`ended up in the hands of criminals
`and addicts. What the drugmaker
`knew
`
`By HARRIET RYAN, LISA GIRION AND SCOTT GLOVER
`July 10, 2016
`
`In the waning days of summer in 2008, a convicted felon and his business
`partner leased office space on a seedy block near MacArthur Park. They set
`up a waiting room, hired an elderly physician and gave the place a name that
`sounded like an ordinary clinic: Lake Medical.
`
`The doctor began prescribing the opioid painkiller OxyContin – in
`extraordinary quantities. In a single week in September, she issued orders for
`1,500 pills, more than entire pharmacies sold in a month. In October, it was
`11,000 pills. By December, she had prescribed more than 73,000, with a street
`value of nearly $6 million.
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`During a single week in September 2008, Eleanor Santiago of Lake Medical, issued orders for 1,500 pills,
`more than entire pharmacies sold in a month. (Court exhibit)
`
`At its headquarters in Stamford, Conn., Purdue Pharma, the maker of
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`OxyContin, tracked the surge in prescriptions. A sales manager went to check
`out the clinic and the company launched an investigation. It eventually
`concluded that Lake Medical was working with a corrupt pharmacy in
`Huntington Park to obtain large quantities of OxyContin.
`
`“Shouldn’t the DEA be contacted about this?” the sales manager, Michele
`Ringler, told company officials in a 2009 email. Later that evening, she added,
`“I feel very certain this is an organized drug ring...”
`
`Purdue did not shut off the supply of highly addictive OxyContin and did not
`tell authorities what it knew about Lake Medical until several years later
`when the clinic was out of business and its leaders indicted.
`
`By that time, 1.1 million pills had spilled into the hands of Armenian
`mobsters, the Crips gang and other criminals.
`
`A Los Angeles Times investigation found that, for more than a decade,
`Purdue collected extensive evidence suggesting illegal trafficking of
`OxyContin and, in many cases, did not share it with law enforcement or cut
`off the flow of pills. A former Purdue executive, who monitored pharmacies
`for criminal activity, acknowledged that even when the company had
`evidence pharmacies were colluding with drug dealers, it did not stop
`supplying distributors selling to those stores.
`
`Purdue knew about many suspicious doctors and pharmacies from
`prescribing records, pharmacy orders, field reports from sales representatives
`and, in some instances, its own surveillance operations, according to court
`and law enforcement records, which include internal Purdue documents, and
`interviews with current and former employees.
`
`Sounding the alarm
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`September 1, 2009
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`"Shouldn't the DEA be contacted about this?"
`
`Purdue district manager Michele Ringler urges company officials to alert the
`DEA. She later recalled a previous visit to the clinic and said, "I feel very
`certain this is an organized drug ring..."
`
`September 2, 2009
`
`A Purdue officials response
`
`Jack Crowley responds to Ringler's concern.
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`Joseph Rannazzisi, who was the top DEA official responsible for drug
`company regulation until last year, said he was not aware of the scope of
`evidence collected by Purdue. Under federal law, drugmakers must alert the
`DEA to suspicious orders. The agency interprets that law, he said, to include a
`duty to reject orders from customers if the company suspects pills are going
`to the black market.
`
`“They have an obligation, a legal one but also a moral one,” he said.
`
`This is the second part of an L.A. Times investigation of OxyContin, the nationʼs best-selling
`and widely abused painkiller.
`The story is based on interviews with current and former Purdue employees, law
`enforcement officials, medical professionals, pharmaceutical industry experts and others as
`well as court filings, law enforcement records and internal Purdue documents. The
`company records come from court cases and government investigations and include many
`records sealed by the courts.
`
`The federal government has not accused Purdue of any wrongdoing in the
`case of Lake Medical or other suspected drug operations.
`
`In a statement, a Purdue lawyer said the company had “at all times complied
`with the law.” General counsel Phil Strassburger said Purdue had reduced
`supplies of OxyContin to distributors servicing some pharmacies it suspected
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`of corruption, but had to be careful such reductions did not interfere with
`legitimate patients getting medication.
`
`He defended the company’s decision not to share all its evidence with
`authorities.
