U.S. Probing Reports of Illicit Drug Sale by ICN : Inquiry Involves Allegation Costa Mesa Firm Sold Ribavirin for AIDS Care Without Approval

A federal grand jury in Los Angeles is investigating allegations that ICN Pharmaceuticals Inc. of Costa Mesa illegally offered to sell a drug for treatment of AIDS patients without government approval.

The criminal investigation was first disclosed by an ICN subsidiary earlier this week in a regularly quarterly filing with the Securities and Exchange Commission. ICN said Friday that the grand jury subpoenaed a “broad range” of records last month on the company and its anti-virus drug, ribavirin.

The company denounced the allegations as “nothing more than old accusations” that it had already denied.

The grand jury appears to be investigating the allegations of a doctor who told a congressional subcommittee last year that ICN tried to persuade him to sell the drug to AIDS patients.

Under federal drug laws, promoting the sale of a drug for an unapproved purpose is illegal. Ribavirin has been approved in the United States for treatment of infant influenza but not AIDS.

No Upheaval Expected

The U.S. Food and Drug Administration later asked the Justice Department to investigate.

“This is old news,” said ICN spokesman Jack Sholl. “We’ve said before the company follows FDA regulations.”

One securities analyst said he doubted the grand jury investigation would delay the regulatory process of approving ribavirin as an AIDS treatment.

“I don’t see any holdups from this,” said Eugene Melnitchenko, who follows the pharmaceutical industry for Eppler, Guerin & Turner, a Dallas brokerage firm.

“In fact, I believe the company will be vindicated,” he said. “And if it is found in violation, it’s a technical matter. The fines would only be a few thousand dollars.”

Not a Cure

Ribavirin is an anti-virus drug that has shown some effectiveness in holding off the growth of the AIDS virus in patients who have not yet developed full-blown AIDS symptoms, Melnitchenko said.

The drug is not a cure, he said, but must be used with other drugs that bolster the body’s immune system and treat other symptoms of the disease.

The drug--marketed under the trade name Virazole--is now close to FDA approval for treating AIDS, Melnitchenko said.

Securities analysts said approval of the drug as an AIDS treatment could send ICN stock through the roof. But not every analyst is a fan of the company. “A lot of question marks surround some of their doings,” said Michael Connor at Edward A. Viner & Co. in New York.

“There has been a considerable amount of blurring of the truth in their self-promotion,” he asserted.

In fact, the SEC filing noted that ICN and two of its subsidiaries--Viratek and SPI Pharmaceuticals Inc.--are the targets of separate investigations by the FDA and by the oversight and investigations subcommittee of the House Energy and Commerce Committee.

The SEC is also looking into whether ICN executives issued misleading statements on the effectiveness of ribavirin.

During an oversight subcommittee hearing in May, 1987, Dr. Bernard Bihari of New York testified that ICN offered him the drug to sell to AIDS patients. When he said he was only interested in the drug for tests, ICN said it was not interested and asked for the names of other doctors with AIDS patients, said Bihari, who is director of the Kings County Addictive Disease Hospital in New York.

The grand jury on Sept. 7 subpoenaed records “covering a broad range of matters, many of which relate to ribavirin and to ICN” in a “criminal investigation,” according to the company’s SEC filing.

ICN said it is cooperating with the investigations and began delivering documents to the grand jury this month. The grand jury, after considering the evidence, has the power to indict the company on criminal charges.

The news of the investigation sent ICN stock down 62.5 cents to close at $6.50 per share in heavy trading on the New York Stock Exchange.

ICN lost $16.6 million last year on sales of $121 million. The company blamed the deficit on losses in its investment portfolio from the stock market crash.

INVESTIGATIONS OF ICN

April, 1986: The U.S. Food and Drug Administration orders ICN Pharmaceuticals to recall a press release containing “false or misleading claims” about the effectiveness of its drug ribavirin as a treatment for a range of viral illnesses. According to the FDA, the release minimized potentially life-threatening side effects of the drug. February, 1987: An ICN officer discloses publicly that the Securities and Exchange Commission is conducting an investigation of possible illegal insider trading of ICN stock. February, 1987: The Food and Drug Administration and the House Energy and Commerce subcommittee on oversight and investigations disclose that they are investigating allegations that ICN failed to notify authorities that ribavirin caused serious side effects among some infants. May, 1987: ICN is criticized before the House subcommittee for providing allegedly misleading information to federal officials about ribavirin’s effectiveness as an AIDS treatment. October, 1987 After two rejections, the FDA grants ICN permission to begin clinical tests for AIDS treatment. March, 1988: The U.S. Justice Department confirms reports that it is looking into “unspecified concerns” raised by the Food and Drug Administration involving ICN. A few days earlier, NBC News reported that the department was asked to impanel a federal grand jury to investigate whether ICN officials should be charged with criminal misconduct. October, 1988: ICN discloses that a federal grand jury is investigating possible criminal conduct involving the company and ribavirin.