[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


 COMBATING THE OPIOID EPIDEMIC: EXAMINING CONCERNS ABOUT DISTRIBUTION 
                             AND DIVERSION

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 8, 2018

                               __________

                           Serial No. 115-124




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                    COMMITTEE ON ENERGY AND COMMERCE

                          GREG WALDEN, Oregon
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio                MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington   JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
BILL JOHNSON, Ohio                   YVETTE D. CLARKE, New York
BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
BILL FLORES, Texas                   JOSEPH P. KENNEDY, III, 
SUSAN W. BROOKS, Indiana             Massachusetts
MARKWAYNE MULLIN, Oklahoma           TONY CARDENAS, California
RICHARD HUDSON, North Carolina       RAUL RUIZ, California
CHRIS COLLINS, New York              SCOTT H. PETERS, California
KEVIN CRAMER, North Dakota           DEBBIE DINGELL, Michigan
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina

                                 7_____

              Subcommittee on Oversight and Investigations

                       GREGG HARPER, Mississippi
                                 Chairman
H. MORGAN GRIFFITH, Virginia         DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
JOE BARTON, Texas                    JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            KATHY CASTOR, Florida
SUSAN W. BROOKS, Indiana             PAUL TONKO, New York
CHRIS COLLINS, New York              YVETTE D. CLARKE, New York
TIM WALBERG, Michigan                RAUL RUIZ, California
MIMI WALTERS, California             SCOTT H. PETERS, California
RYAN A. COSTELLO, Pennsylvania       FRANK PALLONE, Jr., New Jersey (ex 
EARL L. ``BUDDY'' CARTER, Georgia        officio)
GREG WALDEN, Oregon (ex officio)

                                  (ii)
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Gregg Harper, a Representative in Congress from the State of 
  Mississippi, opening statement.................................     2
    Prepared statement...........................................     3
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     4
    Prepared statement...........................................     6
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     7
    Prepared statement...........................................     9
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................    10
    Prepared statement...........................................    11

                               Witnesses

Joseph R. Mastandrea, D.O., Chairman, Miami-Luken, Inc...........    13
    Prepared statement...........................................    16
    Answers to submitted questions...............................   124
John Hammergren, Chairman, President, and Chief Executive 
  Officer, McKesson Corp.........................................    20
    Prepared statement...........................................    22
    Answers to submitted questions...............................   131
George S. Barrett, Executive Chairman, Cardinal Health...........    31
    Prepared statement...........................................    33
    Answers to submitted questions...............................   165
Steven H. Collis, Chairman, President, and Chief Executive 
  Officer, AmerisourceBergen Corp................................    43
    Prepared statement...........................................    45
    Answers to submitted questions...............................   173
James Christopher Smith, Former President and Chief Executive 
  Officer, H.D. Smith, LLC.......................................    57
    Prepared statement...........................................    59
    Answers to submitted questions...............................   187

                           Submitted Material

Subcommittee document binder \1\
Slide, ``Fatal Prescription Opioid Overdose 2017,'' Virginia 
  Department of Health, submitted by Mr. Griffith................    78
Subcommittee memorandum..........................................   107
Reports, chief executive officer salaries and compensation, 
  submitted by Ms. Castor........................................   116

----------
\1\ The information has been retained in committee files and also 
  is available at  https://docs.house.gov/Committee/Calendar/
  ByEvent.aspx?EventID=108260.

 
 COMBATING THE OPIOID EPIDEMIC: EXAMINING CONCERNS ABOUT DISTRIBUTION 
                             AND DIVERSION

                              ----------                              


                          TUESDAY, MAY 8, 2018

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2123, Rayburn House Office Building, Hon. Gregg Harper 
(chairman of the subcommittee) presiding.
    Members present: Representatives Harper, Griffith, Burgess, 
Brooks, Collins, Barton, Walberg, Walters, Costello, Carter, 
Walden (ex officio), DeGette, Schakowsky, Castor, Tonko, Ruiz, 
Pallone (ex officio).
    Also present: Representatives Blackburn, Bilirakis, 
McKinley, Johnson, Guthrie, Lance, and Welch.
    Staff present: Jennifer Barblan, Chief Counsel, Oversight 
and Investigations; Mike Bloomquist, Staff Director; Karen 
Christian, General Counsel; Jordan Davis, Director of Policy 
and External Affairs; David DeMarco, Deputy IT Director; Adam 
Fromm, Director of Outreach and Coalitions; Ali Fulling, 
Legislative Clerk, Oversight and Investigations, Digital 
Commerce and Consumer Protection; Theresa Gambo, Human 
Resources and Office Administrator; Brittany Havens, 
Professional Staff, Oversight and Investigations; Zach Hunter, 
Communications Director; Perry Lusk, Minority GAO Detailee; 
Christopher Santini, Counsel, Oversight and Investigations; 
Jennifer Sherman, Press Secretary; Alan Slobodin, Chief 
Investigative Counsel, Oversight and Investigations; Hamlin 
Wade, Special Advisor for External Affairs; Christina Calce, 
Minority Counsel; Jeff Carroll, Minority Staff Director; 
Tiffany Guarascio, Minority Deputy Staff Director and Chief 
Health Advisor; Christopher Knauer, Minority Oversight Staff 
Director; Miles Lichtman, Minority Policy Analyst; Perry Lusk, 
Minority GAO Detailee; Kevin McAloon, Minority Professional 
Staff Member; Andrew Souvall, Minority Director of 
Communications; and C.J. Young, Minority Press Secretary.

  OPENING STATEMENT OF HON. GREGG HARPER, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF MISSISSIPPI

    Mr. Harper. I now call to order this hearing on ``Combating 
the Opioid Epidemic: Examining Concerns About Distribution and 
Diversion.''
    One year ago today, on May the 8th, 2017, the committee 
opened a bipartisan investigation into the distribution of 
prescription opioids by wholesale drug distributors with a 
specific focus on unusually large opioid shipments to small 
pharmacies in West Virginia. The launch of this investigation 
was spurred by press reports of astonishing levels of opioid 
distribution to pharmacies in small, rural West Virginia towns.
    Between 2007 and 2012, distributors sent more than 700 
million hydrocodone and oxycodone pills to the State, or 433 
pills for every man, woman, and child in the State. In that 
timeframe, 1,728 West Virginians fatally overdosed on these two 
drugs.
    The numbers were eye-opening. The Sav-Rite pharmacy in 
Kermit, West Virginia, population around 400, received nearly 9 
million opioids in a 2-year period. Another pharmacy, in nearby 
Oceana, West Virginia, received 600 times as many oxycodone 
pills as the Rite Aid drugstore just eight blocks away.
    This led the committee, on a bipartisan basis, to request 
information from the Drug Enforcement Administration and the 
so-called Big Three drug distributors: McKesson, Cardinal 
Health, and AmerisourceBergen. These distributors delivered 
more than 500 million opioids to West Virginia between 2007 and 
2012, with Cardinal shipping 241 million opioids, 
AmerisourceBergen shipping about 119 million opioids, and 
McKesson shipping more than 150 million opioids.
    Later in the investigation the committee also sent letters 
to two regional distributors with a major presence in West 
Virginia, Miami-Luken and H.D. Smith. We found that the 
stunning numbers that led us to start this investigation were 
much more common than we had hoped.
    Among our discoveries are a single pharmacy in Mount Gay-
Shamrock, West Virginia, population 1,779, that received more 
than 16.5 million hydrocodone and oxycodone pills between 2006 
and 2016. In nearby Williamson, West Virginia, population 
2,900, distributors sent almost 21 million opioids to two 
pharmacies during the same period. And this is just within the 
targeted areas that we reviewed.
    We have learned much from the investigation but still have 
many questions. For example, why did the distributors 
repeatedly fail to report suspicious orders of opioids or 
exercise effective controls against diversion?
    By 2005, internet pharmacies had transformed the DEA 
regulatory paradigm with unprecedented large volumes of 
controlled substances being shipped to individual pharmacies. 
Pill mill doctors and pharmacies began to proliferate. The 
agency needed help, and given their position in the supply 
chain and their legal obligations to identify and report 
suspicious orders, identified the distributors as a main line 
of defense against diversion.
    Through meetings and letters over a period of years, the 
DEA educated and coached the distributors on their 
responsibilities. The distributors have contended that the DEA 
provided insufficient communication and guidance. Distributors 
have also said that only the DEA can see the full picture with 
respect to pharmacy volume and that distributors are simply 
privy to their own data.
    But were distributors' capabilities that limited? 
Distributors conduct due diligence, site visits, and can obtain 
market data. They can request and analyze a pharmacy's 
dispensing data, which provides the distributors with the 
ability to see all the controlled substances being dispensed by 
a pharmacy and the prescribers over a given period of time.
    In some cases, such as what we have seen in West Virginia, 
the volume of controlled substances a distributor sends on its 
own should be cause for concern.
    Distributors also contend that they do not set demand and 
simply satisfy orders for prescriptions written by licensed 
doctors and filled by licensed pharmacists. But what about the 
distributor's legal responsibility to know their customer and 
perform due diligence?
    And what does our work mean for the rest of the country? 
West Virginia is far from the only State heavily impacted by 
the opioid epidemic. It has hit every State, and everyone in 
this room has been affected in some way.
    How many other communities across the country have received 
millions more opioids than their communities could reasonably 
sustain? How many other times did a distributor miss the red 
flags of their own distribution, let alone what could be found 
with due diligence? How many other Kermits and Williamsons are 
out there?
    It is my hope that we will see some answers today as to how 
the drug distributors seemingly missed the red flags of 
diversion.
    I want to welcome the witnesses and thank each of you for 
your participation to help us in this important investigation.
    I also thank my colleagues from across the aisle for all of 
their hard work on this bipartisan investigation.
    And I now recognize the ranking member of the subcommittee, 
Ms. DeGette.
    [The prepared statement of Mr. Harper follows:]

                Prepared statement of Hon. Gregg Harper

    One year ago today, May 8, 2017, the committee opened a 
bipartisan investigation into the distribution of prescription 
opioids by wholesale drug distributors, with a specific focus 
on unusually large opioid shipments to small pharmacies in West 
Virginia.
    The launch of this investigation was spurred by press 
reports of astonishing levels of opioid distribution to 
pharmacies in small, rural West Virginia towns. Between 2007 
and 2012, distributors sent more than 780 million hydrocodone 
and oxycodone pills to the State--or 433 pills for every man, 
woman, and child in the State. In that timeframe, 1,728 West 
Virginians fatally overdosed on those two drugs.
    The numbers were eye-opening. The Sav-Rite pharmacy in 
Kermit, West Virginia--population around 400--received nearly 9 
million opioids in a 2-year period. Another pharmacy in nearby 
Oceana, West Virginia, received 600 times as many oxycodone 
pills as the Rite Aid drugstore just eight blocks away.
    This led the committee on a bipartisan basis to request 
information from the Drug Enforcement Administration, and the 
so-called Big Three drug distributors: McKesson, Cardinal 
Health, and AmerisourceBergen. These distributors delivered 
more than 500 million opioids to West Virginia between 2007 and 
2012, with Cardinal shipping 241 million opioids, 
AmerisourceBergen shipping about 119 million opioids, and 
McKesson shipping more than 150 million opioids. Later in the 
investigation, the committee also sent letters to two regional 
distributors with a major presence in West Virginia: Miami-
Luken and H.D. Smith.
    We found that the stunning numbers that led us to start 
this investigation were more common than hoped.
    Among our discoveries are a single pharmacy in Mount Gay-
Shamrock, West Virginia-population 1,779-that received more 
than 16.5 million hydrocodone and oxycodone pills between 2006 
and 2016. In nearby Williamson, West Virginia--population 
2,900-distributors sent almost 21 million opioids to two 
pharmacies during the same period. And this is just within the 
targeted areas that we reviewed.
    We have learned much from the investigation, but still have 
many questions. For example, why did the distributors 
repeatedly fail to report suspicious orders of opioids or 
exercise effective controls against diversion? By 2005, 
Internet pharmacies had transformed the DEA regulatory 
paradigm, with unprecedented large volumes of controlled 
substances being shipped to individual pharmacies. Pill mill 
doctors and pharmacies began to proliferate. The agency needed 
help, and, given their position in the supply chain and their 
legal obligations to identify and report suspicious orders, 
identified the distributors as a main line of defense against 
diversion. Through meetings and letters over a period of years, 
the DEA educated and coached the distributors on their 
responsibilities.
    The distributors have contended that the DEA provided 
insufficient communication and guidance. Distributors have also 
said that only the DEA can see the full picture with respect to 
pharmacy volume and that distributors are simply privy to their 
own data.
    But were distributors' capabilities that limited? 
Distributors conduct due diligence, site visits, and can obtain 
market data. They can request and analyze a pharmacy's 
dispensing data, which provides the distributors with the 
ability to see all the controlled substances being dispensed by 
a pharmacy and the prescribers over a given period of time. In 
some cases, such as what we have seen in West Virginia, the 
volume of controlled substances a distributor sends on its own 
should be cause for concern.
    Distributors also contend that they do not set demand, and 
simply satisfy orders for prescriptions written by licensed 
doctors and filled by licensed pharmacies. But what about the 
distributors' legal responsibility to ``know their customer'' 
and perform due diligence?
    And what does our work mean for the rest of the country? 
West Virginia is far from the only State heavily impacted by 
the opioid epidemic. It has hit every State, and every one of 
us in the room has been affected in some way. How many other 
communities across the country have received millions more 
opioids than their communities could reasonably sustain? How 
many other times did a distributor miss the red flags of their 
own distribution--let alone what could be found with due 
diligence? How many other Kermits and Williamsons are out 
there?
    It's my hope that we will get some answers today as to how 
the drug distributors seemingly missed the ``red flags'' of 
diversion.
    I welcome the witnesses and thank you for your 
participation. I also thank my colleagues across the aisle for 
all of their hard work on this investigation and now recognize 
the ranking member of the subcommittee, Ms. DeGette.

    Mr. Harper. And I now recognize the ranking member of the 
subcommittee, Ms. DeGette.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you so much, Mr. Chairman.
    This investigation has been bipartisan. And as you 
mentioned, it was a year ago today when we sent our first 
letters to three of the drug wholesale distributors before us 
today. Those letters described the devastation of the opioid 
crisis, and they referenced a report that, over 6 years, 
distributors showered the State with 780 million hydrocodone 
and oxycodone pills while 1,728 West Virginians fatally 
overdosed on those two painkillers.
    Over the last year, we learned a lot more about the full 
scope of the epidemic in West Virginia. As the chairman said, 
we obtained data showing that pharmacies in tiny towns received 
millions of pills in just a few years.
    But our work is not finished. We want to know what these 
companies knew about the rise of the opioid epidemic, when they 
knew it, and whether it informed their distribution practices.
    In fact, over a decade ago the DEA sent letters to all 
registered distributors informing them that, quote, ``The abuse 
of controlled prescription drugs is a serious and growing 
health problem in this country,'' end quote.
    In 2007, CDC reported that drug overdose deaths nationwide 
increased by 276 percent between 1999 and 2014, and in West 
Virginia, drug overdose deaths were up by 550 percent.
    A well-publicized 2008 JAMA study specifically implicated 
prescription opioids in the rise of overdose deaths.
    In 2010, the New England Journal of Medicine article, ``A 
Flood of Opioids, a Rising Tide of Deaths,'' showed that the 
prescription opioids death toll continued to rise, particularly 
in West Virginia.
    In 2011, the Charleston Gazette published a major story 
describing how residents began calling the town of Williamson, 
quote, ``Pilliamson,'' because so many opioids had flooded that 
town.
    And this is just a small sampling of the articles that 
highlighted the rise of this epidemic.
    So yet, even as this information was coming out, it appears 
that, over 3 years, distributors sent more than 11 million 
pills to one pharmacy in a town of 400 and more than 12 million 
total pills to two pharmacies in a town of 3,000. I mean, come 
on.
    I know we are going to hear from the distributors that they 
had systems in place and that they only fill orders by 
pharmacies that hold valid DEA licenses. At the end the day, 
however, I think we can all agree, whatever systems were in 
place did not prevent damage to these communities caused by 
what appears to be the excessive supply of opioid pills.
    Some of the counties that have been the focus of the 
investigation have the highest death and overdose rates in the 
Nation. The epidemic has devastated families throughout that 
State, and it has placed huge burdens on the State's healthcare 
system, its child welfare program, and its economy as a whole.
    Now, we need to understand the root causes of how we let 
this happen and why distributors apparently supplied so many 
opioids to certain small town pharmacies. For example, how did 
the tiny town of Kermit, with a population of 400, receive 9 
million pills in just 2 years? Shouldn't the distributors' 
suspicious order systems have immediately flagged and halted 
shipment of this magnitude? And shouldn't the distributors have 
examined them more closely to determine the appropriateness for 
shipping them?
    I also want to understand why major drug companies failed 
to have adequate suspicious order reporting programs in place 
and were forced to have to settle with the DOJ and the DEA not 
once, but twice during this epidemic. Do the distributors 
believe that any of their suspicious order reporting system 
failed? And if so, how?
    I hope what we learn today will help us inform 
investigations all across the country, including in Colorado, 
which has had similar concerns raised about overdistribution.
    Mr. Chairman, let me conclude by saying we agree it is 
critical that we understand what happened and how the Nation 
has found itself in the grip of this opioid crisis. But at the 
same time, I think that the overall committee needs to make 
sure that we have adequate resources available to help those in 
need and to get people like those in the hard-hit places we 
will be talking about today the recovery that they need.
    As we look back on what happened, we cannot turn our backs 
on those who were devastated by this crisis.
    Thank you, and I yield back.
    [The prepared statement of Ms. DeGette follows:]

                Prepared statement of Hon. Diana DeGette

    Exactly 1 year ago today, this committee sent our first 
letters to three of the drug wholesale distributors before us 
today. Our letters described the devastation of the opioid 
crisis, and referenced a report that over 6 years, distributors 
``showered the State with 780 million hydrocodone and oxycodone 
pills, while 1,728 West Virginians fatally overdosed on those 
two painkillers.''
    Over the past year, we have learned more about the full 
scope of this epidemic in West Virginia. We have obtained data 
showing that pharmacies in tiny towns received millions of 
pills in just a few years.
    But Mr. Chairman, our work is not finished. I want to know 
what these companies knew about the rise of the opioid 
epidemic, when they knew it, and whether it informed their 
distribution practices.
    In fact, over a decade ago, DEA sent letters to all 
registered distributors, informing them that ``the abuse of 
controlled prescription drugs is a serious and growing health 
problem in this country.''
    In 2007, CDC reported that drug overdose deaths nationwide 
increased by 276 percent between 1999 and 2004, and that in 
West Virginia, drug overdose deaths were up by 550 percent.
    A well-publicized 2008 JAMA study specifically implicated 
prescription opioids in the rise in overdose deaths.
    In 2010, the New England Journal of Medicine article ``A 
Flood of Opioids, a Rising Tide of Deaths,'' showed that the 
prescription opioids death toll continued to rise, particularly 
in West Virginia.
    In 2011, the Charleston Gazette published a major story 
describing how residents began calling the town of Williamson 
[quote], ``Pill-iamson,'' because so many opioids had flooded 
that town.
    And this is just a small sample of the articles 
highlighting the rise of this epidemic.
    And yet, even as all of this information was coming out, it 
appears that over 3 years, distributors sent more than 11 
million pills to one pharmacy in a town of 400, and more than 
12 million total pills to two pharmacies in a town of 3,000.
    I know that we will hear from the distributors that they 
had systems in place and that they only fill orders by 
pharmacies that hold valid DEA licenses. At the end of the day, 
however, whatever systems were in place did not prevent the 
damage to these communities caused by what appears to be the 
excessive supply of opioid pills.
    Some of the counties that have been the focus of our 
investigation have the highest death and overdose rates in the 
Nation. The epidemic has devastated families throughout that 
State and it has placed huge burdens on the State's health care 
system, its child welfare program, and its economy as a whole.
    We need to understand the root causes of how this happened, 
and why distributors apparently supplied so many opioids to 
certain small-town pharmacies.
    For example, how did the tiny town of Kermit with a 
population of 400 hundred receive 9 million pills in just 2 
years? Should the distributors' suspicious order systems have 
immediately flagged and halted shipments of this magnitude, and 
examined them more closely to determine their appropriateness 
before shipping them?
    I also want to understand why major drug companies failed 
to have adequate suspicious order reporting programs in place 
and were forced to settle with DOJ and DEA not once, but twice 
during this epidemic. Do these distributors believe that any of 
their suspicious order reporting systems failed, and if so, 
how?
    I hope that what we learn today will inform investigations 
in other States, including Colorado, which has had similar 
concerns raised concerning over distribution, going forward.
    Mr. Chairman, let me conclude by saying that it is critical 
that we understand what happened and how the Nation has found 
itself in the grip of this ongoing opioid crisis. But at the 
same time, I also believe we commit to making adequate 
resources available to help those in need, and get people, such 
as those in the hard hit places we will be talking about today, 
the recovery help they need. As we look back at what happened, 
we cannot turn our backs on those who have been devastated by 
this crisis.
    Thank you.

