Physician-Buyer Beware



AG Targets Doctors for Illegal Drug, Device Purchases

Texas Medicine Logo

Law Feature  – August 2011


Tex Med. 2011;107(8):49-53. 

By Crystal Conde
Associate Editor

 Texas Attorney General Greg Abbott is cracking down on physicians who purchase medical products and drugs deemed illegal to use in the United States. In some instances, the physicians purchased misbranded products or medical devices from outside the United States not approved by the U.S. Food and Drug Administration (FDA). And some physicians unknowingly bought products from a distributor not licensed and not authorized to do business in Texas or the United States.  

Last year, six Grapevine physicians found themselves embroiled in a lawsuit with the attorney general for selling patients a version of the Mirena intrauterine device (IUD) the FDA has not approved for distribution in this country. Women's Integrated Healthcare settled with the attorney general in March, agreeing to pay penalties. 

And in 2009, the Texas Department of State Health Services (DSHS) inspected a Harlingen physician's medical practice as a result of its investigation of Elite Med, LLC, a distributor operating in New Braunfels. Authorities said Elite Med didn't have a license to do business in Texas and was selling physicians medical products not approved for sale in the United States. The physician reached an agreement with the attorney general last November. 

The physician, who asked not to be named, describes the experience as "really painful." In fact, the doctor closed the Harlingen medical practice earlier this year and is looking for a position in other states due in large part to the ordeal.  

"I totally cooperated throughout the entire process of the investigation," the physician said. "I've practiced for decades in an impoverished region of Texas, where it's difficult to recruit doctors. For none of this to be taken into consideration by the attorney general is a slap in the face."

Earlier this year, the Texas Medical Liability Trust (TMLT) alerted its policyholders to the attorney general's action against physicians who purchase products from unlicensed distributors and to the presence of misbranded drugs on the market.

The DSHS Drug and Medical Devices Group licenses distributors of drugs and medical devices in Texas. According to Kerrville attorney Jay Henderson, DSHS may learn of the distribution or purchase of unauthorized drugs or devices by Texas physicians from any source. These reports may be made directly to the agency or anonymously. He says DSHS doesn't divulge anonymous sources.  

Mr. Henderson has represented physicians sued by the attorney general for using unapproved or misbranded drugs and medical devices. He says once DSHS decides to investigate, the department has authority to inspect the distributors and report them to the attorney general's office for prosecution.  

If physicians find themselves in a situation in which they've been distributing non-FDA-approved drugs or devices to patients, Mr. Henderson suggests they call their professional liability insurer or a lawyer familiar with drugs and devices.  

"Physicians shouldn't try to deal with the problem themselves or ignore it. That's not a good approach," he said. 


Ignorance No Excuse

According to Mr. Henderson, the attorney general's office generally alleges that receiving and using unapproved drugs or devices violate the Texas Deceptive Trade Practices Act (DTPA).   

Mr. Henderson says the attorney general's office contends that a physician or distributor "need not have wrongful intent or have engaged in a 'knowing' violation of the statute. If you engage in the prohibited conduct, you may be prosecuted."  

The penalties under the DTPA are severe. The attorney general may seek up to $20,000 per violation, plus an added penalty of up to $250,000 if the affected consumer is older than 65. 

Physicians also can find themselves facing violations of the Texas Food, Drug, and Cosmetic Act. The civil penalty may not exceed $25,000 a day for each violation under the act. In determining the penalty, the court considers:   

  • Any previous violations, 
  • The seriousness of the violation, 
  • Any hazard posed to the public health and safety, and 
  • Demonstrations of good faith by the person charged.   

Mr. Henderson says physicians are vulnerable, particularly if they buy drugs or devices from discount suppliers or on the Internet.  

"My short take on this issue is that doctors are at substantial risk for being prosecuted if they buy or use non-FDA-approved drugs or devices. … The safest way to avoid this situation is to buy from a reputable and established supplier or from the actual drug or device manufacturer," he said. (See "Verify Sources of Drugs and Medical Devices.") 

