STATE OF FLORIDA DEPARTMENT OF HEALTH DEPARTMENT OF HEALTH, through its BUREAU OF STATEWIDE PHARMACEUTICAL SERVICES, Petitioner, vs. STONE GROUP, INC., a Florida Corporation, and ADAM RUNSDORF, Individually, Respondents. ADMINISTRATIVE COMPLAINT Notice is hereby provided that Petitioner, Department of Health by and through its Bureau of Statewide Pharmaceutical Services (the “bureau”), intends to revoke the permit of Stone Group, Inc., (“Stone Group”), to operate as a prescription drug wholesaler (permit number 22:01274) in Florida and impose against Respondents, Stone Group, Inc., a Florida corporation, and Adam Runsdorf, individually, an administrative fine in the amount of three hundred twenty- seven thousand five hundred dollars ($327,500), pursuant to section 499.066(3), Florida Statutes. In support of the intended final agency action the bureau states: (1) Petitioner, Department of Health, through its Bureau of Statewide Pharmaceutical Services, (“Bureau”) 2818-A Mahan Drive, Tallahassee, Florida, 32308, is the Florida state agency responsible for implementing and enforcing the provisions of the Florida Drug and Cosmetic Act, Chapter 499, Florida Statutes, (‘the Act”) including the regulation of the acquisition and distribution of prescription drugs in Florida as well as the permitting of entities to engage in this activity. The prescription drug wholesaler permit is established under the Act. (2) Respondent, Stone Group, Inc., is a Florida registered corporation whose principal place of business is 1141 South Rogers Circle, Suite 3, Boca Raton, Palm Beach a ” +d _ County, Florida 33487. Respondent, Stone Group, is permitted as a prescription drug wholesaler (permit number 22:01274) pursuant to the Act. By letter dated September 4, 2002, Stone Group, Inc., requested permit number 22:01274 be reissued in the name of Stone Medical Group, LLC. All allegations and action under the complaint are directed at the company and Adam Runsdorf operating pursuant to permit 22:01274 regardless of the permit name. Permit number 22:01274 was initially issued to Stone Group on September 28, 2001, and expires on September 30, 2003. (3) Respondent, Adam Runsdorf, is the president of Stone Group and was at all times material hereto responsible for and involved in the prescription drug wholesale operations of Stone Group, and specifically the activities alleged in this complaint. (4) Stone Group purchased prescription drugs, that according to all of the business records of BTC and Stone Group which they have provided to date, marked as Exhibits 1 through 54, came from BTC Wholesale, at the time of the transactions a licensed prescription drug wholesaler at 3501 West Vine Street, Suite #264, Kissimmee, Florida. However, Stone Group routinely picked up prescription drugs that were invoiced from BTC Wholesale to Stone Group from a residence in Weston, Florida. This residence in Weston, Florida is not permitted under the Act to purchase, possess, or distribute prescription drugs as required by ss. 499.01 and 499.012(2)(a) and (3), F.S. Sections 499.01(1)(d), and 499.012(3), F.S., require a permit for each establishment that operates as a prescription drug wholesaler. An establishment is defined in s. 499.003(13), F.S., as a place of business at one general physical location. Section 499.01(1)(b), F.S., specifically prohibits a residence from operating under ss. 499.001-499.081 (includes prescription drug wholesaling) and from receiving a permit under the Act. Furthermore, ss. 499.012(2)(a) and (3), F.S., state that a person that engages in the wholesale distribution of prescription drugs in this state must have a wholesale distributor's permit issued by the department prior to engaging in the wholesale distribution of prescription drugs. Wholesale distribution is defined in s. 499.012(1), F.S., as the distribution (sale, gift, delivery, or , ” ~ ~ transfer) of prescription drugs to persons other than a consumer or patient, with certain exceptions not germane to this complaint. (5) As a result, the prescription drugs represented on these invoices all left the regulatory channels for the distribution of prescription drugs. Prescription drugs that have left the regulatory controls established in federal and state laws for the distribution of prescription drugs are adulterated pursuant to s. 499.006(2) and (3), F.S., because they could have been contaminated with filth or rendered injurious to health, and the methods used in or the facilities or controls used for the holding do not conform to or are