    Mr. Harper. The gentlewoman yields back.
    The Chair now recognizes the chairman of the full 
commitment, Mr. Walden, for the purposes of an opening 
statement.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Thank you, Mr. Chairman.
    Over the last few years, the Energy and Commerce Committee 
has conducted multiple investigations, enacted major bipartisan 
legislation, and helped authorize historic levels of funding to 
help those battling this epidemic in our communities all across 
America. But clearly we have much more work to do, including 
two important hearings and a full committee markup this week on 
this issue.
    Our efforts continue on two tracks. One is to provide new 
legislative solutions, new laws, new programs to combat the 
crisis. And the second track is to continue our yearlong 
investigation into its causes.
    As you have heard before, today's hearing marks a 1-year 
anniversary since we first asked the Drug Enforcement 
Administration and the Nation's largest distributors of opioids 
for information about the overwhelming amount of prescription 
opiates that flooded into countless communities all across the 
United States.
    After hearing from the DEA in March, it is important that 
today we hear from the executives who lead the most influential 
pharmaceutical distribution companies in America. We have tough 
questions for you today. You know that. But we ask you these 
questions in order for all of us to find solutions.
    Today, a thousand people will go into emergency rooms 
overdosing on opioids. Today in America, 115 people will die 
from opioid addiction and overdose. This is why we are moving 
forward.
    A decade ago, the DEA realized that its enforcement 
strategy had to change to fight the rising tide of internet 
pharmacies, internet pharmacies and pill mills. With more than 
a million DEA registrants, the DEA simply could not fight this 
only at an individual doctor and pharmacy level.
    So to more effectively and efficiently combat this emerging 
law enforcement challenge, the DEA asked the drug distributors 
to play a more proactive role in identifying, analyzing, and 
reporting and blocking suspicious orders of controlled 
substances.
    In 2005, the DEA started the Distributor Initiative 
Program. That program had a goal of educating registrants on 
maintaining effective controls against diversion and monitoring 
for and reporting suspicious orders. DEA held individual 
meetings in 2005 and 2006 with McKesson, with Cardinal Health, 
and AmerisourceBergen, and instructed companies on how to 
identify and submit reports of suspicious orders.
    In 2006 and 2007, the DEA sent three letters to all DEA-
registered distributors to put them on notice about their legal 
obligations. However, soon after the start of this initiative, 
each of these three companies faced enforcement actions, in 
2007 and 2008, for failures to maintain effective controls 
against the diversion of controlled substances. Cardinal Health 
and McKesson each paid civil penalties totaling millions of 
dollars.
    Meanwhile, the opioid crisis worsened over the next decade, 
especially in ravaged communities like we have heard about this 
morning and in our investigations in small towns in West 
Virginia.
    Even after the 2008 settlements, while concerns rose over 
the opioid epidemic, some distributors were still failing to 
exercise effective controls against diversion. This led to more 
enforcement actions and more settlements, including a record-
setting $150 million civil penalty by McKesson in 2017. It 
remains an open question today whether the distributors have 
finally achieved effective DEA compliance programs.
    Since the 1970s, distributors have had a statutory 
responsibility under the Controlled Substances Act to exercise 
due diligence to report and avoid filling suspicious orders. 
This responsibility is due to their unique position in the 
marketplace. They are the chokepoints in the U.S. prescription 
drug supply chain.
    Three of those that are before us today, McKesson, Cardinal 
Health, and AmerisourceBergen, account for about 85 percent of 
the drug supply. So it is not sufficient just to blame the DEA, 
although we have our own issues with the DEA's role in this. 
You have a unique set of resources and tools at your disposal 
and a shared responsibility in flagging suspicious activity and 
diversion. You are on the front lines of the defense in this 
crisis.
    Instead, the information uncovered by the investigation 
over the last year is stunning. There is no logical explanation 
that we can find for why a town of approximately 400 people 
would receive 9 million opioid pills in 2 years or why a single 
pharmacy in a town of 1,800 people would receive nearly 17 
million opioid pills in a decade. Then there are two pharmacies 
in a nearby town of 2,900 people which received nearly 21 
million opioids in the same timeframe.
    No matter how you cut these data, behind each of these 
numbers was a pill mill, and they proliferated for far too 
long.
    So given what we know about the volume of opioid shipments 
to small towns in West Virginia and the associated pill mills 
and diversion schemes in those areas, it is difficult not to be 
troubled by the compliance efforts by our Nation's 
distributors.
    So we look forward to getting a better understanding of the 
facts and to finally have this necessary and frank 
conversation. We owe it to the 115 Americans who will die today 
and every day from opioid overdoses and to their loved ones to 
understand what led to this crisis and to identify solutions to 
stem the tide.
    With that, Mr. Chairman, I yield back.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Mr. Chairman, thank you for holding this hearing. I also 
want to thank you and Ranking Member DeGette for your work in 
this bipartisan investigation.
    This Energy and Commerce Committee is leading the national 
fight to combat the opioid crisis. Over the past few years 
we've conducted multiple investigations, enacted major 
bipartisan legislation, and helped authorize historic levels of 
funding--to help those battling this epidemic in communities 
across the country. But clearly we have more work ahead of us, 
including two important hearings and a full committee markup 
this week. Our efforts continue on two-tracks, providing new 
legislative solutions to combat the crisis and conducting 
thorough investigations into its causes.
    Today's hearing marks 1 year to the day since we first 
asked the DEA and the Nation's largest opioid distributors for 
information about the overwhelming amount of prescription 
opiates that flooded countless communities. After hearing from 
the DEA in March, it's important that today we hear from the 
executives who lead the most influential pharmaceutical 
distributors in the country. We have tough questions for you 
today, but we ask you these questions in order for us all to 
find solutions.
    More than one decade ago, the DEA realized that its 
enforcement strategy had to change to fight the rising tide of 
internet pharmacies and pill mills. With more than one million 
DEA registrants, the DEA simply could not fight this only at an 
individual doctor and pharmacy level. To more effectively and 
efficiently combat this emerging law enforcement challenge, the 
DEA asked the drug distributors to play a more proactive role 
in identifying, analyzing, reporting, and blocking suspicious 
orders of controlled substances.
    In 2005, the DEA started the ``Distributor Initiative 
Program,'' with the goal of educating registrants on 
maintaining effective controls against diversion, and 
monitoring for and reporting suspicious orders. DEA held 
individual meetings in 2005 and 2006 with McKesson, Cardinal 
Health, and Amerisource Bergen, and instructed the companies on 
how to identify and submit reports of suspicious orders. In 
2006 and 2007, the DEA sent three letters to all DEA-registered 
distributors to put them on notice about their legal 
obligations.
    However, soon after the start of this initiative, each of 
these three companies faced enforcement actions in 2007 and 
2008 for failures to maintain effective controls against 
diversion of controlled substances. Cardinal Health and 
McKesson each paid civil penalties totaling millions of 
dollars.
    Meanwhile, the opioid crisis worsened over the next decade, 
especially in ravaged communities like the small towns in rural 
West Virginia.
    Even after the 2008 settlements, while concerns rose over 
the opioid epidemic, some distributors were still failing to 
exercise effective controls against diversion. This led to more 
enforcement actions, and more settlements, including a record-
setting $150 million civil penalty by McKesson in January 2017. 
It remains an open question today whether the distributors have 
finally achieved effective DEA compliance programs.
    Since the 1970s, you have had a statutory responsibility 
under the Controlled Substances Act to exercise due diligence 
to report and avoid filling suspicious orders. This 
responsibility is due to your unique position in the 
marketplace. You are the chokepoints in the U.S. prescription 
drug supply chain. Three of you--McKesson, Cardinal Health, and 
AmerisourceBergen--account for about 85 percent of the drug 
supply.
    It is not sufficient to simply blame the DEA. You have a 
unique set of resources and tools at your disposal, and a 
shared responsibility in flagging suspicious activity and 
diversion. You are supposed to be one of the first lines of 
defense in this crisis.
    Instead, the information uncovered by this investigation 
over the last year is stunning. There is no logical explanation 
for why a town of approximately 400 people would receive 9 
million opioid pills in 2 years. Or why a single pharmacy in a 
town of about 1,800 people would receive nearly 17 million 
opioid pills in a decade. Then there are the two pharmacies in 
a nearby town of 2,900 people which received nearly 21 million 
opioids in the same time frame. No matter how you cut this 
data, behind each of these numbers was a pill mill. And they 
proliferated for far too long.
    Given what we know about the volume of opioid shipments to 
small towns in West Virginia, and the associated pill mills and 
diversion schemes in those areas--it is difficult to not be 
troubled by your compliance efforts and the part you have 
played in our Nation's opioid crisis.
    We look forward to getting a better understanding of the 
facts, and to finally have this necessary and frank 
conversation. We owe it to the 115 Americans who die every day 
from opioid overdoses, and their loved ones, to understand what 
led to this crisis and to identify solutions to stem the tide.

    Mr. Harper. The chairman yields back.
    The Chair will now recognize the ranking member for the 
full committee, Mr. Pallone.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    The opioid epidemic continues to devastate this country, 
and virtually no community in America has been left untouched. 
West Virginia in particular has been severely affected. For the 
last several years, West Virginia has had the highest overdose 
death rate in the country.
    This committee's investigation has uncovered some very 
troubling information about seemingly large shipments of 
opioids from drug distributors to rural pharmacies in West 
Virginia over the course of several years.
    And I think it is important for us to understand what went 
wrong and why, but we must also understand what needs to change 
so that we do not ever find ourselves in this situation again. 
For example, there is simply no excuse for distributors sending 
more than 13 million doses of opioids to a single pharmacy in a 
town of just over 400 people over a 6-year period.
    Some of the distributors who supplied high amounts of pills 
to this pharmacy appear not to have submitted suspicious order 
reports to DEA even though the law requires them to do so. In 
addition, some of the distributor's files are either sparse or 
unavailable, raising additional questions about whether they 
investigated the risk of diversion before shipping these pills.
    In the end, Federal authorities raided and shut down this 
pharmacy, and its owner went to jail. And we must understand 
what went wrong here so that we can be sure that no town is 
ever again flooded with pills.
    In another case, two doctors in the town of Williamson 
prescribed more opiates than entire hospitals did, according to 
a Justice Department press release, and these doctors were in 
fact the highest opioid prescribers in the entire State and 
were widely known to be running pill mills. One of these 
doctors ultimately went to jail; the other fled overseas.
    It appears that certain distributor systems failed to 
detect the volume of prescriptions these pharmacies were 
filling for these doctors, which may have led to oversupply and 
diversion of pills.
    It is the distributors' responsibility to know their 
customers, monitor orders, refuse suspicious orders, and report 
those orders to DEA. Distributors must perform these functions 
particularly when pharmacies order high volumes of opioids. But 
our investigation has shown that this did not always happen.
    In fact, some of these distributors paid large fines to DOJ 
because their systems failed and because they did not report 
suspicious orders to DEA as required. And these distributors 
promised to clean up their act, but just a few years later, 
they were again hit with multimillion-dollar fines for the very 
same shortcomings.
    So I want to know how we can be confident that distributors 
have sufficiently improved their systems now so that going 
forward we will not miss key indicators that may help uncover 
diversion in other situations.
    For example, one distributor told us that, with the benefit 
of hindsight, they wished they had asked different questions of 
at least two of the pharmacies we have examined. And I would 
like to know what kind of questions they believe will make the 
process more effective and reduce the possibility of diversion.
    Mr. Chairman, this is a nationwide concern. The problems we 
found in West Virginia have broader lessons for the rest of the 
county.
    I also want point out that this investigation focused on 
the role the distributors played in this crisis, but we know 
that there are many causes of this epidemic. This includes the 
role of some manufacturers in manufacturing these drugs, the 
role of some rogue physicians in overprescribing them, and the 
failure of regulators at the State and Federal level to 
adequately oversee the opioid supply chain.
    But let me also highlight another important aspect of this 
committee's work which I hope will not be lost as we look as 
how events unfolded in the past, because this crisis is far 
from over. Right now countless Americans, including those in 
the hard-hit areas of West Virginia, still need to access 
quality healthcare to help them recover from the opioid crisis.
    In the past month, we have marked up a substantial number 
of opioid-related bills, and I am still concerned that we have 
made this push without taking the time to make sure we get it 
right without much of an emphasis on treatment. It is not 
enough to only look backwards at this crisis. We must take the 
necessary steps to actually help those who are suffering by 
providing comprehensive treatment to individuals and 
communities in need.
    Unless someone wants my minute, I will yield it back.
    Thank you.
    [The prepared statement of Mr. Pallone follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    The opioid epidemic continues to devastate this country, 
and virtually no community in America has been left untouched. 
West Virginia in particular has been severely affected. For the 
last several years, the State has had the highest overdose 
death rate in the country.
    This committee's investigation has uncovered some very 
troubling information about seemingly large shipments of 
opioids from drug distributors to rural pharmacies in West 
Virginia over the course of several years.
    I think it is important for us to understand what went 
wrong and why, but we must also understand what needs to change 
so that we do not ever find ourselves in this situation again.
    For example, there is simply no excuse for distributors 
sending more than 13 million doses of opioids to a single 
pharmacy in a town of just 400 people over a 6-year period.
    Some of the distributors who supplied high amounts of pills 
to this pharmacy appear not to have submitted suspicious order 
reports to DEA, even though the law requires them to do so. In 
addition, some of the distributors' files are either sparse or 
unavailable, raising additional questions about whether they 
investigated the risks of diversion before shipping these 
pills. In the end, Federal authorities raided and shut down 
this pharmacy and its owner went to jail. We must understand 
what went wrong here so that we can be sure no town is ever 
again flooded with pills.
    In another case, two doctors in the town of Williamson 
prescribed more opioids than entire hospitals did, according to 
a Justice Department press release. These doctors were in fact 
the highest opioid prescribers in the entire State, and were 
widely known to be running ``pill mills.'' One of these doctors 
ultimately went to jail; the other fled overseas. It appears 
that certain distributors' systems failed to detect the volume 
of prescriptions these pharmacies were filling for these 
doctors, which may have led to oversupply and diversion of 
pills.
    It is the distributors' responsibility to know their 
customers, monitor orders, refuse suspicious orders, and report 
those orders to DEA. Distributors must perform these functions, 
particularly when pharmacies order high volumes of opioids. But 
our investigation has shown that this did not always happen.
    In fact, some of these distributors paid large fines to DOJ 
because their systems failed and because they did not report 
suspicious orders to DEA as required. These distributors 
promised to clean up their act. But just a few years later, 
they were again hit with multi-million dollar fines for the 
very same shortcomings.
    I want to know how we can be confident that distributors 
have sufficiently improved their systems now, so that going 
forward we will not miss key indicators that may help uncover 
diversion in other situations. For example, one distributor 
told us that, with the benefit of hindsight, they wish they had 
asked different questions of at least two of the pharmacies we 
have examined. I would like to know what kind of questions they 
believe will make the process more effective and reduce the 
possibility of diversion.
    This is a nationwide concern, and the problems we have 
found in West Virginia have broader lessons for the rest of the 
country.
    I also want to point out that this investigation focused on 
the role that distributors played in this crisis, but we know 
that there are many causes of this epidemic. This includes the 
role of some manufacturers in marketing these drugs, the role 
of some rogue physicians in overprescribing them, and the 
failures of regulators at the State and Federal level to 
adequately oversee the opioid supply chain.
    But let me also highlight another important aspect of this 
committee's work, which I hope will not be lost as we look at 
how events unfolded in the past, because this crisis is far 
from over.
    Right now, countless Americans, including those in the 
hard-hit areas of West Virginia, still need access to quality 
health care to help them recover from the opioid crisis. In the 
past month, we have marked up a substantial number of opioid-
related bills. I am concerned that we have made this push 
without taking the time to make sure we get it right or without 
much of an emphasis on treatment.
    It is not enough to only look backwards at this crisis. We 
must take the necessary steps to actually help those who are 
suffering by providing comprehensive treatment to individuals 
and communities in need. I yield back.

    Mr. Harper. The gentleman yields back.
    I ask unanimous consent that the Members' written opening 
statements be made a part of the record. Without objection, it 
will be entered into the record.
    Additionally, I ask unanimous consent that Energy and 
Commerce members not on the Subcommittee on Oversight and 
Investigations be permitted to participate in today's hearing. 
Without objection, so ordered.
    I would now like to introduce our witnesses for today's 
hearing.
    First today we have Dr. Joseph Mastandrea, chairman of the 
board at Miami-Luken; John Hammergren, chairman, president, and 
CEO of McKesson Corporation; George Barrett, executive chairman 
of the board at Cardinal Health; Steven Collis, chairman, 
president, and CEO of AmerisourceBergen Corporation; and 
finally, J. Christopher Smith, former president and CEO, H.D. 
Smith Wholesale Drug Company.
    You are aware that the committee is holding an 
investigative hearing. And when doing so, we have the practice 
of taking testimony under oath.
    Do any of you have any objection to testifying under oath?
    Seeing none, the Chair then advises you that, under the 
rules of the House and the rules of the committee, you are 
entitled to be accompanied by counsel.
    Do you wish to be accompanied by counsel during your 
testimony today?
    Seeing none, in that case, if you would please rise. Raise 
your right hand, and I'll swear you in.
    [Witnesses sworn.]
    Mr. Harper. Each of you are now under oath and subject to 
the penalties set forth in Title 18, Section 1001 of the United 
States Code.
    You may now give a 5-minute summary of your written 
statement. We will begin first hearing from Dr. Joseph 
Mastandrea.
    You are recognized for 5 minutes.
    I ask that everyone pull your microphone close to you, make 
sure it's on.
    And you're recognized for 5 minutes, Dr. Mastandrea.

