By Jon Kamp
Cardinal Health Inc. (CAH) said Wednesday that the government is
seeking information in a process that could lead to civil fines
following a recent settlement over allegations the drug wholesaler
didn't do enough to stop misuse of prescription painkillers from a
Florida distribution hub.
The Dublin, Ohio, company reached the settlement with the Drug
Enforcement Administration in mid-May over the Lakeland, Fla.,
center. Cardinal agreed to a two-year suspension of its license to
ship controlled substances from that facility and also agreed to
improve its procedures.
Cardinal didn't pay a fine in May, but the deal "did not
foreclose the possibility of the U.S. Department of Justice seeking
civil fines for historical conduct covered by the settlement
agreement," Cardinal said in a regulatory filing Wednesday.
"In that regard, we are responding to civil subpoenas from two
local offices within the DEA and the U.S. Department of Justice
related to our distribution of controlled substances," the company
said.
Cardinal also said it is not yet possible to "reasonably
estimate a range of possible loss."
The government has been closely scrutinizing the nation's
pharmacy-supply chain, including drug wholesalers and retail
pharmacies, amid a soaring problem with prescription painkiller
abuse. In 2008, Cardinal was blocked from shipping out controlled
substances at three facilities due to DEA allegations the company
wasn't doing enough to spot illegitimate purchases. Cardinal
eventually paid a $34 million settlement payment but did not admit
any wrongdoing.
ISI Group analyst Ross Muken noted that the 2008 fine "related
to a much broader suit than they may face today," and he sees
"minimal financial impact" if Cardinal winds up paying a fine.
The company also noted in Wednesday's filing that the DEA
confirmed, as part of May's settlement, that it wasn't planning
further administrative actions at any other Cardinal facilities
based on conduct prior to the settlement.
Cardinal competitor AmerisourceBergen Corp. (ABC) disclosed
earlier this month that it received subpoenas from the U.S.
Attorney's Office in New Jersey and the DEA seeking documents on
the company's internal controls. In 2007 the DEA suspended all
controlled-substance shipments for several months at an
AmerisourceBergen facility in Orlando, Fla., until the company
installed a more-robust order-monitoring program.
Cardinal shares recently traded down 0.7% to $39.60.
Write to Jon Kamp at jon.kamp@dowjones.com
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