FDA beefs up criminal enforcement with help from states' attorneys.

WASHINGTON -- FDA-regulated firms might long for the days when they worried about misdemeanor liability, when most criminal investigations were conducted by lawyers in FDA's Office of Consumer Litigation (OCL).

That was the word from Steven Kowal, an attorney with Chicago law firm Bell, Boyd and Lloyd, at the Food and Drug Law Institute's (FDLI) 47th Annual Conference here April 15. He said FDA's enforcement activities have taken a new twist toward criminal enforcement as the agency "tries to take the biggest bite that it can."

Now, many investigations are initiated by local U.S. state attorneys' offices, according to Kowal, who said FDA has the authority to go directly to the states. He said this presents a problem because it creates a situation where investigations are conducted by state attorney offices that do not involve OCL lawyers at all.

"State attorneys don't have the knowledge FDA does on statutes and regulations," Kowal said. "Different players usually mean there are different kinds of investigations," he added.

For example, an administrative subpoena can sometimes be used to investigate a firm, and it doesn't provide protection from disclosure, according to Kowal, who said this was "not necessarily a big problem with government but without that protection, information disclosed as a result of that investigation may be defeated."

"What happens with FDA and what is said to the investing public will have an effect on the value of a company and possible criminal charges on a company," Kowal said. He also noted that the centralized procedure with the Securities and Exchange Commission (SEC) about drug company statements was significant because FDA could disclose information about a company to SEC without informing the company about the disclosure.

"We've been concentrating on the relationship between FDA and SEC but the SEC announced that it is expanding its relationship with the Department of Justice Corporate Fraud Task Force," he said, adding that continued controversy existed relating to the "Principles of Federal Prosecution of Business Organizations," issued by Deputy Attorney General Larry Thompson in January 2003.

At issue is the Justice Department's policy concerning a company's waiver of privileges, which is "almost always sought," Kowal said, adding that "refusal to waive has been alleged as affirmative evidence of concealment of misconduct."

This action on the part of government has a "chilling effect on loyalty of employees," Kowal stressed. He said once confidentiality is waived, information provided to government will be turned over to avoid criminal as well as civil charges.

FDA Chief Counsel Daniel Troy said in his keynote address that with respect to recent litigation cases, the issue most discussed is illegal de-importation, which he called "smuggling," because "de-importation suggests they leave here, go there and then come back."

"People only seem concerned when there are bodies in the streets," Troy quipped. "People ask: Where are the dead Canadians?" Yet, Troy said given the complexity in determining if a generic drug is the same, "how difficult would it be to see if a foreign drug is as safe as an FDA-approved drug?"

Troy suggested this would mean "selling out a domestic manufacturer and would lower the gold standard in the U.S."

So far, 51 offensive cases have been submitted to Troy's office. Generally, he said, the "target companies are pretty clearly breaking the law...and most companies settle once we sue."

Troy also clarified that FDA guidelines are recommendations and are not binding like regulations. He said the guidance communicates with the field about how to apply knowledge.

Arthur Levine, a former FDA attorney, said FDA has always operated on two classic parallel tracks: promoting voluntary compliance and prosecuting for non-compliance.

FDA's Carl Draper, director of Compliance in the Office of Enforcement noted that FDA does issue prior notices before enforcement actions are taken. However, Draper said there are exceptions.

For example, if the violation presents a danger to health, the agency will initiate action without prior notice, such as a seizure. Other exceptions include intentional violations, and gross or flagrant violations, such as a total lack of environmental controls in a manufacturing facility.

Also, repeated continuous violations are another exception. However, in this case FDA is operating under the assumption that firms have already been given notice.

FDA's prior notice must clearly state what the violations are and what must be corrected, Draper told attendees. He noted that the "how to" is the responsibility of consultants, not FDA. Prior notice must also be given to the most responsible person of a company.

Inspections are the most common form of prior notice, Draper said. For fiscal year 2003, FDA conducted 22,955 inspections. Of those, 7,813 FDA 483s and 545 warning letters were issued. In addition, 2,375 recall classification letters and 30,373 import detentions and refusals were meted out.

"Warning letters are the most common final warning," Draper said, "which are issued to the most responsible person in the firm and request a response in 15 days."

Recall classification letters outline violations that led to the recall, which is the firm's removal or correction of a marketed product. Finally, import detentions come into play when firms take a risk in releasing a product before it gets through customs.

"Almost any form of communication can form the basis of a formal warning," Draper advised.

CPGs, like FDA guidance, are not binding, but convey agency views and promote certain enforcement approaches in order to clarify areas of confusion. However, he admitted that CPGs may not be broad enough, so the agency may take on other initiatives, such as the GMP initiative, which represents ongoing interaction between FDA and stakeholders.

FDA's goal is to communicate the factors that FDA considers in prioritizing targets, which include drugs with potential safety risks (direct and indirect), drugs that lack evidence of effectiveness, and health fraud drugs.--Article By Tamra Sami, Managing Editor