On July 17, 2018, the former president of Cumberland Distribution, Inc. (Cumberland) was sentenced to 15 years in prison and ordered to forfeit $1.4 million for his leading role in a drug diversion plot in which tainted pharmaceuticals were shipped to pharmacies nationwide from a Nashville warehouse.

Jerrod Nichols Smith and his co-conspirators, Charles Jeffrey Edwards and Brenda Edwards, also of Houston, operated a 32-month drug diversion scheme that saw $50 million worth of drugs purchased from unlicensed suppliers “cleaned, sorted, re-packaged, and shipped to independent pharmacies around the country” via Cumberland’s Nashville storage facility. Evidence presented during Smith’s February 2018 trial showed that the unlicensed suppliers had initially obtained the diverted drugs from patients in and around New York and Miami. The drugs included medications used to treat of HIV/AIDS, high blood pressure, and diabetes, along with antipsychotic and anti-depressant medications.

While many of the drugs were sent directly to the Nashville facility, Smith and Jeff Edwards also had drugs shipped to shell companies in Louisiana and Arkansas before forwarding them on to Nashville for sorting and repackaging. These companies were in fact licensed to sell drugs, but the conspirators used them as pass-through companies to “create the appearance that Cumberland was purchasing drugs from licensed suppliers” according to a statement issued by the United States Attorney’s Office for the Middle District of Tennessee. This process was utilized to conceal the origins of the drugs and create a paper trail of false documentation that was then supplied to Cumberland’s pharmacy customers.

In addition to the illegality of the diversion scheme itself, many of the drugs that were ultimately shipped out to independent pharmacies by Cumberland had problems that could have caused harm to patients. Some prescription drug bottles contained the wrong medicine or were labeled with the wrong dosage information. Others were found to contain foreign objects, while several witnesses testified at Smith’s trial that at least one bottle contained nothing but breath fresheners rather than medication.

Following his week-long trial, Smith was convicted of 15 counts of mail fraud, conspiracy and making a false statement to the U.S. Food & Drug Administration. Charles and Brenda Edwards had previously pleaded guilty to related charges. Charles Edwards was sentenced to six years in prison and ordered to forfeit $1.4 million. Brenda Edwards will be sentenced later this year.

The FisherBroyles Pharmacy and Health Care Law team is pleased to keep you updated on events of interest to those in the healthcare and pharmaceutical industries. Questions regarding the subject matter of this alert may be directed to any of the following attorneys:

Brian Dickerson, FisherBroyles Partner
Brian E. Dickerson

Anthony Calamunci, FisherBroyles Partner
Anthony Calamunci

Nicole Waid, FisherBroyles Partner
Nicole Hughes Waid

Amy Butler, FisherBroyles Partner
Amy Butler