   STATEMENTS OF JOSEPH R. MASTANDREA, D.O., CHAIRMAN, MIAMI-
 LUKEN, INC.; JOHN HAMMERGREN, CHAIRMAN, PRESIDENT, AND CHIEF 
EXECUTIVE OFFICER, MCKESSON CORP.; GEORGE S. BARRETT, EXECUTIVE 
    CHAIRMAN, CARDINAL HEALTH; STEVEN H. COLLIS, CHAIRMAN, 
   PRESIDENT, AND CHIEF EXECUTIVE OFFICER, AMERISOURCEBERGEN 
CORP.; AND JAMES CHRISTOPHER SMITH, FORMER PRESIDENT AND CHIEF 
               EXECUTIVE OFFICER, H.D. SMITH, LLC

               STATEMENT OF JOSEPH R. MASTANDREA

    Dr. Mastandrea. Good morning, Committee Chairman Walden, 
Subcommittee Chairman Harper, Ranking Members Pallone and 
DeGette, and distinguished members of the subcommittee. Thank 
you for the invitation to testify before you today, and thank 
you for your tireless efforts to address our Nation's ongoing 
opioid epidemic.
    I would like to share some background about Miami-Luken 
with you. The company was originally cofounded by my father, 
Robert E. Mastandrea, in 1962 as the Miami Valley Wholesale 
Drug Company in Dayton, Ohio. Nine years later, in 1971, the 
acquired the A.G. Luken Drug Company of Richmond, Indiana. It 
was then that the company Miami-Luken was born.
    Since then, the company has made additional acquisitions in 
Ohio and West Virginia, yet has always remained a relatively 
small regional distributors.
    I first started working for the company at the age of 14 
working in the warehouse. After graduating college, I worked a 
short time with my father learning the day-to-day operations of 
the business where I was involved in making sales calls, 
deliveries, and various warehouse duties.
    It was a wonderful place to work, and I was proud of my 
father and what he had achieved. He was born in Italy and came 
to this country at the age of 13. He subsequently graduated 
from college and began a business career that would lead to the 
formation of Miami-Luken. Through my father's leadership, the 
company's culture was more like a family than just a place to 
work.
    I entered medical school in 1979 and after my residency 
embarked on a full-time career as a physician in Dayton. 
Several years later I was asked to serve on the board of 
directors of Miami-Luken, which I accepted. Some years later, I 
became the chairman of the board and have held that position 
since that time.
    Management of the company remained pretty much the same 
until 2007 when a new president was appointed by the board. 
This individual had extensive managerial experience in both the 
wholesale drug business and the wholesale grocery business and 
was more than qualified to lead the company. He was 
knowledgeable, confident, and well-liked by the company's 
employees.
    It was not until several years later, in 2013, after the 
board learned that the DEA had issued a number of subpoenas to 
the company, that we realized the Government had concerns with 
the company's compliance efforts.
    In response, we retained the services of a prominent 
attorney here in Washington who used to work for the DEA. This 
attorney worked with management to assist the company in 
fulfilling its DEA compliance obligations. We also instructed 
the company's president to purchase a computer program to 
better identify suspicious orders from customers, which he did.
    When we subsequently learned that management was having 
difficulties with the computer system they purchased, it was 
apparent to us that we needed someone more capable in that 
position. The board immediately began looking for a replacement 
and after considering several individuals hired the company's 
current president and CEO, Michael Faul.
    In addition to hiring Mr. Faul, the company hired a new 
director of compliance and security who worked with Mr. Faul to 
implement a number of significant changes in the company's 
compliance program.
    These included more frequent and robust customer visits by 
compliance staff, greater scrutiny of requests from customers 
to increase purchase quantities, increased facility and 
transportation security, implementation of compliance training, 
purchase of the NTIS database, enhancing the controlled 
substance profile that customers are required to complete 
during the on-boarding process, and the complete overhaul of 
Miami-Luken's standard operating procedures regarding DEA 
compliance.
    The compliance director also worked with the software 
vendor to recalibrate the company's computerized suspicious 
orders notification system, improved its effectiveness in 
identifying suspicious orders on a daily basis, and started the 
process of uploading all relevant data on shared computer 
drives providing employees and DEA investigators easier access 
to information pertaining to individual customers.
    He also hired additional staff to assist the company in its 
compliance efforts and created a new analytical tool on an 
Excel spreadsheet to assist in conducting due diligence on 
current and prospective customers. In fact, the compliance 
director last year was recognized by the National Association 
of Drug Diversion Investigators for his outstanding work in 
drug diversion prevention.
    As a result of new management's enhanced compliance 
efforts, Miami-Luken terminated its relationship with multiple 
customers, many of whom are still in business purchasing from 
other sources. Since 2014, we have reduced the sale of 
oxycodone by approximately two-thirds and the sale of 
hydrocodone by a similar margin.
    It is our understanding that former management took what 
they believed to be sufficient steps at the time, believing 
that the State medical boards and State pharmacy boards were in 
a strong position to monitor the physicians and pharmacists 
they licensed.
    Former management also believed that since Miami-Luken 
regularly provided the DEA with sales data for all its 
customers, the Government would have advised us if they had any 
concerns with sales to specific parties.
    Unfortunately, we know that is not enough. And as you know 
from the materials we have provided this committee last year, 
Miami-Luken has taken aggressive action going back several 
years to strengthen its compliance efforts and suspicious order 
monitoring system and reporting. And as I sit here now, I can 
assure you that our company employs a compliance program that 
is second to none.
    In closing, I welcome any questions you have and will 
answer them to the best of my ability. Thank you again for this 
opportunity and for all your efforts.
    [The prepared statement of Dr. Mastandrea follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Harper. Thank you, Dr. Mastandrea.
    The Chair will now recognize John Hammergren, chairman, 
president, and CEO of McKesson Corporation, for 5 minutes.

                  STATEMENT OF JOHN HAMMERGREN

    Mr. Hammergren. Mr. Chairman, Ranking Member DeGette, and 
members of the subcommittee, my name is John Hammergren, and 
for almost two decades I've had the privilege to serve as the 
chief executive officer of McKesson Corporation.
    The impact the opioid epidemic has had on our Nation is 
devastating. Millions of Americans have been affected, 
including employees of McKesson and their families. We 
recognize the importance of this committee's investigation, and 
I appreciate the opportunity to appear before you today to help 
the committee address this crisis. I will also explain the 
steps that we ourselves are taking.
    Our company has over 70,000 employees worldwide. Our 
distribution business receives 275,000 orders every day, 
serving 40,000 pharmacies and hospitals. Like all distributors, 
we have two critical priorities: to deliver medicines to 
pharmacies and hospitals when and where they need them and to 
help the protect the integrity of the supply chain.
    As a distributor, we don't manufacture prescription drugs, 
we don't market them to doctors or patients, nor do we market 
any particular category of drugs, such as opioids, to 
pharmacists. Distributors respond to pharmacy orders, which are 
based on doctor's prescriptions.
    For years we have reported every controlled substance 
transaction that we have made in West Virginia and across the 
country to the DEA. Other distributors provide similar 
information so that only the DEA has an overall view of opioids 
distributed in this country.
    Distributing controlled substances represents a small share 
of McKesson's total business. The two schedules of controlled 
substances that include the most commonly abused prescription 
opioids constitute approximately 3 to 4 percent of our total 
revenue.
    The committee has highlighted a large volume of opioids 
distributed to pharmacies in West Virginia by McKesson and 
other distributors. Over a 6-year period addressed by the 
committee, McKesson distributed approximately 151 million doses 
of oxycodone and hydrocodone there.
    To put that into some perspective, if you look at all 
prescription drugs of any kind that McKesson distributed, the 
total number was nearly 2 billion doses in West Virginia during 
the same period.
    There is no question that a key driver of the crisis, as 
the CDC has said, is the overprescribing of opioids by doctors 
across the country. At the same time, there clearly were 
certain pharmacies in West Virginia that were bad actors that 
McKesson itself terminated. In hindsight, I would have liked to 
have seen us move much more quickly to identify the issues with 
these pharmacies.
    We learned important lessons, so let me tell you how we're 
applying those lessons today.
    Over the last 5 years, we have successfully used the latest 
technology and the best available expertise to strengthen 
controls. We have invested millions of dollars in enhancing our 
controlled substance monitoring program, or CSMP. A key part of 
that is sophisticated data analytics designed by outside 
experts which harness the power of advanced statistical models 
to set caps on sales to individual pharmacies. And then we 
block sales that exceed those caps, which are constantly 
monitored and fine-tuned.
    Our CSMP team is independent of the business and has 
unilateral authority to deny a customer access to controlled 
substances. Our team includes former DEA agents with more than 
240 years of collective DEA enforcement experience.
    And the CSMP is working. In fact, over the last decade, we 
blocked and reported to the DEA over 1 million suspicious 
orders nationwide.
    With a strong program in place today to monitor sales of 
opioids, we are extremely focused on advancing solutions to the 
country's opioid crisis more broadly.
    First, we are moving forward with the development of a 
prescription safety alert system. This would be an electronic 
system to provide doctors and pharmacies with real-time red 
flags based on a patient's nationwide prescription history. 
Congress and the FDA can help make this a reality.
    Second, we are requiring our customers to accept electronic 
prescriptions in 2019. Handwritten prescriptions are more prone 
to fraud.
    Third, we're pushing for opioid manufacturers to use 
limited dose packaging, such as blister packs, to facilitate 
smaller prescription sizes.
    And fourth, we've announced the formation of a foundation 
to fight the opioid epidemic and committed $100 million dollars 
to launch its mission.
    McKesson and I personally fully understand the gravity of 
this crisis and our essential role in helping to address it.
    Thank you again for the opportunity to testify today. I 
would be happy to address your questions.
    [The prepared statement of Mr. Hammergren follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Harper. Thank you, Mr. Hammergren.
    The Chair will now recognize George Barrett, executive 
chairman of the board at Cardinal Health.
    Thank you.

                 STATEMENT OF GEORGE S. BARRETT

    Mr. Barrett. Chairman Harper, Ranking Member DeGette, and 
members of the subcommittee, Chairman Walden, Ranking Member 
Pallone, and other members of the full committee, thank you for 
the opportunity to be here today. I also want to extend my 
thanks to your staff for their professionalism and courtesy.
    My name is George Barrett, and I have committed my 
professional career to healthcare in a wide range of roles for 
over three decades. Between 2009 and 2017, I was privileged to 
serve as CEO and chairman of Cardinal Health, which today is 
composed of more than 50,000 dedicated men and women.
    We simply cannot look at the impact of opioid abuse on so 
many lives and not feel sorrow. I speak for the entire Cardinal 
Health team when I say that we care deeply about the 
devastation that opioid abuse is causing families and 
communities around our country. We are resolved to be a 
constructive part of the effort to alleviate this complex 
national public health crisis.
    Some of the issues we will discuss today involve the 
healthcare system in our neighboring State of West Virginia 
where hundreds of our employees live and work. The people of 
West Virginia are not just the recipients of the medicine and 
the medical products we distribute to hospitals and pharmacies, 
they are our coworkers, friends, neighbors, and family members.
    I have visited the State to hear firsthand about the 
challenges of opioid abuse and how Cardinal Health can play a 
constructive role in addressing these challenges.
    To the people of West Virginia, I want to express my 
personal regret for judgments that we'd make differently today 
with regard to two pharmacies that have been a particular focus 
of this subcommittee. With the benefit of hindsight, I wish we 
had moved faster and asked a different set of questions. I'm 
deeply sorry that we did not.
    Today I'm confident that we would reach different 
conclusions about opioid orders from those two pharmacies. 
We've taken responsibility with our regulators. Cardinal Health 
has not distributed oxycodone or hydrocodone to either of these 
two pharmacies for years.
    We understand that no antidiversion program is perfect, 
which is why we are so focused on continuous improvement. We 
are at the table focused on alleviating this critical national 
health problem. We are committed to working with Congress, 
regulators, and others in the healthcare system to combat this 
crisis and address its effects.
    There is no single root cause of the crisis, and addressing 
it requires that all healthcare participants work together, and 
we have to do it now.
    We recognize the challenge posed by lawful yet high-volume 
prescribing of opioids. On the one hand, we know there are many 
individuals who rely on these medications to address suffering 
associated with terminal illnesses, painful neurological 
conditions, severe injuries, and other medical conditions.
    On the other hand, we share the recent judgments of 
policymakers, including senior leadership at HHS, the FDA, the 
surgeon general, the CDC, and others, that there have been too 
many prescriptions for too many pills.
    As a pharmaceutical wholesale distributor, we have a dual 
responsibility: to ensure that prescription medications are 
available for healthcare providers and their patients when 
needed while working to limit the potential for those 
prescription medicines to fall into the wrong hands.
    Pharmaceutical wholesale distributors do not and should not 
have visibility into the medical judgment or the patients for 
whom prescriptions are written. However, we can play a role by 
raising awareness of the dangers of overprescribing, which we 
are doing.
    Our antidiversion tools are built around a core commitment 
to spot, stop, and report potential diversion. Our program is 
supported by a dedicated antidiversion team of investigators, 
auditors, analysts, former law enforcement officers, compliance 
officers, and pharmacists deployed nationwide and augmented by 
substantial external resources and technology.
    From 2008 to the present, we have stopped suspicious orders 
for the shipment of hundreds of millions of opioids. We will 
not ship an order for hydrocodone or oxycodone to pharmacies 
that do not meet our standards. We have refused to onboard 
pharmacies that cannot pass our rigorous screening, and we have 
cut off existing customers that do not have effective controls.
    But with a problem as large and complex as opioid 
addiction, we know there is always room to do better, and we 
will never stop working to continuously improve and refine our 
systems.
    For over a decade, we have funded education and prevention 
programs that have been used in every State and more than 100 
colleges and pharmacies. We have also launched an opioid action 
program including the free distribution of opioid reversal 
medication to law enforcement and first responders beginning in 
four of the Nation's hardest-hit States across Appalachia.
    As I indicated earlier, Cardinal Health is at the table and 
intends to be here for as long as the problem persists. Today 
I'll do my best to answer your specific questions and hope that 
our dialogue will continue.
    Thank you.
    [The prepared statement of Mr. Barrett follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Harper. Thank you, Mr. Barrett.
    The Chair will now recognize Steven Collis, chairman, 
president, and CEO of AmerisourceBergen Corporation.
    Mr. Collis.

                 STATEMENT OF STEVEN H. COLLIS

    Mr. Collis. Thank you. Thank you, Chairman Walden, 
Subcommittee Chairman Harper, Ranking Member Pallone, Ranking 
Member DeGette, and distinguished members of the committee. On 
behalf of AmerisourceBergen's over 21,000 associates, thank you 
for the opportunity to be here today. We are committed to 
working with you and all stakeholders to help combat the tragic 
opioid abuse epidemic.
    I will begin today by sharing three distinct perspectives 
that have shaped my thinking on this urgent issue.
    First, like so many others, I have been touched and 
saddened by the excruciating stories that demonstrate the 
destruction wrought by the disease of addiction, many shared by 
your colleagues as they relayed the devastation that opioids 
have left in their States. Some time ago, a Member shared a 
story of a mother who overdosed, leaving her two children 
starving and unattended for several days. Stories like this, 
and sadly so many that tell similar tragic tales, are always on 
my mind.
    Second, I have seen friends, family, and those in my 
community fight through uncontrolled pain and have experienced 
firsthand the sad necessity of pain medications. This topic is 
frequently brought up in my conversations with doctors and 
healthcare professionals and was the focus of a recent 
discussion I had with the CEO of a world-class cancer treatment 
center in which he articulated his concern that the reaction to 
the opioid crisis would prevent his team from providing 
necessary and appropriate end-of-life care.
    Lastly, I have spent the majority of my 30-plus-year career 
in healthcare providing services surrounding the pharmaceutical 
industry with a focus on working to enable patient access to 
the medications they need.
    As you all know, AmerisourceBergen's role in regard to 
prescription opioid medications is one of a logistics provider 
and distributor. We are responsible for getting FDA-approved 
drugs from pharmaceutical manufacturers to DEA-registered 
pharmacies that dispense them based on prescriptions by 
licensed healthcare providers.
    We have no ability and no desire to encourage the 
prescribing or dispensing of pain medication. We do not 
manufacture or promote the prescribing of these medications. 
And we are not qualified to interfere with the very personal 
clinical decisions made between patients and their physicians.
    Here are some things that AmerisourceBergen does do. For 
more than a decade, we've reported every opioid order we 
distribute on a daily basis to the DEA. So every order, every 
shipment, every day. We use statistical-based algorithms and 
data analytics tools to monitor and assess every order we 
receive in an effort to identify, stop, and report suspicious 
orders.
    Just as importantly, we continuously focus on enhancing our 
diversion control efforts. And our best-in-class diversion-
control team endeavors to track patterns and behaviors beyond 
just individual suspicious orders that have led us to refuse 
service or terminate service to pharmacies we've identified as 
problematic, including several of the pharmacies we have all 
heard about today in West Virginia.
    And we collaborate with and support others who are also 
working hard to address the crisis, partnering with others 
across the country to provide drug deactivation and disposal 
resources, and with our customers, not-for-profits, and 
innovators to support take-back programs and advance ideas that 
could help combat the opioid abuse epidemic.
    We believe we've taken meaningful action, but this epidemic 
cannot be solved unless we improve the ways we work together. 
Communication and technology between the DEA and pharmaceutical 
distributors should be enhanced. Specifically, the sharing of 
the DEA's comprehensive data of all opioid sales to all 
pharmacies on a de-identified basis would alert distributors if 
pharmacies are receiving controlled substances from other DEA 
registrants.
    Beyond improved data sharing, additional DEA guidelines for 
distributors with uniform standards for suspicious ordering 
monitoring programs would create a more consistent approach 
across the more than 900 registered distributors in the 
industry and, in turn, more actionable input for law 
enforcement professionals.
    We also support a number of solutions that are not specific 
to distributors, including revising prescriber guidelines, 
mandatory e-prescribing for controlled substances, enhanced 
prescription drug monitoring programs to enable physicians and 
regulators to determine if patients are obtaining prescriptions 
in more than one State, and a number of the proposals the 
subcommittee considered just last week.
    Our work to play a role in combating abuse while supporting 
clinically appropriate access will never be complete. We always 
strive to be better. I join you today with an open mind and a 
sincere desire for additional guidance and ideas from this 
committee.
    Thank you.
    [The prepared statement of Mr. Collis follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Harper. Thank you, Mr. Collis.
    The Chair will now recognize J. Christopher Smith, former 
president and CEO of H.D. Smith Wholesale Drug Company.
    Mr. Smith.

