Reverse logistics processor is indicted by DoJ for fraud and theft


Feds allege that Guaranteed Returns improperly withheld over $116 million in reimbursements from drug purchasers

Guaranteed Returns (Holbrook, NY) is one of a relatively small number of companies that specialize in processing expired, overstock or recalled pharma products from distribution channels, including retail pharmacy, hospitals, GPOs and government health programs. On Oct. 29, the Dept. of Justice (Eastern District) released an indictment against the company, and arrested company CEO Dean Volkes, CFO Donna Fallon, and an IT employee, Ronald Carlino, on (collectively) multiple counts of wire fraud, mail fraud, conspiracy, obstruction of justice and lying to federal investigators.

DoJ alleges that Guaranteed Returns has been engaged in a complex process of accepting returned pharma products prior to their expiration date, holding them until they were eligible for return and refund with manufacturers (a process called “indating,” which is entirely legal), collecting the refunds, but then not forwarding them to the pharmacies that were expecting them. Upwards of $116 million was allegedly defrauded over a period that began at least in 1999 and continued into 2011, including a Defense Dept. program that lost $14 million in the scheme. For unexplained reasons, a grand jury was empaneled in 2008, and investigations performed then through 2010, but the indictments and arrests did not occur until now.

Guaranteed Returns has issued a statement saying, in part: "The allegations brought against the company are entirely false and the company looks forward to its day in court, where it believes it will be exonerated of all charges. It is intent on assuring its customers, employees, the public and the community that it remains fully operational, open for business and in all ways, functioning normally. All customers can be assured of prompt and efficient service."

The reverse logistics process in pharma distribution has often had problems; returns processors themselves complain that retail pharmacies sometime return pill bottles filled with candy rather than the original medication, thereby gaming the system. The multiple handoffs for products (which sometimes never physically are returned to the manufacturer, but are sent to destruction at waste processors) requires many parties’ participation. For that reason, reverse logistics providers offer a “one touch” system where most of the transactions are handled by themselves on behalf of both retailers and manufacturers or their distributors. According to HDMA data, approximately $800 million worth of product was returned to its member distributors annually in recent years.

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