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Executive Summary

In excess of 12 generic companies could be the subject of U.S. Attorney's criminal investigations, according to a memo prepared by Rep. Dingell's (D-Mich.) Energy & Commerce Oversight subcommittee released at the Dec. 19 hearing. The memo notes that "corruption, fraud and false statements are the subject of the grand jury inquiry, but enough facts have emerged to implicate more than a dozen generic drug firms, and scores of individuals, in [fraudulent] activity." "Criminal charges and related actions are expected to play out through 1991 and well into 1992," the subcommittee memo notes. "Just as alarming is the frequency of problems with adherence to FDA regulations," the memo states. The memo lists the regulatory status of 30 generic companies. In addition, FDA Generic Drug Compliance Chief Paul Vogel testified to continuing problems with certain companies (see chart on following pages for summaries and text of subcommittee and Vogel's comments on generic companies implicated in the investigations). American Therapeutics, Inc., which was among the first companies implicated in the scandal, is one of the generic firms that continues to be plagued by difficulties with the agency. ATI agreed to temporarily shut down operations on Dec. 18 to give FDA time to analyze information from the company's full-scale audit. Vogel said that "some of the audits that were spot-checked revealed that there were some significant discrepancies not picked up through the firm's own audit." Recently, ATI agreed to withdraw nine ANDAs based on prior false statements, Vogel noted. He said that "time will tell whether or not the audits were comprehensive and whether or not the firm's decisions based on those audit findings were responsible. FDA is going to closely scrutinize whatever has occurred at ATI." The subcommittee memo notes that four of the "supposedly independently audited ANDAs include false reporting of biobatch size with regard to thiothixene." Also FDA is "investigating a new report that ATI may have falsified its records regarding danazol to hide the use of an active ingredient from an unapproved source." The memo states: "The firm is quickly moving to the top of FDA's scofflaw list." Par, another generic firm implicated in the first round of the scandal, also was criticized by the subcommittee and Vogel. An audit recently completed by Par of 95% of its products was critiqued by the FDAer in his testimony to the subcommittee. "Where you have problems with falsifications of records, audits merely relying on what is in the records raise the prospect that you are confirming that false records corroborate each other," Vogel said. Consequently, Vogel noted that he has "encouraged the firm" to interview personnel to assess whether the records appear to be correct. One problem that the company has run into is that "individuals whose names appeared in records don't want to talk at all about the records," Vogel remarked. Dingell noted that "some 40 or more employees at Par and Quad have now engaged criminal counsel." And although most of Par's management has been replaced, Dingell said, "it is unclear that all responsible persons involved in the various frauds and false statement have been removed." Dingell likened the company self-audits to the "fox watching the chicken coop" and called the auditors "magnificent alchemists" who are supposed to be responsible for changing lead into gold. It is the auditors job, Dingell suggested to turn "falsehood and false ANDAs into a product which is all of a sudden no longer a threat to anybody." One of the firms the subcommittee believes to be under criminal investigation is Chelsea Labs. In February, FDA proposed to withdraw nine ANDAs of Chelsea Labs because of falsification of biobatch records. The company subsequently decided to conduct an audit of all of its ANDAs, approved and pending. "Those findings have demonstrated similar problems, that is, the rewriting of records in an area material to the approval for at least 11 more ANDAs," Vogel said. He added that the company has voluntarily withdrawn two ANDAs, and has stopped distribution of all the products with tainted ANDAs, but refuses to recall the products. Interpharm is also "believed to be under criminal investigation," the memo notes, for making false statements in its three clonidine ANDAs. In addition to the clonidine problems, the memo notes that "a recent regulatory letter was sent to Interpharm regarding GMP problems, including unapproved changes in other ANDAs." The subcommittee suggested that the actions of certain companies may warrant criminal investigations. For example, the memo states, several of Halsey Drug's pending applications "have apparently been determined to contain false statements and on that basis may well be referred for criminal investigation." The memo