Class Action Lawsuits Attack Yogurt Products for Nonconformance with Standards of Identity

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Over the past eight months, numerous class action lawsuits have been filed by consumers against yogurt manufacturers regarding the use of milk protein concentrate (“MPC”) as an ingredient in yogurt products. Generally, the lawsuits allege that the yogurt and Greek yogurt products are not actually yogurt because they do not comply with the required standard of identity for yogurt due to the use of MPC as an ingredient. Such lawsuits have been filed against General Mills Yoplait Greek yogurt, Cabot Greek-style yogurt, Dannon Activia yogurt, and Lucerne Greek yogurt.

The plaintiffs in these various suits allege that the products do not meet the FDA-approved standards of identity because the products contain MPC, which is not permitted in yogurt. MPC is often used as a filler to create a thicker product and increase the amount of protein. Plaintiffs also allege that because the products do not conform to the standard of identity for yogurt, the products are misbranded in violation of state law and the Federal Food, Drug and Cosmetics Act (“FDCA”).

Standards of identity define certain food products and govern the ingredients that must be used, or may be used, in the manufacture of those food products. The standard of identity for yogurt describes the permissible ingredients for yogurt, and components and processes that can be used to manufacture yogurt. The standard of identity for yogurt, nonfat yogurt and low fat yogurt are defined in 21 C.F.R. 131.200, 21 C.F.R. 131.203 and 21 C.F.R. 131.206, respectively.  As noted in the complaints, MPC is not expressly listed or described as a permitted ingredient in the applicable standards of identity for yogurt.

Pursuant to Section 403(g)( 1) of the FDCA, a food product is misbranded if: (i) it does not conform with the applicable standard of identity; or (ii) its label does not bear the name of the food specified in the definition and standard. 21 U.S.C. § 343(g). Moreover, courts have held that foods which purport to be standardized products, but contain ingredients not recognized in the standard of identity, are misbranded even if the label accurately describes the product’s ingredients. Libby, McNeill & Libby v. United States, 148 F.2d 71 (2d Cir. 1945) (affirming United States v. 306 Cases Containing Sandford Tomato Catsup With Preservative, 55 F. Supp. 725 (E.D.N.Y. 1944)).

According to the complaints, the use of MPC as an ingredient in these products renders the products misbranded pursuant to the FDCA, 21 U.S.C. § 343, because the products are represented as yogurt for which the standard of identity had been prescribed by regulation and the use of MPC in these products does not conform to the standards.

Significantly, manufacturers whose products are deemed by the FDA to be misbranded are subject to enforcement action. Enforcement actions can include the issuance of Warning Letters, injunctions or criminal penalties.  21 U.S.C §§ 332, 333. Previously, the FDA has warned dairy food product manufacturers that when MPC is not listed as an optional dairy ingredient in products governed by a standard of identity, the use of MPC is not permitted and would render the product misbranded. The FDAs Warning Letter can be found here. FDA Warning Letters notify recipients and the public that the FDA believes that a particular firm has violated federal law. Thus, given the bad publicity that these letters generate, it is advantageous for firms to correct possible violations as quickly as possible. The recipients of Warning Letters typically have 15 days to address the issues presented by the Warning Letter and to develop specific corrective actions. Failure to do so may put the recipient in jeopardy of facing product seizures or formal legal action by the FDA. Please see our previous reports here and here, discussing whether, and if so how, the recipients of Warning Letters may respond or challenge the Warning Letters in court in light of the United States Supreme Courts recent ruling in Sackett v. EPA.

Notably, on December 10, 2012, Judge Susan Richard Nelson of the U.S. District Court in Minnesota dismissed the General Mills Yoplait Greek yogurt lawsuit. In the ruling, Judge Nelson invoked the doctrine of primary jurisdiction, concluding that the FDA was best suited to handle the dispute. Under the doctrine of primary jurisdiction, a court has discretion to retain jurisdiction or stay litigation and refer issues that fall within the special competence of an administrative agency to that agency for its decision. See Access Telecomms. v. Sw. Bell Tel. Co., 137 F.3d 605, 608 (8th Cir. 1998). Courts generally apply the doctrine to promote uniformity and consistency within the particular field of regulation. Here, the Court determined that the underlying issue is whether MPC is a proper, permitted ingredient in yogurt as governed by the standard of identity for yogurt, and the resolution of this question falls squarely within the competence and expertise of the FDA, pursuant to the authority granted to the Agency by Congress. See 21 U.S.C. §§ 301, et seq.

It remains to be seen how quickly the FDA will act to address the ambiguities regarding the standard of identity for yogurt. Fuerst Ittleman David & Joseph will continue to monitor the FDAs regulation of food products. The attorneys in the Food, Drug, and Life Sciences practice group are well-versed in the complex FDA regulatory framework. For more information, please email us at contact@fidjlaw.com or call us at (305) 350-5690.

