Virtual Pharmacy Practice and Wholesale Distribution. Out of Thin Air

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1 Virtual Pharmacy Practice and Wholesale Distribution Out of Thin Air

2 Virtual Wholesalers and Dysfunction in s Prescription Medication Supply Virginia Herold Executive Officer CA State Board of Pharmacy

3 Statutory Mandate Protection of the public shall be the highest priority for the State Board of Pharmacy in exercising its licensing, regulatory, and disciplinary functions. Whenever the protection of the public is inconsistent with other interests sought to be promoted, the protection of the public shall be paramount. CA Business and Professions Code

4 Virtual Manufacturing Traditional manufacturing New models being developed NDA holder contract manufacturer contract packager contractor labeler 3PL distributes from warehouse

5 Goal The aim of prescription drug diversion is to acquire drugs at steep discount and reintroduce them into the wholesale market in a manner that obscures the fact that the drugs were ever diverted.

6 When done effectively, neither the pharmacist nor the consumer know that the diverted drugs are handled, packaged and labeled by parties not authorized or qualified to do so. $440,000,000 worth of drugs diverted Federal Grand Jury Indictment, #12-922(ORD), 26 Defendants, filed12/12/12

7 Virtual Wholesaler Brokers drug sales, but does not take possession typically Located anywhere, may operate from a home If unlicensed, where are the drugs coming from?

8 Pharmaceutical Supply Chain Manufacturer Wholesaler Pharmacy

9 Supply Chain is Not Really a Chain but a Network

10 Wholesale Broker Z: Unlicensed Wholesaler Arranges Sales & Purchases Through the Following Nevada Puerto Rico New York Ohio Kentucky Mexico New Jersey Louisiana Ohio Texas 2 Individuals Location unknown Employer unknown New York Oregon Oregon Minnesota PHARMACY Pedigree is created by Pharmacy Located in Same address as another Pharmacy Address on ALL pedigrees show purchase by Pharmacy located in licensed as a pharmacy, not as a wholesaler. Brokers sales to pharmacies. PHARMACY PHARMACY PHARMACY PHARMACY PHARMACY PHARMACY PHARMACY PHARMACY Hawaii PHARMACY Pharmacy Wholesaler Puerto Rico PHARMACY Wholesaler PHARMACY New Jersey Wholesaler Connecticut Wholesaler Arizona Wholesaler Wholesaler Wholesaler Georgia Pharmacy New Jersey Pharmacy Pharmacy Puerto Rico Puerto Rico

11 Who s in the Chart? 26 wholesalers, 17 non-licensed in CA; 17 pharmacies; plus one (unlicensed) wholesale broker overseeing all From: NV - 1, Puerto Rico 3, NY 2 OH 2, KY -1, NJ 2, LA -1, TX -1, OR -- 2, MN 1, CT 1, AZ 1, CA- 8, GA 1, Mexico 1, unspecified -- 1

12 The Story is Overly complex drug distribution makes investigation involving diversion, counterfeiting, misbranding and adulteration difficult

13 Drop Shipments Manufacturer ships product to pharmacy or practitioner, but ownership of the product goes to the wholesaler, who never possesses the product. Is also being done with 3PLs shipping, or wholesalers drop shipping to other wholesalers, or to pharmacies or...?

14 Disposing of Drugs? Reverse distributors create additional challenges record keeping/inventories inadequate pharmacies & wholesalers Drug take back programs in pharmacies No charge pickup from skilled nursing facilities and residential care homes of unwanted/unneeded medication

15 What Is Unusual Here?

16 Which One Is the Counterfeit?

17 Which is the counterfeit?

18 Counterfeit Adderal on the bottom, the real drug on the top; purchased from Internet May 2012

19 Problems with Supply Network April 2012 NY pharmacy purchased $274 million worth of black market HIV medications from a web of shell companies Drugs obtained from numerous sources Rebottled with fake labels and serial numbers, broken seals, outdated, or contain different medications than what is indicated on the labels. Result: patients exposed to potential adverse drug interactions, overdoses, or a decline in their condition by not getting the treatment prescribed

20 New York Field Office, FBI July 17, 2012 Manhattan U.S. Attorney Announces Charges Against 48 Individuals in Massive Medicaid Fraud Scheme Involving the Diversion and Trafficking of Prescription Drugs Scheme Caused Losses Estimated at More Than Half-a-Billion Dollars to Medicaid and is Believed to be the Largest Single Prescription Drug Diversion Scheme Ever Charged at One Time

21 Empty Containers in Pharmacy

22 Drugs Sorted to Fill Empty Containers

23 Drugs from other sources

24 Found in another pharmacy

25 Where did these come from? And where are they going?

26 Additional Source

27 More Sources for Bad Drugs Cargo thefts Recalls are now frequent are we certain all product recalled has been removed and destroyed, not re-entering supply? Drugs from US suppliers are too expensive for pharmacies and some wholesalers so they purchase made from outside US illegally. Some of these sales are brokered

28 More recently We have seen similar, less complex, networks developed for: - attempts to manipulate or profit from drug shortages - compounded drugs provided to MDs for office use or dispensing to patients and for workers comp schemes

29 Market Manipulations Exacerbating Drug Shortages and Excessive Prices In CA, pharmacies can only resell medication to the wholesaler they bought it from More than 55 pharmacies worked with one wholesaler to purchase their full allotment of short-supply drugs for profit, then wholesaler greatly increased price. Other non-licensed wholesalers purchased product from these pharmacies, or from the scavenger wholesaler

30 The State Board of Pharmacy has been notified about a possible attempt to introduce counterfeit Serostim 8.8 into the drug supply. According to the manufacturer, EMD Serono, it has received an inquiry about the legitimacy of Serostim 8.8, with a lot number of Y12A1165 and expiration date of 5/2016. This specific product with this lot number and expiration date is not legitimate. Anyone encountering such a product should quarantine the drug and contact the Board of Pharmacy for direction. Alert, 4/19/13

31 In Closing The aim of prescription drug diversion is to acquire drugs at steep discount and reintroduce them into the wholesale market in a manner that obscures the fact that the drugs were ever diverted.

32 When done effectively, neither the pharmacist nor the consumer know that the diverted drugs are handled, packaged and labeled by parties not authorized or qualified to do so. $440,000,000 worth of drugs diverted Federal Grand Jury Indictment, #12-922(ORD), 26 Defendants, filed12/12/12

33 Thank you.