Tag: 2019 News

An Ohio drug wholesale distributor and two former executives were charged with profiting from the U.S. opioid epidemic by selling millions of pills despite signs the addictive drugs were being misused.

Federal prosecutors in Cincinnati charged Miami-Luken Inc and four people with conspiring to distribute controlled substances in the second U.S. criminal case against a drug distributor over its role in a crisis that has killed hundreds of thousands of people.

The indictment charged the Springboro, Ohio-based company; Anthony Rattini, its former president; James Barlay, Miami-Luken’s former compliance officer, and two pharmacists with conspiring to distribute controlled substances.

Prosecutors said Miami-Luken and the executives failed to guard against the dangerous drugs it shipped to pharmacies in five states from being diverted for illegal uses or to report suspicious orders to the U.S. Drug Enforcement Administration.

It shipped millions of pills to rural Appalachia, where the opioid epidemic was at its peak, including 3.7 million hydrocodone pills from 2008 to 2011 to a pharmacy in Kermit, West Virginia, a town of just 400 people, prosecutors said.

Two pharmacists who ordered drugs from Miami-Luken were also charged: Devonna Miller-West, the owner of Oceana, West Virginia-based Westside Pharmacy, and Samuel Ballengee, who ran Williamson, West Virginia’s Tug Valley Pharmacy.

Defense lawyers could not be immediately identified. Miami-Luken last year said it would close its operations.

The case is the latest to result from investigations into the extent drug manufacturers and distributors helping fuel the deadly opioid abuse epidemic.

Top executives from distributors as well as Miami-Luken were called to testify before a Congressional committee in May 2018 regarding the opioid epidemic. Asked if they contributed to it, only Miami-Luken’s then-chairman, Joseph Mastandrea, said yes.

Prosecutors said Miami-Luken, which closed in October, made more than $173 million in consolidated sales from 2008 to 2015 supplying drugs to 200 pharmacies in Ohio, West Virginia, Kentucky, Indiana and Tennessee.

Federal prosecutors in Manhattan in April brought the first opioid-related criminal case against a distributor, upstate New York’s Rochester Drug Co-operative Inc. The company paid $20 million to resolve the charges.

The data, released this week by a federal court in Ohio as part of a far-reaching opioids case, shows that companies distributed 8.4 billion hydrocodone and oxycodone pills to commercial pharmacies in 2006 and 12.6 billion in 2012. That’s an increase of over 50%.

Over that seven-year period, 76 billion pills were distributed in all, according to an analysis by The Washington Post, which had sued along with another outlet, HD Media, to obtain the data.The shipments increased even after one of the companies, Purdue Pharma, was leveled with a $635 million federal fine in 2007 for falsely claiming its drug, OxyContin, was not as addictive as earlier opioids.

While OxyContin is the best-known prescription opioid, the Post analysis shows that Purdue accounted for just 3% of pills sold during that time. Three makers of generic drugs accounted for nearly 90% of the sales.

The data tracks a dozen different opioids, including oxycodone and hydrocodone, according to the Post. They account for most of the pill shipments to pharmacies.

The distribution data, maintained by the U.S. Drug Enforcement Administration, is a key element of lawsuits filed by more than 2,000 state, local and tribal governments seeking to hold drug companies accountable for the crisis.

Drug distribution companies told The Post that the federal data would not exist without their providing accurate reports to the DEA.

One company, AmerisourceBergen, said the data “offers a very misleading picture.”

Cleveland-based U.S. District Judge Dan Polster, who is overseeing most of the cases, ruled Monday that the information covering shipments from 2006 to 2012 could be made public. He said in a ruling that there is “clearly no basis” for shielding older data.

His order came a month after a federal appeals court in Cincinnati vacated Polster’s July 2018 decision that local and state governments, which had been granted access to the data, should not make it public.

A three-judge panel for the 6th U.S. Court of Appeals said Polster went too far in blocking the release of data that government attorneys argued could compromise DEA investigations. Polster asked attorneys from all sides Monday to suggest how DEA data collected for 2013 and 2014 should be protected.

The Washington Post and HD Media, which owns newspapers in West Virginia, went to court for access and were the first media outlets to receive the data. By Tuesday, it had not been made available to the public or other news organizations that had requested it, including The Associated Press.

In a statement, a group of plaintiff attorneys applauded Polster’s decision.

The first scheduled trial before Polster is set for October in lawsuits filed by Ohio’s Summit and Cuyahoga counties, areas that have been hit particularly hard by the ongoing opioid crisis. It is considered a bellwether trial that could force the defendants to reach a global settlement for all of the lawsuits.

