programs, or REMS, which include activities such as creating a medication guide and 

communication plan for healthcare professionals and distributors. These initiatives can help identify potential riska, 

harmful drug interactions, and other guidelines for safe use and proper disposal of opioids. Given the potential 

safety riska associated with opioids, the FDA has a class-wide REMS policy for all extended release and long acting 

(ER/LA) opioids. However, not all long-acting opioids have been subject to REMS requirements. The FDA recently 

announced that it intends to require a REMS for all forms of opioids to "ensure the benefits of these drugs continue 

to outweigh the risks of misuse, abuse, addiction, overdose and death ... 19 McKesson supports the FDA's initiative. 

The impact of opioid REMS has been hindered by low awareness of, and limited participation in, the physician 

education programs offered by drug manufacturers. For example, the voluntary REMS for ER/LA opioids fell short 

of its targeted prescriber goal. In the first two years, 37,512 prescribers completed the training, accounting for just 

under half (47 percent) of the targeted So,ooo prescribers.•• A recent PriMed study involving 441 healthcare 

providers that received REMS training and 4,669 providers that were not trained, found that those who had REMS 

training had a 10% drop in ER/LA prescribing compared with a 4% increase in the untrained popu1ation.21 

To improve effectiveness of the opioid REMS program, McKesson recommends: (1) implementing REMS 

requirements for all long-acting opioids as soon as possible; (2) increasing provider participation in REMS 

educational activities; and (3) improving the educational programs associated with REMS requirements and 

beyond. An exemption should be granted for cases in which a physician cares for a patient with a terminal 

condition, since certain REMS requirements (e.g., requiring physicians to document that terminally-ill patients 

understand the risk of addiction and abuse) could contribute to the patient avoiding the medication due to fear of 

addiction. 

Section 2: Improve Dispensing Practices for Opioids 

Dispensing pharmacists are a strong second line of defense to detect potential opioid abuse or misuse. Unlike 

prescribers who often do not engage with patients during refills, pharmacists handle refill prescriptions and the 

interaction with patients. Therefore, they must be a part of the solution. To maximize a dispenser's ability to 

identify potential instances of fraud or opioid misuse, it is vital that pharmacists and their staff have easy access to 

reliable, up-to-date information about a patient's prescription history. Further, to minimize the risk of opioid 

misuse, patients must not be prescribed more medication than they will need to manage their medical conditions. 

Recommendation 4: Integ>•ate a National Patient Safety Network into the p/tannacy dispensing process Under the current system, which the National Council for Prescription Drug Programs (NCPDP) describes as 

"systematicaUy burdensome," pharmacists must leave their workstations to check a PDMP.22 Unsurprisingly, research 

indicates that pharmacists do not always consult PDMPs. For example, a survey of pharmacists in Maine found that, in 

2014, only 56 percent were using the state's PDMP." Delivering alerts through the very same system that pharmacists 

use as part of their dispensing process would save significant time and, most importantly, would increase the likelihood 

that pharmacists consult their PDMPs. 

To make the most informed dispensing decisions. pharmacists need access to robust, real~time information that can 

access and analyze data across all so states. One tool that can be used to increase patient safety is an automated, 

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clinically-based system that notifies dispensers in real-time and in workflow when a drug may present a safety issue 

to a patient (e.g., non-medical use, miscalculated dosage, or drug interactions). 

This tool, a National Patient Safety Network ("Network"), as envisioned by NCPDP would identify "red flags" and 

alert dispensers whenever patient safety issues are identified. For example, in instances where there may be nonmedical use of opioids, the Network would notify the pharmacist who could voluntarily check the PDMP before 

dispensing. The Network would corn:plement PDMPs in two significant ways by: (1) providing alerts to dispensing 

pharmacists that are based on real-time, comprehensive prescription history data for patients, regardless of setting 

of care, and (2) promoting more effective use of PDMP information since pharmacists would know when to consult 

the PDMP rather than having to check it for all patients. 

The Network could also benefit physicians, who according to a 2014 survey cited the time-consuming nature of 

retrieving data from PDMPs as a barrier to their use." The same survey found that while doctors prescribed opioids 

for an average of 35 patients a month, they retrieved data from a PDMP for an average of only eight patients a 

month.•• The NCPDP solution proposes that all electronic prescriptions, as well as all pharmacy dispensing activity, 

are evaluated against the Network. 

Reco'lnmendulions: ImpJ•ove iriforntation sharing among PDMJ's 

PDMPs are an important tool for pharmacists who serve as a crucial line of defense in identifying and avoiding 

potential opioid misuse and abuse. However, the data in PDMPs are typically limited to the prescription data from 

within the state the pharmacist is operating in. This means that a pharmacist searching a PDMP in one state may not 

have access to data from another state's PDMP. The data collected by PDMPs vary by state'' and, according to a 

December 2016 report by Pew Charitable Trusts, data sharing between PDMPs is often slow.'' Establishing a 

mechanism to exchange opioid prescription data across all state PDMPs would enable standardized data to be shared 

on a real-time basis. For example, a system like the one envisioned by Common Well® Health Alliance, a vendorneutral platform that breaks down barriers that currently inhibit effective, interoperable exchange of health data, 

would enable prescribers and dispensers to access comprehensive data from PDMPs from across the country that 

captures all opioid prescription activity, regardless of setting of care. The Network described above can provide 

PDMPs more robust real-time data, if states elect for that data to be incorporated into their PDMPs. 

Recommendation 6: PermilJ>arlial refills lo reduce risks a.•sociated willt an excess ofunu..•ed pills 

Prior to 2016, as Schedule II products, opioid prescriptions were not permitted to be refilled. This may have led 

some prescribers who anticipate an increased need for pain management in patients with acute pain to prescribe a 

greater supply of medication than necessaty. This practice has resulted in an excess of unused pills. According to a 

study by the Johns Hopkins Bloomberg School of Public Health, six out of 10 adults prescribed opioid painkillers 

have leftover pills.'" Allowing patients to partially refill their prescriptions increases the chances that a patient will 

be prescribed the exact number of pills that he or she needs, thereby reducing the risk of these "extra" pills being 

improperly disposed, lost, stolen, sold or given to others. 

States and federal lawmakers have begun to take action aimed at limiting the risks associated with excess pills. For 

example, New Jersey recently enacted a law that imposed a five-day limit on a patient's first opioid prescription." 

At the federal level, CARA permits a prescription for a Schedule II controlled substance to be partially filled if: (1) it 

is not prohibited by state law; (2) the partial fill is requested by the patient or the practitioner who wrote the 

prescription; and (3) the total quantity dispensed in all partial fillings does not exceed the total quantity 

prescribed.3• Providing flexibility to allow patients and prescribers to reduce the number of unused opioid pills 

limits opportunities for diversion or misuse of these medications. A swift and comprehensive implementation of 

this policy, along with proper coordination with the states, can reduce the volume of unused pills and the risk of 

diversion and misuse. 

Section 3: Our Efforts McKesson understands that thoughtful and innovative public policy solutions alone are not enough. We are 

committed to working closely with our partners and customers to fight the opioid abuse epidemic. 

Promoting a Seeul'c SuJ>ply Cltain 

McKesson plays an important role in the proper disposal of medication. We are committed to ensuring unused 

medications are properly collected from our customers and our distribution centers and safely processed out of the 

supply chain. Over the last three years, we have worked with reverse distributors to appropriately dispose of, and in 

many instances, recycle, an average of7.2 million products a year. In addition, we leverage our unique relationship 

with our customers to educate pharmacists about medication disposal so they in turn can educate their patients. 

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McKesson provides its Health Mart® pharmacists with "Drug Take Back Solutions" information, which demonstrate 

how they can partner with local law enforcement in getting unwanted or expired medications off the street. 

McKesson operates a robust Controlled Substances Monitoring Program (CSMP) to help us identify and report 

suspicious orders. We also are utilizing advanced analytical tools to closely monitor our customers' purchases. We 

are committed to continuing to make enhancements as needed to ensure our CSMP remains an effective 

contribution in our country's battle with opioid diversion and abuse. 

Educating Our Customer'S 

An FDA advisory panel has endorsed mandatory training for doctors who prescribe opioids as part of the efforts to 

stem the national epidemic of deaths and addiction related to these drugs. McKesson supports improvements in 

both formal medical education and continuing medical education to better inform clinical practice in pain 

management. MedTrainer, a compliance and regulatory training tool offered to McKesson's provider customers, 

provides training opportunities focused on responsible opioid prescribing and on recognition of drug seeking 

behavior and substance abuse disorders.» 

Similarly, McKesson provides its nearly 5,000 HealthMart® independent community pharmacies with relevant 

information, tools, and resources about prevention of opioid abuse. As independent business owners, Health Mart® 

members are empowered to become advocates for drug abuse prevention in their communities, starting with their 

own pharmacies. All HealthMart® pharmacies are equipped with the Health Mart Operations Toolkit, an online 

portal where pharmacists can access resources created specifically to help prevent drug abuse in their communities, 

including: (1) education and training courses available for the entire pharmacy's staff; (2) drug abuse prevention 

solutions, which contains news, drug take back solutions, education, and outreach ideas; (3) best practices and 

practical advice for pharmacists and technicians to prevent drug abuse when filling prescriptions; and (4) 

community outreach resources with strategies to promote drug abuse prevention at the local level. 

Conclusion 

Absent thoughtful and innovative solutions, the disturbing impact of opioid abuse and misuse will continue 

unabated. Meaningful solutions require the partnership of a variety of stakeholders, including doctors, 

pharmacists, distributors, manufacturers, payers, policymakers, and regulators. We believe the innovative 

solutions presented above offer a practical and unique approach to both the improvement of prescribing and 

dispensing practices and processes. 

As a company, we are committed to advancing impactful solutions and continuing to innovate in our own processes. 

We stand ready to collaborate with lawmakers and all stakeholders and partners in the pharmaceutical supply chain 

to address our nation's devastating opioid abuse epidemic. For more information or to partner with McKesson 

Public Affairs on these policy solutions, contact PublicAffairs@McKesson.com. 

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References 

'Rudd, Rose A., Noah Aleshire, Jon E. Zibbell, and Mathew R. Gladden. "Increases in Drug and Opioid Overdose Deaths- United States, 2ooo2014." Morbidity and Mortality Weekly Report, January 1, 2016, 1378~82. 

:t Centers for Disease Control and Prevention, National Center for Health Statistics. Prescription Opioid Overdose Data 1999·2015 on CDC Injury 

Prevention & Control: Opioid o,·erdose Online Database, released 2016. https:jjv.·ww.cdc.gov/drugoverdose/datajovenlose.btml 

llbid. 

4 Senate caucus on International Narcotics Control. "America's Addiction to Opioids: Heroin and Prescription Dmg Abuse". Washington, DC: 

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congress/2016/amcricas.-nddiction-to-opioids-hcroin-prescription-drug-nhuse 

.s "Centers for Medicare& Medicaid Services (CMS) Opioid Misuse and Strategy". Washington. DC: Centers for Medicare & Medicaid Services; 

2017. Available at https:/ /mvw.cms.gov/Outreach·and-EducationjOutreach/Partnerships/Downloods/CMS-Opioid~Misuse-Strategy-2ol6.pdf 

6 U.S. Department of Veterans Affairs. Office of Public and Intergovernmental Affairs. "VA Initiative Shows Early Promise in Reducing Use of Opioids for Chronic Pain" Press Release, Febntary, 25 2014. https:/ /www.vn.govjopa/prcssre!fpressrclease.cfm?id=2529 

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8 K.Murpby, M.Beckcr,J.Locke, C. Kelleher, J.Mcl..cod, and F.Isasi, Finding Solutions to the Prescription Opioid and Heroin Crisis: A Road Map 

for States (Washington, D.C.: National Governors Association Center for Best Practices, July 2016) 

<~Implementing Coverage and Payment Initiatives: Results from a so-State Medicaid Budget Survey for State Fiscal Years 2016 and 2017. Report. 

The Henry J. Kaiser Family Foundation. October 13, 20t6httt>:/ /kff.org/report-section/implementing-covernge-and·payment-initiatives~ 

bcncfits-nnd-phnrmacy/ 

10 Blue Cross Blue Shield of Massachusetts. Stopping the National Epidemic of Prescription Opioid and Heroin Usc released 2017. 

https:/ fwww.bluecrossma.com/opioid-crisis/ 11 Colvin L, Forbes K, Fallon M; Difficult pain. BMJ. 2006 May 6;332(7549}:1081-3 

~~Gabriel MH, Swain M. E-Prescribing Trends in the United States. ONC Data Brief, no.J8. Washington, DC: Office of the National Coordinatot· for Health Information Technology, July 2014. https:/ jwww.henlthit.gov/opioidsjepcs 

13 Hufstnder, Meghnn, Jamie Y. Smith, Max Sow, Seth Joseph, and Tricia 1..., Wilkins. "Electronic Prescribing of Controlled Substances: A Tool to 

Help Promote Better Patient Care." Am J Pharm Benefits, 2016, (8/s): 185-189 14 Herrick, Devon M. "Prescribing: A Commonsense Solution". Report July 16, 2016. http:/ /mvw.ncpa.org/pdfs/st38s.pdf. 15 Surescripts. 2015 National Progress Report. released 2016. http:/ jsurescripts.com/news-center/national-progress-report-2015/ 16 lbid 

17 Surcscripts Press Release. Doctors rapidly adopting electronic prescribing technology to combat prescription fraud and abuse. March 251 

2016. Available at: http:jfsurescripts.com/news~center/press·releases/!contcntfdoctors·rnpidly-adopting-electronic-prescribing·lechnology-to· 

combat-prescription-fraud-and-abuse. 

•e Hufstader, Meghan, Yi. Yang, Max Sow, Varun Vaidya, and Tricia L., Wilkins. "Adoption of Electronic Prescribing for Controlled Substances 

among Providers and Pha~macics." Am J Managed Care, 2014, 20(11 Spec No 17): SP541~SP546 

~~Cipriano, Michael. "Opioids May All Require Mandatory Education As US FDA Expands REMS To Immediate-Release Fonnuladons." Pink 

Sheet, December 20, 2016. https:/ /pink.phnrmamedtechbi.com/PSu9715/0pioids-Mny-All-Requirc-Mnndntory-Education~As-US-FDAExpands-REMS-To-ImmediateRelcase-Fonnulations. 

~Fiore, Kristina. "Opioid REMS Falls Sbort on Reaching Docs." MedPage Today, April28, 2016. 

http:/ /www.medpugetoday.com/ncurology/painmanagcment/57575 ~~Fiore, Kristina. "Opioid REMS Impact Unclear'" McdPage Today, May 3, 2016. 

http:/ /lvww.medpagetoday.comjwnshington-watch/fdagencralfs768s 

:n "NCPDP's Recommendations for an Integrated, Interoperable Solution to Etl.'mre Patient Safe Usc of Controlled Substances." Paper. National Council for Prescription Drug Programs. November, 2016. 

http:fjwww.ncpdp.org/NCPDP/mcdia/pdf/wp/NCPDP _POMP _WhitePnper_2ot6II-(2).pdf 

:t:J Piper, Brian J., Clare E. Desrosiers, John W. Lipovsky, Matthew A. Rodney, Robert P. Baker, Kenneth L. Mccnl1, Stephanie D. Nichols, and 

Sarah L. Martin. "Use and Misuse of Opioids in Maine: Results From Phatmacists, the Prescription Monitoring, and the Diversion Alert Programs." Journal of Studies on Alcohol and Drugs 77, no. 4 (2016): 556-65 

:14 La.inie Rutkow, Lydia Turner, Eleanor Lucas, Catherine Hwang and G. Caleb Alexander. Most Primal)' Care Physicians Are Aware Of 

Prescription Drug Monitoring Programs, But Many Find The Data Difficult To Access. Health Affairs 34, no.3 (2015):484-492. 

2Slbid. 

