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U.S. Regulatory Probe on Illicit Prescription Drug Distribution Targeting FedEx and UPS

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As I pen this posting, the weekend is approaching is there is lots of breaking news concerning industry supply chains.

Probably the biggest bombshell was that The Wall Street Journal reported today (paid subscription or free metered view) that both FedEx and UPS have been targeted by the U.S. Drug Enforcement Agency (DEA) in that agency’s continued crackdown on illegal prescription drug sales.  The WSJ report indicates that according to company disclosures, each has have been served with subpoenas starting as long as four years ago, and the latest probe is reaching a head.  The WSJ quotes Fed-Ex’s in-house legal counsel as indicating that that company could soon face criminal charges related to this latest probe. A spokesperson for FedEx is further quoted as indicating that the ongoing investigation has become “absurd and deeply disturbing” and that the government wanted to “deputize” FedEx personnel to report on suspected illegal shipments. UPS on the other hand, seems to be in talks about settling the case with the U.S. Justice Department.

Our Supply Chain Matters readers might recall that in our 2012 Predictions issued almost a year ago, we predicted stepped-up efforts in 2012 to mitigate supply chain unscrupulous activities. Many industries would be impacted not the least of which was the pharmaceutical industry which was already reeling from a number of significant supply chain related supply and enforcement issues. Throughout 2012, U.S. regulatory and legal authorities have been, as the WSJ rightfully describes, moving up the prescription drug supply chain in its current enforcement crack-down efforts concerning the flow and distribution of illicit prescription drugs.  Administrative cases were pursued with retail drug chain CVS and Walgreens, each targeted for suspected large volumes of potential illegal prescription drug sales in Florida. The DEA took the unusual step of targeting the supplier to these pharmacies, Cardinal Health Inc., the second largest U.S. wholesale pharmaceutical distributor, by seeking to block distribution of controlled substances from Cardinal’s distribution facility located in Lakeland Florida. The DEA alleged that Cardinal has failed to follow agreed-to procedures to monitor misuse of controlled substances such as oxycodone. Cardinal has since agreed to a settlement.

More developments concerning legal proceedings involving the two largest global shipment carriers will most likely come to the attention of business media in the days to come.  The timing is not exactly deal, given the height of the holiday buying and shipping period.

In any case, one thing is certain, the U.S. Justice Department is serious about cracking down on either the knowledge and/or aiding of the sale and distribution of illegal prescription drugs, and the enforcement path involves multiple members of the overall supply chain.

Bob Ferrari

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