Ex-Pharma CEO Found Guilty of Aiding Opioid Sales to Addicts

(Bloomberg) -- The former head of a major generic-drug distributor was convicted of conspiring to sell opioids to crooked pharmacies to boost profits and his own pay.

Laurence F. Doud III, who spent 25 years as chief executive officer of Rochester Drug Co-operative, was found guilty Wednesday in New York 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.

Doud, 78, bowed his head and looked at the floor as a juror read the verdict, which could put him in prison for the rest of his life. He faces a minimum of 10 years in prison when he's sentenced June 29.

Doud was convicted of 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 jury delivered its unanimous verdict on the second day of deliberations.

“Mr. Doud is a good, and honorable man,” his lawyer, Robert C. Gottlieb, said in an email. “Today's verdict is a monumental travesty of justice. Mr. Doud's fight is just beginning, and he will prevail on appeal.”

During the trial, his defense attorneys argued that Doud wasn't responsible for failing to stop illegal opioid sales. There was no agreement among Doud and his employees to distribute drugs illegally, they said, and he hired outside consultants, including a former DEA agent, to look into RDCs compliance.

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 painkillers.

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.

Red Flags

Prosecutors argued that Doud disregarded strict laws making it illegal to sell the drugs without controls preventing them from being diverted to illegal uses. He also ignored red flags such as unusual sales volumes, a high proportion of cash purchases, buyers traveling from out of state to buy from suspected drug stores, and prescriptions from doctors on opioid watch lists, government lawyers said.

Doud derived $500,000 in bonuses from RDC's sales of opioids in five years before he was set to retire, according to the government.

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.

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).