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HOW FAKE LIPITOR WAS SOLD ś Convicted cocaine smugglers plot and

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HOW FAKE LIPITOR WAS SOLD ś Convicted cocaine smugglers plot and Powered By Docstoc
					HOW FAKE LIPITOR WAS SOLD ¶ Convicted cocaine smuggler’s plot and loose regulation of pharmaceutical distribution allowed ineffective version of Pfizer’s popular cholesterol pill to reach consumers• • By SUSAN TODD • STAR-LEDGER STAFF • • Florida police rapped on Julio Cesar Cruz’s door in the waning darkness before sunrise July 21. He answered wearing his underwear. ¶ For the second time in three weeks, he was under arrest. ¶ As Cruz dressed, five police officers and a state pharmaceutical regulator listened while he tried to soothe his sobbing wife, according to a person who was there. At one point, he turned and asked the police: “Are they state or federal charges?” ¶ ¶ “State,” an officer replied. ¶ “Don’t worry,” Cruz told his wife. “This will be nothing.” ¶ Then police told him the charges: multiple counts of racketeering, part of a roundup of illicit prescription drug wholesalers. ¶ Cruz’s face dropped. This was bigger than the probation violation he had been nabbed for earlier. ¶ “Call the attorney,” he said to his wife. “Call the attorney.” ¶ As it turned out, Cruz was involved in something even bigger. A criminal complaint filed by federal prosecutors nine days ago accuses Cruz of masterminding a scheme to counterfeit Lipitor, which led to a nationwide recall of the cholesterol drug prescribed to 18 million Americans. ¶ Federal prosecutors say Cruz, a 41-year-old, twice-convicted cocaine dealer, manufactured, imported and distributed a convincing copy of the world’s best-selling medicine. ¶ By the time the U.S. Food and Drug Administration caught on, 200,000 bottles had to be recalled, a historic amount that exposed the vulnerabilities of a distribution system considered the safest in the world. ¶ “This isn’t the quiet industry it used to be,” said John Theriault, vice president of global security at Pfizer, the company that makes Lipitor. “Really clever criminals have seen that they’re going to make a lot more money with a lot less risk knocking off Lipitor and other prescription drugs. ¶ “The smart guys aren’t doing crack cocaine anymore.” ¶ During the past four months, with information from investigators and hundreds of pages of court documents, The Star-Ledger pieced together how the counterfeit Lipitor made its way from a factory in Costa Rica into medicine cabinets across the United States. ¶ A federal criminal investigation continues, but details are emerging of how a small group of sophisticated criminals allegedly profited from a scheme that treated medicine no differently than if it were $20 bills or designer handbags. ¶ No one has been convicted of any crime associated with the case. Lawyers for the four people charged refused to comment in detail. ¶ Lipitor, a tiny, oval-shaped white tablet, is a blockbuster for an industry whose heart lies in New Jersey. Sales of the drug reached $8 billion last year. That was the major reason Pfizer, the world’s largest drug maker with nearly 4,000 employees in New Jersey, paid $120 billion four years ago to acquire the company that developed it, Morris Plains-based Warner-Lambert. ¶ The tablet is a saving grace for a nation obsessed with unhealthy cholesterol levels. Rich people take Lipitor. Poor people take Lipitor. Members of Congress take Lipitor. ¶ “It really hit home,” said Donald deKieffer , an international trade lawyer in Washington, D.C., who advises companies on anti-counterfeiting measures. “A lot of the drugs that have been counterfeited in the past have been the high-end drugs, but very few people have Serostim or Epogen in their medicine cabinets.” ¶ The Lipitor case made one thing clear: The way medicine is moved from manufacturing plants to pharmacies has little oversight. While federal authorities police manufacturing and repackaging, regulating the distribution of medicines is left to the states. ¶ But state officials say they lack money and manpower to do the job. ¶ THE PRODUCT ¶

