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October 22, 2014

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Suspicious pharmaceutical sales detailed at hearing

A Las Vegas pharmaceutical wholesaler bought and sold prescription drugs from wholesale companies under criminal investigation in Florida, an investigator testified Wednesday.

Gary Venema, special officer with the Florida Department of Law Enforcement, was a witness Wednesday in a hearing before the Nevada State Board of Pharmacy in Las Vegas. The board is conducting an administrative hearing that is scheduled to run through today on charges it filed against Las Vegas wholesalers Dutchess Business Services Inc. and Legend Pharmaceuticals Inc.

The companies are accused of buying and selling prescription Lupron and Zoladex from other wholesalers that were not authorized to possess the drugs. They are competing drugs that are used in the treatment of prostate cancer and must be administered by a physician. Both drug manufacturers have contractual provisions that prevent physicians, clinics and hospitals from ordering more than they can use on their own.

It's suspected by law enforcement officers and drug manufacturers that doctors, hospitals and clinics illegally sell the drugs, which they buy at discounted prices, to secondary wholesalers that aren't authorized to have them.

Dutchess and Legend officials said they didn't know the out-of-state wholesalers were not authorized to sell the drugs.

Dutchess is also accused of distributing counterfeit Serostim, which is used in the treatment of AIDS patients who suffer from excessive weight loss in a short amount of time. Dutchess officials say they didn't know the Serostim was fake and when they found out, they recalled it. It's unknown whether anyone in Nevada used the fake drug.

The Nevada complaint filed on Aug. 21 by board Executive Secretary Keith Macdonald said the companies should have known the drugs they were buying and selling weren't from manufacturer-authorized distributors and they weren't licensed in Nevada. It also said Dutchess should have known the Serostim was fake.

The complaint against Dutchess and Legend could result in fines and suspended licenses if they are found guilty.

Dutchess and Legend are affiliated companies and share the same physical address, Nevada pharmacy licensing records show. Nevada Secretary of State records show Lance Packer as the president, secretary and treasurer of Legend, while George Lotman is listed in those roles for Dutchess.

Ryan Schultz, an attorney for both companies, told the pharmacy board Packer was a former principal in Dutchess.

Officials of TAP Pharmaceutical Products of Lake Forest, Ill., testified Wednesday that Dutchess filed a notice to transfer the manufacturer's authorization to sell TAP's drugs from Dutchess to Legend in April

The pharmacy complaint said Dutchess and Legend purchased Lupron and Zoladex from Florida wholesalers Crystal Coast Inc., Xenigen Inc. and Genendo Purchasing Organization LLC and South Carolina wholesaler Rekcus Inc. All of the companies are affiliated with or owned by Elenore Walker, Per Oddmund Loyning and Guy Sarapo. All three have been arrested in Florida on various charges including racketeering and fraud, Venema said.

Venema said that for the last two years he has been investigating pharmaceutical crimes, especially prescription drugs diverted into the black market through illegal means. In July, 19 people were indicted in Florida by a Supreme Court Grand Jury on charges involving illegal trade in pharmaceutical drugs.

Since then, he has been involved with the indictment and charges of others involved with similar schemes. Walker was arrested in June and her common-law husband, Loyning, was arrested in May following a sting operation at their Florida home, Venema said. Loyning was using the name of Walker's ex-husband, William Walker, Venema said.

Venema said Loyning testified he was selling Lupron and Zoladex to Dutchess.

Florida law enforcement officers found in the Florida home of Loyning and Walker faxes from and shipping labels addressed to Dutchess from a combination of Xenigen, Genendo and Rekcus, Venema said.

Venema said Loyning told him that he didn't sell to any other companies. Law enforcement officials found no records to contradict Loyning's statement, he said.

Walker and Loyning obtained Lupron and Zoladex from doctors in Florida and other states, he said. Venema said they told him they made a $15,000 profit per month from their companies.

An official from Wilmington, Del.,-based AstraZeneca Pharmaceuticals Inc., the manufacturer of Zoladex, testified Wednesday by telephone that neither Dutchess, Legend, Crystal Coast, Rekcus, Xenigen nor Genendo were ever authorized distributors of Zoladex.

Dutchess applied to be an authorized distributor of Zoladex in 2000, but the application was rejected, said Mark Holder, director of trade customer relations for AstraZeneca. He did not elaborate on why the application was declined.

Holder said the company cannot trace its drugs beyond the initial shipments to doctors, clinics, hospitals and wholesalers. However, manufacturer-authorized wholesalers are expected to be able to provide information about where the drugs were shipped if necessary, he said.

He said there were no contractual agreements that prohibit sales between wholesalers, but he is unaware of any sales between authorized distributors to other wholesalers.

Barb Tolbert, manager of customer service for TAP Pharmaceuticals, testified Wednesday that her company manufactures Lupron and that Dutchess, Legend and Rekcus had been, or are, customers of the company.

She said each Lupron package is laser etched with the physician's name and city before it is shipped out to curtail it from being diverted through illegal channels. Physicians are able to purchase the drug at a contractual discounted rate if they belong to certain group purchasing organizations.

Some wholesalers have admitted to diverting Lupron from the designated path and TAP sales representatives said they have had samples stolen from them, Tolbert said.

Venema later testified that the containers used by Walker, Loyning and Sarapo had the laser-etched names removed with a buffing machine.

Dutchess and Legend attorneys Schultz and Steven Gibson assert the pharmacy complaint was filed in retaliation for a lawsuit filed in U.S. District Court in Las Vegas in March. Dutchess and other companies filed the pending lawsuit against Pharmacy Board executive secretary Macdonald and board general counsel Louis Ling. The lawsuit resulted in a gag order against both men. The drug companies claim the Nevada regulators are biased against them and want to shut down the secondary drug industry in Nevada.

On Friday, Dutchess and Legend filed a lawsuit in Clark County District Court against Macdonald and Ling. The lawsuit alleged both men abused the process regarding the pharmacy complaint and alleged both men were biased against the companies and the secondary wholesaling industry. Judge Jessie Walsh issued a restraining order that prevents Macdonald and Ling from participating in the pharmacy hearing.

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