Pharmakon collected $560K in incentives before ceasing operations

Two related Noblesville-based pharmacy companies received more than a half-million dollars in tax breaks and other incentives from state and local governments before suspending operations last year after a Food and Drug Administration investigation uncovered safety issues and possible criminal activity.

Noblesville-based Pharmakon Pharmaceuticals Inc. and sister firm Pharmakon Long Term Care Pharmacy Inc., which had been on a fast growth path over the past decade, terminated 195 employees in September after losing a major client and dealing with financial issues related to a Federal Drug Administration investigation. The companies ceased operations in December and were recently dissolved.

Last month, the U.S. Department of Justice announced that Pharmakon Pharmaceuticals owner and founder Paul Elmer and director of compliance Caprice Bearden had 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 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.

Bearden is expected to plead guilty to the charges, and Elmer is set for a trial in August.

Before the company’s downfall, it collected a total of $560,325 in state and local incentives—$252,360 from the Indiana Economic Development Corp. and nearly $308,000 in local tax breaks.

Noblesville approved the initial agreement with Pharmakon in September 2013 as the company planned to relocate from Carmel to an existing 37,000-square-foot facility at 14450 Getz Road. The agreement called for a 50 percent reduction on real property taxes for five years that was expected to save the company a total of $158,740 and a four-year personal property tax abatement estimated to be worth $38,407.

At the time, Pharmakon planned to invest $3.5 million to acquire and equip a vacant building in Noblesville’s Saxony Corporate Campus where it said it would employ 135 people within five years.

Then, in August 2014, Pharmakon announced it would spend $8 million to construct and equip a 50,000-square-foot building next door to its headquarters and hire 150 more employees.

The city then offered the company a 10-year real property tax abatement estimated to be worth $678,224, and a five-year personal property tax abatement worth $105,885. The city also said it would purchase $200,000 worth of equipment on Pharmakon’s behalf.

Meanwhile, the IEDC offered Pharmakon a total of $855,000 in state incentives in deals signed in 2009 and 2014.

The company collected $150,000 in tax credits and $48,312 in training grants from the 2009 agreement with the state after it fulfilled its pledge to spend nearly $1.9 million to open a new facility and hire 52 full-time employees.

It collected another $46,920 in training grants from the 2013 agreement, but received just $7,127 in tax breaks out of a potential $600,000 after failing to add and retain another 74 employees. The company would have needed to employ 282 people by the end of 2018 to fully collect on the 2013 agreement.    

Pharmakon ended up receiving only a portion of the $1.8 million offered by the state and local deals, but a new unrelated pharmacy company that has taken over the former Pharmakon facility is on track to receive some of those same incentives.

The Noblesville City Council approved transferring the remainder of its incentives package with Pharmakon to MedScript Long Term Care Pharmacy at a meeting June 27.

MedScript purchased the former Pharmakon facility in December 2016 and retained 48 former Pharmakon employees. The company also expects to hire 100 additional employees within five years.

MedScript could save more than $670,000 with the remaining years in the local incentives package. The company has not received any state incentives.

Noblesville Economic Development Director Judi Johnson said the equipment the city purchased for Pharmakon was acquired by MedScript when it took over the building.

No penalties are being imposed against Pharmakon. The measure the City Council approved June 27 waived the compliance requirements. The resolution said the company did not comply with the agreement but "such failures were caused by circumstances beyond the control of Pharmakon, resulting in a decline of demand for Pharmakon's products and services."