Hearing for pharmacy suppliers recessed

Michelle Swafford

Friday, Oct. 17, 2003 | 10:47 a.m.

Two Las Vegas pharmaceutical wholesalers must wait until at least December for state regulators to resolve a complaint alleging they did business with unauthorized drug distributors and, in one case, sold a counterfeit AIDS drug.

An administrative hearing before the Nevada State Board of Pharmacy was postponed until Dec. 3 in Reno after a three-day hearing in Las Vegas ran out of time Thursday. At least three witnesses still have to testify.

Dutchess Business Services Inc. and Legend Pharmaceutical Inc. are accused of buying and selling Lupron and Zoladex in deals with wholesalers in Florida and South Carolina that weren't authorized to possess the drugs. Lake Forest, Ill.-based TAP Pharmaceutical Inc. manufactures Lupron and Wilmington, Del.-based AstraZeneca Pharmaceuticals Inc. makes Zoladex. Both drugs are used to treat prostate cancer and must be administered by a physician.

Contractual provisions prevent physicians from ordering more of the drug than they can use on their own.

Law enforcement officers and the drug manufacturers say that physicians purchase the drugs at a discounted rate and, in some cases, are selling them to secondary wholesalers that aren't authorized by the manufacturers to possess the drugs.

Dutchess and Legend say they didn't know the wholesalers weren't authorized to buy and sell the drugs.

Dutchess is also accused of distributing counterfeit Serostim, which is used in the treatment of AIDS patients suffering from excessive weight loss. The complaint said Serostim was allegedly sold to a company that sold it to major wholesaler McKesson Corp. In turn, the drug was sold to retail pharmacies and some patients used the drug. It is uncertain if any pharmacies or patients in Nevada obtained the fake drug. Serono Inc. in Rockland, Md., manufactures Serostim.

Serono officials said neither Dutchess nor Legend were authorized purchasers of the drug.

Dutchess said it didn't know about any counterfeit Serostim and when it heard that some was potentially counterfeit it recalled the drug batches in question.

The pharmacy 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 authorized distributors approved by their manufacturers. It also said Dutchess should have known the Serostim was fake.

The allegations in the complaint against Dutchess and Legend could result in fines and a suspended license if they are found guilty.

Dutchess is owned by George Lotman, but the operations were run by his longtime friend Paul DeBree, Lotman testified Thursday.

Lotman said Lance Packer, one of DeBree's sons-in-law, bought Dutchess a couple of months ago and changed the name to Legend. Nevada pharmacy licensing records show both companies have the same physical address. Pharmacy records also show Dutchess's wholesale license was transferred on March 7 to Legend.

The 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 three people arrested in Florida on various charges including racketeering and fraud, said Gary Venema, special officer with the Florida Department of Law Enforcement.

Venema testified Wednesday and Thursday that he has been investigating pharmaceutical crimes for the last two years. He helped other law enforcement officers arrest Elenore Walker in June, her common-law husband Per Oddmund Loyning in May and Guy Sarapo in August. Loyning had assumed Walker's ex-husband's name, William Walker, Venema said.

Venema said he found faxes and shipping records in the Florida home of Walker and Loyning that linked their companies to Dutchess and DeBree.

Other records found during the search showed physicians were paid between $20,000 and $400,000 for the drugs they provided to the Florida and South Carolina wholesalers, Venema said Thursday.

After the Florida investigation was under way, Dutchess and Legend officials were asked by the Nevada Pharmacy Board to provide company records related to Crystal Coast, Genendo, Xenigen and Rekcus. The Pharmacy Board had received a request for assistance from the Florida Department of Health.

Pharmacy Board investigator Fred Ackermann said Thursday that officials for Dutchess and Legend would not cooperate initially when he and another investigator arrived at the companies' headquarters on Jan. 30.

"DeBree is always very sociable and a gentleman," Ackermann said. "Packer became very aggravated, very animated and very foul in his language."

Packer then called one of his attorneys, Steven Gibson, Ackermann said.

Following Ackermann's testimony, the board recessed until the December meeting in Reno. At that meeting, Gibson will cross-examine Venema and begin calling his witnesses. Mary Boetsch, the state prosecutor of the pharmacy complaint, is scheduled to call DeBree.

Gibson said 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. They are accused of being biased against secondary wholesalers and trying to close that 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 drug wholesaling industry. Judge Jessie Walsh ordered a restraining order that prevents Macdonald and Ling from participating in the pharmacy hearing.