A Slap on the Corporate Wrist

By TChris, Section Crime Policy
Posted on Fri Nov 30, 2007 at 08:44:21 PM EST
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Distributing Vicodin to people who don't have a prescription for it is conduct that typically results in the kind of harshly punitive criminal sentence that has become the trademark of the war on drugs. Unless the drug distributor is a business like Cardinal Health Inc. The DEA "is suspending its license to distribute controlled substances from its Auburn, Wash. facility" because it sold Vicodin to a "pharmacy that allegedly dispensed excessive amounts based on illegitimate prescriptions from Internet pharmacy web sites."

A license suspension sounds serious, doesn't it? Not to Wall Street analysts.

Shares of Cardinal Health Inc. edged higher Friday as analysts said the Drug Enforcement Administration's action to suspend the company's controlled substances license at its Washington facility won't materially affect its bottom line.

And why is that? (more ...)

JPMorgan analyst Lisa C. Gill said she spoke with a DEA representative, who stated the Auburn facility will be allowed to remain operational until Monday to serve legitimate customers, after which Cardinal will have to make other arrangements to serve customers until the suspension on controlled substances is lifted. ...
In a note to clients, Gill said Cardinal Health's situation appears similar to that of AmerisourceBergen, which in April had its Orlando distribution center's license suspended but reinstated a few months later, with no visible material impact to earnings. ... Gill wrote[:] "We expect no material impact to earnings as a result of today's DEA action."

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A Slap on the Corporate Wrist | 10 comments (10 topical)

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Wall Street (1.00 / 0) (#5)
by jimakaPPJ on Sat Dec 01, 2007 at 08:24:12 AM EST

very very often prices shares based on the expected future value of the shares. It is probable that the stock prices have been depressed expecting future legal action. Now that the results are in, people started buying the stock based on what they now expect the future to be and the price rose.

seriously... (none / 0) (#1)
by diogenes on Fri Nov 30, 2007 at 09:21:12 PM EST

If I am a beer distributor and I sell beer to a bar that then sells it to underage drinkers, do I lose my license to distribute beer?

Perhaps (none / 0) (#2)
by squeaky on Fri Nov 30, 2007 at 10:08:10 PM EST

Keg registration plan approved in New York - Brief Article
Modern Brewery Age, June 9, 2003
AP--New York State Legislators and beer sellers said Wednesday they have agreed to a registration system for kegs sold in New York.
Under the proposal, buyers of kegs would have to put down a $75 deposit and provide identification. Retailers could only legally sell kegs with a traceable identification number--either etched into the barrel or on a tag purchased from the State Liquor Authority-- and they must keep a log of people buying each keg.
The idea is to prompt retailers to sell kegs only to qualified buyers and provide law enforcement agencis with a way of tracking down buyers of a keg if its beer is consumed by underage drinkers, legislative sponsors said.
Among the groups negotiating with lawmakers over the bill were the state Beer Wholesalers Association and the state Food Industry Alliance.
"This sends a clear message to those under 21 that the beer industry doesn't want your business," said Michael Vacek, a representative of the beer wholesalers' group.
He said the measure would create a "trail of responsibility" in cases of illegal buying or drinking of beer.

A keg bought by consumers usually contains 15.5 gallons of beer and sells for between $50 and $75. Retailers typically ask for deposits of $10, Vacek said.
Not all retailers demand identification from purchasers, Brodsky said.

Because of the paperwork and potential liabilities it is virtually impossible to buy a keg in Manhattan. Not a problem though, because you can call a distributer in Brooklyn and they will deliver it to Manhattan.


: as a general rule, (none / 0) (#4)
by cpinva on Fri Nov 30, 2007 at 11:08:01 PM EST

bars don't ordinarily sell kegs to their customers in-house, the distributors do that. so that really doesn't apply to the original question.

not unless the bar is issuing (none / 0) (#3)
by cpinva on Fri Nov 30, 2007 at 10:10:30 PM EST

fake prescriptions for the beer. believe it or not, drug manufacturers and wholesalers are required to maintain a database showing the level of prior sales, of specified drugs, to their customers. if there is a precipitous, unexplained, increase in those sales, they are required to ask questions.

there may be a legitimate reason for a sudden increase in sales: a competitor may have gone out of business, or closed its local store, shifting it's customers, and their prescriptions, elsewhere.

last time i checked, the beer distributors don't have this issue. they don't need a license from the DEA either.

in the case of a company with multiple distribution facilities, they just move those drugs to another, licensed facility. their customers will never even notice the difference.


What a tremendous waste.... (none / 0) (#6)
by kdog on Sat Dec 01, 2007 at 10:02:12 AM EST

of time, money, and effort.

Have the FDA slap a warning label on all drugs listing the effects, and let adults by whatever the hell they want. Let freedom ring...

apples and reflexively anti-corporate oranges (none / 0) (#7)
by roy on Sat Dec 01, 2007 at 10:19:46 AM EST

On the one hand "distributing Vicodin to people who don't have a prescription for it..."

On the other, relevant hand: distributing Vicodin to people who distributed Vicodin to people who do have a prescription for it but whose prescriptions allegedly are not valid, with no information on which people knew whether whose people's prescriptions were valid when.

see above comment. (5.00 / 0) (#9)
by cpinva on Sun Dec 02, 2007 at 03:31:31 AM EST

either a. they did know, and chose to ignore it., or b. they didn't know, because the required tracking system wasn't in place, or they chose to ignore the results.

they know exactly who they're selling to, and exactly how much they purchase, of every item sold. for them to claim otherwise should cause their per share market value to drop, because it indicates a management failure.


: Certainly Cardinal Health knows... (none / 0) (#10)
by roy on Sun Dec 02, 2007 at 11:46:01 AM EST

... who buys drugs from Cardinal Health. Are you claiming that they know who buys drugs from pharmacies? That would be news to me, and I wouldn't expect it to be possible without violating privacy laws. Barring some implied revelation on that front, the DOJ's press release isn't very detailed, but it has this:

In spite of being warned by DEA about the characteristics of rogue internet pharmacies, Cardinal Health's Auburn branch distributed nearly 18 million dosage units of hydrocodone to retail pharmacies...
Nothing in it supports the notion that Cardinal Health had or should have had specific knowledge that their customer pharmacies had specific knowledge that their customer drug users had invalid prescriptions. It's about "characteristics" of pharmacies, which is called "profiling" when the speaker wants a sympathetic connotation.
Cardinal Health was insufficiently psychic. Thus, it's quite a bit different from the sort of intentional behavior that lands street-level drug dealers in prison.

Yep (1.00 / 0) (#8)
by jimakaPPJ on Sat Dec 01, 2007 at 10:43:29 AM EST

that's about it.
