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About POGO's Federal Contractor Misconduct Database (FCMD)
The government awards contracts to companies with histories of misconduct such as contract fraud and environmental, ethics, and labor violations. In the absence of a centralized federal database listing instances of misconduct, the Project On Government Oversight (POGO) is providing such data. We believe that it will lead to improved contracting decisions and public access to information about how the government spends hundreds of billions of taxpayer money each year on goods and services. Report an instance of misconduct »
Ranking: 11
McKesson
McKesson Corporation is a healthcare services and information technology company. McKesson provides pharmaceutical and medical-surgical supply management; healthcare information technology for hospitals, physicians, homecare and payors; and hospital and retail pharmacy automation.
Federal Contract $: $4706.1m
Total Number of Instances: 18
Total Misconduct dollar amount: $1815.6m
- Annual Report
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- SEC 10K
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Instances of Misconduct
1. McKesson/HBOC Inc. ERISA Litigation
The case “involves [Employee Retirement Security Income Act] claims brought on behalf of the HBOC Profit Sharing and Savings Plan (the “HBOC Plan”) and the McKesson Profit Sharing and Investment Plan (the “McKesson Plan”), as well as participants in those plans. On May 6, 2005, a Stipulation and Agreement of Settlement was executed for that portion of the ERISA Action that involves HBOC Plan claims. The proposed settlement resolves all claims by the HBOC Plan and its participants in consideration of an $18.2 million cash payment by the Company. The settlement is subject to various conditions, including, but not limited to, notice to the class and final approval by the Court. Judge Whyte has scheduled a hearing on final approval of the HBOC Plan settlement for September 9, 2005. The separate ERISA claims of the McKesson Plan and its participants are not resolved by this settlement. The Company’s motion to dismiss those claims remains pending before this Court.”... more»
2. McKesson/HBOC, Inc. Securities Litigation
In January 2005, McKesson reached an agreement to settle a consolidated securities class action arising out of the discovery in April 1999 of accounting improprieties at HBO & Co., Inc. (HBOC), which McKesson acquired in January 1999. The improprieties turned out to be part of a long-running scheme at HBOC to fraudulently inflate revenue and net income, a scheme for which several former HBOC executives pled guilty. Under the agreement, McKesson agreed to pay the class members a total of $960 million in cash.... more»
3. Oregon Drug Prices Lawsuit
The state of Oregon reached a $4.3 million settlement with McKesson over claims that McKesson artificially inflated the average wholesale price (AWP) of prescription drugs and defrauded the state Medicaid program.... more»
4. SEC v. Lapine (Securities Fraud)
In March 2010, a consent and final judgment against Jay Lapine, former general counsel at McKesson HBOC (now McKesson Corporation), was entered by the United States District Court for the Northern District of California. Lapine was charged by the Securities and Exchange Commission (SEC) with securities fraud in connection with a financial reporting fraud at McKesson HBOC. The SEC complaint, filed in 2001, alleged that Lapine, together with other senior executives, participated in a long-running scheme to inflate the revenue and net income of HBO & Company, which merged with McKesson in 1999. As part of the final judgment, Lapine agreed to pay a civil penalty of $60,000. He was also stripped of his right to practice law before the SEC for five years. Lapine consented to the entry of judgment without admitting or denying the allegations of the complaint except as to jurisdiction. Lapine was acquitted in November 2009 of criminal charges in the matter. (See related McKesson instances, “McKesson/HBOC, Inc. Securities Litigation,” “SEC v. Smeraski (HBOC Securities Fraud)”, “U.S. v. McCall et al. (Securities Fraud)”, and “SEC v. McCall (Securities Fraud)”. )... more»
5. SEC v. McCall (Securities Fraud)
In May 2010, a consent and final judgment against Charles McCall, former chairman of McKesson HBOC (now McKesson Corporation), was entered by the United States District Court for the Northern District of California. McCall was charged by the Securities and Exchange Commission (SEC) with securities fraud in connection with a financial reporting fraud at McKesson HBOC. The SEC complaint, filed in June 2003, alleged that McCall, together with other senior executives, participated in a long-running scheme to inflate the revenue and net income of HBO & Company, which merged with McKesson in 1999. SEC alleged McCall personally took part in negotiating at least two contracts with side letter agreements containing cancellation contingencies, one of which was also backdated. According to the complaint, these practices failed to comply with Generally Accepted Accounting Principles. As part of the final judgment, McCall agreed to pay almost $1.9 million in disgorgement and prejudgment interest. In November 2009, McCall was convicted of securities fraud and related charges arising from the fraud at HBOC and McKesson HBOC and was sentenced to ten years’ incarceration and ordered to pay a $1 million criminal fine. (See McKesson instance, “U.S. v. McCall et al. (Securities Fraud).”) McCall consented to the entry of judgment without admitting or denying the allegations of the complaint except as to jurisdiction. (See related McKesson instances, “McKesson/HBOC, Inc. Securities Litigation,” “SEC v. Smeraski (HBOC Securities Fraud)”, and “SEC v. Lapine (Securities Fraud)”.)... more»
