Ex-Wholesaler Tells of Diverting Drugs
Ex-Wholesaler Tells of Diverting Drugs
Jul. 10, 1986
WASHINGTON (AP) _ A former pharmaceutical wholesaler on Thursday described his multimillion- dol lar dealings on the shadowy drug diversion market that congressional investigators call a dangerous source of ineffective, adulterated or counterfeit medicines.
Marvin Sandler, who was recently convicted of conspiracy to commit wire fraud, told a House subcommittee that selling illegally diverted drugs to drugstore chains each year accounted for $2 million of his $5 million to $8 million business.
Sandler, 53, said his suppliers obtained the drugs at discount prices from American pharmaceutical manufacturers on the ''false representation'' that they would be sold for charitable purposes overseas or to U.S. organizations.
The reimportation of American-made drugs sent overseas by illegal drug diverters is under investigation by the House Energy and Commerce oversight and investigations subcommittee, which conducted the hearing.
''The widespread trafficking in these drugs moving long distances around the world affords significant peril to American consumers,'' said Rep. John Dingell, D-Mich., the panel's chairman.
''The reimportation of these drugs, which are often sent to areas of the Third World where handling and storage conditions are of uncertain quality, constitutes a continuing fraud against American manufacturers and a constant health and safety threat to American consumers,'' Dingell said.
Sandler, who said he dealt in diverted drugs from 1981 to 1984, recalled one shipment that had been sent to Somalia, then to Italy and back to New York.
''My primary interest was in obtaining pharmaceuticals at the lowest possible cost, so long as I was satisfied that there were no restrictions of sale on the package,'' he testified.
''Even though I knew deep inside there was something wrong ... I felt from a legal point of view I was probably OK.''
Sandler, former vice president and still part-owner of his family's Interstate Drug Exchange Inc. in Plainview, N.Y., said his customers, did not know the source of his merchandise.
''In general, they didn't ask where and I didn't tell them,'' Sandler said under questioning by Rep. Fred J. Eckert, R-N.Y.
But he said these customers could have reasonably concluded the drugs had been illegally diverted because they were being sold at a discount of 7 percent to 15 percent off the wholesale price.
Committee investigators testified that transhipment of drugs to overseas points solely for reimportation to the United States has sharply decreased since last September, when $2.5 million worth of medicines were reimported.
But David W. Nelson, a subcommittee economist, said once congressional and other government investigations stop, the trade will increase again.
''Clearly the circuitous routes of these goods suggest the basic goal is to deceive U.S. manufacturer,'' Nelson said.
The amount of drugs shipped in recent years to Grand Cayman, a Caribbean island with a population of 10,000, ''would have kept that country awash in medicines for the rest of the century,'' Nelson said.
''Some of the goods actually circumnavigated the globe to get back here,'' he said.
Nelson described how drugs were shipped to Hong Kong, then to Paris and back to the United States, where they were allowed into the country by the U.S. Customs Service as ''American Goods Returned.''
In some cases, Food and Drug Administration officials seized drugs that did not have proper documentation proving they were U.S.-made, Nelson said. But he said the FDA did not test enough samples to determine if the drugs were still effective despite transhipment and storage in steamy tropical climates.
''Chemical deterioration due to heat and poor storage would be the problem,'' Nelson said.
Sandler said his suppliers sometimes asked him to return goods when drug- company officials were checking to make sure the merchandise was being exported. In one case, he said, he substituted generic equivalents that he placed in the original drug-company packing case.
Another supplier who once needed a large quantity of liquid medicine said it would be acceptable to substitute water ''since it was going to a desert country,'' Sandler said, so he sent 2,000 one-gallon bottles of water.
The discovery that 2 million counterfeit U.S. birth-control pills had been imported in 1984 triggered the subcommittee's investigation.
Dingell, Eckert and other subcommittee members are sponsoring legislation that would prohibit the reimportation of American-made drugs by wholesalers and dealers. Only the drug's manufacturer would be allowed to reimport their products.