Friday, Jan. 16, 2004 | 10:55 a.m.
Two related Las Vegas pharmaceutical wholesalers had their licenses revoked for an undetermined period after they were found guilty of 11 charges by the Nevada State Board of Pharmacy on Thursday.
Dutchess Business Services Inc. and Legend Pharmaceuticals Inc. were found guilty of falsifying their records and buying and selling drugs that were illegally obtained from companies not authorized to possess them.
Dutchess was run by E. H. Paul DeBree at the location where Legend now operates. Legend is owned and was run by Lance Packer, DeBree's son-in-law. DeBree said he offered consulting services to Legend.
Dutchess was found guilty of buying and selling counterfeit Serostim, a drug used to treat excessive weight loss in AIDS patients. Some of the fake Serostim, which is manufactured by Rockland, Mass.-based Serono Inc., ended up in patients' hands. DeBree had testified he didn't know the drugs were counterfeited.
Both Dutchess and Legend had their wholesale licenses revoked and will have to split the investigation and prosecution fees associated with the complaint. In addition, Dutchess will have to pay a $1 million fine, while Legend was fined $371,000.
Dutchess voluntarily closed its license in April 2003, but cannot apply to have it reinstated for at least one year because it was revoked Thursday.
Legend can also apply to have its license reinstated by the Pharmacy Board in one year.
In both cases, the board recommended that Pharmacy Board staff should go after personal assets if necessary to make sure the fines are paid. The board also recommended that no legal agency should allow Dutchess or Legend to do business during an appeal, if one is filed.
The wholesalers can appeal the Pharmacy Board's decision to the Pharmacy Board or through judicial review.
Pharmacy Board Executive Secretary Keith Mcdonald brought the accusations against Dutchess and Legend on Aug. 21. Dutchess was accused of buying drugs from Florida-based wholesalers Crystal Coast Inc., Genendo Purchasing Organization, LLC and Xenigen Inc. and South Carolina-based Reckus Inc. The principal parties involved with these companies were arrested in May and August and charged with various crimes including racketeering. Two people have entered plea agreements in Florida.
The Pharmacy Board became aware of the connection between the East Coast companies and the Las Vegas wholesalers after an investigation was launched in Florida in January 2003.
Gary Venema, special agent for the Florida Department of Law Enforcement, said he was investigating the Florida companies and that all of the drugs sold by these firms to Dutchess and Legend were obtained illegally. In this case, physicians supplied drugs intended for their own patients to wholesalers for a profit.
Physicians are among a small group of medical professionals who can purchase drugs at a discount from manufacturers. They are only allowed to use them on their own patients in exchange for the discount, manufacturers said.
The board found Dutchess had indicated on its sales records that it purchased drugs as an authorized distributor from the manufacturer, but really obtained them from Crystal Coast, Genendo, Xenigen and Reckus. In addition to purchasing Serostim, Dutchess purchased Lupron and Zoladex, which are competing drugs used to treat prostate cancer. AstraZeneca in Wilmington, Del., makes Zoladex and TAP Pharmaceuticals Inc. in Lake Forest, Ill., makes Lupron.
DeBree said he did not know the drugs were fake. He also testified that one of his customers told him about rumors that one of the batches he was selling was part of a fake batch. Despite his customer's comments, DeBree said he resold the product after his initial customer declined it.
"Whether he knew or didn't know is irrelevant," Pharmacy Board member Michael Triolo said. "The fact that he had it is wrong."
Dutchess said it voluntarily recalled the counterfeit Serostim and sought advice in 2000 on how to handle the fake drugs from Mcdonald and the U.S. Food and Drug Administration.
Steven Gibson, attorney for Dutchess and Legend, said his clients were conned by Crystal Coast, Genendo, Xenigen and Rekcus. He also said they should be rewarded for cooperating with Pharmacy Board staff and for alerting Mcdonald about counterfeit Serostim.
Dutchess also was charged for claiming the Lupron it purchased was from the manufacturer instead of from the Florida and South Carolina wholesalers. Nevada regulations require wholesalers to record every stop a drug has made when it is purchased from another wholesaler. TAP does authorize Dutchess as an authorized distributor, but most of Dutchess' product wasn't from TAP.
Legend, which has been licensed since May 1, 2003, was charged for claiming the Lupron it purchased was from the manufacturer instead of from the Florida and South Carolina wholesalers.
DeBree said he did his due diligence to confirm the credibility of the Florida and South Carolina companies by calling officials to see if each company was licensed and by trying to call the manufacturers to see if each company was authorized to sell the drugs. He said the manufacturers wouldn't tell him and he opted to do business with the Florida and South Carolina wholesalers anyway.
"You don't stop trying until you can prove it's correct," said Katie Craven, Pharmacy Board member.
Dutchess and Legend are part of a secondary wholesaling industry that exists by finding bargain batches of drugs and then re-selling them in a distribution channel that eventually provides drugs to the major wholesalers that deal with retail pharmacies. The major wholesalers are Amerisource-Bergen Corp. in Chesterbrook, Pa., Cardinal Health Inc. in Dublin, Ohio, and McKesson Corp. in San Francisco.
In order for the secondary wholesalers to make money, they buy drugs priced well below the manufacturers' generally accepted wholesale prices, DeBree said.
He said most of the drugs Dutchess and Legend bought and sold were at least 10 percent below the manufacturers' accepted wholesale prices.
"The harm with this industry is everybody makes a profit; the consumer is not protected and quality control is out the door," Nevada special prosecutor Mary Boetsch said.
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