Few people consider the sometimes torturous route prescription medicines take to them. Because it is usually cheaper, big pharmaceutical companies hire wholesalers to ship their drugs to retailers. ¶ Three companies - Cardinal Health, McKesson and Amerisource Bergen - command roughly 90 percent of the $1.2 billion distribution market. The other 10 percent is handled by regional or specialty wholesalers. ¶ Operating outside the system are thousands of companies - secondary wholesalers. This is known as the “gray market.” The secondary wholesalers are often staffed by a couple of people and operated from strip malls or small suites. ¶ They frequently buy and sell to one another, so medicines sometimes change hands a half-dozen times before reaching a pharmacy. Making matters worse, investigators say, documents known as pedigrees that are supposed to provide a road map of a drug’s travels are easily forged. ¶ Some secondary wholesalers serve a legitimate purpose. For example, if a hospital has too much of one medicine, it can sell its supply before it expires. Even the big three wholesalers sometimes buy medicine in the gray market because it is cheaper. It is a matter of supply and demand. ¶ But the gray market is also vulnerable to criminals who are exploiting it with alarming ease. It is here the “greatest opportunities for compromising the safety of the U.S. distribution system exist,” according to an FDA counterfeiting task force report issued during October. ¶ Sometimes, medicine meant for sale overseas - and not approved by the FDA - enters the gray market in a practice known as diversion. In these cases, lower-priced or donated drugs are illegally imported into the United States, where they can be sold at higher prices. ¶ In the secondary market, some wholesalers have little regard for anything but price, and medicines are often stolen, expire, or are improperly stored. It also becomes an entry point for counterfeiters. ¶ It is this combination of lax regulation, loopholes and criminal ingenuity that investigators believe set the stage for one of the largest drug counterfeit cases in U.S. history. ¶ THE JAIL-YARD CLASSROOM ¶ Julio Cesar Cruz likely learned about prescription drug counterfeiting in prison. He certainly spent enough time there. ¶ Born in Cuba and raised in Miami, Cruz went to state prison in Florida at 22 on a four-year sentence for cocaine trafficking. After serving one year, he was released during late 1985. ¶ Only one detail is publicly recorded about what happened during the years after his release: In 1990, he was married. But during May 1995, he was sentenced to 136 months in federal prison. Again, it was cocaine trafficking. Much of the sentence was spent in Georgia, according to court and prison documents. ¶ By early 2001, Cruz was transferred home to Florida where he was released a few months later. He was still serving part of his sentence - five years of supervised release - when police came knocking during July. ¶ By then, cocaine was no longer his main line of business. ¶ At least two other members of the group suspected of making the fake Lipitor served in prison with Cruz, according to investigators. One was a convicted cocaine trafficker, the other was a convicted marijuana smuggler. ¶ Shortly after Cruz left the Eglin Federal Prison Camp in Fort Walton Beach, Fla., during April 2001, he used an old alias, Ricardo “Rick” Garcia, to obtain a driver’s license and a passport. Both were violations of his probation. ¶ A driver’s license and less than $1,000 is all he needed in Florida to become a licensed drug wholesaler, according to state regulations. If those seem like flimsy requirements, consider New Jersey. Here, people can pay as little as $200 and check a few boxes on a six-page form to be licensed to buy and sell prescription drugs. In the aftermath of high-profile drug diversion cases, Florida and Nevada passed laws making it tougher to get wholesaler licenses. ¶ That was only after Julio Cruz had entered the gray market. ¶ Just five months after leaving prison, he incorporated Medical Dynamics in Miami, according to papers filed with the state of Florida. Next, he used his alias to establish Pharma Medical in Gatlinburg, Tenn. Still another company was established in Miami earlier this year with a business address that was in a Mailboxes Etc. store. ¶ Millions of dollars passed through Cruz’s companies, according to reports compiled by Florida investigators over the past year. In one transaction, Cruz’s comp

