Drugmaker Gilead Alleges Counterfeit Ring Sold $250 million of HIV Drugs

Drugmaker Gilead Sciences Inc. said that a network of little-known drug suppliers and distributors sold illicit and potentially dangerous fake versions of its HIV medicines that ended up in pharmacies and in the hands of patients.

In all, Gilead identified 85,247 counterfeit bottles of its branded medications worth more than $250 million that were sold to pharmacies over the past two years following an intensive investigation and court-approved civil seizures, a company spokesman said.

The Gilead spokesman said that many of the counterfeit drugs were purchased from homeless or drug-addicted HIV patients and then resold using falsified documentation.

“Gilead has uncovered and stopped a complex and criminal enterprise distributing counterfeit Gilead HIV medication through the legitimate U.S. supply chain,” the spokesman said.

The company uses the word “counterfeit” to include genuine medications that have faked documentation or altered packaging, as well as fake pills.

Gilead filed a lawsuit in July 2021, which was unsealed on Tuesday, January 18, 2022, alleging that the distributors sold its HIV drugs with falsified documentation and altered packaging. In several cases, the bottles contained the wrong pills, including an over-the-counter painkiller and an antipsychotic drug instead of the HIV medications the patients were prescribed, the company alleged. An updated version of the complaint names dozens of defendants, including marketers, suppliers and distributors.

The judge unsealed the case after asking Gilead last week to explain why the case should remain fully sealed, saying its continued investigation wasn’t a reason for sealing. Gilead said it didn’t object to the unsealing.

In filing the lawsuit, Gilead has taken an under-the-radar approach, by hiring its own private investigators and working with federal and local law enforcement to execute seizures of the defendants’ offices and warehouses, before the defendants were aware of the case.

The company sought the seizures under the Lanham Act, a federal trademark statute that allows for plaintiffs to execute civil seizures and litigate a case under seal if approved by a judge.

Such seizures, which defendants aren’t aware of in advance, can be a quicker way of getting products off the market than through criminal-law channels, said Randy Gaw, who has represented wholesalers in Lanham Act cases but isn’t involved in the Gilead dispute.

“It also gives the company more control over the process itself,” said Mr. Gaw. “When the evidence is seized by the government, it’s in the property of the government and not shared with the company.”

As a result of the litigation, Gilead has conducted court-permitted seizures at warehouses and offices spanning 17 locations and nine states, the Gilead spokesman said.

Gilead has asked a judge to award damages and to bar the defendants from selling its medications, “whether genuine or counterfeit.” Its claims include violations of trademark laws and that some defendants took part in a racketeering conspiracy.

Gilead’s allegations pertain primarily to two of its HIV treatments, Biktarvy and Descovy, the latter of which is also used to prevent HIV infection. The drugs are projected to have had $10.2 billion in combined sales last year. Descovy and Biktarvy arrive at pharmacies in sealed bottles, so pharmacists have no role in filling the containers.

A 2013 law required sellers of prescription drugs to provide buyers with a transaction history document known as a pedigree, which details each previous seller and buyer in the supply chain. The law was an effort to crack down on the practice of diverting medicines from the regulated supply chain and then reselling them to pharmacies at discounted prices using falsified pedigrees.

In the court papers, Gilead said it first became aware of counterfeit medication in August 2020 after a report from White Cross Pharmacy in Brawley, Calif. That month, a customer called to tell the pharmacy that a bottle of Biktarvy contained the wrong pills, which turned out to be Tylenol, Shane Jerominski, White Cross’s pharmacist-in-charge, said in an interview.

The patient didn’t take the pills, and the pharmacy replaced the medication with authentic Biktarvy, Mr. Jerominski said. He said he reported the fake pills to Gilead.

Mr. Jerominski said White Cross purchased Biktarvy from Safe Chain Solutions LLC, a wholesale distributor based in Maryland, because it was charging a cheaper price than its primary wholesaler.

“I had no way of knowing this was fake,” Mr. Jerominski said.

An attorney for Safe Chain, which is a defendant in the suit, said his clients strongly disagree with Gilead’s allegations and that one of the company’s founding principles is protecting the safety and integrity of the pharmaceutical supply chain. In court documents, Safe Chain accused Gilead of abusive litigation tactics. The company also said it never sold products it was aware were counterfeit, and quarantined products that it suspected were counterfeit.

After Gilead determined that the fake pills weren’t an isolated incident, it sent an alert to all U.S. retail pharmacies warning of fake pills distributed by Safe Chain, the Gilead spokesman said. The March 2021 notice said that Gilead received pharmacy reports of five instances in which patients returned bottles of Biktarvy or Descovy that contained foreign tablets.

In July 2021, Gilead learned that Woody Weaver Pharmacy in Tyler, Texas, had purchased bottles of Biktarvy from Scripts Wholesale Inc., court documents say. The pedigree traced the bottles from a wholesaler to authorized distributor AmerisourceBergen Corp. , the documents say. But Gilead said the pedigree was fake.

Jackie Weaver, who operates the Texas pharmacy, said that Amerisource told him that the pedigree was fake, and that he returned the bottles to Scripts for a refund.

Scripts, a defendant in the suit, declined to comment. An Amerisource spokeswoman said the company used transactional data to confirm that the allegedly falsified medicines had not moved through its facilities.

Gilead said it was aware of eight bottles with foreign tablets that Safe Chain sold to pharmacies. One held an over-the-counter painkiller, another an HIV drug made by another company, three contained the antipsychotic drug Seroquel, and the remainder contained other Gilead drugs. One patient who unknowingly took Seroquel instead of their HIV pill “could not speak or walk afterwards,” Gilead said in a court filing.

After a judge granted permission, Gilead executed seizures on July 26, 2021, when it seized more than a thousand bottles of its medications from Safe Chain.

In August, the company issued a public warning in a statement on its website. “Distributors not authorized by Gilead to sell Gilead-branded medicine have sold these counterfeits to pharmacies where genuine Gilead bottles have been tampered with a counterfeit foil induction seal or label and contain incorrect tablets,” the company said in a statement. It said it was working with the U.S. Food and Drug Administration, pharmacies and legal authorities.

Later in August, Gilead seized more than 17,000 bottles of Gilead-labeled medicines from wholesaler ProPharma Distribution LLC, all of which had counterfeit pedigrees and many of which had counterfeit labels, Gilead says in the documents.

A lawyer for ProPharma, a defendant in the case, didn’t respond to a request for comment. In court documents, ProPharma said it denied the allegations in the case.