notes that the firm voluntarily withdrew the applications for sulfamethoxazole and trimethoprim after the "firm's records revealed that the raw materials alleged by the firm to be used in the biobatch were not received until sometime after the biobatch was allegedly produced." Two contract testing laboratories are also the targets of criminal investigations, the memo suggests. "PharmaKinetics and its now former chief scientific officer [Mark Perkal, PhD] have both been informed that they are targets of the Baltimore grand jury investigation," the memo notes. The other contract testing lab, Quality Research Labs "is believed to be under criminal investigation for the fabrication of certain test values resulting in false test results on in-process and finished products." UPDATE ON 30 GENERIC COMPANIES' COMPLIANCE RECORDS Excerpts from a House Oversight/Investigations subcommittee report prepared by Rep. Dingell (D-Mich.) on 30 generic companies and testimony by FDA Generic Drug Compliance Chief Paul Vogel at a Dec. 19 hearing before the subcommittee. ALRA -- FDA is "currently evaluating" the firm's response to GMP issues raised in an April 30 reg letter, which warned that FDA "is prepared as necessary to initiate proceedings to withdraw approval of ANDAs and revoke exemptions from batch certification requirements for antibiotic drug products" unless Alra brings its operations "into compliance with cGMPs." The letter further threatened that "the Agency is prepared to invoke regulatory sanctions provided under the law. These sanctions may include seizure and injunction." FDA inspections of Alra revealed that "certain batch operations" were recorded before they were performed, were recorded inaccurately, were recorded as completed for one batch but performed on another, or were incompletely recorded or missing. In addition, data was initially recorded other than in the batch production and control record, and some data were entered by persons other than the one performing the operations. "Each of these violations of GMP could have easily been used to cover fraud," the subcommittee stated. "If in fact the firm doesn't do the right thing we are prepared to aggressively pursue the remedies within the statute," Vogel told the subcommittee. AMERICAN THERAPEUTICS, INC. -- ATI has recently pleaded guilty to payoffs of FDA employees, and its CEO, Raju Vegesna, was convicted of bribery and is currently a fugitive belived to be in his native India, the subcommittee said. FDA has also "found with respect to several ANDAs...significant discrepancies relating to the manufacture or testing of...the biobatches," Vogel said. FDA has informed ATI that it is proceeding to withdraw nine ANDAs based on false statements material to the approval of the applications. ATI has told FDA that it plans to submit a voluntary request to withdraw the nine ANDAs. ATI commissioned an independent consultant to review existing ANDAs. The first four reviews have been audited by FDA and all four contain false information or discrepancies unidentified by the consultant. The company has discontinued marketing more than half of its products. "Last week, I informed ATI counsel that I was dissatisfied with the progresss of those audits and the reporting of the results to the agency...due to a number of events that were inconsistent with the company's repeated statements that they were being cooperative and providing full disclosures to the agency," Vogel said. "I told the ATI counsel to inform ATI management that given the slow pace of these audits, the fact that I was not being given conclusions on any of the audits in a timely manner, plus new evidence developed by our New York district office that some of the audits that were spot-checked revealed that there were some significant discrepancies not picked up through the firm's own audit. I told the firm in the interest of public health it should be shut down until the matter was resolved....They have in fact recalled three more products based on their findings," Vogel continued. "On Monday, Dec. 17 they submitted conclusions on all the audits" to FDA, Vogel said. On Dec. 18, "the firm agreed to voluntarily suspend distribution of products for a short period of time to give FDA the opportunity to digest this information before they resume production. Time will tell whether the audits were comprehensive and whether or not the firm's decisions based on those audit finds were responsible FDA is going to closely scrutinize whatever had occurred at ATI," Vogel noted. The subcommittee reported: "FDA is investigating a new report that ATI may have falsified its records regarding danazol to hide the use of an active ingredient from an unapproved source. In short, the subcommittee believes the firm is quickly moving to the top of FDA's scofflaw list." BARRE- NATIONAL -- Last year, Barre stopped distribution of 20 products and recalled