A Vermont pharmaceutical company with a history of defying safety regulations closed last month amid mounting pressure from federal inspectors who accused it of selling potentially contaminated drugs to health care facilities nationwide. 

The closure left dozens of people without jobs and has raised questions about why Vermont regulators, who were aware of problems at Colchester-based Edge Pharma, did not intervene.

As a licensed pharmaceutical compounder, Edge made and sold dozens of non-U.S. Food & Drug Administration approved drugs, including those used for chemotherapy.

The company was subject to strict federal regulations meant to ensure that injectable drugs are produced in a sterile environment, lest they be contaminated with potentially deadly bacteria. But Edge was cited for breaking those federal regulations repeatedly over the years, FDA records show, and continued to do so even after its founder and CEO, Bill Chatoff, became chair of the Vermont Board of Pharmacy, which regulates drug-compounding facilities in the state.

In summer 2021, members of the FDA's Office of Criminal Investigations began discreetly interviewing former Edge employees about what they saw during their time at the Colchester facility, according to several of those employees who requested anonymity because the investigators told them not to discuss the matter. (No criminal charges have been filed.)

But while a number of state regulator agencies joined the feds in raising concerns about Edge and two formally sanctioned the company last year, Vermont took no public action, instead allowing Chatoff to remain in a regulatory role responsible for judging alleged violations at other pharmaceutical companies.

The state Office of Professional Regulation's legal counsel, Gabe Gilman, declined to answer questions about Edge, citing a Vermont law that prevents OPR from discussing companies that have no pending charges against them. He said the office has the authority to take emergency action against companies deemed an immediate risk to public safety.

"You can infer from the absence of any summary proceeding against someone that prosecutors did not see an immediate threat," he said. 

The FDA's concerns came to a head last fall, when investigators found unsanitary conditions and lackluster quality-control efforts that convinced them the company could not guarantee the safety of its drugs. In early December, FDA officials requested that Edge voluntarily recall all of its products, and the company did.

Chatoff eventually relented to the FDA's demands that he keep Edge closed after the recall until the agency could confirm its compliance. He furloughed all but a few dozen of Edge's 100-plus employees and tasked a skeleton crew with monthslong remediation efforts.

The feds weren't satisfied. Last month, the FDA sought a legal injunction to prevent Edge from reopening without its consent, citing Chatoff's "history of failing to heed FDA's warnings."

Before a judge could review a proposed settlement, Chatoff closed the company. Reached by a Seven Days reporter earlier this month, Chatoff immediately hung up.

"Regretfully I will need to shut down Edge Pharma as of today," he wrote in an email to employees on May 31. He blamed "FDA timelines and cash constraints."

'An opportunity'

Drug compounding — combining, mixing or altering ingredients to create a custom medication — has ancient roots. 

For centuries, pharmacists have tailored medications to suit individual patients, tweaking dosages, removing certain ingredients or changing flavors. After the 20th century gave rise to mass-produced pharmaceuticals, smaller-scale compounding pharmacies modified medicines for people who, for instance, struggled to swallow pills or were allergic to certain ingredients.

Compounding evolved over time into a more profitable enterprise. As hospitals began outsourcing their own operations to save money, some pharmacies grew into mini manufacturers, hawking drugs to health care facilities across the country.

Regulators failed to keep pace with the changes. Compounders were subject to state law, but state boards of pharmacy lacked resources and rarely took action against unsafe facilities. And unlike traditional drugmakers, whose products are approved by the FDA, compounders were not obligated to report problems to the agency or open their records to federal inspectors.

Regulatory shortcomings came into sharp relief in 2012, when a meningitis outbreak that sickened hundreds and killed at least 75 people was linked to an injectable steroid produced at the New England Compounding Center.

The Massachusetts firm's former owner was sentenced last year to 14 years in federal prison and ordered to pay restitution of $82 million. The company's former chief pharmacist received a 10-year prison sentence.

The FDA said after the deaths that it lacked power to police the compounder. In response, Congress passed a law in 2013 granting the agency greater oversight. 