              STATEMENT OF JAMES CHRISTOPHER SMITH

    Mr. Smith. Good morning, Chairman Walden, Chairman Harper, 
Ranking Member DeGette, and members of the subcommittee. Thank 
you for inviting me here today.
    I would like to start by telling you a little bit about 
H.D. Smith, how it began, and the vision that guided it from 
the very beginning.
    My grandfather, who was a pharmacist, had the idea for it. 
And with that idea from his own father, my father founded H.D. 
Smith in Springfield, Illinois, in 1954, because he saw that 
there was a true need for a wholesale drug distributor that 
would commit to serving small town and rural independently 
owned mom-and-pop pharmacies and downstate hospitals as there 
was no other wholesale drug distributor like that in 
Springfield.
    My father's vision in starting the company was to make 
certain that a wholesale drug distributor would not only commit 
to serving these underserved communities, but he did so with 
the mission that patient care should never be disrupted because 
a rural small town pharmacy, hospital, or later, inner-city 
pharmacy, could not quickly and reliably supply the medicines 
that the patients in these communities needed right when they 
needed them.
    This is the mission and vision he taught to me and my 
brother as we later joined the company and rose through its 
ranks over time. As a child, I sometimes accompanied my father 
when he, himself, would make emergency deliveries at night or 
over weekends. And as an employee of H.D. Smith, I did the same 
as well, along with many others. That is and always was our 
legacy.
    I first began working for H.D. Smith full-time in 1980 as a 
buyer and gradually moved my way up through the ranks over the 
years. In September 2007, I was appointed president and COO. In 
March 2015, I became president and CEO.
    In January 2018, H.D. Smith was acquired by 
AmerisourceBergen, and I no longer hold any office, position, 
or employment with H.D. Smith.
    But it is important to remember that since its founding in 
1954 until its acquisition in 2018, H.D. Smith always remained 
a family-owned business, which I am very proud to have served. 
I am certain, absolutely certain, that H.D. Smith's new 
management will observe my family's guiding principles just as 
loyally as I tried so hard to do myself.
    I share the committee's grave concern about the opioid 
crisis and am committed to doing all we can to address it. We 
always took seriously our responsibilities to distribute 
controlled substances appropriately. We had a DEA license. We 
sold only to DEA- and State-licensed pharmacies and hospitals. 
We followed DEA regulations in handling controlled substances. 
We reported all our purchases and sales of controlled 
substances to the DEA.
    My company distributed all kinds of pharmaceutical 
products. Only a small percentage were controlled substances, 
including pain medication. We didn't advertise or promote the 
medication or do anything else to encourage doctors to 
prescribe them or pharmacies to dispense them. Our job as a 
distributor was to fill orders that pharmacies sent us.
    In fact, as a distributor, we could only see part of the 
distribution chain--the pharmacy that we supply. We didn't see 
the prescriptions the pharmacy filled or know the doctors who 
wrote them or have any contact with knowledge of the patients.
    As a distributor, we had to manage to the twin imperatives 
of ensuring that we distributed pharmaceuticals appropriately, 
for legitimate purposes, and ensuring the pharmacies that they 
had the products they needed when the patient arrived with a 
prescription so as to ensure undisrupted patient care.
    To meet this challenge, we created strong diversion control 
systems and continually improved them overtime. We always did 
our very best to make sure that all orders we shipped went to 
pharmacies that dispensed medications only on legitimate 
prescriptions for legitimate medical reasons.
    I am certain AmerisourceBergen will continue my company's 
proud tradition and do everything that can be done to help with 
the solutions to the opioid crisis in this country.
    Thank you.
    [The prepared statement of Mr. Smith follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Harper. Thank you, Mr. Smith.
    I ask unanimous consent that the contents of the document 
binder be introduced into the record and to authorize staff to 
make any appropriate redactions. Without objections, the 
documents will be entered into the record with any redactions 
that staff determines are appropriate.\1\
---------------------------------------------------------------------------
    \1\ The information has been retained in committee files and also 
is available at  https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=108260.
---------------------------------------------------------------------------
    At this point, each Member will have the opportunity to ask 
questions, and I will recognize myself first for 5 minutes.
    I want to thank you all for participating in today's very 
important hearing. As the subcommittee closely examines this 
very serious opioid crisis, I think it would be helpful at the 
outset to help establish a baseline of understanding. And I 
would like for each of you to answer each question that I am 
going to ask now.
    First, do you believe that the actions that you or your 
company took contributed to the opioid epidemic?
    Mr. Barrett.
    Mr. Barrett. Thank you, Mr. Chairman.
    Mr. Harper. We're really looking here, because I've got a 
lot of questions, ``yes'' or ``no.'' And if it is not either 
one----
    Mr. Barrett. No. No, sir, I do not believe that we 
contributed to the opioid crisis.
    Mr. Harper. We'll come back to you then.
    Dr. Mastandrea.
    Dr. Mastandrea. Yes.
    Mr. Harper. Mr. Hammergren.
    Mr. Hammergren. No.
    Mr. Harper. Mr. Smith.
    Mr. Smith. I believe H.D. Smith conducted itself 
responsibly and discharged its obligations.
    Mr. Harper. Is that a no?
    Mr. Smith. That is a no.
    Mr. Harper. OK.
    Mr. Collis.
    Mr. Collis. No. I believe we--it's a no for 
AmerisourceBergen.
    Mr. Harper. Do you acknowledge--another question for each 
of you--do you acknowledge that your company had past failings 
in maintaining effective controls to prevent the diversion of 
opioids?
    Mr. Barrett.
    Mr. Barrett. I believe that our organization understood the 
responsibilities and conducted them as best they could with the 
understanding at that time. I have no reason to challenge the 
good faith of the decisions made by people many years ago. But 
I can say that the decisions, as I mentioned in my commentary 
today, that we might have made on some of those pharmacies 
would look differently today.
    Mr. Harper. Is that a no?
    My question was, do you acknowledge that your company had 
past failings in maintaining effective controls to prevent the 
diversion of opioids?
    Mr. Barrett. I think our organization understood its 
obligations. We did resolve with regulators where we had areas 
where we thought we could have done better, and I think those 
resolutions satisfied the right balance of serving patients and 
satisfying those controls, sir.
    Mr. Harper. So is that a yes, it's now a no? I'm trying--I 
mean, I'm a little----
    Mr. Barrett. I am looking back on history. And what I'm 
describing is an organization that I believe did its job at the 
time understanding its responsibilities to address the 
responsibilities of controlled drugs.
    Mr. Harper. Dr. Mastandrea, the question is, do you 
acknowledge that your company had past failings in maintaining 
effective controls to prevent the diversion of opioids?
    Dr. Mastandrea. Yes.
    Mr. Harper. Mr. Hammergren.
    Mr. Hammergren. Our organization has worked for decades to 
try to meet our obligations under the DEA regulations. And we 
continue to work today to evolve our processes to understand 
what they're asking us to do and make sure that we have state-
of-the-art capabilities in place.
    Mr. Harper. It seems like a pretty simple question. Do you 
acknowledge that your company had past failings in maintaining 
effective controls to prevent the diversion of opioids?
    Mr. Hammergren. In the past we've had challenges 
understanding the expectations that our regulator would like us 
to follow.
    Mr. Harper. Mr. Smith.
    Mr. Smith. Again, I believe H.D. Smith has acted 
responsibly. So the answer would be no.
    Mr. Harper. Mr. Collis.
    Mr. Collis. I believe we've always discharged our duties 
effectively and responsibly and have maintained an adequate 
diversion program.
    Mr. Harper. The number of opioids shipped to pharmacies in 
small towns of West Virginia has been astonishing: nearly 800 
million opioids in total distributed to West Virginia in just a 
5-year period, 20.8 million opioids to Williamson, and nearly 
17 million opioids to a single pharmacy in Mount Gay-Shamrock 
over a decade, 9 million opioids in just 2 years to Kermit.
    Do the extraordinary volume of opioid shipments to 
pharmacies in small towns of West Virginia indicate a breakdown 
in the suspicious order monitoring system?
    Mr. Barrett.
    Mr. Barrett. Mr. Chairman, it is a very important question. 
I don't believe that the volume in relation to the size of the 
population is a determining factor. We often know that there's 
a small population, a town, which serves a large service area 
that may have a medical center or a cancer institute in the 
nearby area.
    I have said, and I said in my statements, and I repeat 
here, that I think some of the decisions on particular 
pharmacies in West Virginia, knowing what we know today, we 
would have made different decisions, sir.
    Mr. Harper. Dr. Mastandrea.
    Dr. Mastandrea. Yes.
    Mr. Harper. Mr. Hammergren.
    Mr. Hammergren. We had a pharmacy in Kermit, West Virginia, 
called Sav-Rite that we actually terminated in that period of 
time.
    What I can say is that, knowing what we know today, in 
hindsight, we wish we would have terminated that relationship 
sooner.
    Mr. Harper. Mr. Smith.
    Mr. Smith. Can you repeat the question?
    Mr. Harper. The question is, do the extraordinary volume of 
opioid shipments to pharmacies in small towns of West Virginia 
indicate a breakdown in the suspicious order monitoring system?
    Mr. Smith. I don't believe we had a breakdown in our 
system.
    Mr. Harper. Mr. Collis.
    Mr. Collis. If you're talking specifically about 
AmerisourceBergen, we didn't ship to any of those pharmacies. 
If you're talking about the industry, I believe it probably 
did.
    Mr. Harper. My time has expired.
    The Chair will now recognize the ranking member of the 
subcommittee, Ms. DeGette, for 5 minutes.
    Ms. DeGette. Thank you, Mr. Chairman.
    Gentlemen, each of you in your own way spent time very 
carefully telling this committee what your companies do not do 
in terms of prescribing or things like that. But in fact each 
of your companies, under the Controlled Substances Act, has a 
duty to make sure that that controlled substances are 
distributed correctly.
    Would you agree with that statement, Mr. Barrett, yes or 
no?
    Mr. Barrett. Yes, we do.
    Ms. DeGette. And, Dr. Mastandrea.
    Dr. Mastandrea. Yes.
    Ms. DeGette. Mr. Hammergren.
    Mr. Hammergren. We have a duty to support----
    Ms. DeGette. ``Yes'' or ``no'' will work.
    Mr. Hammergren. We have a duty to support the----
    Ms. DeGette. You have a duty to make sure that controlled 
substances are distributed appropriately, correct?
    Mr. Hammergren. We have a responsibility to----
    Ms. DeGette. OK.
    Mr. Smith.
    Mr. Smith. Yes, we have a responsibility.
    Ms. DeGette. Mr. Collis.
    Mr. Collis. Yes, we have a responsibility.
    Ms. DeGette. And in fact I would direct your gentlemen's 
attention to exhibit 59 in the binder, which was a letter dated 
September 27, 2006, which was sent to every commercial entity 
in the United States registered with the DEA to distribute 
controlled substances.
    And on page 3 of that letter, it lists an entire panoply of 
things that your companies are supposed to do. The letter was 
then followed up on two times in 2007.
    I want to start with you, Dr. Mastandrea, and I want to ask 
you, Federal regulations require you to design and operate a 
system to disclose Federal operators from pharmacies. Is that 
correct?
    Dr. Mastandrea. I'm sorry. I really don't understand----
    Ms. DeGette. Federal regulations require you to design and 
operate a system to disclose suspicious orders from pharmacies.
    Dr. Mastandrea. Yes, I believe that to be correct.
    Ms. DeGette. Yes, they do. OK.
    And according to--and I want to focus a little bit on 
Kermit, which is a town of 600--I'm sorry, 400.
    According to data that Miami-Luken provided to the 
committee, in 2007 your company supplied Sav-Rite pharmacy in 
Kermit with nearly 1.5 doses of opioids. Is that correct?
    Dr. Mastandrea. I believe so.
    Ms. DeGette. In 2008 your company supplied Sav-Rite with 
nearly 2 million doses of opioids. Is that correct?
    Dr. Mastandrea. It's my understanding that is correct.
    Ms. DeGette. And then in 2009 you supplied Sav-Rite with 
another 800,000 pills. Is that correct?
    Dr. Mastandrea. I believe so.
    Ms. DeGette. Now, in fact you continued supplying Sav-Rite 
until 2011 even though the pharmacy was actually raided by 
Federal authorities in early 2009. Is that correct?
    Dr. Mastandrea. I believe so.
    Ms. DeGette. Now, Dr. Mastandrea, we asked Miami-Luken to 
provide us with its entire due diligence file on the Sav-Rite 
pharmacy, and this is what we got from you.
    Do you recognize these documents?
    Dr. Mastandrea. No.
    Ms. DeGette. OK. We can have somebody hand them to you, but 
I will assure you it's about 15 pages of purchase orders and 
sales orders.
    Do you think this is a sufficient due diligence file for 
all of the number of opioids that you were sending to this one 
Sav-Rite pharmacy in Kermit, West Virginia?
    Dr. Mastandrea. No.
    Ms. DeGette. OK. Thank you. And you know what, thank you 
for your honesty today. I appreciate it.
    I want to ask you now, Mr. Hammergren, a question. Now, in 
2006, McKesson supplied Sav-Rite pharmacy with nearly 2.3 
opioid pills, which is more than 190,000 a month. Is that 
correct?
    Mr. Hammergren. I believe so.
    Ms. DeGette. And in 2007, McKesson again supplied Sav-Rite 
with over 2.6 million opioid pills, or more than 222,000 pills 
per month. Is that correct?
    Mr. Hammergren. I believe so.
    Ms. DeGette. Now, in your written testimony, Mr. 
Hammergren, you put a lot of thought into using population 
statistics and other arguments to justify your shipments to 
Sav-Rite and other pharmacies. We just heard Mr. Barrett 
talking about that, too. But when the committee asked you to 
provide McKesson's due diligence file for Sav-Rite, you gave us 
a single document from 2007.
    Do you recognize this document, sir?
    Mr. Hammergren. No, I don't.
    Ms. DeGette. OK. It's exhibit 3 in the binder.
    Do you recognize that document now? You don't.
    Mr. Hammergren. This is first time I've seen this document.
    Ms. DeGette. OK. Well, I will tell you for the record that 
this document, which says, ``Declaration of Controlled 
Substances Purchases,'' which is a two-page document, is the 
only documentation that McKesson gave to this committee when we 
asked for the due diligence file for Sav-Rite.
    Do you think that this fulfills the requirements of the DEA 
that your company do due diligence for distribution of opioids 
to this city?
    Mr. Hammergren. I believe our relationship with Sav-Rite 
should have been terminated immediately.
    Ms. DeGette. Yes or no, do you think this is sufficient 
documentation to show compliance with the rules of the DEA?
    Mr. Hammergren. We continue to evolve our diligence----
    Ms. DeGette. ``Yes'' or ``no'' will work, sir.
    Mr. Hammergren. I've not reviewed the document. I can't 
provide an answer to that.
    Ms. DeGette. OK. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Harper. At this time, the Chair will recognize Chairman 
Walden, chair of the full Committee for Energy and Commerce, 
for 5 minutes.
    Mr. Walden. Thank you, Mr. Chairman.
    And I appreciated the opportunity I had yesterday to meet 
with several of you and talk about how we work together going 
forward as a country to prevent this kind of disaster from 
continuing or ever happening again.
    Mr. Hammergren, between 2006 and 2007 McKesson supplied 
Sav-Rite pharmacy in Kermit, as you've heard, a town of 400, 
5.6 million opioids. Our research has indicated this pharmacy 
was fueled by prescriptions from a pill mill. This was widely 
known in the community.
    In fact, our investigators have uncovered that the pill 
mill was widely known, and there were reports even in the media 
over years that indicated customers were selling pills in the 
parking lot, and that the cash drawer was so full it could not 
be shut.
    Now, McKesson started a program in 2007, I think you called 
it the Lifestyle Drug Monitoring Program, under which McKesson 
reviewed every single customer for high-volume orders for 
certain drugs. Is that correct?
    Mr. Hammergren. That's correct.
    Mr. Walden. Including hydrocodone and oxycodone. I think we 
referenced that in tab 1 in the binder.
    So the initial threshold, as I understand it, set by 
McKesson was 8,000 pills a month. The document indicates that 
you picked that number as a reasonable monthly threshold, 
correct?
    Mr. Hammergren. That's correct.
    Mr. Walden. And so do you know the average number of 
hydrocodone dosage units or pills McKesson distributed to that 
Sav-Rite pharmacy that you terminated a relationship with back 
in 2007?
    Mr. Hammergren. I do not.
    Mr. Walden. So we did some research. It appears it's 9,650 
pills a day, which averages to 289,500 hydrocodone pills in a 
30-day month, which is more than 36 times the initial monthly 
threshold set by the program.
    The program required distribution centers to review any 
order in excess of the threshold and document why orders above 
the threshold were shipped.
    Now, according to a document produced by McKesson, all 
customers had been reviewed by June 12, 2007. This clearly 
should have identified Sav-Rite, considering your own 
distribution was 36 times higher than the threshold you set. I 
think that document's in tab 2.
    So did this program identify the Sav-Rite pharmacy?
    Mr. Hammergren. It did not, sir. It should have been 
terminated sooner.
    Mr. Walden. And if so, on what basis did McKesson decide to 
continue supplying hydrocodone far above your own threshold? 
This is what we're trying to figure out.
    Mr. Hammergren. Our systems at the time were not automated 
enough, certainly, and we didn't flag it fast enough and get it 
fast enough.
    Mr. Walden. So are there any documents justifying the 
continued distribution to Sav-Rite?
    Mr. Hammergren. I don't know, sir. But, as I've testified, 
we terminated that relationship as soon as we became aware that 
the purchases were as you described.
    Mr. Walden. In your testimony you note that the large 
distribution figures highlighted by the press in this 
investigation reflect a volume of opioid orders ``not 
inconsistent'' with the rate at which opioids were prescribed.
    If this is the case and 9,600 pills a day distributed by 
McKesson to Sav-Rite in 2007 is reasonable, then why set the 
initial monthly limit at 8,000 per month? Or is this something 
you just--the system did not catch?
    Mr. Hammergren. We did not properly manage that Sav-Rite 
relationship and certainly didn't do it soon enough.
    Mr. Walden. I see. So what we're trying to figure out is, 
are there other Sav-Rites out there today? And this would apply 
to everybody on the panel. What is it in the systems you have 
or the DEA have that allowed this to happen then, and are they 
in place today to prevent this from happening? How do we shut 
down these pill mills?
    Mr. Hammergren. We certainly learned, Mr. Chairman, from 
that experience at Sav-Rite, and we realized that we needed 
automated systems that don't allow any order to ship out of our 
facilities that are past those thresholds.
    So today Sav-Rite pharmacy wouldn't get a single order from 
McKesson. Our systems block those orders as they're inbound. 
And if they want to have that order shipped, we have to go out 
and do an investigation at that pharmacy to justify any 
increase.
    So if they open--if a pharmacy somewhere was going to open 
a new relationship with a hospice, our people would go out and 
view that and understand whether that is a legitimate business 
reason, exactly for your purpose.
    Mr. Walden. And are your systems in place today that would 
identify an overprescribing physician or facility that is 
driving too many pills? How does that work?
    Mr. Hammergren. That's one of the challenges, frankly, with 
the systems that McKesson has. We don't see the prescribing 
systems that are reported out of the pharmacy. So the way we 
have to manage it is to determine a suspicious order based 
primarily on quantities compared to average pharmacies that are 
similar.
    And clearly, the challenge in that is that suspicious is 
really an isolated individual customer-by-customer evaluation 
that isn't informed by the physician population, the 
prescribing habits, et cetera.
    Mr. Walden. Unfortunately, my time has expired. I'm sure 
we'll have questions for the record. I'd appreciate the 
feedback from all of you on that topic, because we're trying to 
find solutions here.
    Thank you, Mr. Chairman.
    Mr. Harper. Thank you, Chairman Walden.
    The Chair will now recognize the ranking member of the full 
committee, Mr. Pallone, for 5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman.
    I'm trying to run through this quickly, so I may have to 
try to have you summarize.
    This committee's investigation has uncovered a number of 
shortcomings in the way that some distributors handled the 
distribution of opioids as this horrible epidemic unfolded. But 
what I really want to know is, moving forward, how do we ensure 
that adequate systems are in place to detect the kinds of 
problems that have clearly led to the oversupply and diversion 
problems we've seen in West Virginia?
    For example, in Kermit, population 400, several 
distributors each sent millions of pills to a single pharmacy, 
and it's hard to understand why certain distributors didn't 
have systems to flag and prevent some of these shipments.
    Another example, Miami-Luken alone sent almost 1.5 million 
pills to Sav-Rite in 2007 and almost 2 million pills in 2008, 
and on its face these levels seem ridiculous. At the end of the 
day, this pharmacy was raided and its owner was sentenced to 
prison.
    So let me start with Dr. Mastandrea.
    Have you made changes to your system to compare the number 
of pills you send a pharmacy against the population of that 
region to catch something like this before it gets out of 
control? Quickly, because I have more questions.
    Dr. Mastandrea. Thank you, Congressman.
    Yes, we have made changes. We've made significant changes. 
We have a full-time compliance officer that monitors all--we're 
not that big, so it's not that hard to monitor our opioid 
distribution.
    We have purchased a commercial algorithm-based system that 
stops the suspicious order in real time, is reported to the DEA 
in real time. We have site visits. We have an investigator that 
makes site visits. We review the accuracy and timeliness----
    Mr. Pallone. I'm going to have to cut you off, only because 
I want to ask Mr. Barrett a question.
    Cardinal provided two pharmacies, Hurley Drug and Family 
Discount, which filled prescriptions for Dr. Katherine Hoover, 
and her clinic was widely known as the pill mill and Federal 
authorities closed it in 2010. Dr. Hoover was the number one 
prescriber in the entire State, yet she seemed to be able to 
write scripts for local pharmacies for years before her clinic 
