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FDA ENFORCEMENT ACTIVITY IN POST-HHS IG RECISSION ERA: 81 CASES RESULT IN ONLY TWO GRAND JURY REFERRALS, STAFFER TELLS DINGELL OVERSIGHT SUBCMTE.

Executive Summary

A House Energy & Commerce/Oversight subcommittee review of 81 of the 130 cases returned to the Justice Department following HHS Secretary Sullivan's redelegation of HHS Inspector General enforcement authority found that "only two [cases] involve Federal grand juries," subcommittee staffer David Nelson told a June 20 hearing. "Some" of the 81 cases "should never, and most never will, result in criminal charges," Nelson remarked. Of the 81 case records looked at by subcommittee staff, only three involve generic drugs, Nelson noted. The others deal with a variety of subjects, including trafficking in anabolic steroids, counterfeit drugs, drug fraud and diversion. The hearing was ostensibly called to drum up support for the Dingell-Bliley FDA "emergency" bill; however, Dingell seemed more interested in pointing out the continuing wave of drug diversion incidents. "By and large" the generic cases reviewed by the subcommittee are "immune" from the recission decision because they were either already under the purview of the Maryland U.S. Attorney's Office in Baltimore or are still under HHS IG inspectors under a "hot pursuit" definition, Nelson noted. * Of the three cases involving generic drugs, two are "likely to be closed" and one is "likely" to be referred for criminal prosecution, Nelson predicted. In one of the two cases likely to be closed, according to Nelson, there is a "distinct difference of opinion" between FDA investigators and the IG investigators. While HHS special agents "clearly felt" that destruction of negative stability test results at one firm "was deliberate," Nelson said, FDA "apparently believes that the destruction...was inadvertent and deserved only a regulatory letter." The other case that Nelson predicted will probably be closed involves Danbury Pharmacal. Nelson provided a copy of an April 24, 1990 memo from the Generic Drugs Compliance Branch discussing the merits of the Buffalo, N.Y. FDA district office's suggestion that withdrawal proceedings be initiated for Danbury's ANDA for prazosin. Making no bones about the subcommittee's suspicion regarding Danbury, the company's vice-chairman William Haddad, and the firm's partnership agreements with Bolar covering generic Dyazide and sucralfate, Nelson maintained that "even a firm like Danbury Pharmacal deserves due process, something that does not currently exist in the FDA alert system." According to the subcommitte's reading of the FDA memo on Danbury's prazosin, Danbury "cannot receive any new [ANDA Approvals]" while the prazosin situation is being reviewed, even though FDA's compliance branch "does not feel it should remain open," Nelson said. Danbury, through its attorney, says it is not on the FDA alert list. Nelson also referred to a "criminal investigation" of Danbury. the company's attorney declares that there never has been a criminal investigation concerning prazosin. The subcommittee sees the Danbury case, however, as a cautionary tale, Nelson indicated. "The regulated industries should take no particular comfort from the existence of an investigative apparatus that is not capable of the timely completion of criminal investigations, either through referral for prosecution or though appropriate closure," he stated. At the June 20 hearing the subcommittee heard several examples of mismanaged investigations into anabolic steroid distribution in the wake of the enforcement authority recission. For example, Nelson told of one case in a Utica, Michigan high school which, he suggested, led to the passage of a state law governing steroid use due to the void in federal enforcement. Another witness, Brighton, Colorado police detective Mark Chavez, described how a local undercover investigation of anabolic steroids screeched to a halt following the switchover from an HHS-IG investigator to an "untrained" FDA inspector. The police investigation, initiated in November 1989, succeeded in videotaping two separate transactions at a print shop and obtained other physical evidence (syringes, bottles, etc.) that was sufficient, according to Chavez, to provide "probable cause" for both search and arrest warrants in the case. FDA has so far failed to take any action, he told the subcommittee, except for a phone call on June 14 following the subcommittee's contact with Chavez. Nelson, briefly highlighting other types of cases transferred back to Justice from the HHS-IG, listed a pending New York mail-order products case; a Denver district case involving allegations of false clinical test data; Mexico border area cases involving steroids and counterfeit drugs; thefts of drug samples from the cars of company sales reps; a Los Angeles area cancer fraud case; "several instances" of Medicare fraud; a political corruption investigation; and one case where the IG would not continue an investigation without being deputized to carry firearms. A Florida Department of Health & Rehabilitative Services officer, Richard Grant, cited a number of drug cases that have added to the heavy workload of the state's overburdened law forces. Four of Grant's stories involved cases of drug diversion (see related story, p. 12) In addition, Grant reported on a discovery of counterfeit Zantac that has led to an ongoing investigation involving "numerous" businesses in and out of Florida, according to Grant. The counterfeit Zantac, discovered by a county sheriff's officer in Stuart, Fla. in January 1989, were first thought to be an instance of sample diversion, Grant noted, but were later discovered to be fakes that were apparently intended for sale overseas. In August of last year, a "stop-sale" order was placed on 22 bottles of the bogus product at the request of FDA. "Eighty-nine days later no federal agency had taken legal action" to seize the counterfeit Zantac, Grant said. He suggested that "the inaction appeared to be due to a lack of coordination between federal agencies." In his opening statement, Oversight Subcommittee Chairman Dingell (D-Mich.) maintained that the "conspiracy of incompetence that characterizes the combined criminal enforcement efforts" of FDA and the Justice Department's Office of Consumer Litigation proves the need for passage of the Dingell-Bliley FDA "emergency" bill (HR 4810). The bill, introduced May 15 ("The Pink Sheet" May 21, p. 9), seeks to enhance the agency's punitive powers in the generic area and to reauthorize the HHS Inspector General to investigate felony violations of the Food, Drug & Cosmetic Act. Preparing the audience for the recital of flubbed investigations in the post-recission era, Dingell likened the Office of Consumer Litigation and the FDA Chief Counsel's continued efforts to fight oversight by the HHS IG to "sawing off the arms and legs of the boy to make the suit fit." The result, the congressman argued, is that FDA's genuine efforts to investigate and prosecute criminal violations of the FD&C Act are "meager." * The effect on active cases of the recission, which went into effect in January, was first reviewed in an April subcommittee report critical of HHS' handling of the situation ("The Pink Sheet" April 16, p. 8). The report concluded that Sullivan rescinded the HHS IG's authority only under pressure from the Justice Department. In a June 15 letter to every member of the Senate Judiciary Committee, Dingell reminded the senators that William Barr, now being considered for the deputy attorney general post, reportedly was the "key actor" in the Justice Department's pressure on Sullivan. Dingell said his letter to the senators "merely suggests lines of inquiry regarding his attitude and past conduct" that should be explored before a decision is made on Barr's nomination.
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