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Friday, January 25, 2013
Feds indict 3 in pharmaceutical sales conspiracy
A Texas trio ran a $60 million drug operation in Nashville that sold thousands of pounds of unregulated pharmaceuticals to independent pharmacies across the state, according to a federal indictment announced Thursday.
For about three years, according to the U.S. attorney’s office in Nashville, a couple and an associate from Houston moved large quantities of discounted prescription drugs from street dealers in New York City and Miami through a sophisticated distribution system they used to dupe pharmacies into buying the products.
The aim of the “drug diversion” scheme was to make a handsome profit on unregulated medications. The three Texans portrayed the operation as a wholesaler, authorities say.
The federal investigation led to grand jury indictments of Charles Edwards, 51; Brenda Edwards, 42; and Jerrod Smith, 43, all from the Houston area. None of the three could be reached for comment.
The company the three allegedly operated, Cumberland Distribution, used warehouses in Nashville to sort and relabel drugs to make them appear as if they had been purchased legally, according to the indictment.
Authorities further allege the defendants fabricated documents they gave to pharmacy customers, who received at least 3,600 pounds of pharmaceuticals.
The transactions, which persisted for nearly three years ending in August 2009, moved more than $58 million in pharmaceuticals, resulting in a $14 million profit for Cumberland, prosecutors say.
Jerry Martin, U.S. attorneyfor the Middle District of Tennessee, called the scheme “a grave threat to the public.” He said some of the unregulated drugs could have been contaminated, expired or otherwise mismanaged.
Martin would not comment about whether the unregulated drugs had harmed any consumers.
The indictment paints a picture of a sophisticated, multilayered supply chain in which products traversed the Southeast and Eastern Seaboard with the look and feel of a credible business.
Packages containing drug products — obtained from people with legitimate prescriptions — were shuttled between Minnesota, Nashville, New York City, Miami and Arkansas. The indictment did not spell out how that happened.
Large-sum wire transfers, sometimes exceeding $100,000, were sent from American, Canadian and Mexican banks to pay people federal officials described as “street collectors.”
The U.S. Food and Drug Administration regulates the wholesale drug market, and the agency is tasked with rooting out counterfeit and improperly labeled medications. Federal law stipulates that only state-licensed entities can possess and sell prescription drugs.
Since the late 1980s, federal regulators have been combating a practice known as “drug diversion,” the buying and selling of unregulated pharmaceutical products. It is nearly impossible to determine whether such drugs have been altered or stored improperly, according to federal prosecutors.
The three defendants face charges of conspiracy, obstruction of justice and money laundering.
If convicted, each could go to jail for decades and face hundreds of thousands of dollars in fines.
According to public records, Charles Edwards has a criminal record in Texas, including convictions from more than a decade ago for aggravated sexual assault and indecency with a child. The other two defendants had no criminal background.