was shut down.
    One of your fellow distributors reported that Dr. Hoover 
alone was responsible at one time for 69 percent of the 
hydrocodone prescriptions at Hurley Drugstore in Williamson and 
more than half of the hydrocodone prescriptions at Family 
Discount.
    So, Mr. Barrett, are there lessons that you believe can be 
taken from what happened with Dr. Hoover that will change how 
you conduct due diligence going forward?
    Mr. Barrett. Ranking Member Pallone, thank you. And the 
answer is yes, I think we would do things very differently 
today. That kind of order volume would have been picked up and 
stopped just statistically by our algorithms.
    I think the subjectivity of judgment of whether a pharmacy 
is legitimate or not legitimate today is really not the 
question. We look at data, and if the data tells us there is an 
aberrant pattern, we simply stop.
    In this case, as it turned out, there was a bad actor in 
the area, a doctor, which we later found out, which is why we 
shopped shipment. But today's systems would simply stop that.
    Mr. Pallone. All right. Let me go to McKesson.
    McKesson has reached two settlements with DOJ about alleged 
failures to monitor for suspicious orders.
    So, Mr. Hammergren, how will it be different this time? 
What serious changes have you made to your systems to flag 
suspicious orders?
    Mr. Hammergren. We certainly have learned lessons from our 
experience in the past. And our systems today are automated and 
not subjective. As Mr. Barrett just said, we shut those orders 
off inbound in the door.
    We also have hired very experienced, DEA experienced people 
to come out and help us investigate facilities before we bring 
them online and to make sure that we've not brought a bad actor 
on at any point in the process.
    I think the thing that would continue to help us is if we 
can put physicians in a place where they have more information 
when they're prescribing, and certainly at the pharmacy level 
help the pharmacies understand red flags of patients that may 
be getting multiple doses in different directions.
    So I think there's more that we can do as an industry. 
Blocking the orders is certainly important, but you can imagine 
every time we block an order, there are legitimate patients in 
some of those pharmacies looking for their medications. So it's 
a little bit of a blunt force.
    Mr. Pallone. Last question, going back to Mr. Barrett.
    Cardinal also reached two settlements with DOJ over these 
same issues, and it's only fair I ask you the same question. 
How will this time be different? How can you assure us that 
you've addressed the issues raised in the settlement 
agreements? What specific enhancements have you made to your 
system?
    Mr. Barrett. Thank you for the question.
    The settlement in 2008 reflected the rising of what was 
internet pharmacy. Our organization I think was doing what it 
thought was right to adapt to that.
    At the same time, we saw emergence over the next few years 
of pain clinics, many of which were legitimate, by the way, but 
as it turns out some were not.
    And I think we had to learn during that process of the 
shift of this crisis. I think we've learned that and our 
systems today reflect that learning.
    Mr. Pallone. Thank you.
    Thank you, Mr. Chairman.
    Mr. Harper. The Chair will now recognize Mr. Barton for 5 
minutes.
    Mr. Barton. Thank you, Mr. Chairman.
    And thank each of you for attending voluntarily. We didn't 
have to subpoena you. We appreciate that.
    And, Mr. Collis, I understand that you forego back surgery 
to appear today, so we really appreciate you. I noticed you 
stood up a little bit ago and walked. Dr. Burgess will 
prescribe an opioid if you don't make it through the hearing.
    This is an unusual hearing because each of you provides a 
much-needed list of products that are legal, and all of you 
represent corporations that have generally had a very positive 
record in your industry. And yet, we have a huge problem, 115 
people a day are dying of opioid overdoses, and most of those 
are from legally prescribed opioids.
    I'm an industrial engineer. I'm kind of a simplistic 
person. Our system that we're looking at starts with the 
patient and the doctor relationship. The doctor prescribes an 
opioid. It's sent to a pharmacy. The pharmacy accumulates 
orders and sends to a wholesale distributor, which is one of 
your companies in most cases. You get your drugs from a 
manufacturer.
    The whole system is overseen by the DEA and is a part of a 
culture which has evolved that pain is something that should be 
addressed in any way possible. And at the time the epidemic 
really took off, there wasn't a huge public outcry over opioid 
prescriptions. It's different today. The culture today is 
looking at the problem differently than it did 10 years ago or 
15 years ago.
    My first question, since you folks are part of the legal 
distribution system, is the overuse of legal opioids a solvable 
problem, yes or no? Legal opioids.
    Let's start with the gentleman down at the end and work our 
way down.
    Mr. Barrett. Yes, Congressman. Thank you for the question.
    I think the practice of medicine is evolving, and I think 
that we know more than we did today. And I think, in fact, the 
prescribing of legal opioids, high-potency opioids, is 
declining.
    Mr. Barton. I really just need----
    Mr. Barrett. I think the answer is yes, it can be solved.
    Mr. Barton. Yes or no?
    Dr. Mastandrea. Yes, sir.
    Mr. Hammergren. Yes, better informed physicians will solve 
the problem, I think.
    Mr. Barton. Mr. Smith.
    Mr. Smith. The use of drugs always come with a risk-return 
tradeoff. So I think there will always be some risk-return 
tradeoff to this category of drugs and any other. So I'm not 
exactly sure what you mean by solve.
    Mr. Barton. Well, I think ``solve'' is a pretty common 
term.
    Mr. Smith. But I think we can greatly improve the 
situation.
    Mr. Barton. You know, fixed.
    Mr. Smith. I think that we can bring it back into much more 
acceptable levels.
    Mr. Barton. I've got a minute and a half left.
    Mr. Collis. There are already significant changes in 
prescription trends for legal opioids, but I think it can be 
vastly improved. I don't know if completely solved.
    Mr. Barton. Generically, everybody said yes, with some 
modification. I think it can be, too.
    Now, this is a little bit trickier question. What percent 
responsibility do you believe your part of the chain of the 
industry have in solving the problem, from zero percent, we 
have no responsibility, to 100 percent, it's all our 
responsibility?
    You just all said that it is solvable. Now, what percent of 
responsibility do you think the distribution, wholesale 
distribution system has in solving the problem?
    Again, we'll just start at one end and go to the other.
    Mr. Barrett. Congressman, I don't feel qualified to give a 
percentage of responsibility. I think all of us in the 
healthcare system have to work together to address this, and I 
think we should.
    Mr. Barton. Do you agree that you have some responsibility?
    Mr. Barrett. I believe that we've got a role in an 
integrated healthcare system.
    Mr. Barton. So you have some responsibility.
    Dr. Mastandrea. Congressman, I believe that it's a shared 
responsibility among many different players, physicians, 
pharmacists, State medical boards, State pharmacy boards, DEA.
    Mr. Barton. But you agree you have some responsibility?
    Dr. Mastandrea. I have said that, yes.
    Mr. Barton. Your company, your industry, not you 
personally.
    Dr. Mastandrea. The percentage is shared.
    Mr. Hammergren. We have a role to play, Congressman, 
certainly. And in your example, one of the most important roles 
we play is to make sure we find suspicious customers and 
suspicious orders and cut off the supply to those customers.
    Mr. Barton. My time has expired, but I'll let each of you 
two.
    Mr. Smith. Well, I would just say that H.D. Smith had its 
role as a distributor to play and did so.
    Mr. Collis. I get the benefit of going last, so I just 
would say it's very difficult to ascribe a percentage, given 
the shared responsibility.
    Mr. Barton. Well, I think you do have a responsibility, I 
think it's a significant responsibility, but I don't think you 
have a majority of the responsibility. And hopefully, by the 
time we end these hearings, we'll get all the players in here.
    Thank you, Mr. Chairman.
    Mr. Harper. The Chair now recognizes the gentlewoman from 
Florida, Ms. Castor, for 5 minutes.
    Ms. Castor. Well, thank you, Mr. Chairman.
    This committee's investigation has made plain that drug 
wholesale distributors flooded areas of West Virginia and other 
parts of the country with massive amounts of opioids. This has 
fed into the public health epidemic that is costing us at least 
$8 billion per year nationwide and costing lives, 116 deaths 
every day. We focused on West Virginia because it has the 
highest opioid death rate in the country.
    Mr. Barrett, your company Cardinal shipped 1.5 million 
opioid pills each year from 2009 to 2011 to a single pharmacy, 
Family Discount, in the small town of Mount Gay. That is an 
average of about 4,000 pills per day.
    At the subcommittee's March 20 hearing, DEA testified that 
that amount shipped to that single pharmacy was, indeed, 
excessive. And this was after Cardinal had been sanctioned by 
the DOJ through a settlement agreement for not following the 
law.
    Mr. Barrett, you've said that the wholesalers don't control 
demand, but clearly you have a responsibility under the law to 
highlight and flag these suspicious orders. How did Cardinal 
estimate what was appropriate for a given pharmacy?
    Mr. Barrett. Congresswoman, thank you for your question.
    I think our organization recognizes it as a dual 
responsibility. One is to provide medicine to a system 
requiring it as prescribed, and the other is to do what we can 
to prevent those from falling in the wrong hands.
    We've evolved over the years. We've become more attuned to 
the changes. I think today----
    Ms. Castor. But this kept happening even after DOJ had 
warned you and you had accepted responsibility and said you 
would do a better job.
    In more recent years, this pharmacy's total purchases of 
these drugs declined dramatically. In 2015 and 2016, it was 
down to about 500,000 pills. And that wasn't just from 
Cardinal, that was from everyone, from all distributors. That 
was but a fraction of what Cardinal alone had shipped them in 
earlier years.
    So isn't this a clear reflection that that was not the 
medical need in the community? The amount being shipped didn't 
reflect what could have been appropriately used in rural West 
Virginia, especially after DOJ had already warned you.
    Mr. Barrett. Congresswoman, let me make two points about 
that, if I may.
    One is, I've acknowledged earlier that I had wished that we 
had moved earlier to stop shipping to that pharmacy, which we 
have many years ago.
    Second, I think the evolution was of our looking at a 
system that was focused on the legitimacy of a pharmacy--which, 
by the way, is still in business--and the awareness of 
something happening in the system, which was a bad doctor. And 
we should have moved more quickly on that.
    Ms. Castor. I'd now like to turn to McKesson.
    Mr. Hammergren, your company McKesson distributed over 1.8 
million opioid pills each year in 2006 and 2007 to Family 
Discount Pharmacy. That's an average of about 5,000 pills per 
day in this rural small town. Based upon a figure cited by DEA, 
McKesson shipped Family Discount roughly six times the amount 
of hydrocodone that an average pharmacy in rural West Virginia 
would have received during those years.
    So a similar question to you. McKesson delivered millions 
of pills to the single pharmacy. Clearly, that's not reasonable 
and you should have flagged that and stopped that right away. 
Why didn't you?
    Mr. Hammergren. We did terminate the relationship with that 
pharmacy. And like Mr. Barrett, I would have liked us to have 
made a decision faster. That's the answer. We caught a bad 
pharmacy and shut it down.
    Ms. Castor. And as I mentioned, this pharmacy's total 
purchases of oxycodone and hydrocodone dropped dramatically, 
but that wasn't until 2015, 2016. And that means the amount of 
opioids your company alone shipped back in 2006 was over three 
times as much as the pharmacy got from all distributors in 
2016.
    Now, you in your testimony, you pointed to, well, 
overprescribing by doctors, maybe the DEA should have done 
more, pharmacy bad actors. But you can't reasonably claim that 
this pharmacy's dispensing filled the medical need. I mean, it 
took you years to respond. Why was that?
    Mr. Hammergren. I can't comment on the medical need, 
Congresswoman. What I can say is that today in our systems, any 
shipment that was outside those boundaries would never have 
happened. It would have been shut down and reported 
immediately.
    Ms. Castor. Why didn't you address--given that this 
community was ravaged by opioid deaths and addiction, and the 
town of Williamson was even nicknamed Pilliamson, don't you 
take responsibility for what was happening back then? Was it 
the profit motive simply overcame the--you saw that paying the 
penalties under settlement agreements was a cost worth paying 
because you were making so much money?
    Mr. Hammergren. Congresswoman, we take all of these matters 
very seriously. Any settlement with a regulator we take very 
seriously. Our systems have evolved, and we continue to invest 
heavily to make sure that situations like that don't happen 
again.
    Ms. Castor. I think this was the opposite of due diligence 
that was required under the law, and we're going to be looking 
for greater accountability.
    Thank you, and I yield back.
    Mr. Harper. The Chair now recognizes the vice chairman of 
the subcommittee, Mr. Griffith, for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman.
    Mr. Hammergren, in the limited time I have, I'm going to 
ask you a series of yes/no questions. But first, as background, 
my district borders southern West Virginia. McKesson was a 
major supplier of pharmacies there, as were some of the others, 
distributing millions of pills, most into West Virginia in 
towns that were between 30 and 60 miles from my district.
    And last week, I was at an opioid conference, and look at 
this map that they gave us.
    [Slide follows.]
    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Griffith. That dark brown area are the deaths per 
capita in the Commonwealth of Virginia, and you will note 
there's a correlation with the dark brown areas most common to 
the border with West Virginia.
    And so, gentlemen, when you say that, you know, you're not 
sure that you have a role--not all of you have said that--it 
flies in the face of that map and the people of my district.
    So, Mr. Hammergren, in May of 2008 McKesson Corporation and 
the Justice Department and DEA entered into a memorandum 
agreement, tab 4 in the binder there. You signed on behalf of 
McKesson Corporation on page 10 of the settlement and release 
agreement and page 7 of the settlement agreement.
    Do you recall signing the document, yes or no?
    Mr. Hammergren. Yes.
    Mr. Griffith. The conduct at issue in this first settlement 
with the DEA was that the DEA believed certain McKesson 
distribution centers did not report suspicious orders and did 
not have effective controls against diversion. Because of the 
serious commitments that McKesson made to the U.S. Government 
and the $13.25 million civil penalty--you recall that, don't 
you?
    Mr. Hammergren. I do.
    Mr. Griffith. Two months later, you presided over a July 
23, 2008, board of directors meeting. And according to the 
board minutes at tab 12 in the binder, public policy issues 
were discussed affecting the corporation. In an accompanying 
slide at tab 13, DEA suspicious orders, defined as orders of 
unusual size, orders deviating substantially from a normal 
pattern, and orders of unusual frequency were categorized as 
high, in terms of the degree of political urgency, and impact 
to, and the level of engagement of the corporation.
    The urgency of the DEA suspicious orders issue was tied to 
the May 2008 settlement, wasn't it, yes or no?
    Mr. Hammergren. We certainly took the settlement, 
Congressman, very seriously.
    Mr. Griffith. The corporation's high level of engagement 
meant McKesson management would put in a high level of effort 
to carry out the promises made in your 2008 memorandum of 
agreement. Isn't that correct?
    Mr. Hammergren. It is correct that it was a top priority 
for us.
    Mr. Griffith. In your experience as an executive at 
McKesson Corporation, when the company makes a legal 
commitment, especially one with a high level of engagement, the 
corporate leadership gives a directive and the appropriate 
personnel carry it out. Isn't that correct?
    Mr. Hammergren. Congressman----
    Mr. Griffith. Yes, correct?
    Mr. Hammergren. Congressman, we took it very seriously.
    Mr. Griffith. Yes. However, according to media reports, 
from 2008 to 2013, the McKesson Aurora, Colorado, warehouse 
filled 1.6 million orders, but only reported 16 suspicious 
orders. The Landover, Maryland, warehouse, which supplied West 
Virginia, routinely failed to report and fulfilled suspicious 
orders placed by numerous pharmacies in West Virginia.
    While the Landover facility was closed in 2012, the serious 
lack of suspicious order reporting does not show a high level 
of engagement by McKesson, does it, yes or no?
    Mr. Hammergren. We took our responsibilities very 
seriously.
    Mr. Griffith. Yes or no? Failing to live up to the 2008 
agreement does not show a high level of commitment, does it?
    Mr. Hammergren. That's not true. We had a high level of 
commitment, Congressman.
    Mr. Griffith. And you failed. The DEA alleged that McKesson 
distribution centers ignored thresholds and supplied pharmacies 
volumes of controlled substances that exceeded their assigned 
amount without a proper review. That also does not show a high 
level of engagement, does it, yes or no?
    Mr. Hammergren. Congressman, we had a high level of 
engagement.
    Mr. Griffith. Were any McKesson personnel fired in 
connection with any of the failures noted in the 2017 
memorandum of agreement? That's at tab 5.
    Mr. Hammergren. Congressman, the people involved today in 
the CSMP are vastly different than the people in 2008.
    Mr. Griffith. Was anybody fired?
    Mr. Hammergren. Congressman, the people are different 
today. Many of them have left the corporation.
    Mr. Griffith. But they weren't fired.
    Mr. Hammergren. We don't talk about specific----
    Mr. Griffith. I'm not asking you to talk about specifics. 
I'm asking you to tell me if anybody got fired. Did you hold 
anybody personally responsible for what was happening in West 
Virginia and in Colorado and other parts of the country?
    Mr. Hammergren. Congressman, everybody at the company is 
accountable to do what's right.
    Mr. Griffith. But no one was fired. All right.
    In January 2017, McKesson Corporation and the Justice 
Department and the DEA entered into another memorandum of 
agreement, because you didn't live up to 2008. As a result of 
this agreement, McKesson paid a record-setting $150 million 
fine.
    In this memorandum of agreement, in section 2, acceptance 
of responsibility, McKesson acknowledged it failed to identify 
or report to DEA certain orders by certain pharmacies which 
should have been detected by McKesson as suspicious. This 
involved 12 out of 30 McKesson distribution centers. More than 
a third of your distribution centers were involved in these 
failures.
    That is a widespread systemic failure. Wouldn't you agree?
    Mr. Hammergren. Congressman, our organization in 2008 was 
working closely with the DEA.
    Mr. Griffith. This is 2017.
    Mr. Hammergren. I understand. And we have created a program 
that really we believe is meeting their needs, focused on 
suspicious customers and knowing our customers.
    Mr. Griffith. And a third of them were out of compliance.
    Mr. Chairman, I yield back.
    Mr. Harper. The gentleman yields back.
    Before I recognize the next person, Mr. Hammergren, it 
seems like a pretty easy question to answer if anyone was fired 
in response to Mr. Griffith's question. And the answer is yes, 
no, I don't know, or I refuse to answer. What is your answer?
    Mr. Hammergren. Yes, people were fired as a result of this.
    Mr. Harper. Thank you very much, Mr. Hammergren.
    I'll now recognize the gentlewoman from Illinois, Ms. 
Schakowsky, for 5 minutes.
    Ms. Schakowsky. I have to say that I'm pleased that you're 
all with us today to discuss the role your companies played in 
supplying the opioid epidemic, but I have to also say that this 
reluctance even to answer that simple question, or reluctance, 
always qualifying your responsibility--clearly, you had a 
responsibility.
    And, Mr. Hammergren, you acknowledge that you wish you had 
terminated your relationship with Sav-Rite earlier and that you 
did end that relationship. But why did you then--why did you 
ship 5 million pills before you shut it down?
    Mr. Hammergren. Congresswoman, thank you for the question. 
Certainly, we've learned from our experience during the 2006, 
2007, over a decade ago, and today's systems are much more 
robust than they were then. Our orders actually aren't even 
processed today if they're above thresholds. In those early 
phases of 12 years ago, our systems weren't as automated as 
they are today.
    Ms. Schakowsky. You know, all of you, I hope, will 
acknowledge that since 1971, your companies are required by 
Federal law to halt and report suspicious orders of 
prescription opioids.
    Did you, before all of this broke, have a process to do 
that, if I could just go down, to obey the 1971 law?
    Mr. Barrett. Yes. Our organization, Congresswoman, has had 
a clear sense of the Controlled Substance Act and reported all 
orders to the DEA of narcotics.
    Ms. Schakowsky. OK.
    Mr. Mastandrea?
    Dr. Mastandrea. Yes, we did have a system in place, 
Congresswoman.
    Mr. Hammergren. Congresswoman, we also reported all orders 
required.
    Ms. Schakowsky. Mr. Smith.
    Mr. Smith. At different points in time, the expectations of 
the DEA were different.
    Ms. Schakowsky. Microphone, please.
    Mr. Smith. At different points in time, the expectations of 
the DEA were different. Up till about 2007, the DEA expectation 
was for us to report suspicious orders after the fact with 
monthly reporting, and we did so.
    It was in 2007 that the DEA expressed a very different 
expectation concerning controlled substance orders and that if 
it was suspicious they asked that we develop a system to hold 
those orders at the time they were received.
    Ms. Schakowsky. OK, I'm going to move on.
    Mr. Smith. We implemented that system in 2008.
    Ms. Schakowsky. Sir.
    Mr. Collis. Congresswoman, AmerisourceBergen didn't exist. 
There were many predecessor companies. I'm not aware of any of 
them that weren't committed to compliance with all Federal 
statutes.
    Ms. Schakowsky. I just think it's really important to put 
on the record that this is not a new requirement, that yes, 
maybe there wasn't the kind of enforcement, but nonetheless, 
your companies had a responsibility.
    I also want not only to look back and see what went wrong, 
but also to look forward to see how to do better. And it is 
apparent now that pharmaceutical corporations are taking 
advantage of the opioid epidemic by spiking the price of life-
saving drugs like naloxone, and that that, in my view, is 
unacceptable. Pharmaceutical corporations can't start this 
epidemic with irresponsible and reckless on day--recklessness 
one day--and then turn around and profit the next.
    So I wanted to again ask Mr. Hammergren, McKesson 