26 National Alliance for Model State Drug L.nws. Compilation of Prescription Monitoring Program Maps, released May 2016. 

http:/ fwww.namsdl.org/librn•y/CAE6s4BF-BBEA-2nE-694C7ssEt6C2DD2t/ 

'¥!The Pew Charitable Trusts. "Prescription Drug Monitoring Programs", released December 2016. http:/ fwww.pe"1rusts.org/-/media/assets/2016/12/prescrlption_drug_monitoring_progrnms.pdf 

~~~John Hopkins Bloomberg School of Public Health. ""Six in Ten Adults Prescribed Opioid Painkillers Have Leftover Pills", released June 13, 

2016. http:/ jwww.jhsph.edu/ncwsfne-.\'s-releases/2016/six-in-ten-adults-prescribed-opioid-paiokillers~have-lef'tover-pills.html 

29 Caffrey, Mary. "Christie Signs Nation's Strictest Opioid Treatment Mandate, Prescription Limit." The American Journal of Manngcd Care, 

Februnry 15, 2017. 

http://www.ajmc.com/newsroom/NJ-Opioid-Treatment~M::mdate·Prcscription-Limit-Heads-to-Governor-Christie#sthash.bsqHV3L7.dpuf 

:10 S.524, 114 Cong., Coogress.gov (2016) (enacted). 

Jt Williams, Brian S., and Patrick Williams. "Opioid Prescribing: Chronic Pain & the Identification of Abuse and Addiction ... Lecture1 

McdTrainer. Dccembcr7, 2016. https://mms.mckesson.com/documents/2ot82/1412tS/Dccemher 2016 Opioid Prescribingj69d9528b-ee63~ 

45b6-bf64-o62fot68o8sn 

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McKesson's Recommendations 

to Combat the OtJioid Crisis 

The opioid epidemic continues to affect communities across America. Our 

prioritized set of recommendations focus on enhancing clinical knowledge 

and leveraging data and technology solutions across the care continuum to 

address overprescribing and dispensing and enable real* time solutions to 

identify at-risk patients. 

Key recommendations include: 

Implement a prescription safety-alert system to provide pharmacists and 

ultimately doctors with reaHime alerts to identify at-risk patients 

Incentivize implementation of opioid stewardship or similar clinical 

excellence programs 

Ensure patients receive education on risl<s and benefits of opioids, and 

clinically appmpriate treatment alternatives 

Require electronic prescribing (eRx) of all controlled substances 

Require use of electronic prior authorization (ePA) to better align prescribing 

with best clinical practices, prevent misuse, and ensure access for patients 

with legitimate need 

Pilot pharmacist-led opioid care management programs 

Public Affairs 

McKesson Corporation 
150 


Our country's opioid epidemic has continued to affect 

communities throughout the country. It has clalmed 

victims from all races, ages, and soclo~economlc 

groups. 

The oploldepldemlc is a complex, multi-faceted 

problem that cannot be solved by focusing on one part 

of the system or stakeholder. Rather, solutions must be 

comprehensive and should include, among others: 

the doctors who write the prescriptions, 

the pharmacists who fill them, 

the distributors who deliver the pharmacists' orders. 

the manufacturers who make and promote the 

products, 

the payers who make reimbursement decisions. 

and the regulators who license the above activities 

and determine supply. 

More must be done, starting with acting on the 

recommendations we've proposed in this paper. 

Every day, our company and our people work hard 

to ensure that appropriate treatments are available 

to patients in need. We remain steadfast in our 

commitment to work with aU stakeholders to protect 

the supply chain and prevent diversion while ensuring 

that patients who need their medicines get them in a 

timely manner. With customers across the healthcare 

industry and government, we have a unique view of 

the healthcare ecosystem. That's why we'H continue to 

advocate for policy recommendations and technology~ 

driven ideas that we strongly believe can slow the 

abuse and diversion of opioids, and most important, 

help to end this national crisis. 

As the opioid epidemic persisted, we wanted to 

help the healthcare system look at holistic ways to 

combat the problem. That's why in 2015, we created 

an internal task force of experts, including clinicians, 

technologists, and public policy experts. In March 

2017, McKesson released our policy paper,1&mlli!J,i!Jg_ 

!1J.g_Q!_1ioid Abu~e Epidemic· A Shared Respon-.!b!li!y_ 

!]:gLRg_gu I res lllllilY~'i.<l!uiivm. It Included policy 

recommendations ln six major areas that we believe 

will help curb the oplold epidemic. 

In this paper. we expand upon our 2017 policy 

recommendations. identify additional opportunities 

for appropriate intervention and describe approaches 

for comprehensive, integrated solutions to address the 

opioid epidemic across the healthcare ecosystem. Our 

new set of policy recommendations included in this 

paper continues to reinforce the need for public and 

private partnerships that: 

Promote patient~centered solutions, 

Foster clinical collaboration across the care 

continuum, and 

Bolster leadership and accountabUity. 

For a fulllistlng ofMcKJ>sson's efforts to combat 

the oploid crisis, please visit: ~1~~S.Qil~con\L 

rtbout-mckt•sson/1\ghting-QpJnid-abuse/ 
151 


It is critical that we drive a culture of change that embraces a team·based 

approach to comprehensive pain management. This requires coordination 

across all stakeholders that impact the supply chain and those on the front 

lines of care delivery. Data and technology solutions must be thoughtfully 

deployed to ensure that necessary data flows through the healthcare system, 

enabllng clinicians to meet the diverse needs of patients. However, this 

cannot be done until stakeholders collectively agree to utilize the tools 

at our fingertips to modernize the way opioids are prescribed and patients 

are managed across the care continuum. 

The recommendations laid out in the next section, "McKesson's Prioritized 

Public Policy Recommendations," focus on enhancing clinical knowledge 

and leveraging data and technology solutions across the care continuum to 

address overprescribing and dispensing, while enabling real-time technology 

solutions to reduce supply and identify at-risk patients. We also advocate for 

additional policy changes that we believe can play a significant role in ending 

the opioid epidemic. 

Details of our full set of2018 recommendations can be found in Appendix A. 

A comprehensive list of our 2017 and 2018 recommendations can be found 

in Appendix B. 

EnaiJfe Real-Time Solutions t.o Reclw:e Sttpply amlltkut(fy l'atiems. at Risk 
152 


McKesson's l?rioriitiizeldll?ublliic 

l?ollicy Recommenldlatnous 

We recognize that modernizing the approach to pain 

management and opioid prescribing shouJd be driven 

by enhancing clinical knowledge, understanding 

prescribing best practices, and using tools and 

technological solutions to assist in clinical decision 

making and patient engagement. We believe our policy 

recommendations can be implemented today and can 

have an immediate impact in curbing the opioid crisis. 

Clinical De<.·lsiou Support 

Independent medical experts have advised that 

appropriate opioid prescribing is built upon 

comprehensive pain management knowledge, 

understanding of opioid prescribing guidelines, and 

effective patient engagement. However, most opioids 

are not prescribed by pain specialists. Rather they 

are prescribed by primary care physicians, internists. 

dentists, and orthopedic surgeons.! While technology 

embedded within the electronic health record may 

prompt the clinician with relevant information, we 

think it is important to ensure clinical behaviors are 

driven by an expanded knowledge of comprehensive 

pain management, rather than simply reducing opioid 

prescriptions. In addition to constraining supply 

through initiatives such as limiting initial fills, our 

recommendations seek to increase clinical knowledge 

and improve patient engagement. 

Recommendations: 

Implement nationwide prescription safety-alert 

system that may be used by pharmacists, and 

ultimately by prescribers, to inform clinical decision 

making (details on pageS) 

Incentivize implementation of opioid stewardship or 

similar clinical excellence programs 

Require all prescribers to participate in approved 

clinical training and continuing medical education 

as condition of licensure 

Deploy in~ person prescriber training programs 

to reduce overprescribing 

Electronic {e)-Benefit Veriflcations 

Use of pharmacy benefit verification tools allows 

providers to have a more complete picture of a patient's 

insurance coverage and any limits the payer may have 

on op!oids and alternative treatments, including supply 

limits and mandatory prior authorizations. These too1s 

also increase cost transparency. They can enable an 

open discussion between providers and patients on 

the impact cost may have on treatment selection. Use 

of e-benefit verification tools provide prescribers a 

unique opportunity to discuss the risks and benellts of 

opioid use, as well as clinically appropriate treatment 

alternatives. We strongly believe in the value of these 

solutions. We encourage an prescrlbers to utilize such 

tools to increase shared·decision making, and improve 

adherence and patient knowledge on the risks of oplold 

addiction. 

Recommendations: 

Ensure patients receive education on risks and 

benefits of opioids, and clinically appropriate 

treatment alternatives, at the time of prescribing 

and on a consistent basis 

Electronic Prescriblng(eRx) 

Handwritten prescriptions can be forged, altered, or 

diverted and can enable illegal access to prescription 

opioids. Moreover. paper prescriptions make it difficult 

to identify prescribing trends. eRx allows prescriptions 

to be transmitted to pharmacies securely while 

minimizing the risk of alteration or diversion. eRx also 

allows for data analytics and trendspotting regarding 

opioid prescribing. eRx of controlled substances 

(EPCS} is currently permitted in aliSO states. yet is only 

required in a few. Research on EPCS has been scarce. 

but surveys have shown that prescribers are generaUy 

optimistic about its benefits.2 Because utUization of 

eRx is still modest despite it being allowed in aU states, 

the use of mandates has become necessary to curb the 

epidemic. 

Recommendations: 

Implement mandatory eRx of opioids under 

Medicare Part D as proposed in pending federal 

legislation and in some states 

Strongly encourage private payers to adopt similar 

policies 

Electronic Priol" Anllrorlzation (ePA) 

Employers and payers have implemented programs 

to detect and intervene in inappropriate prescribing 

of opioids. Prior authorization (PA), a process to 

verify that medications or procedures are medically 

necessary, is used by payers before they grant 

coverage approvals} A study of Medicaid patients 
153 


in Pennsylvania found that enrollees within plans 

that subject opioids to PA policies had lower rates of 

abuse and overdose after initiating opiold medication 

treatment.4 While the use ofPA is frequently 

associated with reductions in use of opioids, traditional 

PA- most often completed via handwritten faxed 

forms or phone calls- can frequently place significant 

burdens on physicians, pharmacists, and patients who 

legitimately need prescription painkillers to manage 

their conditions. 

Recommendations: 

Require use ePA of opioids under Medicare Part D 

as proposed in pending federal legislation 

Require use of ePA for opioids and other drugs 

as proposed in several state proposals 

• Strongly encourage private payers to adopt similar 

policies 

Natiouwicle PrescriJJtion Safety-Alert System 

We strongly support the implementation of a 

nationwide prescription safety*alert system, a model 

conceived by the National Council for Prescription 

Drug Programs (NCPDP} and recently cited by the Duke 

Margolis Center for Health Pollcy.s The prescription 

safety*alert system would use patient prescription 

history data and clinical rules to identify patients and 

prescription patterns that may indicate risks of oploid 

overuse, abuse, addiction or misuse. Pharmacies 

would receive real~time alerts in workflow indicating 

that the pharmacist should gather additional patient 

information before dispensing. This might include 

a more in-depth conversation with the patient, a 

consultation with the prescribing physlclan(s), and 

review of the relevant state PDMP data. To maximize 

success, the prescription safety-alert system must have 

access tO data from aU entities dispensing covered 

controlled substances. e-prescribing would facilitate 

prescriber access to the prescription safety-alert system. 

Recommendation: 

Health and Human Services/Food and Drug 

Administration, through its existing Risk Evaluation 

and Mitigation Strategy authority, should require 

that manufacturers only provide covered controlled 

substances to pharmacies and healthcare providers 

that participate In a prescription safety*alert system 

Enhanced Phannacist Engagement 

According to the Johns Hopkins Bloomberg School 

of Public Health, "community pharmacy remains the 

'untapped resource' for the national opioid epldemlc." 

Furthermore. the U.S. is also in the early stages of 

another looming public health crisis- a projected 

physician shortage of over 100,000 physicians by 2030, 

due to a growing and aging populatlon.6 In addition, 

every year, roughly one out of every four substanceabuse clinicians nationally leaves the profession.7 

Total pharmacist employment. on the other hand, is 

projected to grow by almost 18,000 jobs by 2026,8 

Given our country's current opioid crisis, impending 

physician shortage crisis, and the availability of highly 

skilled, medically-trained pharmacists that can help 

now, pharmacists must be better equipped to fight 

against the epidemic. 

Recommendations: 

• Pilot pharmacisHed opioid care management models 

• Allow pharmacists to participate in and be 

reimbursed for Screening, Brief, Intervention and 

Referral to Treatment (SBIRT) activities 

• Expand ac<:ess to Medication-Assisted Treatment 

(MAT) by allowing pharmacists to provide and 

be reimbursed for MAT 

Increase access to opioid overdose antidotes, such 

as naloxone, by alJowing pharmacists to dispense 

and be reimbursed for such treatments without 

a prescription 

Permit pharmacists to use greater discretion 

in partial fills 

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154 


Appendix A Ovenrnew olf McKesson's lFudn Set olf20l!SlP'u.nbaic 

JP>ollicy JRecommemllations 

We reeognize some recommendations may require federal or state legislation or regulatory action, and believe such 

action is warranted. The persistence of this public health crisiscalts for more assertive policy interventions. Other 

recommendations rely on private sector leaders to willingly adopt changes to ensure effective coordination across 

public and private payers. It is critical we implement solutions that positively affect all patients, regardless 

of geography or payer coverage, consistently. 

Our positions arc organized across key stakeholders with the following goals: 

/in!l1ii'i,\ 

DntgSupply 

~ 

Reduce Supply srtd 

OvefPrescriptkln 

Prescribers Dispensers Patients Data & Teclmo!ogy lncrease CUnical Knowledge Expand Role ol Pharmacists Improve Patient Access Deploy Solullons to ldentily 

and Pallent Engagement in Care Teams AI-R!skPallents 

Reduce Supply and Over Prescription 

Encourage FDA to require ~ 

that manufacturers package 

oplolds In limited dose blister 

packs to reduce potential for 

unused product Drug supply 

Establish programs for 

the return or destruction 

of unused opioids to ensure that each patient 

prescribed an opioid can access drug disposal 

mechanisms 

We must implement effective strategies to curb 

overprescribing across the entire healthcare spectrum 

now, while protecting access for patients with 

legitimate medical needs for opiold medications. 

Recommendation: Encourage FDA to require 

that manufacturers package oploids in limited 

dose blister packs to reduce potential for unused 

product. FDA Commissioner Dr. Scott Gottlieb has 

effectively convened stakeholders and presented 

thoughtful ways for the Agency to combat opioid 

abuse. FDA is contemplating a novel idea to leverage 

blister packs as a way to give providers better options 

for tailoring how much should be prescribed, relative 

to the clinical need,9 For example, according to Dr. 

Gottlieb: "Suppose the dental community developed 

an expert guideline that said that no routine dental 

procedure should require more than a three or five~day 

initial fill of an immediate-release opioid, and the FDA 

reviewed and determined that blister packs in 

these quantities were necessary to ensure safe use. 

If the drugs were then packaged in blister packs that 

comported with these durations of use. it could help 

reduce overall dispensing. More doctors might more 

readily opt to prescribe these bUster packs instead 

of other treatment options."lO Dr. Gottlieb states 

FDA could use any conclusive, significant scientific 

support for these shorter durations of use as the basis 

for further regulatory action to drive more appropriate 

prescribing. 

McKesson supports this innovative concept, and 

recommends that the FDA leverage its current authority 

to explore optimal packaging approaches. HoweveJ~ we 

strongly encourage the FDA to work closely wit11 provider 

specialty societies and guideline developers to ensure 

that blister packs meet evldence~based guidelines and 

do not inadvertently encourage overprescribing by 

limiting prescribers lO specific dose ranges. 

Recommendation: Establish programs for the 

return and destntction of unused opioids to ensure 

that each patient prescribed an opioid can access 

dispensing drug technology, The Substance Abuse 

and Mental Health Services Administration (SAMHSA). 

reports that 50 percent of individuals who misused 

prescription pain medicines said they obtained them 

from a friend or relative for free.lt Patients should 

not be prescribed excessive amounts of opioids and 

unused pills should be disposed of promptly and 

properly. Prescribers must ensure patients understand 

best practices for storage and disposal to minimize 

diversion. 
155 


t\1cKcsson supports pu!Jiic·private partllersillpsfocused 

on s11pplying retail pharmacies with drug deactivation 

bags to be dispensed witlt all opioid prescription. This 

rccD/HIIWJ!dat.ion is supported by tltePresidenc's 

Commissioll on Combating Drug Addiction and Lf1e 

Opioid Crisis.f2 

Incentlvize implementation 

of opioid stewardship or 

similar clinical excellence 

programs 

Require all prescribers to 

participate in approved 

Prescribers 

clinical training and CME as a condition of 

licensure 

Deploy in-person prescriber training programs to 

inform better prescribing practices 

Ensure patients receive education on risks and 

benefits of opioids, and clinically appropriate 

treatment alternatives, m the time of prescribing 

and on a consistent basis with clinically~ 

appropriate exceptions 

Poiicymakers should ensure that prescribing clinicians 

have all information necessary to make fully informed 

decisions about whether to prescribe an opiold drug. 

The same is true for patients, wbo should be advised of 

risks and bcnel'J.ts by fully trained physicians and oLhcr 

qualified healthcarc providers- both consistently 

and across the care spectrum. Supporting team~based 

approaches to care delivery will enhance opportunities 

for collaboration and coordination. 

Rccommcntlation: Iuccntivizc implementation of 

opioid stewardship or similar clinical excellence 

prognuus. Stewardship and clinical excellence 

programs such as the Center for Disease Control 