6. Overcharging the Government
McKesson Corporation, a wholesale pharmaceutical distributor, agreed to pay the United States $3 million to settle claims that it defrauded the Department of Defense from October 1997 to December 2001. The settlement resolved “allegations that the San Francisco-based corporation defrauded the United States by knowingly charging the Defense Department’s medical treatment facilities more for pharmaceutical products than was allowable under its prime vendor contracts with the government.”... more»
7. Nevada Hepatitis C Outbreak Litigation
A Nevada jury ordered three pharmaceutical companies – Teva Parenteral Medicines, Baxter Healthcare, and McKesson – to pay $182.6 million in damages in a lawsuit accusing them of negligently distributing vials of the anesthetic propofol to Nevada colonoscopy clinics at the center of a 2008 hepatitis C outbreak. McKesson’s share of the damages was $17.9 million. (Teva manufactures propofol, and McKesson serves as its U.S. distributor. Teva signed an indemnity agreement accepting financial responsibility for all Nevada propofol cases.) Plaintiffs accused the companies of recklessly distributing 50 milliliter vials of the anesthetic propofol to clinics, where 10 or 20 milliliter doses were commonly needed for outpatient colonoscopy procedures. The plaintiffs argued that propofol was provided in large vials with the expectation that doctors to reuse them, thus risking the spread of blood-borne diseases such as hepatitis. In February 2012, the companies settled the lawsuit as part of a global settlement of lawsuits involving the hepatitis C outbreak.... more»
8. U.S. ex rel. Morgan v. Express Scripts, Inc. (Medicaid Fraud)
A whistleblower lawsuit filed in 2005 accused McKesson of defrauding the Medicaid program by falsely reporting inflated average wholesale prices (AWP) on more than 1,400 brand name drugs to the First DataBank (FDB) system, causing the federal and state governments to overpay millions of dollars in reimbursements. In April 2012, McKesson settled with the federal government for $190 million. Three months later, McKesson settled with 29 states and the District of Columbia for $151 million.... more»
9. Caccavale v. McKesson Medical Surgical (Abuse of Process)
A federal jury awarded $11 million in damages to Carmen Caccavale, a Phoenix, Arizona medical and pharmaceutical supplies salesman, and his company in a countersuit they filed against McKesson Medical Surgical Inc., a division of McKesson Corp. McKesson originally sued Caccavale in 2004, claiming Caccavale, a former employee, had violated trade practices when he left the company to take a job with another medical supply company. McKesson’s suit was dismissed in 2008. Caccavale and his company, Henry Schein Inc., countersued McKesson for abuse of the legal process. The jury in the countersuit awarded $5 million to Caccavale and $6 million to Henry Schein.... more»
10. U.S. v. McCall et al. (Securities Fraud)
Former McKesson HBOC Chairman Charles McCall was convicted on four counts of securities fraud and one count of circumventing internal accounting controls. (McKesson and HBOC merged in January 1999.) The government accused McCall and other top company executives of defrauding shareholders from December 1997 to April 1999 by inflating publicly reported revenue. In March 2010, McCall was sentenced to ten years’ incarceration and ordered to pay a $1 million criminal fine and a $500 special assessment. Co-defendant Jay Lapine, former general counsel at McKesson HBOC, was acquitted of securities fraud and other charges.... more»
11. Roby v. McKesson (Wrongful Termination)
A California state court jury found that McKesson Corp. harassed, discriminated against, and wrongfully fired employee Charlene Roby based on her medical condition and related disability and awarded $3,511,000 in compensatory damages and $15 million in punitive damages (both awards were each reduced to $1,905,000 on appeal). Roby claimed McKesson subjected her to harassment and wrongly fired her because medication she took to help her panic attacks caused body odor and other side effects, and her medical condition necessitated frequent absences from work.... more»
12. Racial Discrimination
