The Teamsters union is calling on shareholders of drug giant Cardinal Health to strip the company’s top executive of his duties as board chairman, saying the firm is “in the midst of a corporate crisis” over its role in the opioid epidemic that has ravaged West Virginia and other states.
The Teamsters accuse Cardinal Health CEO George Barrett of poor leadership while the company has become “entangled in the opioid epidemic” and faces investigations and dozens of lawsuits. The union urged investors to vote to appoint an independent board chairman at Cardinal Health’s annual shareholder meeting, Nov. 8, in Columbus, Ohio.
Cardinal Health’s board opposes the Teamsters’ actions, the union told shareholders in a letter Friday, by saying that Barrett’s leadership as board chairman has set a “powerful tone from the top” on “compliance and reputation.”
During the past decade, the company has paid more than $100 million in fines and settlements to end allegations that it distributed an excessive number of painkillers and neglected to report suspect drug orders from “pill mill” pharmacies. At the same time, Cardinal’s board awarded top executives with lavish pay raises and bonuses, the union said.
“Under the current governance structure, Cardinal Health’s board has repeatedly fallen down on these priorities as they pertain to the company’s core business mission: the safe and secure distribution of controlled substances,” said Teamsters Secretary-Treasurer Ken Hall, who is also president of Teamsters Local 175 in South Charleston.
Cardinal Health distributes more prescription drugs than any other wholesaler in West Virginia. The Teamsters have pension funds that invest in the company, which is headquartered in Dublin, Ohio. A Cardinal Health spokeswoman did not respond to a request for comment Friday.
Between 2007 and 2012, Cardinal Health shipped 241 million doses of hydrocodone and oxycodone — two powerful and potentially lethal painkillers — to pharmacies and hospitals across West Virginia, according to Drug Enforcement Administration data.
Lawsuits against the company have spotlighted large shipments of pain pills to small communities. Over two years, Cardinal Health shipped more than 309,000 prescription opioids to the town of Van in Boone County, according to state lawsuit that’s since been settled. About 200 people live in Van.
In January, Cardinal Health agreed to pay $20 million to the state of West Virginia to settle a 2012 lawsuit that alleged the company acted “negligently” and “recklessly” by distributing an excessive number of painkillers to the state. Cardinal Health denied any wrongdoing.
In 2008, the company paid a $34 million penalty to resolve allegations that it failed to notify the DEA of suspiciously large orders of hydrocodone in Florida.
At the time, Barrett, who was then over Cardinal Health’s Supply Chain Services, stated, “We are working [our] tails off to restore our reputation with the DEA and gain back the ability to distribute controlled drugs from all of our facilities,” according to a company earnings call cited by the Teamsters.
But four years later, Cardinal Health was back in hot water. The DEA again investigated the company for turning a blind eye to suspicious orders of prescription opioids. In response, Cardinal Health’s board set up an independent committee to review shareholder concerns about the investigation. The panel concluded that “robust systems were in place to flag suspect orders for painkillers,” according to the Teamsters.
“And yet, as allegations against the company’s distribution and compliance practices continue to mount, the board has been steadfast in its refusal to pursue a new independent investigation of these concerns,” Hall wrote to shareholders Friday. “This is profoundly troubling.”
In December 2016, the wholesaler paid a $44 million fine to settle the DEA’s latest investigation.
“Allowing failures in the company’s core compliance and business functions to fester for over a decade is a damning indictment of the current leadership structure,” Hall said.
Hall also criticized Barrett for his recent remarks on the opioid crisis, saying the CEO’s “tone was notably off-pitch.” During an August earnings call, Barrett said the “search for blame” in the opioid problem is the “enemy of the search for solutions,” according to the Teamsters. Such remarks undermine corporate accountability, Hall said.
The Teamsters’ letter also skewers Cardinal Health’s compensation committee, which gave a bonus to the company’s chief compliance officer each of the past six years. Barrett has received $127 million in compensation over the past three years.
This isn’t the first time the union has targeted a drug wholesaler.
In July, McKesson shareholders voted down a Teamster’s proposal to create an independent board chairman, so the company’s CEO kept both jobs. However, the board announced it would have a separate CEO and chairman, starting with the chief executive who follows its current chief executive. The board would continue its practice of evaluating at least annually whether its leadership structure continues to be in the best interest of the company and its shareholders, McKesson said a the statement.
In May, a congressional committee started investigating Cardinal Health’s painkiller shipments to West Virginia. The inquiry also targets three other drug wholesalers — Mc- Kesson, AmerisourceBergen and Miami-Luken. The panel has directed the companies to turn over internal records.