Grey-Market Distributor Convicted of Defrauding FDA

South Carolina-based Altec Medical pleaded guilty to one count of conspiring to defraud FDA and to commit federal offenses in connection with a drug-diversion scheme that lasted from 2007 to 2009. Altec was ordered to pay a $2 million fine and to forfeit a further $1 million, and has also been placed on probation for a year, according to a Justice Department release.

According to the release, the government charged that Altec paid its supplier and co-conspirator William D. Rodriguez approximately $55 million for prescription drugs that it knew had been diverted from lawful channels of drug wholesale distribution. The government alleged that Rodriguez first sent the diverted drugs to companies he controlled in South Carolina. His companies, in turn, resold the drugs to Altec, which, in turn, resold the drugs to various purchasers throughout the US, including drug distributors with valid drug distribution licenses. Eventually, the diverted drugs were bought by retail pharmacies, which dispensed the drugs by filling prescriptions for individual consumers. Altec admitted to falsifying pedigrees for the drugs to make it appear that they had come through legal distribution channels.

In June 2012, in US District Court in Miami, Rodriguez pleaded guilty to conspiracy and money laundering in a separate case charging him with, among other things, his role in this drug diversion scheme. He has not yet been sentenced, according to the release.

“Drug diversion undermines the safety and effectiveness of our prescription drug system,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division, in the release. He added, “When individuals divert drugs from lawful channels, we cannot be sure that the drugs are properly handled and stored. As a result, diverted drugs could be expired, become contaminated, or have their mechanisms of action altered. Diversion is a serious crime that puts consumers at risk; we will continue to prosecute those who engage in it aggressively.”