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Utah issued refund for $800,000 in anti-malarial meds

Meds in Motion owner defends deal as legal, fair and in ‘good faith’

This Monday, April 6, 2020, file photo shows an arrangement of hydroxychloroquine pills in Las Vegas.
John Locher, Associated Press

SALT LAKE CITY — Gov. Gary Herbert’s Office issued a statement Wednesday saying the office has completed a “thorough internal review” of the state’s $800,000 purchase of anti-malarial drugs that had raised red flags to pharmacists, medical professionals and lawmakers with medical backgrounds.

“We have determined that all involved acted proactively, preemptively and prudently during an emergency in an effort to save lives. Although there were breakdowns in communication between state agencies, all involved acted in good faith,” the governor’s office said in the statement.

“In the weeks since the purchase, and prior to taking possession of the medication, the state of Utah has determined that a state supply of chloroquine/hydroxychloroquine is no longer prudent,” stated the governor’s office news release issued Wednesday.

“In light of these circumstances, we are grateful that the vendor, Meds in Motion, accepted our request to refund the $800,000 expended by the state,” the news release stated.

The state received the money earlier this afternoon, state officials said.

Also on Wednesday, after days of silence as concerns swirled around the state’s purchase of the drugs from Meds in Motion, the pharmacy’s owner, Dan Richards, spoke out in an interview with the Deseret News soon after the governor’s office issued the statement.

Richards said the transaction was done in “good faith,” the sale was completely legal, and accusations of price gouging are unfounded — rather, the state would have been given a more than 50% discount in the custom compounded drugs.

“Everyone acted in good faith, and the deal just didn’t happen,” Richards said. “It didn’t come to fruition the way we wanted. It’s disappointing, but we will continue to be here to help and raise our hand to help Utah in any way we can.”

Now, after Meds in Motion spent close to $1 million stockpiling chloroquine and hydroxychloroquine, Richards said the pharmacy plans to take a loss and donate the medication to charity, to address a worldwide shortage of anti-malarial medications in developing countries, including Africa.

“It’s unfortunate that it didn’t come to fruition,” Richards said. “But this was not the windfall for our business. The revenue made up less than 2% of our business operation, and so we move on. I’m disappointed that it didn’t work out, but we move on nonetheless.”

On state officials’ decision that it would not be “prudent” to purchase the drugs, Richards said he still believes the drugs have “potential” for treatment of COVID-19.

“The governor decided to pass on that,” he said. “Time will tell.”

Herbert said in a news conference last week the state health department’s negotiations to purchase more of the drugs have “ceased,” and that he didn’t know about the $800,000 purchase of 20,000 medication packs of chloroquine, zinc and hydroxychloroquine, executed March 31, according to an invoice obtained by the Deseret News.

Questioning the “transparency” of the deal, the governor said it was being reviewed to see “why it happened, when it happened and how it happened.”

Last week, a health department spokesman told the Deseret News when asked about the $800,000 purchase that the health department was not aware of that transaction, which was separate from the health department’s negotiations on a larger contract with Meds in Motion.

Paul Edwards, communications director of the state’s COVID-19 Community Task Force, said the order was authorized by the Governor’s Office of Management and Budget after the governor’s administration granted the authority to that office early on in its pandemic response.

When the invoice of the purchase came to light, it prompted pharmacists to question whether Meds in Motion, which has been licensed as a class A and class B pharmacy in the state of Utah, could legally manufacture and sell that many doses of the drug.

Asked about those concerns, Richards told the Deseret News the state purchase and distribution of the drug would have been legal, and that the drugs were a “custom compound” made through “anticipatory compounding” that wouldn’t be resold, but rather distributed through the state, “much like programs like Planned Parenthood,” he said.

“It’s called anticipatory compounding. We are compounding in anticipation per use, which is permitted and passed by the (Utah) Department of Licensing,” he said. “So the distribution model was cleared.”

On accusations that the $800,000 sale to the state of Utah was price gouged, Richards said each of the 20,000 medication packs, sold at $40 a pack, contained eight tablets. More specifically, the purchase included 7,000 hydroxychloroquine packets and 13,000 chloroquine packets. Richards noted chloroquine is a drug currently in shortage and costs more than hydroxychloroquine.

“The total value of those meds is $1.8 million, which means ... the state had a custom compound in a quantity that is not available anywhere else on earth at a 53% discount compared to market rate,” Richards said.

The governor’s office said its internal review showed the “challenging decisions made by Utah officials in the early days of the COVID-19 crisis.”

“In the absence of a vaccine, Utah leaders were actively seeking out effective treatments that could reduce the duration and severity of the virus and thereby protect precious hospital resources from being overwhelmed,” the office said in Wednesday’s news release. “In this fast-changing environment, there were promising reports about the role of antiviral medications in treating COVID-19 symptoms. Although reports of efficacy were mixed, top medical specialists in the state — before this issue became politicized — urged state officials to look seriously at chloroquine and hydroxychloroquine as effective treatment options.”

So state officials, including the Utah Department of Health, began working with Meds in Motion to custom compound the drugs in “quantities sufficient to meet anticipated need,” the governor’s office stated.

“As global interest in chloroquine and hydroxychloroquine subsequently spiked and supply chains frayed because of speculation, state officials authorized the purchase in question which was executed by our Division of State Purchasing and General Services at a fair price,” the news release stated.

Through the review, the governor’s office stated “we also have a clearer sense of the unprecedented challenges” facing the state’s purchasing department. As global supply chains fractured, the department implemented emergency procurement protocols to buy personal protective equipment, testing supplies and other needed items to address the COVID-19 pandemic, according to the news release.

Because the purchase happened under both the governor’s and the president’s emergency declarations, a competitive bid process was not required for the purchase, according to the governor’s office.

“Nonetheless, State Purchasing is required to exercise caution and afterwards justify their actions,” the governor’s office stated.

Since March 24, the state’s purchasing department has issued over 300 purchase orders under emergency protocols for about $70 million in supplies, according to the governor’s office.

“Some of those orders have been subsequently canceled as a result of product failure, failure to deliver, or the state determining products were no longer needed,” the news release stated. “Our review shows a State Purchasing system that is to be commended for adapting rapidly to crisis conditions and exercising judgment in balancing expediency, cost and quality.”

“It is easy to sensationalize and second guess decisions made on the field of battle,” the release continued. “There is little here to second guess, and the governor is grateful to public and private sector partners, including Meds in Motion, who have acted with dispatch in a good faith effort to save lives.”