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Press Release

New Jersey Medical Device Manufacturer Admits Selling Contaminated Ultrasound Gel

For Immediate Release
U.S. Attorney's Office, District of New Jersey

NEWARK, N.J. – Pharmaceutical Innovations Inc., based in Newark, New Jersey, pleaded guilty today to criminal charges and resolved a civil suit arising from the company’s distribution of ultrasound gel contaminated with bacteria, U.S. Attorney Paul J. Fishman of the District of New Jersey and Principal Deputy Assistant Attorney General Benjamin C. Mizer of Justice Department’s Civil Division announced. 

Pharmaceutical Innovations pleaded guilty before U.S. District Judge Esther Salas in Newark federal court to an information charging it with two misdemeanor counts of introducing adulterated medical devices into interstate commerce. In addition to placing the company on two years of probation, Judge Salas ordered the company to pay a criminal fine of $50,000 and to forfeit an additional $50,000 – the approximate value of the adulterated gel.

In the civil settlement, which was also resolved today, Pharmaceutical Innovations agreed to the forfeiture and destruction of particular gel products that tested exceptionally high for infectious bacteria and agreed to a permanent injunction that requires independent experts and auditors to conduct regular inspections and certifications at the company’s expense.

“Pharmaceutical Innovations shipped defective products that exposed hospital patients to dangerous bacterial contamination,” U.S. Attorney Fishman said. “Today’s plea agreement and civil settlement require Pharmaceutical Innovations to accept responsibility for the contamination and take the necessary steps to prevent it from happening again.”

“The sale of adulterated medical devices puts patients at great risk,” said Principal Deputy Assistant Attorney General Mizer. “Device manufacturers that fail to comply with good manufacturing practices, thereby threatening patient safety, will be held accountable.”

According to documents filed in the case and statements made in court:

Doctors and hospitals use ultrasound gel to take ultrasound scans, sonograms, EKGs, and similar procedures. In February 2012, a Michigan hospital reported that 16 surgical patients were infected with Pseudomonas aeruginosa, a bacterial pathogen.  The hospital believed the infections were associated with a particular lot of Pharmaceutical Innovations ultrasound gel.

A sample of that lot then tested positive for Pseudomonas aeruginosa.  A second lot was shipped in April 2012 and found to be contaminated with two types of bacteria, Pseudomonas aeruginosa and Klebsiella oxytoca.

The U.S. Department of Justice filed a civil suit in October 2014 against Pharmaceutical Innovations and its founder, owner, and longtime president, Gilbert Buchalter (Gilbert Buchalter was later dropped from the case; his son, Charles Buchalter, became company president and was added to the case).  The civil complaint alleged that the company was selling medical devices that the Food and Drug Administration (FDA) had not approved or cleared, that it was violating current good manufacturing practices, and that it failed to take required actions after receiving reports in February 2012 of serious injuries associated with its products.

The Consent Decree of Permanent Injunction requires Pharmaceutical Innovations to submit a detailed compliance plan to FDA within 20 days, and to have outside experts certify in writing by Oct. 31, 2016 that the company meets current good manufacturing practice requirements. At the company’s expense, the FDA will then conduct a follow-up inspection. For the next three years, Pharmaceutical Innovations must hire outside auditors to conduct and submit detailed audit reports to FDA. In addition, the company will forfeit and pay for the destruction of contaminated gel that the U.S. Marshals Service seized in April 2012 as part of a seizure and forfeiture case filed by the United States.

The investigations leading to the corporate guilty plea and civil settlements were conducted by special agents of the FDA’s Office of Criminal Investigations’ New York Field Office, under the direction of Acting Special Agent in Charge Jeffrey Ebersole.

Assistant U. S. Attorney R. David Walk Jr. of the District of New Jersey’s Health Care and Government Fraud Unit represented the government in the criminal prosecution, with the assistance of Associate Chief Counsel Lynn M. Marshall of the Department of Health and Human Services’ Office of General Counsel-Food and Drug Division. The government was represented in the civil cases by Trial Attorney Daniel K. Crane-Hirsch of the Department’s Consumer Protection Branch, Senior Counsel Michele Lee Svonkin and Associate Chief Counsel Julie A. Dohm of the Department of Health and Human Services’ Office of General Counsel–Food and Drug Division, Assistant U.S. Attorney Lucy Muzzy of the District of New Jersey’s Health Care and Government Fraud Unit, and Peter Gaeta of the District of New Jersey’s Asset Forfeiture and Money Laundering Unit.

U.S. Attorney Fishman reorganized the health care fraud practice at the U.S. Attorney’s Office of the District of New Jersey, including creating a stand-alone Health Care and Government Fraud Unit, which handles both criminal and civil investigations and prosecutions of health care fraud offenses. Since 2010, the office has recovered more than $1.29 billion in health care fraud and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act and other statutes.

Defense counsel: A. Ross Pearlson Esq., West Orange, New Jersey

Updated September 1, 2016

Health Care Fraud
Press Release Number: 16-199