not operated or administered in conformity with current good manufacturing practices to assure that the drug meets the requirements of s. 499.001-499.081 and that the drug has the identity and strength, and meets the standard of quality and purity, which it purports or is represented to possess. (6) Stone Group sold the prescription drugs that it purchased in the transactions referenced in paragraph (4). These sales transactions are marked as Exhibits 1 through 54. (7) Based on the allegations in paragraph (4), Stone Group purchased or otherwise received prescription drugs from persons not permitted to wholesale prescription drugs under the Act and Stone Group thereby violated s. 499.005(14), F.S. (8) Based on the allegations in paragraphs (4) and (6), Respondents purchased and distributed (sold) adulterated prescription drugs and Respondents thereby violated ss. 499.005(1), (2), and (4), F.S.., and (14), F.S., (9) On or about January 21, 2002, Stone Group offered for sale or sold prescription drugs that had been stolen on or about January 16, 2002, from BioPharm, a permitted prescription drug wholesaler in Miami, Florida. These prescription drugs had left the regulatory channels for the wholesale distribution of prescription drugs and therefore were adulterated pursuant to s. 499.006(2) and (3), F.S. As a result, Stone Group violated s. 499.005(1), (3) and (4), F.S. - a — ~ (10) Stone Group purchased over $2.9 million worth of prescription drugs in 11 transactions marked as Exhibits 55 to 65 from Optia Medical, a prescription drug wholesaler in Sait Lake City Utah that is permitted to wholesale prescription drugs into the state of Florida by virtue of its Out-of-State Prescription Drug Wholesaler permit number 23:01418. Optia Medical provided pedigree papers to Stone Group for each of these 11 transactions. For purposes of this complaint, a pedigree paper is a record required by s. 499.0121(6)(d), F.S., and Rule 64F- 12.012(3), Florida Administrative Code (Fla. Admin. Code”) to be provided by a prescription drug wholesaler, which is not an authorized distributor of record, distributing a prescription drug to another prescription drug wholesaler that traces all prior sales of the prescription drug back to (a) the manufacturer or (b) an authorized distributor of record for that manufacturer. Furthermore, for purposes of this complaint, in order for a wholesaler to be an authorized distributor of record, the wholesaler must purchase prescription drugs directly from the manufacturer for which the authorized distributor of record status is claimed. The pedigree papers indicate that Cardinal Distribution in Phoenix, Arizona, an authorized distributor of record, sold the relevant prescription drug(s) to Optia Medical in Sait Lake City, Utah. However, Cardinal Distribution had not conducted prescription drug wholesaling operations from Phoenix, Arizona since September 10, 2000, and at all times material to the time period covered by the distribution of the prescription drugs as represented in these pedigree papers, Cardinal Distribution’s Arizona Distribution Center was located in Tolleson, Arizona. Further, neither the Cardinal Distribution Center in Arizona nor a nearby Cardinal Distribution Center in Utah distributed prescription drugs to Optia Medical in Salt Lake City, Utah. As a result, the true source(s) of approximately $ 2.9 million in prescription drugs purchased and ultimately sold by Stone Group is not disclosed in these transactions and has not been disclosed to date. The pedigree papers related to these prescription drugs are false. There is no reasonable assurance that the prescription drugs have remained within the regulatory controls for the * —=_= — distribution of prescription drugs, therefore these prescription drugs were rendered unfit for human distribution and use and are adulterated pursuant to s. 499.006(2) or (3), F.S. (11) Stone Group purchased prescription drugs from R.G.D. Enterprise, Inc., in Boone, North Carolina, in at least four transactions marked as Exhibits 66 through 69. However, R.G.D. Enterprise is not permitted as an Out-of-State Prescription Drug Wholesaler under the Act to wholesale prescription drugs into Florida. (12) Stone Group’s pedigree papers in at least 17 transactions marked as Exhibits 70-78 and 80-87 represent that Stone Group purchased prescription drugs from Matrix Medical Distributors in South River, New Jersey. However, at the time of these 17 transactions, Matrix Medical Distributors was not permitted as an Out-of-State