The largest drug retailer in the US has hit back at its board members. Chairman James Skinner and CEO Gregory Wasson have been sued by shareholders who blame them for exercising poor corporate oversight regarding the distribution of prescription painkillers like Oxycodone
The mishap resulted in the Drug Enforcement Agency (DEA) levying a fine against Walgreens for $80m. Shareholders believe that the board of directors knowingly breached drug regulations by encouraging the sale of prescription painkillers, which in turn forced the DEA to take out an investigation into Walgreens and the subsequent fine.
The investors who filed the complaint, which consist of a number of small pension funds did so because they are worried the fine will damage the company’s share price. They estimate a four to six percent hit in the third quarter of this year.
“Walgreens admitted, among other things, that it had not upheld its obligations as a DEA registrant, which requires the company to report suspicious orders of prescription painkillers like oxycodone,” according to the complaint.
Walgreens’ top six stores, which are all located in Florida – a state historically known as the American centre of illegal prescription drug sales – were found to be purchasing more than 1.6m dosage purchases of Oxycodone, one of the strongest available painkillers on the market. This is more than 20 times the average amount acquired by other US pharmacies.
“A majority of the board was aware of these improper sales of prescription painkillers since at least 2010 and appears to have either condoned the practices or done nothing to prevent them,” investors told Bloomberg Businessweek.
Kermit Crawford, the president of the pharmacy, health and wellness division for Walgreens, which is headquartered in Deerfield, Illinois explained in a statement “we have worked closely with DEA over the past several months to reach this agreement, which concludes the DEA’s review of out operations.”
The prescription drug epidemic in America continues to be a source of concern, with prescription drug overdoses rising year on year. The Centre for Disease Control and Prevention (CDC) reported that in 2010 that around 12m Americans (age 12 or older) had reported nonmedical use of prescription painkillers in the past year. Drug overdose death rates in the US have more than tripled since 1990. Nonmedical use of prescription painkillers like Oxycodone cost health insurers around $72.5bn annually in direct health care costs.