Kentwood Pharmacy: Drugs Fished Out of Garbage and Resold to Patients

Gray Market Diverters

At the 2013 Interchange, PSM Board Member Dr. Marvin Shepherd
offered an explanation of how drug diversion
subverts the securesupply chain and endangers patient health.

Three pharmacists from the now shuttered Kentwood Pharmacy have been sentenced in Federal court, and stripped of their right to practice as a result of their guilty pleas on charges of reselling discarded medication. The CEO of Kentwood Pharmacy also faces related charges in the drug diversion case, which alleges he structured cash deposits of profits from Kentwood Pharmacy to avoid law enforcement scrutiny.

James D. Orr, 76, Thomas Verhage, 68, and Eugene A. Biegert, 69 were sentenced on November 15 for their roles in repackaging and distributing old medication that had been discarded from nursing homes that Kentwood Pharmacy did business with, reports the Department of Justice (DOJ) in their press release on the occasion of the pharmacists’ sentencing. Orr and Verhage were fined $30,000, and Biegert was fined $15,000, reports the DOJ.

In a story reporting the indictment of Kentwood Pharmacy’s CEO, MLive cited witnesses who “told agents that some bags of returned drugs contained mouse droppings and, in one case, a bag contained a used catheter.”

In addition to their fines, “as a consequence of the convictions, U.S. Department of Health and Human Services will exclude the defendants from participation in any Federal Health Care Program (Medicaid and Medicare) and the U.S. Food and Drug Administration will debar them from working for anyone with an approved or pending drug product application,” reports the DOJ.

Orr, Verhage & Biegert pleaded guilty to a convoluted scheme that set up Kentwood Pharmacy as a clearinghouse for used prescription drugs. According to MLive, the charges alleged “a variety of wrongdoing by the pharmacy, including unsanitary conditions at the packing plant and the possibility for customers to get the wrong or cross-contaminated drugs or medication effected by light, temperature and humidity.”

The indictment against Orr and Verhage described their crimes saying that they “returned and supervised the return of previously dispensed drugs to manufacturer stock bottles resulting in the co-mingling of such previously dispensed drugs with drugs that had never been dispensed, thereby causing the stock bottles to bear false and misleading labeling in that lot number and expiration date required by law to appear on the labels of the stock bottles did not accurately reflect the lot number and expiration date of all the drugs contained within the stock bottles.”

In the MLive story on the occasion of the pharmacists’ sentencing, Assistant U.S. Attorney Raymond Beckering III described Kentwood as a “pharmacy cesspool,” and added, “Prescription drugs are one of the products in our society that we should expect are not recycled or reused given that the integrity of the product is essential to its safety and efficacy. We reasonably expect that our drugs, like our food, have not previously been served to someone else.”

Kentwood Pharmacy CEO Kim Duron Mulder has also been indicted on separate charges in the drug diversion case, reports MLive. He is alleged to have structured profit deposits to hide their existence from regulators by making smaller deposits at separate bank branches to break them into smaller increments. He “made large cash deposits — three of nearly $10,000 each to Huntington Bank on May 5, 2009 and three more totaling more than $19,000 the next day — in violation of a federal reporting requirement. Banking regulations require reports of deposits in excess of $10,000,” reports MLive.

US Attorney Patrick Miles said in the FBI press release on the occasion of Orr and Verhages’ guilty pleas, “The Federal Food Drug and Cosmetic Act provides an essential regulatory framework to safeguard the public’s use of prescription drugs. These federal regulations are buttressed by explicit state laws which strictly limit the reuse of drugs which have left the control of pharmacies. The public must be able rely on pharmacists who have both professional and statutory duties to ensure that pharmacies operate in compliance with these federal and state laws regulating the handling, packaging, and distribution of drugs.”

The FBI press release also reports that the investigation of this case was initiated by confidential tips, and that the investigation is ongoing and being coordinated by the FDA, FBI, DEA, and IRS. Assistant U.S. Attorney Ray Beckering is prosecuting the case on behalf of the government.

By S. Imber