distributes Evzio, which has raised its price from $690 to 
$4,500. So what does McKessonearn net per unit for Evzio?
    Mr. Hammergren. I can't answer that question, Ms. 
Congresswoman. I would say that we don't set the prices for 
branded drugs. Those are set by the manufacturers.
    Ms. Schakowsky. And how much does McKesson net annually for 
the distribution of Evzio?
    Mr. Hammergren. Congresswoman, I don't have that 
information. I'd be happy to get it for you.
    Ms. Schakowsky. McKesson also distributes Narcan. What does 
McKesson earn net per unit for Narcan?
    Mr. Hammergren. Congresswoman, I don't know the answer to 
that question.
    Ms. Schakowsky. And how much does McKesson earn net 
annually for its distribution of Narcan?
    Mr. Hammergren. I don't know that question.
    Ms. Schakowsky. So I would expect that we'll put that in 
writing and that we'd get this information. Because, you know, 
you can't have it both ways, fellas. You know, the opioid 
epidemic is there, and now for life-saving drugs those prices 
are going through the roof.
    And I yield back.
    Mr. Griffith [presiding]. I thank the gentlelady and now 
recognize the gentleman from Texas, Dr. Burgess.
    Mr. Burgess. Thank you, and thanks for having the hearing.
    Mr. Hammergren, let me just continue on that line for a 
moment, because I think this is an important point. You as a 
distributor do not set the list price of the compounds that you 
were being questioned about. Is that correct?
    Mr. Hammergren. I don't believe so. If they're branded 
patented drugs, we don't set the price.
    Mr. Burgess. So you receive an order and you fill an order. 
You're agnostic as far as the price. That is set by the person 
selling the product. Is that correct?
    Mr. Hammergren. Congressman, the manufacturer sets those 
prices, to the best of my understanding.
    Mr. Burgess. Mr. Collis, you mentioned--it was almost an 
offhanded mention, but it is important--one of the first 
hearings that I sat through in this subcommittee in 2005 was a 
hearing on why don't doctors prescribe enough pain medicine. 
And you referenced that there are some people who are watching 
this debate who are concerned are they going to be able to get 
the medicines for the treatments for which they are being 
treated.
    And I think that is a legitimate concern and we do need to 
be mindful. We cannot overlook the fact that there are serious, 
serious problems that need to be fixed. But I thank you for 
bringing that up, because that is an important reference point 
that we sometimes overlook.
    Mr. Smith, let me just ask you, we've actually heard some 
back-and-forth, and I think there was a question on the other 
side dealing with a document or a letter from Mr. Rannazzisi at 
the DEA, Drug Enforcement Administration, that said, don't just 
report to us the total sales.
    Mr. Collis, I think you said, we just report, we're not 
making a judgment whether it's suspicious, this is what we 
deliver to place A, B, or C. Is that correct?
    Mr. Collis. We do report every day, and we also report on a 
monthly basis all cost data, but we do make determinations of 
what is a suspicious order and we hold them.
    Mr. Burgess. Sure, and I appreciate that. This is what is 
so frustrating to me for an all-hands-on-deck situation. The 
DEA says, don't just report your raw data. But you have 
algorithms. The DEA should have algorithms. I think the Center 
for Medicare and Medicaid Services probably should have 
algorithms in their database so that they can identify who are 
the outliers.
    Not saying that someone is doing something wrong, it may be 
a pain clinic, it may be a cancer clinic, but let's afford some 
extra scrutiny if this is the amount of product that's going 
out so we don't end up with a situation such as in Kermit.
    Now, Mr. Smith, let me ask you, your company, and I think 
you testified to this, your company reports suspicious orders. 
What does the DEA do with that information when you report it?
    Mr. Smith. I don't really know.
    Mr. Burgess. You've sold your company, I understand that.
    Mr. Smith. But I don't really know. And the DEA, as we talk 
about the DEA, the DEA has not been the same in their outlook, 
attitude, and interaction with the industry over my career. For 
most of my career, the interactions with the DEA were very 
collaborative and very purposeful, in terms of working with 
them to try to control controlled substance distribution.
    Back about 10 years ago, with the advent of this 
expectation of holding orders, it became very, very difficult 
to interact with the DEA and to get feedback. They were, in 
fact, as evasive as possible in the midst of this crisis to us, 
in terms of giving us guidance. More recently, that attitude 
has been changing and improved.
    Now, as you point out, as of 2018, I was pretty much out of 
the picture. I can only hope that the DEA will continue to work 
collaboratively with the industry going forward.
    Mr. Burgess. And what you have just related is information 
that independently I and my staff have acquired, that the 
number of administrative actions against registrants by the 
DEA--now I'm merely talking about doctors, because that was my 
focus when I began this--but when you look at the numbers in 
the committee's memo, how things have just been going up 
through the roof, the number of administrative actions, I'm not 
talking about for West Virginia, I'm talking about for the 
whole country, 21 in 2014, at the same point that point in the 
graph was probably at its apex.
    I've got to believe that the DEA--I'm not saying that 
everything that you've reported--I want you to do your job, but 
I want the DEA to do their job, and it doesn't look like they 
have been. And I'll just share with you, they've been very, 
very difficult to get information out of the agency.
    I hope you're right, Mr. Smith, I hope it is changing. But 
we cannot fix this problem if the agency required to be in 
charge simply is insensitive to our requests for information.
    I thank all of you for being here today.
    Mr. Chairman, I yield back.
    Mr. Griffith. I thank the gentleman, and now recognize the 
gentleman from New York, Mr. Tonko, for 5 minutes.
    I understand you have a UC request.
    Mr. Tonko. I'll yield to Ms. Castor.
    Ms. Castor. Thank you, Mr. Chairman.
    I'd like to ask unanimous consent to submit for the record 
information relating to the salaries of the CEOs of the Big 
Three drug wholesalers, including the McKesson CEO, who made 
over $692 million in the 10 years leading up to 2017.
    Mr. Harper [presiding]. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Ms. Castor. I yield back.
    Mr. Tonko. Thank you, Mr. Chair.
    Mr. Barrett, I asked about Cardinal's sales to pharmacies 
that filled prescriptions written by two doctors, Katherine 
Hoover and Diane Shafer. Federal law enforcement put both of 
these doctors out of business around 2010.
    Dr. Shafer was sentenced to 6 months in prison after she 
admitted to writing illegal opioid prescriptions. According to 
the United States Attorney's Office for the Southern District 
of West Virginia, she wrote more prescriptions than entire 
hospitals did between 2003 and 2010.
    Dr. Hoover was the single largest prescriber of controlled 
substances in West Virginia between 2002 and 2010. When her 
clinic was raided, she fled to the Bahamas.
    Cardinal served two pharmacies, Hurley Drug and Family 
Discount, which filled prescriptions from Dr. Hoover. In 
September 2008, a Cardinal employee raised an alarm about 
Hurley Drug in a memo, which noted that Hurley filled 
prescriptions from Dr. Katherine Hoover even though other 
pharmacies refused to fill her prescriptions.
    According to this document, another pharmacist stated that 
he would not fill Hoover's prescriptions because, quote, ``He 
had ridden by the office of Dr. Hoover and there are lines of 
people standing outside waiting to get into the office,'' close 
quote.
    In fact, according to a 2011 news report in the late 2000s, 
quote, ``Crowds of people filled the lot outside Dr. Hoover's 
clinic,'' and it was, in quote, ``an open secret that it was 
essentially a pill mill.''
    Is that accurate? And did your employee observe the lines 
of people outside that office as early as 2008, which could 
indicate a possible pill mill?
    Mr. Barrett. Congressman, I've been briefed on those memos.
    Mr. Tonko. Pardon me?
    Mr. Barrett. Yes, I've been briefed on that report.
    Mr. Tonko. OK. So your employee's memo appears in 
Cardinal's due diligence file for Hurley, but it is unclear 
what actions Cardinal took based on it. For example, Cardinal 
continued to supply Hurley for another 6 years.
    So why? Do you know whether Cardinal ever followed up on 
this memo?
    Mr. Barrett. So we've not shipped that company high-potency 
opioids for many years. I mentioned earlier that based on what 
I've seen, I wish we had taken action earlier. I think we had a 
system that allowed for too much subjectivity about the 
legitimacy of a pharmacy.
    Today's system simply would have taken the data, seen 
outlier data, and shut it off. And, as I said earlier, I've 
seen enough to know that I wish we would have acted earlier.
    Mr. Tonko. Cardinal also supplied Family Discount Pharmacy, 
sending it more than 5.5 million pills from 2009 to 2012, after 
which you ended your relationship with them.
    According to a document in another distributor's files, in 
2009, 51 percent of Family Discount's hydrocodone prescriptions 
came from Dr. Hoover. That distributor also reported to the 
committee that Dr. Hoover was responsible for 69 percent of 
Hurley Drug's hydrocodone orders, which the distributor 
considered a, quote, ``cause of concern.''
    Mr. Barrett, in your written testimony, you say you wish 
you had asked a different set of questions before distributing 
to this pharmacy. It appears that Cardinal may have missed the 
red flags connecting Dr. Hoover to both Hurley Drug and Family 
Discount. So I'd like to know how this will be fixed going 
forward.
    Mr. Barrett. Congressman, it is a great question. It is 
fixed going forward. As I mentioned earlier, I think both of 
the pharmacies to which you referred were influenced by this 
same doctor who, as it turns out, was a bad doc.
    Today's systems would not allow subjectivity. Today's 
systems would simply say, we set thresholds or limits, based on 
certain criteria, primarily relationship between controlled 
drugs and on other drugs and the nature of the community. And 
if it crossed those thresholds, we simply would shut the order 
down, and that's what we do today.
    Mr. Tonko. So is it your belief that these two situations 
would have been caught much earlier?
    Mr. Barrett. In today's system, absolutely.
    Mr. Tonko. It's unbelievable that these numbers of pills 
were being sold and that this pill mill was getting away with 
activity.
    I just hope that all of the distributors before us have 
much more rigorous due diligence standards in place today that 
can help them spot these red flags.
    And with that, Mr. Chair, I yield back.
    Mr. Harper. The gentleman yields back.
    The Chair will now recognize Mrs. Brooks for 5 minutes.
    Mrs. Brooks. Thank you, Mr. Chairman.
    Mr. Smith, I'd like to talk about Family Discount Pharmacy 
that has been mentioned here already. Your company terminated 
Family Discount Pharmacy's ability to purchase controlled 
substances in 2011. Is that correct?
    Mr. Smith. I believe that we discontinued selling them 
anything at that--around that time.
    Mrs. Brooks. Correct, in 2011. But prior to that, was H.D. 
Smith aware of the prescriber we've heard about, Dr. Katherine 
Hoover, who was responsible for providing over 262,000 
hydrocodone prescriptions to Family Discount Pharmacy as well 
as other nearby pharmacies in February of 2008? Was H.D. Smith 
aware of the Dr. Hoover problem?
    Mr. Smith. I am not aware of the specific timing of when 
our due diligence team became aware of that issue. I do know 
that with Family Discount that when we implemented our 
controlled substance ordering monitoring program, we began to 
limit the controlled substances that we sent and----
    Mrs. Brooks. Excuse me. Did Dominic Grant work for you.
    Mr. Smith. I beg your pardon?
    Mrs. Brooks. Did Dominic Grant for you? Did George Euson 
work for you?
    Mr. Smith. George Euson worked for me.
    Mrs. Brooks. In 2008?
    Mr. Smith. Uh-huh.
    Mrs. Brooks. Where I have an email indicating that Dr. 
Hoover had prescribed, had filled over 262,000.
    Mr. Smith. OK.
    Mrs. Brooks. So I do believe that your director of 
corporate security was aware of that.
    Mr. Smith. Thank you.
    Mrs. Brooks. If you turn to tab 16 you'll see that over a 
year later H.D. Smith noted in a November 12, 2009, report--
2009--that Dr. Katherine Hoover was responsible for 51 percent 
of the hydrocodone scripts being filled by Family Discount.
    Now, knowing that, was Family Discount Pharmacy--had that 
become a concern for your company in November of 2009?
    Mr. Smith. It appears that it was at that time.
    Mrs. Brooks. And did H.D. Smith report this to the DEA?
    Mr. Smith. I'm not sure what the timing of what we would 
have reported to the DEA was.
    Mrs. Brooks. Well, in fact, we know that Family Discount 
did make some reports to the DEA between May of 2008 and May of 
2009, but not at this time, in November of 2009.
    In April of 2015 then, interestingly, did H.D. Smith--so 
you then terminated with Family Discount in 2011, but then, 
going to April of 2015, did H.D. Smith make the decision to 
resume its business relationship with Family Discount Pharmacy?
    Mr. Smith. That's possible. We have a robust program, and 
that includes reviewing new data that comes along. It is 
possible that we could reopen an account if we saw that there 
were indications that the situation was different.
    On the other hand, that doesn't end our robust due 
diligence. We can continue to do that and can decide to close 
it again.
    Mrs. Brooks. Let's talk about the due diligence. Were you 
aware that Family Discount had been dropped by some of the 
other distributors here at the table when you renewed your 
relationship? Were you aware of that?
    Mr. Smith. No, I was not aware.
    Mrs. Brooks. So please turn to tab 19, speaking of due 
diligence. An email was sent by an H.D. Smith employee in 
January of 2016 expressing concern that the company was 
providing controlled substances to Family Discount's other 
location, located just 3 miles away, despite the fact the 
company, your company, had never performed any new customer due 
diligence on that pharmacy. Were you aware of that?
    Mr. Smith. No.
    Mrs. Brooks. The employee's email also noted that this 
pharmacy had reached its hydrocodone threshold only 12 days 
into a month. Were you aware of that?
    Mr. Smith. No.
    Mrs. Brooks. And did you report the suspicious activity to 
DEA?
    Mr. Smith. I do not know.
    Mrs. Brooks. I would assume you did not.
    Following the January 2016 correspondence, did either 
Family Discount location continue to place controlled substance 
orders that exceeded the monthly thresholds established by H.D. 
Smith, this new amazing system you put in place?
    Mr. Smith. I do not know.
    Mrs. Brooks. Well, you might want to take a look at emails 
in June and October of 2016 showing that Family Discount had 
placed orders in excess of established thresholds, that, in 
fact, one of your employees indicated that the justification 
was to meet our guideline to obtain our monthly discount. What 
monthly discount?
    Mr. Smith. I'm not sure what that refers to.
    Mrs. Brooks. A monthly discount with the manufacturer?
    Mr. Smith. No.
    Mrs. Brooks. Monthly discount--no idea what monthly--what 
deals were being cut?
    Mr. Smith. I'm not sure what that refers to.
    Mrs. Brooks. H.D. Smith then blocked Family--H.D. Smith 
block Family Discount's ability to purchase controlled 
substances on February 16 of 2018. Were you in charge at that 
time of the company?
    Mr. Smith. No. My managerial responsibilities ended at the 
acquisition of H.D. Smith in January of 2018.
    Mrs. Brooks. In January of 2018. Well, I will say that 
according to a document we received, the committee, the company 
cited its reason for taking this action and finally terminating 
the relationship with Family Discount was due to reference 
negative news articles.
    With that, I yield back.
    Mr. Harper. The Chair will now recognize Mr. Ruiz for 5 
minutes.
    Mr. Ruiz. Thank you, Mr. Chairman.
    This crisis continues to overwhelm our healthcare system, 
and as an emergency physician I have been involved in the front 
lines taking care of opioid-addicted and overdosed patients way 
before it made national headlines. Doctors struggle with 
treating pain adequately and identifying drug seekers.
    Hospitals in my district are seeing an increase in 
uncompensated care, because they are seeing more and more 
patients with chronic opioid-related kidney, heart, and lung 
complications, not to mention overdoses.
    It is good that more funds are going to fight the opioid 
epidemic. I agree with that. I encourage that. But if you 
eliminate mental health coverage, emergency care coverage as an 
essential health benefit, or if you repeal Medicaid expansion, 
then you actually are taking 1 step forward and 10 steps back 
and are actually hurting patients and making the problem worse.
    Moving forward, I think it is critical that the various 
players--DEA, hospitals, physicians, pharmacists, 
manufacturers, and distributors--work together to identify and 
implement systems and processes that move us forward to 
identify and implement solutions.
    I understand that as this crisis has continued to escalate, 
many of you have put internal systems in place to increase 
accountability, but we have been told that before and it turned 
out to be untrue. And there's a difference between what you 
have on paper and what you are actually implementing.
    At our March 20 hearing, members of this committee 
described the quantity of opioid pills sent to particular 
pharmacies in this region and asked DEA Administrator Patterson 
whether those amounts were excessive and whether the 
distributors failed to adequately exercise due diligence. The 
DEA agreed on both counts.
    So I'd like to quickly go down the line and find out 
whether the problems that led to this overdistribution have 
been fixed.
    Dr. Mastandrea, Miami-Luken distributed substantial 
quantities of pills to certain places in West Virginia. For 
example, your company sent Sav-Rite pharmacy in Kermit, a 
population of only 400, nearly 2 million pills in just 1 year.
    Would Miami-Luken's current system discover these large 
shipments and more closely examine them to determine if such a 
large volume was appropriate and not going to a rogue 
operation, such as a pill mill?
    Dr. Mastandrea. Yes, sir.
    Mr. Ruiz. And how can you guarantee us that that system 
will be implemented?
    Dr. Mastandrea. It's already implemented.
    Mr. Ruiz. So you're saying that there's no mistakes 
currently being done that you know of? There's no way of--what 
is your system to find and review in case you do make a 
mistake?
    Dr. Mastandrea. Each order is reviewed by our--we purchased 
a Buzzeo system. It's a computer algorithm that tells us 
whether or not the order deviates from frequency, pattern, 
size. And we stop it in real time if it does. We pend the 
order. If the order is adjudicated to be an appropriate order, 
then we release it. If it's not, then we report it.
    Mr. Ruiz. The DEA data indicate that McKesson also supplied 
the Sav-Rite in Kermit, population of 400, with almost 5 
million opioids over a 2-year period.
    So, Mr. Hammergren, if a pharmacy serving a comparable 
population placed those large orders today, particularly in an 
area hard hit by opioid diversion, would McKesson's monitoring 
systems be capable of flagging these orders for further review 
to make sure that they are not affiliated with a pill mill?
    Mr. Hammergren. Congressman, that's a good question. We 
would not ship to Sav-Rite today.
    Mr. Ruiz. OK. So, in terms of your system, if this happened 
to another comparable city, do you have a system in place to 
flag? The first question.
    Mr. Hammergren. We have a system in place that would block 
the order if it was a pharmacy that was outside of a boundary, 
a threshold being set.
    Mr. Ruiz. So why hasn't that happened? Why did you have 
another settlement in 2017, when you told us this exact same 
thing in 2008?
    Mr. Hammergren. We had a system in place from 2008 to block 
suspicious orders. Our settlement in 2017 was really related to 
our reporting of suspicious orders.
    Mr. Ruiz. And so the implementation of those reporting and 
also the shipping of orders.
    So I think it's very important that we also identify, which 
we see on multiple scenarios where corporations and agencies 
will hold up their policy on paper, but then the actual 
implementation of those are either not enforced or they're not 
transparent to determine what's working and what's not working.
    Mr. Collis, since you are now responsible for H.D. Smith's 
customers as well as your own, this question is for you. 
Without debating the merits of the West Virginia litigation 
that's currently undergoing, do you now have a way to assess 
orders for high volumes of pills against the populations 
receiving them?
    Mr. Collis. I believe we do. I believe we have a robust 
system and we've always had one.
    Mr. Ruiz. OK. I yield back my time.
    Mr. Harper. The Chair will now recognize the gentleman from 
Michigan, Mr. Walberg, for 5 minutes.
    Mr. Walberg. Thank you, Mr. Chairman. And thank you for 
having these hearings.
    As we look at the various players--and today, of course, we 
have distributors--we had the opportunity to have DEA in front 
of us, and that was an amazing time of testimony as well with 
amazing failings that went on in DEA also.
    But this epidemic knows no boundaries. When we talk of 
losing 115 Americans every day to the opioid epidemic, these 
are people that are our neighbors, our friends, our fathers, 
our family members, our sons, our daughters, our mothers. It 
knows no bounds. But the sheer number of opioids dumped into 
small town America is simply baffling and incomprehensible to 
me.
    Many of us have tragic stories of pill mills in our 
district. And my district in Michigan is, unfortunately, no 
different. In Monroe County, one doctor alone was able to get 
his hands and prescribe over 2 million pain killers in just two 
short years.
    I, for one, am interested to have the distributors here 
today to tell us exactly how and why this type of thing happens 
and to hear the steps that they have or will take.
    Mr. Collis, you wrote in an editorial last year that 
AmerisourceBergen has, and I quote, ``reported and stopped tens 
of thousands of suspicious orders since 2007,'' end quote. If a 
specific pharmacy is reported for suspicious orders multiple 
times during a short period, would that trigger a heightened 
investigation of that customer?
    Mr. Collis. I believe it absolutely would. I wouldn't say 
we don't make mistakes, but I will tell you one of pharmacies 
that's been mentioned several times, we had them on service for 
38 days, and we reported them 36 of the 38 days. And on the 
38th day we stopped servicing them.
    Mr. Walberg. In the editorial, you also noted that 
AmerisourceBergen uses, and I quote, ``complex algorithms to 
identify and stop orders that are deemed to be suspicious.'' 
From 2012 to 2015, AmerisourceBergen reported 394 suspicious 
orders for a single West Virginia pharmacy, Beckley Pharmacy.
    If the company opens an investigation of a pharmacy like 
Beckley, the investigators would want to know the percent of 
controlled substance prescriptions the pharmacy filled, 
correct?
    Mr. Collis. That's correct.
    Mr. Walberg. Whether there are signs of drug activity 