and Prevention's {CDC's) Antibiotic Resistance 

Solutions Initiative have demonstrated success in 

driving changes to clinical behaviors, enhanced 

coordination, and improvement in patient outcomes. 

While components of these programs wiH vary, they 

arc likely to include enhancing clinical knowledge of 

comprehensive pain management, multirnodal pain 

management techniques, opioid prescription best 

practices, consistent communication with patients 

regarding the risks and benefits of opioid treatment, 

Importance of appropriate disposal of unused drugs, 

and usc of team~bascd models to support engagement 

across providers and settings of care. The National 

Quality Forum's (NQF's) National Quality Partners 

(NQP} Opioid Stewardship Playbook developed 

in partnership with CDC and other healthcare 

stakeholders is an example of how these types of 

programs may be implemented. 

McKesson supports public~privace parmerships 

t.o incentivizc adoption of opioid stewardship and 

clinical excellence programs. As with any quality 

improvement ej)Ort that seeks to change lfle way care 

is delivered, 01:ganizationalleadership, commitment, 

aud accounta/Ji!ityare critical to success. lncemives to 

implement tllese programs are critfcal to drive change 

across stakeholclers- and we spec{{ically encota·age 

commw1ities to reward cccwt·based approaches 

awe bridge tile gap between pllysicians, lrospitals, 

pharmacies and other critical care providers. 

Recommcndnlion: Require all prescribers to 

participate in approved clinical training and CME 

;.ts condition of licensure. Formal medical education 

and CME must be improved to better inform clinical 

practice in pain management. While medical, nursing 

and pharmacy schools continue to explore avenues 

to bolster clinical training on comprehensive pain 

management and opioid use, we recommend that 

all prescribers participate in approved CME as part 

of their licensure. It is critical that prescribers have 

the appropriate clinical knowledge to adhere to best 

practices in pain management and patient engagement, 

and not simply focus on reducing opioid use alone. 

Additionally, a FDA advisory panel has endorsed 

mandatory training for doctors who prescribe op!oids. 

McKesson supports policy initiatives that would require 

all prescribers of opioicls !0 undergo approved clinical 

trai11ing and CME as a COilt!ition of licensure. We also 

continue to support the use ofFDAS REMS Cluthority 

to require ma11datory education for lwallhcare 

projessio1wls.JJ 

Recommendation: DCflloy in~pcrson prescriber 

traiuinA programs to reduce ovct-rn·cscdbiug. 

In·person provider training is a promising strategy 

to help ensure that physicians' medical decisions are 

based on evidence~based information. This approach, 

which involves one~on*one educational outreach 

between a specially trained clinician and a physician, 

has successfully aiTected lhe management of health 

conditions such as chronic obstructive pulmonary 

disease (COP D) and alrial fibriliution. Recently, the 

method has been suggested to target physicians who 

prescribe opioids. Studies in numerous other settings 

have shown that the strategy has successfully provided 

physicians with evidencc~bascd information in a 

way that improves their prescribing practices. A 2017 

study concluded that this method of addressing opioid 

safety and naloxone prescribing was well~rcceived by 

primary care providers and associated with an increase 
156 


of naloxone prescriptions filled by Medi-Cal patients. 

The approach is also recommended by the NQF Opiold 

Stewardship Playbook, and is used by the Veterans 

Health Administration for treatment of opioid abuse 

disorder.l7 

McKesson supports use ojin·person training programs 

by public and private payers. While current programs 

may target prescribers viewed to be outliers relative to 

peers, McKesson believes that these types of education 

programs should be offered toallprescrlbers desiring to 

improve their clinical knowledge and seeking to adopt 

evidence-based oploid prescribing behaviors. We support 

public·pn'vate partners/tips that nmuld enable this 

one·on~one training across specialties, settings of care 

and communities. 

Recommendation: Ensure patients receive 

education on risks and benefits of opioids, and 

clinically appropriate treatment alternatives • .at 

the time of prescribing and on a consistent basis. 

Consistent messaging and use of shared decisionmaking tools will help patients understand their pafn 

management options, and risks and benefits of oploid 

use. These discussions also provide an opportunity to 

educate patients on the safe storage and disposal of 

unused opioids. Patients should also be informed that 

under the Comprehensive Addiction and Recovery 

Act (CARA) rules, they may request partial fills of 

their prescriptions. Allowing patients to request 

partial fills helps to reduce the risk of"extra" pills 

being improperly disposed, lost, stolen, sold or given 

to others. Patients determined "at risk" by clinical 

guidelines should undergo consultation, attestation 

and/or confirmation testing for subsequent fills 

of prescription opioids. 

McKesson strongly supports policy initiatives to ensure 

that patients receive this critical education for new and 

subsequent prescriptions to ensure they are consistently 

informed of the clinical options and risks of continued 

opioid use. We support publicMprivate partnerships that 

ensure this education occurs as part of routine clinician 

vlsies, or as part of opioid stewardship programs as 

recommended by the National Quality Forum's Oploid 

Stewardship Playbook. JB 

Pilot pharmacist-led oploid 

care management models 

Allow pharmacists to 

participate in and be 

reimbursed for SBIRT 

activities 

Dispensers 

Expand access to MAT by allowing pharmacists 

to provide and be reimbursed for MAT 

Increase access to opioid overdose antidotes, 

such as naloxone, by allowing pharmacists 

to dispense and be reimbursed for such 

treatments without a prescription 

Permit pharmacists to use greater discretion 

in dispensing partial fills 

• Train pharmacists on best practices to evaluate 

legitimacy of opioid prescriptions 

As examples below highlight, states are beginning to 

recognize and empower pharmacists to do more to 

combat the opiotd crisis. We recommend the following 

actions to ensure that pharmacists within thetr scope 

of licensure are leveraged, trained, and reimbursed 

for preventing, identifying, and treating opioid abuse 

disorder (OUD) and other substan-ce use disorders 

(SUDs). 

Recommendation: Pilot pharmacist~lcd opioid 

care management models. Pharmacists are uniquely 

positioned to have a comprehensive view of a patient's 

health status, since they see the prescriptions and 

diagnoses of multiple physicians and generally have 

strong relationships with their patients. This vantage 

point allows pharmacists to detect potential problems 

ofnon~adherence, drug interactions with opioids, 

and potential misuse and/or signs of potential abuse. 

Additionally, with proper medication adherence 

increasingly linked to better clinical outcomes and 

lower healthcare costs, pharmacist~ led medication 

therapy management (MTM) is increasingly being 

employed by federally qualified health centers (FQHCs) 

and other care settings. 

HHS' Indian Health Setvice (IHS} offers a noteworthy 

examp1e of effective employment of pharmacists to 

provide the cilnlcal expertise and critical leadership 

support needed to Implement a comprehensive 

approach to opioid safety throughout Indian Country. 

Clinical pharmacists serving patients at IHS locations 

in the Southwest, Midwest, and Great Lakes regions 

have "transcended traditional dispensing roles by 

augmenting services in the management of primary 

care patients with pain and opioid use disorders. Novel 

approaches include patient consultation and education 

from within the pharmacy, patient management in 
157 


chronic non~cancer pain clinlcs, and care coordination 

through MAT programs. Pharmacists in some 

facilities are fully integrated into multidisciplinary 

chronic pain management programs and deliver care 

through a patient-centered model. Clinical roles range 

from individual consultation appointments to full 

prescriptive authority for controlled substances."19 

We recommend public and private payers, including 

the Center for Medicare& Medicaid lnnova£ion (CMS 

Innovation Center), test pharmacist·led care delivery 

models, with specific focus on opioid care management. 

Lack of Medicare recognition and inconsistent payer 

reimbursement often limit the formal roles pharmacists 

play in alternative payment models. Pharmacists' 

clinical training, unique vantage point, and frequency of 

patient touclz points provide a unique opportunity for these 

experts to engage on tlrejrontlines of the opioid epidemic. 

We encourage payers and providers to consider a 

robust team~based approach where the pharmacist is 

positioned as the pharmacologic leader and coordinator 

across the care continuum. Services ti~ey may provide 

include: assessing clinically appropriate drug doses, 

ldentifj!ingpotential drug~drug interactions, educating 

patients 011 risks and benefits of treatments, assessing 

patient risk of misuse and abuse, evaluating pain 

status and need for ongoing or alternative therapy, 

and educate on appropriate drug storage and disposal 

techniques. Pharmacists are also well positioned to 

assess whether certain high~riskpatlents would benefit 

from being co~prescribed oplotd reversal age-nts such 

as naloxone. It is critical that we leverage all members 

of the Jzealtlzcare ecosystem and drive team~based 

approaches to ending the opioid epidemic. 

Recommendation: Allow pharmacists to 

participate in and be reimbursed for SBIRT 

activities. Pharmacists should be permitted to 

provide and be reimbursed for SBIRT activities. which 

help to identify individuals who may struggle with 

alcohol and/or substance use. The program includes 

a screening and. if needed, a brief Intervention to 

educate individuals about their use, alert them to 

possible consequences, and motivate them to take 

steps to change their behavior. Virginia is currently the 

only state that empowers and reimburses pharmacies 

to provide SBIRT services under Virginia's Addiction 

Recovery Treatment Services (''ARTS") benefit for 

Medicaid patients)O 

McKesson joins the National Community Pharmacists 

Association (NCPA) in encouraging other states to follow 

Virginia's example in permitting pharmacists to provide 

and be reimbursed for SBIRT services)! 

Recommendation: Expand access to MAT by 

allowing pharmacists to provide and be reimbursed 

for MAT. Addiction experts consider MAT, which 

combines medications and behavlorai therapy, as 

the gold standard in addiction care. Therefore, as 

addiction experts contend, policymakers should 

elevate expanded access to FDA~approved MAT as a 

critical component of fighting the opioid crisis. We 

applaud HHS Secretary Alex Azar's acknowledgement 

that "the evidence on [MAT] is voluminous and ever~ 

growing."22 The President has proposed to "test and 

expand nationwide [for Medicare] a bundled payment 

for community·based medication-assisted treatment, 

including Medicare reimbursement for methadone 

treatment for the first time," 

We support this and other proposals to expand 

community·based MAT. particularly in rural areas. 

However, we strongly urge that pharmacists be 

considered eligible to provide and be reimbursed for 

MAT services in any nationwide pilot and expansion. 

Today. nearly every state permits pharmacists to 

forge collaborative practice agreements (CPAs) with 

physicians and other prescribers to provide advanced 

care to patients, including components of MAT, and 

some states allow pharmacists to prescribe Schedule 

II-V controlled substances under a CPA.23 States that 

allow such agreements have found that pharmacist 

involvement in MAT helps to increase access, improve 

health outcomes, and reduce the risk of relapse.24 

However, pharmacists in states that allow them to 

prescribe Schedule III controlled substances, such 

as MAT medications. are still prohibited from doing 

so. This is because under federal law, pharmacists 

are ineligible for Drug Addiction Treatment Act 

(DATA) waivers that are available for other mid~ level 

practitioners, such as physician assistants (PAs) and 

nurse practitioners (NPs). 

McKesson urges Congress to pass the Expanded Access 

to Oplold Abuse Treatment Act of2017(H.R. 3991), 

which would enable pharmacists to obtain DATA 

waivers and expanded access to MAT in states where 

they are pennitted to do so. 

Recommendation: Increase access to opioid 

overdose antidotes, such as naloxone, by allowing 

pharmacists to dispense and be reimbursed for 

such treatments without a prescription. Naloxone 

- also known as Narcan - is deemed by FDA to be a 

safe and effective antidote to opioid overdoses and 

is currently available without a written prescription 

in most states. While such antidotes should not be 

considered a long·term solution, the reversal agent 
158 


can mean the difference berween life and death for 

Individuals. 

McKesson believes pharmacists in every state should 

be permitted to dispense and be relmbursedforoplold 

overdose antidotes without a prescription. As a matter 

of good clinical practice and care coordination, the 

pharmacist would be expected to communicate this care 

decision to the appropriate prescribing provider(s). 

Recommendation: Permit pharmacists to use 

greater discretion in partial flUs. According to a 

Johns Hopkins Bloomberg School of Public Health 

study, six out of 10 adults prescribed opioid painkillers 

have leftover pills,zs which poses significant risk 

of misuse and diversion. Pharmacists should be 

empowered to exercise their clinical Judgment 

to be able to reduce the number of unused opioid 

pills. CARA permits a prescription for a Schedule II 

controlled substance to be partially filled If: (1) It is not 

prohibited by state Jaw; (2) the partial fill is requested 

by the patient or the prescriber (note: not pharmacist): 

and (3) the total quantity dispensed In all partial 

fillings does not exceed the total quantity prescribed.26 

To date, only a handful of states allow pharmacists to 

panialty fill a prescription under current CARA rules. 

McKesson supports cltanges to CARA that would allow 

pharmacists to exercise their professional judgment 

in deciding to partially fill prescriptions. We also 

encourage Drug Enforcement Administration to clarifY 

tlzat pharmacies may dispense less than prescribed 

amounts of opioids in response to any health plan 

designs that would limit coverage of opioids. 

Recommendation: Train pharmacists on best practices to evaluate legitimacy of opioid prescriptions. 

Pharmacists receive rigorous clinical training and have 

strong relationships with their patients. They represent 

a critical line of defense and should be adequately 

equipped to help prevent opioid abuse, misuse, 

and diversion. 

We support pending legislation in Congress that 

would provide for the development and dissemination 

ofprogramsand materials for pharmacists and 

other providers tojacilitatedetectlon of fraudulent 

prescriptions and other behavior linked to abuse 

and diversion. 

Require co~prescribing of 

overdose reversal agents for high~ 

risk patients 

Promote community~based pilot 

programs focused on veterans 

Pilot recovery coach programs Patiems 

Meaningful solutions must have better health for 

patients as the highest priority. The right solutions 

will include effective patient safety measures while 

ensuring access to care for patients in need. McKesson 

encourages lawmakers to ensure that proper safeguards 

are in place to make certain that patients with a 

legitimate medical need do not experience disruptions 

in their ability to access needed patn medications. It 

is important that every opioid management program 

and policy have proper exemptions in place for 

cancer patients and terminally~lll patients. since 

it is estimated that pain occurs in up to 70 percent 

of patients with advanced cancer,27 In addition, aU 

individuals battling with addiction. regardless of how 

they got there. should receive the same standard of 

care that any other patient battllng any other disease 

would receive. 

Recommendation: Require co~prcscribing of 

overdose reversal agents for patients who arc 

considered high-risk and for patients with high~ 

dose prescriptions of opioids. In 2017, the American 

Medical Association {AMA) Opioid Task Force issued 

guidance encouraging physicians to consider co· 

prescribing naloxone with prescription opioids when 

clinically appropriate for patients who are at risk 

for opioid overdose or might be in a position to help 

someone else at risk.28 The guidance includes several 

questions that physicians should consider to determine 

whether they should co-prescribe naloxone to a 

patient, a family member, or close friend of the patient. 

Furthermore, the Johns Hopkins Bloomberg School 

of Public Health also recommends that patients on 

a high·dose opioid carry naloxone, just as individuals 

with peanut allergies carry an EpiPen in case they 

accidentally ingest a peanut product.29 

McKesson supports policies that would require health 

plans to cover naloxone when prescribed by a physician 

nrother qualified healthcm·e provider for clinically 

appropriate patients. Additionally, we believe that 

pl!annaclsts in all states should be able to dispense 

naloxone for clinically appropriate patients without a 

prescription. As a matter of good clinical practice and 

care coordination, the pharmacist would be expected 

to communicate this care decision to tile appropriate 

prescribing provider. 

10 
159 


Recommendation: Promote community~based 

pilot programs focused on prevention and care 

for veterans. The Department of Veterans Affairs 

(VA) has reported that veterans are twice as likely as 

non-veterans to die from overdose of addictive pain 

medicines. reflecting the high levels of chronic pain 

among the veteran population, particularly those 

who served In Iraq and Afghanlstan,30 We applaud 

VA efforts to combat overprescribing, including the 

Department's recent initiative to publicize information 

on opioids dispensed from VA pharmacies3l and 

its commitment to implement academic detailing 

programs focused on overdose education. naloxone 

distribution, and oploid use disorder.az 

McKesson encourages tlze development of community~ 

based pilot programs focused on preventing oploid abuse 

and misuse among veterans, including tltose that draw 

on VA·tested best practices. 

Recommendation: Pilot recovery coach programs 

to help patients. Recovery coach programs 

are currently being piloted in eleven emergency 

departments across Massachusetts.33 Governor Charlie 

Baker recently filed legislation to create a commission 

to review and make recommendations regarding the 

credentialing and registration standards that shouJd 

govern recovery coaches.34 Under a pharmacist~led 

care management model, pharmacists could also be 

trained to provide counseling and recovery coaching 

services whenever patients have difficulty in accessing 

substance-abuse clinicians due to the increasing 

number leaving the profession. 

We are encouraged by these programs and support 

policies that would drive the development of national 

recovery coach models. We encourage public and private 

payers to cover these services today wlten provided by 

qualified healthcare providers, such as pharmacists. 

