Federal grand jury probing Nevada pharmacies

David Strow

Thursday, March 30, 2000 | 10:52 a.m.

The U.S. attorney's office in Las Vegas is conducting an investigation into possible fraudulent drug sales by unnamed pharmacies in Nevada.

The investigation, which has been under way for at least six months, was revealed this week by Bindley Western Industries Inc., an Indianapolis pharmaceutical distributor that says it is being probed in the "ongoing grand jury investigation."

The investigation is targeting certain pharmacies in Nevada and California that purchased drugs from Bindley Western's Southern California office from 1995 to 1997.

In its annual report, Bindley Western did not say what other companies were being investigated by the U.S. Attorney, but said it is cooperating with the investigation and has launched its own investigation. To date, the U.S. attorney has not made any formal charges.

Bindley Western said the investigation is focusing primarily on the activities of institutional pharmacies in both Nevada and California. Also known as "closed-door" pharmacies, these companies purchase drugs from distributors at prices below wholesale, but may only sell the products to their own long-term patients, such as nursing home and assisted living patients. Wholesalers are given credits by drug manufacturers for sales to these pharmacies.

The U.S. attorney is investigating whether closed-door pharmacies violated these agreements by reselling drugs at a profit, rather than distributing solely to their customers.

Such sales are a widespread problem in Las Vegas, said Keith Macdonald, executive secretary of the Nevada Board of Pharmacy. About 30 to 40 pharmacies in Las Vegas, he said, regularly buy drugs through closed-door agreements and resell them into the secondary "grey market" at a profit.

"They've become very flagrant," Macdonald said. "It drives the cost up, that's all. It doesn't do a damn thing for the buying public."

One Las Vegas pharmacy, Macdonald said, sold $1 million in drugs in a single year through such methods, but didn't fill a single prescription. The drugs, he said, were acquired from Bindley Western.

However, Macdonald said the state has been powerless to act because Nevada pharmacy law doesn't specifically prohibit the practice.

Bindley Western is a target of the investigation because government officials want to know if company employees knew the drugs were going to be resold for a profit when they struck deals with the closed-door pharmacies.

"To date, the government's investigation has been substantially focused on sales that the company made at the San Dimas, Calif., division of Bindley Western Drug Co. to certain institutional pharmacies located in California and Nevada, principally between 1995 and 1997," Bindley Western's annual report said.

The two Bindley Western managers involved in the sales no longer work for the company, Bindley Western said. One was fired by the company two years ago for ethics violations, while the other resigned last October after the investigation was launched.

The company said it hasn't sold to the pharmacies under investigation "for an extended period."

"The company believes that its two former managers have admitted to certain wrongdoing in connection with their activities while employed by the company," Bindley Western said. The company didn't elaborate.

Officials at the U.S. attorney's office couldn't be reached for comment. Macdonald said the board wasn't aware of the investigation.

"It doesn't surprise me, and I welcome it," Macdonald said. "I hope they're imminently successful."