When the department did move to get tough starting in fall 2001 -- after learning that suspect drugs were flowing from Florida -- its leaders backed off four separate times amid opposition from wholesalers, their lobbyists and their allies in the Legislature.

Also, records show the state for years did little background checking on wholesale firms, giving licenses to convicted drug smugglers, armed robbers, burglars and white-collar criminals. When wholesalers broke the rules and lost their licenses, they often kept operating anyway.

Drug-industry experts say the same pattern shows up in many states and in Congress. Drug suppliers have bottled up a strict federal law passed in 1988, persuading officials to delay the start of the new rules four times, most recently until April 2004.

"Bad drugs stem from a lack of real enforcement," said Mick Kolassa, a former University of Mississippi pharmacy professor and author on the industry. "These [illegal wholesalers] can get out there and fly under the radar."

Florida passed what Gov. Jeb Bush called the nation's toughest law to regulate wholesalers, effective Tuesday. The new law, however, was diluted compared to tougher recommendations by state prosecutors and a Fort Lauderdale grand jury investigating adulterated drugs.

"When the state tries to act," Kolassa said, "legislators hear from the industry and lobbyists about how `overzealous regulators' are going to drive them out of business. The legislators then put the pressure on [regulators]. They never hear about why the reforms are needed. There's nobody to argue on the other side. The industry brings lots of campaign contributions. Unless someone is sitting on the other side with a bigger checkbook, nothing gets done."

Florida's health secretary, Dr. John Agwunobi, said the new law is strong enough to clean up the problem, and was worked out with wholesalers so they will now buy into it.

"The reason we got to this success was because we were deliberate, we engaged all the stakeholders," Agwunobi said. "If an industry doesn't want to participate in a regulatory scheme, it's tough for government to make significant changes all on its own. Consensus is always preferable."

Florida has emerged as a home for pharmaceutical tampering since 2001, when state and federal health investigators began tracing at least $100 million in suspect drugs to wholesale firms located mainly in South Florida.

Unscrupulous firms have focused on expensive drugs injected by cancer and AIDS patients, but they also have been caught with adulterated cholesterol pills, asthma inhalers and other medicine. At least 50 of 1,400 wholesalers selling in the state are under investigation, the South Florida Sun-Sentinel reported last month.

The state long has had trouble controlling the industry.

An example: Miami wholesalers Per Oddmund Loyning and Sheldon Kresler sold adulterated medications for years, even though both had criminal records that should have barred them from the business.

Cocaine conviction

Loyning, 57, of Norway, was here illegally after being deported because of a 1990 conviction for dealing cocaine in Broward County. Kresler, 61, was convicted of burglary and robbery. But Loyning assumed the alias William P. Walker, and the pair used their wives' names to get a wholesaler license as Crystal Coast Inc. in 1999. No one caught on.

By 2001, federal agents looking into patients' complaints about fake growth hormone Nutropin had traced 17 vials to a Davie wholesaler, who said he got it from Crystal. Loyning could not document a legitimate source for the drugs, so the state yanked Crystal's license.

Loyning and Kresler soon reappeared, illegally buying, relabeling and reselling prostate cancer drugs without a license, records show. In May, undercover agents sold Loyning $37,436 of medicine and arrested him at his condo in Coconut Grove's Yacht Harbor tower.

Florida had tried to crack down on wholesalers in 1993 with a law that required wholesalers to give every buyer a "pedigree paper" listing all owners of the shipment back to the manufacturer. Buyers could make calls to prove the drugs were good.

Wholesalers large and small complained the law would create tons of paperwork, waste money tracking shipments and drive up drug prices. With as many as 30,000 medications in stock, they said it would be logistically impossible to segregate boxes from different sellers so that they could be identified for "pedigrees."

Wholesalers decided to read the law their own way. They interpreted it to mean that "pedigrees" were not required for sales by "authorized distributors of record," or ADRs, wholesalers who buy directly from the factory.

And, they said, any wholesaler who bought from a manufacturer only twice in two years was an ADR for all of that company's drugs, even for shipments that did not come from the factory. Hundreds of small firms were deemed ADRs.

Suddenly, any shipment sold to an ADR had a clean, untraceable history.

