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PAR AND QUAD SENTENCINGS POSTPONED UNTIL JAN. 12 WHILE SECOND PHASE OF JUSTICE DEPARTMENT INVESTIGATION CONTINUES INTO ANDA SUBMISSION IRREGULARITIES

Executive Summary

The sentencing date for Par and its Quad subsidiary in Baltimore federal court has been postponed to Jan. 12 while the Justice Department looks into alleged misrepresentations in the firms' ANDA submissions. The scheduled Oct. 20 sentencing had been expected to focus on illegal gratuities paid to generic division reviewers by former Quad CEO Dilip Shah and former Par Senior VP Ashok Patel. The postponement was requested in light of an ongoing Justice Department "second phase" investigation into alleged recordkeeping alterations and data manipulation for ANDA submissions. Par said Oct. 17 that it had been advised by the Maryland U.S. Attorney's office that it is one of a number of companies under investigation by the Justice Department for alleged violations of the FD&C Act. "It is the company's understanding that such allegations relate to matters previously disclosed by Par," the company said. At least two other companies are understood to be under HHS Inspector General investigation for allegedly submitting fraudulent data to FDA in support of ANDA applications: Bolar and Vitarine. For Bolar, the criminal investigation compounds the firm's difficulties. FDA has already initiated ANDA withdrawal proceedings for two Bolar drugs -- generic versions of Dyazide and Macrodantin -- and has questioned the company about an alleged bioequivalence sample switch involving Bolar's version of Mellaril. FDA has reportedly asked the Inspector General's office to investigate Bolar's ANDA submissions for six generic drugs, including the company's versions of Dyazide, Macrodantin and Mellaril as well as three others. Bolar says that it is not been informed of IG interest in six products. Former Par exec Ashok Patel was sentenced on Oct. 17, as scheduled. Patel became the fourth person, and the second industry official, to be sentenced in the criminal investigations. Patel was charged with paying $2,900 in illegal gratuities to former FDA generic division supervisory chemist Charles Chang and making payments of $1,600 more to other FDA personnel, including former chemist David Brancato, over a period beginning in early 1987. U.S. Attorney Gary Jordan reported at the sentencing that Patel has "in the last few weeks," met with the government concerning the "second phase" of its investigation into Par involving alleged data manipulation and recordkeeping alterations for ANDA submissions. Jordan told the courtroom that Patel's information was "a major factor in persuading Shah and Brancato to plead guilty" for their respective roles in offering and accepting illegal gratuities. Ashok Patel also contributed to FDA chemist Walter Kletch's decision to cooperate and plead guilty, Jordan said. The U.S. Attorney recounted how the former Par exec met with the U.S. Attorney's office in Baltimore and with the HHS Inspector General's office "on several occasions" from January to April 1989, providing the government with "useful background information" on how the generic drug approval process at FDA worked, both in reality and in theory. Highlighting Patel's early and continuing cooperation with the government and the fact that he has accepted full responsibility for his actions, Judge John Hargrove sentenced Patel to a one-year suspended sentence, 18 months of probation, a $150,000 fine, a $50 special assessment and 12 months of full-time voluntary service for his part in passing illegal gratuities to FDAers. Patel will fulfill the last part of the sentence in Bergen County, New Jersey. Sentencing for Brancato has been postponed until Jan. 5. The ex-FDAer is continuing to cooperate with the Justice Department investigations. Ashok Patel's attorney, Andrew Krulwich, stressed his client's role as one of the linchpins in the government's case on the illegal gratuities phase of the ongoing generic investigation. Krulwich said that Patel gave Jordan "the ability to bring in Brancato" and "broke the logjam" in the investigation. In a plea for leniency, Krulwich noted that Patel's legal difficulties are far from over, citing ongoing congressional and government investigations and civil and criminal lawsuits in which his client is embroiled. At a Sept. 11 hearing of Rep. Dingell's House Energy & Commerce Oversight Subcommittee, FDA inspectors revealed a number of significant data and recordkeeping irregularities at Par. Shah, Ashok Patel and two other Par witnesses refused to answer questions about false data submissions to FDA. They cited their Fifth Amendment rights against self-incrimination. Former Quad VP-Quality Assurance Jan Sturm, also pleading the Fifth, refused to answer a question about whether he sold confidential FDA information before he left the agency. Before announcing his sentence, Judge Hargrove said he was "not equating [Ashok Patel's] case with Shah [who] was less cooperative and more extensively involved." In an exchange with the U.S. Attorney, Hargrove noted: "Even now, I'm not sure the government thinks Shah has fully cooperated." Barr Labs, which petitioned FDA on June 14 to revoke ANDAs for generic drug companies involved in the ongoing investigation, also is suggesting that Shah has more to tell. In an Oct. 11 supplemental memorandum to its petition, Barr said: "[Ashok] Patel's and Shah's unwillingness to testify [Sept. 11] leaves unanswered the questions: what additional payments did Patel and Shah make to FDA employees, who received those payments, and what benefits did Par and Quad receive in return?" Par said it has made permanent the interim appointment of President and CEO Kenneth Sawyer ("The Pink Sheet" Oct. 2, T&G-1). Sawyer was brought in Sept. 22 by Par then-Chairman Perry Levine and given carte blanche to clean up the company's problems. One of Sawyer's first responsibilities will be dealing with FDA's proposal to withdraw ANDAs for Par's generic Maxzide (triamterene/hydrochlorothiazide) and its muscle relaxants, orphengesic and orphengesic forte. The proposal was published in the Oct. 16 Federal Register with a request for hearing due on Nov. 15. Par recalled the three products during the week of July 24 after reporting that a Par executive switched samples of the product during an FDA inspection ("The Pink Sheet" July 31, p. 15). Par initiated a recall on Sept. 25 of roughly 35,000 bottles of leucovorin 5 mg and 25 mg tabs. FDA identified the cause for the Class II recall as "discrepancies in manufacturing records."

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