BROOKLYN (CN) – Wyeth claims that a drug supplier bilked it for $1.3 million on phony returns in a recall. Wyeth claims that Quality King Distributors heard about the recall one day before it was issued, then bought up supplies of the cough medicine to return it, knowing it was not entitled to do so.
In its federal complaint, Wyeth says it recalled Robitussin and Dimetapp in October 2007 because some dosage cups were missing the half-teaspoon marks.
The recall entitled direct customers to a credit of the list price, plus a $3.24 per dozen handling fee. Indirect customers had to seek credit or reimbursement from their suppliers.
Direct customers had to contact Wyeth’s agent, Carolina Supply Chain Services, to get “return kits,” and send back the medicines to be destroyed in accordance with FDA regulations.
Quality King Distributors and its co-defendant subsidiary Quality Healthcare stockpiled the drugs from markets in Puerto Rico, buying them at lower-than-continental U.S. prices, then selling them back in the United States for a profit, but still below Wyeth’s list prices, according to the complaint.
“This practice is known as ‘product diversion.’ On information and belief, QKD is the largest product diverter in the United States by sales volume,” according to the complaint.
Wyeth claims that when Quality King got a day’s jump on the recall, it worked out a scheme to profit from it.
It claims that Quality King’s Vice President Louis Assentato claimed to be a direct customer, got the return kits, and then “boasted” to his CEO “that he had orchestrated the return of approximately 26,000 dozen units of product subject to the recall, allegedly entitled QKD to a ‘1.3 (million)’ cash payment at a gross profit of 32 percent,” according to the complaint. (Parentheses in complaint.)
“In an email to Mr. [CEO Glenn] Nussdorf, Mr. Assentato stated, ‘Wyeth Consumer was only giving credits on recalls to existing customers. I got a rep at Returns company to give us (a return authorization), even though we’re not a Wyeth customer,'” according to the complaint. (Parentheses in complaint.)
Over the next 4 months, Quality King “actively sought to purchase recalled product from more than a dozen intermediaries,” the complaint states.
Wyeth claims that Quality King “routinely seeks to profit from manufacturer safety recalls.”
Wyeth says that in February 2008 it informed Assentato that Quality King was not entitled to a credit. Wyeth says Quality King responded by filing a collections action for more than $1.3 million in May 2009.
Wyeth seeks $2 million in compensatory damages for breach of contract, unjust enrichment and tortuous interference.
It is represented by Bruce Kaplan with Friedman Kaplan Seiler & Adelman.