`
`“It would be irresponsible to direct every single anecdotal and often
`unconfirmed claim of potential misprescribing to these organizations,”
`Strassburger said.
`What Purdue knew
`More than 194,000 people have died since 1999 from overdoses involving
`opioid painkillers, including OxyContin. Nearly 4,000 people start abusing
`those drugs every day, according to government statistics. The prescription
`drug epidemic is fueling a heroin crisis, shattering communities and taxing
`law enforcement officers who say they would benefit from having
`information such as that collected by Purdue.
`
`A private, family-owned corporation, Purdue has earned more than $31
`billion from OxyContin, the nation’s bestselling painkiller. A year before
`Lake Medical opened, Purdue and three of its executives pleaded guilty to
`federal charges of misbranding OxyContin in what the company
`acknowledged was an attempt to mislead doctors about the risk of addiction.
`It was ordered to pay $635 million in fines and fees.
`
`Watch the video
`Inside an OxyContin ring
`
`After the settlement, Purdue touted a high-powered internal security team it
`had set up to guard against the illicit use of its drug. Drugmakers like Purdue
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`are required by law to establish and maintain “effective controls” against the
`diversion of drugs from legitimate medical purposes.
`
`That anti-diversion effort at Purdue was run by associate general counsel
`Robin Abrams, a former assistant U.S. attorney in New York who had
`prosecuted healthcare fraud and prescription drug cases. Jack Crowley, who
`held the title of executive director of Controlled Substances Act compliance
`and had spent decades at the DEA, was also on the team.
`
`Purdue had access to a stream of data showing how individual doctors across
`the nation were prescribing OxyContin. The information came from IMS, a
`company that buys prescription data from pharmacies and resells it to
`drugmakers for marketing purposes.
`
`That information was vital to Purdue’s sales department. Representatives
`working on commission used it to identify doctors writing a small number of
`OxyContin prescriptions who might be persuaded to write more.
`
`By combing through the data, Purdue also could identify physicians writing
`large numbers of prescriptions – a potential sign of drug dealing.
`
`Soon after Lake Medical opened, Purdue zeroed in on prescriptions of 80-
`milligram, maximum-strength OxyContin written by Eleanor Santiago. Once
`a respected physician, the 70-year-old was in failing health and drowning in
`debt when she took the job of clinic medical director alongside several other
`doctors.
`
`The 80-milligram pills Santiago prescribed had the strength of 16 Vicodin
`tablets. Doctors generally reserved those pills for patients with severe,
`chronic pain who had built up a tolerance over months or years.
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`In the illegal drug trade, however, “80s” were the most in demand.
`
`During the years that Lake Medical was in business, the pills could be
`crushed and smoked or snorted, producing a high similar to the drug’s
`chemical cousin, heroin. On the street, the pills went for up to $80 apiece.
`
`A physician writing a high volume of 80s was a red flag for anyone trying to
`detect how OxyContin was getting onto the black market.
`
`The number of prescriptions Santiago was writing wasn’t merely high. It was
`jaw-dropping. Many doctors would go their entire careers without writing a
`single 80s prescription. Santiago doled out 26 in a day.
`
`Purdue was tracking her prescriptions.
`
`Pills prescribed by Santiago
`
`At the Lake Medical clinic, Dr. Eleanor Santiago prescribed jaw-dropping quantities of 80
`mg. OxyContin, the strength favored by addicts.
`
`75thousand pills
`
`Sep
`08
`
`Dec
`08
`
`Sep
`09
`
`Mar
`10
`
`60
`
`45
`
`30
`
`01
`
`5
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`Insights
`
`Dec. 2008: Purdue lawyers put Santiago in "Region Zero," a company database of doctors
`suspected of misprescribing narcotics.
`
`Sept. 2009: Purdue sales manager raises alarm about Lake Medical after visiting
`Huntington Park pharmacy.
`
`March 2010: The clinic closes.
`
`Source: California state prescribing records Raoul Rañoa, Armand Emamdjomeh /
`@latimesgraphics
`
`Michele Ringler, the district sales manager for Los Angeles and a company
`veteran, went to Lake Medical to investigate. When she and one of her sales
`reps arrived, they found a building that looked abandoned, according to
`company emails recounting the visit. Inside, the hallways were strewn with
`trash and lined with a crowd of men who looked like they’d “just got out of
`L.A. County jail,” according to the emails. Feeling uncomfortable, Ringler
`and the rep left without speaking to Santiago.
