Settlement with DEA results in a top-to-bottom overhaul of controlled-substances handling
The top-line news that Cardinal Health released last week is that DEA licenses for three of its distribution centers (and a voluntary suspension of order processing at a fourth DC) have been reinstated, following a series of DEA enforcement actions in late 2007. DEA charged that Cardinal was distributing excessive amounts of controlled substances to pharmacies that were then selling the products illicitly. Without admitting to any wrongdoing, Cardinal is also paying a $34-million “settlement.”
“We will continue to work with the DEA and other supply chain partners to take all necessary steps to keep these powerful drugs out of the wrong hands,” said R. Kerry Clark, Cardinal chairman.
The announcement also noted that Cardinal has invested $20 million over the past year in upgrading its internal controls. Mark Hartman, newly appointed SVP of supply chain integrity and regulatory operations, provides some details about the “suspicious order monitoring program” represented by that investment. “The changes are both organizational and technological,” he says, noting that he now manages a 10-person central group that will monitor and audit controlled-substance orders in near real time. There is now a fulltime compliance officer at each of Cardinal’s 24 DCs (it had previously been a part-time responsibility), and a large proportion of the company’s workforce has received new training. Cardinal has also hired Craig Morford, a former acting deputy U.S. Attorney General, into an expanded chief compliance officer role.
On the technical side, Hartman says that the company has revamped its order-processing IT systems to automatically flag orders that go outside of thresholds set by statistically driven algorithms. The thresholds depends on prior ordering patterns and communcations between Cardinal and its pharmacy customers; when an order is flagged, that could generate a call from the monitoring team to review business conditions. This IT system was developed internally. “The challenge is to run this system while meeting customers’ expectations for less-than-24-hour order turnarounds, and at the razor-thin margins that pharmaceutical distribution operates with today,” says Hartman. So far, the system, which is now live, has flagged a “small percentage” of suspicious orders; Hartman notes that part of the process is to notify DEA when orders are deemed to be suspicious.
Hartman says that the monitoring program is 100% dedicated to controlled substances and DEA compliance for now. A parallel group continues to work on system changes initiated by an agreement in 2006 with the New York State Attorney General’s office; that monitoring program is focused on diverted or counterfeit drugs.
