50 Targeted in Discount Drug Resale Scheme

About 50 people are expected to be indicted today by a federal grand jury in Atlanta in connection with a scheme in which prescription drugs sold to hospitals and physicians at discount prices were allegedly illegally resold to wholesalers, The Times has learned.

The indictments are the result of a two-year FBI “sting” operating out of the agency’s Atlanta office, an affidavit filed Monday in U.S. District Court here revealed.

Seven Californians, including a San Diego pharmacist and a Bay Area physician, are expected to be charged, said Lorie Rice, executive officer of the state Pharmaceutical Board in Sacramento.

More Charges Expected

“These are the first wave of indictments,” Rice said. “We expect more indictments to be coming.”

The affidavit said the scheme centers on so-called diverters--people who illegally buy drugs sold to hospitals or doctors at huge discounts and then sell them to wholesalers, who in turn sell them to retail pharmacies.

A large percentage of the diverted drugs come from nonprofit hospitals, according to David Nelson, a staff member with the House subcommittee on oversight and investigations. The hospitals buy more drugs than they need and sell the excess illegally to diverters.

The drugs are then illegally removed from their original packaging and sold in “loose” form to legal wholesalers and pharmacists at bargain prices, the affidavit said.

Some of the drugs that ended up on drugstore shelves throughout the country were incorrectly labeled and many had met their potency expiration dates, the affidavit said. Other drugs were obtained from Mexico and other countries and sold here without warnings, directions or lot numbers, making it impossible for the government to recall them.

Greater Danger Seen

Most pharmaceuticals manufactured abroad are not approved by the U.S. Food and Drug Administration.

“Diversion is a serious problem by itself. But when you include foreign drugs, it doubles the danger,” Nelson said. “These drugs enter the United States without being tested. There’s no way for a retail druggist at the end of the chain to know if he is getting bad drugs.”

The subcommittee, chaired by Rep. John D. Dingell (D-Mich.), has been investigating the diversion of pharmaceutical drugs and the illegal importation of foreign drugs. The panel, in a report released last month, warned that “consumers can no longer purchase prescription drugs with the certainty that the products are safe.”