`
`When a Purdue security committee met in Stamford in December 2008, less
`than five months after Lake Medical opened, Santiago was under review,
`according to internal records and interviews. The panel, comprised of three
`company lawyers, could have reported her to the DEA. Instead it opted to add
`her name to a confidential roster of physicians suspected of recklessly
`prescribing to addicts or dealers.
`
`Purdue calls that list Region Zero and has been adding names to it since 2002.
`A Times investigation in 2013 revealed the existence of the list. At that time,
`the company acknowledged that there were more than 1,800 doctors in
`Region Zero.
`
`Purdue directed its sales reps to avoid those doctors, and it didn’t tell
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`physicians they had been placed on the list. Company executives told The
`Times in a 2013 interview that Purdue had reported about 8% of the doctors
`on the list to authorities.
`
`One doctor Purdue put in Region Zero was Eric Jacobson, a Long Island, N.Y.,
`physician prescribing huge amounts of OxyContin. The company stopped
`sending sales reps to his office in 2010. The following year, one of Jacobson’s
`patients killed four people, including a high school student, in a pharmacy
`robbery.
`
`In the investigation, authorities discovered that Jacobson had been selling
`prescriptions to dealers and addicts for years. The doctor “directly
`contributed to the tragedy of prescription drug abuse that has swept our
`district and our nation,” said Loretta Lynch, then the region’s top federal
`prosecutor, now the U.S. Attorney General.
`
`Jacobson was convicted of unlawful distribution of oxycodone. The
`prosecutor and lead investigator told the Times that Purdue did not disclose
`what it knew about Jacobson to them either before or after the pharmacy
`slayings.
`Following the pills
`In L.A., Santiago kept writing prescriptions in ever larger numbers.
`
`To keep the OxyContin flowing, Lake Medical needed people. Lots of them.
`Age, race and gender didn’t matter. Just people whose time was cheap. For
`that, there was no place better than skid row.
`
`Low-level members of the Lake Medical ring known as cappers would set up
`on Central Avenue or San Pedro Street. The stench of urine was everywhere.
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`People were lying in doorways, sleeping in tents, fighting, shooting up. Who
`wants to make some money, the cappers would shout.
`
`For as little as $25, homeless people served as straw patients and collected
`prescriptions for 80s. It required just a few hours at the clinic, filling out a few
`forms and sitting through a sham examination. They were then driven, often
`in groups, to a pharmacy, where a capper acting as a chaperone paid the bill
`in cash. He then took the pills back to the Lake Medical ring leaders who
`packaged them in bulk for sale to drug dealers.
`
`The skid row connection
`
`The pills from Lake Medical coursed out of L.A. An informant would later
`tell an FBI agent that East Hollywood’s White Fence gang trafficked pills to
`Chicago, according to the agent’s report. A Crips leader from the Inland
`Empire also bought OxyContin from Lake Medical, according to law
`enforcement records.
`
`In the months after the Lake Medical ring started, Purdue was informed that
`homeless people were being used in an OxyContin ring. In December 2008,
`the same month Santiago was placed on the Region Zero list, a company
`sales rep visited Central Care Pharmacy, an Encino store filling Lake Medical
`prescriptions. The pharmacist said there appeared to be some kind of scam
`going on with 80-milligram pills, according to the sales representative’s report
`to headquarters. They’re shuttling homeless people around to pharmacies,
`the pharmacist said.
`
`Purdue sent Ringler to follow up and her report on the pharmacist’s concerns
`reached Purdue’s security and risk management teams the next day.
`Pharmacist complaints
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`Pharmacist complaints about Santiago kept piling up.
`
`“The first few of these prescriptions…looked legitimate…[but] after those
`were filled, a steady flow of younger, more ambulatory, customers came in
`with the same prescriptions,” a Temple Street pharmacist told a Purdue
`representative, according to a January 2009 field report.