As the New England Compounding Center scandal unfolded, Chatoff was looking for his next venture. A trained nuclear pharmacist, Chatoff, alongside his father and brother, had founded and run a Florida-based company called PharmaLogic in the early '90s that produced radioactive materials used to diagnose and treat certain diseases, but he left the organization in late 2012. 

Chatoff saw in the 2013 compounding law "an opportunity," according to a post on Edge's Facebook page. His business sense proved solid: In January 2014, the FDA encouraged hospitals to purchase compounded drugs from registered facilities, since they had come under increased oversight.

Edge registered with the FDA a week later.

Quick growth

Edge ran afoul of federal regulators almost immediately.

Investigators noticed at Edge's first inspection in 2014 that it had failed to test to confirm that its sterile clean rooms would keep out contaminants. The company also wasn't adequately monitoring environmental conditions, nor was it properly testing drugs for sterility or strength, according to a post-inspection report.

The FDA's acting New England district director followed up a year later in a letter that said the "serious deficiencies" could put patients at risk.

Edge was far from alone in its noncompliance; dozens of compounding facilities received warning letters or problematic inspections during the first few years of the FDA's new regulatory posture. And while Edge would be cited for serious deficiencies in three more FDA inspections over the next five years, the company continued to operate unimpeded.

Edge experienced quick success during its first five years, steadily increasing the number of states in which it was allowed to sell drugs while carrying out a $1.5 million expansion to boost production fivefold. In 2020, Vermont awarded the company a $62,000 workforce development grant.

Interviews with former employees suggest the growth came at a cost. 

One former lab technician who prepared drugs for shipment said he filled a few hundred syringes per day when the company first opened. Several years later, people in that role were expected to produce up to four times that amount. Process efficiencies explained some, but not all, of the increase, he said.

"We were told they were basically timing our lunch and bathroom breaks down to the second," said the employee, who requested anonymity out of fear that Chatoff might sue him. "There was a constant pressure to make sure products were going out the door." 

That extended to the employees responsible for inspecting finished products for possible contamination, according to a different technician on the postproduction side, who also requested anonymity out of fear of a lawsuit from Chatoff.

Compounding facilities must save samples from every batch. If they receive complaints, they can run tests to validate their safety. That tech said floor managers sometimes instructed him to swap out expensive chemotherapy drugs that failed visual inspection with samples from the same batch meant for retention. Instead of using the retention area as a safety net, "They were just using it like a bank," he said — "deposit a negative sample and take out a good one."

Tension between management and rank-and-file staff boiled over in the spring of 2020 after lab technicians and clean room staff were told to spray down the facility using a chlorine-based cleaner without the proper protective equipment, resulting in numerous people seeking medical attention, according to both technicians.

The Vermont Occupational Safety and Health Administration eventually fined the company $8,000 for several related workplace violations.

Recalls

A manila envelope arrived at the Vermont Office of Professional Regulation in early April 2021 addressed to the Board of Pharmacy executive officer, Carrie Phillips. It was postmarked from Vermont with no return address.

The envelope contained a copy of a January 22, 2021, letter that the FDA had sent to Chatoff admonishing Edge for producing a type of medication without the appropriate federal license, as well as a 20-page complaint from California's board of pharmacy dated February 17, 2021, that accused Edge of violating federal laws in connection with several recent drug recalls Edge had made. 

OPR staff were already aware of concerns surrounding Edge. State inspectors regularly attended FDA inspections at the Colchester facility, including one in March 2020 that resulted in 14 violations, and California had notified Vermont officials months earlier that it was building a disciplinary case.

Vermont, too, may have been looking into Edge when the file arrived. "Talk about weird coincidences?" the pharmacy board's Phillips wrote in an email to a member of the office's investigative team, forwarding the documents. 

In July 2021, when seeking to renew Edge's license in Vermont, Chatoff was asked in a form whether the company was facing disciplinary charges in any other state. He was also asked whether Edge had received any letters from the FDA within the previous year. Despite the California complaint and the FDA's January missive, he answered no to both questions, the application shows.

Licensees sign these forms under the possible penalty of perjury and can have their applications denied or face other sanctions if found to have provided false information. When OPR staff notice discrepancies, they are supposed to alert the office's enforcement unit for follow-up investigation.

