BINDLEY WESTERN, BERGEN BRUNSWIG DROP PURCHASES FROM SECONDARY SUPPLIERS

Executive Summary

Bindley Western and Bergen Brunswig will no longer rely on secondary sources for pharmaceutical supply, the whslrs. recently announced in separate decisions. Bindley said in a Nov. 11 press release that it halted secondary source purchases in June; Bergen told analysts in late October that it had stopped the purchases. The policy changes were disclosed in the wake of announcements that investigations into allegedly illegal drug diversion practices by whslrs. are continuing. Officials of Bergen Brunswig are reportedly being investigated in the "Pharmoney" investigation based in Atlanta. Bindley Western has appointed a special cmte. comprising its outside board members to review allegations of illegal diversion by the firm and to "formulate recommendations to the board of directors," Bindley announced on Nov. 11. The cmte. members are board secty. Edward Rosenfeld (partner, Indianapolis law firm Rosenfeld Parnell & Shames) and asst. secty. K. Clay Smith (President & CEO, Underwood Machinery Transport, Inc.). On Friday, Nov. 8, federal investigators executed a search warrant at the company's Indianapolis headquarters. The investigators were agents of the Drug Enforcement Administration, the FBI, and the Internal Revenue Service. The search indicates that the Atlanta-based investigation has a companion effort in Indiana. Bindley said the search "was apparently part of an investigation by a federal grand jury in Indianapolis." Bindley also reported that Chairman William Bindley and VP-Treasurer David Swaim are being investigated. The announcement follows a guilty plea by former President Jack Laughner and the sentencing of former VP Stephen Asher ("The Pink Sheet" Nov. 11, p. 6). The Bindley special board cmte. has retained outside counsel to aid in its inquiry, the company noted. As previously announced, another internal investigation by separate outside counsel is ongoing to determine the extent of illegal conduct by former employees and possible involvement by current ones. The law firms involved are Schwab Donnenfeld Bray & Silbert and Wilmer Cutler & Pickering, both of Washington, D.C. Another whslr. announced that rather than avoid secondary sources, it has instituted a program to test pharmaceuticals supplied through the gray market. Med-Sales, a Hollywood, Fla.-based distributor that specializes in secondary-source distribution, announced Nov. 1 that it would test all drugs not obtained direct from the mfr. or an authorized distributor. The program is similar to one recently announced by the drug chain, Revco ("The Pink Sheet" Oct. 7, T&G-3). Med-Sales reportedly sent samples on Nov. 14 from a secondary source shipment containing CooperVision products, to Innotech Labs in Fort Lauderdale for testing.