It’s unclear who’ll pay in PIN Rx drug case

Even the state board that handed out the largest fine in its history this week isn’t sure who should be responsible for the $500,000 penalty it issued to PIN Rx, the former Indian Island mail-order pharmacy.

On Tuesday, the state Board of Pharmacy found the defunct mail-order prescription business and two of its pharmacists guilty of illegally selling more than $3 million in prescription drugs over the Internet.

“This company was an LLC [limited liability company] with a board of directors. We are seeking to determine who is liable for the fine,” said Doug Dunbar, assistant to the commissioner of the state Department of Professional and Financial Regulation, in an e-mail this week.

Penobscot Nation Chief Kirk Francis said Thursday that PIN Rx was separate and distinct from the tribe.

The state Office of Health Policy and Finance and the tribe acted as partners in establishing the business to address the needs of MaineCare and elderly patients in Maine.

“I don’t think you hold investors responsible for day-to-day business,” Francis said in an interview. “It’s a corporate fine. It’s the corporation that’s responsible for it.”

The problem is that the corporation is defunct, and never before has the pharmacy board fined a business that no longer exists and has turned in its pharmacy license.

“PIN Rx is no longer an entity,” Neal Pratt, the tribe’s attorney, said Wednesday. “The tribe’s not going to be responsible for this.”

As for Reginald Gracie Jr., the company’s chief executive officer who also served as a pharmacist, he received more than $300,000 in fines that his attorney said Tuesday he can’t afford to pay.

Gracie was found guilty of receiving about $120,000 in kickbacks he received from Internet facilitation companies placing orders with PIN Rx in addition to $1 for each of the 183,704 prescriptions that the board ruled were filled illegally at the pharmacy.

“Nobody knew what he was doing,” Francis said. “He’s not being made a scapegoat here, [but] there was evidence showing that there was extreme personal benefit.”

The chief stressed that all of this happened over six months before PIN Rx was sold in March and that no one from the tribe knew or did anything purposefully wrong.

“Why would [the pharmacy board] expect anybody conducting themselves in a criminal manner to be transparent or to expose that to anyone, especially when they’re benefiting thousands of dollars a month from it?” Francis said.

The Penobscot chief has taken some heat in recent days for holding a news conference last week to defend the tribe’s position and explain why tribal members who were subpoenaed to testify before the Board of Pharmacy hearing did not participate.

“The assistant attorney general and the Board of Pharmacy had their minds made up three months ago, and we got tried and crucified in the newspaper,” Francis said. “They were trying to paint a picture of this illegal drug trafficking ring and nothing could be further from the truth.”

No one from the state was subpoenaed to testify at the hearing, although the state was a partner in establishing the business and helped obtain $1 million in grants and loans to contribute to the startup.

In return, the state didn’t take any revenues from the business, but did benefit from a $5 million to $6 million savings by PIN Rx providing mail-order prescriptions to the state’s MaineCare patients.

“They had a definite incentive in this,” Francis said.

A board made up of tribal members was organized to get the business off the ground, but the state Office of Health Policy and Finance and Eastern Maine Development Corp. also played a part.

“There were a lot of people sitting there making decisions that walked away when all of this hit,” Francis said. “Everybody’s been able to walk away, and we’re dealing with the aftermath of it. It’s caused a lot of pain here and it’s too bad.”

He added that the tribe isn’t trying to defer blame.

“We’re not trying to throw the state or anybody else under the bus,” he said.

“We were only doing what we were being advised to do,” Francis said. “We weren’t perfect in the situation.”

There were financial problems with the company from the beginning, but consultants, auditors and others attributed those to the fact that almost all startup businesses struggle at first.

“The company never had any discussion of knowing about any wrongdoing to make that [money] up,” Francis said.

The original PIN Rx board of trustees – whose names are listed on the now invalid LLC license – was intended to be temporary to allow appropriate management to be hired to operate the pharmacy.

“There’s people out there who understand how this was set up and understand how ridiculous it is that these tribal members should be held responsible, and nobody’s saying anything,” Francis said. “We’re going to stand up and do what we have to do to get through this, but in the end there are a lot of people not being held accountable for their roles.”