three others. "It is believed that Barre-National's recurring problems are largely the result of poor manufacturing practices," the committee said. In the case of their topical hydrocortisone lotion, Barre only reported successes in its stability testing and not failures. During the summer, FDA "basically concluded that based on current evidence the firm had achieved a status of substantial compliance with current GMPs," Vogel told the subcommittee. "However, I understand that the district has just completed an inspection out there and the preliminary report from the district is that they again found some GMP problems....My sense is that it is not of the scale that prompted my testimony last year." BIOCRAFT -- Firm has had 16 recalls since 1978 and six mislabeling recalls since 1988, including a November, 1989 Class I recall of supposed chloroquine phosphate tablets that were actually furosemide tablets. FDA has discovered "many GMP issues" related to labeling and is "reportedly considering various regulatory options to correct this problem," the committee said. "Industry sources suggested that one of the firm's problems has to do with the educational level of its work force," the subcommittee added. "For whatever reason, the lack of adequate controls over the labeling process creates a continuing health hazard that the agency cannot ignore." The agency is "currently aggressively pursuing action to assure that [labeling] problems don't this particular firm," Vogel said. He told the subcommittee that Biocraft's "track record is not confidence inspiring." BIODECISIONS -- A March EIR of the contract research lab showed "widespread violations of good laboratory practices," the committee said. Companies that used Biodecisions' lab for approvals for narrow therapeutic range drugs have been asked to audit Biodecision's work. When those results are in, FDA will determine "the extent to which the broad therapeutic range drugs require auditing," the subcommittee said. BIOPHARMACEUTICS -- FDA "is currently considering rather drastic action with regard to the firm" after "the most recent FDA inspection showed very serious GMP violations," the subcommittee report states. Biopharmaceutics requested the withdrawal of six pending ANDAs after the inspection, and asked the agency to "return or destroy all paperwork relative to these filings in order to avoid any possible confusion with any filings we may prepare or file in the future, thank you very much for your cooperation," the report adds. A "for cause" inspection, which stemmed from the company's voluntary request to withdraw six pending ANDAs, "actually found significant discrepancies in the preapproval batch records that were gain the approval of various applications. Needless to say our investigation is not completed and we will continue to aggressively pursue that investigation," Vogel told the subcommittee. BOLAR -- Two of Bolar's executives have pleaded guilty to felonies pertaining to the falsification of Dyazide bioequivalency data. "It is believed," the committee said, "that Bolar substituted the innovator product for its own in at least three other instances." Furthermore, "false statements are believed to be pervasive in the Bolar submissions to FDA," the subcommittee added. Dozens of Bolar products are being voluntarily withdrawn or will "likely be the subject of FDA withdrawal actions in the near future," the subcommittee said. CHELSEA -- Firm has withdrawn two ANDAs containing false data. FDA has published notice of its intention to withdraw nine products, and is preparing notices for the withdrawal of 12 other ANDAs, the subcommittee report notes. "Chelsea is believed to be currently under criminal investigation for the falsifications in these applications," the subcommittee said. "Our investigation determined that there seemed to be a practice in the mid-to-late-1980s whereby before an ANDA was submitted...often the biobatch manufacturing records were rewritten to make them reflect procedures that actually were not used in manufacturing the biobatch. In doing so, essentially, they falsified the submission to FDA in an area that we consider material to the approval of the application...