In a second criminal case against a pharmaceutical distributor and its executives this year, the Department of Justice has accused Ohio-based Miami-Luken and its former President and Compliance Officer of conspiring to distribute controlled substances without a legitimate medical purpose, a crime punishable by up to 20 years in prison. Also indicted on the same charge are two West Virginia pharmacists whose pharmacies purchased opioids from Miami-Luken.

The individual executives of Miami-Luken are accused of failure to maintain effective controls against diversion, ignoring obvious signs of abuse, and failing to report suspicious orders, even after being advised by the DEA of their reporting responsibilities. Similar to the allegations in April of this year against RDC and its executives, personal liability is alleged for providing controlled substances to pharmacies that had been cut off by other wholesalers. Other alleged red flags included customers (pharmacies and physicians) under DEA investigation, and pharmacy utilization reports showing the pharmacy customers accepted cash payment for controlled substances.

Miami-Luken allegedly violated its own internal control policy by regularly exceeding the internal threshold limit for customers. While Miami-Luken’s internal Suspicious Order Monitoring System (SOMS) flagged many orders, the company and its executives allegedly failed to conduct due diligence to confirm the legitimacy of all orders and to comply with the reporting obligations.
The alleged conspiracy among the named defendants and unnamed co-conspirators was with scienter – knowing that the drugs were being diverted or likely to be diverted, and for the purpose of personal enrichment.

The Indictment is heavily laden with numbers. Substantial amounts of oxycodone and hydrocodone were distributed to doctors and pharmacies in Ohio, Kentucky and West Virginia, including rural Appalachia where the opioid epidemic was rampant. As part of an evolving trend regarding investigations of over-prescribers in the last few years, the Justice Department is now using data analytics to track orders to detect patterns of abuse and actors allegedly abetting the addiction crisis. In early 2019 the Department of Justice applied the new data-driven approach to the Appalachian region, leading to indictments of individuals and entities identified through analyzing the data.

This is yet another reminder for both pharmacies and distributors to analyze overall prescription/order patterns and to take into consideration the totality of the circumstances, rather than merely focusing on each individual prescription or order in isolation.

This alert does not purport to be a substitute for advice of counsel on specific matters.

Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Melville, New York City, Rochester, Saratoga Springs, Syracuse, Uniondale and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.