Two years after McKesson Corp. agreed to pay a record $150 million fine for allegedly failing to report suspicious drug orders, federal agents have obtained a warrant to inspect the company’s West Sacramento facility for records of how it distributed highly addictive drugs like oxycodone and hydrocodone.
U.S. Magistrate Judge Deborah Barnes issued the warrant late Thursday following a request by the federal Drug Enforcement Administration that cited “suspicious orders” of controlled substances dating back to 2016.
The application for the warrant, submitted by DEA diversion investigator Christina Grijalva, said that a check of DEA databases showed San Francisco-based McKesson was the largest distributor in California over the past two years of oxycodone and hydrocodone.
Grijalva asked for a warrant to inspect company records, facilities and computers to determine if it is within compliance of the 2017 settlement it reached with the Justice Department.
“In light of significant discrepancies from the DEA database between McKesson Drug Company’s purchase and sale of Schedule II through V controlled substances, as well as its record distribution of such drugs, this inspection is to ensure that McKesson is in compliance” with the 2017 agreement, Grijalva wrote.
The application says the DEA review of computer records shows McKesson distributed more oxycodone and hydrocodone in California than any other distributor since 2017, with sales of 6.1 million oxycodone doses and 20.2 million hydrocodone doses so far in 2019.
“The DEA database revealed that McKesson reported more sales of Schedule II and Schedule III controlled substances than what purchasers reported purchasing from McKesson by an amount of 1,285,785 dosages and 8,902.70 grams, indicating inventory and recordkeeping discrepancies,” the inspection application says. “The DEA database also revealed that McKesson reported purchasing more Schedule II and III controlled substances than wholesalers reported selling to it by 116,032,246 dosages and 122,894.08 grams, indicating another recordkeeping discrepancy.”
The application also alleged that McKesson had failed to report suspicious orders of such drugs since 2016, the same type of allegations that led to the $150 million settlement.
McKesson spokeswoman Kristin Chasen said the company was cooperating the with DEA and has reported hundreds of suspicious orders to the agency.
“We are working cooperatively with the DEA to better understand their record-keeping concerns and believe that any perceived discrepancies will be resolved,”she wrote in a statement. “The DEA’s claim that our Sacramento distribution center has not submitted any suspicious order reports is wrong.
“In accordance with our agreement with the DEA, since 2016, all McKesson distribution centers — including our Sacramento location — submit suspicious order reports to DEA headquarters. Sacramento has submitted hundreds of reports to DEA since that time.
“McKesson is committed to maintaining – and continuously enhancing – strong programs designed to detect and prevent opioid diversion within the pharmaceutical supply chain. In addition to reporting controlled substances transactions to DEA on a regular basis, we have invested significant amounts of time and financial resources into our Controlled Substance Monitoring Program.”
McKesson is one of the nation’s largest drug distributors and is among several ensnared in massive, nationwide lawsuits filed by states and other entities alleging that they flooded American cities with highly addictive drugs. In July, records kept by the DEA showed that 76 billion oxycodone and hydrocodone pills — the vast majority of them generics, not brand names such as those of OxyContin’s maker Purdue Pharma — were shipped to U.S. pharmacies from 2006 to 2012.
In May, McKesson settled a lawsuit by West Virginia for $37 million after the state alleged the company distributed nearly 100 million doses of oxycodone and hydrocodone in the state from 2007 through 2012. McKesson denied the allegations.
The $150 million fine in 2017 followed years of inspections of McKesson facilities nationwide, including the West Sacramento operation on Seaport Boulevard, that found the company had failed “to report suspicious orders of controlled substances,” according to Justice Department documents.
Under the deal, the company agreed to “maintain a compliance program intended to detect and prevent diversion of controlled substances.”
The DEA’s court filing Thursday questions whether McKesson is in compliance with the agreement and says “there are likely to be suspicious orders for controlled substances and record-keeping violations.”