"You could wash bad drugs through the ADR. The trail had a break in it," said Benny Ridout, a consultant for the trade group Pharmaceutical Research and Manufacturers of America.

State officials did not agree with the industry's reading of the law, but went along.

Unscrupulous wholesalers exploited the loophole. They obtained fake or expired drugs for pennies, relabeled them and sold them at a discount to other wholesalers with contracts to sell to the nation's three huge distributors, records show. The "Big 3" unknowingly bought bad drugs and shipped them to suppliers, drugstores, doctors and hospitals.

"This is like someone backed up alongside the car and is siphoning gas out of the tank. No one seems to be able to do anything about it," industry expert Kolassa said.

The U.S. Food and Drug Administration began hearing from patients getting fake medicine, often from Florida. Nine of 15 major FDA recalls since February 2001 were for bad drugs originating in or passing through South Florida.

State health officials decided to respond. In October 2001, about the time Agwunobi arrived, the department declared it would start enforcing its reading of the "pedigree" law, not the industry's.

Wholesalers were incensed. Industry trade groups hired eight Tallahassee lobbyists to persuade legislators, the governor and secretary Agwunobi to back off, or at least delay for more study.

"The way [the state] wanted to do it was going to put everyone out of business," said Thomas Panza, a Fort Lauderdale lobbyist hired by small wholesalers of the Pharmaceutical Distributors Association in Boca Raton.

Agwunobi relented. On Feb. 18, 2002, he agreed to hold off on the new enforcement until Sept. 30, after a report from a state-and-industry committee he created to reshape the "pedigree" law.

The panel tussled for months over how to track drugs.

"You had a lot of pretty aggressive people in the room," said the chairman, Pensacola pharmacist Michael Stamitoles. "A lot of times the two sides would be polarized. Little by little, they moved more to a middle ground."

Deadline comes and goes

When Agwunobi's Sept. 30 deadline arrived, he again delayed enforcement.

The panel's recommendations proved a compromise: Stricter licensing to keep out bad apples. Tougher criminal penalties for violators. Far fewer authorized distributors. But as for "pedigrees," wholesalers would have to give buyers full histories only for about 30 high-cost drugs among the 30,000.

The giant manufacturer Pfizer Inc. said the panel had backed off too much.

"While we appreciate that this threshold would ease administrative burdens for Pfizer, we question whether it would deliver the desired results for the state of Florida," Pfizer attorney Susan Stolzer said in an Oct. 9 letter to the health department.

Small wholesalers contended that manufacturers have an ulterior motive of trying to knock out small firms because they undercut factory prices.

On Feb. 14, the department put out new rules that surprisingly took a hard line: Full "pedigrees" for all drugs, and buyers would have to verify the accuracy of the papers.

"We had a fit," said Bonnie Basham, a lobbyist for the Healthcare Distribution Management Association, a group for nationwide and regional suppliers.

Lobbyists complained loudly to the Bush administration. The department rescinded the new rules within days. After rewrites, the rules now demand full "pedigrees" only for the 30 drugs and eased other aspects.

Meanwhile, Bush and the Legislature compromised, too. Their new law made many reforms but delayed full "pedigrees" until July 1, 2006, except for those 30 drugs. The ADR loophole remains open until March 2004. Background checks and some tougher licensing rules start on Jan. 1.

The new law and new rules take effect July 1, almost two years after the state first tried to get tough.

A critic, Sen. Walter "Skip" Campbell, D-Fort Lauderdale, said the administration caved in to pressure from the pharmaceutical industry, which contributed more than $750,000 to state election campaigns last year, records show.

"I think Dr. Agwunobi wants the strongest possible regulations," Campbell said. "What happens in a bureaucracy is, higher-ups tend to look at who's giving money to campaigns and then decide what the state can and can't do."

Said Agwunobi: "We're not putting anything off. It forces them down that road to go toward pedigree papers for all drugs. It gives both sides of the partnership time to implement this big change."

Lobbyist Basham said the result was fair, not a sellout to the industry: "There are some things in this bill the industry had to really, really, really, really, really take a deep breath to accept," she said.

Bob LaMendola can be reached at blamendola@sun-sentinel.com or 954-356-4526. Sally Kestin can be reached at skestin@sun-sentinel.com or 954-356-4510.