[and as a result nine ANDAs were downgraded to BX]," Vogel said. The firm has conducted an internal audit of 200 approved and pending applications, Vogel told the subcommittee. "Those problems have been submitted to us and so far our evaluation of those findings has demonstrated similar problems -- that is the rewriting of records in an area material to the approval for at least 11 more ANDAs. For those ANDAs we have told Chelsea that we are again going to proceed to downgrade the ratings and proceed to withdraw the applications," Vogel said. "In response to that preliminary notice of our intentions, Chelsea has strenuously argued that the products remain safe, effective and bioequivalent....Right now we are evaluating that response before making a final decision on downgrading and proceeding to withdraw. Aside from those products the firm has voluntarily withdrawn two ANDAs, where its own audit had disclosed that the records were falsified in the area of new formulations that were actually used for the biobatch," Vogel said. He said in his view the false statements should be subject to criminal prosecution. DANBURY PHARMACAL -- The firm "is not believed to be currently under criminal investigation," the subcommittee report states. However, the subcommittee did point out that former Vice Chairman William Haddad (now Vice Chairman of the parent company, Schein) was involved in working toward the approval of Bolar's generic version of Dyazide, which was the subject of a co-marketing agreement between Bolar and Danbury. The subcommittee also noted that, in May, FDA sent eight non-approvable letters to the firm on pending ANDAs because of unapproved changes in Danbury's stability program. DURAMED -- FDA is currently trying to get Duramed to recall all of its 1990 lots of conjugated estrogens, the subcommittee reported. The company has balked at this, according to the subcommittee report, and in doing so had made "the agency's task of removing the product from the market lengthy and time consuming." The committee added that "certain information that is apparently false in Duramed applications may warrant a criminal investigation." "Although the firm has recalled 20% of the [conjugated estrogens] lots made in 1990, we remain concerned about the remainder of the 1990 production in the marketplace. Since the firm has elected not to recall the remaining lots in distribution, the agency is aggressively pursuing available regulatory options to get the product off the market," Vogel told the subcommittee. HALSEY DRUG -- Several ANDAs "have apparently been determined to contain false statements and on that basis may well be referred for criminal investigation," the committee said. Two of the firm's voluntarily withdrawn ANDAs involved a combination of sulfamethoxazole and trimethoprim, which were produced before the recorded arrival of raw materials, the subcommittee stated. INTERPHARM -- Firm has had three of its approved applications withdrawn, has recalled all strengths of clonidine because of false statements in the application, and "is believed to be under criminal investigation," the subcommittee said. The company, under new management since December 1989, said it is unaware of any investigation involving the company or current management. KALIPHARMA -- Firm received a reg letter for "failure to adequately supervise contract testing of generic drugs by Quality Research Labs," the committee said. LYPHOMED -- "Lyphomed's GMP problems are legendary," the subcommittee said. A July inspection resulted in "yet another" reg letter in December regarding validation, lab controls, and test failure evaluation. PAR PHARMACEUTICAL -- Par has been "the subject of intense Subcommittee investigation." One of its founders, Ashok Patel, has pleaded guilty to paying illegal gratuities to FDAers. A number of its former execs took the fifth rather than testify, although the subcommittee did receive testimony about the involvement of another of the firm's founders, R. K. Patel, in the reformulation of generic Maxzide and subsequent efforts to obstruct FDA's investigation of that product. "The firm appears to have adopted a strategy of exhausting its administrative remedies preparatory to legal action," the subcommittee report contends. "The U.S. Attorney's investigation of fraud in Par applications is far from complete," the subcommittee noted. "Some 40 employees of Par and Quad are believed to have retained counsel in the ongoing inquiry by the U.S. Attorney into illegality in those firms' applications," the report adds. Par VP-Sales and Marketing Jeffrey Levine, in testimony before the subcommittee, "asserted that all the illegality at the firm was limited to the activity of two employees, Ashok Patel at Par and Dilip Shah at Quad," the report states. "In fact, Levine had been aware of the incident where R. K. Patel had order the substituion of a Maxzide sample requested by an FDA inspector. As a result of that revelation, the subcommittee referred Mr. Levine to the U.S. Attorney for investigation of possible violation of 18 U.S.C. 1001." The committee added that "it is unclear that all responsible persons involved in the various frauds and false statements have been removed from Par management." PHARMAFAIR -- Firm had five "serious" recalls in 1990 because of potency and stability problems. The subcommittee described one case where Pharmafair "apparently fabricated stability test data in response to a regulatory letter." The subcommittee said it "believed that the matter is in a criminal proceeding now before the Eastern District of New