A Las Vegas pharmaceutical wholesaler acknowledged Wednesday he bought and sold an AIDS drug that was later determined to be counterfeit.
E.H. Paul DeBree testified before the Nevada State Board of Pharmacy in Las Vegas that while he was president and chief executive of Dutchess Business Services Inc, the company unknowingly purchased some counterfeit Serostim, a drug used to treat excessive weight loss in AIDS patients.
A complaint filed Aug. 21 by State Pharmacy Board Executive Secretary Keith Mcdonald accuses Dutchess Business Services of knowingly buying and selling counterfeit Serostim in 2000 and 2001. The complaint said that some of the counterfeit Serostim was allegedly sold to major wholesaler McKesson Corp., which then sold it to retail pharmacies. Patients received some of the fake drug before it was recalled, but it is uncertain if any of them were from Nevada.
The pharmacy board hearing reconvened Wednesday after time ran out in October. If Dutchess and related company Legend Pharmaceuticals Inc. are found guilty of the charges, they could loss their pharmaceutical licenses, pay hefty fines for each count or a combination of the two.
Dutchess voluntarily recalled its supply of Serostim after its manufacturer, Serono Inc., recalled lot numbers that were not authenticated. Serono, based in Rockland, Mass., said the two lot numbers in circulation did not come from its company. DeBree said he had consulted with Mcdonald and the Food and Drug Administration before recalling the drug.
Dutchess and its successor, Legend, also are accused of conducting millions of dollars worth of business with wholesalers in Florida and South Carolina that were unauthorized to possess the drugs involved in the transactions.
Dutchess was licensed as a Nevada drug wholesaler from July 1998 to April 2003 and is accused of buying drugs from Florida-based wholesalers Crystal Coast Inc. and Xenigen Inc. and South Carolina-based Rekcus Inc. In addition to Serostim, Dutchess purchased Lupron and Zoladex, which are competing prostate treatment drugs that must be administered by a physician. AstraZeneca in Wilmington, Del., makes Zoladex and TAP Pharmaceuticals Inc. in Lake Forest, Ill., makes Lupron.
Dutchess is accused of selling Serostim and Zoladex when it was not authorized by the manufacturers to possess the drugs. The complaint also alleges Dutchess claimed the Lupron it sold was from the manufacturer instead of from Crystal Coast, Rekcus and Xenigen. The complaint alleges Dutchess is authorized by TAP Pharmaceuticals to buy and sell Lupron, but most of its supply did not originate from the manufacturer.
Legend, which has been licensed as a Nevada drug wholesaler since May 2003, is accused of claiming its Lupron supply was from TAP when Legend's records show the Lupron came from Rekcus. Legend is owned by DeBree's son-in-law, Lance Packer.
Dutchess and Legend have been inspected annually by State Pharmacy Board officials and the FDA inspected Dutchess after the counterfeit Serostim was reported. No disciplinary actions or charges were brought against the company at that time.
The State Pharmacy Board became aware of Dutchess' and Legend's involvement with people who have been charged with various crimes, including racketeering, in January 2003 when Florida law enforcement officers asked for help in obtaining records from the two companies.
Gary Venema, special agent for the Florida Department of Law Enforcement, has been investigating the Florida companies and said the drugs were illegally obtained for resale.
DeBree said he started working with Florida wholesalers after receiving a solicitation fax and that he took steps to confirm the companies were licensed.
In order for the secondary wholesale market to make money, it relies on transactions priced below the manufacturers' generally accepted wholesale prices, DeBree said.
He said most of the drugs Dutchess and Legend buy and sell are below wholesale prices. For example, a Florida company offered at least a 10 percent discount to Dutchess and Legend. The companies in turn make about a 5 percent profit before taxes when they sell the drugs, DeBree said.
Dutchess and Legend are among the bottom-tier of wholesalers that sell to other wholesalers, which sell to three big distributors that provide drugs to retail pharmacies. The major wholesalers are Amerisource-Bergen Corp. in Chesterbrook, Pa.; Cardinal Health Inc. in Dublin, Ohio; and McKesson Corp. in San Francisco.
Typically, drugs are sold by the manufacturers to wholesalers before they are sold to retail pharmacies, hospitals and physicians, pharmacists say.
In some cases, the drugs are obtained illegally and then sold from wholesaler to wholesaler before ending up on retail shelves.
TAP customer service manager Barb Tolbert said in October that some wholesalers have admitted to diverting Lupron from its designated path and sales representatives have reported samples stolen.
Venema said sometimes physicians write prescriptions for patients who either don't exist or who don't need the drugs and then sell the drugs to wholesalers.
The drugs Dutchess and Legend purchased from the Florida wholesalers were obtained from East Coast physicians who resold their supplies that were intended for their patients, he said.
Physicians and hospitals are among the groups that can purchase drugs from the manufacturer at a discounted rate with the stipulation that the drugs are for their own patients' use, drug makers testified in October.
The pharmacy complaint is part of an ongoing feud between the Las Vegas wholesalers and Pharmacy Board executives. Steven Gibson, attorney for Dutchess and Legend, filed a lawsuit in U.S. District Court on March 5 that alleges Mcdonald and Pharmacy Board Legal Counsel Louis Ling went beyond their regulatory duties by smearing his clients' reputations in an attempt to put them out of business. The case is still pending.
Since Gibson's initial filing, Dutchess and Legend have filed complaints alleging Ling and Mcdonald made untrue statements about them to other wholesalers and tried to blacklist them in Nevada.
Prior to the October Pharmacy Board Hearing, Gibson filed a lawsuit in Clark County District Court seeking an order to prevent Ling and Mcdonald from participating in the hearing. Judge Jessie Walsh issued a temporary restraining order that prevented both men from participating in October, but Judge Mark Denton dismissed the case in December because Dutchess has not exhausted its administrative remedies. Ling and Mcdonald have been participating in the hearings this week.
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