Pikeville hospital to pay millions after employee stole drugs for distribution

The Pikeville Medical Center will pay $4.39 million in civil penalties to settle allegations that the hospital violated federal record keeping laws mandating that the hospital closely monitor the amount of controlled substances it distributes.

Federal officials alleged that poor record keeping on the part of the hospital allowed a former pharmacy technician to divert over 60,000 dosage units of oxycodone, hydrocodone and methadone from the hospital’s narcotics vault and other stores of drugs for over two years ending in 2018, a release from the U.S. Attorney’s Office for the Eastern District of Kentucky stated.

In September 2018, hospital leadership identified the diversion of drugs, reported the issue and then cooperated with the U.S. Drug Enforcement Administration’s investigation into the matter, the hospital said in a statement.

The pharmacy technician’s husband distributed the stolen drugs throughout the community, the U.S. Attorney’s office said. The couple, Kayla White Perry and William Chad Perry, pleaded guilty to federal drug charges in 2020.

“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 stated. “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 healthcare in the southeastern Kentucky community by providing quality care to our patients.”

No patients were harmed or deprived of needed medication as the drug diversion occurred, the hospital said.

“As the opioid crisis continues to plague communities in Kentucky, hospitals like PMC have a responsibility and critical role to play. They must ensure that controlled substances are carefully tracked and protected against theft and loss, so that these drugs are not diverted for illegal uses,” said Carlton S. Shier, IV, United States Attorney for the Eastern District of Kentucky, in a statement.

The hospital violated the Controlled Substances Act, the U.S. Attorney’s office said. The settlement sum is the third-largest civil penalty ever obtained from a hospital under the act.

“The size of this fine shows how serious this situation is,” said Special Agent in Charge Todd Scott, head of the DEA’s Louisville Division. “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.”

As part of the settlement, the hospital entered into a three-year agreement with the DEA that requires the hospital to train all employees who have access to controlled substances on federal laws and regulations, as well as investigate and report suspicious incidents related to controlled substances.

The hospital also will need to conduct an inventory of select controlled substances and send the results to the DEA every six months while also allowing DEA personnel to enter the hospital at any time to verify compliance.

Pikeville Medical Center’s board of directors approved over $4 million in security upgrades in response to the incident, the hospital said. Additionally, the hospital purchased a Flowlytics data mining software that monitors for suspicious activity, and expanded policies relating to handling of controlled substances and the investigation process for suspicious activity.

U.S. District Judge Robert E. Wier sentenced William Chad Perry to three years and six months in federal prison on the drug conspiracy charge and Kayla White Perry to three years and two months.

The judge also ordered them to pay $34,390 to the Pikeville hospital for the drugs Kayla Perry stole and provided to her husband to sell, according to court records.