Implement a national 

prescription safety~alert 

system for both dispensers 

and ultimately prescribers 

Require use of electronic 

prior authorization (ePA) 

EnsurePDMP 

interoperabillty by 2020 

Data& 

Teclmology 

and compatible safety alert systems that will 

increase utilization and provision of real time and 

actionable data for clinical decision making at the 

point of prescribing and dispensing 

Require DEA to provide more data to registrants 

who report to the Automation of Reports and 

Consolidated Orders System (ARCOS) database 

Encourage wholesale distributors to provide 

states with the same ARCOS and suspicious order 

monitoring (SOM) data submitted to DEA 

Harmonize controlled substances sales 

reponing system 

The U.S. is the global leader in technological 

innovation. But when it comes to harnessing 

technology to address the worst public health 

crisis In modern history, our country has failed to 

mobilize its full potential. This is unacceptable for 

patients and for the healthcare professionals who 

are on the front lines caring for patients. Physicians, 

pharmacists, and clinicians agree that the realities 

of delivering care today- patient demands and 

tightening reimbursement- require 21st century 

technology that is interoperable, real time and easily 

accessible, in workflow. We recommend the following 

policy recommendations and private sector-led 

solutions to protect against abuse and to equip doctors, 

pharmacists, public health officials, and others with 

the tools necessary to help end the oploid crisis, 

Recommendation: Implement a nationwide 

prescription safety·alcrt system that would 

provide pharmacists, and ultimately prescribers 

with real-time alerts to identify patients who arc 

at risk for oploid overuse, abuse, addiction or 

misuse. We strongly support the implementatlon of a 

nationwide prescription safety-alert system, a model 

conceived by the National Council for Prescription 

Drug Programs (NCPDP} and recently cited by the Duke 

Margolis Center for Health Policy,3s The prescription 

safety-alert system would use patient prescription 

history data and clinical rules to identify patients and 

prescription patterns that may indicate risks of oploid 

overuse, abuse, addiction or misuse. Pharmacies 

would receive real-time in workflow alerts indicating 

11 
160 


that the phannacist should gather additional patient 

information before dispensing. This might include 

a more In-depth conversation with the patient, a 

consultation with the prescribing physician{s), and 

review of the relevant state PDMP data. To maximize 

success, the prescription safety-alert system must have 

access to data from all entitles dispensing covered 

controJled substances. 

McKesson urges HHS/FDA, through its existing REMS 

authority to require that manufacturers only provide 

covered controlled substances to pharmacies and 

health care providers that participate in a prescrlptlon 

safety·alertsystem. 

Recommendation: Harness ePA to prevent misuse 

and accelerate access for patients with legitimate 

need. Employers and payers have implemented 

programs to detect and intervene in inappropriate 

prescribing of opioids. PA, a process to verify that 

medications or procedures are medically necessary, is 

used by payers before they grant coverage approvaJs.36 

A study of Medicaid patients In Pennsylvania found 

that enrollees within plans that subject opioids to PA 

policies had lower rates of abuse and overdose after 

initiating oploid medication treatment37 While the 

use of PA is frequently associated with reductions in 

use of opioids, traditional PA- most often completed 

via handwritten faxed forms or phone calJs- can 

frequently place significant burdens on physicians, 

pharmacists, and patients who legitimately need 

prescription painkHlers to manage their conditions. 

A 2016 AMA survey reported that 75 percent of 

respondents said handling PA requests were a "high" 

or "extremely high" burden and that an average 

of16.4 hours of physician and staff time each week 

was spent on completing PA requirements to get 

patients the medicines and procedures they needed.38 

Pharmacists a1so reported similar challenges. 

According to the ePA National Adoption Scorecard, 

66 percent of prescriptions rejected at the pharmacy 

require PA and 36 percent of those prescriptions are 

abandoned.39 Clinicians, including pain experts, 

report that patients with legitimate need for pain 

medications are increasingly. involuntarily losing 

access to the medicines they need due partially to 

rigid and needlessly cumbersome efforts to prevent 

overprescribing. Prior authorization and other 

interventions meant to combat overprescribing must 

be improved by harnessing technology. ePA is a proven 

and promising solution that helps physicians and 

pharmacists securely and electronically transmit PA 

requests within their clinical workflows up to three 

times faster than paper-based PA and with fewer 

mistakes. 

McKesson supports policy initiatives tltat would enhance 

the use of ePA across all payers. We support current 

federalleglslalion that would mandate use of ePA in 

Medicare Part D and strongly urge commercial payers 

to adopt similar pollcles. Additionally, we support state 

legislative efforts to standardize the PAprocessjordrugs 

and services. It is critical we reduce access lturdlesjor 

patients and minimize administrative burden on our 

already strained healthcare ecosystem. 

Recommendation: Require eRx of all controllc d 

substances. Handwritten prescriptions can be forged, 

altered, or diverted and can enable illegal access to 

prescription oplolds.40 eRx allows prescriptions to 

be transmitted to pharmacies securely without risk 

of alteration or diversion. E·prescribing of controUcd 

substances (EPCS) Is currently permitted in aliSO 

states, yet is only required in a handful of states. 

Research on EPCS has been scarce, but surveys have 

shown that prescribers are generally optimistic about 

the benefits ofEPCS.41 

We join the National Association of Chain DrugStores 

(NACDS) and others in support of efforts by Congress to 

require e-prescribing of opioids in Medicare Part D, and 

encourage other payers to adopt similar policies. We 

strongly believe tltat all opioids in this country should 

be prescribed electronically. 

Recommendation: Require DF.A to provide mnre 

data to registrants who report to the ARCOS 

database. The Controlted Substances Act requires 

wholesale distributors and other DEA registrants to 

report certain transaction data to DEA, which is housed 

in a database known as ARCOS. This data shows how 

many pills were sold, where in the U.S. they were sent, 

and what pharmacies bought them. 

McKesson supports pending legislation tltat would 

require DEA to provide registrants who report to 

the ARCOS database with information regarding(!) 

total number of specific distributors serving a specific 

pharmacy for reportable drugs (aggregated by the name 

and address of eaclz pharmacy) and (2) the total number 

and type of opioids distributed to each pharmacy in 

order to ltelp distributors further assess product orders 

or provide other supportive information. 

Recommendation: Encourage wholesale 

distributors to provide states with the same ARCOS 

and SOM data submitted to DEA. States may not 

have access to the ARCOS data, as welt as reports of 

suspicious orders - requests from customers that are 

unusual in size. deviate substantially from normal 

patterns, and unusually frequent. 

12 
161 


McKesson is committed to voluntarily providing ARCOS 

and SOM data to any state that requests the information. 

Recommendation: Harmonize controlled 

substances sales reporting systems. McKesson 

is committed to working with governors, attorneys 

general, the National Association of Boards of 

Pharmacy (NABP}, and DEA to harmonize controlled 

substances sales reporting systems. Such a policy 

would be in a form and frequency conducive to 

rigorous and timely analysis, would facilitate data 

sharing between state and federal governments. and 

would ultimately help to better identify and prevent 

non~medical use of prescription drugs. 

McKesson supports state efforts to adopt a Wli/orm 

system for suspicious order reporting, so tllat states 

can receive standardized reports oj suspicious orders 

in a timely and consistent manner. 

Conclusion 

Our country has made some progress in prioritizing 

and combating the opioid epidemic, but more must 

be done. Until we implement innovative solutions, 

like the ones we've recommended, we fear that the 

opiold crisis will persist. Meaningful solutions require 

doctors, pharmacists. distributors, manufacturers, 

payers, policymakers, and regulators, to come 

together. McKesson is committed to partnering with 

the Administration. Congress, the states, and all 

stakeholders who share our dedication to working 

together, with urgency, to help to end this national 

crisis. As never before, we must look to private sector 

innovation to inform and power public and regulatory 

policies that wllJ break through the barriers that 

have stymied meaningful and sustainable barriers to 

addressing the public health crisis of our day. If you'd 

like partner with us on these solutions or would like 

more information, contact McKesson Public Affairs 

at PublicAffairs@McKesson.corn. 

13 
162 


Summary of McKesson 2017 --2018 Public 

Recom.mendations 

We continue to support our 2017 rccommendutions and new emergent public and 

regulatory policies that encourage policymakers to look "upstream" in the supply 

chaln to prevent abuse, misuse and diversion: (1) Enact nationwide opioid 

prescription limits (7Mday supply limit for acute pain). (2) Permit parti:!l fills, 

and (3) Re-quire DEA to revisit annual production quotas. 

Additionally, we call for expanded reforms to better manage supply of drugs in 

our communities and facilitate the proper disposal of unused opioids. 

Encoumgc !IDA to t'On!-iklcr limited dose blister paci{S 

• Cstuhlish progr<~ms for the return rmd destruction of unused opioids 

We continue to support our 2017 recommendation that the FDA harness t11e 

power of its REMS programs, particularly as It relates to prescriber education 

and training. 

Appropriate opioid prescribing is built upon comprehensive pain management 

knowledge, understanding of opioid prescribing guidelines, and effective patient 

engagement. As such, we recommend immediate reforms to ensure prescribers 

adopt evidence~ based strategies today. 

Inceutivizc implementation of opioid stewardship or simil~tr clinic~tl 

cxccllcncc programs 

Require all prcscribct·s to participate in approved cHuicat training aml 

CME as a condition of licensure 

Deploy in·pcnwn provider training programs by independent 

mcliicHt cxpc1·ts 

Ensure :ttl patients receive education on risl{S and benefits of opiolch; and 

clinically appropriate treatment alternatives consistently 

We continue to support our 2017 recommendation requiring opioid 

management progrom1s for o:tlt pnycrs and providers. 

However, this year we are also focused on ensuring that pharmacists practicing 

within the scope of their licensure are leveraged, trained, and reimbursed for 

preventing, identifying and treating opioid abuse disorder and other substance 

abuse disorders. 

Pilot plmrmaclst~lcd opioid care management models 

Hccognizc and reimburse pharmacists fot· Screening, Brief, 

Intcrvl!ntion and Referral to Treatment (SIHRT) and MAT, and 

opioid overdose antidotes 

Permit pharmacists to nsc grcntcr discretion in partial flUs 

• Trnin pharmacists on best practices to evaluate lcgitimucy of opioid 

prcscl'iptions 

14 
163 


@ 

f:IJ 

or Pall cuts 

Data& 

Teclmology 

While our policy recommendations for prescribers and dispensers also seek to 

improve patient engagement and expand access to treatments such as SBIRT and 

MAT, we also recommend: 

Require co-prescribing of overdose reversal agents for high-risk patients 

Promote community-based pilot programs focused on veterans 

Pilot recovery coach programs 

We continue to support our 2017 recommendations that leverage data and 

technology to improve the flow of prescription data and ensure clinicians and 

pharmacies have the necessary clinical data prior to prescribing and dispensing 

opioids: (l) Integrate a national prescription safety system into the 

pharmacy dispensing process, (2) RequireeRx for all controlled substances 

nationally, and (3) Promote utilization of aud improve infonuatiou sharing 

among PDMP and data integration into a patient's electronic health record. 

This year we build upon these recommendations and seek to increase data 

sharing across stakeholders. 

• Implement the NCPDP national prescription safety·alcrtsystem concept 

for dispensers. and ultimately prescribers 

• Require use of electronic prior authorization (ePA) 

• Require DEA to JUovide more data to registrants who report to the 

ARCOS database 

Encourage wholesale distributors to provide states with the same ARCOS 

and SOM data submitted to DEA 

Harmonize controlled substances sales reporting systems 

15 
164 


References 

l. Ringwatt C, Gugelmann H. Garrettson M. eta!. Differential 

prescribing of oploid analgesics according to physician 

specialty for Medicaid patients with chronic noncancer 

pain diagnoses. Pain Research & Management: The 

Journal of the canadian Pain Society, 2014;19(4):179~185. 

2. Hufstader, Meghan, Yi. Yang, Max Sow, Vanm Valdya, and 

Tricla L., Wilkins. MAdoption of Electronic Prescribing for 

Controlled Substances among Providers and Pharmacies.'' 

Am J Managed Care. 2014. 20{11 Spec No 17}: SPS4l~SP546 

3. "Preauthorizatlon." Healthcare.gov. 

4. Cochran G. Gordon AJ, Geilad WF, et al. "Medicaid 

Prior Authorization and Opioid Medication Abuse and 

Overdose." American Journal of Managed Care, May 26, 

2011. 

5. ..Strategies for Promoting the Safe Use and Appropriate 

Prescribing of Prescription Opiolds.." Duke Margolis Center 

for Health Policy, 

February 2018. 

6. "Research Shows Shortage of More than 100,000 Doctors 

by 2030, Association of American Medical Colleges, March 

14,2017. 

7. Shortage of Addiction Counselors Further Strained by 

Opiold Epidemlc. NPR, February 2016. 

8. "2016~2026 Occupational Outlook Handbook, Bureau of 

Labor Statistics, Department of Labor. 

9. Statement from FDA Commissioner Scott Gottlieb, M.D., 

on new steps to help prevent new addiction, curb abuse 

and overdose related to oploid products, FDA Press 

Release, January 30,2018. 

10. lbid. 

u. Lipari, R.N. and Hughes, A. "How people obtain the 

prescription pain relievers they misuse." The CBHSQ 

Report: January 12, 2017. Center for Behavioral Health 

Statistics and Quality, Substance Abuse and Mental Health 

Services Administration, Rockville, MD. 

12. Final Report of the President's Commission on Combating 

Drug Addktlon and the Opioid Crisis. November 2017, p, 

56. 

13, Risk Evaluation and Mitigation Strategy (REMS} for Oplold 

Analgesics, Food and Drug Administration. 

14. Margot Trotter Davis, Ph.D .. Brian Bateman, MD, and Jerry 

Avorn, MD. "Educational Outreach to Oploid Prescribers: 

The Case for Academic Detailing." Pain Physician Journal: 

Oplold Special Issue, 2017. 

IS. Multiple authors, San Francisco Department of Public 

Health. ~Academic Detailing Pilot for Naloxone Prescribing 

Among Primary Care Providers in San Francisco," Family 

Medicine, 2017, 

16. National Quality Players Playbook: Opioid Stewardship, 

March2018. 

17. "Opiold Taper Decision Tool," Veterans Health 

Administration. 

18. National Quality Players Playbook: Opioid Stewardship, 

March20IS. 

19. "Indian Health Service pharmacists engaged in opioid 

safety initiatives and expanding access to naloxone." 

Journal of the American Pharmacists Association, January 

2017. 

20. Department of Medical Assistance Servltes (DMAS) 

Reimbursement for Screening, Brieflnterventlon and 

Referral to Treatment (SBIRT) 

21. NCPA Letter to House Ways and Means Committee, March 

13.2018. 

22. Kounang, Nadia. "FDA to broaden access to medication 

assisted treatment for oploid addiction.~ CNN, February 

26,2018. 

23. National Pharmacists Associations Statement for the 

Record before the House E&C Committee, October 2017. 

24. DlPau!a, B.A. & Menachery, E. "Phys!c!an·pharmac!st 

collaborative care model for buprenorphine·maintained 

opiold~dependent patients." Journal of the American 

Pharmacists Association, March/Aprii2015,18H92. 

25. John Hopkins Bloomberg School of Public Health. "Six in 

Ten Adults Prescribed Oploid Painkillers Have Leftover 

Pills", released June 13, 2016. 

26. S.S24, 114 Cong., Congress.gov (2016) (enacted). 

27. Colvin L, Forbes K, Fallon M; Difficult pain. BMJ. 2006 May 

6;332(7549);!081·3 

28. Robeznieks. Andis. "New guidance: Who can benefit from 

naloxone co-prescribing." AMA Wire, September 7, 2011. 

29. "Serving the Greater Good: PubUc Health & Community 

Pharmacy Pannershlps," Bloomberg School of Public 

Health/Center for Health Security, October 2017, 

30. Goldberg, Barbara. "Oploid abuse crisis takes heavy toll on 

U.S. veterans." Reuters, November 10, 2017. 

31. "VA Becomes First Hospital System to Release Opioid 

Prescribing Rates, Veterans Affairs Press Release, January 

11,2018. 

32. '1\cademic Detalling Service- Education Materials" U.S. 

Department of Veterans Affairs. 

33. "Governor Baker Highlights Role of Recovery Coaches 

During Visit to Beverly Hospital," Commonwealth of 

Massachusetts Press Release, January 11, 2018. 

34. Ibid. 

35. Ibld,5. 

36. lbld,3. 

3'7. lbld,4. 

38. 2016 AMA Prlor Authorization Physician Survey, American 

Medical Association 

39. 2018 ePA National Adoption Scorecard, CoverMyMeds. 

40. Gabriel MH, Swain M. "E~Prescrlbing Trends In the 

United States." ONC Data Brief, no.18. Washington, DC: 

Office of the National Coordinator for Health Information 

Technology .. July 2014. 

41, Hufstader, Meghan, Yl. Yang, Max Sow, Varun Valdya, and 

Trlcia L .• Wilkins. "Adoption of Electronic Prescribing for 

Controlled Substances among Providers and Pharmacies." 

Am J Managed Care, 2014, 20(11 Spec No 17): SPS41·SP546 

16 
165 


GREG WALDEN, OREGON 

CHAinMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

<!tongrrss of tbe Wnitell ~tates 

~ou!jc of ll\eprc%cntati!Jes 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 (202)225-·2927 

(202)22S..3641 

May 3!, 2018 

Mr. George S. Ba1Tett 

Executive Chairman of the Board 

Cardinal Health, Inc. 

7000 Cardinal Place 

Dublin, OH 43017 

Dear Mr. Barrett: 

Thank you for appearing before the Subcommittee on Oversight and Investigations on May 8, 

2018, to testify at the hearing entitled "Combating the Opioid Epidemic: Examining Concerns About 

Distribution and Diversion." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open Jor ten business days to permit Members to submit additional questions for the record, which are 

attached. To facilitate the printing of the hearing record, please respond to these questions with a 

transmittal letter by the close of business on Thursday, June 14,2018. Your responses should be mailed to 

Ali Fulling, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Ofilce 

Building, Washington, DC 20515 and e-mailed in Word format to Ali.Fulling@mail.house.gov, 

Thank you again for your time and eff011 preparing and delivering testimony before the 

Subcommittee. 

a:;;.~ Gregg Harper 

Chairman 

Subcommittee on Oversight and Investigations 

cc: The Honorable Diana DeGette, Ranking Member, Subcommittee on Oversight and Investigations 

Attachment 
166 


Responses of Cardinalllealth, Inc. to Letter from Chairman Harper, dated May 31, 2018 