York." In addition, as a result of unapproved formulation changes, the company recalled all lots of 1% hydrocortisone in April. FDA has asked Pharmafair to recall all lots of .5% as well because stability testing does not support the product's expiration date. However, the subcommittee said, "Pharmafair has resisted FDA's recall requests and the agency is apparently considering seizing the product." PHARMAKINETICS -- "PharmaKinetics was intimately entangled in the Bolar and Vitarine generic Dyazide scandals," the subcommittee noted. The company and its former CEO are both the targets of a Baltimore grand jury investigation. "The firm has not announced, and perhaps does not yet know, why it has been targeted by the Baltimore grand jury. However, it would appear that it would be logically tied to the Dyazide incident," the committee said. PharmaKinetics had caught Bolar attempting a product substitution in 1982, but, the subcommittee said: "In hindsight, it is regrettable that Alan Woodman, the then-President of PharmaKinetics, elected to give Bolar an additional opportunity to correct its fraudulent behavior." PHARMACEUTICAL BASICS, INC. (DENVER) -- ANDAs are free of allegations of fraud or false statements. One PBI official, Raj Matkari, pled guilty to charges that he bribed Charles Chang of FDA. "In terms of GMPs, however, the firm's record is less than stellar," the subcommittee said. PBI's generic version of Bristol-Myers Squibb's Megace was demonstrated last December to be inequivalent, apparently because the product was produced with raw materials from a different source than the biobatch. The company, however, has thus far refused an FDA request to recall the product down to retail level, although it has discontinued distribution. The company has since submitted a new biostudy in hopes that FDA will "reinstate the therapeutic equivalence rating," Vogel told the subcommittee. PHARMACEUTICAL BASICS, INC. (MORTON GROVE) -- PBI purchased this facility from MY-K Laboratories soon after MY-K and its owner K. C. Bae were accused of paying illegal gratuities and producing controlled substances. Bae has been convicted in Maryland, but, the committee said, he "walked away from MY-K with $20 mil. and received a three month sentence and a $25,000 fine." However, the subcommittee added, "the Justice Department in Chicago still has K. C. Bae under investigation for some of the gross manufacturing deficiencies." PBI "has allegedly spent $2 mil." to clear up the GMP problems, including providing remedial English classes for employees. "Given the need for such classes, it is not surprising that there have been several very dangerous labeling mix-ups at this facility," the committee noted. PBI-Morton Grove has had one Class I recall this year, for metaproternol sulfate inhalation solution which may have been mislabelled as carbinoxamine compound drops. "The inadequate regard for human health in pursuit of profits at firms like MY-K is very worrisome to the Subcommittee and to FDA," the committee added. QUAD -- All of the Par subsidiary's production has been shut down and many of its products have been recalled pending independent audits, as a result of the discovery of false statements in ANDAs about drug potency ranges. "The U.S. Attorney for the District of Maryland is believed to be actively involved in an investigation of former Quad officials," the committee added. QUALITY RESEARCH LABS, INC. -- QRI is "believed to be under criminal investigation" for fabrications in its contract testing work for Sidmak and Kalipharma, the committee said. "The Subcommittee has no information to suggest that Sidmak or Kalipharma themselves are under criminal investigation for these activities, but it should be noted that, under FDA rules, companies have an obligation to audit" contract research, the committee added. QUANTUM PHARMICS -- The American Home Products subsidiary is now "for all practical purposes...out of business," the committee reported. "However, the criminal investigation is believed to be active." Following an FDA inspection of the facility, AHP elected to shut it down, recall its products, and withdraw its ANDAs. SIDMAK -- In January, FDA took over an investigation of the company then being conducted by the Inspector General at FDA's request, which proved only a GMP violation. A January follow-up inspection found "numerous significant GMP deviations," including inadequate validation and manufacturing processes for dipyridamole, the subcommittee reported. As a result of the inspection, Sidmak recalled all four lots of dipyridamole. SUPERPHARM CORP. -- FDA has published a Notice for Opportunity for Hearing involving three Superpharm products, and is preparing a fourth because "Superpharm has not been willing to voluntarily withdraw the ANDAs," the subcommittee report states. The committee also noted, however, that Superpharm has petitioned