Oxycontin and prescription scriptFrom 2012 to 2016, RDC's sales of Oxycodone increased 800 percentand sales of fentanyl rose 2,000 percent. (Photo:Shutterstock)

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Federal prosecutors unveiled the first criminal charges againstpharmaceutical executives for illegallydiverting opioids, accusing the former chief executive officer andthe head of compliance at a major U.S. drug distributor with anarcotics conspiracy.

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Laurence F. Doud III, who spent 25 years as CEO of RochesterDrug Co-operative, and William Pietruszewski orchestrated a schemeto distribute high volumes of Oxycodone, fentanyl and other highlyaddictive opioids to pharmacies knowing the drugs would be sold topeople who had no medical need for them, prosecutors said. Doud,75, and other executives pressed ahead with the sales to increaserevenue and boost their salaries, the U.S. said.

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Related: Key lawsuit could define the 'face of the opioidcrisis'

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“Why did they do it? The answer is greed,” U.S. AttorneyGeoffrey Berman said at a press conference in New York onTuesday.

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Pietruszewski pleaded guilty on April 19 and agreed to cooperatewith prosecutors, according to court records. The company, whichbills itself as the nation's seventh-largest drug distributor, iscriminally charged with a narcotics conspiracy. It will pay a $20million penalty, and prosecutors agreed to dismiss the case afterfive years if the company stays out of trouble.

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The case is not the first against an opioid-company executive.Ex-Insys Therapeutics founder and CEO John Kapoor is awaiting aBoston jury's verdict on charges he oversaw a scheme to bribedoctors to boost sales of the company's top-selling opioidpainkiller.

New charges

Officials said the new charges were a major step in the U.S.crackdown on those who have fueled the nation's prescription-opioidepidemic, which has prompted a 33 percent surge in overdose deathsin the 10 years leading up to 2017, at a rate of more than 17,000annually, according to the Centers for Disease Control. Still,Berman faced questions about why the company was allowed to enter adeferred-prosecution agreement rather than being required to pleadguilty.

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“We believed RDC could be reformed,” Berman said, adding thecompany has undertaken a management overhaul and new complianceprogram. A guilty plea could have risked licenses that may haveforced the company out of businesses, causing hundreds of employeesto lose their jobs, he added.

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Privately held RDC, based in Rochester, New York, buyspharmaceuticals from manufacturers and sells them to retailpharmacies. It covers 10 states in the northeast from Maine toPennsylvania and has more than $1 billion in annual revenue.

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In a prepared statement posted on the company's website, thecompany said that its “mistakes” were directed by formermanagement. “We can do better, we are doing better and we will dobetter,” it said.

Cash payments

According to prosecutors, company officials failed to alert theDrug Enforcement Administration to suspicious orders, as requiredby law. They ignored the high percentage of cash payments forprescriptions at certain pharmacies, orders for out-of-statepatients, and prescriptions issued by doctors acting outside thescope of their medical practice. Authorities said the company oftendid business with pharmacies that had been blacklisted by otherdistributors.

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From 2012 to 2016, RDC's sales of Oxycodone increased 800percent and sales of fentanyl rose 2,000 percent, prosecutors said.Compensation for Doud more than doubled to more than $1.5 millionin 2016, they said.

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The executives ordered the compliance department not to reportsuspicions of abuse about the pharmacies to authorities, becausethey knew it would result in the customers being investigated andshut down, the U.S. said. Of 8,300 orders flagged by the company aspotentially suspicious, it reported four to the DEA forinvestigation, prosecutors said.

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Compliance and sales staff repeatedly warned top executives, atone point describing high-volume purchases as “a stick of dynamitewaiting for the DEA to light the fuse,” according to an email citedin court documents.

Doud sued

“If the pharmacies were dynamite, then what was RDC? A warehouseof dynamite,” Ray Donovan, special agent in charge of the DEA's NewYork office, said at the press conference.

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Doud, who will appear in court on Tuesday, has sued RDC,claiming he was forced out last year and became a scapegoat for thecompany's mishandling of opioid painkillers. He said he was falselyaccused of taking kickbacks in an effort to tarnish hisreputation.

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Along with the criminal charges, RDC faces lawsuits by dozens ofNew York counties accusing it of helping to fuel a public-healthcrisis. The company has been named in a federal suit filed bycities and counties across the U.S. targeting makers' anddistributors' handling of the painkillers.

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In those cases, the local governments claim Purdue Pharma LP,Johnson & Johnson, McKesson Corp. and other opioid makers anddistributors downplayed the painkillers' health risks and oversoldtheir benefits through hyper-aggressive marketing campaigns. Theplaintiffs are seeking to recoup the costs of dealing with opioidaddictions and overdoses.

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The suits allege McKesson, Cardinal Health and other drugdistributors contributed to the epidemic by failing to haltsuspiciously large shipments of the painkillers. McKesson isaccused of shipping 3 million pills to a single West Virginiapharmacy over a 10-month period. The store served a town with apopulation of 400 people.

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The case is U.S. v. Doud, 19-cr-285, U.S. District Court,Southern District of New York (Manhattan).

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