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First criminal charges filed against opioid distributor in Manhattan federal court; former exec charged, too

"This country is in the midst of a prescription drug epidemic," Manhattan U.S. Attorney Geoffrey Berman said at a news conference to announce the charges.

Former Rochester Drug Cooperative CEO Laurence Doud III,

Former Rochester Drug Cooperative CEO Laurence Doud III, right, leaves U.S. District Court in Manhattan with his attorney Robert C. Gottlieb on Tuesday. Photo Credit: AP/Kathy Willens

Manhattan federal prosecutors on Tuesday filed what they called their first criminal drug distribution charges against a pharmaceutical wholesaler and its executives, accusing Rochester Drug Cooperative of unlawfully distributing oxycodone and fentanyl.

The company, one of the 10 largest pharmaceutical distributors in the United States, agreed to reform its practices as part of a deferred prosecution agreement. But former CEO Laurence Doud III was arraigned in court on charges that could carry a mandatory 10-year sentence if convicted.

“This country is in the midst of a prescription drug epidemic,” Manhattan U.S. Attorney Geoffrey Berman said at a news conference to announce the charges. “This epidemic has been driven by greed. As alleged, Doud cared more about profits than the laws intended to protect human life.”

The government charged that under Doud, the company flouted laws that require distributors to be “gatekeepers” of the distribution by flagging, cutting off and reporting pharmacies that appear to be giving out addictive prescription opioids indiscriminately.

By ignoring red flags, prosecutors said, from 2012 to 2016 Rochester Drug Cooperative (RDC) pushed sales of oxycodone tablets from 4.7 million to 42.2 million – an 800 percent increase – and fentanyl from 63,000 to over 1.3 million, a 2,000 percent increase.

At the same time, the increased profits drove Doud’s salary up by 125 percent to $1.5 million.

On upper management’s orders, the charges said, the company served pharmacies that doled out unusual amounts of oft-abused controlled substances, had large numbers of out-of-state and cash customers, and served doctors writing high-dose prescriptions outside their practice area.

Prosecutors said Doud called RDC a “knight in shining armor” for pharmacies rejected by other distributors, and compliance staff referred to some customers as “dynamite” that the DEA could detonate.

The company didn’t want the Drug Enforcement Administration to shut off its revenue stream from pill mills thriving off of opioid abuse, prosecutors said, and of 8,300 orders identified by the company compliance department as suspicious, only 4 were reported to the DEA.

Doud, 75, of New Smyrna, Florida, was released on a $500,000 bond after pleading not guilty during a brief court appearance. He faces charges of conspiracy to distribute controlled substances, which carries the 10-year mandatory minimum, and conspiracy to defraud the United States.

Doud last year filed a civil suit against RDC, alleging that he was being used as a “scapegoat” to blame for the then-pending criminal investigation of the company’s practices. On Tuesday, defense lawyer Robert Gottlieb said in a statement that his client was wrongly charged.

“Mr. Doud is being framed, plain and simple,” he said. “The government has it all wrong and is being used by others to cover up their wrongdoing. Mr. Doud will fight these false charges to his last breath and he will be vindicated.”

Prosecutors said the company’s former chief of compliance, William Pietruszewski, 53, of Oak Ridge, New Jersey, pleaded guilty earlier this month to the same charges as Doud, as well as failure to file suspicious order reports with the DEA, and has agreed to cooperate.

RDC, with over $1 billion in sales according to the government, admitted to the charges as part of its deferred prosecution agreement, and agreed to pay a $20 million penalty, reform its compliance practices and submit to supervision by an independent monitor.

If it complies for five years, the government agreed to dismiss the charges. Berman said a criminal conviction might have put the RDC out of business and caused innocent employees to lose their jobs.

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