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Covid drug profit scheme entangled in Tennessee pharmacies

August 23, 2022 by admin

A Delaware man faces five years in federal prison for a COVID-19 drug fraud scheme that has roped in pharmacies in Etowah and Maryville, authorities said.

Jose Torres, 58, of Shelbyville, Delaware, pleaded guilty last week to one count of conspiracy to participate in the unlicensed wholesale distribution of prescription drugs. in U.S. District Court for the Eastern District of Tennessee. Torres faces up to five years in prison, $250,000 in fines and three years of supervised release and will be sentenced March 29, according to the U.S. District Court for the Eastern District of Tennessee.

“This advocacy agreement represents the United States Attorney’s Office’s commitment to prosecuting those who have exploited the fears of others to take undue advantage during the COVID-19 pandemic,” US attorney Francis M. Hamilton III said.

Federal prosecutors will face the Howard H. Baker, Jr. on Monday, June 7, 2021.  United States Courthouse in downtown Knoxville.

Torres conspired to buy drugs that were in short supply and sell them to wholesale distributors for a hefty profit, according to the charges filed against him. Torres partnered with a California-based company that recruited independent pharmacies to join a network called the Pipe-Line Program.

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Independent pharmacies in Etowah and Maryville, not named in the complaint, joined the Pipe-Line program, which was described as a partnership designed to fill gaps in the drug supply chain. This allowed Torres to purchase drugs from the pharmacies’ authorized distributors and pay the pharmacies a whopping 23% commission.

The pharmacies were led to believe this was a valid program and were legally allowed to wholesale up to 5% of their annual gross sales, according to the federal complaint.

The most egregious fraud came after the onset of the COVID-19 pandemic, when Torres purchased hydroxychloroquine sulfate tablets from a Maryville pharmacy for $178 per unit and resold them to a Veterans Affairs medical center for $442 per unit, according to the complaint.

Torres’ fraudulent purchase came as the epidemic began to flood the health care system and an unscreened medical study suggested that hydroxychloroquine could help patients, according to the Journal of the American Medical Association.

At the start of the pandemic, then-President Donald Trump authorized the US government to purchase and store 29 million pills of hydroxychloroquine for use by patients with COVID-19. The FDA subsequently revoked its license to use the drug in mid-June 2020.

Howard H. Baker, Jr.  United States Courthouse in Knoxville, Tennessee on Thursday, November 4, 2021.

Torres used an Etowah dispensary to buy epinephrine for $63 a unit and sold it at a 120% markup, the complaint said. The drug is used for the emergency treatment of severe allergic reactions. The man later bought amiodarone, a heart medication, from the same pharmacy for $42 a unit and sold it on to a Veterans Affairs medical center for nearly three times the purchase price.

Likewise, he bought famotidine, an antacid, from a Maryville pharmacy and resold it for a profit of $60 a unit.

According to the federal indictment, Torres personally profited from nearly $120,000 from those four transactions, an amount he has promised to repay.

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