Newtown Drug Manufacturer Charged With Conspiracy To Defraud FDA

NEWTOWN, PA — A pharmaceutical company based in Newtown and two of its executives were charged with conspiracy to defraud the U.S. Food and Drug Administration, the U.S. Attorney's Office announced Friday.

Generic drug manufacturer KVK Tech, Inc., and Murty Vepuri, 69, and Ashvin Panchal, 50, were charged by indictment arising from the alleged distribution of unapproved drugs, as well as alleged efforts to mislead the FDA and conceal information which could impact drug safety and effectiveness.

The company was also charged with one count of mail fraud arising from the alleged sale of unapproved drugs to customers who believed the drugs were made with the approval of the FDA.

From October 2010 through at least March 2015, Vepuri and Panchal, the company's de facto owner and head of quality assurance, respectively, conspired to defraud the U.S. 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 U.S. are safe and effective for their intended uses, according to the indictment.

Vepuri, who previously owned a drug company in New Jersey that was subject to a restraining order due to FDA violations, is charged with hiding his involvement in the Newtown company by placing its ownership in private trusts to benefit 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, federal prosecutors said.

Under his control, the company ignored regulatory requirements that had the potential to slow the manufacture, distribution and sale of its drugs, authorities said. 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 the company would falsely assure the FDA that violations had been addressed when they knew no corrective and preventative actions had been taken, the U.S. Attorney's Office said.

The indictment highlights the company's conduct with regard to Hydroxyzine, a prescription drug to treat anxiety, for which Vepuri purchased an ingredient made in Mexico that was not an FDA-approved source.

“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,” Acting U.S. Attorney Williams said in a news release. “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.”

If convicted, Vepuri and Panchal each face a maximum possible sentence of five years in prison, three years of supervised release, a $250,000 fine and other financial penalties including forfeiture. KVK Tech faces fines up to $4 million and other financial penalties such as forfeiture and probation. The parties also face mandatory exclusion from participating in federal programs

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