FDA Blasts McKesson for Shipping Illegal Opioid Products

Major drug distributor McKesson (NYSE:MCK) is under fire from the US Food and Drug Administration (FDA) for reportedly shipping illicit opioid products, making this the agency’s first warning issued under the Drug Supply Chain Security Act.

In the statement released on Tuesday (February 12), the FDA accused McKesson of not properly identifying, isolating or investigating “illegitimate medications.”

The official warning letter to McKesson dated February 7 indicates that in early fall 2016, the company was notified by its trading partner, Rite Aid, that three of its pharmacies received “illegitimate product,” which it claims had been shipped to them by McKesson.

The FDA said in its statement that McKesson didn’t notify pharmacy customers who may have received these products nor did the company advise the National Drug Code about the possibility of these products appearing in the supply chain.

“This is simply unacceptable,” FDA Commissioner Scott Gottlieb said in Tuesday’s statement. “A distributor’s failure to have systems in place to investigate and quarantine suspect and illegitimate products within their control is a violation of the law.”

Throughout September and October 2016, the FDA said that McKesson shipped to the three Rite Aid pharmacies, all located in Michigan, labelled bottles containing 100 tablets of oxycodone hydrochloride, but the seals were broken and instead contained 15 tablets of naproxen.

While the FDA acknowledged in its warning letter to McKesson that the company investigated the three separate incidents, the agency claims that the oxycodone hyrdochloride was replaced with the other product while in the hands of McKesson.

This isn’t the first time McKesson has faced backlash over the opioid epidemic. In fact, the drug distribution company is currently at the center of multiple lawsuits related to the crisis, which includes claims the company sent “millions” of opioid drugs to pharmacies in New York, Bloomberg reported last July.

Other lawsuits include one filed in San Fransisco, California, in December against McKesson and “other pharmaceutical companies.” The filing claims that the accused companies falsely demonstrated the drugs they developed were safe, and named various pharmaceutical companies that created the drugs and drug distributors like McKesson for failing to suspicious sales of opioids.

Prior to December’s court filings, longtime McKesson CEO, John H. Hammergren, announced in November he would be stepping down as the company’s leader effective this March. In the announcement, Hammergren revealed that Brian Tyler would be assuming his position.

“This is the right time to turn the leadership reins over to the next generation and no one is better equipped than Brian to lead McKesson into the future. He is a gifted leader with deep industry knowledge and an unwavering commitment to enhancing value for our customers and their patients,” Hammergren stated in the release.

Meanwhile 60 Minutes, a program on broadcasting company CBS, televised a segment on the opioid crisis in December and put the spotlight on a number of companies related to the epidemic, including McKesson. In the program, Mike Moore, Mississippi’s attorney general, called on manufacturers and distributors of opioid painkillers to “pay for the epidemic of addiction and death” that has impacted the US.

However, McKesson then responded to the segment and said that it continues to enhance “strong programs designed to detect and prevent opioid diversion within the pharmaceutical supply chain.”

“We only distribute controlled substances, including opioids, to DEA-registered and state-licensed pharmacies,” McKesson said in response to the 60 Minutes segment.

The FDA said in its Tuesday announcement that the opioid epidemic remains a challenge both for the US and the agency itself.

“Our efforts to combat this public health emergency, however, extend also to stopping the spread of illicit opioids and further securing all aspects of the supply chain for legitimate medications, including opioids,” the announcement said.

So, how does the opioid epidemic impact pharma investors? For starters, while pharmaceutical companies are largely blamed for the crisis itself, these companies are also at the forefront of developing drugs to resolve the disaster. What this means is investment opportunities in these companies is still an attractive option.

Surprisingly, shares of McKesson itself were on the rising following the statement released by the FDA on Tuesday. McKesson’s stock rose 2.73 percent over the one-day trading period to close Tuesday at US$134.

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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.