Lebanon County Employees' Retirement Fund v. Amerisourcebergen Corporation

2020 WL 132752 (2020)


Lebanon (Ps) own stock in AmerisourceBergen (D). D is one of the world's largest distributors of pharmaceutical products, including opioids. D must comply with the Comprehensive Drug Abuse Prevention and Control Act of 1970 and its implementing regulations. A distributor must maintain 'effective controls against diversion of [opioids] into other than legitimate medical, scientific, research, or industrial channels. A distributor must also 'design and operate a system to disclose to the registrant suspicious orders of [opioids]. Starting in the late 1990s, pharmaceutical companies reassured doctors that patients would not become addicted to opioids. Doctors responded by writing more prescriptions for opioids, often without appreciating or advising patients about the risk of addiction. Increasing levels of opioid abuse led to greater demand for opioids. So-called 'rogue pharmacies' met the demand by filling large numbers of prescriptions. Stopping rogue pharmacies became a DEA priority. In April 2007, the DEA suspended D's license for its distribution center in Orlando, Florida, because of its involvement with rogue pharmacies. D settled with the DEA and committed to adopt and maintain 'a compliance program designed to detect and prevent diversion of controlled substances.' According to D's public filings, the company's senior officers and its board of directors play a significant role in monitoring and enforcing compliance. In 2012, the Attorney General for the State of West Virginia sued D and other opioid distributors, alleging that they had failed to implement effective controls to identify suspicious orders and guard against the diversion of opioids. In 2018, the United States House of Representatives found that D and the two other largest wholesale opioid distributors in the United States 'failed to address suspicious order monitoring' in West Virginia. In 2019, the New York Attorney General by a complaint contended that D's policies facilitated the diversion of opioids and that D failed to stop it from happening. The NYAG Complaint alleged that D lacked 'an internal rule or policy that requires investigation of a customer based on a specific number of suspicious order reports.' D is also a defendant in multidistrict litigation pending in the United States District Court for the Northern District of Ohio. Since September 2017, AmerisourceBergen has spent more than $1 billion on litigation and opioid-related costs, including settlements and legal fees relating to opioid lawsuits and investigations. Ps are investigating whether the firm engaged in wrongdoing in connection with the distribution of opioids. Ps sought to inspect D's books and records pursuant to Section 220. D rejected the Demand in its entirety, contending that the Demand did not 'state a proper purpose or a credible basis to suspect wrongdoing' and that the scope of the inspection was 'overly broad.' Ps filed this action. A trial on a paper record took place on October 15, 2019.