FDA Exhibits Increased Authority under Food Safety and Modernization Act

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In early September of 2012, the U.S. Food and Drug Administration (“FDA“) and Centers for Disease Control and Prevention (“CDC“) announced an investigation into a multi-state outbreak of Salmonella Bredeney infections linked to peanut butter manufactured by Sunland, Inc. The outbreak sickened 42 people in 20 states according to the CDC. As part of the investigation in late September, the FDA and CDC briefed Sunland on the status of the investigation and the company volunteered to recall approximately 100 products, which included peanut butter and other products made with nuts and seeds. A list of those products can be found in Sunlands recall announcement.

During the investigation, the FDA discovered multiple sanitation violations at the Sunland manufacturing facility. FDA testing revealed the presence of Salmonella in raw peanuts from the peanut processing facility. The FDA also found that Sunland had knowingly released contaminated products onto the market between 2009 and 2012. A copy of the FDAs inspection report can be found here.

In response to the outbreak, the FDA suspended the food facility registration of Sunland on November 26, 2012. Registration with the FDA is required for any facility that manufactures, processes, packs, or holds food for consumption in the United States. 21 CFR 1.225. If a facilitys registration is suspended, that facility is prohibited from introducing food into interstate or intrastate commerce. The suspension, however, is only temporary, and does not prevent Sunland from continuing to manufacture foods while the registration is suspended.

Significantly, this was the FDAs first use of its registration suspension authority pursuant to the Food Safety Modernization Act (“FSMA”). 21 U.S.C. § 350d(b). As we have previously reported, the FSMA contains various sweeping provisions that expand the FDAs power to regulate food facilities. The new authority enables the Agency to suspend registration when food manufactured, processed, packed, received, or held by a facility (1) has a reasonable probability of causing serious adverse health consequences or death to humans or animals; or (2) the facility knew of, or had reason to know of, such reasonable probability, and packed, received or held such food.

On December 20, 2012, the U.S. Department of Justice (“DOJ“) filed a complaint against Sunland and its president, Jimmie D. Shearer, in the U.S. District Court in the District of New Mexico seeking a permanent injunction. The suit was filed on behalf of the federal government by US Attorney for the District of New Mexico Kenneth Gonzales. The DOJ press release can be found here.

According to FDAs press release, on December 21, 2012, U. S. District Court Judge William P. Johnson signed a consent decree imposing requirements on Sunland to keep potentially harmful products from entering the marketplace. The consent decree requires that Sunland retain an independent sanitation expert to develop a sanitation control program that the company must then implement in compliance with current good manufacturing practice (“cGMP”) regulations. According to the consent decree, the FDA has determined that adequate grounds no longer exist to continue the suspension and will reinstate Sunlands food facility registration. However, the company cannot process or distribute food from its peanut butter plant until it has complied with the consent decrees requirements to the Agencys satisfaction and obtained written authorization from the FDA.

This case highlights the FDAs increased authority under the FSMA to take enforcement actions against non-compliant food facilities. Fuerst Ittleman David & Joseph will continue to monitor the FDAs measures under the FSMA. For more information regarding the FSMA, FDA enforcement measures, or other compliance issues, please contact us at contact@fidjlaw.com or (305) 350-5690.

How Can FDA More Reasonably Regulate Autologous Stem Cell Procedures?

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In the December 26, 2012 edition of the Food & Drug Law Institutes (FDLI) Policy Forum, Andrew Ittleman of Fuerst Ittleman David & Joseph took on the question of how FDA may more reasonably regulate autologous stem cell procedures. In the article, Mr. Ittleman concludes that FDA, under certain circumstances described in the article, should exercise “enforcement discretion” with respect to autologous stem cell procedures. Mr. Ittleman also describes how FDA has interpreted the concepts of “minimal manipulation,” and “homologous use,” and discusses FDAs regulation of autologous stem cell procedures as being in direct conflict with traditional notions of the practice of medicine. A copy of the article is available here.

United States v. Caronia: Second Circuit Rules Manufacturers Cannot Be Criminally Prosecuted for Off-Label Promotion of Drugs Under FDCA

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On December 3, 2012, the United States Court of Appeals for the Second Circuit issued a landmark decision in United States v. Caronia, holding that “the government cannot prosecute pharmaceutical manufacturers and their representatives under the FDCA for speech promoting the lawful, off-label use of an FDA-approved drug.” In its opinion, available here, the court rejected the Governments interpretation of the FDCA as prohibiting manufacturer promotion of off-label uses and held that such a prohibition on manufacturers speech is an unconstitutional violation of the First Amendment. This decision is significant because it could change the way the FDA continues to regulate drugs under the misbranding and adulteration provisions of the FDCA.

Regulatory Framework

Under 21 U.S.C. § 355(a) of the FDCA, a drug must be approved by the FDA for specific use prior to being distributed into interstate commerce. Once the FDA approves a drug for distribution, physicians can prescribe the drug for both FDA-approved and unapproved (or “off- label”) uses. Courts and the FDA have long recognized the public value in allowing physicians to, in their best judgment, prescribe drugs for off-label use when in the best interest of the patient.

