PIKEVILLE, Ky. — The U.S. Attorney’s Office announced Wednesday that Pikeville Medical Center has agreed to pay the government $4.39 million in civil penalties to resolve record-keeping violations related to the Controlled Substances Act, which allowed thousands of pills from the pharmacy to be stolen by a pharmacy technician and sold illicitly by her husband.

However, the announcement credited PMC for self-reporting the diversion of the drugs and fully cooperating with the investigation into the matter. Authorities also recognized PMC for taking “substantial steps to address deficiencies in its handling of controlled substances even before reaching the settlement.”

“After discovering this diversion event, we immediately contacted the appropriate authorities,” PMC President & CEO Donovan Blackburn said. He also noted that the illegal actions taken by the employee began prior to the current administration’s arrival and, once discovered, the employee was terminated immediately.

The penalty was described by authorities as “one of the nation’s largest relating to [Controlled Substances Act] recordkeeping violations involving allegations of drug diversion at a hospital.”

“The size of this fine shows how serious this situation is,” the head of the Drug Enforcement Administration’s Louisville office, Special Agent in Charge Todd Scott, said. “Hopefully, Pikeville Medical Center will do a better job in the future with their record keeping and the resulting harm inflicted on the community can be reversed.”

According to records on file in U.S. District Court in Pikeville, pharmacy tech Kayla Nicole White Perry exploited incomplete records relating to drug inventories and dispensing information to divert 60,000 dosage units of oxycodone, hydrocodone and methadone, from Jan. 1, 2016, to Sept. 7, 2018. Those drugs were then sold by her husband, William Chad Perry.

Both later pleaded guilty to conspiracy charges related to the diversion, with each sentenced to more than three years in prison and ordered to pay more than $34,000 in restitution.

“Patient safety and care is our number one priority to Pikeville Medical Center,” the hospital said in a statement. “As the diversion occurred at a point in the supply chain prior to patient contact, we can confirm no patients were deprived of medication or harmed as a result of this staff member’s actions.”

Under the terms of the agreement between the hospital and authorities, PMC has agreed to a number of steps over the next three years. Those include:

• Permitting DEA personnel to enter its registered location at any time during regular business hours without an administrative inspection warrant, and without prior notification to PMC, to verify compliance with the Memorandum of Agreement;
• Conducting an inventory of select controlled substances every six months and providing the results to DEA;
• Investigating and documenting any concerns about diversion, employee theft, or significant loss of controlled substances;
• Reporting suspicious controlled substance incidents to DEA on a quarterly basis; and
• Providing mandatory training on federal laws and regulations pertaining to controlled substances for all employees and contract personnel who have access to controlled substances.

The hospital says it has spent more than $4 million for security upgrades and new technological monitoring at the pharmacy.

“I wanted to go overboard to ensure that the chance of something like this happening again is zero to nil,” Blackburn said.

In addition, PMC has taken the following steps:

• Purchased Flowlytics data mining software to monitor for suspicious activity;
• Hired Comprehensive Pharmacy Solutions as an external consultant and management company;
• Established a Diversion Prevention Committee;
• Enhanced our medication reconciliation reporting procedures, and;
• Expanded our policies related to both the handling of controlled substances and the investigation process related to suspected diversion.

“We are deeply concerned that this incident occurred, and we’re committed to the safety and well-being of our patients and staff,” the hospital said in its statement. “We have taken multiple steps and invested in new technology to better detect and prevent medication diversion in our facility. Pikeville Medical Center and our current leadership is committed to being the provider and employer of choice for health care in the southeastern Kentucky community by providing quality care to our patients.”

Blackburn said the hospital’s efforts have not gone unnoticed. He said following a very recent audit of the hospital’s pharmacy, one state official said PMC had the best security program he had ever seen. Blackburn also said there have been no significant problems detected in the pharmacy’s security protocols since the diversion was discovered.

“I’m very proud of our team not only for minimizing the impact of what took place over four years ago, but also for taking the steps necessary to make sure nothing like this ever happens again …” Blackburn said. “Security has improved not just a little bit, but drastically.”