`
`Encino pharmacist Tihana Skaricic raised questions about
`prescriptions from the Lake Medical clinic. (Liz O. Baylen / Los
`Angeles Times)
`
`Pharmacists from La Canada-Flintridge, Glendale, Moreno Valley and
`elsewhere also complained to Purdue. Company executives and lawyers
`received at least 11 reports about Santiago in the four months after they
`placed her in Region Zero.
`
`On June 10, the Encino pharmacist sent an email to her Purdue sales rep with
`the subject line “urgent question.” The pharmacist said she was being asked
`to fill prescriptions written by Santiago and other Lake Medical doctors for
`“lots of Oxy patients.”
`
`“I want to make sure Dr office is legit,” Tihana Skaricic wrote. “So
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`wondering…if you know ‘behind the scenes.’”
`
`Reports of concern
`
`June 10, 2009
`
`Pharmacist's letter
`
`In June 2009, an Encino pharmacist emailed a Purdue sales rep and her
`manager asking for help determining whether OxyContin prescriptions from
`Lake Medical were legitimate. Purdue did not respond, the pharmacist said in
`an interview.
`
`January 9, 2009
`
`Suspicious prescriptions
`
`In January 2009, a Purdue sales rep filed a report after paying a sales call to a
`Temple Street pharmacy. The pharmacy was getting "many suspicious
`prescriptions from Dr. Eleanor Santiago" for OxyContin.
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`The email was forwarded to Ringler, who sent it to a company lawyer, who
`sent it to Crowley, an executive responsible for compliance with the federal
`controlled substances law. No one at Purdue ever got back to Skaricic, she
`said in an interview. Eventually she and some other pharmacists decided on
`their own to turn away business from Lake Medical.
`
`Had Purdue passed on its concerns, Skaricic said, “I would have stopped
`filling these prescriptions way earlier.”
`‘I was sitting on a gold mine.’
`With a few keystrokes on his computer at Purdue, Jack Crowley could identify
`pharmacies around the country that were moving a staggering volume of 80s
`and almost nothing else.
`
`“I could punch it in at any time…Bang,” Crowley told the Times. “I was sitting
`on a gold mine.”
`
`Crowley retired from Purdue in 2013 and works in Georgia for a
`pharmaceutical consulting company. After The Times approached him, he
`agreed to a series of interviews in which he talked at length about the inner
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`workings of Purdue’s security operation.
`
`Until a decade ago, Purdue, like most drug manufacturers, didn't monitor
`pharmacies for criminal activity. The DEA has held wholesalers, not
`drugmakers, responsible for identifying and reporting suspicious orders from
`their customer pharmacies.
`
`In 2007, the DEA pressured drug manufacturers to do more to stem the
`prescription drug crisis and warned that it would be looking at every step in
`the supply chain. In response, Purdue decided to gather detailed information
`about pharmacies, Crowley said.
`
`The company approached wholesalers and struck agreements allowing the
`company access to their sales reports. With the new data, the security team in
`Stamford could see all wholesalers’ OxyContin sales to individual
`pharmacies, down to the pill.
`
`“I can look at something and say, ‘Geez, that stinks’ without me even visiting
`the place,” Crowley recalled.
`
`The DEA had access to similar pharmacy purchasing data, but many
`investigators regarded the database as unwieldy because it encompassed
`dozens of drugs sold by more than a thousand companies and could be up to
`six months out of date.
`
`As Lake Medical entered its second year, Crowley’s computer screen showed
`a handful of small pharmacies in the L.A. area suddenly ordering eye-
`popping amounts of maximum-strength OxyContin.
`
`Following the pills
`Using a doctor and homeless people, ringleaders had prescriptions for OxyContin filled at
`pharmacies across the L.A. region.
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`(Raoul Rañoa / Los Angeles Times Graphics)
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`At one San Marino store, Huntington Pharmacy, monthly orders for 80s were
`up nearly 20-fold over the previous year. At another in East L.A., orders
`jumped 400% in two months. A small shop in Panorama City, Mission
`Pharmacy, became the top seller of OxyContin in the entire state of
`California.
`
`Purdue added those store names to a long list of problematic pharmacies
`across the country. Each month, a group called the Order Monitoring System
`committee — Crowley, company lawyer Abrams, the chief security officer, a
`sales executive and others — met to discuss what to do about the stores,
`according to security team memos.
