Oxy Manufacturers Knowingly Supplied LA Drug Ring with More than 1 Million Pills

By Paul Gaita 07/11/16

A Times investigation revealed that Purdue Pharma reportedly knew they were supplying OxyContin to illegal distributors yet continued to do so for over a decade.

Oxy Manufacturers Knowingly Supplied LA Drug Ring with More than 1 Million Pills

From 2008 to 2010, a business purporting to be a medical clinic near Los Angeles’ MacArthur Park doled out an astonishing number of prescriptions for maximum-strength OxyContin, many of which were fraudulently billed to public insurance programs, and then sold the highly addictive opioid painkiller on the street to criminal organizations, including Los Angeles gangs.

The trafficking organization was eventually shuttered a year later by the combined efforts of federal, state and local authorities, but the real controversy concerning the clinic would not surface until a recent investigation by the Los Angeles Times revealed that Purdue Pharma, which manufactures OxyContin, was not only aware of the clinic’s activities—along with similar operations at numerous other facilities and pharmacies—but also continued to supply distributors servicing such locations, even as complaints from area pharmacists and Purdue’s own district sales managers piled up.

The Los Angeles Times report—the second in a series by the newspaper on OxyContin—interviewed current and former Purdue employees, including Michele Ringler, Purdue’s district sales manager for Los Angeles who went to the clinic, Lake Medical Group, in 2009 after a number of area pharmacies reported receiving numerous prescriptions for maximum-strength, 80-milligram OxyContin written by Dr. Eleanor Santiago, one of two doctors employed by the clinic. Due to the strength of the pills, which were equivalent to 16 Vicodin tablets, the number of prescriptions, which at one point numbered 26 per day—more than most doctors issued in their entire careers—and their high street value (up to $80 per pill), Ringler went to Lake Medical to investigate.

According to her report to Purdue, the clinic was filled with trash and appeared nearly abandoned save for its minimal staff and a crowd of people she described in an email as looking like they’d “just got out of LA County jail.” Subsequent investigations by the Food and Drug Administration’s Office of Criminal Investigations revealed that some of these individuals were homeless and/or addicted locals recruited by low-level members of the Lake Medical organization to fill out forms to receive the Oxy prescriptions. They were then taken to local pharmacies to fill the prescriptions and then bring the drugs back to Lake Medical, where they were repackaged and sold throughout Los Angeles. An informant would later tell federal investigators that pills obtained from Lake Medical were being sold as far as Chicago and locally by members of the Crips gang.

In emails to Purdue officials in 2009, Ringler felt certain that Lake Medical was operating a drug ring and wrote, “Shouldn’t the Drug Enforcement Administration (DEA) be contacted about this?” But the company’s response was to add Santiago to its Region Zero list, a confidential roster of more than 1,800 medical professionals suspected of prescribing to addicts or dealers. Of that group, company executives admitted in 2013 that they had only reported about 8% of them to authorities. Santiago and Lake Medical continued to write prescriptions for Oxy, even after they had been added to the list, and according to at least one Los Angeles pharmacist, Purdue did not respond to emails that raised alarms about these prescriptions.

Lake Medical wasn’t the only facility to which Purdue had turned a blind eye. According to Jack Crowley, who served as the company’s executive director of Controlled Substances Act compliance before retiring in 2013, Purdue had a list of wholesalers’ reports on OxyContin sales to individual pharmacies across the country. In 2010, that list showed a staggering amount of 80-milligram OxyContin sales to a number of small Los Angeles pharmacies which, according to Crowley, were recommended by several company executives for reporting to the DEA. But as he and others noted, company policy prohibited employees from taking such actions without first consulting distributors, and Purdue continued to fulfill orders to stores, even in cases where company employees personally witnessed suspicious behavior at these locations.

More significantly, Purdue did not share data collected on these stores with federal authorities. The Times feature cites a series of exchanges between Ringler and Crowley about a Huntington Park pharmacy which had experienced a 1400% uptake in orders for 80-milligram Oxy from Lake Medical. Ringler investigated the store and strongly recommended intervention by the DEA. Crowley responded that the company was “considering all angles,” but the pharmacy continued to receive large shipments of Oxy five months after the initial investigation.

In a statement issued to the Times, Purdue’s general counsel Philip C. Strassburger said that the company is “required to monitor and report suspicious orders to the DEA,” but also noted that “once Purdue identifies the potential suspicious activity of a wholesaler’s customer, Purdue informs the wholesaler, so they can perform their due diligence.“

In the case of Lake Medical, Purdue did not approach investigators with information about its OxyContin orders until 2011, one year after the clinic had closed its doors and Santiago had been placed under arrest. By that point, Medicare prescription programs had paid more than $2 million for the 10,000 prescriptions for Oxy filed by Lake Medical, while Medicare and Medi-Cal had paid more than $6 million for the medical services that had been allegedly performed to generate those prescriptions.

Two more years would pass before Purdue would provide any physical documentation about Lake Medical, by which time Santiago had pleaded guilty to healthcare fraud, and prosecutors had begun cases against the clinic’s operators, Mike Mikaelian and Anjelika Sanamian. Santiago would eventually serve 20 months in prison, while Mikaelian and Sanamian would receive sentences of 12 and eight years respectively for conspiracy to distribute controlled substances and other crimes.

The federal government has not accused Purdue of any wrongdoing in the case, while the company issued a statement that it had “at all times complied with the law.” 

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Paul Gaita lives in Los Angeles. He has contributed to the Los Angeles Times, Variety, LA Weekly, Amazon.com and The Los Angeles Beat, among many other publications and websites.