Mr. Henderson adds doctors would be wise to examine the product upon receipt. He says labeling in any language other than English is a red flag indicating the product may be misbranded.

In many instances, physicians attempt to purchase drugs and medical devices in the most efficient way possible to provide patients with affordable products, Mr. Henderson says. 

"This regulatory system warrants modification, at least to the extent doctors should not be subject to these huge fines and the attendant anxiety if they are acting in good faith," Mr. Henderson said.  


"Really Painful"

A court last December prohibited Elite Med, along with defendants S&B Marketing and Brian Bailey, Elite Med's owner, from doing business in the state. The attorney general's office charged the medical devices wholesaler with acquiring, stocking, and selling products not approved for sale in the United States. To view the attorney general's temporary restraining order against Elite Med, click here [PDF].

A month earlier, the Harlingen physician caught up in the Elite Med investigation agreed to pay $86,000 in civil penalties to the state and refrain from using unapproved medical devices in the future. The attorney general's lawsuit against the physician sought more than $3 million for more than 100 alleged violations.  

"The physician settled the matter to bring closure and without admitting any wrongdoing. At all times, the physician fully cooperated with the state and voluntarily quit doing business with Elite Med immediately upon learning the facts," said his attorney, John McClendon, of Austin. 

The physician says other doctors in similar situations face the difficult position of having to settle with the state agency or enduring the costly and time-consuming process of defending themselves at trial. 

"Defending myself in court would have cost hundreds of thousands of dollars and would have taken years. If the attorney general doesn't like what you're doing, you're basically stuck having to pay the fine," the doctor said. "As physicians, we always thought our biggest concern was medical malpractice. Now we're entering an age where as physicians we have to be more worried about the state regulatory agencies and the federal government taking some kind of action against us for any number of things we might do." 

The physician encourages doctors to call an experienced health care attorney if DSHS comes to inspect their offices or the attorney general contacts them. 

According to Mr. McClendon, the physician used synovial fluid purchased from Elite Med to relieve joint pain in patients.  

"Unknown to the physician, the distributor was unlicensed. Upon learning this, the physician immediately quit buying from Elite Med," Mr. McClendon said. "At all times, the patients received original product from the original manufacturer. There has never been a patient complaint, and these injections greatly benefited the patients."  

The state, he said, had his physician client "on a technicality."  

"It never dawned on the physician or the staff to check if Elite was licensed. I spoke to other doctors around the state, and they too were unaware distributors had to be licensed. And there is no law requiring a doctor to make sure the distributor is licensed," he said. 

According to a press release from the attorney general's office, other physicians and clinics improperly acquired arthritis injections from Elite Med, which distributed arthritis injections Orthovisc, Synvisc, Hyalgan, and Eufflexa. Elite Med purchased the drugs in bulk from MTE Diagnostics, a Canadian company.  

The state contends Elite Med violated state law when it failed to seek a license from DSHS.  

After inspecting Mr. Bailey's records, DSHS officers used lot numbers on invoices and conversations with the manufacturer to determine the devices were intended for shipment to Turkey and other countries. MTE Diagnostics, however, shipped the unapproved devices back to the United States. 

DSHS also found labels on the devices in languages other than English, another violation of state law. DSHS determined that because the products' original export destination was outside the United States, they were misbranded devices and not legally authorized for use in this country. 

According to the attorney general's office, Mr. Bailey could not provide documentation to DSHS verifying FDA approval of Elite Med's products or clearance for entry by the U.S. Customs Service. 

The attorney general's office wouldn't comment on how many physicians have been investigated for buying and using Elite Med products. Spokesperson Tom Kelley said the agency doesn't comment on ongoing investigations. 

Mr. Kelley did say the attorney general is acting against physicians for purchasing Elite Med products "because this amounted to doing business with an unlicensed entity [Elite]. None of the products that the doctors injected into Texas consumers that were purchased from Elite were approved for use in the U.S. These were clear violations of the Texas Food, Drug, and Cosmetic Act and the Deceptive Trade Practices Act." 