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`Some on the committee argued for reporting suspicious pharmacies to the
`DEA and instructing distributors to stop selling to those stores, Crowley said.
`But he and others felt it was up to the distributors to take action, he said,
`noting that company policy prohibited employees from reporting pharmacies
`to the DEA without first consulting their distributors.
`
`In the case of Mission in Panorama City, a top supplier to the Lake Medical
`ring, the committee decided the best course was for Crowley to “continue to
`watch” the situation, according to an internal company email.
`
`In an interview, Crowley said that in the five years he spent investigating
`suspicious pharmacies, Purdue never shut off the flow of pills to any store.
`
`Pharmacies were allowed to buy OxyContin even in cases when Purdue
`security staffers personally witnessed suspicious behavior. Crowley said
`during visits to two San Francisco pharmacies, he saw homeless people filling
`prescriptions and then handing the bottles off to men he suspected were drug
`dealers. In 2009, he and a Purdue investigator went to Las Vegas to check on
`Lam’s, a pharmacy next to a bar in a mini-mall that Crowley said was one of
`the top five sellers of OxyContin in the nation.
`
`He and his colleague sat in their rental car watching crowds of young people
`come and go with pills, Crowley said.
`
`“It was terrible,” he recalled. “It was just a drug-distribution operation.”
`
`Crowley said he phoned in a tip to a DEA agent he knew in San Francisco,
`and Mark Geraci, the company’s security chief, wrote a letter to the DEA
`about Lam’s. But the company did not share the telltale sales data with the
`DEA or others in law enforcement, Crowley said. With Lam’s, some
`wholesalers decided to stop supplying the store and Purdue ultimately
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`limited the amount of OxyContin the pharmacy’s remaining wholesaler
`could buy. But in that case, and in San Francisco, the company did not cut off
`the wholesalers completely.
`
`Federal prosecutors in Las Vegas later targeted Lam’s, charging a local drug
`dealer, an 87-year-old doctor, a pharmacist and others with participating in a
`criminal ring that furnished pills to addicts as far away as Ohio and New
`Hampshire. Several were convicted. Others are awaiting trial.
`
`In Southern California, one of Purdue’s OxyContin distributors eventually
`noticed a troubling spike in sales at St. Paul’s Pharmacy in Huntington Park,
`which was filling prescriptions for Lake Medical.
`
`“They are buying a lot of Oxycontin 80s from us,” the security chief for
`distributor HD Smith emailed Crowley in August 2009.
`
`Purdue knew St. Paul’s orders for 80s were up nearly 1400%. But the
`company’s monitoring committee “hadn’t gotten around to discussing” the
`store, Crowley wrote in an email to colleagues, and he asked Ringler, the L.A.
`district manager, to investigate.
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`St. Paul's pharmacy in Huntington Park was among those that filled
`prescriptions from Lake Medical for 80mg OxyContin pills. (Court
`exhibit)
`
`The pharmacist told Ringler his business “exploded” when he started filling
`80s for Lake Medical doctors, according to series of emails and reports on her
`August 2009 visit.
`
`Ringler asked the pharmacist if the cash transactions for maximum-strength
`OxyContin concerned him, according to the emails, but he declined to
`answer. When she suggested he call law enforcement, “he said he didn’t want
`to get audited by the DEA,” Ringler told supervisors. “I told him that
`eventually the DEA will track down where these Rxes are getting filled.”
`
`HD Smith cut off shipments to the pharmacy after her visit, but other
`distributors still filled orders from the store and other pharmacies were filling
`prescriptions from doctors at Lake Medical.
`
`In an email to Crowley and others at Purdue, Ringler said the drug sales were
`“clearly diversion” – illegal use or distribution of pharmaceuticals.
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`Reaching out to the DEA “is under serious consideration,” Crowley replied.
`Ringler pushed back, telling him that Lake Medical was “very dangerous”
`and “an organized drug ring.”
`
`“It just seems that trained professionals like the DEA would be better
`equipped to do further investigation of this clinic,” she wrote.
`
`“Thanks, Michele,” Crowley replied. “We are considering all angles.”
