Bloomberg News

Cardinal DEA Settlement Calls for Two-Year Shipping Halt

May 15, 2012

Cardinal Health Inc. (CAH:US), the second- largest U.S. drug distributor by revenue, agreed to suspend shipments of controlled drugs from a Florida facility for two years in a settlement with the Drug Enforcement Administration.

Federal officials had challenged Dublin, Ohio-based Cardinal’s procedures, contending the Lakeland, Florida, distribution center posed a public safety threat by shipping large quantities of the prescription painkiller oxycodone to pharmacies. The Memorandum of Agreement between the company and the DEA issued today doesn’t free Cardinal from possible civil penalties linked to the violations.

“In the agreement, Cardinal admits that its due diligence efforts for some pharmacy customers and its compliance with an earlier MOA signed in 2008 for similar violations at the same facility were, in certain respects, inadequate,” according to a statement from the DEA.

The terms of the settlement involving heightened scrutiny of controlled-substances sales apply to 28 Cardinal facilities registered with the agency. The agreement will remain in place for five years unless the DEA seeks earlier termination.

“Cardinal Health is not above the law, and with this agreement it admits that it neglected its vital responsibility to prevent the diversion of controlled substance medications,” Joseph Rannazzisi, deputy assistant administrator in the DEA’s Office of Diversion Control, said in the statement.

Cardinal today asked the U.S. Court of Appeals in Washington today to dismiss its challenge to the Florida suspension.

‘Behind Us’

“This agreement allows us to put this matter behind us, and just as important, will clear the way for a more productive dialogue about how we and others in the health-care and regulatory community can work together to prevent the abuse and misuse of prescription drugs,” George Barrett, Cardinal Health’s chairman and chief executive officer, said in a statement.

The DEA suspended Cardinal’s license to ship controlled substances from the Lakeland facility, which supplies 2,500 pharmacies, in February. The agency alleged the company failed to ensure the drugs went only to legitimate patients, and it ordered Cardinal to explain why the suspension shouldn’t be made permanent.

Since the suspension, Cardinal has supplied controlled substances to those pharmacies from its distribution center in Jackson, Mississippi.

Months of Proceedings

The settlement averts the need for months of administrative proceedings and appeals to restore the license. An administrative hearing on the matter had been scheduled for today.

“It’s not enough to scare anyone into compliance, especially given that Cardinal says its shipments aren’t being disrupted -- they’re just being switched to its distribution in Jackson,” said Erik Gordon, a professor at the University of Michigan’s Stephen M. Ross School of Business.

Cardinal settled similar allegations in 2008 for $34 million, then the largest fine under the Controlled Substances Act.

Last year, Cardinal shipped enough of the semi-synthetic opiate painkiller oxycodone to two CVS Caremark Corp. pharmacies in Sanford, Florida, to supply a population eight times the city’s size, according to the government. The DEA alleged in court filings that Cardinal didn’t question the orders or heed its warnings to conduct on-site audits.

Under the memorandum, Cardinal agreed to improve “anti- diversion procedures” to keep better control of narcotics companywide. The DEA is planning “no further administrative actions at other Cardinal Health facilities,” the company said.

The case is Cardinal Health v. U.S. Department of Justice, 12-05061, U.S. Court of Appeals, District of Columbia Circuit (Washington).

To contact the reporters on this story: Phil Milford in Wilmington, Delaware, at; Tom Schoenberg in Washington at

To contact the editor responsible for this story: Michael Hytha at

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Companies Mentioned

  • CAH
    (Cardinal Health Inc)
    • $83.04 USD
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    • 0.76%
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