laurence doud III

Former CEO of Rochester Drug Co-operative Laurence Doud III was indicted on federal charges on Tuesday his alleged role in fueling in America's devastating opioid crisis
The former CEO of a drugs company has turned himself in to authorities after he was charged for his role in fueling America's devastating opioid epidemic.

Laurence Doud III was indicted on federal charges on Tuesday following an investigation into lax distribution of controlled substances by Rochester Drug Co-operative.

The 75-year-old became the first pharma CEO in the U.S. to face prosecution for allegedly ignoring red flags while his company delivered massive hauls of powerful painkillers to pharmacies across the country.

Doud was handcuffed before he appeared in Manhattan federal court on Tuesday.

He is now awaiting arraignment on two counts of criminal conspiracy related to drug trafficking.

If convicted, he faces a mandatory minimum sentence of 10 years in prison.

The indictment states: 'Under the direction of Doud, RDC supplied tens of millions of oxycodone, fentanyl, and other dangerous opioids to pharmacy customers that its own compliance personnel determined, and reported to Doud, was dispensing these drugs to individuals who had no legitimate medical need for them.'

The Justice Department said this helped Rochester more than quadruple sales of controlled substances from 2012 to 2016, with its former chief executive earning 'millions of dollars' in compensation as a result.

His lawyer, Derrelle Janey, said Doud 'is not the culprit here. We intend to fully defend against these charges.'

The 75-year-old, who retired in 2017, alleged in a lawsuit last year that Rochester Drug Co-Operative tried using him as a scapegoat for its legal and regulatory troubles.

The charges against Doud and RDC's former chief of compliance William Pietruszewski were confirmed by Geoffrey S Berman, United States Attorney for the Southern District of New York, at a press conference Tuesday afternoon.

'This prosecution is the first of its kind: executives of a pharmaceutical distributor and the distributor itself have been charged with drug trafficking, trafficking the same drugs that are fueling the opioid epidemic that is ravaging this country,' Berman's office said in a statement.

'Our Office will do everything in its power to combat this epidemic, from street-level dealers to the executives who illegally distribute drugs from their boardrooms.

The case marks an escalated effort to curtail the growing opioid crisis, which claims the lives of 115 Americans each day.

RDC agreed to pay a $20million penalty and entered a deferred prosecution agreement.

The agreement will allow RDC to keep operating, subject to three years of independent compliance monitoring, and avoid prosecution if it complies with the terms.

RDC spokesman Jeff Eller said in a statement: 'We made mistakes. RDC understands that these mistakes, directed by former management, have serious consequences.

'One element of the opioid epidemic is a dramatic increase in the volume of prescriptions for opioids and all narcotics. With that dramatic volume increase came an increase in our business, resulting in an increase in orders we should have identified as suspicious order, which we failed to report to DEA.'

The Department of Justice alleges that Rochester ignored its legal obligation to detect and report suspicious orders by pharmacy customers, and from May 2012 to November 2016 reported just four out of more than 2,000 such orders to the Drug Enforcement Administration.

The company's chief operating officer allegedly told investigators that there was no program in place to notify the DEA of suspicious orders and that RDC's suspicious order reporting system was 'broken', according to a complaint.

'RDC's top management, including its former Chief Executive Officer, instilled a culture of non-compliance at the company and prioritized attracting business, catering to existing customers, and making money above all else,' the complaint said.

Doud allegedly encouraged his sales force to sign up new customers with no questions asked, picking up competitors' rejects as he boasted that his company was 'the knight in shining armor' for independent pharmacies, the indictment said.

When Rochester's largest customer went from buying 70,000 units of oxycodone per month in October 2012 to more than 200,000 units per month a year later, Doud had its back - overruling his own compliance officers and ordering that the pills keep flowing because it was a 'big account', the indictment said.

Rochester is privately-held, and competes with drug distributors including publicly-traded AmerisourceBergen Corp, Cardinal Health Inc and McKesson Corp.

Opioids, including prescription painkillers and heroin, played a role in a record 47,600 US deaths in 2017, according to the Centers for Disease Control and Prevention.

Hundreds of lawsuits by state and local governments accuse drugmakers such as Purdue Pharma of deceptively marketing opioids, and distributors such as AmerisourceBergen Corp, Cardinal Health Inc and McKesson Corp of ignoring that they were being diverted for improper uses.

These defendants, as well as RDC, were among those named last month in a lawsuit by New York Attorney General Letitia James alleging widespread fraud.