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FOR IMMEDIATE RELEASE
Thursday, June 22, 2017

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

The owner and director of compliance of an Indiana compounding pharmacy were charged criminally in connection with their distribution of over- and under-potent drugs, and defrauding the United States by interfering with and obstructing the lawful functions of the Food and Drug Administration (FDA), the Department of Justice announced today.

Paul J. Elmer, 64, of Fishers, Indiana, and Caprice R. Bearden, 62, of Carmel, Indiana, were charged in a 10-count indictment with one count of conspiracy to defraud the United States, three counts of distributing an adulterated drug in interstate commerce and six counts of adulterating drugs while held for sale after shipment of a drug component in interstate commerce. Elmer was arrested yesterday and had his initial court appearance in U.S. District Court in the Southern District of Indiana where he pleaded not guilty and was released under conditions imposed by the Court. Trial has been scheduled for Aug. 21 at 9 a.m.

“The distribution of over- and under-potent drug products poses a serious risk of harm to patients,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “FDA’s efforts to ensure the safety of compounded drugs is critically important. Impeding FDA’s ability to do its job and uncover these types of safety concerns will not be tolerated. The Justice Department is committed to working with FDA to protect patients and ensure compounded drugs are safe.”

“These defendants put greed and the reputation of their company ahead of the health and safety of our most innocent victims,” said U.S. Attorney Josh Minkler for the Southern District of Indiana. “Their actions put lives in danger and they will be held accountable.”

Elmer owned and was the President of Pharmakon Pharmaceuticals Inc. (Pharmakon), and Bearden was the company’s Director of Compliance. Pharmakon compounded drugs at a facility in Noblesville, Indiana for customers in Indiana and many other states.

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 for potency, indicating that drugs such as morphine sulfate and fentanyl were either under- or over-potent. According to the indictment, Bearden discussed the out-of-specification test results with Elmer, a licensed pharmacist, and until Pharmakon compounded over potent morphine sulfate in February 2016, Elmer determined that Pharmakon should not contact any individuals or entities – including hospitals – who received the drugs, nor conduct any product recalls before FDA intervention.

On several occasions, according to the indictment, infants were injected with drugs compounded by Pharmakon - that were significantly over-potent. For example, the indictment alleges that in early February 2016, Pharmakon distributed over potent morphine sulfate, an opioid typically used for relief of moderate to severe acute and chronic pain, to a hospital in Indiana and a hospital in Illinois. As alleged in the indictment, three infants at the hospital in Indiana received the morphine sulfate which was nearly 25 times the strength indicated on its label, and one infant was taken by emergency helicopter to a nearby children’s hospital.

Further, as alleged in the indictment, during FDA inspections of Pharmakon in 2014 and 2016, Bearden lied about Pharmakon’s never having received any out-of-specification drug potency test results. According to the indictment, Elmer learned of Bearden’s lies during or shortly after the FDA’s inspections and took no action to correct her and to inform the FDA of the extent of Pharmakon’s drug potency failures. The indictment alleges that Elmer and Bearden conspired to defraud the United States by interfering with and obstructing the lawful functions of the FDA, and obstructing, influencing and impeding FDA inspections. In addition, as alleged, during the 2016 inspection, Elmer directed at least one Pharmakon employee to backdate batch records of compounded drugs.

“Companies that do not meet federal manufacturing standards, especially when dealing with highly potent drugs like fentanyl meant for vulnerable populations, put the health and safety of American consumers at great risk,” said FDA Commissioner Scott Gottlieb, M.D. “The FDA and our Office of Criminal Investigations will continue to pursue and help bring to justice those companies who put the public health at risk.”

According to the indictment, during two inspections of Pharmakon in 2014, FDA observed conditions that did not comply with FDA regulations. The indictment alleges that Elmer and Bearden failed to investigate the root causes of the drug potency failures and otherwise failed to make changes in Pharmakon’s compounding operations to reduce the incidence of these failures. Instead, as alleged in the indictment, under the direction and supervision of Elmer and Bearden, Pharmakon continued to distribute under- and over-potent drugs, shipping these drugs before receiving the potency test results.

The conspiracy charge carries a statutory maximum sentence of five years in prison and a fine of $250,000 or twice the gross gain or gross loss from the offense. The charges of distributing an adulterated drug in interstate commerce and adulterating drugs while held for sale after shipment of a drug component in interstate commerce each carry a statutory maximum punishment of one year in prison and a fine of $100,000 or twice the gross gain or gross loss from the offense.

Acting Assistant Attorney General Readler and U.S. Attorney Minkler commended the FDA Office of Criminal Investigations, which conducted the investigation. The case is being prosecuted by Assistant U.S. Attorney Cindy J. Cho, of the U.S. Attorney’s Office for the Southern District of Indiana and Trial Attorney David A. Frank of the Civil Division’s Consumer Protection Branch.

For more information about the Consumer Protection Branch, visit its website at http://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Southern District of Indiana visit its website at https://www.justice.gov/usao-sdin.

Topic(s): 
Consumer Protection
Press Release Number: 
17-689
Updated June 22, 2017