Pikeville Medical Center to Pay $4.39 Million to Resolve Alleged Controlled Substance Act Violations That Allowed Drug Diversion

LEXINGTON, Ky. — The United States Attorney’s Office for the Eastern District of Kentucky announced that Pikeville Medical Center (“PMC”) has agreed to pay the United States $4,394,600 in civil penalties, to resolve allegations that its violations of the Controlled Substances Act’s (“CSA”) recordkeeping provisions resulted in significant diversion of dangerous opioids from its pharmacy.  The settlement is one of the nation’s largest relating to CSA recordkeeping violations involving allegations of drug diversion at a hospital. The settlement is the third-largest civil penalty ever obtained from a hospital system under the CSA.

As a registrant with the U.S. Drug Enforcement Administration (“DEA”), PMC had certain recordkeeping obligations, which included maintaining complete and accurate records of each controlled substance received, dispensed, and disposed.  DEA has the authority to inspect the records of registrants like PMC, to verify that their records are complete, accurate, and in compliance with the CSA.

In settlement documents, the Government contends that over a two-year period, PMC violated multiple provisions of the CSA relating to recordkeeping, including by failing to maintain complete and accurate inventories and dispensing records for Schedule II controlled substances.  The Government alleges that as a result of these failures, a PMC pharmacy technician was able to divert more than 60,000 dosage units of oxycodone, hydrocodone, and methadone from PMC’s narcotics vault and Pyxis MedStations, from January 1, 2016, through September 7, 2018.  The controlled substances diverted from PMC ultimately were distributed by the pharmacy technician’s husband to the community.  Both the PMC pharmacy technician and her husband have pled guilty to violating 21 U.S.C. § 846, conspiracy to distribute Schedule II controlled substances, in the matter of United States v. Perry et al., 7:20-cr-12. 

“As the opioid crisis continues to plague communities in Kentucky, hospitals like PMC have a responsibility and critical role to play.  They must ensure that controlled substances are carefully tracked and protected against theft and loss, so that these drugs are not diverted for illegal uses,” said Carlton S. Shier, IV, United States Attorney for the Eastern District of Kentucky.  “My office will continue to seek appropriate civil penalties from healthcare providers who are careless with their recordkeeping and fail to provide effective safeguards against drug diversion.”

“All DEA registrants, to include hospitals and healthcare providers, are obligated to adhere to the strict record-keeping requirements outlined in the Controlled Substances Act; failure to do so often leads to the diversion of controlled substances,” said Special Agent in Charge Todd Scott, head of the Drug Enforcement Administration’s Louisville Division.  “The size of this fine shows how serious this situation is.  Hopefully, Pikeville Medical Center will do a better job in the future with their record keeping and the resulting harm inflicted on the community can be reversed.”

As part of the settlement, PMC has entered into a three-year Memorandum of Agreement with DEA, which prescribes the hospital’s drug-handling responsibilities going forward. These steps include: 

  • Permitting DEA personnel to enter its registered location at any time during regular business hours without an administrative inspection warrant, and without prior notification to PMC, to verify compliance with the Memorandum of Agreement;
  • Conducting an inventory of select controlled substances every six months and providing the results to DEA;
  • Investigating and documenting any concerns about diversion, employee theft, or significant loss of controlled substances;
  • Reporting suspicious controlled substance incidents to DEA on a quarterly basis; and
  • Providing mandatory training on federal laws and regulations pertaining to controlled substances for all employees and contract personnel who have access to controlled substances.

PMC cooperated with the DEA’s investigation and self-reported the diversion.  As recognized in the Memorandum of Agreement, PMC took substantial steps to address its deficiencies in its handling of controlled substances before the settlement was entered.

A main objective of the CSA is controlling illegitimate traffic in controlled substances.  To prevent the diversion of controlled substances, the CSA regulates persons and entities that manufacture, distribute, and dispense controlled substances.  The Government’s investigation and resolution of this matter illustrates its continued emphasis on combating the prescription opioid crisis by ensuring that opioids are not diverted.  Anyone with concerns about prescription drug diversion can report them to the DEA, by submitting a tip at https://www.dea.gov/submit-tip.

The case was investigated by the Drug Enforcement Administration’s London Resident Office Diversion Group, with assistance from the Kentucky Board of Pharmacy, and handled by the U.S. Attorney’s Office’s Affirmative Civil Enforcement section, including Assistant U.S. Attorneys Meghan Stubblebine and Mary Melton.  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Via DOJ press release.