Drug Distribution: Friends in High Places

Tuesday, January 13, 2015 | 0

Here's the simple version: a drug is discovered, researched and developed by a pharmaceutical company. The company takes a new chemical compound from the work bench of a scientist through the various stages of animal testing and then through phases I, II and III (and sometimes IV) trials mandated by the Food and Drug Administration before a drug is approved. This process is expensive, takes a long time and is fraught with risk.  

But have you ever wondered how a pill gets from the pharmaceutical company to your local pharmacy? Who handles that part of the value chain? Turns out this is, by itself, a multibillion dollar industry called "drug distribution" and it's dominated by two very large firms, McKesson (No. 15 on the Fortune 500 list with $122 billion in revenue) and Cardinal Health (No. 22 on the Fortune 500 list with $101 billion in revenue).  

And with the responsibility for drug distribution comes the risk of lawsuits connected to prescription drug misuse and abuse.  

A judge in West Virginia has just decided to allow a lawsuit against drug distributors to move forward, overruling objections from the companies (thanks to Alix Michel for the tip).  The companies sought to have the suit dismissed on the grounds that, among other things, they hadn't broken any laws in the state of West Virginia. 

Boone County Judge William Thompson ruled that the two state agencies bringing the suit, the Department of Health and Human Resources and the Department of Military Affairs, have the right to sue. The suit alleges that the drug distributors did not have proper diversion-prevention programs in place and turned a blind eye to suspicious orders from local pharmacies for prescription opioids, thus fueling the epidemic of prescription drug misuse and abuse in West Virginia.  

When I got to the list of drug distributors associated with the suit, I scanned the list for McKesson and Cardinal. They were conspicuous in their absence.  

So I kept reading ...

The state agencies actually asked the West Virginia Attorney General to add McKesson to the lawsuit. He declined to do so based on the state's "ongoing investigation" into McKesson. Cardinal is part of a separate lawsuit (the article doesn't disclose how it's different). That seemed odd to me.

So I kept reading ...

Turns out the AG used to be a lobbyist for McKesson in DC and his wife was a lobbyist for ... you guessed it ... Cardinal.

You can't make this stuff up.

Michael Gavin is president of Prium, a managed care provider for the workers' compensation industry. This column was reprinted with his permission from the firm's Evidence Based blog.