`
`Purdue's statement
`Purdue provided a statement for this story. Read it here.
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`In his statement to The Times, Purdue’s general counsel, Strassburger,
`acknowledged that the company is “required to monitor and report
`suspicious orders to the DEA," but he noted that "Purdue does not ship
`prescription products directly to retail pharmacies; it sells only to authorized
`wholesalers, who maintain their own order monitoring programs.”
`
`“Once Purdue identifies the potential suspicious activity of a wholesaler’s
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`customer, Purdue informs the wholesaler, so they can perform their due
`diligence…,” Strassburger said.
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`In the case of Lake Medical, Purdue didn't notify some distributors that it
`suspected St. Paul's was part of a drug ring. Five months after HD Smith
`stopped shipments, another wholesaler selling large quantities of 80s to St.
`Paul’s reached out to Crowley seeking information about the store.
`‘It really takes the ‘G’ a long time to catch up with these jokers’
`In the end, the Lake Medical ring was brought down by a team of state,
`federal and local investigators who collected tips from citizens and spent
`hours staking out the clinic, interviewing witnesses and turning junior ring
`members into informants. When Lake Medical closed in 2010, after a year
`and a half in business, Purdue had still not shared its wealth of information
`on the clinic with the authorities, according to law enforcement sources.
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`Dr. Eleanor Santiago leaves U.S. District Court in Los Angeles on Oct.
`3, 2014 after testifying against alleged co-conspirators in an
`OxyContin trafficking ring. (Al Seib / Los Angeles Times)
`
`In an email to a distributor after the arrest of Santiago and the clinic
`operators, Crowley criticized the pace of the government investigation.
`
`“It really takes the ‘G’ a long time to catch up with these jokers,” he wrote.
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`In a memo to supervisors after the clinic was shuttered, Ringler noted that
`more than 20 doctors in her territory were still doling out large amounts of
`80s, some using the same pharmacies Lake Medical had used. She suggested
`that Purdue use its databases to “proactively” report suspicious prescribing,
`across the country, to insurers as well as law enforcement.
`
`Purdue did not respond to questions about the proposal. Crowley said he was
`never told about her plan. Ringler declined to speak to The Times.
`
`The company introduced a new, tamper-resistant OxyContin tablet in August
`2010. Addicts found them almost impossible to smoke or snort. Within
`months, the old 80s were gone from the streets and many dependent on the
`pills switched to heroin, which was chemically similar and readily available.
`
`In December 2011, two months after the Lake Medical arrests, Purdue lawyer
`Abrams emailed a DEA official in LA the names of local doctors it suspected
`of misprescribing OxyContin. Santiago, who had already been arrested, was
`on the list.
`
`“Basically, it was old news,” said Mike Lewis, then the agency’s diversion
`program manager in L.A. The doctors were “people we were already actively
`investigating or cases we had taken action on.”
`
`Times investigation
`Full coverage: One town's battle with OxyContin
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`Two years later, in 2013, Abrams called the U.S. Attorney’s Office in L.A. with
`an offer of assistance, according to an investigator’s report. The company
`turned over hundreds of pages of internal records about the Lake Medical
`ring and other suspicious operations in Southern California, which Purdue’s
`Strassburger said were used by federal prosecutors.
`
`By the time Purdue approached prosecutors, the ring had been out of
`operation for more than three years and Santiago had pleaded guilty to
`healthcare fraud. (She was later sentenced to 20 months in prison.)
`Prosecutors had already built cases against the other ring participants.
`
`Clinic operators Mike Mikaelian and Anjelika Sanamian pleaded guilty to
`conspiracy to distribute controlled substances and other crimes in 2014 and
`received sentences of 12 and eight years. The St. Paul’s pharmacist, Perry
`Nguyen, was sentenced to six months in prison for financial crimes
`connected to the drug case.
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`In hindsight, Crowley said, he questions whether Purdue should have done
`more.
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`“Are we responsible for diversion at the pharmacy level?” Crowley said. “Well,
`once we start to learn about it, we’ve got to report it. That’s for sure.”
`
`Credits: Design and production by Lily Mihalik and Evan Wagstaff. Graphics
`by Raoul Rañoa.
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