With Florida a hotbed for the gray market, it was no surprise that Cruz’s operation bumped into Michael Carlow, the accused ringleader of another drug-diversion ring in South Florida. ¶ On the same day police showed up at Cruz’s door during July, Carlow and his wife were arrested at their estate in a gated community in Weston, outside Fort Lauderdale. The arrests - 17 people in all culminated an investigation that began when a legitimate drug wholesaler was burglarized and the stolen drugs showed up for sale on the Internet. ¶ Cruz used Carlow’s far-flung operation to move Lipitor into the mainstream, according to federal and state investigators. Carlow boasted of making millions, and he collected many trappings of success - a mansion, a Ferrari, a couple of Harley-Davidsons and a yacht. ¶ “The allusion to the cocaine cowboy of the’80s is a good one,” said Oscar Gelpi, an assistant state prosecutor in Florida. “There are a lot of similarities, everything from the way they organize their enterprises to the lavish lifestyles of some of the more successful ones.” ¶ Cruz wasn’t as showy. He dressed well, but he lived with his wife and child in a lower middleclass neighborhood of attached townhouses in Miami. ¶ But Cruz was quietly socking away money, according to state and federal investigators. Pharma Medical, one of the companies he controlled, wired at least $9.4 million to Lighthouse Capital Investments in Coral Gables. Authorities have yet to account for all the money. Cruz told investigators $500,000 in cash is stashed in a bank account in Zurich, Switzerland, according to a report by officials who questioned him last month. ¶ THE SCHEME ¶ If money was the motivation behind the counterfeiting, technology was one of the engines that made it possible to carry out. ¶ Cruz worked directly with at least four other men, according to investigators. Two helped to make the counterfeit tablets in Costa Rica and divert Lipitor from Brazil for repackaging in a Costa Rican warehouse. One got the Lipitor in the United States and another produced the finishing touch: sophisticated-looking labels to package the tablets. ¶ In Costa Rica, the operation involved three companies, a pharmaceutical manufacturing plant and two associated businesses, according to investigators. ¶ Cruz handled some of the arrangements himself, traveling to Costa Rica several times to meet associates - violations of his release from federal prison. ¶ Smaller than the state of West Virginia, Costa Rica is best known for coffee and bananas, not prescription drugs. Its pharmaceutical industry is minuscule, with just a few small companies. ¶ But Costa Rica does have one advantage for counterfeiters - patent laws that are full of holes. ¶ “It seems it’s an easy place for copy products,” said Mark Grayson, a spokesman for Pharmaceutical Research and Manufacturers of America, a Washington D.C.-based trade association. ¶ Patents give companies such as Pfizer an exclusive right to sell a drug for eight to 12 years. The idea is to allow a drug maker can recoup its investment and turn a profit. After the patent expires, generic companies can sell the drug at cheaper prices. Pfizer’s patent on Lipitor expires during 2010. ¶ Medicine is considered counterfeit if it is sold under a name brand without authorization, if it doesn’t have the right main ingredient or if it is wrapped in fake packaging. The maximum penalty for making a counterfeit drug is three years in prison. Counterfeiting a label is considered more serious: the maximum sentence is 10 years. ¶ If you can bake, you can counterfeit drugs, experts say. And such was the case in Costa Rica. ¶ The phony Lipitor tablets contained enough of the medicine’s main ingredient to make them passable, but not enough to necessarily reduce cholesterol levels. They also contained other chemicals not found in the authentic medicine. ¶ Getting the counterfeit to people willing to pay for it was a little trickier. To make it happen, Cruz used a home-field advantage: Miami International Airport. ¶ Under questioning by investigators last month, Cruz said the tablets arrived in containers labeled to be held “in transit,” a Customs term that signifies a product from overseas is supposed to be held in a warehouse for safekeeping until it continues on its way. ¶ In this case, the Lipitor was heisted from a warehouse at the airport and moved to another run by Cruz in Miami, according to the internal report containing information he told investigators. ¶ In the same report, Cruz described removing the fake Lipitor, filling the containers with a substitute and returning them to the warehouse. ¶