The Honorable Gregg Harper 

/. Does your company request dispensing data}i-om both prospective and existing pharmacy 

customers as part of its due diligence efforts to mitigate controlled substance diversion? {(so, at 

what ji-equency does your company request/his information and how is the dispensing data 

utilized? If no, why not? 

As part of its comprehensive anti-diversion program, Cardinal Health periodically 

requests and receives aggregate dispensing data and total number of prescriptions filled for both 

controlled and non-controlled substances from prospective and existing pharmacy customers. 

Cardinal Health requests total number of prescriptions filled for certain controlled substances 

from prospective customers as part of its initial Know Your Customer account set up process. In 

addition, outside of the account set up process, requests for aggregate dispensing data or total 

number of prescriptions filled may be made by Cardinal Health professionals working in 

Cardinal Health's anti-diversion program when they determine such a request is appropriate 

pursuant to the monitoring, inspection, and escalation protocols of the company's anti-diversion 

policies and procedures. That aggregate dispensing data and total number of prescriptions filled, 

along with Cardinal Health's complete data about its own distributions to each customer, is 

utilized to set and evaluate customer thresholds for controlled substance distributions, 

Also, Cardinal Health reports all distributions of controlled substances to the DEA, which 

receives similar reports from every distributor through its ARCOS data reporting system. These 

reports, taken together, provide DEA with contemporaneous data rct1ecting all opiates purchased 

by every pharmacy in the United States. 

2. In its contracts with pharmacy customers, is your company able to require that a pharmacy 

produce dispensing data upon request? If so, does your company include such a requirement in 

the contracts it enters into with its pharmacy customers? I{your company doesn't include such a 

requirement in its contracts, H'hy not? 

Cardinal Health will not distribute opioids to a pharmacy customer without receiving 

sufficient information about its dispensing to allow the company to evaluate the pharmacy 

customer and its orders under Cardinal Health's anti-diversion program, nor will Cardinal Health 

distribute opioids to pharmacy customers who refuse to provide such information upon request. 

3. As part of your company's due diligence efforts related to prospective and existing cus/Omers, 

does your company review and maintain a list ~{the number of pharmacies that are located in 

the prospective/existing customer's service region? If so, huw long has that been your company's 

practice and hol--i' does your company determine what a pharmaGy 1s potential 5;ervice region is? 

Among the many factors Cardinal Health considers when evaluating customers are the 

pharmacy's size, business model, location, historical volume of controlled substance purchasing, 

and its ratio of controlled substance purchasing to non-controlled substance purchasing. This 

multifaceted analysis is performed because appropriate thresholds for a pharmacy arc not 

necessarily reflective of the size of the community where the pharmacy is located or how many 

pharmacies are located in a particular geographic area. Other relevant factors include the volume 
167 


Responses of Cardinal Health, Inc. to Letter from Chairman Harper, dated May 31,2018 

of patients served as reflected by the volume of non-controlled substances dispensed, and the 

pharmacy's proximity to or affiliation with hospitals, clinics, surgery centers, hospice facilities, 

and long-term care facilities. 

4. Does your company request dispensing data from both prospective and existing pharmacy 

customers as part of its due diligence efforts to mitigate controlled substance diversion? If so, at 

what frequency does your company request this information and how is the dispensing data 

utilized? If no, why not? 

Cardinal Health refers the Committee to the response to Question I above. 

5. In its contracts with pharmacy customers, is your company able to require that a pharmacy 

produce dispensing data upon request? If so, does your company include such a requirement in 

the contracl.\' it enters into with its pharmacy customers? if your company doesn't include such a 

requirement in its contracts, why not? 

Cardinal Health refers the Committee to the response to Question 2 above. 

6. As part ofyour company's due diligence ~{forts related to pro5pective and existing customers, 

does your company review and maintain a list of the number of pharmacies that are located in 

the prospective/existing customer's service region? If so, how long has that been your company's 

practice and how does your company determine what a pharmacy's potential service region is? 

Cardinal Health refers the Committee to the response to Question 3 above. 

The Honorable Michael C. Burgess 

1. While your companies seem to have putforth effort to improve your system a./flagging 

possible drug diversion, there remains work to be done. In February, the Drug Enforcement 

Administration announced that it would begin sharing select data it collects on controlled 

substance prescriptions with drug distributors. Have your companies been able to access that 

data, and if so, has it been usefid? 

On February 14, 2018, DEA announced that it added a feature to the ARCOS Online 

Reporting System that would allow distributors and manufacturers the opportunity to "view the 

number of competitors who have sold a particular controlled substance to a prospective customer 

in the las\ six months." Cardinal Health has been able to access this data, but its usefulness is 

limited because it docs not reflect specific products within drug families and because it reflects 

only the number of distributors who shipped to the customer within the prior six months, but not 

the volume of controlled substances shipped. Many if not most pharmacies purchase controlled 

and non-controlled substances from multiple distributors for a variety of business reasons, 

including price and product availability. The fact that a particular pharmacy purchased 

controlled substances from more than one distributor is not necessarily indicative of a risk of 

diversion. 

2 
168 


Responses of Cardinal Health, Inc. to Letter lrom Chairman Harper, dated May 31, 2018 

2. What is the largest hurdle youface as your companies scale up your diversion prevention 

activities? ls data-sharing, or lack thereof the primm:v challenge? 

As an intermediary in the pharmaceutical supply chain, Cardinal Health does not 

ultimately control either the supply of or the demand for opioids. The demand for legal opioids 

is generated by licensed physicians prescribing medications for individual patients, and the 

supply of legal opioids is controlled by the annual DEA procurement and manufacturing quotas. 

The company's role as a distributor is to provide a secure channel to deliver medications of all 

kinds, from the hundreds of manufacturers who make them, to the thousands of hospitals and 

pharmacies authorized by the DEA to dispense them. Cardinal Health has a dual 

responsibility-to ensure that prescription medications are available for prescribers and their 

patients when needed, while working to limit the potential for those prescription medications to 

fall into the wrong hands. Cardinal Health shares the judgment of policymakers at the 

Department of Health and Human Services, the Food and Drug Administration, the Surgeon 

General, the Centers for Disease Control and Prevention, and others that there have been too 

many prescriptions for too many pills across the country. However, other participants in the 

healthcare delivery system have greater access to information than distributors. For example, 

many individual states have taken enormous strides in improving data sharing amongst licensed 

healtheare providers and pharmacies through prescription drug monitoring programs ("PDMPs"). 

DEA also has access to comprehensive data through ARCOS. 

3. Throughout each ofyour written testimonies, you mentioned your efforts to report suspicious 

orders to the DEA, and in cases that exceed the volume threshold, you stop the orders enlirely. 

Where is the line drawn between drug manufacturers and the DEA in responding to suspicious 

orders? Does the DEA take el?forcement action after you report the suspicious order? 

Cardinal Health generally does not have knowledge of what actions DEA may take in 

response to suspicious order reporting, nor can it speak to the role of drug manufacturers. As a 

distributor, Cardinal Health has reported to DEA hundreds of thousands of opioid orders that 

exceeded the company's conservative thresholds and that we have refused to ship. The company 

also has terminated or refused to distribute controlled substances to over a thousand pharmacies. 

4. Distributors and other pieces of the drug supply chain have a responsibility to help prevent 

diversion. What can Congress do legislatively to strengthen oversight '!f that supply chain? 

Cardinal Health supports appropriate prescribing limits on opioid pain medications, the 

creation of a national prescription drug monitoring program through collaboration with industry 

participants, and state and federal regulations and legislation that would require prescriptions to 

be issued electronically. Cardinal Health also supports legislation aimed at illegal street 

narcotics interdiction that target the supply of heroin and illicit fentanyl within communities. 

finally, Cardinal Health shares the Committee's view that all parties in the health care 

community have a responsibility to help prevent opioid abuse and diversion, and the company is 

committed to doing its part to help ensure opioids are not diverted from the distribution channels 

within which Cardinal Health operates. In this regard, Cardinal Health supports legislative 

solutions that would harness the power of modern data analytics to strengthen oversight of the 

entire supply chain by encouraging greater data sharing and visibility among industry 

3 
169 


Responses of Cardinal Health, Inc. to Letter from Chairman Harper, dated May 31, 2018 

participants and with regulators. Cardinal Health also supports and encourages increased 

communication between distributors and the federal and state regulators responsible for licensure 

of prescribers and dispensers. 

The Honorable David B. McKinley 

I. As a Wholesale Distributor of prescription opiates. do you agree that you owe a duty under 

federal law to monitor, detect, investigate, re{z1se and report suspicious orders? 21 US. C.§ 823, 

21 CFR 1301.74. 

As a licensed pharmaceutical distributor, Cardinal Health is subject to regulatory 

oversight by the Drug Enforcement Administration, including pursuant to the laws cited above. 

Cardinal Health has a dual responsibility--to ensure that prescription medications are available 

for prescribers and their patients when needed, while working to limit the potential for those 

prescription medications to fall into the wrong hands. Cardinal Health takes its regulatory 

obligations to the DEA seriously, and has worked continuously to improve its anti-diversion 

program to address the ever-changing diversion landscape and to account for changing 

regulatory expectations. 

2. Do you agree that the foreseeable harm ()(a breach of this duty is the diversion of 

prescription opiates for nonmedical purposes? 

Cardinalllealth's dual responsibility is to ensure that prescription medications are 

available for prescribers and their patients when needed, while working to limit the potential for 

those prescription medications to fall into the wrong hands. Licensed pharmacies order 

medications from Cardinal Health. As a distributor, Cardinal Health is not licensed to engage in 

the practice of medicine, never sees or examines the patient, and cannot second guess the 

professional judgments of licensed prescribers, pharmacists and pharmacies, FDA, DEA, or state 

Boards of Pharmacy. The medications Cardinal Health supplies should never be dispensed by a 

pharmacy unless the pharmacy receives a lawful prescription from a licensed prescriber. 

3. In other words, ifyou ship a suspicious order, it is likely that prescription opiates will be 

diverted into the illicit market. Agree? 

Licensed pharmacies order medications from Cardinalllealth. As a distributor, Cardinal 

Health does not write prescriptions to patients (doctors do that), and docs not transact directly 

with customers of a pharmacy seeking to fill those prescriptions (pharmacists do that). The 

medications Cardinal Health supplies never reach a patient unless a doctor prescribes them and 

the pharmacy dispenses them. The fact that a particular pharmacy places large orders to fill 

prescriptions by licensed doctors can be reflective of the practice of medicine and pharmacy and 

not necessarily reflective of diversion. Cardinal Health maintains and continuously improves 

robust anti-diversion controls to prevent the shipment of opioids to customers that it believes 

present a substantial risk of diversion, and does not ship orders it determines are suspicious. 

4. Do you concur thatfilling sr1.1picious orders is a direct and proximate cause of prescription 

opiate abuse, addiction, morbidity and mortality? 

4 
170 


Responses of Cardinal Health, Inc. to Letter from Chairman Harper, dated May 31, 2018 

Cardinal Health refers the Committee to the response to Question 3 above. 

5. Do you agree the United States is in the midst of a prescription opiate epidemic? 

There is a public health crisis involving drug abuse including both legal and illegal opioid 

drugs. Cardinal Health is committed to doing its part to fight opioid abuse and misuse. For over 

a decade, Cardinal Health has funded education and prevention programs in communities across 

the country through Generation Rx, which the Cardinal Health Foundation developed in 

partnership with the Ohio State University School of Pharmacy. Generation Rx is a national 

prescription drug misuse prevention program that has been used in every state, at more than I 00 

colleges of pharmacy, and has provided more than a million people with tools and educational 

resources to prevent and address the issues that drive opioid abuse. More recently, Cardinal 

Health launched its Opioid Action Program (OAP), which has four elements, each of which has 

been cited by leading experts as essential to the fight to reduce opioid abuse and casualties. The 

OAP includes: I) partnership with a leading school of medicine to refine and share medical 

school curricula that address opioid abuse and treatment through a collaboration with over 20 

medical schools nationwide; 2) increased support of drug take back efforts to ensure excess 

medications arc not available for abuse; 3) grants for community organizations engaged in youth 

prevention education, prescriber opioid awareness and reduction efforts, and community 

responses to the epidemic; and 4) the distribution of overdose reversal drug Narcan free-ofcharge to first responders and law enforcement. Cardinal Health piloted OAP in four of the 

nation's hardest-hit states across Appalachia-Ohio, Kentucky, Tennessee, and West Virginiato help alleviate the opioid epidemic. 

6. Do you concur that filling suspicious orders is a direct and proximate cause o.lthe 

prescription opiate epidemic plaguing our country? 

Cardinal Health refers the Committee to the response to Question 3 above. 

7. Do you believe the prescription opiate epidemic is an immediate hazard to public health and 

salety? 

Cardinal Health refers the Committee to the response to Question 5 above. 

8. Do you believe the prescription opiate epidemic is a public nuisance? 

Cardinal Health refers the Committee to the response to Question 5 ahove. 

9. Are you aware ()/your company's efforts to detect, address, and report suspiciousZv large 

orders in West Virginia? 

Cardinal Health has invested significant resources to develop and operate a rigorous antidiversion system. Through its anti-diversion program, Cardinal Health employs technology and 

analytics to evaluate its customers and scrutinize orders to identify potentially suspicious orders. 

5 
171 


Responses of Cardinal Health, Inc. to Letter from Chairman Harper, dated May 31, 2018 

Cardinal Health reports potentially suspicious orders to federal and state authorities, including 

the West Virginia Board of Pharmacy. 

10. Are you aware that.fi!r years your company neverfo1lowed West Virginia's law by reporting 

all suspicious orders to the West Virginia Board <Jf Pharmacy? 

Cardinal Health produced documents to the Committee identifying over 1,900 potentially 

suspicious orders that were reported to West Virginia regulatory authorities. See CAII_llOUSE000024 and CAH_HOUSE-002299. 

11. Did your company have a policy that orders had to be less than 50% controlled substances 

to be .filled? 

Cardinal Health processes orders on a line item basis, meaning each order is for a single 

pharmaceutical product. As part of its anti-diversion program, Cardinal Health evaluates the 

controlled substance purchasing and non-controlled substance purchasing across a pharmacy's 

total orders, not within a particular order or subset of orders. Every Cardinal Health customer 

has an individualized threshold limit for all drug families of controlled substances Cardinal 

llealth distributes. The thresholds are based on various factors specific to the customer as well 

as analysis of third-party data detailing dispensing volumes of pharmacies nationwide. 

The Honorable Frank Pallone, Jr. 

1. Cardinal's responses to the Committee do not appear to include any suspicious orders 

submitted by Cardinal to DEA prior to 2012. But rhe opioid crisis was exploding during the mid2000s, and West Virginia has the highest death rate in the country from opioids. In retrospect, 

what could Cardinal have done to more proactively monitor its orders and help spot diversion? 

Cardinal Health has had a suspicious order monitoring process in place going back 

decades. From at least the late 1980's through approximately 2007, Cardinallleallh used the 

DEA's mandated algorithm to identify excessive purchases that were reported to DEA. See 

Drug Enforcement Administration, Office of Diversion Control Suspicious Order Task Force, 

Report to the U.S. Attorney General, October 1998, Ex. 11. Cardinal Health's system has been 

continually enhanced and improved as the diversion landscape has changed over time, and as 

DEA provided letters to industry and undertook enforcement actions. Cardinal Health takes its 

regulatory obligations seriously: on Cardinal Health's own initiative and in response to 

regulators, Cardinal Health has increased the size of its anti-diversion team, including bringing in 

personnel with additional regulatory, pharmaceutical, and law enforcement experience to further 

enhance the anti-diversion program. The company developed an analytical model to evaluate 

customers, assigned threshold ordering volumes, created a centralized database to store and track 

data on customers and orders, and designed new policies and procedures for anti-diversion 

personnel. No program can be perfect, which is why Cardinal Health is so focused on 

continuous improvement. 

The Honora hie Jan Schakowskv 

6 
172 


Responses of Cardinal Health, Inc. to Letter from Chairman Harper, dated May 31, 2018 

I. According to the DEA records, Cardinal Healrh paid $34 million in civil penalties to the DEA 

regarding allegations that youfailed to report suspicious orders, as required by the Controlled 

