LV drug wholesalers in legal battles with state regulators

Cy Ryan and Michelle Swafford

Friday, Aug. 29, 2003 | 10:56 a.m.

Two Las Vegas drug wholesalers involved in a long-running dispute with state regulators are now accused of selling counterfeit prescription drugs and buying and selling $8.5 million in drugs in transactions involving unlicensed companies.

The Nevada Board of Pharmacy last week filed a 57-page complaint against Dutchess Business Services Inc. and Legend Pharmaceuticals, which according to the complaint are affiliated companies.

A disciplinary hearing will be held in Las Vegas on Oct. 15. The Las Vegas wholesalers could lose their licenses or pay fines of up to $10,000 per count if they're found guilty.

The case sheds some light on the complicated methods in which drugs reach consumers.

Prescription drugs aren't delivered directly from manufacturers to retail pharmacies, doctors and hospitals, as some believe. As with many businesses, there is a middle man, said Tom Dodge, pharmacy director of specialty pharmacy Option Care of Nevada.

Pharmacy wholesalers purchase drugs in bulk from pharmacy manufacturers and then mark up prices that are paid by individual pharmacies, he said.

"Their function is warehousing for these drugs because an individual pharmacy can't store all these drugs," Dodge said.

The complaint, signed by board executive secretary Keith Macdonald, said Dutchess and Legend bought and sold drugs in deals involving unauthorized wholesalers in Florida and South Carolina. All wholesalers involved are said to have made a profit before the drugs reached consumers.

Dodge said he could see where wholesalers might sell drugs to each other because the quantity of drugs determines the pricing.

"It's fairly uncommon, but it's going on," he said.

Steven Gibson, attorney for the two companies, said, "We deny any unlawful conduct and will conduct a vigorous defense of the action." He said the companies also deny purchasing and selling fake drugs.

Gibson said he has 14 days before he files an answer to the allegations.

The complaint said Dutchess purchased the drugs Serostim, Zoladex and Lupron from unauthorized wholesalers in South Carolina and Florida and sold them to wholesalers in other states. Serostim is used for several diseases but is most commonly used to treat AIDS. Lupron and Zoladex are competitive products used primarily in the treatment of prostate cancer.

The board said the drugs branded as Serostim were fake and were not produced by the manufacturer Serono. The board said Dutchess bought and sold 399 vials of counterfeit Serostim and had been informed by Serono that certain lots were fake.

"Unfortunately, some of the counterfeit Serostim was purchased and used by patients who suffered harm as a result of receiving counterfeit Serostim rather than real Serostim," according to the complaint.

It is not known if the counterfeit Serostim reached Nevada pharmacies or what harm consumers encountered.

Macdonald and board legal counsel Louis Ling said they could not comment on the complaint because they are under a gag order issued by the federal district court in Las Vegas.

Gibson said Dutchess and other companies secured the restraining order against Macdonald and Ling as individuals in March, which was five months prior to the state's complaint against Dutchess and Legend.

Ling and Macdonald are accused of business slander and intentional interference of an economic advantage. According to a lawsuit filed by Dutchess against the pair, "Ling has stated publicly that he would like to see all Nevada wholesalers put out of business even if he does not have legal jurisdiction for doing so."

The lawsuit goes on to say, "Macdonald has also expressed that he would like to see all Nevada wholesalers put out of business and that they are all illegitimate."

The lawsuit contends that Macdonald and Ling told an out-of-state wholesaler it should not do business with Nevada wholesalers.

Ling indicated the state's complaint against Dutchess and Legend is not related to the lawsuit filed by Dutchess against the regulators.

"The only linkage between (the lawsuit and complaint) is the parties."

But Gibson said he is investigating and analyzing whether retaliation is behind the complaint.

The complaint said Legend Pharmaceutical is accused of selling Lupron that didn't come from an authorized wholesaler.

According to the complaint, manufacturers supply doctors in Florida with drugs at a deeply discounted price with the condition they prescribe them for their patients. But apparently some physicians stock up and then sell the drugs to wholesalers in Florida that then merchandise them across the nation.

Dutchess and Legend are accused of buying these drugs from firms that are not licensed in Nevada and then selling them to other unlicensed companies. The complaint said Dutchess sold drugs to wholesalers in Kentucky, Missouri, Florida, California, Utah and Michigan.

"Unlawfully procured prescription drugs (were) fraudulently and deceitfully passed off to other wholesalers as having originated from the manufacturers when, in fact, the drugs originated from physicians' offices and drug counterfeiters," the complaint said.

It identified E. H. Paul DeBree and his son-in-law Lance Packer as principals in Dutchess. Corporation documents filed with the Nevada Secretary of State's office show Packer as the president of Legend.

DeBree owned LVPD, Las Vegas Distributor, which was a drug wholesaler in 1989. He brought on another son-in-law, Benjamin Ross. In 2000, Ross pleaded guilty and was convicted on one count of conspiracy for reselling discounted drugs from doctors to other wholesalers.

Dutchess and Legend apparently purchased drugs from Crystal Coast, a wholesaler in Florida whose license was revoked in that state in February 2002. Dutchess also bought Lupron and Zoladex from Genendo and Xenigen, both Florida wholesalers that were not licensed in Nevada.

The complaint also said the Las Vegas companies kept false records of their purchases and sales, giving the impression that they were buying the drugs from authorized distributing firms of the drug manufacturer. Or, records were missing of the drug transactions, the complaint alleged.

In failing to keep accurate and dependable records, the two companies violated state regulations, according to the complaint.

Florida officials in May and June arrested three people allegedly involved in illegal pharmaceutical dealing. They were Per Oddmund Loyning, his wife, Elenore Walker, and his partner Sheldon Kresler, who operated out of the Florida cities of Miami and Davie.