“The system isn’t designed to prevent crime,” said Benjamin England, a former FDA employee and a lawyer in Washington D.C. “It’s a financial-driven system to ensure that Customs receives tariffs.” ¶ The scope of the operation took no one familiar with counterfeiting by surprise. ¶ “This is big stuff. It’s big money,” Pfizer’s Theriault said. “There’s a lot of incentive for people to be clever.” ¶ THE CUSTOMER ¶ Fifteen hundred miles away from Miami, Cruz found the opening he needed to sell the Lipitor in Doug Albers. ¶ During July 2002, Cruz contacted Paul Kriger, a pharmaceutical broker from California, who worked closely with Albers, according to investigators and court documents. Kriger, who also had a connection to Michael Carlow in Florida, offered Albers a chance to buy the Lipitor. ¶ Albers denies knowing of any association between Kriger and Carlow. But Kriger arranged $23 million worth of prescription drug sales between Albers and Carlow’s companies during 2002, according to documents released by Florida prosecutors as part of their case against the Carlow network. ¶ In a lawsuit filed last month, Albers said Kriger told him everything was on the up and up with Lipitor: A distributor in Puerto Rico who worked with Pfizer was selling it. There was only one hitch Albers had to buy the tablets from a wholesaler licensed to do business in Missouri. Cruz’s companies didn’t fit the bill. ¶ So, starting in November 2002, Albers bought the Lipitor from a Maryland company controlled by Carlow and licensed to do business in Missouri, court documents said. The purchases continued for eight months. During that time, Albers sold at least $7 million of the medicine to 13 customers, authorities said. Only one customer, H.D. Smith Wholesale Drug, has been identified. ¶ Albers, who is being sued by Pfizer and patients based on his sale of the counterfeit medicine, claims he was deceived by Kriger and others. Kriger’s attorney, Matt Geiger, said his client is cooperating with investigators. ¶ “Neither OTS Sales nor Paul Kriger were aware or had any knowledge of any counterfeit Lipitor being brought in or out of Albers,” Geiger said. ¶ Albers has refused to speak to reporters. His attorney, Cathy Dean, and a spokeswoman, Laurie Roberts , maintain he was duped by his long-time broker. ¶ “Albers has conducted its business with the highest ethical standards for 27 years and will continue to do so,” Roberts said last month. ¶ At 52 years old, Albers seems to be everything you would imagine a heartland pharmacist to be. Tall and affable, he volunteers at his church and keeps close ties to his alma mater, the University of Missouri’s School of Pharmacy. ¶ “Everything that I have heard about this man has always been positive,” said Robert Peipho, dean of the school of pharmacy. “There’s a lot of respect for him.” ¶ Albers’ wholesale business started as an offshoot of his Kansas City pharmacy. The wholesale business is located in the same downtown building, a 1,000-square-foot office decorated with red and yellow memorabilia from the Kansas City Chiefs. ¶ The modest office belied his success. ¶ Last year, the wholesale business generated at least $45.7 million in sales, according to data from DB, formerly Dun & Bradstreet. That was more than double the $20 million in sales for 2000, the year before Ernst & Young named him Entrepreneur of the Year for the Kansas City region. ¶ By the time the counterfeit Lipitor appeared, investigators already suspected Albers Medical Distributors as being a huge opening - like a hole ripped into a chain-link fence - for stolen and illegally imported medicines. ¶ Missouri regulators cited him a dozen times from May 2000 through June 2002 for buying medicines from companies that were not licensed to do business in the state. During September, without acknowledging guilt, he agreed to a 30-day license suspension and a five-year probation in Missouri. ¶ Florida was tougher. During July, regulators there barred him from selling drugs in the state, citing a pattern of violations last year and in early 2003, including forged paperwork. ¶ Albers was considered one of Carlow’s best customers - worthy of a 25 percent discount according to the documents released by Florida prosecutors. ¶ Experts say the availability of Lipitor, a drug still under patent, at such a steep discount should have been an immediate warning. Typically, the medicine has a wholesale price of $262.34 per 100-tablet bottle, according to Mick Kolassa of Medical Marketing Economics, a research firm in Oxford, Miss. ¶

Under normal circumstances, a wholesaler can expect to receive a 2 percent discount. ¶ “Lipitor at that discounted price should be a massive red flag,” Kolassa said. “I don’t know if there’s that kind of discount available to anyone outside the federal government.” ¶ In the gray market, drugs can be bought and sold by people who never actually handle them. In this case, Albers bought the Lipitor and sent it to Med-Pro, a family-owned drug repackager in Nebraska. ¶ Repackagers play an important role because wholesale medicine often comes in huge bottles containing thousands of tablets. So

An investigation into Albers’ role is continuing, according to state and federal investigators. ¶ It is too early to say if Cruz’s arrest will be a turning point in the battle against counterfeit prescription drugs. ¶ “We will continue to step up enforcement,” FDA Commissioner Mark McClellan said last week. “We’ve seen counterfeit operations grow more sophisticated and use new technologies. We have new technologies on our side as well.” ¶ Star-Ledger staff writers Ed Silverman and David Schwab contributed to this article. ¶


				
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