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Pharmacy Owner and Director of Compliance Charged with Defrauding United States and Distributing Adulterated Products

On Tuesday, June 20, 2017, Paul J. Elmer, pharmacist and owner of Pharmakon Pharmaceuticals Inc. (a 503B Outsourcing Facility), and Caprice R. Bearden, Pharmakon’s Director of Compliance, were arrested and later indicted by a Federal Grand Jury in Indiana, charged with one count of conspiracy to defraud the United States and three counts of distributing adulterated products. According to FDA requirements, 503B Outsourcing Facilities must comply with current Good Manufacturing Practices (cGMPs)- the same requirement that big pharmaceutical manufacturing companies, such as Pfizer, are required to follow. 

The indictment alleges that from July 2013 through mid-February 2016, Bearden received approximately 70 potency test failure notices from companies used by Pharmakon to test compounded products potency, indicating that drugs, such as morphine sulfate and fentanyl, were entire under- or over-potent. In addition to receiving 70 potency tests indicating that Pharmakon’s products were adulterated, the indictment also alleges that after reviewing the results, Elmer and Beardon actively decided not to recall any products or alert anyone with the intent to protect profits and Pharmakon’s reputation. Further, the indictment alleges that during the course of three separate FDA inspections at Pharmakon, Elmer and Beardon lied to FDA investigators when they were specifically asked whether Pharmakon had received any out-of-specification test results, despite their knowledge to the contrary. This is ultimately the basis for the charge of conspiracy to defraud the United States.

This indictment comes not long after a Massachusetts pharmacist, Barry Cadden, was convicted of racketeering and fraud for his role as president of New England Compounding Center, whereby adultered drugs were sold that that caused the 2012 meningitis outbreak, ultimately killing 64 people, and sickening hundreds more.

Five major, important lessons can be drawn from this indictment for both 503B Outsourcing Facilities and 503A Compounding Pharmacies. 

  1. 503B Outsourcing Facilities and 503A Compounding Pharmacies are a hot topic on the FDA’s radar.
  2. 503A Compounding Pharmacies and 503B Outsourcing Facilities should engage in potency testing or another applicable test that establishes that the compound’s potency matches the compound’s label.
  3. If potency tests fail to establish that the compound’s potency matches the compound’s label, then the Pharmacy or Outsourcing Facility responsible should work with the FDA to initiate a recall.
  4. Employees and representatives should make nothing less than truthful statements, which are believed in good faith to be accurate, to the FDA during any interaction or correspondence with the FDA.
  5. Outsourcing Facilities and Compounding Pharmacies should have robust policies and procedures regarding their operations for compounding and should have a robust compliance/quality program that can identify issues or potential issues in order to respond quickly and comprehensively to any identified problems.

Frier Levitt routinely works with 503B Outsourcing Facilities and 503A compounding pharmacies in top-to-bottom operational assessments and compliance reviews, including drafting policies and procedures to meet both Federal and State requirements. Frier Levitt also represents 503B Outsourcing Facilities and 503A Compounding Pharmacies that have received Form FDA 483 and FDA Warning Letters. Contact Frier Levitt today to speak to an attorney.