Substances Act. Do you accept and admit to this Committee that your company repeatedly 

shipped and failed to report suspicious orders? 

As was stated in Mr. Barrett's written testimony, despite the development of a quality 

anti-diversion system, Cardinal Health has not always gotten every decision right, and in the past 

has entered into settlements with regulators to address aspects of its anti-diversion program. The 

company has learned and improved from each of them. While no program can ever be perfect, 

the company's goal is always to get it right, and Cardinal Health has stopped suspicious orders 

for the shipment of hundreds of millions of dosage units of controlled substances over the last 

decade. Cardinal Health does not ship opioids to customers that it believes present a substantial 

risk of diversion, and does not ship orders it determines are suspicious. 

2. Does your company buy the drugsfrom the manufacturers, take title and move pallets to and 

fi'om your warehouse? Or are you like brokers, working on consignment, arranging sales to 

pharmacies and then taking a percentage C!f the sale price? 

ln the vast majority of cases, Cardinal Health buys medications from manufacturers, 

taking title to the product. Cardinal Health generally does not sell medications on a consignment 

arrangement. 

3. In setting prices to pharmacies, is your markup more like ajlat rate (for example, selling 55 

more than the price at which you bought), or is your markup more like a percentage (for 

example, selling for 5% higher than the price at which you bought)? 

Cardinal Health negotiates a variety of different pricing arrangements with its pharmacy 

customers depending on their needs and preferences. 

4. [, it possible that even if your company pays a higher price to get those drugs in stock, you 

end up making more money on those sales where your acquisition prices are higher? And would 

the same be true for your consignment/broker sales? 

Cardinal Health refers the Committee to the response to Question 3 ahove, 

7 
173 


GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

((ongre%% of tbt Wnlttb ~tate% 

1!)omie of i~epre£ientatil:le1i 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

Mi!lority (202.)225-2927 

Minority (202)225-3641 

May 31,2018 

Mr. Steven H. Collis 

Chairman, President, and CEO 

AmerisourceBcrgen Corporation 

1300 Morris Drive 

Chesterbrook, PA 19087 

Dear Mr. Collis: 

Thank you for appearing before the Subcommittee on Oversight and Investigations on May 8, 

2018, to testify at the hearing entitled "Combating the Opioid Epidemic: Examining Concerns About 

Distribution and Diversion." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which are 

attached. To facilitate the printing of the hearing record, please respond to these questions with a 

transmittal letter by the close of business nn Thursday, June 14, 2018. Your responses should be mailed to 

Ali Fulling, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office 

Building, Washington, DC 20515 and e-mailed in Word format to Ali.FuUing@maiLhouse.gov, 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

a;~~ Gregg ! iarper 

Chairman 

Subcommittee on Oversight and Investigations 

cc: The Honorable Diana DeGctte, Ranking Member, Subcommittee on Oversight and Investigations 

Attachment 
174 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourccBergen Drug Corporation 

The Honorable Gregg Harper 

I. Does AmerisourceBergen request dispensing data from both prospective and existing 

pharmacy customers as part of its due diligence efforts to mitigate controlled substance 

diversion'! If so, at what frequency does your company request this information and 

how is the dispensing data utilized? lf no, why not? 

Answer: ABDC does, at times, request dispensing data from both cutTcnt and prospective 

customers. There is no specific frequency at which dispensing data is requested from 

customers. When received, the dispensing data is reviewed to identify data patterns and 

trends that could be indicative of possible diversion, such as unusually high dispensing of 

formulations or strengths of controlled substances that are more likely to be abused. 

2. Docs H. D. Smith request dispensing data from both prospective and existing 

pharmacy customers as part of its due diligence efforts to mitigate controlled 

substance diversion'! If so, at what frequency does your company request this 

information and how is the dispensing data utilized? If no, wh)' not? 

Answer: H. D. Smith's customers are in the process of being integrated into the ABDC diversion 

control program and currently are treated in accordance with the response to Question I 

above. 

l!istorically, H. D. Smith did periodically request dispensing data from current or 

prospective customers, which was analyzed to identify patterns or trends indicative of 

possible diversion. 

3. In its contracts with pharmacy customers, is AmerisourceBcrgen able to require that a 

pharmacy produce dispensing data upon request? If so, does your company include 

such a requirement in the contracts it enters into with its pharmacy customers? If your 

company doesn't include such a requirement in its contracts, why not? 

Answer: ABDC's contracts with its pharmacy customers do not typically include a provision that 

would require its customers to provide dispensing data, although such contracts do provide 

that ABDC can reject customers' orders or place restrictions on the ordering of controlled 

substances at the discretion of ABDC's Diversion Control Team. Such restrictions can 

include declining to ship controlled substances to a customer who refuses to provide 

dispensing data when asked. Nevertheless, ABDC is evaluating additional measures 

it can take to enhance its Diversion Control Program and consider potential contractual 

amendments as part of that ongoing evaluation. 

4. In its contracts with pharmacy customers, is H. D. Smith able to require that a 

pharmacy produce dispensing data upon request? If so, docs your company include 

such a requirement in the contracts it enters into with its pharmacy customers? If your 

company doesn't include such a requirement in its contracts, why not? 

Answer: ! I. D. Smith will use ABDC contracts moving forward. 
175 


House Committee on Ener&'Y and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Hecord 

Hesponscs Submitted by Mr. Steven Collis 

on Behalf of AmcrisourceBergen Drug Corporation 

H. D. Smith's historic contracts with its pharmacy customers do not include a provision that 

would requlre its customers to provide dispensing data. H. D. Smith did, however, 

periodically request such data of its customers and a customer's refusal to comply with that 

request may have resulted in the termination of the ability to purchase controlled substances 

and potentially the termination of the account, if the customer never complied. 

5. As part of AmerisourceBergen's due diligence efforts related to prospective and existing 

customers, does your company review and maintain a list of the number of pharmacies 

that arc located in the prospective/existing customer's service region? If so, how long 

has that been your company's practice and bow does your company determine what a 

pharmacy's potential service region is? 

Answer: ABDC docs not use the term "service region." ABDC's diversion control program 

believes factors besides the size of a service community are more relevant to analyzing the 

customer's purchasing patterns, including the pharmacy's purchases of both controlled and 

non-controlled substances, and the type of patients being served by the pharmacy. 

Moreover. ABDC recognizes that a pharmacy in a small town may serve a population much 

larger than the town itself. ABDC does not have access to the geographic dispersal of 

patients served by a pharmacy because of patient privacy protections. 

Notwithstanding the above. as part of its diversion control program. ABDC docs compare 

purchasing patterns of customers served by the same distribution center, and ABDC does 

currently consider various factors involving the customer's geographic location in making 

decisions about suspicious orders. These factors include population. opioid overdose death 

rates and Medicare part D prescribing rates for opioids. 

6. As part of H. D. Smith's due diligence efforts related to prospective and existing 

customers, docs your company review and maintain a list of the number of 

pharmacies that are located in the prospective/existing customer's service region? If 

so, bow long has that been your company's practice and bow does your company 

determine what a pharmacy's potential service region is? 

Answer: H. D. Smith's customers arc in the process of being integrated into the 

AmerisourceBergcn diversion control program and currently are treated in accordance with 

the response to Question 5 above. 

Historically. H. D. Smith did occasionally consider the population of the town in which a 

pharmacy was located \Vhcn evaluating that pharmacy, but did not have access to 

information regarding the patient population being served by a pharmacy because of patient 

privacy protections. The size of the town being served was not always considered and was 

only one of the factors H. D. Smith used in evaluating pharmacies because the population of 

the town in which the pharmacy is located may he smaller or larger than the patient 

population being served. Other factors considered by H. D. Smith included the proximity of 

hospitals, long term care facilities and hospice centers \Vhcn evaluating customer orders. 

7. Does AmcrisourceBcrgen request dispensing data from both prospective and existing 

pharmacy customers as part of its due diligence efforts to mitigate controlled substance 
176 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBergen Drug Corporation 

diversion? If so, at what frequency does your company request this information and 

how is the dispensing data utilized? If no, why not? 

Answer: ABDC does, at times, request dispensing data from both current and prospective 

customers. There is no specific frequency at which dispensing data is requested from 

customers. When received, the dispensing data is reviewed to identify data patterns and 

trends that could be indicative of possible diversion, such as unusually high dispensing of 

formulations or strengths of controlled substances that are more likely to be abused. 

8. Does H. D. Smith request dispensing data from both prospective and existing pharmacy 

customers as part of its due diligence efforts to mitigate controlled substance diversion? 

If so, at what frequency does your company request this information and how is the 

dispensing data utilized? If no, why not? 

Answer: H. D. Smith's customers are in the process of being integrated into the 

AmerisourceBergen diversion control program and currently are treated in accordance with 

the response to Question 1 above. 

Historically, H. D. Smith did periodically request dispensing data !rom current or 

prospective customers, which was analyzed to identify patterns or trends indicative of 

possible diversion. 

9. In its contracts with pharmacy customers, is AmerisourceUergen able to require that a 

pharmacy produce dispensing data upon request? If so, does your company include 

such a requirement in the contracts it enters into with its pharmacy customers? If 

your company doesn't include such a requirement in its contracts, why not? 

Answer: ABDC's contracts with its pharmacy customers do not typically include a provision that 

would require its customers to provide dispensing data, although such contracts do provide 

that ABDC can reject customers' orders or place restrictions on the ordering of controlled 

substances at the discretion of ABDC's Diversion Control Team. ABDC can also decline to 

ship controlled substances to a customer who refuses to provide dispensing data when asked, 

so a separate contractual provision regarding dispensing data is not needed to achieve the 

goals of ABDC's Diversion Control Program. 

10. In its contracts with pharmacy customers, is H. D. Smith able to require that a 

pharmacy produce dispensing data upon request? If so, does your company include 

such a requirement in the contracts it enters into with its pharmacy customers? If your 

company doesn't include such a requirement in its contracts, why not? 

Answer: H. D. Smith will use ABDC contracts moving forward. 

H. D. Smith's historic contracts with its pharmacy customers do not include a provision that 

would require its customers to provide dispensing data. H. D. Smith did, however, 

periodically request such data of its customers and a customer's refusal to comply with that 

request may have resulted in the termination of the ability to purchase controlled substances 

and potentially the termination of the account, if the customer never complied. 
177 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBergen Drug Corporation 

ll . As part of AmerisourceBergen's due diligence efforts related to prospective and 

existing customers, docs your company review and maintain a list of the number of 

pharmacies that are located in the prospective/existing customer's service region'! If so, 

how long bas that been your company's practice and how does your company 

determine what a pharmacy's potential service region is? 

Answer: ABDC does not use the term "service region.~' ABDC's diversion control program 

believes factors besides the size of a service community are more relevant to analyzing the 

customer's purchasing patterns. including the pharmacy's purchases of both controlled and 

non-controlled substances, and the type of patients being served by the pharmacy. 

Moreover, ABDC recognizes that a pharmacy in a small town may serve a population much 

larger than the town itself. ABDC does not have access to the geographic dispersal of 

patients served by a pharmacy because of patient privacy protections. 

Notwithstanding the above, as part of its diversion control program, ABDC does compare 

purchasing patterns of customers served by the same distribution center, and ABDC does 

currently consider various factors involving the customer's geographic location in making 

decisions about suspicious orders. These factors include population, opioid overdose death 

rates and Medicare part D prescribing rates for opioids. 

ABDC does not maintain a list of pharmacies by potential geographic reach as doing so 

would have with little meaningful impact on ABDC's ability to evaluate its customers' 

orders. The retail pharmacy community is constantly shifting, with the opening of new 

pharmacies and the closure of existing pharmacies a regular occurrence. Even assuming 

the ability to track this activity, simply knowing the number ofphannacies servicing a 

particular geographic region would have limited value to the wholesale distributor without 

knowing the patient community that each pharmacy is servicing, how many and what 

controlled substances distributors are supplying to those pharmacies and what precisely 

those pharmacies are dispensing to their patient customers. 

12. As part of H. D. Smith's due diligence efforts related to prospective and existing 

customers, does your company review and maintain a list of the number of pharmacies 

that are located in the prospective/existing customer's service region? If so, how long 

has that been your company's practice and how does your company determine what a 

pharmacy's potential service region is? 

Answer: H. D. Smith's customers are in the process of being integrated into the 

AmcrisourceBergen diversion control program and currently arc treated in accordance with 

the response to Question 5 above. 

H. D. Smith did not use the term "service region." Historically, H. D. Smith did occasionally 

consider the population of the town in which a pharmacy was located when evaluating that 

pharmacy, but did not have access to intormation regarding the patient population being 

serviced by a pharmacy, which may be smaller or larger than the population of the town in 

which the pharmacy was located, because of patient privacy protections. The size of the 

town being serviced was not always considered and was only one of the factors H. D. Smith 

used in evaluating pharmacies. Other factors considered by H. D. Smith included the 

4 
178 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of ArnerisourceBergen Drug Corporation 

proximity of hospitals, long term care facilities and hospice centers \Vben evaluating 

customer orders. 

13. Why did AmerisourccBergen begin doing business with Beckley Pharmacy in 2016 

after cutting the pharmacy off as a customer in 2015? 

Answer: In 2016, Beckley Pharmacy sought reconsideration of the decision to terminate sales of 

controlled substances to the pharmacy. At that time, ABDC requested de-identified 

dispensing data from the pharmacy, which the pharmacy provided. A detailed review of that 

dispensing data revealed that several of the concerns that had resulted in the pharmacy's 

termination of ability to purchase controlled substances had been alleviated. As a result of 

that review, ABDC concluded that there was a reduced risk of diversion at the pharmacy 

which made allowing the pharmacy to purchase controlled substances appropriate. Beckley 

Pharmacy's purchases continue to be processed through ABDC's Diversion Control 

Program, which will allow ABDC to continue to monitor for signs of possible diversion 

from the pharmacy and take appropriate action again, if necessary. 
179 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBcrgen Drug Corporation 

The Honorable Michael C. Burgess 

1. While your companies seem to have put forth effort to improve your system of flagging 

possible drug diversion, there remains work to be done. In February, the Drug 

Enforcement Administration announced that it would begin sharing select data it 

collects on controlled substance prescriptions with drug distributors. Have your 

companies been able to access that data, and if so, has it been useful? 

Answer: ABDC has accessed the information on purchasing by other distributors referenced in 

the DEA ·s February 14, 2018 press release and has found it useful, but with certain 

limitations. \Vhile knowing that a customer has purchased opioids from other suppliers can 

help to inform decisions. not knowing the quantities of such products purchased limits the 

utility of that information. 

2. What is the largest hurdle you face as your companies scale up your diversion 

prevention activities? Is data-sharing, or lack thereof, the primary challenge? 

Answer: ABDC has had in place since the 1980s a robust diversion control program. ABDC has 

continually enhanced and upgraded this comprehensive program over time and continues to 

do so to this day. We believe the lack of data sharing and transparency is certainly a 

challenge to our diversion control efforts. It is, however, only one of the challenges ABDC 

faces in its diversion control program. For example, ABDC's limited role in the supply 

chain also presents challenges when evaluating pharmacy orders; as a result of its limited 

role, ABDC has no access to patient-specific data, no access to prescriptions, no access to 

medical records, and no way to evaluate the legitimacy of patient need. 

3. Throughout each of your written testimonies, you mentioned your efforts to report 

suspicious orders to the DEA, and in cases that exceed the volume threshold, you stop 

the orders entirely. Where is the line drawn between drug manufacturers and the J)EA 

in responding to suspicious orders? Does the DEA take enforcement action after you 

report the suspicious order'! 