Prescription Drug Wholesaler under the Act to wholesale prescription drugs into Florida. (13) Based on the allegations in paragraphs (11) and (12) Stone Group violated s. 499.005(14), F.S., by purchasing prescription drugs from unauthorized sources. (14) Stone Group produced to the bureau a purchase order and pedigree paper supporting the purchase of two boxes of Epogen 40,000 from R.G.D. Enterprise, Inc., marked as Exhibit 68. Stone Group sold this Epogen 40,000 as documented in Exhibit 68 with a corresponding pedigree paper. These pedigree papers indicate that El Paso Pharmaceutical in El Paso, Texas is an authorized. distributor of record for the Epogen 40,000 and does not disclose any previous sellers of the Epogen 40,000 before El Paso Pharmaceutical. However, El Paso Pharmaceutical is not the manufacturer of Epogen 40,000. In addition, at any time material to the allegations in this complaint, El Paso Pharmaceutical did not purchase Epogen 40,000 directly from the manufacturer, Amgen, therefore El Paso Pharmaceutical is not an authorized distributor of record as reflected on the pedigree paper. The pedigree paper related to these two boxes of prescription drugs is false. (15) Stone Group produced to the bureau a pedigree paper, marked as Exhibit 57 supporting the purchase and sale of two boxes of Procrit 20,000 that indicates Consumer ” “ ~ ~ Service Group in Knoxville, Tennessee is an authorized distributor of record for this product and the pedigree paper does not disclose any previous sellers of the Procrit before Consumer Service Group. However, Consumer Service Group in Knoxville, Tennessee is not the manufacturer of Procrit 20,000. In addition, at any time material to the allegations in this complaint, Consumer Service Group did not purchase Procrit directly from the manufacturer, Amgen, therefore Consumer Service Group is not an authorized distributor of record as reflected on these pedigree papers. The pedigree paper related to these two boxes of prescription drugs is false. , (16) Stone Group produced to the bureau a sales invoice to Breckenridge and supporting pedigree paper for the sale of Epogen 10,000 and Epogen 20,000, marked as Exhibit 70. This pedigree paper indicates that JGW Pharmaceuticals in Houston, Texas is an authorized distributor of record for the Epogen 10,000 and Epogen 20,000 and does not disclose any previous sellers of the Epogen 20,000 before JGW Pharmaceuticals. However, JGW Pharmaceuticals is not the manufacturer of Epogen in any strength. In addition, at any time material to the allegations in this complaint, JGW Pharmaceuticals did not purchase Epogen 10,000 or 20,000 directly from the manufacturer, Amgen, therefore JGW Pharmaceuticals is not an authorized distributor of record as reflected on the pedigree paper. The pedigree paper related to these 16 units of prescription drugs is false. (17) Stone Group produced to the bureau pedigree papers supporting the purchase of over $500,000 in prescription drugs from BTC Wholesale, marked as Exhibits 2, 4, 6, 10, 13, 15, 19, 21, 25, 30-32, 34-37, 41, 43, 44, and 49. Stone Group sold these prescription drugs with a corresponding pedigree paper, referenced in the same exhibit. These pedigree papers indicate that Belco in Amytiville, New York sold these prescription drugs to El Paso Pharmaceutical in El Paso, Texas. However, at any time material to this complaint, Belco did not sell these prescription drugs to El Paso Pharmaceutical. The pedigree papers related to ed 7 these prescription drugs are false and the true source of these prescription drugs is not known or disclosed. (18) Respondents failed to examine the prescription drugs that Stone Group purchased in the transactions alleged in paragraphs (14) through (17) as required by Rule 64F- 12.013(5)(a), Fla. Admin. Code. Compliance with this rule would have disclosed that the pedigree papers did not document that the prescription drugs had remained within the regulated channels for the wholesale distribution of prescription drugs. Further, there is no reasonable assurance that the prescription drugs have remained within the regulatory controls for the distribution of prescription drugs, therefore these prescription drugs were rendered unfit for human distribution and use and accordingly are adulterated pursuant to s. 499.006(2) or (3), F.S. As a result of this failure to examine the prescription drugs, including the pedigree papers that are intended to demonstrate that those prescription drugs have remained within the regulatory oversight of