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EX-VITARINE EXEC BUSHLOW SENTENCED TO EIGHT MONTHS IN JAIL

Executive Summary

EX-VITARINE EXEC BUSHLOW SENTENCED TO EIGHT MONTHS IN JAIL, including four months of community confinement, by Baltimore federal court Judge John Hargrove on Feb. 21. Criminal charges were brought against John Bushlow, Vitarine's former VP- manufacturing, on Sept. 6. On Oct. 3, he pled guilty to one count of fraudulent failure to establish and maintain records of drug manufacture relating to the AADA for bulk cephradine ("The Pink Sheet" Oct. 7, T&G-12). Bushlow also will serve three years of supervised release but was not fined in the case. Bushlow originally faced a maximum sentence of three years and/or a fine of $250,000. Maryland Assistant U.S. Attorney Gary Jordon said he reduced the sentence request because Bushlow accepted responsibility for the charge and cooperated with the government investigation of Vitarine generic drug fraud. As product manager of Vitarine's St. Croix, Virgin Islands manufacturing facility, Bushlow was responsible for producing the company's generic cephradine. The AADA was approved by FDA on Feb. 25, 1988, but the bulk powdered formula produced by Vitarine presented Bushlow with a problem -- the powder would not compact enough to fit into the capsules, Bushlow's attorney Stephen Salke told the sentencing hearing. Bushlow explained to Judge Hargrove: "We made the product according to how it was supposed to be made [in the approved AADA]. It didn't work." According to the Statement of Facts submitted by the Maryland U.S. Attorney's office when Bushlow was charged in September, ex- Vitarine VP Steven Colton, PhD told Bushlow to solve the problem using a compacted bulk cephradine rather than a powdered formulation. Bushlow suggested that Vitarine file a supplement with FDA for approval of the altered formula. Then, on July 28, 1988, Bushlow began production of two batches of the compacted bulk cephradine at the direction of his supervisors without submitting a supplemental AADA. When those two batches were produced, Jordan told Judge Hargrove, Bushlow directed employees to falsify records to show that Vitarine's batch of cephradine conformed with the approved formula. The prosecution charged that, via this directive, Bushlow acted with the "clear intent to defraud consumers...and FDA." Three more batches were manufactured and shipped with falsified records, the Statement of Facts says. However, Bushlow's attorney claimed that "the records and facts bear out a number of mitigating factors in this case." He pointed out that Bushlow made an extra batch of the compacted bulk cephradine to submit to FDA. Bushlow also sent out the batch for analytical study to assure that the product did not pose a "health or safety risk." Jordon calculated that Vitarine's gross sales of the unapproved product totaled $82,000. Subtracting the value of cephradine recalled during June 1989 after FDA learned of the unapproved new formula, the prosecution held Bushlow responsible for $42,000 in net sales of the fraudulent drug. Salke contested this amount, claiming that his client was not the "sole cause of that gain." Hargrove found the figure of $42,000 "very generous" in that Bushlow was not being held responsible for the entire amount of fraudulently sold product. In his presentencing statement, Bushlow admitted to the judge: "I know I did wrong." He explained that after he presented his superiors with information that the original formula did not work, "I was told I had to make the product." He added: "I've had two bad experiences with other companies, and that made me more disposed to do what I was told." Judge Hargrove did not accept any attempt to shift responsibility. He told the court: "If [Bushlow] had the knowledge that this is illegal...then he can't push the blame on his employers. They're going to have to face the music themselves." In response to the defense's claim that Bushlow's actions did not constitute fraud because he was not selling the product for personal profit, Hargrove said: "If you're a manager, you do it because you want to keep your job. You're out there for yourself." Bushlow is the second former Vitarine exec to be sentenced in the ongoing generic drug scandal. Steven Colton was sentenced to 27 months in prison without parole on Sept. 6 ("The Pink Sheet" Sept. 9, T&G-8). On May 17, Colton pled guilty to three counts of making false statements to FDA ("The Pink Sheet" May 20, T&G-1).

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