It is stunning to think of a legitimate corporation as a drug dealer. Criminal charges filed for exactly that demonstrate why government regulation must be a part of our capitalistic economy.
On Tuesday, a U.S. attorney in New York announced that Rochester Drug Cooperative, the country’s sixth largest pharmaceutical distributor, and two of its executives were indicted on criminal drug distribution charges usually reserved for street dealers or drug trafficking cartels.
The indictments are a new tactic unleashed to stem an addiction crisis driven by prescription painkillers.
For policymakers and voters, the indictments afford an opportunity to consider why government regulation is necessary to make the American economy benefit all stakeholders, from investors to customers.
Rochester shipped millions of doses of the opioids to pharmacies it admits it knew were distributing the drugs illegally. Lawsuits making similar allegations have been filed against Purdue Pharma and the Sackler family, originators of OxyContin.
Both companies made billions in rewards while escaping any risk. Rochester and Purdue transferred all the risks that might have slowed their sales onto consumers by pushing the drug to physicians and pharmacies while hiding its addictive nature.
Government regulations can help guard against such transfers of risk by helping assure that consumers have what they need to make informed buying decisions. The risks of penalties for not providing that information must remain with companies.
Regulatory systems only work when they can be reviewed and reworked on a consistent basis.
When government’s role in that process is cast as illegitimate, battles over the mere existence of regulations dominate and a responsive process cannot happen. Customers and companies suffer as government regulations calcify.
Rochester has agreed to a penalty including a $20 million fine and five years of supervision. Purdue and Rochester’s former chief executive are still in court.
Billions in illegitimate profits and an estimated 200,000 lives lost finally may have triggered government actions strong enough to restore an appropriate risk-reward balance.
Capitalism’s strength comes from rewarding initiative and creativity. It only works for everyone when government intervention ensures that those traits aren’t used to exploit consumers in the service of greed.