NBTY's Poor Recordkeeping of Pseudoephedrine May Cost theCompany $146 Million

NBTY's Poor Recordkeeping of Pseudoephedrine May Cost theCompany $146 Million

BROOKLYN, N.Y.--In a complaint filed April 14, the U.S.Attorney's Office of the Eastern District of New York alleges Bohemia,N.Y.-based NBTY Inc. illegally distributed pseudoephedrine products in"extraordinary quantities" in the United States and abroad. In itscomplaint, the office was concerned because pseudoephedrine is an ingredientused in the manufacture of methamphetamine, a controlled substance. Roslynn R.Muskopf, the prosecuting attorney, is asking that because the company failed tokeep properly documented records of these transactions, NBTY should be made topay approximately $146 million in injunctive relief under the ControlledSubstances Act (CSA).

Currently, all mail order distributions of pseudoephedrine tablets aremonitored as part of the CSA. Prior to Oct. 17, 2001, the "tip-off"amount was 24 g or more of pseudoephedrine base per tablet; after Oct. 17, thetotal was knocked down to 9 g. In addition, all mail order distributions ofpseudoephedrine tablets in a bottle or other package that contain more than 3 gof pseudoephedrine base are treated as "regulated transactions" underthe CSA. In comparison, a cold medicine such as Pfizer's Sudafedr has 30 mg ofpseudoephedrine per dose. "[A]t all times relevant to this action, each'regulated person' who engages in a `regulated transaction' has been required toidentify the other party to the transaction," the complaint read.

NBTY, as a manufacturer of pseudoephedrine-based products, has been underthis scrutiny. According to the complaint, NBTY engaged in a "regulatedtransaction" by distributing pseudoephedrine tablets to 5,796 individualsvia mail order between November 2000 and September 2002. In addition, NBTYreportedly failed to obtain a signature, driver's license information and oneother form of identification with each sale, as required by the CSA.

NBTY is also purported to have engaged in 65 mail order distributions of 60mg pseudoephedrine tablets to individuals not registered with the DrugEnforcement Administration (DEA) to distribute or export pseudoephedrine. TheU.S. Attorney's Office alleges that the amount sold was in excess of what"could be used for legitimate purposes by an individual who was notregistered to distribute or export tablets containing pseudoephedrine."

Also, the complaint alleges NBTY exported pseudoephedrine tablets 116 times,even though the company is not registered to do so.

In an April 17 company release, NBTY acknowledged that a complaint had beenfiled that alleged the company did not keep good technical recordkeeping andviolation reports for the company's antihistamine and decongestant products.Total sales of these products generated approximately $160,000 of the company'stotal sales for fiscal 2001 (FY01), or .0002 percent of FY01's $964 millionsales.

NBTY reported it has cooperated in all respects with the DEA in itsinvestigation of sales identified in the complaint. "[We believe] there isno valid basis for the claims asserted or penalties sought and [intend] tolaunch a vigorous defense," the company stated.