A trial in an opioid suit brought by Johnson & Johnson by Oklahoma in state court there wrapped up this week. A judge will rule on that case. Purdue and Teva Pharmaceutical Industries Ltd. were named in that suit but settled before the trial.

Kia Zolfaghari pleaded guilty to charges regarding his role in a conspiracy to distribute fentanyl, as well as to related weapons and money laundering charges, announced United States Attorney David L. Anderson and Drug Enforcement Administration Special Agent in Charge Chris Nielsen..

In the plea agreement, Zolfaghari, 42, of San Francisco, admitted that from May of 2014 until June of 2016 he agreed with others to distribute and possess with intent to distribute fentanyl.  Fentanyl, a Schedule II controlled substance, is a highly potent opiate that can be diluted with cutting agents to create counterfeit pills that attempt to mimic the effects of oxycodone, and can typically be obtained at a lower cost than genuine oxycodone. In this case, Zolfaghari admitted that his role in the conspiracy included buying a pill press, using it to manufacture pills, and selling the pills, principally online.  Zolfaghari admitted he stamped the pills in a manner consistent with genuine oxycodone and advertised the pills as oxycodone, but that the pills did not contain oxycodone and instead contained fentanyl.  

In his plea agreement, Zolfaghari also described the roles of two of his co-conspirators in the drug trafficking conspiracy.  For example, Zolfaghari acknowledged that one of his co-conspirators assisted him in the operation by packaging and mailing pills as well as cleaning up after he manufactured the pills.  Additionally, Zolfaghari explained that another co-conspirator assisted him by maintaining a post office box for the delivery of fentanyl powder that he used to make pills and by delivering the powder that arrived in that post office box.  Zolfaghari admitted that over the course of the conspiracy he made over $400,000 through his sales, and sold at least 13,000 fentanyl pills.

Zolfaghari also pleaded guilty to conspiring to launder the proceeds of the drug trafficking operation.  Specifically, Zolfaghari admitted that sometime before May 1, 2014, he agreed with others to engage in several financial transactions to conceal the of those proceeds of his drug sales. For example, he arranged to be paid in the digital currency bitcoin, he used unlicensed bitcoin brokers to exchange the bitcoin for cash, and he directed a co-conspirator to purchase gift cards with the cash.  Zolfaghari further admitted that these transactions were intended to conceal the source and ownership of the proceeds of his drug transactions.  Zolfaghari also admitted he used the proceeds from his drug trafficking operation to make a $40,000 down payment (and additional monthly payments) on a 2015 Audi RS5 Coupe; to make payments on an apartment in San Francisco; and to make purchases of luxury goods such as high-end watches, designer shoes, and jewelry.

Zolfaghari was arrested on June 10, 2016.  At the time of his arrest, Zolfaghari was found in possession of a Smith & Wesson handgun and 500 pills containing fentanyl.  

Judge Illston scheduled Zolfaghari’s sentencing for November 22, 2019.  Zolfaghari faces a maximum sentence of life in prison and a $10,000,000 fine for the conspiracy to manufacture and distribute fentanyl charge.  The charge also carries a minimum 10 years in prison. The statutory maximum for the money laundering conspiracy charge is 20 years in prison, and a fine of $500,000 or twice the gain or loss from the criminal activity.  The statutory maximum for the weapons charge is life in prison and a $250,000 fine.  This charge carries a minimum five years in prison, which term must run consecutive to any other sentence imposed.  Additional terms of supervised release and monetary assessments also may be ordered; however, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

In April 2017, Zolfaghari jumped bail and failed to appear for a hearing in this case.  On February 9, 2018, Judge Illston sentenced his wife and co-defendant, Candelaria Dagandan Vazquez, 43, who was also a fugitive, to 151 months imprisonment.  In February 2019, the United States Marshals Service, together with the Mexican Federal Police, located Zolfaghari and Vazquez in Mexico.  Vazquez is currently serving her sentence in the custody of the Federal Bureau of Prisons.  Also prosecuted for his role in the drug distribution scheme was King Edward Harris, II, 37, of Oxnard.  On September 22, 2017, Judge Illston sentenced Harris to five years in prison for possession and distribution of 40 grams or more of fentanyl.

Operating under their company, P&R Med-Legal Medical Corporation (P&R), Dolphus Dwayne Pierce, a chiropractor, and Tomas Ballesteros Rios, a physician, conspired with others to defraud various workers’ compensation insurance carriers. P&R contracted with physicians to perform cursory (if any) examinations of workers’ compensation patients at chiropractic clinics, and then dispense prepackaged medications to these patients with little or no regard for medical need.