governmental agencies to help ensure the safety and integrity of the prescription drugs, Stone Group has violated s. 499.005(1), (3), and (4), F.S., for purchasing and distributing adulterated prescription drugs or prescription drugs that otherwise have been rendered unfit for human use. (19) In addition, Respondents engaged in misrepresentation or fraud in the distribution of prescription drugs when Stone Group and Runsdorf sold the prescription drugs referenced in paragraph (18) since the pedigree papers they provided to customers did not accurately reflect the true source(s) of the prescription drugs Stone Group sold to them and thereby violated s. 499.005(23), F.S. (20) All exhibits referenced in the allegations of this complaint are attached to and incorporated by reference herein. (21) The violations of Chapter 499, F.S., by Respondents as set forth in this complaint constitute sufficient grounds for DOH to impose an administrative fine of three hundred twenty- seven thousand five hundred dollars ($327,500) or impose any other penalty authorized by - a ~ ~ chapter 499, F.S. and chapter 64F-12, Fla. Admin. Code against the Respondents. The intended fine is within the limits prescribed for such violations by section 499.066(3), F.S. and Rule 64F-12.024, Fla. Admin. Code due to the threat to public health posed by these violations and the egregious activities of Respondents and their disregard for the public health and welfare. In particular, Respondents’ violations jeopardize public health because Respondents have failed to demonstrate that the prescription drugs acquired and distributed in numerous transactions were obtained from authorized sources. Furthermore, Respondents have failed to demonstrate that the prescription drugs they acquired, held, and distributed were held under conditions to assure that each drug had the identity and strength, and met the standards of quality and purity which it was represented to possess and that the drug had not been contaminated with filth or rendered injurious to health. Respondents have distributed adulterated prescription drugs. (a) Rule 64F-12.024 (4), Fla. Admin. Code sets the range of the penalty for acquiring prescription drugs from an unauthorized source from a Warning Letter to $1,000 per violation per day. Since, for purposes of this complaint, the source of the prescription drugs in paragraphs (11) and (12) were permitted in their resident states, but not Florida, the administrative fine for that violation is $500. However, the source of the prescription drugs involved in the allegations in paragraph (4) of this complaint came from unknown sources and were outside all regulatory channels and warrant revocation of Stone Group’s prescription drug wholesaler permit. Further, the violations alleged in paragraph (4) warrant an administrative fine of $54,000 based on $1,000 for 54 transactions. The total fine for the violations of s. 499.005(14), F.S., is $54,500. (b) Rule 64F-12,024 (4), Fla. Admin. Code sets the range of the penalty for activity with an adulterated drug from a Warning Letter to a fine of $5,000 per violation per day and revocation of a permit. Since the prescription drugs involved in paragraphs (4), -7? 7 (10) and (14) through (17) of this complaint came from unknown sources and were outside the regulatory channels, they pose the greatest risks to the public health and warrant revocation of Stone Group's prescription drug wholesaler permit. Further, the violations alleged in these paragraphs warrant an administrative fine of $134,000 based on $1,000 for 134 transactions. The administrative fine for the violations alleged in paragraph (9) is $5,000, however the department reserves the right to amend the administrative penalty for this allegation. The total fine for the violations of s. 499.005(1), (3), and (4), F.S., is $139,000. (c) Rule 64F-12.024 (4), Fla. Admin. Code sets the range of the penalty for engaging in ~ fraud, deceit, misrepresentation or subterfuge in the acquisition or distribution of a prescription drug as a fine ranging from $500 to $5,000 per violation per day and revocation of the permit. The allegations in paragraphs (4), (10), (14) through (17), and (19) of this complaint warrant an administrative fine of $134,000 based on $1,000 for 134 transactions and revocation of Stone Group's prescription drug wholesaler permit. (20) Section 499.067(1), Florida Statutes (F.S.), authorizes the department to deny, suspend, or revoke a permit if it finds that there has been a substantial failure to comply with