Answer: As a preliminary matter. orders placed by ABDC's customers that exceed that 

customer's threshold are held and evaluated to determine whether that order is suspicious. If 

the determination was made that the order is suspicious, it is cancelled and reported to DEA. 

If, hmvever, after evaluation of the order, ABDC determines that the order is not suspicious, 

it is released and shipped to the customer. 

ABDC does not know whether DEA shares suspicious order reports with drug 

manufacturers, or even with DEA's own local field oftices. ABDC does not provide its 

suspicious order reports to any drug manufacturers. 

ABDC does not have visibility into DEA 's internal processes and does not know how DEA 

processes, analyzes and uses the suspicious order data it provides. ABDC does know that 

pharmacies remain DEA-Iicensed even after suspicious orders are reported. 

6 
180 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourccBcrgen Drug Corporation 

4. Distributors and other pieces of the drug supply chain have a responsibility to help 

prevent diversion. What can Congress do legislatively to strengthen oversight of that 

supply chain? 

Answer: Af3DC would welcome the following measures: 

greater supply chain data transparency (including ARCOS data sharing and/or data 

sharing among distributors); 

additional resources for patient and prescriber education and medication safe storage and 

disposal; 

additional support fore-prescribing; 

mandating the use of electronic ordering for controlled substances; 

notice to distributors when one of its customers has ordered controlled substances from 

another distributor including the amount of the order- before the order is processed; 

additional funding for DEA IT enhancement and future enforcement; 

creation of new DEA registration classifications, such as Pain Specialty Pharmacy, that 

would require more in-depth investigation by DEA and Boards of Pharmacy and allow 

greater scrutiny by distributors; and 

enhancing state prescription drug monitoring programs, 

7 
181 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBergen Drug Corporation 

The Honorable David B. McKinley 

1. As a Wholesale Histributor of prescription opiates, do you agree that you owe a duty 

under federal law to monitor, detect, investigate, refuse and report suspicious orders? 

21 U.S.C. § 823, 21 CFR 1301.74 

Answer: ABDC acknowledges the provisions of21 U.S. C.§ 823 and 21 CFR 1301.74. ABDC 

administers a robust anti-diversion program in order to meet, and in fact exceed. the 

requirements imposed on it as a distributor. ABDC's Order Monitoring Program ("OMP") 

is the means by which the Company monitors for and reports suspicious orders of controlled 

substances and listed chemicals. The OMP is a multi-faceted approach to awareness, 

monitoring, investigation, and reporting overseen by ABDC Corporate Security and 

Regulatory Affairs (''CSRA"). 

2. Do you agree that the foreseeable harm of a breach of this duty is the diversion of 

prescription opiates for nonmedical purposes? 

Answer: AB DC has operated a system to monitor, detect and report suspicious orders to the 

DEA for many decades. ABDC invests significantly in its effort to deter diversion, but there 

arc unavoidable limits to ABDC's ability to monitor and prevent diversion given its limited 

role in the supply chain. ABDC has no access to patient-specific data, no access to 

prescriptions. no access to medical records, and no way to evaluate the legitimacy of patient 

need. ABDC has no control over, nor input into, the amount of controlled substances that 

are produced in a given year. Instead, production quotas are set by the DEA with input from 

manufacturers. Nor is ABDC involved in the licensing and regulation of the medical and 

pharmaceutical professionals who actually prescribe or dispense controlled substances. That 

responsibility belongs to federal and state governmental agencies, including the DEA. 

Finally, ABDC docs not promote the prescribing or use of opioids to physicians, hcalthcare 

providers or patients. 

3. In other words, if you ship a suspicious order, it is likely that prescription opiates will be 

diverted into the illicit market. Agree? 

Answer: ABDC does not ship the orders it reports as suspicious. In an effort to comply with all 

regulatory requirements, ensure a safe delivery system, and help address this crisis, ABDC 

has implemented rigorous antiwdivcrsion policies and procedures and is actively engaged in 

various industry and policy group initiatives that support the fight against opioid abuse. 

4. Do you concur that filling suspicious orders is a direct and proximate cause of 

prescription opiate abuse, addiction, morbidity and mortality? 

Answer: ABDC identifies and reports suspicious orders. ABDC does not fill any suspicious 

orders. 

Prescription opioid abuse is a multi-faceted problem with many causes. As a distributor, 

ABDC plays a limited role in the distribution chain for prescription opioids. ABDC (I) is 

not involved in obtaining FDA approval for opioids, labeling or warning about opioids, 

setting guidelines for prescribing opioids, or promoting the prescribing or use of opioids to 
182 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBergen Drug Corporation 

pharmacies. physicians, or patients; (2) has no control over the amount of controlled 

substances that are produced in a given year (instead, production quotas are set by the DEA 

with input from manufacturers); (3) is not involved in the licensing and regulation of the 

medical and pharmaceutical professionals who actually prescribe or dispense controlled 

substances (that responsibility belongs to federal and state governmental agencies, including 

the DEA); and ( 4) docs not receive or have access to any prescription-level information or 

other patient-specific data. 

5. Do you agree the United States is in the midst of a prescription opiate 

epidemic? 

Answer: ABDC shares the Committee's concern about the tragic epidemic of opioid abuse. 

ABDC desires to be part of much-needed, and unquestionably multi-faceted, solutions to 

address this public health crisis. 

To that end, AmerisourceBergen funded a grant to the Health Care Improvement Fund to 

support prescriber education for post-surgical procedures. Amerisourceflergen has also 

partnered with Walgreens to support the safe disposal of unused controlled substances and 

has provided drug disposal bags to multiple communities to assist with the disposal of 

unused controlled substances. 

AmerisourccBergen also supports mandatory e-prcscribing. which would generate real-time 

information on opioid use and reduce the number of opioids obtained through fraudulent 

prescriptions or doctor shopping. We support policies to make state PDMPs interoperable. 

which would allow physicians and regulators to detenninc if patients are obtaining 

prescriptions from physicians in more than one state. We are also the only distributor 

member of the Collaborative for Effective Prescription Opioid Policies ("CEPOP"), which 

supports policies to reduce prescription opioid abuse and promote treatment options. 

AmerisourceBcrgcn is also eager to collaborate with policymakers and stakeholders 

throughout the pharmaceutical supply chain to improve distributors' ability to assess and act 

on possibly suspicious orders of prescription opioids. As part of the National Association of 

Drug Diversion Investigators, J\merisourccBergen has presented on effectively combatting 

drug diversion at the distribution level and collaborating with law enforcement. 

Amerisourcel3ergen also supports increased fees for DEA registration to help support such 

enhanced data capabilities. 

6. Do you concur that filling suspicious orders is a direct and proximate cause of 

the prescription opiate epidemic plaguing our country? 

Answer: ABDC identifies and reports suspicious orders. ABDC does not fill any suspicious 

orders. 

The prescription opioid epidemic is a multi-faceted problem with many causes. As a 

distributor. ABDC plays a limited role in the distribution chain for prescription opioids. 

ABDC (1) is not involved in obtaining FDA approval for opioids, labeling or warning about 

opioids, setting guidelines for prescribing opioids, or promoting the prescribing or use of 

opioids to pharmacies, physicians. or patients; (2) has no control over the amount of 

9 
183 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBergen Drug Corporation 

controlled substances that are produced in a given year (instead, production quotas are set by 

the DEA with input from manufacturers); (3) is not involved in the licensing and regulation 

of the medical and pharmaceutical professionals who actually prescribe or dispense 

controlled substances (that responsibility belongs to federal and state governmental agencies, 

including the DEA); and (4) does not receive or have access to any prescription-level 

information or other patientMspecific data. 

7. Do you believe the prescription opiate epidemic is au immediate hazard to public health 

and safety? 

Answer: The prescription opioid epidemic is a complex problem that affects many aspects of our 

society. As a distributor, ABDC plays a limited role in the distribution chain for prescription 

opioids. ABDC (I) is not involved in obtaining FDA approval for opioids, labeling or 

warning about opioids, setting guidelines for prescribing opioids, or promoting the 

prescribing or use of opioids to pharmacies, physicians, or patients; (2) has no control over 

the amount of controlled substances that are produced in a given year (instead, production 

quotas arc set by the DEA with input from manufacturers); (3) is not involved in the 

licensing and regulation of the medical and pharmaceutical professionals who actually 

prescribe or dispense controlled substances (that responsibility belongs to federal and state 

governmental agencies, including the DEA); and (4) docs not receive or have access to any 

prescriptionMlevcl information or other patient-specific data. 

8. Do you believe the prescription opiate epidemic is a public nuisance? 

Answer: The prescription opioid epidemic is a complex problem that affects many aspects of our 

society. As a distributor, ABDC plays a limited role in the distribution chain for prescription 

opioids. ABDC (!)is not involved in obtaining FDA approval for opioids, labeling or 

warning about opioids, setting guidelines for prescribing opioids, or promoting the 

prescribing or use of opioids to pharmacies, physicians, or patients; (2) has no control over 

the amount of controlled substances that are produced in a given year (instead, production 

quotas are set by the DEA with input from manufacturers); (3) is not involved in the 

licensing and regulation of the medical and pharmaceutical professionals who actually 

prescribe or dispense controlled substances (that responsibility belongs to federal and state 

governmental agencies, including the DEA); and ( 4) does not receive or have access to any 

prescription-level information or other patient-specific data. 

9. Are you aware of your company's efforts to detect, address, and report suspiciously large 

orders in West Virginia? 

Answer: Since at least the 1980s, AmerlsourceBcrgen Drug Corporation has had in place a 

system to monitor the orders it receives, the OMP. We worked with the DEA to enhance the 

system in 1998, and again in 2007, and have continually reviewed and improved it, including 

a comprehensive 2015 revision to build on current data, respond to trends in prescription 

drug abuse, and adopt improved technological capabilities, including data-driven analytical 

tools. ABDC's Order Monitoring Program has been consistent with DEA's guidance, 

including the September 2006, February 2007, and December 2007 letters sent by DEA to 

the distributors. 

10 
184 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBergen Drug Corporation 

10. Are you aware that for years your company never followed West Virginia's law by 

reporting all suspicious orders to the West Virginia Board of Pharmacy? 

Answer: ABDC reached out to the West Virginia Board of Pharmacy multiple times, including 

in 2012 after the litigation filed against ABDC on behalf of the Attorney General and certain 

West Virginia agencies was filed. During the course of those conversations, ABDC was 

instructed that it was not required to report suspicious orders to the West Virginia Board of 

Pharmacy as long as those orders were reported to DEA. Since that time, the head of the 

West Virginia Board of Pharmacy has repeatedly stated publicly, and testified in the 

litigation, that the West Virginia Board of Pharmacy received very few suspicious order 

reports prior to 2012 and, when it started to receive suspicious orders, took no action in 

response to those orders. ABDC began providing suspicious order reports to the West 

Virginia Board of Pharmacy in early 2017, once it received instruction to do so. 

11. Did your company have a policy that orders had to be less than so•;., 

controlled substances to be filled? 

Answer: While ABDC docs not have such a policy, the percentages of controlled substances 

purchased by its customers is one of the factors monitored by ABDC as part of its diversion 

control program. 

Within West Virginia, controlled substances were only 3.9% of all ABDC 

prescription drug sales by dosage unit and 2.1% of all ABDC prescription drug 

sales by dollar value. 

]] 
185 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBergen Drug Corporation 

The Honorable Frank Pallone •• Jr. 

1. In AmerisourceBergen's response to the Committee, you provided the number of pills 

the company distributed to West Virginia. In 2016, AmerisourceBergen shipped about 

6 million hydrocodone pills. But back in 2008 and 2009, AmerisourceBergen shipped 

16.2 million and 17.5 million pills annually. What explains why in 2009 

AmerisourceBergen shipped nearly 3 times the amount the company would later ship 

in 2016? Did additional due diligence or recognition of the unfolding opioid crisis lead 

AmerisourceBergen to ship far fewer pills in the later years than in 2008 and 2009? 

Were there other factors? 

Answer: The primary driver of ABDC's sales is and always has been the orders placed by its 

customers, licensed and regulated pharmacies, to fill prescriptions written by licensed and 

regulated practitioners. ABDC monitors orders placed by its customers and reports 

suspicious orders to the DEA, and did so in both 2008/2009 and in 2016. In addition to its 

suspicious order monitoring, All DC conducted due diligence on prospective customers and 

monitored its current customers. As a result of that additional due diligence, ABDC refused 

to sell controlled substances to a number of pharmacies that were licensed to be able to 

purchase those products. 

There are many factors that could have resulted in the reduction in orders placed by 

customers in West Virginia, including changes in physician prescribing practices that may 

have resulted in reduced ordering by pharmacies. 

12 
186 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. Steven Collis 

on Behalf of AmerisourceBergen Drug Corporation 

The Honorable Jan Schakowsky 

I. Does your company buy the drugs from the manufacturers, take title and move pallets to 

and from your warehouse? Or are you like brokers, working on consignment, 

arranging sales to pharmacies and then taking a percentage of the sale price? 

Answer: ABDC purchases prescription medications, including controlled substances, from the 

manufacturers. ABDC typically takes title to the product it sells but does. in limited 

circumstances, facilitate shipments directly from a manufacturer to a pharmacy. 

2. In setting prices to pharmacies, is your markup more like a flat rate (for example, selling 

$5 more than the price at which you bought), or is your markup more like a percentage 

(for example, selling for 5% higher than the price at which you bought)? 

Answer: ABDC sells some products at a mark-up (profit) and some products at a mark-down 

(loss). The price structure varies depending on product and contract As a general matter, 

however. ABDC makes approximately I% net profit on its entire suite of products. 

3. Is it possible that even if your company pays a higher price to get those drugs in stock, 

you end up making more money on those sales where your acquisition prices are 

higher? And would the same be true for your consignment/broker sales? 

Answer: ABDC sells some products at a mark-up (profit) and some products at a mark-down 

(loss). The price structure varies depending on product and contract As a general matter, 

however, ABDC makes approximately 1 ~/o net profit on its entire suite of products. 

13 
187 


GREG WALDEN, OHEGON 

CHAIRMAN 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

ONE HUNDRED FIFTEENTH CONGRESS 

!!ongress of tbe W'niteb $tates ~ouse of 3l\cpresentati\Jcs 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

Mr. J, Christopher Smith 

Former President and CEO 

H.D.Smith 

C/o AmerisourceBergen Corporation 

1300 Morris Drive 

Chesterbrook, PA 19087 

Dear Mr. Smith: 

[202)225-2927 

(202)225-3641 

May 31,2018 

Thank you for appearing before the Subcommittee on Oversight and Investigations on May 8, 

2018, to testify at the hearing entitled ''Combating the Opioid Epidemic: Examining Concerns About 

Distributicn and Diversion." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which are 

attached. To facilitate the printing of the hearing record, please respond to these questions with a 

transmittal letter by the close of business on Thursday, June 14,2018. Your responses should be mailed to 

Ali Fulling, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office 

Building, Washington, DC 20515 and c-mailcd in Word format to Ali.Fulling@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Gregg Harper 

Chairman 

Subcommittee on Oversight and Jnvt.!stigations 

cc: The Honorable Diana DcGette, Ranking Member, Subcommittee on Oversight and Investigations 

Attachment 
188 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr . .James Christopher Smith 

on Behalf of H. D. Smith, LLC 

The Honorable Michael C. Burgess 

1. While your companies seem to have put forth effort to improve your system of !lagging 

possible drug diversion, there remains work to be done. In February, the Drug 

Enforcement Administration announced that it would begin sharing select data il collects 

on controlled substance prescriptions with drug distributors. Have your companies been 

able to access that data, and if so, bas it been useful? 

Answer: AmerisourceBcrgen began its acquisition of H. D. Smith in late 2017, which was 

consummated on January 2, 2018. before this data was made available, and thus H. D. Smith has 

had no experience with it. It is true that the DEA added a new feature to its ARCOS Online 

Reporting System which allows DEA-rcgistered manufacturers and distributors to view the 

number of competitor companies who have sold a particular controlled substance to a prospective 

customer in the last six months. 

2. What is the largest hurdle you face as your companies scale up your diversion prevention 

activities? Is data-sharing, or lack thereof, the primary challenge? 

Answer: H. D. Smith had in place a robust diversion control program, continually enhanced and 

upgraded its program over time, and was in frequent contact with the DEA while developing and 

then continuously components of the program. 

For H. D. Smith, a lack of data sharing and transparency was the primary challenge to our 

diversion control efforts. We did not have access to information that would allow us to verify 

whether a particular pharmacy was purchasing from other suppliers, and until very recently did 