He adds that the agency doesn't take into account whether the physicians it investigates knowingly and intentionally purchase products from an unlicensed distributor. 

"The statute does not have a requirement of knowingly or intentionally. The products were misbranded because the labeling was in a foreign language, and there are FDA-required caution statements that should have been on the labels/labeling that were not present," Mr. Kelley said. 


AG Sues Over Unapproved IUDs

The attorney general sued Women's Integrated Healthcare, PA, of Grapevine, and six physicians after a DSHS inspection revealed that the clinic sold 490 unauthorized Mirena IUDs purchased through a Canadian distributor.  

The lawsuit [PDF] sought up to $20,000 in civil penalties for each violation and a court order requiring the clinic to sell only FDA-approved IUDs. The agency also wanted the clinic to ensure the IUDs it sells feature labeling in English. (See "Consider the Source," January 2011 Texas Medicine, pages 49-52.) 

The lawsuit says Bayer Healthcare Pharmaceuticals produces different versions of the Mirena IUD, but the FDA says only one version meets its standards for use in the United States. TheraCom distributes the approved IUD. Bayer's plant in Finland manufactures all the IUDs. 

Jamie Hawkes, spokesperson for Women's Integrated Healthcare, said she could not comment on the attorney general's case against the physicians. However, one of the physicians, Barbara Coulter-Smith, DO, told Texas Medicine in November that she and her colleagues acquired the Canadian IUDs to offer more affordable birth control to uninsured patients and those with high insurance deductibles. She said the FDA-approved version of the IUD purchased in the United States can cost up to three times more than the unapproved version purchased through Bayer's Canadian distributors.  

The Grapevine clinic physicians' agreement with the attorney general calls for them to pay $271,605.15 in civil penalties, attorneys' fees, and DSHS investigative costs. They agreed not to purchase or sell unapproved or misbranded drugs or devices. 

The clinic doesn't admit to any violations of the DTPA or the Texas Food, Drug, and Cosmetic Act. The clinic stipulates in the agreement that it purchased some of the Mirena IUDs from a Canadian pharmacy and that the devices were manufactured for use in countries other than the United States.  

Crystal Conde can be reached by telephone at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by email.


SIDEBAR

Verify Sources of Drugs and Medical Devices

Physicians can verify all drug distributor and in-state medical device distributor licenses online through the Public License Search feature provided by the Texas Department of State Health Services (DSHS) Division of Regulatory Services at https://vo.dshs.state.tx.us/datamart/txrasMainMenu.do. Physicians may ask the distributor to provide a copy of the license. 

For distributors of medical devices located outside Texas, DSHS recommends physicians verify that the supplier is lawfully engaged in the wholesale or retail distribution of such devices in their resident state.  

For additional assistance, contact the DSHS Drugs and Medical Devices Group at (512) 834-6755. 

To check a product's authenticity, visit the Food and Drug Administration website at Drugs@FDA or FDA Basics, or log on to Daily Med.  

In addition, the websites of products or manufacturers typically provide links to all marketed products and their labels. 

The Food and Drug Administration (FDA) advises physicians to make medical product Internet purchases from state-licensed distributors or pharmacies in the United States to avoid breaking federal law and to reduce their risk of receiving unapproved or adulterated devices.  

Licensed Internet pharmacies display a Verified Internet Pharmacy Practice Sites (VIPPS) seal.

Under the Texas Food, Drug, and Cosmetic Act, DSHS warns physicians against:   

  • Purchasing or administering drugs or devices that are not approved by the FDA and that do not have labeling in English. These products are considered misbranded. 
  • Purchasing or administering drugs from manufacturers or distributors located either in Texas or outside Texas who are not licensed with DSHS.  
  • Purchasing or administering devices from manufacturers or distributors located in Texas who are not licensed with DSHS or located outside of Texas without verifying that the supplier is lawfully engaged in the manufacture or distribution of such devices in the United States. 

Back to article


August 2011 Texas Medicine Contents
Texas Medicine Main Page