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Ken Hall: A shareholder’s prescription for the Big Three opioid distributors

By By Ken Hall
AP file photo

Flooding America with prescription opioids has meant big money for America’s largest pharmaceutical wholesale distributors and big payouts for their CEOs. But as the overdose death toll mounts and the costs of litigation and enforcement actions climb, shareholders are demanding answers about what’s gone wrong and why no one at the top has stopped it.

Over the past year, elected leaders and the news media have rightly turned their attention to the role of the country’s “big three” distributors — McKesson, AmerisourceBergen, and Cardinal Health — in fueling our country’s deadly prescription opioid epidemic which claims the lives of 62 Americans every day.

As this newspaper has reported, in West Virginia alone, these three companies collectively supplied enough hydrocodone and oxycodone over a six-year period to provide 235 pills to every man, woman and child. Over this same period, more than 1,700 people in West Virginia fatally overdosed, and the “big three” together reported more than $17 billion in profit.

These arresting figures are all the more outrageous given that all three distributors were already on notice by the Drug Enforcement Administration for previous failures to report suspicious orders of controlled substances, as required by law.

Amid the annals of corporate America, this must rank as one the most tragic failures of corporate integrity — a devastating breakdown in values, culture, ethical conduct and regard for the law.

As a long-term shareholder of these companies, the International Brotherhood of Teamsters has demanded that our elected, corporate board representatives do their jobs.

Throughout this crisis, management at the “big three” has downplayed its role in the pharmaceutical supply chain, pawning off the blame to rogue pharmacists and unscrupulous doctors. The boards of these companies must break with this blame-shifting and grasp the cold reality: that as the major suppliers of prescription opioids, their companies are uniquely positioned to address this problem.

In short, with market power, comes responsibility, something that other stakeholders, including the growing number of West Virginia counties and municipalities suing the companies, already recognize.

The board’s responsibility to reform how opioids are distributed is firmly rooted in its obligation to minimize legal, regulatory and reputational risks to shareholders. But there is a broader, moral imperative for swift action. By ensuring that drug distributors adhere to the highest standards of ethical conduct and regulatory compliance, directors will help lift our communities out of despair.

To begin addressing this fundamental question of corporate integrity, I have urged the boards of McKesson, AmerisourceBergen and Cardinal Health to take the following three steps:

n First, the board must assert its independence from management by appointing an independent chair, giving strong consideration to an outside candidate that is apt at crisis management. Having the CEO simultaneously serve as board chairman in this environment is akin to the fox guarding the henhouse.

n Second, the board must set up an independent committee to investigate the company’s opioid distribution practices, including allegations of sales incentives and other practices that have surfaced in the West Virginia lawsuits. This must be done with assistance of outside counsel and public health experts and its findings made public.

n Third, the board must reform executive compensation. It is scandalous that the CEOs of the “big three” have collectively received pay worth more than $542 million over the past five years, while at the same time drowning states like West Virginia with prescription opioids. The boards should ensure that they have the means to clawback pay from executives when the company’s reputation and integrity have been so sorely damaged.

At the companies’ annual shareholder meetings this year, shareholders must demand greater accountability from board members at the “big three.” The Teamsters will be doing its part. Let’s hope these directors hear the painful truth about opioids and take the actions needed for the long-term health of these companies, our communities and our country.

Ken Hall is general secretary-treasurer of the International Brotherhood of Teamsters and president of Teamsters Local 175 in South Charleston.

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