around the pharmacy. Is that correct?
    Mr. Collis. We would review the type of business that they 
are servicing. Some of my colleagues on the panel here have 
talked about the type of business. If they service a hospice 
account or pain management clinic, we would investigate that.
    Mr. Walberg. If there are any known pill mill doctors 
writing prescriptions, you would want to note that, correct?
    Mr. Collis. If we knew that they were servicing a pill mill 
doctor, by your description, we would not service that 
pharmacy. If their business was designed around that, we would 
not service that.
    Mr. Walberg. AmerisourceBergen reported 199 of its 
suspicious orders for Beckley Pharmacy between 2013 and March 
of 2014. But documents your company provided to the committee 
indicate that Amerisource didn't investigate the pharmacy until 
February 2015.
    Please, if you would, turn to tab 46 to see the 
investigator's February 2015 report, which found, and I'll read 
that:
    The pharmacist said that 50 percent of prescriptions he 
filled were for controlled substances and that customers told 
him other pharmacies wouldn't fill their prescriptions. Some of 
the pharmacies top 10 prescribers were among the top 
hydrocodone prescribers in the State, and the pharmacy security 
guard referred to customers as drug addicts and drug dealers 
and said he witnessed numerous drug deals in the parking lot 
after customers filled oxycodone prescriptions.
    Amerisource didn't stop doing business with that pharmacy 
until November 2015, 10 months after the investigator's report, 
which itself came only after your company filled hundreds of 
suspicious orders. The company is supposed to use, and I quote, 
``complex algorithms'' to identify problems pharmacies have.
    So why did it take so long?
    Mr. Collis. I have a team, some them are behind me. We 
trust them. I think that we--I have never heard of this 
pharmacy before. But we're committed to continuous learning. 
And if we made mistakes, hopefully we'll rectify them and they 
won't happen in the future.
    Mr. Walberg. Well, if we could get the response to that 
question, since you're not aware of it. It comes from your 
reports and the reports that we have in front of us.
    Mr. Collis. We ship 100,000 orders a day. It's not feasible 
that I would know about all the orders.
    Mr. Walberg. Well, we'll appreciate the response to that.
    Mr. Chairman, I have other questions I'll have included in 
the record.
    Mr. Harper. Certainly. Each of the witnesses will be aware, 
you may be getting written questions following this. We'd ask 
for your response to those as quickly as possible, including an 
answer to that question, Mr. Collis, at your earliest 
convenience.
    At this time, the Chair will recognize the gentlewoman from 
California, Mrs. Walters, for 5 minutes.
    Mrs. Walters. Thank you, Mr. Chairman.
    And, Mr. Barrett, these questions will be asked of you.
    When Cardinal began setting threshold limits for pharmacies 
in 2008, the company set Family Discount's hydrocodone 
threshold at 27,000 doses a month. In a little over a year, 
Cardinal adjusted the pharmacy's threshold 14 times. And by 
August 2009, it was cleared to receive 110,000 hydrocodone 
pills a month.
    The pharmacy's threshold for hydrocodone reached a peak of 
150,000 dosages a month in January 2010, a level it remained at 
for a year and a half before Cardinal officials reviewed and 
reduced it.
    Mr. Barrett, when a pharmacy goes over its monthly drug 
threshold, does Cardinal inquire about the reason for the 
higher drug order?
    Mr. Barrett. Thank you, Congresswoman.
    Today, if an order reaches its threshold, it simply stops. 
So the process is the threshold is set, and the threshold is 
set based on a number of factors, the size of the community it 
serves, not just the population but the community it serves. 
Other factors. Does it serve a hospice center, a surgical 
center, et cetera. If an order reaches that threshold, that 
limit, it simply stops.
    Mrs. Walters. But in the past, did it question it, before 
today?
    Mr. Barrett. So as I look back at some of the historical 
documents, I think the thresholds probably should have been set 
with a different set of eyes. I've mentioned this notion of 
asking different questions. And I think today we'd probably set 
those quite differently.
    But I think at the time of those pharmacies you referred 
to, thresholds probably should have been adjusted down more 
quickly.
    Mrs. Walters. Did they--did Cardinal make an assessment as 
to whether the explanation for increasing its threshold made 
sense and verified it in any way?
    Mr. Barrett. It's hard for me to answer that fully. Again, 
this is part of the history. I have no reason to question the 
good intent of those doing that kind of assessment. They were 
professionals. I think they were looking at the incoming order 
of prescribing.
    I think now we know some of that prescribing was driven by 
some behavior that we would have liked to have caught in the 
physician world. And today that simply could not happen.
    Mrs. Walters. OK. In Family Discount's case, the pharmacy 
gave several explanations as to why it needed higher drug 
threshold. But in April 2009, the pharmacy said its hydrocodone 
volumes increased because of the closure of a nearby pharmacy 
called Sav-Rite pharmacy.
    Mr. Barrett, do you know why Sav-Rite closed in 2009?
    Mr. Barrett. I'm sorry, Congresswoman, I don't.
    Mrs. Walters. OK. Well, it closed because it was raided by 
the DEA as part of a crackdown on prescription drug diversion.
    Sav-Rite, which is located about 30 miles away from Family 
Discount, closed after it was raided by the DEA, as I just 
mentioned. And the raid was covered in the local media at the 
time, but due diligence files Cardinal provided the committee 
do not indicate that the company knew about this event. Is that 
something Cardinal should have investigated or known?
    Mr. Barrett. I think today under our procedures in our, 
essentially, know your customer model, we try to take into 
account what factors that we can that are fact. Those weigh 
into the judgment along with various analytical tools that 
relate to the nature of the community of practices that a 
pharmacy serves. So very likely today that would have been a 
factor that would have been--it would have been caught in the 
system.
    Mrs. Walters. OK. Cardinal's policies indicate that, as of 
2016, two people must now sign off on the decision to raise 
certain drug threshold levels above 20,000 and above 40,000 a 
month. Before that policy was adopted, was Cardinal failing to 
properly vet threshold level adjustments?
    Mr. Barrett. I'm not sure, Congresswoman, that I could say 
that we were failing to reflect that. I think we were using the 
tools of the moment. And it was probably much more subjective 
judgment than what would happen today. Today it is a much more 
rigorous, evidence-based, data-based decision, and it doesn't 
have the same kind of subjectively I think that was present at 
that moment.
    Mrs. Walters. OK. Cardinal Health has advised the committee 
staff that, starting in 2012, your corporation implemented 
stronger compliance systems. However, I would note that, in 
March 2017, the California State Board of Pharmacy filed a 
complaint against Cardinal's Valencia, California, facility for 
shipping suspicious orders, including hydrocodone, during 2012 
to 2015, to Pacific Plaza Pharmacy.
    I would further note that the conduct of the Cardinal 
Valencia facility figured in the 2008 $34 million settlement 
with the Justice Department and DEA. The shipments to Pacific 
Plaza involved sharp increases in the volume of controlled 
substances over a period of time. There were also orders of 
significant amounts of the highest available strength of drug 
compared to lower strengths, a red flag for illegitimate 
pharmacy dispensing.
    I understand Cardinal is contesting the complaint. But, Mr. 
Barrett, shouldn't Cardinal Health's stronger compliance system 
have been able to detect and to prevent these transactions?
    Mr. Barrett. Congresswoman, if I'm responding, I think, to 
the case that you referred to, and, again, this is important, 
we ship to a pharmacy that had an employee that stole a 
product. We were then criticized for shipping to the pharmacy 
and not being able to detect that internal theft.
    Again, I think this in some ways highlights part of the 
challenge. We ship to hospitals and pharmacies all over this 
country. There are things that may happen inside their watch.
    If the volumes are not things that would normally hit our 
thresholds that are happening at a much lower level, and this 
can happen, that is something we probably would not somebody 
detect.
    And so, again, this may or may not be the situation you're 
referring to. If it is, and I think it may be, that's 
essentially what the issue is.
    But for us today, we are driven by strict thresholds, and 
those are limits on the amount of certain products, 120 
categories of drugs that can go to certain pharmacies.
    Mrs. Walters. OK. Thank you.
    I'm out of time.
    Mr. Harper. The Chair now recognizes the gentleman from 
Georgia, Mr. Carter, for 5 minutes.
    Mr. Carter. Thank you, Mr. Chairman.
    And thank all of you for being here today. We appreciate 
this very much.
    I have to say that I'm pleased thus far that my colleagues 
have not made this a witch hunt. But instead, I think they've 
asked some great questions and very fair questions.
    What I've heard, and I've been kind of in and out, but what 
I've heard is that you've acknowledged that you have a 
responsibility here and that you understand that. What I think 
I've also heard is that if you knew back then what you know 
now, you'd do things differently. And I think that's true for 
all of us in this profession. And I say that having practiced 
pharmacy for over 30 years.
    I'm going to ask you all to be very, very honest with me 
right now, because I'm concerned, as Dr. Burgess mentioned, 
about the role of the DEA.
    Now, we've already had the DEA before this committee, and I 
think we had--I think we kind of had it backwards. I wish I 
could have another shot at them, to be quite honest with you, 
to ask them some questions.
    But let me--I just ask any of you. I assume all of you are 
compliant to ARCOS, that you're reporting. What does DEA do 
with that information? Do you know? And if you can be brief, 
because I've got a bunch of questions.
    I ask you, Mr. Hammergren. Do you have any idea what DEA 
does with that information?
    Mr. Hammergren. No, I don't, sir.
    I would also say, Congressman, some of this testimony, you 
see these pharmacies switch wholesalers back and forth.
    Mr. Carter. Absolutely.
    Mr. Hammergren. We don't see it before that happens.
    Mr. Carter. OK.
    Mr. Collis, do you have any idea what the DEA does with 
this?
    Mr. Collis. No. No. We would like more feedback. We'd also 
like [off mic] the rules, for example, on what constitutes a 
suspicious order.
    Mr. Carter. OK.
    Mr. Collis. Very, very helpful. I know one of the gentlemen 
and I think we would be very interested in complying with the 
rules.
    Mr. Carter. Let me ask any of you. Has the DEA ever come to 
you and said do not send opioids to that pharmacy or to that 
clinic or to that hospital? Has anybody ever been told that by 
the DEA?
    Mr. Collis. Not to my knowledge.
    Mr. Carter. Have they ever given you any kind of directions 
or guidelines? You know, I get it if they're outside of the 
rim, you know, and obviously there's something going on. But, I 
mean, aside from that.
    Mr. Collis.
    Mr. Collis. Well in 2007, we had a lot of discussion with 
them, and we developed our current controlled substance order 
monitoring program and with the understanding that this was 
where they wanted the industry to go to.
    So I would say we do have regular consultation with them. 
We have worked with them on training programs.
    I wouldn't say it's--I would say, like all relationships, 
it can be improved and worked upon.
    Mr. Carter. Right. Right.
    Mr. Collis. But it's not totally without communication and 
collaboration.
    Mr. Carter. Let me ask you this. Obviously, you know the 
difference in a schedule two drug and a schedule three drug. 
The DEA schedules those depending on the tendency for 
addiction.
    When did hydrocodone become a C two drug?
    Mr. Collis. I do not know.
    Mr. Carter. I will tell you. It became a C two drug in 
2014.
    Why did it take so long, do you think, for the DEA to 
reclassify hydrocodone from a C three to a C two drug? Do you 
treat C two drugs differently from C three drugs?
    I know you do, because when I get them from you, or when I 
used to get them from you, I had to sign different documents 
that came in a different box. They came sealed.
    Now, we're talking about all these pills that came here, 
and they weren't sealed, they weren't on a different invoice or 
anything else.
    I'm just wondering, and, again, I wish I could ask the DEA 
this, why did it take so long to reschedule hydrocodone?
    The last thing I will say is this. Mr. Smith, you were 
involved in the situation in West Virginia. And I'm not taking 
up for you guys. You guys have a responsibility, and I believe 
you take that responsibility very seriously. And what I said 
earlier, I believe. I believe that if you had it to do to over 
again, you'd do some things differently.
    Mr. Smith, there was a doctor, a Dr. Katherine Hoover, who 
accounted for 69 percent of all the prescriptions that were 
written during that timeframe in this town in West Virginia. Do 
you know whatever came about with Dr. Hoover? Do you know where 
she is today?
    Mr. Smith. I believe they referred to her earlier, and that 
she's either--oh, I'm sorry.
    Thanks, Steve.
    I believe she was referred to earlier and that there's 
either been disciplinary action taken with her or she's left--
--
    Mr. Carter. She fled to the Bahamas. She bought an island. 
Twenty-one doctors, Dr. Burgess pointed out, 21 doctors in the 
whole Nation.
    Now, when you're sending drugs to a pharmacy, and it's out 
of control, there's one of two things happening. Either that 
pharmacy is out of control and they're selling drugs out the 
back door, or there's a doctor who's out of control in that 
area.
    Has the DEA ever come to you asking you about a particular 
doctor?
    Mr. Collis. Not to the best of my knowledge.
    Mr. Carter. Nobody has.
    Dr. Mastandrea. We have received subpoenas regarding 
physicians.
    Mr. Carter. Good. Thank you. I'm glad to hear that. And I 
hope that we will hear that.
    I'm sorry. I'm out of time. But, again, we all have 
responsibility in this. All of us. There is no one solution to 
the opioid epidemic. All of us. Pharmacists, distributors, 
manufacturers, physicians, all of us have a responsibility.
    And I appreciate your role in that responsibility and you 
accepting that role in that responsibility. This is very 
important. You can help, and I hope that you are committed to 
helping. I believe that you are.
    Thank you, Mr. Chairman, and I yield back.
    Mr. Harper. The gentleman yields back.
    The Chair will now recognize the gentleman from 
Pennsylvania, Mr. Costello, for 5 minutes.
    Mr. Costello. Thank you, Mr. Chairman.
    Mr. Barrett, the committee asked Cardinal Health how it 
assessed whether the 6.5 million opioid pills distributed to 
Family Discount Pharmacy over a 5-year period was an 
appropriate number to send to a town of less than 2,000 people. 
The company's response was that Family Discount in Mount Gay-
Shamrock was a large pharmacy that served the broader Logan 
County, which has a population of 35,000 people.
    When Cardinal investigators reviewed several high-volume 
purchases of controlled substances in 2008, they did not cite 
the county population in their investigation. They instead 
cited the population within a 35-mile radius of the pharmacy as 
2,600 people. I know which figure looks better for the company, 
but why is the company now relying on the county population 
data when it cited a more limited area in its investigation of 
this pharmacy?
    Mr. Barrett. Mr. Congressman, let me start by saying, and I 
have mentioned earlier, if we looked at that pharmacy today and 
those patterns, we would have come to different conclusions. So 
I can only observe what I see in the documents back then.
    I think the pharmacy is--its volumes are not necessarily 
dictated by the size of the community. It's dictated by the 
nature of the customers that it serves: hospitals, clinics, 
surgery centers, regional centers.
    So in some cases, rural centers--excuse me--rural 
pharmacies, which have small populations, search a large area. 
So I think that may have been part of the judgment.
    What is important for me today is looking at it with 
today's eyes. And with today's eyes, I still think we would 
have made a different decision.
    Mr. Costello. Thank you.
    Cardinal also told the committee that when assessing 
pharmacy drug orders it doesn't have the full picture of how 
many pills are being sent to a pharmacy or the surrounding area 
by other distributors. That's because the company does not have 
the ARCOS data collected by the DEA. But this argument that the 
distributor has to see the full picture to recognize issues 
with its own distribution is nevertheless problematic, I think.
    Using ARCOS data, the committee was able to determine how 
many opioids Cardinal alone dispensed to pharmacies in ZIP 
Codes surrounding Family Discount. The company sent over 16 
million hydrocodone and oxycodone pills to that West Virginia 
region between 2006 and 2016. Family Discount received 6.7 
million of those pills and its Stollings location received 
another 1 million.
    Mr. McKinley, I apologize if I pronounced Stollings wrong. 
I think I got it right, but if I did.
    Cardinal could see that 46 percent of its own distribution 
of opiates to the region was going to two related pharmacies.
    Mr. Barrett, can you really tell me that Cardinal needed to 
know what other companies were distributing in order to raise a 
red flag? I understand what you just said about hospitals in 
the region, but I'm trying to dig a little bit deeper here.
    Mr. Barrett. So again, I can only repeat what I've said 
about this. I've seen enough in reviewing this file to say that 
we should have seen patterns earlier. But I think the comment 
that was in our document is generally true about how we do 
assessment of pharmacies, that there are many factors that go 
beyond simply the size of the community.
    Mr. Costello. Right. But you did cut off Family Discount in 
2012. Why is that?
    Mr. Barrett. Again, I think our team had enough data at 
that point in that moment at that time to say we are not 
comfortable with these levels of hydrocodone and oxycodone and 
at that point made a decision to cut off those pharmacies.
    Mr. Costello. But that data did not yield conclusions as to 
other pharmacies at that moment in time? Presumably not if you 
didn't stop.
    Mr. Barrett. I really can't answer that. I'm sorry. I just 
don't know the answer to that, sir.
    Mr. Costello. In addition to knowing what Cardinal itself 
distributes to a pharmacy, the company can also ask a pharmacy 
to produce a drug dispensing report. Is that correct?
    Mr. Barrett. I'm sorry. Could you repeat one more time
    Mr. Costello. In addition to knowing what Cardinal itself 
distributes to a pharmacy, the company can also ask a pharmacy 
to produce a drug dispensing report. Is that correct?
    Mr. Barrett. I think that may occur from time to time, yes.
    Mr. Costello. In the case of Family Discount, Cardinal 
asked for and received drug dispensing reports, an example of 
which can be found on tab 55, tab 55 in the document binder. 
Dispensing reports contain information about all the 
prescriptions and drugs a pharmacy sends out the door, not just 
the drugs that Cardinal supplied. Is that correct?
    Mr. Barrett. I think that's correct, sir.
    Mr. Costello. And for Family Discount, investigators 
requested drug dispensing reports multiple times as they 
reviewed high orders for controlled substances. Isn't that 
right?
    Mr. Barrett. Sir, I believe all this is in the documents. 
But I believe that's correct.
    Mr. Costello. Very good.
    I will yield back the balance of my time.
    Mr. Harper. The Chair will now recognize the gentlewoman 
from Tennessee, Mrs. Blackburn, for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    Thank you all for being here today. We appreciate this.
    And I think probably what you're hearing from us on each 
side of this dais is enough is enough. And you all have faced 
penalties. You have had settlements. You have had memorandums. 
We have covered every bit of that.
    And just as we are doing more at this committee to get our 
arms around this issue, legislation that we are moving forward 
with, we expect you all to do more also.
    And I have spent a lot of my time since I was in the senate 
in Tennessee, the Tennessee State Senate, doing roundtables, 
visiting treatment centers, sitting down with families, law 
enforcement, hearing their stories. And what we know is that 
the opioid crisis is different. The detox, the treatment, the 
recovery is different. And this is going to have to be a 
concerted effort to end this crisis.
    And Senator Portman has CARA 2.0 in the Senate. I have it 
along with Congressman Ryan here in the House. It's totally 
bipartisan. Another billion dollars to go toward addressing 
this crisis. So we do expect you all to work with us on this.
    And I have got kind of a different set of questions I want 
to run through fairly quickly, and this will be a yes or no. 
And I'm going to start with you, Mr. Barrett, straight down the 
list.
    Have any of you personally met with families who have lost 
loved ones or survivors, individuals who are in recovery? Just 
yes or no right down the line.
    Mr. Barrett. Yes, ma'am.
    Dr. Mastandrea. Yes.
    Mr. Hammergren. Yes.
    Mr. Smith. I have not.
    Mrs. Blackburn. You have not?
    Mr. Collis. Yes.
    Mrs. Blackburn. OK. So four of you have.
    Now, let me ask you this. Do you have employees who are in 
treatment or recovery for opioid addiction, and does your 
insurance cover that treatment for these employees? Because 
what I understand is it takes about a year to a year and a half 
for someone to rewire their brain. Yes or no, straight down the 
line.
    Mr. Barrett. I believe our coverage does cover behavioral 
health issues.
    Dr. Mastandrea. Yes, we do have employees who have had 
substance abuse problems, and we do cover substance abuse 
treatment.
    Mr. Hammergren. Sadly, Congresswoman, I've had employees as 
well that are in treatment. And in addition to the insurance, 
we've also got a fund that helps them anytime it's outside of 
the treatment from insurance to cover those costs.
    Mr. Smith. I was generally not told about any health 
conditions of any employees, so I can't speak to that. But I do 
believe that during my tenure that would have been covered.
    Mrs. Blackburn. Yes or no is fine.
    Mr. Collis.
    Mr. Collis. I'm not aware. I do not know.
    Mrs. Blackburn. You do not know.
    Well, let me ask you this. When you started distributing 
the opioids, were you aware of the addictive nature of this 
drug? Yes or no, straight down the line.
    Mr. Barrett. Our company's been distributing opioids----
    Mrs. Blackburn. Yes or no.
    Mr. Barrett [continuing]. For as long as it's been in 
business. I would assume that we know that all drugs have side 
effects.
    Mrs. Blackburn. OK.
    Yes or no.
    Dr. Mastandrea. Yes.
    Mrs. Blackburn. You were.
    Dr. Mastandrea. We know the requirements of the DEA 
schedules.
    Mrs. Blackburn. OK.
    Mr. Smith.
    Mr. Smith. We know there's a tradeoff with every drug.
    Mrs. Blackburn. OK. All right.
