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ICN SETTLES JUSTICE DEPARTMENT VIRAZOLE AIDS PROMOTION SUIT WITH $ 600,000 PAYMENT; SETTLEMENT COULD PRESAGE FDA's USE OF CIVIL PENALTIES IN AD CASES

Executive Summary

ICN Pharmaceuticals will pay $ 400,000 to settle a Justice Department suit alleging that it illegally promoted Virazole (ribavirin) as a treatment for AIDS. The settlement, reached May 24, also requires ICN to pay FDA $ 200,000 to cover administrative costs. Filed in Los Angeles federal court, the suit alleges that "beginning on or about Nov. 1, 1985 . . . the defendant marketed, promoted, and sold Virazole (ribavirin) as a treatment for AIDS and related diseases." Virazole is indicated only for the treatment of respiratory syncytial virus under an NDA approved Dec. 31, 1985. The investigation focused specifically on the distribution of the drug to six physicians for use by AIDS patients, ICN said. The monetary penalties arising from alleged violations of the FD&C Act are unusual. The complaint, in keeping with the language of the act, did not ask the court to impose a fine but sought to "restrain and enjoin ICN" from continuing alleged violations. The settlement clears away all civil and criminal investigations of ICN pertaining to Virazole AIDS promotions. In an announcement May 24, ICN said the settlement "was reached in order to avoid future litigation costs and bring to a conclusion a matter that has already consumed three years of company time." The company added: "These actions will bring this matter to a conclusion and once and for all put allegations of criminal wrongdoing to rest." Of more general significance to the FDA-regulated industries, the settlement appears to reinforce FDA's growing interest in the use of civil penalties. Authority to impose civil penalties for violations of the FD&C Act is part of the Administration's draft FDA enforcement bill ("The Pink Sheet" March 25, p. 3). The ICN settlement could cut two ways. It could be used as support for new legislative authority by showing the effectiveness of civil penalties as a way to get a relatively quick and public ending to a dispute without having to go into the more protracted and costly criminal prosecutions. On the other hand, the settlement could lend credence to the contentions of those who feel that new powers are unnecessary because FDA already has the means to exact such penalties. The settlement decree stipulates that for three years, ICN must ask physicians what use they intend for drugs purchased from the company. ICN may not make a sale to a physician "absent satisfaction" that the drug will be used only for an approved indication or in an approved trial, the settlement says. In addition, for 36 months ICN has agreed to inform FDA two days prior to any intended "dissemination within the U.S. of findings or actions of foreign regulatory bodies relating to any new drug," or any other disclosure necessary for "the full exchange of scientific information." ICN must "hand-deliver notice of the proposed disclosure, including the form and substance, and, where feasible, the identity of each person . . . to whom the proposed disclosure is to be made." ICN must also notify FDA of any disclosure required by statute within seven days. Virazole was the subject of a May 28, 1987 hearing before Rep. Dingell's (D-Mich.) House Energy & Commerce/Oversight Subcommittee. At that hearing, then-Center for Drug Evaluation and Research Compliance Office Director Daniel Michels said he had never seen a case "involving so many different potential -- and I underscore 'potential' -- violations of the law." One issue was the "imbalance" of the randomized Phase II data used in applying for a Treatment IND for use in AIDS patients. FDA rejected Treatment INDs for Virazole as an AIDS treatment in April and August 1987 ("The Pink Sheet" Sept. 7, 1987, p. 11). The drug is currently in Phase III testing as an AIDS treatment. Another issue was promotion for the AIDS indication. Then-FDA Commissioner Young testified that he believed ICN and its Viratek subsidiary had "crossed the line" in its press promotions of the drug's AIDS results. A grand jury investigation of ICN followed the Dingell hearing, ICN said, but expired without forwarding anything for prosecution.
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