ss. 499.001-499.081 or chapter 465, chapter 893, or chapter 501, or the rules adopted under any of those sections or chapters. In addition, s. 499.067(3)(c), F.S., authorizes the department to deny, suspend or revoke a permit if the permittee has violated any provisions of ss. 499.001- 499.081 or rules adopted under those sections. (21) The violations alleged in this complaint evidence a substantial failure by Respondents to comply with the Act and are substantial violations of the Act. Prescription drugs moving from permit holder to permit holder and the examination or product, including a review of the documentation accompanying those transactions, is the cornerstone for the federal and state regulatory scheme for the distribution of prescription drugs in this country. Further Stone Pa ~ — ~~ Group’s failure to reflect it's immediate supplier in the pedigree papers it prepared is a substantial violation of the Florida Drug and Cosmetic Act, Chapter 499, Florida Statutes. The allegations in this complaint regarding Respondents’ acquisition of prescription drugs from unknown sources and their subsequent distribution of these prescription drugs and the repetitive deficiencies regarding the true source of the prescription drugs reflected in the pedigree papers received by Respondents demonstrate Stone Group’s and Runsdorf's disregard for the regulatory scheme for the wholesale distribution of prescription drugs as well as the health and safety of those persons ultimately consuming the prescription drugs they purchased and sold that warrant revocation of Stone Group's prescription drug wholesaler permit. (22) You have the right to request an administrative hearing pursuant to ss. 120.569 and 120.57, F.S., if you wish to challenge the imposition of the administrative fine and the intended agency action to deny renewal and the revocation of permit 22:01274. Such proceedings are governed by ss. 120.569 and 120.57, F.S., and Rules 28-106 and 28-107, Florida Administrative Code. Request for a hearing, formal or informal, must comply with Rule 28-107.004, Florida Administrative Code. A petition for administrative hearing must be in writing and must be received by the Agency Clerk for the Department, within twenty-one (21) days from the receipt of this complaint. The address of the Agency Clerk is 4052 Bald Cypress Way, BIN # A02, Tallahassee FL 32399- 1703. The Agency Clerk's facsimile number is 850-410-1448, Mediation is not available as an alternative remedy. Your failure to submit a petition for hearing within 21 days from receipt of this complaint will constitute a waiver of your right to an administrative hearing, under Florida Administrative Code Rule 28-106.111 and this complaint shall become a "final order”. Should this complaint become a final order, a party who is adversely affected by it is entitled to judicial review pursuant to s. 120.68, F.S. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings may be commenced by filing one copy 10 7 7 of a Notice of Appeal with the Agency Clerk of the Department of Health and a second copy, accompanied by the filing fees required by law, with the Court of Appeal in the appropriate District Court. The notice must be filed within 30 days of rendition of the final order. (23) The undersigned certifies that a true copy of this amended administrative complaint was sent by certified mail to Adam Runsdor, individually and as President of Stone Group at 1141 South Rogers Circle, Suite 3, Boca Raton, Palm Beach County, Florida 33487, this i yh day of October, 2002. »Ph., C.Ph. tewide Pharmaceutical Services 2818-A Mahan Drive Tallahassee, Florida 32308 Telephone: (850) 922-5190 Copy also furnished to: Counsel for the Department: Robert P. Daniti Senior Attorney 4052 Bald Cypress Way Bin #A02 Tallahassee, Florida 32399 (850) 245-4005 11 SENDER: COMPLETE THIS SECTION ™ Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. m Print your name and address on the reverse so that we can return the card to you. ® Attach this card to the back of the maiipiece, or on the front if space permits. 1. Article Addressed to: AN C C. Signature wa C) Agent , We<_ O Addressee D. Is Uélivery address different from item 1? CI Yes If YES, enter delivery address below: O No ‘ Adam Runsdorf, President Stone Group, Inc. {| 1141 South Rogers Circle, Suite 3 ‘ Boca Raton, Florida 33487 . Service Type CO Certified Mail 1 Express Ma:i ; C Registered Return Receipt for Merchandise | C1 Insured Mail C.0.D. . Restricted Delivery? (Extra Fee)

Docket for Case No: 02-004388