On March 6, 2002, a federal court "approved a $1,245,000 settlement of a class action race discrimination lawsuit brought by EEOC and private counsel against McKesson Water Products Company and Groupe Danone...The EEOC initiated an investigation of McKesson in 1998 when Steven Crutchfield and several other African-American employees filed charges of discrimination with the Commission alleging that they had suffered racial discrimination at the drinking water processing and delivery company. Specifically, they charged that McKesson had paid African-American drivers less and increased their compensation at a slower rate than white drivers. They claimed that McKesson assigned African-American drivers to routes in low-income neighborhoods, which were often less profitable than routes in affluent communities. Because pay and promotion were tied to the profitability of the routes, the African-American drivers received lower compensation and fewer promotions than those assigned to the affluent areas."... more»
13. SEC v. Smeraski (HBOC Securities Fraud)
The United States District Court for the Northern District of California entered a consent and final judgment against Michael G. Smeraski, former senior sales vice president at HBO & Company, Inc. (HBOC), an Atlanta, Ga.-based health care software vendor that merged with McKesson in 1999. Smeraski was charged with securities fraud in connection with a long-running scheme at HBOC to fraudulently inflate revenue and net income. Smeraski and others routinely approved software sales contracts with associated side letters containing unsatisfied contingencies precluding revenue recognition and backdated contracts and other documents for the purpose of recognizing revenue in an earlier reporting period. These practices failed to comply with Generally Accepted Accounting Principles. In addition to being permanently enjoined from violating the antifraud provisions of the federal securities laws, Smeraski was ordered to pay a civil penalty of $50,000. See related McKesson misconduct instances “McKesson/HBOC, Inc. Securities Litigation” and “McKesson/HBOC Inc. ERISA Litigation.”... more»
14. Kentucky Drug Prices Lawsuit
Kentucky's Attorney General sued McKesson, accusing the company of conspiring to inflate the published average wholesale prices (AWPs) for more than 1,800 brand name prescription drugs. The state alleged that, beginning in August 2001, McKesson and pharmaceutical data publishing company First DataBank (owned by Hearst Corporation) conspired to artificially inflate AWPs and caused the Kentucky Medicaid program to overpay for those drugs by tens of millions of dollars. In December 2012, Kentucky settled the lawsuit for $9.84 million.... more»
15. Governmental Entities Average Wholesale Price Litigation
McKesson agreed to pay $82 million to resolve a class-action lawsuit brought by several local government entities accusing the company and pharmaceutical data publisher First DataBank, Inc., of fraudulently inflating the prices of many brand-name prescription drugs, including Prozac, Lipitor, Zocor and Vioxx. The suit alleged that McKesson and First DataBank inflated the Average Wholesale Price (AWP) of hundreds of brand-name drugs, causing governments to pay hundreds of millions of dollars in excessive drug reimbursements from 2001 to the present. The settlement included an express denial of liability of any kind by McKesson.... more»
16. Average Wholesale Price (AWP) Lawsuit
A class-action lawsuit filed in federal court in Massachusetts against McKesson Corporation alleges McKesson and pharmaceutical data publishing company First DataBank entered into a secret agreement to artificially inflate the average wholesale price (AWP) of hundreds of brand-name drugs. The government uses average wholesale prices as reported by drug companies to set reimbursements from federal health programs. The lawsuit was filed on behalf of healthcare consumers and third-party payors who allegedly overpaid for drugs by billions of dollars. In November 2008, McKesson agreed to settle all private party claims for $350 million. The settlement terms, which are subject to final court approval, include an express denial of liability. Claims made by public entities, including federal, state and local governments, remain pending. See related McKesson pending instance, "Connecticut Drug Prices Lawsuit."... more»
17. Connecticut Drug Prices Lawsuit
The state of Connecticut sued McKesson Corp., accusing the company of conspiring to artificially inflate the wholesale prices of hundreds of brand-name drugs. The state alleged that McKesson and pharmaceutical data publishing company First DataBank conspired to artificially inflate the average wholesale price (AWP) of the drugs, causing state health insurance programs to pay millions of dollars in excess charges. In October 2010, McKesson agreed to pay $15 million to settle the lawsuit. See related McKesson instance “Average Wholesale Price (AWP) Lawsuit.”... more»
18. Federal Drug Reporting Violations
McKesson Corp. agreed to pay over $13 million to U.S. Attorney's Offices in California, Colorado, Florida, Maryland, Texas and Utah to settle allegations that it violated federal drug reporting provisions. According to the Department of Justice, McKesson violated the Controlled Substances Act by failing to report to the Drug Enforcement Administration suspicious sales of prescription medications to various pharmacies, including those that fill orders from Internet sites that sell drugs online to customers who do not have a legal prescription. McKesson made no admission of liability under the settlement.... more»
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