Pharmakon owner, compliance director face criminal charges

The owner and the director of compliance for Noblesville-based Pharmakon Pharmaceuticals Inc. have been charged with multiple criminal counts related to the sale of compounded painkillers that were as much as 25 times more potent than they should have been, the Department of Justice announced Thursday.

The drugs were used on numerous hospitalized infants, including one that had such an adverse reaction that it had to be flown by emergency helicopter to a nearby children’s hospital for treatment, the indictment says.

Paul Elmer, 64, of Fishers, and Caprice Bearden, 62, of Carmel, were charged in a 10-count indictment with one count of conspiracy to defraud the United States, three counts of distributing an adulterated drug in interstate commerce, and six counts of adulterating drugs while held for sale after shipment of a drug component in interstate commerce.

Elmer, who founded the company in 2003, was arrested Wednesday and pleaded not guilty in his initial court appearance in U.S. District Court. He was released until a trial scheduled for Aug. 21.  

U.S. Attorney Josh Minkler said Bearden, the director of compliance, is expected to plead guilty to all charges.     

“These defendants put greed and the reputation of their company ahead of the health and safety of our most innocent victims,” Minkler said in written comments. “Their actions put lives in danger and they will be held accountable.”

Pharmakon compounded drugs at a facility in Noblesville for institutional customers in Indiana and other states. It suspended operations late last year after announcing plans to eliminate 195 of its 215 employees.

The company cited an investigation by the Food & Drug Administration and the loss of a major client as reasons for the layoffs. A new unrelated pharmacy business has since taken over the 52,000-square-foot building in the Saxony Corporate Campus.

The indictment alleges that from July 2013 through February 2016, Bearden received about 70 potency-test failure notices from companies used by Pharmakon, indicating that drugs such as morphine sulfate and fentanyl were either under- or over-potent.  

The indictment says Bearden discussed the out-of-specification test results with Elmer, a licensed pharmacist, and Elmer determined that Pharmakon should not contact any clients–including hospitals–who received the drugs, nor conduct product recalls before FDA intervention.

The lack of action resulted in several infants being injected with drugs compounded by Pharmakon that were significantly over-potent, investigators said.

In early February 2016, Pharmakon distributed morphine sulfate, an opioid typically used to relieve moderate to severe pain, to a hospital in Indiana and a hospital in Illinois. FDA investigators said the drug was 25 times more potent than it should have been and sickened three infants, including one who was flown to another hospital to receive emergency treatment.

The indictment says Bearden falsely told FDA inspectors in 2014 and 2016 that Pharmakon had  never received any out-of-specification drug-potency test results. Elmer learned of Bearden's deception but took no action to notify the FDA or clients.

“The indictment alleges that Elmer and Bearden conspired to defraud the United States by interfering with and obstructing the lawful functions of the FDA, and obstructing, influencing and impeding FDA inspections,” the Department of Justice said in a written statement. “In addition, as alleged, during the 2016 inspection, Elmer directed at least one Pharmakon employee to backdate batch records of compounded drugs.”

The conspiracy charge carries a maximum sentence of five years in prison and a fine of $250,000 or twice the gross gain or gross loss from the offense, the DOJ said.

The other charges each carry a maximum punishment of one year in prison and a fine of $100,000 or twice the gross gain or gross loss from the offense.

Elmer and Bearden could not immediately be reached for comment Thursday morning.

Pharmakon had been on a path of fast growth over the past decade after moving its headquarters from Indianapolis to Carmel in 2008.

In 2014, the Carmel City Council canceled a 10-year property-tax abatement when Elmer decided to move the business to Noblesville.

The company made further incentive agreements with the city of Noblesville and the Indiana Economic Development Corp.