    Mr. Collis. It's done in a pure clinical decision.
    Mrs. Blackburn. All right.
    OK. We've talked a little bit about your algorithms and the 
way you've changed your protocols, moving to more of an 
evidence-based database, a platform less subjective. And we 
hope that that helps with the distribution.
    I want to know from each of you, how many pharmacies have 
you removed from your distribution list?
    Straight down the line. You can say--give me the number or 
``I don't know.'' And then you'll submit it for the record.
    Mr. Collis. We have 800.
    Mrs. Blackburn. I'll get to you in a minute.
    Mr. Barrett.
    Mr. Barrett. We have cut off or refused to do business with 
a thousand or more.
    Mrs. Blackburn. A thousand.
    You don't know? Please submit for the record.
    Mr. Hammergren. Hundreds.
    Mrs. Blackburn. Hundreds? I'd like an exact, please.
    Mr. Smith. What time period are you asking for?
    Mrs. Blackburn. Well, through the history of your company. 
How many of----
    Mr. Smith. I wouldn't be able to give an exact number, but 
hundreds.
    Mrs. Blackburn. OK, find a number and let us know.
    Mr. Collis. We have a robust list that we have 800 
pharmacies.
    Mrs. Blackburn. I would to know--800. That you've cut off 
or that you distribute to?
    Mr. Collis. That we do not ship to.
    Mrs. Blackburn. Eight hundred. OK. That is wonderful.
    And how often does your algorithm flag a--and you all can 
submit this, because I'm out of time and there are others who 
want questions.
    I want to know, how often does your system flag a bad 
pharmacy? And then what is your threshold? You have mentioned 
thresholds several times, but you have not given a specific as 
to what that threshold is that kicks a pharmacy out. And if 
each of you will submit that in writing, I'd appreciate it.
    Thank you. I yield back.
    Mr. Harper. The Chair will now recognize the gentleman from 
New Jersey, Mr. Lance, for 5 minutes.
    Mr. Lance. Thank you very much, Mr. Chairman.
    Dr. Mastandrea, Miami-Luken noted that in June of 2015, 
following a review of Westside Pharmacy's dispensing data, the 
company identified concerns with two of the pharmacy's top 
prescribing physicians of oxycodone, Dr. David Morgan and Dr. 
Sanjay Mehta. The company has said that you expressed your 
concerns to the pharmacy's owner who assured you the pharmacy 
would no longer fill their prescriptions effective June 30 of 
2015.
    However, as I understand it, in October of that year, 
Miami-Luken learned that Drs. Morgan and Mehta continued to be 
among the pharmacy's top prescribing physicians.
    When Miami-Luken learned that Westside pharmacy had not 
been truthful by continuing to fill prescriptions written by 
these doctors, did you drop the pharmacy as a customer?
    Dr. Mastandrea. We probably dropped that customer within 30 
days of finding out that she was not cooperating with us.
    Mr. Lance. On November 4, 2015, your director of compliance 
performed a site evaluation at Westside Pharmacy. You will find 
this evaluation in the binder at tab 33. Shouldn't your site 
investigators have investigated the pharmacy's falsehoods 
instead of ignoring them?
    Dr. Mastandrea. I'm sorry. The question was shouldn't the 
investigators have done what?
    Mr. Lance. Shouldn't your site investigators have 
investigated the pharmacy's falsehoods instead of apparently 
ignoring them?
    Dr. Mastandrea. I think that they should have investigated 
the pharmacy in totality.
    Mr. Lance. After you knew the pharmacy wasn't telling you 
the truth by continuing to fill prescriptions written by Drs. 
Morgan and Mehta, did Miami-Luken agree to increase Westside 
Pharmacy's oxycodone threshold in November 2015?
    Dr. Mastandrea. I am not aware of that.
    Mr. Lance. I request that you review the situation and give 
the committee an answer, yes or no. Not being aware of that is 
not sufficient, and please report back to the committee with 
the answer.
    Dr. Mastandrea. My counsel will do so.
    Mr. Lance. Thank you.
    Given that the DEA cited Miami-Luken's relationship with 
Westside Pharmacy in its order to show cause, doesn't that 
raise a question in your mind about your company's due diligent 
efforts with respect to this pharmacy?
    Dr. Mastandrea. Congressman, we were in the process of 
vetting that particular customer at the time we received the 
order to show cause. We had already terminated--I believe there 
were 13 different customers that were on the order to show 
cause and we terminated, prior to receiving the order to show 
cause, all of them with the exception of Westside Pharmacy, 
which we were in the process of vetting at the time. When we 
found that they were on the order to show cause, enough was 
enough, and we terminated the relationship.
    Mr. Lance. It's my belief that the relationship was 
terminated at a point well beyond when it should have been 
terminated.
    I realize that monitoring for and reporting suspicious 
records is often complicated. Therefore, I take this 
opportunity to discuss a proposal that may enable distributors 
and the DEA to use the data that is available to them in a more 
effective way. And this is for the entire panel.
    Technology today that didn't exist when ARCOS was put into 
place is able to deliver information that would allow the DEA 
to stop a suspicious order before it is filled. I, along with 
colleagues in the Senate, I am working on a proposal that would 
create a new data platform for the DEA to utilize moving 
forward so that this situation is ameliorated to the greatest 
extent possible.
    To the entire panel, will you commit to working with me and 
other Members of Congress--and this will be completely 
bipartisan, I assure you--to create a system that can 
effectively ensure that we are ready to police suspicious 
orders in a way that is truly effective? And as Congresswoman 
Blackburn suggested, going down the line.
    Gentlemen.
    Mr. Barrett. I would support any technology that would help 
us do this job better, yes.
    Dr. Mastandrea. Yes.
    Mr. Hammergren. I look forward to working with you.
    Mr. Smith. I am no longer employed in the industry, but I 
wish you the best of luck.
    Mr. Lance. Yes, we will need more than luck.
    Mr. Collis. Yes. Absolutely.
    Mr. Lance. Thank you.
    I yield back the balance of my time, Mr. Chairman.
    Mr. Harper. The gentleman yields back.
    And I would like to clarify for the record that Miami-Luken 
did increase the threshold, as Mr. Lance described. The Chair 
will now--and also would like to put into the record a letter 
so signifying.
    Without objection.\1\
---------------------------------------------------------------------------
    \1\ The letter appears in the document binder, which has been 
retained in committee files and also is available at  https://
docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=108260.
---------------------------------------------------------------------------
    Mr. Harper. Now the Chair will recognize the gentleman from 
West Virginia, Mr. McKinley, for 5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman. And thank you, 
because I'm not a member of this committee, for the opportunity 
to address the panel and carry on.
    I'm from West Virginia we've been hearing about all day 
today. The fury inside me right now is bubbling over with how 
we're going to address this problem. And for several of you to 
say you had no role whatsoever in this, I find it particularly 
offensive when we've had over 900 people a year dying in West 
Virginia because of lack of attention on your algorithm and 
your operation. And deflecting responsibility saying, ``I just 
had to fill the order,'' no, you had a role. You had a role.
    So let me just--Mr. Hammergren, if I could focus on you. 
You said you have notified the DEA of suspicious activity--
suspicious orders. But between years 2001 and 2014, did any of 
those suspicious orders involve West Virginia?
    Mr. Hammergren. I can't be certain, Congressman. We've 
reported between 2000--in that period of time, around a million 
orders to the DEA as suspicious.
    Mr. McKinley. Well, I just want to, for all of you, between 
2001 and 2014, none of you were complying with State law. State 
law says if there is a suspicious order that you file with the 
DEA, you're supposed to send a copy of that order to the West 
Virginia Board of Pharmacy, and none of you have done it 
between those time periods. Not only a suspicious order, but at 
the end of every month, you're supposed to file a report that 
says, during the past month, they give you 15 to the end of--
after 15 days, you're supposed to file a report with the Board 
of West Virginia Pharmacy saying no suspicious orders took 
place in West Virginia.
    But you didn't do it. And that was some of the heart. That 
was the genesis. That's when this disease really took hold in 
West Virginia. And you weren't complying. But yet you said the 
same thing. You said: We're not responsible.
    I think you very much were responsible.
    So, Mr. Hammergren, again, do you agree that a person like 
Dr. Hoover should be held accountable for her actions and 
perhaps pay more than a fine for her actions?
    Mr. Hammergren. Congressman, I don't know Dr. Hoover, and I 
don't know the situation of her case.
    Mr. McKinley. Do you just think in general doctors that 
spread this poison, writing 40,000, 50,000, 100,000 of 
prescriptions on opioids, should pay a penalty?
    Mr. Hammergren. Absolutely, Congressman.
    Mr. McKinley. OK. What about pharmacies, pharmacies that 
are following that order? The one that we have in particular, 
Sav-Rite pharmacy. Should that pharmacy, should that pharmacist 
be held accountable for what he's done?
    Mr. Hammergren. In fact, I think that pharmacy was closed, 
per some earlier----
    Mr. McKinley. What about--no, no. It may have been closed. 
He may have lost his job. But what about him or her who filled 
the order? Should she have been held accountable?
    Mr. Hammergren. I don't know the specifics. I can't comment 
on it.
    Mr. McKinley. OK. I'm coming back. I'm setting this up. I 
want to know whether you all should be held accountable. 
Because if the doctors and the pharmacies are being held 
accountable, I sure as the dickens would think you all have a 
role in this thing, too.
    So if I could, I want to go back again, Mr. Hammergren, to 
you. Let me try again with another. Do you regret any role that 
your company has played in this crisis?
    Mr. Hammergren. Congressman, I don't know how you could 
look at this crisis and not feel terrible about what's going on 
in this country. And I certainly believe in situations like the 
Sav-Rite pharmacy and----
    Mr. McKinley. So you do regret----
    Mr. Hammergren. I feel terrible about this----
    Mr. McKinley [continuing]. That what McKesson did in 
participating in this scourge that's ravaged this country, you 
regret it?
    Mr. Hammergren. I feel terrible about this crisis.
    Mr. McKinley. So what's the proper accountability? What's 
the punishment? It's just a slap on the wrist of maybe 100th of 
1 percent of the revenue? What's the accountability, what's the 
punishment that fits this crime when 900 people in West 
Virginia lose their life or 115 people lose their lives across 
this country? Just a slap on the wrist? A financial penalty? Or 
should there be time spent for participating in this?
    So I just want you to feel shame about your roles, 
respectively, in all of this, how we're going to get through 
this.
    So apparently I have run out of time, but--let me just 
leave it at that. I am so frustrated for the people in West 
Virginia and across this country that you all have not played 
and stepped up, took more responsibility for this.
    I yield back my time.
    Mr. Harper. The Chair now recognizes the gentleman from 
Ohio, Mr. Johnson, for 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman.
    And, gentlemen, thank you for being here today.
    I have listened with interest to today's testimony and the 
questions that you have responded to. It's a very tough 
subject. Eastern and southeastern Ohio sits at the epicenter of 
the opioid epidemic. I hear about it every day that I'm out and 
about in my district.
    And I don't know if you've heard this yet today, but I'm 
glad you folks are at the table. And part of my questioning is 
going to be, where do we go from here? What are the solutions 
to this problem that you folks have been looking at and maybe 
some things that you're looking at down the road?
    Let me start out with Dr. Mastandrea. Do I have that 
pronounced right? And I apologize
    Dr. Mastandrea. Yes, sir.
    Mr. Johnson. OK.
    As I mentioned, I represent eastern and southeastern Ohio. 
It includes the town of Wheelersburg in Scioto County. In 2008 
Scioto County had an overdose death rate of more than 27 times 
the national average.
    For several years, 2005 through 2011, Dr. Margy Temponeras 
owned and operated the Unique Pain Management Clinic there in 
Wheelersburg. This clinic was a pill mill. Temponeras saw more 
than 20 patients per day who paid cash, starting at $200 for 
each appointment, and received monthly prescriptions for 
similar combinations of medications such as 120 to 150 pills of 
oxycodone and 90 pills of Xanax.
    In April of 2017, Dr. Temponeras pleaded guilty in U.S. 
District Court to conspiracy to distribute a controlled 
substance, which she did through a pain clinic and dispensary.
    Between November 2008 and August 2010, Miami-Luken supplied 
the Unique Pain Management Clinic with controlled substances, 
including oxycodone.
    So my first question. According to the DEA, December of 
2008 was the first full month that Miami-Luken began shipping 
to Dr. Temponeras. In that month's shipment, 97 percent of the 
total dosage units were controlled substances and 84 percent of 
the controlled substances ordered, totaling 71,100 dosage 
units, were oxycodone.
    Do those numbers seem unusually high to you?
    Dr. Mastandrea. Congressman, I find it to be unusual that 
we would sell directly to a physician. I find it unusual that 
she would be a dispensing physician. By doing that, she 
bypassed all of the checks and balances that were in place.
    Mr. Johnson. OK. But I'm not talking about what she did. 
I'm talking about what you guys did. Did those numbers----
    Dr. Mastandrea. That's right. And what we should not have 
done, we never should have supplied to a dispensing physician.
    Mr. Johnson. All right. Given that, should those orders be 
investigated, do you think?
    Dr. Mastandrea. Those orders should have never been 
shipped.
    Mr. Johnson. But should they be investigated?
    Dr. Mastandrea. How so?
    Mr. Johnson. Well, I think, if my facts are correct, Miami-
Luken claims to have investigated Dr. Temponeras and the 
clinic. You, yourself, stated that in November 2008 one of the 
company's salesmen conducted an inspection. However, according 
to the DEA, that inspection was cursory at best and it failed 
to take into account the area's prescription drug problem.
    Then, in 2009, Miami-Luken CEO Tony Rattini and compliance 
manager Jim Barclay showed up to investigate on a day when the 
facility was closed and never returned to visit when it was 
open.
    So I guess my question to you is, looking back in 
retrospect, are those instances, in your opinion, adequate due 
diligence? I mean, you express outrage now that it never should 
have happened. But was due diligence supplied, do you think, 
when the opportunity presented itself?
    Dr. Mastandrea. Due diligence was attempted in that 
particular situation.
    Mr. Johnson. When they showed up and didn't show back up, 
the alarm bells didn't go off?
    Dr. Mastandrea. I said it was attempted.
    Mr. Johnson. OK. All right.
    My time has expired. But I do appreciate you folks being 
here. And I know that--I know there's a lot of emotion around 
this issue. There certainly is in my district. And I want to 
thank you for any work that you are doing and continue to do to 
help us get a handle on this, 115 people dying per day. We need 
your engagement at your level to get this problem resolved.
    Mr. Chair, I yield back.
    Mr. Harper. The Chair now recognizes the gentleman from 
Florida, Mr. Bilirakis, for 5 minutes.
    Mr. Bilirakis. Thank you, Mr. Chairman.
    And I appreciate you all being here. This is something we 
need to focus on. It's an epidemic, and we need your 
engagement, as my colleagues said.
    So I'm glad to hear that the drug distributors acted in 
recent years to reform the policies and tighten controls on the 
distribution of opioid pain pains. But I'm surprised to hear, 
why did it take so long?
    And Florida was awash in pain-- I represent the State of 
Florida, the Tampa Bay area, as you know, and the Tampa Bay 
area, in particular, but the whole State of Florida was awash 
in pain pills back in 2010. And it's taken significant efforts 
by law enforcement and Florida lawmakers, the local lawmakers, 
to battle the prescription drug epidemic in recent years.
    On the part of the distributors, I'm concerned that you may 
not be on the same page. For instance, Mr. Barrett, Cardinal 
was the subject of a DEA administration action in Florida 
several times over the years. The DEA took enforcement action 
against Cardinal's Lakeland, Florida, distribution center in 
2007 for failure to maintain effective controls against the 
diversion of hydrocodone and again for similar allegations 
involving oxycodone in 2012.
    In court documents involving the 2012 action, the company 
made an interesting point. Cardinal said between 2009 and 2012 
it stopped distributing controlled substances to 149 Florida 
pharmacies. But the company noted that 113 of those Florida 
pharmacies still had DEA registrations as of 2012. That means 
even though Cardinal had cut off pharmacies it suspected of 
drug diversion, other drug distributors were still doing 
business with them.
    I understand the committee's investigation turned up 
numerous examples in West Virginia of one distributor dropping 
a pharmacy due to diversion concerns only for another 
distributor to immediately start doing business with the 
pharmacy. I mean, that's very concerning again.
    So for all the witnesses, starting over here, I'd like all 
your companies to address two questions, please.
    First, when your company is considering bringing on a new 
pharmacy as a customer, do you verify whether that particular 
pharmacy was cut off from another distributor for suspected 
diversion?
    Please begin.
    Mr. Barrett. Congressman, I don't think we can know for 
sure. Actually, we don't have access to that information that 
another company has necessarily cut off a pharmacy. We may, but 
there's nothing in the mechanics of the regulatory process that 
makes that happen.
    Mr. Bilirakis. All right. Next, please.
    Dr. Mastandrea. We ask them whether or not--why they are 
coming to us and whether or not they were with another 
distributor and why they left that distributor.
    Mr. Bilirakis. And you take their word for it?
    Dr. Mastandrea. We do as much due diligence investigation 
as we possibly can, but it's, unfortunately, a trade.
    Mr. Bilirakis. Next, please.
    Mr. Hammergren. It's difficult for us to get accurate 
information on that.
    Mr. Bilirakis. Next, please.
    Mr. Smith. In my experience at H.D. Smith, that was 
something that we sought from the customer, an explanation, if 
they were leaving another wholesaler. But, no, we didn't talk 
to the other wholesaler about it.
    Mr. Bilirakis. Next.
    Mr. Collis. I agree with the previous comments. That 
information would be very helpful, Congressman.
    Mr. Bilirakis. OK. Next question. And second, what 
safeguards do you have in place to ensure your company is not 
bringing on a bad actor as a customer after they were dropped 
by one of your competitors?
    Let's start again from you.
    Mr. Barrett. So, Congressman, given the observation I made 
earlier, which is you don't know for certain, we try to take, 
in this know-your-customer program of ours, any information 
that will help us dictate the nature of that pharmacy, who it 
serves, what its customers are, and whether or not there are 
any red flags.
    Mr. Bilirakis. So what safeguards do you have?
    Mr. Barrett. I'm sorry?
    Mr. Bilirakis. What safeguards do you have in place, any 
particular safeguards? Name a few safeguards.
    Mr. Barrett. Well, as I mentioned today, we have either not 
taken on or shut off a thousand pharmacies over these last 7 or 
8 years. So we literally put in place----
    Mr. Bilirakis. What kind of process?
    Mr. Barrett. If they won't qualify, they don't get products 
from us.
    Mr. Bilirakis. Do you have any kind of a process that you 
go through?
    Mr. Barrett. Yes, a very rigorous process, sir.
    Mr. Bilirakis. All right. Go next, because I don't have a 
lot of time. Next, sir, please.
    Dr. Mastandrea. We ask for drug utilization reviews from 
every new customer.
    Mr. Bilirakis. All right. Next, please.
    Mr. Hammergren. We certainly--first, we'll check with the 
regulatory agencies, the DEA and the State boards of pharmacy, 
make sure the licensing is all done. That would be a baseline 
check.
    So certainly if there was a problem that was reported to 
the DEA and the DEA reported it to us, or a State pharmacy 
board, that would be the end of the decision relative to that 
pharmacy.
    Mr. Bilirakis. Do you do that as well, sir?
    Mr. Smith. We had a due diligence process that included all 
the elements I think that you've heard from the other 
wholesalers.
    Mr. Bilirakis. OK. Yes, please.
    Mr. Collis. If we did bring on a new customer, we would 
have extensive monitoring requirements and look at--in our 
suspicious order program, we'd be looking at what is the 
content of the orders that we receive from that pharmacy.
    Mr. Bilirakis. Would you also--for the first two--would you 
also check with the regulatory agencies as well.
    Mr. Barrett. Yes. We can't onboard a pharmacy without the 
proper authorization from the regulatory agencies.
    Mr. Bilirakis. That's a common practice for you as well?
    Mr. Barrett. It's a standard practice.
    Mr. Bilirakis. OK. Standard practice.
    OK. Thank you very much. I appreciate it.
    I yield back, Mr. Chairman.
    Mr. Harper. The gentleman yields back.
    Certainly, I think each of you recognize and would agree 
that the distributors are the first line of defense against 
diversion of opioids.
    And I know we've spent a lot of time on West Virginia. Is 
it been on the front line of the opioid epidemic. That's why we 
use apportions of the State as a case study in this 
investigation. But it leads us to wonder are there other hot 
spots across the country that there are problems that maybe we 
haven't really seen enough of that information yet.
    So given what you've heard today, will each of you commit 
to look for communities across the country where the volume of 
opioids that your company distributed appear far in excess of 
what the community can sustain?
    Mr. Barrett. Sir, we will and we do.
    Dr. Mastandrea. Absolutely.
    Mr. Hammergren. Absolutely.
    Mr. Smith. I'm not in a position to do that.
    Mr. Collis. We will. And, unfortunately, you know, opioids 
seem to thrive in communities where there often is, you know, 
hardship. And so we feel particularly concerned about that.
    Mr. Harper. I want to thank each of you for taking your 
valuable time to help us on this very important matter. I know 
everyone recognizes the seriousness of this. We're going to 
have to look at every aspect of what goes on. But we do 
appreciate the time.
    I want to remind Members that they have 10 business days to 
submit questions for the record. And I ask that the witnesses 
agree to respond promptly to those questions.
    Mr. Harper. With that, the subcommittee is adjourned.
    [Whereupon, at 12:50 p.m., the subcommittee was adjourned.]
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