The owner of a Utah pharmacy that was poised to sell millions of dollars worth of hydroxychloroquine to the state has pleaded guilty to illegally importing the drugs before the state canceled the controversial contracts.
Dan Richards, CEO of Draper-based Meds in Motion, was charged this week with a federal misdemeanor for receiving bulk amounts of chloroquine and hydroxychloroquine from an unregistered manufacturer in China, in shipments that were labeled as an herbal supplement.
Richards pleaded guilty to the charge Friday.
But his lawyer has said state officials gave Richards “the green light ... to do exactly what he did.”
“At the time it was kind of a vaunted product, and it would have been very difficult to get that locally,” said Richards’ attorney, Greg Skordas.
Instead, charging documents state, he ordered the drugs from a Chinese supplier that wasn’t registered with the U.S. Food and Drug Administration, in shipments that were falsely labeled as Boswellia serrata extract. The herbal extract, otherwise known as Indian frankincense, is used to reduce inflammation and to treat arthritis, asthma and inflammatory bowel disease.
It doesn’t appear that prosecutors are planning to prepare charges against state officials who Skordas said approved of Richards’ practices.
“This office, with our partners at the FDA and FBI, pursued every meaningful investigative lead in this matter, and fully examined the facts and circumstances surrounding this federal offense,” said United States Attorney John W. Huber. “This is the just outcome of that thorough investigation, and it will conclude our review.”
Richards did not speak at Friday’s hearing except to enter a guilty plea. He is scheduled to be sentenced April 5.
“Proffering the sale of misbranded prescription drugs of unknown origin puts consumers’ health at risk,” FDA agent Charge Charles L. Grinstead said in the news release.
The criminal case is only the latest episode in the state’s controversial efforts to procure the antimalarial drugs, touted by President Donald Trump last year as a “miracle” cure for the coronavirus but later discouraged by the FDA due to possible health risks and a lack of evidence it was effective in treating the virus.
Richards in late March had secured an $800,000 no-bid state contract for hydroxychloroquine before the FDA in April warned against its use for COVID-19.
But even as new research showed possible risks of using the drug to treat coronavirus, state lawmakers set aside another $8 million for a second, larger drug buy from Richards. That plan was canceled after the FDA’s warning — about the same time as federal investigators seized 500 kilograms of hydroxychloroquine and 50 kilograms of chloroquine Richards had planned to use for the state’s orders, Skordas said.
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 had urged state health officials 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.
The state ultimately backed away from plans to distribute the drugs without prescriptions, but still planned to buy Richards’ hydroxychloroquine and distribute it to pharmacies for COVID-19 patients.
Then, 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. Skordas said he wasn’t certain whether the contracts were canceled before or after investigators seized the mislabeled shipments.
Skordas said Richards’ defense team had the mislabeled drugs tested, and they were in fact the chloroquine and hydroxychloroquine Richards had ordered — and both met U.S. standards for quality.
But Richards’ role in the state’s plan already was under scrutiny: A state investigator in April urged Richards to abandon the state deal after she found that Richards’ pharmacy wasn’t licensed to mix, or “compound” drugs for mass distribution — something other Utah pharmacists also noted.
Richards then complained about the investigator’s attempt to intervene, and the investigator was overruled by her supervisor and other top state officials, who said the crisis posed by coronavirus justified bending the usual rules.
Meanwhile, as 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, proposed 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 his company soon 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.