Pierce and Rios contracted with a company to prepare and submit canned medical reports and bills to workers’ compensation insurance carriers. These bills sought payment for the medications dispensed, and for services relating to the dispensing of medications – some of which were not performed, and some costlier than the services actually performed by the physician. Eventually, a search warrant was executed on businesses and homes associated with P&R.

After P&R shut down, Pierce and Rios contracted with another company to rebill the insurance carriers for services initially billed by P&R, seeking to collect on existing unpaid bills for medications previously dispensed.

In June 2012, Pierce and six codefendants (Rios, John Brent Arakelian, Maria Cecilia Rios Cabangangan, Charles Orlando Lewis, M.D., Cathy Aguilar Pierce, and Chi Hong Yang, M.D.) were charged by grand jury indictment with conspiracy to commit insurance fraud and related charges.

Physician Tomas Rios pled guilty to conspiracy as charged in count 1 and testified for the prosecution. On October 22, 2015, jury trial against Pierce alone began. On January 8, 2016, the jury returned a verdict of guilty on count 1 and acquitted Pierce of the remaining counts.On September 16, 2016, the trial court placed Pierce on probation for five years, with the condition that he serve one year in county jail and pay $770,421 in restitution.

On appeal, Pierce raises numerous issues, contending the trial court prejudicially erred: (1) when it overruled his demurrer to count 1 of the amended indictment; (2) when it refused to strike reference to section 550, subdivision (a)(5) from the conspiracy charge as surplusage; (3) when it denied a motion to compel election of conspiracies at the close of the prosecution’s case; (4)in jury instructions given and refused; (5) when it denied a motion for acquittal; (6) when it quashed his subpoenas to the insurance companies and admitted the testimony of two attorneys; and(7) when it denied hismotion for recusal. Finally, Pierce contends sentencing error occurred.

The Court of Appeal affirmed the conviction in the unpublished case of People v Pierce.

The Court found no merit to any of the issues raised by Dolphus Pierce D.C.

Global consumer goods conglomerate Reckitt Benckiser Group plc (RB Group) has agreed to pay $1.4 billion to resolve its potential criminal and civil liability related to a federal investigation of the marketing of the opioid addiction treatment drug Suboxone. The resolution – the largest recovery by the United States in a case concerning an opioid drug – includes the forfeiture of proceeds totaling $647 million, civil settlements with the federal government and the states totaling $700 million, and an administrative resolution with the Federal Trade Commission for $50 million.

Suboxone is a drug product approved for use by recovering opioid addicts to avoid or reduce withdrawal symptoms while they undergo treatment. Suboxone and its active ingredient, buprenorphine, are powerful and addictive opioids.

On April 9, a federal grand jury indicted Indivior for allegedly engaging in an illicit nationwide scheme to increase prescriptions of Suboxone.

To resolve its potential criminal liability stemming from the conduct alleged in the indictment of Indivior, RB Group has executed a non-prosecution agreement that requires the company to forfeit $647 million of proceeds it received from Indivior and not to manufacture, market, or sell Schedule I, II, or III controlled substances in the United States for three years. In addition, RB Group has agreed to cooperate fully with all investigations and prosecutions by the Department of Justice related, in any way, to Suboxone.

According to the indictment, Indivior promoted the film version of Suboxone (Suboxone Film) as less-divertible and less-abusable and safer around children, families, and communities than other buprenorphine drugs, even though such claims have never been established.

The indictment further alleges that Indivior touted its “Here to Help” internet and telephone program as a resource for opioid-addicted patients. Instead, however, Indivior used the program, in part, to connect patients to doctors it knew were prescribing Suboxone and other opioids to more patients than allowed by federal law, at high doses, and in a careless and clinically unwarranted manner.

The indictment also alleges that, to further its scheme, Indivior announced a “discontinuance” of its tablet form of Suboxone based on supposed “concerns regarding pediatric exposure” to tablets, despite Indivior executives’ knowledge that the primary reason for the discontinuance was to delay the Food and Drug Administration’s approval of generic tablet forms of the drug.

The indictment alleges Indivior’s scheme was highly successful, fraudulently converting thousands of opioid-addicted patients over to Suboxone Film and causing state Medicaid programs to expand and maintain coverage of Suboxone Film at substantial cost to the government.

Under the civil settlement, RB Group has agreed to pay a total of $700 million to resolve claims that the marketing of Suboxone caused false claims to be submitted to government health care programs. The $700 million settlement amount includes $500 million to the federal government and up to $200 million to states that opt to participate in the agreement. The claims settled by the civil agreement are allegations only and there has been no determination of liability.

Under a separate agreement with the Federal Trade Commission (FTC), RB Group has agreed to pay $50 million to resolve claims that it engaged in unfair methods of competition in violation of the Federal Trade Commission Act, 15 U.S.C. § 53(b).