Phillips appears to have done just that: She emailed the FDA's letter to the enforcement team on the same day she reviewed Edge's application. But she instructed staff to process the application anyway, and the license was renewed.

There is no evidence that Chatoff used his position on the Board of Pharmacy to influence the decision. Seven Days asked Chatoff's Boston-based lawyer, David Lazarus, about the application in a series of written questions about Edge's problems but got no response.

Phillips did not respond to interview requests. Gilman, the OPR attorney, declined to comment on Edge's license renewal, but he said that, speaking broadly, OPR staff cannot withhold licenses based on potential application errors alone. If OPR deems that there's no immediate risk to the public, the disciplinary process "can take quite a bit of time," Gilman said. "The license is renewed while that process plays itself out." 

Other states were taking action.

In February 2021, a New York official concerned about the FDA's findings contacted Phillips to inquire about the company's standing in Vermont. Two months later, Virginia's board of pharmacy denied the company a license to sell drugs there. And in early August 2021, just days after Edge received its renewed Vermont license, a California investigator flew across the country to inspect the company. 

That investigator documented a "copious" number of insects, some of which were near the facility's clean rooms. He also took issue with Edge's cleaning and labeling methods. California immediately filed a cease-and-desist order barring Edge from distributing any more drugs in that state.

Contesting the order during a virtual hearing before the California State Board of Pharmacy that same month, Chatoff argued that the inspector singled out the worst areas of a 40,000-square-foot facility that was otherwise very clean. He said what the inspector observed posed no risk to the public.

There has "never been and will never be a legitimate public safety concern," Chatoff said, according to a written decision from the California board.  

The California regulators were unpersuaded. They called Chatoff's dismissal of the findings "concerning" and upheld the cease-and-desist order. A settlement approved by both parties in October 2021 placed the company on probation and stipulated that, among many other requirements, Chatoff attend an ethics course.

FDA investigators had already arrived in Colchester for Edge's next inspection by the time California settled. They found many of the same problems: ants and spiders around clean rooms and bins of finished medicine waiting to be shipped off; rust-like material on surfaces where sterile drugs were mixed; an unknown grime on the floors leading into the clean rooms. 

The FDA's review of the company's records showed Edge had detected mold in the facility more than 120 times over the previous year and a half, including twice inside clean rooms, where sterile drugs are most vulnerable to contamination.

Further, the FDA found Edge had failed to properly investigate some drug batches that it had reason to believe could be tainted. It had also failed to complete thorough reviews following reports from customers that one of its injectable painkillers had caused a painful burning sensation in one patient and proved ineffective for another, according to the inspection report.

The feds immediately scheduled a call with Chatoff and his management team to request that they initiate the recall of all products. An alert posted to the FDA's website on December 4, 2021, blamed "process issues that could lead to a lack of sterility."

The few dozen employees who continued working at Edge after the recall were initially hopeful that they could bring the company back into compliance. But their optimism dimmed as the months dragged on and they ran out of work. 

The FDA's injunction request last month seemed to seal Edge's fate. In an email to employees on May 30, Chatoff said he was meeting with a bank the next morning with the hope of securing enough money to keep the company afloat. He announced the closure the following day.

It is unclear whether Chatoff,  who resigned from the pharmacy board in March, plans to reopen Edge. Two weeks ago, a federal judge signed off on a settlement that outlines an extensive list of improvements Edge would have to make before it could resume compounding drugs.

A press release from the U.S. Department of Justice announcing the settlement on June 13 quoted an FDA official as saying that Edge had "put patients' lives at risk."

Although the settlement effectively ends the FDA's civil action against Edge, the company's problems may not be over.

In January, Chatoff received a federal subpoena requesting all of the company's documents dating back to its first days in business, according to internal company emails obtained by Seven Days. Both the U.S. attorney in Vermont and the FDA declined comment.

In a January 19, 2022, email, Edge's then-chief operating officer wrote to employees about the subpoena: "It is currently unclear on the intention or rationale behind this action." The official, apparently seeking to reassure the workers, added that no one had ever been hurt by any of Edge's drugs.

"There is nothing to hide here," he wrote.

Clarification: This story was updated June 22, 2022 to note that Bill Chatoff resigned in March 2022 from the Vermont Board of Pharmacy.