Exclusive: Feds accuse Utah pharmacy CEO of getting mislabeled hydroxychloroquine from China

Draper-based Meds In Motion won a no-bid state contract worth $800,000 before the state killed the deal.

The owner of a Utah pharmacy that was poised to sell millions of dollars worth of hydroxychloroquine to the state is now accused of receiving the controversial coronavirus drug from an unregistered manufacturer in China, in shipments that were labeled as an herbal supplement.

Dan Richards, who is the CEO of Draper-based Meds In Motion, was charged Monday in U.S. District Court in Salt Lake City with a misdemeanor for allegedly receiving bulk amounts of chloroquine and hydroxychloroquine that were falsely labeled as Boswellila serrata extract.

The herbal extract, otherwise known as Indian frankincense, is used to reduce inflammation and to treat arthritis, asthma and inflammatory bowel disease.

The charge is the latest mark on the state’s efforts to respond to the pandemic and its attempt to procure the antimalarial drugs touted by President Donald Trump last year as the coronavirus spread across the country.

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Richards did not respond to a call or text seeking comment. Utah Department of Health spokesman Tom Hudachko declined to comment on the charge. The maximum punishment for the charge, if convicted, is up to one year in prison and a $100,000 fine, a spokesman for Utah’s U.S. Attorney said.

Richards in late March had secured an $800,000 no-bid state contract for hydroxychloroquine, a malaria drug that was hailed by President Donald Trump as a “miracle” treatment for coronavirus before the Food and Drug Administration in April warned against its use for COVID-19.

And, despite new research showing possible risks of using the drug to treat coronavirus, state lawmakers had set aside another $8 million for a second, larger drug buy from Richards. That plan was canceled after the FDA’s warning.

Richards for weeks had been promoting the drug to state officials while he was buying up vast quantities of hydroxychloroquine and chloroquine powder that he planned to mix with zinc and encapsulate. In a March 19 email obtained by The Salt Lake Tribune, Richards told state officials that he had just purchased more than 800 kilograms of the drug — enough to treat 400,000 Utahns.

Richards allegedly received the mislabeled shipment three weeks later, on or about April 8. But it’s not clear whether the 800 kilograms he described to state officials included the more than 500 kilograms of hydroxychloroquine and 50 kilograms of chloroquine that federal prosecutors say Richards received in that shipment from China, labeled as “Boswellila serrata extract.”

The charging document doesn’t identify the supplier, stating only that the drugs were “manufactured, prepared, propagated, compounded, and processed in an establishment not duly registered as a drug manufacturer with [the] Food and Drug Administration.”

In mid-March, Richards had urged state health director Joseph Miner to create a “standing order” that would allow pharmacies to provide the drugs to patients without a prescription and requiring recipients to sign a legal waiver to prevent them from suing over adverse reactions.

Emails show Richards guided state officials in tailoring the proposed standing order to his pharmacy, instructing them to make sure the provisions covered the specific hydroxychloroquine and zinc blend that he would be compounding.

“This is important or all the product we get in we can’t use to make it,” Richards wrote on March 19.

The state ultimately backed away from plans to distribute the drugs without prescriptions — but two days before prosecutors say the Chinese shipment arrived, a state health official reached out to Richards to find a home for the drugs.

“It would be quite an injustice for you to get ‘stuck’ with a lot of this medication that you couldn’t dispense,” wrote Dr. Marc Babitz, deputy director of the state health department. That led to a plan for the state to buy the hydroxychloroquine and distribute it to pharmacies for COVID-19 patients.

While Richards was promoting the hydroxychloroquine sale, a member of Meds In Motion’s board of directors was lining up a no-bid contract worth millions from the state for his own health care technology company.

Mark Newman, CEO of Nomi Health, was suggesting Nomi could run a website that would screen patients for COVID-19 testing and operate the testing sites. At one point, the site’s survey included questions to determine whether test seekers were good candidates for the drugs.

Newman initially pitched TestUtah.com as a philanthropic effort, but he later secured a $2 million no-bid contract to run the assessment tool and related coronavirus testing sites.

Although early results from the testing sites raised questions as to the accuracy of TestUtah’s tests, and federal regulators found more than 20 violations in an inspection of TestUtah’s lab, Nomi has secured millions more in state contracts. It now coordinates testing sites and runs TestUtah.com.

Amid public outcry, Gov. Gary Herbert in April announced the state would not be pursuing the larger deal with Richards. The state also canceled the 20,000-packet order, and Meds in Motion refunded the $800,000 the state spent on the initial purchase.