A Newtown Township drug manufacturer and two top leaders of the company were indicted Friday morning, according to the U.S. Attorney’s Office for the Eastern District of Pennsylvania.
Generic drug manufacturer KVK-TECH, which is based in Newtown Township and owns a large facility on Cabot Boulevard in Falls Township, Murty Vepuri, 69, and Ashvin Panchal, 50, both of Newtown, were charged by indictment with conspiracy to defraud the United States Food and Drug Administration (FDA) following an investigation by the FDA Office of Criminal Investigations, U.S. Department of Homeland Security Investigations, and U.S. Department of Labor Office of Inspector General. The company is also charged with one count of mail fraud.
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The company distributed unapproved drugs and undertook efforts to mislead the FDA and conceal information that could impact drug safety and effectiveness. The company also sold unapproved drugs to customers who believed the drugs were made with the approval of the FDA, according to authorities.
KVK-TECH operates a facility on Terry Drive and another at the former Lockheed Martin plant off the Newtown Bypass in Newtown Township. Since 2012, the company has owned a plant on Cabot Boulvard in Falls Township. KVK-TECH was founded in 2004.
Between October 2010 through March 2015, Vepuri, who was the de facto owner of KVK-TECH, and Panchal, KVK-TECH’s head of quality assurance, defrauded the federal government by “impeding, impairing, and defeating FDA’s mission to protect the health and safety of the public by ensuring that drugs marketed and distributed in the United States are safe and effective for their intended uses,” officials said.
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As alleged in the indictment, Vepuri directed KVK-TECH’s day-to-day operations and made all key business decisions for the company, including decisions related to drug regulatory requirements, drug composition, drug manufacturing quality, purity, and potency. However, Vepuri – who previously owned a generic drug manufacturer in New Jersey that was subject to a restraining order due to ongoing FDA violations – is charged with hiding his involvement in KVK-TECH by placing its ownership in private trusts for the benefit of his children. Vepuri then allegedly represented to the FDA that he was merely an advisor or consultant to KVK-TECH, when in reality he exercised unchecked authority over the company.
As alleged, under Vepuri’s control, KVK-TECH ignored regulatory requirements that had the potential to slow the manufacture, distribution, and sales of its drugs. Vepuri and Panchal are also charged with having provided false explanations to the FDA when inspectors identified violations. Often, Vepuri and Panchal attributed regulatory failures to a mistake or misunderstanding, and KVK-TECH would falsely assure the FDA that violations had been addressed when they knew no corrective and preventative actions had been taken.
The Indictment highlights KVK-TECH’s conduct with regard to Hydroxyzine, a KVK-TECH prescription drug for the treatment of anxiety, for which Vepuri purchased an active pharmaceutical ingredient (“API”) made in Mexico by Dr. Reddy’s Laboratories (“DRL Mexico”). DRL Mexico was not an FDA-approved source. To the contrary, as alleged, the defendants knew that DRL Mexico’s API was considered adulterated by the FDA due to significant violations of good manufacturing practices (cGMP) at DRL Mexico’s manufacturing plant. The cGMP violations were so severe that the FDA issued an import alert for all DRL Mexico API from July 2011 through July 2012. Nonetheless, from 2011 through 2013, KVK-TECH is charged with having knowingly distributed more than 383,000 bottles of the unapproved Hydroxyzine without the FDA’s knowledge or approval.
Federal prosecutors said the two company executives face maximum possible sentences of five years in prison, three years of supervised release, a $250,000 fine, and potential financial forfeiture if convicted. The company faces fines that could total up to $4 million and financial penalties such as forfeiture and probation. In addition, the two defendants and the company could be blocked from participating in federal programs.
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“FDA laws and regulations regarding drug composition, manufacturing, quality, and related controls are designed to protect Americans’ health and safety – so we can all be confident that our prescription medications will be safe and effective,” said Acting U.S. Attorney Jennifer Arbittier Williams. “When companies attempt to game the system to avoid these regulations and increase their profits, the ramifications are potentially catastrophic. As this Indictment makes clear, any individuals or companies that try to evade the law in this manner will be brought to justice.”
The company had not responded to a request for comment as of 10:20 a.m.
Editor’s Note: All individuals arrested or charged with a crime are presumed innocent until proven guilty. The story was compiled using information from police and public court documents.
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