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HHS STATUS REPORT ON FDA CASES TRANSFERRED TO JUSTICE DEPT. FOLLOWING REDELEGATION OF IG INVESTIGATIVE AUTHORITY REQUESTED BY REP. DINGELL BY JUNE 15

Executive Summary

Rep. Dingell's (D-Mich.) Oversight Subcommittee is asking HHS for a status report by June 15 on criminal FD&C Act violations recently transferred to the Justice Department from the HHS Inspector General. The transfer followed HHS Secretary Sullivan's announcement in December that he was redelegating criminal investigative authority from the IG to Justice ("The Pink Sheet" Jan. 8, p. 12). With the recission, effective in January, authority for investigations was returned to FDA and the HHS chief counsel, as well as the Justice Department's Office of Consumer Litigation. Dingell's request is contained in an April 13 cover letter to a subcommittee staff report on the redelegation of the IG's powers. The staff report is critical of HHS' handling of the situation. The subcommittee "remains concerned that the removal of the Inspector General's delegated authority has, once again, left the FDA vulnerable to fraud and corruption," the letter states. "You should be aware that so-called assurances from the Department of Justice do not provide sufficient grounds for confidence that present and future criminal cases will be thoroughly investigated." The subcommittee contends that the accomplishments of the HHS IG and the subcommittee have been "undone" by the rescission of the IG's authority. "More than 100 cases are, at best, in an unsettled transition," the report maintains. The report is titled "Naked Reverse: Secretary Sullivan's Recission of His Delegation of Investigative Authority to the Inspector General." The subcommittee describes the report as providing "preliminary results" of its investigation into the secretary's decision. The report also suggests that the transfer of cases may jeopardize investigations by leading to inappropriate release of information. For example, the subcommittee maintains that Justice Department Assistant Attorney General for the Civil Division Stuart Gerson "apparently promised FDA in January 1990 that the FDA General Counsel would have access to information received by the Justice Department from the [IG]." Such a release of information, the subcommittee argues, "could, absent stringent safeguards, seriously compromise the independence of investigations of internal FDA corruption, such as that found in the generic drug program." In fact, the report continues, "the General Counsel's office has already mistakenly provided FDA with a list of FDA employees that were under active criminal investigation by the HHS Inspector General." The report notes that prior to the IG's office stepping in, the "combined efforts" of FDA, the HHS General Counsel and Justice "failed utterly to detect and prosecute misbehavior in the generic drug approval process and in the generic drug industry that has turned out to be the largest scandal in FDA's history." The subcommittee also pointed out that "drug diverters and counterfeiters had flourished under the inattention" of the three organizations. FDA and the HHS Chief Counsel's office made only 16 referrals to the Justice Department's Office of Consumer Litigation last year for criminal prosecution, according to the subcommittee, and Justice "historically," turns down a quarter of those cases. By contrast, the IG made over 1,200 referrals for criminal prosecution in 1989, the subcommittee said. * The report suggests that Sullivan was pressured by the Justice Department, which had been waging a turf battle with the Inspector General, to rescind his authorization of the IG's investigative powers at the FDA. The subcommittee also suggested that Sullivan relied too much on the advice of his chief of staff, Michael Calhoun, who lacked experience with FDA regulatory problems. According to the report, Calhoun said his recommendation was based on the perception that "there was no longer a need for the delegation because the emergency in generic drugs had passed." Calhoun also concluded that "there were significant legal flaws in the delegation," the report states, adding, however, that HHS "had no paper from the Justice Department in support of its claimed concern." Finally, the report asserts that Calhoun became convinced that "there was a larger issue of Justice Department primacy that had to be resolved," the subcommittee said.
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