U.S. Attorney for the Southern District of New York Geoffrey Berman speaks during a news conference on Tuesday announcing charges against Rochester Drug Co-Operative.  (AP Photo/Mary Altaffer)

Federal authorities in Manhattan announced criminal charges Tuesday against the Rochester Drug Co-Operative and two of its former executives for unlawfully distributing opioids in what U.S. Attorney Geoffrey Berman of the Southern District of New York called a first-of-its-kind prosecution.

“Our Office will do everything in its power to combat this epidemic, from street-level dealers to the executives who illegally distribute drugs from their boardrooms,” he said in a statement.

The western New York wholesale pharmaceutical distributor is one of the nation’s largest of its kind, with more than 1,300 pharmacy customers and $1 billion in revenue, according to prosecutors. They claim that the company distributed oxycodone, fentanyl, and other drugs to customers its own internal compliance personnel determined were dealing the drugs to others, prosecutors claimed. The decision to do so came from senior management, including the company’s former CEO, Laurence Doud III, and COO, William Pietruszewski.

Prosecutors said the company and its leadership knowingly ignored red flags that continued to pop up. Order for unusually high quantities of the addictive drugs, a high percentage of cash being used to pay for prescriptions, and the filling of scripts by doctors who would not normally be prescribing painkillers were just a few of the signs federal authorities claim Rochester Drug Co-Operative leadership willfully ignored.

Despite the raised suspicions, and even concerns some of the pharmacies were “DEA investigations in the making,” employees’ concerns went unheeded, while profits at the company soared.

According to federal authorities, Doud allegedly directed the increase of sales of oxycodone from 4.7 million to 42.2 million, or an increase of about 800%, between 2012 and 2016. During the same time period fentanyl sales grew from 63,000 dosages to more than 1.3 million, an increase of approximately 2,000%. Doud, for his part, was compensated accordingly: prosecutors claim he made over $1.5 million in 2016, an increase of 125% over the same time period.

Prosecutors said that in addition to turning a blind eye to where its drugs were going, the company also sought to conceal its actions from law enforcement. Doud, according to prosecutors, directed Pietruszewski not to report suspect pharmacies to the Drug Enforcement Agency. The company went so far as to open new accounts without conducting due diligence, including some that lost prior distributors over concerns, despite telling the DEA it was in compliance, authorities said.

This pattern of behavior played out in the numbers. Between 2012 and 2016, 8,300 potentially suspicious orders were flagged internally by Rochester Drug Co-Operative. Yet only four suspicious orders ever made their way to the DEA.

“Today’s charges should send shock waves throughout the pharmaceutical industry reminding them of their role as gatekeepers of prescription medication,” DEA Special Agent in Charge Ray Donovan said in a statement. “The distribution of life-saving medication is paramount to public health; similarly, so is identifying rogue members of the pharmaceutical and medical fields whose diversion contributes to the record-breaking drug overdoses in America.”

At the same time the charges were announced, federal prosecutors unveiled a deferred prosecution agreement with the drug company, and a cooperation deal with Pietruszewski.

Rochester Drug Co-Operative will pay a $20 million fine, and be subject to a three-year compliance monitoring that will include regular progress reports to the DEA.

Company spokesman Jeff Eller said in a statement that the drug company accepts responsibility for its mistakes.

“We made mistakes and RDC understands that these mistakes, directed by former management, have serious consequences,” Eller’s said. “We can do better, we are doing better, and we will do better.”

According to federal prosecutors, Pietruszewski pleaded guilty to multiple conspiracy charges related to distribution of a controlled substance, fraud, and failing to report. He is represented by Porzio, Bromberg & Newman principal William Hughes Jr., who told the New York Law Journal Pietruszewski accepted responsibility and is looking forward to moving on with his life.

Doud was charged with conspiracy to distribute and to defraud the U.S. Gottlieb & Janey name partner Robert Gottlieb represents him in the matter.

In a statement, Gottlieb said his client was being “framed, plain and simple.”

“The Government has it all wrong and is being used by others to cover up their wrongdoing,” Gottlieb said. “Mr. Doud will fight these false charges to his last breath and he will be vindicated.”

The company was represented in the matter by Hyman, Phelps & McNamara director Douglas Farquhar.

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