not have access to any prescriber information unless a particular pharmacy voluntarily supplied it. 

3. Throughout each of your written testimonies, you mentioned your efforts to report 

suspicious orders to the DEA, and in cases that exceed the volume threshold, you stop the 

orders entirely. Where is the line drawn between drug manufacturers and the DEA in 

responding to suspicious orders? Docs the DEA take enforcement action after you report 

the suspicious order? 

Answer: Beginning in 2008 when our automated Controlled Substance Monitoring Program 

("CSOMP") system was put in place, orders placed by H. D. Smith's customers that "triggered" 

the system were held from shipment and evaluated to determine whether the order was 

suspicious. For a period of time, orders were reported to the DEA as suspicious as soon as they 

were held and flagged for evaluation. However, in response to feedback from DEA, we 

subsequently reported orders to the DEA as suspicious only when a determination was made that 

an order was suspicious, and was cancelled. 

At no time did the DEA ever share any suspicious order reports made by others with respect to 

orders placed by any West Virginia pharmacy. H. D. Smith docs not know whether the DEA 

shared suspicious order reports made by wholesale drug distributors with drug manufacturers. H. 

D. Smith did not provide its suspicious order reports to any drug manufacturers. 
189 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. James Christopher Smith 

on Behalf of H.D. Smith, LLC 

H. D. Smith did not have visibility into DEA's internal processes and did not know how the DEA 

processes, analyzes or uses the suspicious order data the company provided to the agency. 

4. Distributors and other pieces of the drug supply chain have a responsibility to help prevent 

diversion. What can Congress do legislatively to strengthen oversight of that supply chain? 

Answer: Congress should focus on issues such as: enhanced supply chain data transparency 

(including ARCOS data sharing and/or data sharing among distributors), additional resources for 

education and medication safe storage and disposal, and additional support fore-prescribing and 

enhancing interoperable prescription drug monitoring programs. 

2 
190 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. James Christopher Smith 

on Uehalf of H.D. Smith, LLC 

The Honorable David B. McKinley 

l. As a Wholesale Distributor of prescription opiates, do you agree that you owe a duty under 

federal law to monitor, detect, investigate, refuse and report suspicious orders? 21 U.S. C. § 

823, 21 CFR 1301.74 

Answer: H. D. Smith has always acknowledged its duties pursuant to the applicable laws. We 

administered a robust anti-diversion program in order to meet, and in fact exceed, the requirements 

imposed on it as a distributor. H. D. Smith's CSOMP system allowed us to monitor for suspicious 

orders of controlled substances, and we also maintained complementary programs such as our 

robust ·'Know Your Customer•· policies and procedures in connection with its regular education 

and training of personnel in anti-diversion efforts. 

2. Do you agree that the foreseeable harm of a breach of this duty is the diversion of 

prescription opiates for nonmedical purposes? 

Answer: H. D. Smith operated a system to monitor, detect, block, and report suspicious orders to 

the DEA. H. D. Smith invested significantly in our efforts to deter diversion, but there were 

unavoidable limits to our ability to monitor and prevent diversion given our limited role in the 

supply chain. For example, distributors such as H. D. Smith have no control over, nor input into, 

the amount of controlled substances that are produced in a given year. Instead, production quotas 

are set by the DEA with input from manufacturers. Nor are distributors involved in the licensing 

and regulation of the medical and pharmaceutical professionals who actually prescribe or 

dispense controlled substances. That responsibility belongs to federal and state governmental 

agencies, including the DEA. Finally, distributors do not promote opioids to physicians, 

healthcare providers or patients. 

3. In other words, if you ship a suspicious order, it is likely that prescription opiates will be 

diverted into the illicit market. Agree? 

Answer: Beginning in 2008, H. D. Smith automatically blocked any pharmacy order that 

triggered our CSOMP program by appearing "of interest." H. D. Smith maintained that block 

unless and until our due diligence demonstrated that the particular order was in fact not a 

suspicious one. 

4. Do you concur that filling suspicious orders is a direct and proximate cause of prescription 

opiate abuse, addiction, morbidity and mortality? 

Answer: Beginning in 2008, I!. D. Smith automatically blocked any pharmacy order that 

triggered our CSOMP program by appearing "of interest." 11. D. Smith maintained that block 

unless and until our due diligence demonstrated that the particular order was in fact not a 

suspicious one. H. D. Smith identified and reported suspicious orders, and did not ship any 

suspicious orders. 

Prescription opiate abuse is a multi-faceted problem with many causes. Distributors play a 

limited role in the distribution chain for prescription opioids. They (I) are not involved in 
191 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. James Christopher Smith 

on BehalfofH.D. Smith, LLC 

obtaining FDA approval for opioids, labeling or warning about opioids, setting guidelines for 

prescribing opioids, or marketing opioids to pharmacies, physicians, or patients; (2) have no 

control over the amount of controlled substances that arc produced in a given year (instead, 

production quotas arc set by the DEA with input from manufacturers); (3) are not involved in the 

licensing and regulation of the medical and pharmaceutical professionals who actually prescribe 

or dispense controlled substances (that responsibility belongs to federal and state governmental 

agencies, including the DEA); (4) do not receive or have access to any prescription-level 

information. unless a pharmacy voluntarily supplies that information; and (5) do not have access 

to any state prescription drug monitoring program information. 

5. Do you agree the United States is in the midst of a prescription opiate epidemic? 

Answer: H. D. Smith has shared the Committee's concern about the tragic epidemic of opioid 

abuse. H. D. Smith has always desired and tried to be part of much-needed. and unquestionably 

multi-faceted, solutions to address this public health crisis. for example, our efforts are evidenced 

in part by the implementation of our robust CSOMP and training programs, particularly with 

respect to the reporting not just of suspicious orders but also of potentially problematic individual 

prescribers. 

6. Do you concur that filling suspicious orders is a direct and proximate cause of the 

prescription opiate epidemic plaguing our country? 

Answer: Beginning in 2008, H. D. Smith automatically blocked any pharmacy order that 

triggered its CSOMP program by appearing "of interest." H. D. Smith maintained that block 

unless and until our due diligence demonstrated that the particular order was in fact not a 

suspicious one. 

Prescription opiate abuse is a multi-faceted problem with many causes. Distributors play a 

limited role in the distribution chain for prescription opioids. Distributors (I) are not involved in 

obtaining FDA approval for opioids, labeling or warning about opioids, setting guidelines for 

prescribing opioids, or marketing opioids to pharmacies, physicians, or patients; (2) have no 

control over the amount of controlled substances that are produced in a given year (instead, 

production quotas are set by the DEA \Vith input from manufacturers); (3) arc not involved in the 

licensing and regulation of the medical and pharmaceutical professionals who actually prescribe 

or dispense controlled substances (that responsibility belongs to federal and state governmental 

agencies, including the DEA); (4) do not receive or have access to any prescription-level 

information, unless a pharmacy voluntarily supplies that information; and (5) do not have access 

to any state prescription drug monitoring program information. 

7. Do you believe the prescription opiate epidemic is an immediate hazard to public health and 

safety? 

Answer: Prescription opiate abuse is a complex problem that affects many aspects of our society. 

Distributors play a limited role in the distribution chain for prescription opioids. Distributors ( l) 

are not involved in obtaining FDA approval for opioids, labeling or warning about opioids, 

setting guidelines for prescribing opioids. or marketing opioids to pharmacies, physicians, or 

patients; (2) have no control over the amount of controlled substances that are produced in a 

4 
192 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. James Christopher Smith 

on BchalfofH.D. Smith, LLC 

given year (instead, production quotas are set by the DEA with input from manufacturers); (3) are 

not involved in the licensing and regulation of the medical and pharmaceutical professionals who 

actually prescribe or dispense controlled substances (that responsibility belongs to federal and 

state governmental agencies, including the DEA); ( 4) do not receive or have access to any 

prescription-level information unless a pharmacy voluntarily supplies that information; and (5) do 

not have access to any state prescription drug monitoring program information. 

8. Do you believe the prescription opiate epidemic is a public nuisance? 

Answer: Prescription opiate abuse is a complex problem that affects many aspects of our society. 

Distributors play a limited role in the distribution chain for prescription opioids. Distributors (l) 

are not involved in obtaining FDA approval for opioids, labeling or warning about opioids, 

setting guidelines for prescribing opioids, or marketing opioids to pharmacies, physicians, or 

patients; (2) have no control over the amount of controlled substances that are produced in a 

given year (instead, production quotas are set by the DEA with input from manufacturers); (3) are 

not involved in the licensing and regulation of the medical and pharmaceutical professionals who 

actually prescribe or dispense controlled substances (that responsibility belongs to federal and 

state governmental agencies, including the DEA); (4) do not receive or have access to any 

prescription-level information unless a pharmacy voluntarily supplies that information; and (5) do 

not have access to any state prescription drug program monitoring information. 

9. Arc you aware of your company's efforts to detect, address, and report suspiciously large 

orders in West Virginia? 

Answer: H. D. Smith's CSOMP system was specifically designed to identify potential suspicious 

orders before the orders are shipped. The CSOMP system was used across all areas of the country 

that we served, including for customers in West Virginia. The development of H. D. Smith's 

CSOMP was consistent with DEA's guidance, including the September 2006, February 2007, and 

December 2007 letters sent by DEA to the distributors, 

H, D. Smith reported to the DEA all suspicious orders, including those in West Virginia. Between 

2008 and 2009, we reported many suspicious orders to the DEA from West Virginia customers. 

Although gathering dispensing and prescribing data from customers was often difficult, if H. [), 

Smith could obtain it, we were able to analyze such information to great effect along with the data 

collected by way ofCSOMP. For example, in February 2008, we requested, obtained, and 

evaluated data from West Virginia customers Hurley Drug Company, Tug Valley Pharmacy, and 

Sav-Rite No.1/Strosnider Pharmacy. We concluded that two physicians were frequently writing 

prescriptions for hydrocodone, and that their patterns were cause for concern. H. D. Smith 

reported our analysis and concerns to the DEA on April 25, 2008, and cooperated with additional 

follow-up requests from the DEA. 

10. Are you aware that for years your compauy never followed West Virginia's law by 

reporting all suspicious orders to the West Virginia Board of Pharmacy? 

Answer: No, H. D. Smith did not always report suspicious orders to the West Virginia Board of 

Pharmacy because we believed it was not required to do so. At the time, H. D. Smith was 
193 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Hecord 

Hesponses Submitted by Mr. James Christopher Smith 

on BehalfofH.D. Smith, LLC 

classified as an out-of-state permit holder (as opposed to an in-state licensee), and one of our 

employees was told by the West Virginia Board of Pharmacy that we were required to comply 

with the West Virginia Controlled Substances Act, but that the Board of Pharmacy regulations 

(which include suspicious order reporting to the Board) did not apply to us as a permittee. 

Additionally, the head of the West Virginia Board of Pharmacy has repeatedly stated publicly, 

and testified in litigation, that the West Virginia Board of Pharmacy received very few suspicious 

order reports prior to 2012 and, when it started to receive suspicious orders, took no action in 

response to those orders. Since then, to the extent H. D. Smith reported a suspicious order to the 

DEA, it also repor1ed that order to the West Virginia Board of Pharmacy. 

It is also worth noting that West Virginia was an "early adopter," in 1995, of a Prescription Drug 

Monitoring Program. The program is extremely detailed and comprehensive, and requires every 

prescriber and every dispenser in the state to report every controlled substance pill prescribed and 

dispensed at least daily. The DEA, the State Police, all medical licensing boards, etc., have 

unlimited access to this database. The Legislature charges the Board with several duties, 

including the duty to capture and report on "abnormal or unusual practices of patients and 

prescribers." 

II. Did your company have a policy that orders bad to be less than 50% controlled substances 

to be filled? 

Answer: H. D. Smith did not have such a policy. However, all prospective customers were asked 

when filling out new customer forms what percentage of their orders they expected would be 

controlled substances. Additionally, H. D. Smith's CSOMP system took into account the ratios 

between purchases of controlled substances and purchases of other prescription and over-thecounter products by its customers. That ratio was closely monitored to identify any issues of 

concern regarding potential diversion activity. 

6 
194 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. James Christophe•· Smith 

on Behalf of H.D. Smith, LLC 

The Honorable Frank Pallone, Jr. 

1. In one of the documents H. D. Smith provided to the Committee, you list the total 

hydrocodone and oxycodone pills sold by H. D. Smith to purchasers in West Virginia from 

2006 through 2017. According to that information, H.D. Smith sent over 17 million 

hydrocodone and oxycodone pills to West Virginia between 2007 and 2011. That includes 6 

million pills sent to the state in 2008 alone. But H.D. Smith's shipments to West Virginia 

plummeted in later years. For example, H.D. Smith provided 583,400 hydrocodone pills to 

West Virginia in 2017. Back in 2008, H.D. Smith had shipped almost 10 times that amount, 

or about 5.4 million hydrocodone pills, according to the company's data. The next year, 

2009, H.D. Smith also shipped a very high amount, which was about 2.8 million pills. I 

understand that prescribing went down in recent years, but did additional due-diligence or 

recognition of the unfolding opioid crisis lead to far fewer pills in these later years than in 

the earlier years? 

Answer: The primary driver of H. D. Smith's sales is and always has been the orders placed by its 

customers. There are many factors that could be driving the reduction in orders placed by 

customers in West Virginia. For example, changes in the number of customers being served could 

drive changes in shipments. It is possible that the implementation of the automated CSOMP 

system contributed to the decline in controlled substances being shipped. H.D. Smith used data 

collected through its CSOMP system to identify, investigate and terminate certain West Virginia 

customers for suspicious order patterns or other reasons related to diversion control. CSOMP 

data contributed to H. D. Smith's decision to close West Virginia pharmacy Sav-Rite No. 1 's 

account in April 2009. As a result ofCSOMP data and an on-site visit, H. D. Smith terminated 

another West Virginia pharmacy Tug Valley's account in August 2009. H. D. Smith closed 

another West Virginia Pharmacy. Westside Phannacy's account in January 2011. Additionally, 

H. D. Smith blocked two West Virginia pharmacies, Family Discount and Hurley Drug, from 

purchasing certain controlled substances in February and March of20 I 1, respectively. 

Moreover, changes in physician prescribing practices could have resulted in reduced ordering by 

pharmacies. 

2. Did H. D. Smith attempt to look at these trends both rising and falling to determine if 

something problematic was happening regarding the company's distribution in West 

Virginia? 

Answer: It is also worth noting that during the time it was designing and implementing its 

CSOMP system, H. D. Smith understood that the DEA was very concerned about internet 

pharmacies and diversion in Florida in particular. But the DEA did not communicate that there 

were any diversion issues then existing in West Virginia or Appalachia generally. Indeed, 

Internet pharmacies were the specific topic of a DEA distributor briefing Kyle Wright made to H. 

D. Smith's head of compliance on January 4, 2007. On October I 0, 2007, H. D. Smith met with 

Wright again for another distributor briefing and agreed to develop what became CSOMP. But 

before conducting that distributor briefing on October I 0, 2007, Wright performed his own 

detailed analysis of H. D. Smith's national ARCOS data to identity H. D. Smith customers whom 
195 


House Committee on Energy and Commerce 

Suhcommittce on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr. James Christopher Smith 

on Behalf of H.D. Smith, LLC 

he believed needed additional scrutiny based on unusual or suspicious ordering patterns. Wright, 

through his analysis, found that no West Virginia pharmacy warranted additional scrutiny. 
196 

Æ 


House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Additional Questions for the Record 

Responses Submitted by Mr .. James Christopher Smith 

on Behalf of H.D. Smith, LLC 

The Honorable Jan Schakowsky 

I. Docs your company buy the drugs from the manufacturers, take title and move pallets to 

and from your warehouse? Or are you like brokers, working on consignment, arranging 

sales to pharmacies and then taking a percentage of the sale price? 

Answer: H. D. Smith is now part of ABC as a result of the ABC acquisition and thus defers to 

ABC on these questions. 

2. In setting prices to pharmacies, is your markup more like a flat rate (for example, selling $5 

more than the price at which you bought), or is your markup more like a percentage (for 

example, selling for 5% higher than the price at which you bought)? 

Answer: H. D. Smith is now part of ABC as a result of the ABC acquisition and thus defers to 

ABC on these questions. 

3. Is it possible that even if your company pays a higher price to get those drugs in stock, you 

end up making more money on those sales where your acquisition prices are higher? And 

would the same be true for your consignment/broker sales? 

Answer: H. D. Smith is now part of ABC as a result of the ABC acquisition and thus defers to 

ABC on these questions.