Profiting from pain case

In 2017, McKesson Corporation, a leading wholesale drug distributor, agreed to pay $150 million in fines to the U.S. Department of Justice. The charges were that the com- pany had failed to implement effective controls to prevent the diversion of prescrip-

1tion opioids for nonlegitimate uses, in violation of the Controlled Substances Act. For

example, McKesson had supplied pharmacies in Mingo County, West Virginiaa poor,

rural county with the fourth-highest death rate from opioid overdoses in the nationwith

3.3 million more hydrocodone pills in one year than it had in five consecutive earlier years. At the time, Mingo County had just 25,000 residents. Yet, the company had not

flagged these orders to federal drug enforcement officials as out-of-the-ordinary. McKesson, which at the time was the fifth largest company in the United Stateswith almost $200 billion in annual revenueplayed a largely unnoticed middleman role in the pharmaceutical industry. The firm's main business was shipping legal, government- approved medicines to pharmacies, hospitals, and health systems. McKesson's unmarked trucks rolled out at midnight from its 28 enormous, highly automated distribution cen- ters, on route to their morning deliveries of one-third of all pharmaceuticals sold in North America. Although distributors like McKesson did not either manufacture or dis- pense opioids, they were responsible for notifying the federal Drug Enforcement Admin- istration (DEA) and corresponding state regulators if orders suggested that controlled nation's burgeoning epidemic of addictive opioids. Drug companiessuch as Purdue Pharma, the maker of OxyContinhad developed new prescription opioids and aggressively mar- keted them to doctors and patients, making vast profits for their owners. Entrepreneurs had opened pain clinics where unscrupulous doctors could write big scripts for the addic- tive pills, and pharmacies had looked the other way while dispensing drugs to suspicious patients. And illegal businesses, from producers of street drugs like heroin to networks of

Opioid epidemic

At the time of the McKesson's settlement with the Justice Department, the United States was deep in the throes of what the Centers for Disease Control and Prevention (CDC) had called "the worst drug overdose epidemic in [U.S.] history."4

Fueling the epidemic was addiction to prescription opioids. Opioids were a class of painkillers derived from the opium poppy. Also referred to as narcotics, opioids included legal prescription medications such as morphine, codeine, hydrocodone, oxycodone, and fentanyl, as well as illegal drugs such as heroin. Opioids worked by dulling the sensation of pain. At high doses, they could also cause feelings of intense euphoria. The journalist John Temple, author of the investigative reportAmerican Pain,described the "high" expe- rienced by users of oxycodone, a strong opioid, this way:

Opioids were highly addictive, and as users developed tolerance, they required larger and larger doses to get high or just to feel normal. Withdrawal from opioids, which could occur after even a single dose, could be excruciating. Users in withdrawal often expe- rienced intense cravings, fever, sweats, and painsensations that addicts referred to as "jonesing." Addiction caused physical changes in the brain, weakening a user's impulse Opioids were killers. In high doses, these drugs caused breathing to slow and finally stop, bringing death by respiratory arrest. In 2015, 33,091 Americans died from an opioid

overdose. This was just slightly less than the number that died that year in car accidents.

Between 1999 and 2015, the rate of death from opioid overdose (number of deaths per 100,000 people) quintupled, that is, it wasfive timeshigher in 2015 than it was a decade and a half earlier.

government regulations

The federal government strictly regulated the manufacture and distribution of opioid medi- cations like OxyContin under the Controlled Substances Act (CSA) of 1970.

The CSA empowered the Drug Enforcement Administration (DEA) and the FDA to create five lists, or "schedules," of certain controlled substances, ranging from one (Sched- ule I) to five (Schedule V). Schedule I drugs were those that had no accepted medical use and high potential for abuse; they included heroin, LSD, and MDMA ("Ecstasy"). These drugs were illegal, and physicians could not prescribe them under any circumstances. Schedule II drugs were those that did have an accepted medical use, but also had high potential for abuse and could lead to severe psychological and physical dependence. They included most prescription opiates, such as oxycodone, hydrocodone, codeine, and fen- tanyl. The DEA registered firms and individuals that handled controlled substances and required them to maintain complete and accurate inventories and records, and to store them securely. It required wholesalers, like McKesson, to maintain a system to detect and pre- vent the diversion of prescription drugs for nonmedical use. The DEA licensed physicians to prescribe Schedule II painkillers and could revoke a license if a doctor did not provide them for a legitimate medical purpose.

The DEA also established annual production quotas of various controlled substances. It negotiated these quotas with drug manufacturers, based on amounts considered necessary for medical, scientific, research, industrial, and export needs and to maintain sufficient reserves. This system was designed to meet legitimate needs, while preventing diversion. Although each company received its own quota, this information was proprietary, and the DEA published only the aggregate annual quota for each drug.

After the introduction of OxyContin, the DEA repeatedly raised the aggregate quota for oxycodone (its main component), as shown in Exhibit B. In 1994, the year before the FDA first approved OxyContin, the DEA limited production to 2,995 kilograms of oxycodone. The agency continued to raise the quota, reaching a peak of 153,750 kilograms in 2013 more than 50 times as high. After 2013, presumably in response to growing concern about

This is the link to the case in course hero "Profiting from pain"

https://www.coursehero.com/file/56473652/document-5pdf/

Questions to be answered

1)Within a Case there are always decisions to be made. Go over some of the tangible and intangible considerations, also weigh the options and show how will key stakeholders be affected, and show other considerations that you have in mind