Colorado couple caught defrauding drug companies

FDA Consumer, July-August, 2003 by Michelle Meadows

A Colorado couple falsified forms, opened phony pharmacies to buy drugs at a discount, and then illegally resold them on the wholesale market in a scheme that swindled pharmaceutical companies out of millions of dollars. According to the FDA's Office of Criminal Investigations (OCI), Darin D. Asay and his wife, Wendy E. Almanza, of Evergreen, Colo., recruited several friends and relatives to help them in the scam.

Pharmacies that provide medications exclusively to people in institutional settings such as nursing homes and hospitals are commonly called "closed-door pharmacies." Pharmaceutical companies typically sell drugs to this type of pharmacy at lower prices than those charged to retail pharmacies and drug wholesalers. Because of the varying prices, manufacturers typically require closed-door pharmacies to sign an "own-use" clause that allows them to dispense the drugs only to patients in institutional settings.

According to court papers filed in the U.S. District Court for the District of Colorado, Asay, Almanza, and their accomplices opened at least eight "shell" closed-door pharmacies in several states, including Colorado, Texas, Arizona, and Idaho. They made it look like they ran legitimate pharmacies and signed various own-use certifications even though they intended to sell the drugs to wholesalers.

The criminal activities started in 1993, when Asay and Almanza opened a wholesale distribution company called. Intermountain Distributors in Golden, Colo. They also arranged to do business as Principal Pharmacy Consultants and Empire Distributors. Their associates, Nigel Jones and Anita Renee Wier Jones of Piano, Texas, operated a pharmacy called Colorado Institutional Services.

The defendants joined drug buying groups that obtained drugs at a lower price for institutional pharmacies. On their membership applications, those operating the scam made false statements concerning the number of nursing home patients they served. Asay, Almanza and others in the scheme directed their shell pharmacies to order large quantities of discounted drugs, and then arranged for the pharmacies to deliver the drugs to wholesale distribution companies to be sold for profit.

In 1994, the Arizona Board of Pharmacy inspected a closed-door pharmacy in Mesa, Ariz., and discovered several state code violations, including a non-pharmacist working without a registered pharmacist present. The inspection also revealed that the pharmacy had purchased drugs from wholesalers at reduced prices and shipped them to Intermountain Distributors. The Arizona Board of Pharmacy referred the matter to the FDA, and the OCI office in Kansas City, Kan., handled the case.

Additionally, the Colorado Board of Pharmacy inspected Principal and Intermountain in 1994 and noted that both businesses had a small drug inventory and that Principal had a small number of prescriptions on file--characteristics of closed-door pharmacies involved in drug diversion, according to court papers. A federal search warrant executed at one of the defendants' pharmacies revealed that the only prescriptions on file were for family members of the defendants. Searches of the offices of Intermountain Distributors Inc., Principal Pharmacy Consultants, Colorado Institutional Services, and other pharmacies turned up business records that documented the fraudulent activities, investigators say.

Some of the defendants' false statements were transmitted by interstate wire transmission, and wholesalers sent payments to the defendants by mail, commercial interstate carrier, and wire transfers. Asay and Almanza deposited more than $23 million in proceeds from the mail and wire fraud scheme into several bank accounts under different business names.

The federal government seized the couple's Colorado mansion and other belongings. The Rocky Mountain News in Denver reported that the $6 million home had 11 bathrooms, a home theater, and a 2,700 square-foot heated deck. Asay and Almanza pleaded guilty to mail fraud in connection with their scheme to defraud manufacturers. In 2001, Asay and Almanza received prison sentences of six and a half and three years, respectively. The court also ordered the couple to pay restitution to the defrauded drug companies. Nigel and Anita Jones also were ordered to pay restitution and received probation. Seventeen drug companies received total restitution of nearly $5 million.