Cardinal settles with U.S. over painkiller shipments to pharmacies

NEW YORK (Reuters) - A drug distributor owned by Cardinal Health Inc has agreed to pay $10 million to resolve claims it failed to alert the U.S. Drug Enforcement Administration to suspiciously large orders of addictive painkillers by New York-area pharmacies.

The settlement with Kinray LLC, a New York City-based pharmaceutical distributor, disclosed in papers filed late Thursday in federal court in Manhattan, comes amid efforts by U.S. authorities to combat the nation’s opioid drug epidemic.

The settlement was secured by the office of Preet Bharara, the U.S. Attorney for the Southern District of New York, who has increasingly turned his sights toward the growing opioid drug epidemic.

Each day about 78 Americans die of an opioid overdose, according to authorities. Oxycodone, a heavily regulated opioid painkiller that has enormous cash value to drug dealers, is abused by over 13 million Americans annually, prosecutors say.

The Kinray settlement came after a DEA investigation of pharmacies in New York and elsewhere that had ordered unusually large and frequent shipments of oxycodone or hydrocodone, according to a lawsuit filed earlier this week.

From January 2011 and May 2012, Kinray shipped the drugs to more than 20 New York pharmacy locations in amounts that were many times greater than the distributor’s average sales of controlled substances to all of its customers, the lawsuit said.

Kinray ignored numerous “red flags” and did not report any suspicious orders to the DEA despite requirements that it do so for such highly regulated drugs, the lawsuit said.

The latest agreement stemmed from a 2012 settlement with the DEA in which its facility in Lakeland, Florida, was suspended from selling painkillers and other drugs for two years, according to Cardinal.

The 2012 deal only resolved administrative aspects of the case, not potential fines Cardinal Health faced in Florida or elsewhere. The Dublin, Ohio-based company has set aside $44 million to cover those potential liabilities.

Cardinal Health, which announced its $1.3 billion acquisition of Kinray in 2010, said on Friday it continues to work with the U.S. Justice Department to resolve the matter.

As part of the settlement, Kinray admitted and accepted responsibility for failing to report suspicious orders to the DEA, according to court papers.

The case is U.S. v. Kinray LLC, U.S. District Court, Southern District of New York, No. 16-cv-09767.

Editing by Lisa Von Ahn and Jeffrey Benkoe