the agency to withdraw 11 other ANDAs and is preparing to withdraw 26 more, after discovery of multiple batch records for the same lot number and other violations. "We are told that firm has completed the audits of all of its approved and pending applications, which included 97 ANDAs," Vogel told the subcommittee. "FDA has not begun its comprehensive spot-checking of the audits that were conducted for Superpharm by one of its consultants -- that remains to be done. So we are not prepared to say that the firm has fixed all of its products and that all of the problem products have been appropriately dealt with," Vogel said. SYOSSET LABS -- Firm is the subject of "an ongoing FDA investigation to determine if criminal referrals are warranted" for falsified ANDAs, the committee said. A recent inspection, the subcommittee added, resulted in recommendations for a reg letter and "seizures for the manufacture of unapproved drugs." WARNER CHILCOTT -- The Warner-Lambert subsidiary is mentioned in the subcommittee memo "solely because its director of regulatory affairs was Milton Kaplan...the individual who purchased the now famous dinner for himself, K. C. Bae, and Marvin Seife." WATSON LABS -- In 1989, the firm received a reg letter regarding poor recordkeeping and deviations from GMPs in the production of furosemide tabs. More recently, Watson asked that five ANDAs be withdrawn for its diazepam products and an FDA investigation has caused concern about its generic Maxzide production. However, the committee reports that "neither Watson nor its principals have been charged in the generic drug scandal." WESTWARD PHARMACEUTICALS -- After being purchased by Moore Medical in 1988, the company was shut down by internal auditors and attorneys because of discrepancies in recordkeeping. "These discrepancies," the subcommittee memo states, "suggest the kind of potential fraud and false statements that have resulted in criminal investigations elsewhere." The company resumed production again before FDA had a chance to review the internal audit but agreed to suspend production a second time after the subcommittee began inquiries. The suspension was supposed to continue until a complete FDA review was conducted; however, the agency subsequently decided not to carry out a criminal investigation for fraud on the part of previous ownership. The subcommittee asserts that this FDA decision not to investigate "highlights one of the basic philisophical differences the subcommittee has had with the agency." "FDA recently sent WestWard a...regulatory letter advising the firm that unless it completes all of the necessary corrections in a timely manner, we are prepared to pursue administrative and/or legal measures to assure that the corrections indeed occur appropriately and in a permanent fashion," Vogel told the subcommittee. The firm temporarily stopped distribution of products again....It has submitted some information to the agency and we are currently evaluating the adequacy of the firm's response," Vogel noted. VITARINE -- The subcommittee claims that in addition to substituting an innovator product for its own in bioequivalence tests, "Vitarine has numerous other apparently fraudulent and false statements in documents, including instances of overstating of batch size, missing documents, missing product records, discrepancies between company records and the ANDAs submitted to the FDA." The subcommittee also asserts that "the firm has attempted to place the blame for all of its problems on Steve Colton," who "had been hired away from Cord in 1987 to supervise product formulation and, basically, the building of a large product inventory for Vitarine." Vitarine has been forced to recall "essentially" all distributed products based on ANDA approvals obtained during Colton's tenure at the firm. The company voluntarily withdrew its Dyazide ANDA and nine other ANDAs were withdrawn by the agency after Notice of Opportunity for Hearing. The subcommittee reports that "additional notices of Opportunity for Hearing preparatory to withdrawal have been issued by FDA on 20 other Vitarine applications...however Vitarine is contesting the FDA's attempts to withdraw these tainted approvals." Two other former Vitarine employees and the firm itself "are believed to be under active criminal investigation." ZENITH LABORATORIES -- FDA was unable to discover "significant GMP or fraud or false statement problems" when they carried out a special inspection of Zenith in 1989. However, since that time, the subcommittee reports that additional recalls of Zenith products have been necessary. The company had to recall 10 batches of their conjugated estrogens product last year. Several former Zenith executives have been charged with providing meals to Marvin Seife and at least one executive may be implicated in criminal proceedings.

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