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ALRA LABS, CORPORATE OFFICERS CHARGED IN FIVE-COUNT CRIMINAL INDICTMENT

This article was originally published in The Tan Sheet

Executive Summary

ALRA LABS, CORPORATE OFFICERS CHARGED IN FIVE-COUNT CRIMINAL INDICTMENT relating to the production of prescription lactulose syrup USP at the company's Gurnee, Ill. facility in 1988 and the selling of the generic product to distributors in East Hartford, Conn. and Brooklyn, N.Y. The criminal indictment of Alra Laboratories and two corporate officers, Raj Bhutani and Neelam Bhutani, was handed down Aug. 11 in Chicago federal court following the findings of an April 1993 grand jury. The Chicago U.S. Attorney's office said the investigation is continuing. An arraignment is set for Sept. 9. The five-count indictment names Alra Labs, President and Treasurer Baldev Raj Bhutani, PhD, 52, and his wife, Corporate Secretary and Quality Control Lab Director Neelam Bhutani, 43. If convicted, corporate defendant Alra could be sentenced to pay fines of up to $ 2.5 mil. The Bhutanis each face 15-year prison terms and fines of up to $ 1.25 mil. The indictments mark the latest, and most serious, violations of the FD&C Act and GMP regulations by the generic and OTC drug manufacturer. Alra has been involved in a series of FDA inspections and reinspections, recalls, regulatory letters, and consent decrees dating back to 1989. In the most recent action, the defendants are charged with providing false and misleading labeling on lactulose syrup USP. They are said to have affixed a false expiration date to the label and shipped the product into interstate commerce after the expiration date had passed. The false labeling date was September 1989. The lot, however, was manufactured in June 1986 and already had expired, the indictment states. Lactulose syrup is indicated for the "prevention and treatment of portal-systemic encephalopathy, including the stages of hepatic pre-coma and coma." None of the product included in the indictment remains on the market. The defendants are also charged, the indictment states, with adulteration of lactulose syrup with intent to defraud and mislead in that: "the product consisted in part of a decomposed substance [partly decomposed lactulose]; the product had not been manufactured in accordance with good manufacturing practices; and the manufacturing procedures for this drug product had been materially altered by adding an undocumented substance, sodium hydroxide, more than two years after the original manufacture." The sodium hydroxide was added, the indictment charges, in an attempt to mask the deterioration of the drug. The indictment further charges that the defendants failed to establish and maintain accurate batch production records "in that they materially altered the manufacturing procedures" by adding the sodium hydroxide, "but, in order to conceal this unauthorized procedure from FDA, failed to document this unapproved manufacturing procedure in the production batch records." The fourth and fifth counts of the indictment charge the defendants with shipping lots of lactulose syrup that were, as a result of the above actions, adulterated and misbranded. In an Aug. 26 release proclaiming its "vehement denials" to the charges, Alra maintained that the two batches of lactulose syrup covered in the indictment "were manufactured between 1986 and 1988 and met all quality standards and stability requirements up to and for one year beyond the expiration date of September 1989." "Written procedures were followed in the manufacture and testing of the [lactulose syrup], and . . . no prior claims have been made to challenge the product's quality, strength, purity or potency throughout its assigned shelf life," Alra declared, adding that sodium hydroxide is an approved ingredient in the manufacture of lactulose syrup. Speculating about the source of the government allegations, Alra suggested that they came from disgruntled ex-employees. This "handful" of former employees, Alra charged, "have openly and repeatedly threatened retribution for their termination." Alra said it will fight the indictment in court. An FDA investigator from the Chicago District Office, Joseph Stojak, testified at a March 7, 1991 hearing before Rep. John Dingell's (D-Mich.) House Energy & Commerce/oversight subcommittee that he found Alra "completely out of control" and had recommended an injunction against the company. Stojak wrote a July 1990 memo to his superiors in the Chicago District Office expressing his frustration with Alra and his belief that the company would not take adverse inspection reports seriously unless FDA sought court action. Shortly after the March 1991 hearing, on March 19, Alra's entire production line was seized by FDA for failure to comply with GMP regs. Fraud was not alleged during the seizure action. In July 1991, the company entered into a consent agreement with FDA, agreeing to have all of its batch records reviewed by an independent audit team and to test samples of its entire inventory to assure the potency and purity of each product. Alra also was required to post a $ 750,000 bond to ensure that no product would be shipped. The company was cleared to manufacture again in December 1991 following an August-September 1991 reinspection. Alra resumed shipping prescription and OTC products in December 1991. An order issued March 19, 1992 by Chicago federal court Judge Milton Shadur found that Alra had met all the terms of the consent agreement.
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