A Medical Device Daily

Cardinal Health (Dublin, Ohio) one of the nation's largest distributors of pharmaceuticals, has agreed to settle allegations that it violated federal reporting provisions relating to its handling of certain controlled substances regulated by the DEA.

Under the agreement between the company and seven U.S. Attorney's offices, Cardinal Health agreed to pay $34 million in civil penalties for alleged violations of its obligations under the Controlled Substances Act.

Cardinal Health, which operates 27 DEA-registered distribution facilities, failed to report to DEA suspicious orders of hydrocodone that it then distributed to pharmacies that filled illegitimate prescriptions originating from rogue Internet pharmacy web sites. These prescriptions violated applicable federal and state law because they were not issued for a legitimate medical purpose by physicians acting within the usual course of professional practice.

Cardinal's conduct allowed the "diversion" of millions of dosage units of hydrocodone from legitimate to non-legitimate channels, the government said. DEA regulations require all manufacturers and distributors to report suspicious orders of controlled substances and, more specifically, to "design and operate a system to disclose to the registrant suspicious orders of controlled substances." Registrants are required to inform DEA of suspicious orders upon discovery.

"Despite DEA's repeated attempts to educate Cardinal Health on diversion awareness and prevention, Cardinal engaged in a pattern of failing to report blatantly suspicious orders for controlled substances filled by its distribution facilities located throughout the United States," said DEA Acting Administrator Michele Leonhart. "Cardinal's negligent conduct contributed to our nation's serious pharmaceutical abuse problem."

She added, "This substantial civil penalty underscores DEA's determination to prevent pharmaceutical diversion and protect the public health and safety by continuing to hold companies responsible if they fail to fulfill their obligations under the Controlled Substance Act."

Seven Cardinal Health distribution centers received and filled thousands of suspicious orders placed by pharmacies participating in illicit Internet schemes, but failed to report the orders to DEA. They did so even after an Aug. 22, 2005, meeting at which DEA officials met with and warned Cardinal officials about excessive sales of their products to pharmacies filling illegal online prescriptions.

The pharmacies filled purported online "prescriptions" for hydrocodone (contained in drugs such as Vicodin), but the prescriptions were issued outside the normal course of professional practice and not for a legitimate medical purpose. The U.S. attorneys allege that the orders that Cardinal received from these pharmacies, and others, were unusually large, unusually frequent and/or deviated substantially from the normal pattern.

"The abuse of prescription medications is a significant and growing problem, and there is a widespread misconception that abuse of these substances is somehow safer than the abuse of illegal drugs such as cocaine, meth and heroin," said Associate Deputy Attorney General Stuart Nash. "Today's settlement makes clear that the Department of Justice is committed to doing its part to curtail illegal access to these dangerous drugs."

This case was investigated by the DEA and handled by attorneys from DEA's Office of Chief Counsel and trial attorneys from the following U.S. Attorneys' offices: Middle District of Florida, Southern District of Texas, Western District of Washington, District of New Jersey, Northern District of Georgia, Central District of California and District of Colorado. Additional assistance was provided by the Criminal Division's Narcotics and Dangerous Drug Section.

In other legalities, the U.S. District Court for the District of Colorado awarded $4.38 million in attorney fees, costs and expenses to BrainLAB (Munich, Germany) for a patent infringement lawsuit brought by Medtronic (Minneapolis).

The court ruled that BrainLAB was entitled to recover the amount from Medtronic and its law firm McDermott, Will & Emery (MWE), previously stating that "Medtronic's and MWE's pursuit of meritless litigation to eliminate competition in the medical products market requires remediation." BrainLAB was represented in the case by the law firms Renner, Otto, Boisselle & Sklar and Baker & Hostetler.

The patent infringement lawsuit filed by Medtronic against BrainLAB in 1998 was dismissed by the U.S. District Court in Denver in February 2006, which ruled that BrainLAB products do not infringe any of Medtronic's patents in the suit.

The court concluded that a September 2005 verdict, which found that BrainLAB had infringed four patents held or licensed by Medtronic, was in error and could not be supported by evidence. Medtronic's award of $51 million in damages was overturned in the process.

In February 2007, the U.S. Court of Appeals for the Federal Circuit upheld the dismissal. The District Court determined in February that BrainLAB was entitled to its attorney fees and expenses (Medical Device Daily, Feb. 8, 2007).

The dispute is over medical products that use acoustics to let surgeons track the precise location of instruments while they are in a patient's body during operations. Medtronic claimed that several BrainLab products infringed its patents.

BrainLab, which develops image-guided systems that provide real-time information used for navigation during surgical procedures, has U.S. headquarters in Westchester, Illinois.

Medtronic and its law firm may appeal the decision.

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