Ex-Pharma CEO Aided Opioid Sales to Addicts, Prosecutor Says

(Bloomberg) -- The former head of a major generic drug distributor conspired to sell opiods to crooked pharmacies to boost profits and his own pay, a prosecutor told jurors at the end of a trial in Manhattan.

Laurence F. Doud III, who spent 25 years as chief executive officer of Rochester Drug Co-operative, is accused of scheming with others at the company to sell large amounts of addictive oxycodone and fentanyl to businesses that diverted the medications to addicts and street dealers. If convicted, Doud, 78, may spend the rest of his life in prison.

Doud kept selling the medications to “drug dealers in lab coats,” disregarding red flags such as unusual sales volumes, a high proportion of cash purchases, buyers travelling from out of state to buy from suspected drug stores and prescriptions from doctors on opioid watch lists, Assistant U.S. Attorney Nicolas Roos told jurors in his closing argument Monday.

“It is illegal to sell controlled substances without substantial controls against diversion to pharmacies that are believed to be diverting or that are diverting,” Roos said. “It wasn't a mistake. This is exactly how Larry Doud wanted to do business.”

Roos claimed that Doud derived $500,000 in bonuses from RDC's sales of opioids in five years before he was set to retire. He's charged with conspiracy to distribute controlled substances and conspiring to defraud the U.S. government by failing to report suspicious orders to the Drug Enforcement Administration. The conspiracy to distribute drugs carries a minimum sentence of 10 years in prison and a maximum of life.

“Nobody is saying RDC's compliance program was great,” said Robert Gottlieb, Doud's lawyer. But Doud didn't intend to conspire with others to distribute dangerous drugs, Gottlieb told the jury. And he argued that prosecutors failed to show any evidence that Doud told his employees to lie to the DEA.

Doud hired outside consultants, including a former DEA agent, to look into RDCs compliance, Gottlieb said.

William Pietruszewski, RDC's former chief compliance officer, testified that Doud knew that many of the drugs being shipped were illegally diverted. Pietruszewski pleaded guilty to his role in the scheme in 2019 and agreed to cooperate with prosecutors.

In his closing statement, Gottlieb attempted to discredit Michael Paulsen, one of the prosecution witnesses. Paulsen operated Regal Remedies, a Staten Island, New York, pharmacy that bought oxycodone from RDC.

Prosecutors claim RDC had information about the diversion of the drugs by Regal but kept supplying drugs and avoided reporting it to the government as required.

Paulsen is “just a lying, thieving criminal,” Gottlieb told the jury. “You can't believe anything this guy said to you.”

Jurors are set to begin deliberations on Tuesday.

Read more: Insys Founder Gets 5 1/2 Years in Prison for Opioid Fraud

While other pharmaceutical executives have faced criminal charges stemming from the opioid epidemic, including many at Insys Therapeutics Inc., Doud is the first to be charged with diverting the painkillers. 

He faces a single charge of conspiracy to distribute controlled substances and conspiring to defraud the U.S. government by failing to report suspicious orders to the DEA. 

Insys founder John Kapoor was convicted of a racketeering scheme featuring sham speakers' fees for doctors who ramped up prescriptions of Subsys, the company's opioid-based pain medicine. He was sentenced in January 2020 to 5 1/2 years in prison.

RDC, which was formed in 1905, was once the sixth-largest pharmaceutical distributor in the U.S. It agreed to pay $20 million to resolve narcotic conspiracy charges on the same day that Doud surrendered to authorities. The company filed for bankruptcy in March 2020, listing assets of more than $50 million and debt of more than $100 million.

The case is: U.S. v. Doud, 19-cr-00285, U.S. District Court, Southern District of New York (Manhattan).

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