According to the FDA, the FDCA permits off-label prescription by physicians but does not allow “misbranding” by manufacturers through off-label promotion. The FDA has interpreted off-label promotion to be misbranding, stating that “[a]n approved drug that is marketed for an unapproved use (whether in labeling or not) is misbranded because the labeling of such drug does not include Ëœadequate directions for use.” (See FDAs Draft Guidance for Industry here.) It is important to note, however, that the FDCA and its associated regulations do not expressly prohibit the “promotion” or “marketing” of drugs for off-label use.

Factual Background

Alfred Caronia, an employee of Orphan Medical, Inc. (“Orphan”), now known as Jazz Pharmaceuticals, was found guilty of conspiracy to introduce a misbranded drug into interstate commerce in violation of the FDCA. Orphan manufactured the drug Xyrem, a central nervous system depressant, which contained gamma-hydroxybutryate (“GHB”), otherwise known as the “date rape drug”. Orphan obtained FDA approval for Xyrem for two indications: 1) to treat narcolepsy patients who experience cataplexy and 2) to treat narcolepsy patients with excessive daytime sleepiness. Due to the serious safety concerns related to the use of Xyrem, the FDA required Orphan to use a “black box” warning on its label stating that the drugs safety and efficacy were not established in patients under 16 years of age.

Mr. Caronia was hired by Orphan as a Specialty Sales Consultant to promote Xyrem. Under Orphans procedures, sales consultants were not permitted to respond to questions regarding the off-label use of Xyrem. Instead, sales consultants were required to fill out “medical information request forms” and Orphan would send information to the inquiring physicians. Any physician employed by Orphan as a promotional speaker, however, was permitted to answer off-label use questions. In 2005, the federal government launched an investigation of Orphan and Dr. Peter Gleason, a physician promotional speaker. The federal governments investigation was specifically focused on the off-label promotion of Xyrem. With the assistance of a government cooperator, who posed as a prospective Xyrem customer, the federal government audio-recorded Mr. Caronia and Dr. Gleason promoting Xyrem for unapproved uses. Specifically, Mr. Caronia was recorded as promoting Xyrem for use in the treatment of muscle disorders, chronic pain, and Fibromyalgia, as well as for treatment in patients under age sixteen. Xyrem was not approved for use in the treatment of these conditions or in patients under the age of sixteen. As a result of these statements, Mr. Caronia was charged and convicted with conspiracy to introduce and introducing a misbranded drug into interstate commerce in violation of 21 U.S.C. §§ 331(a) and 333(a)(2). Mr. Caronia appealed, arguing that the misbranding provisions of the FDCA prohibit off-label promotion, and therefore unconstitutionally restrict speech.

U.S. v. Caronia: Decision and Legal Rationale

The question before the Second Circuit Court of Appeals was whether the governments prosecution of Mr. Caronia under the FDCA for promoting an FDA-approved drug for off-label use was constitutionally permissible. In a 2-1 decision, the court found that “a conviction obtained under the governments application of the FDCAwould run afoul of the First Amendment” and vacated Mr. Caronias criminal conviction. In reaching its decision, the court relied heavily on the reasoning of the United States Supreme Court in IMS v. Sorrell. In that case, the Supreme Court first held that “[s]peech in aid of pharmaceutical marketingis a form of expression protected by the Free Speech Clause of the First Amendment.” In reaching this conclusion, the Court engaged in a two-step inquiry. First, the court considered whether the government regulation restricting speech was content and speaker-based. Second, the Court considered whether the government had shown that the restriction on speech was consistent with the First Amendment under the applicable level of scrutiny. The Court determined that because the statute set forth content- and speaker-based restrictions, it was subject to heighted scrutiny. Specifically, the Court held that the law, which prohibited pharmaceutical companies from using prescriber-identifying information for marketing purposes, disfavored speech with a particular content (marketing) when expressed by certain disfavored speakers (pharmaceutical manufacturers). Therefore, because “the creation and dissemination of information are speech within the meaning of the [Constitution],” the Supreme Court held that the Vermont law unconstitutionally restricted speech.

In reaching its decision in U.S. v. Caronia, the Second Circuit, like the Supreme Court in IMS v. Sorrell, engaged in a two-step inquiry: 1) whether the government regulation restricting speech was content-and speaker-based; and 2) whether the government had shown that the restriction on speech was consistent with the First Amendment under a heightened level of scrutiny. First, the court found that the governments interpretation of the FDCAs misbranding provisions as prohibiting off-label promotion is content-based because it distinguishes between “favored speech” and “disfavored speech” on the basis of ideas. Specifically, the court found that under the governments interpretation of the FDCA, speech about government-approved use of drugs is permitted, while certain speech about the off-label use of drugs is prohibited. Second, the court found that the governments regulation restricting speech only targeted one kind of speaker (pharmaceutical manufacturers), while allowing others to speak freely without restriction. Under the FDCA, off-label prescriptions and drug use are legal, which means that physicians and academics, for example, can speak about off-label use without consequence, while the same speech is prohibited when delivered by pharmaceutical manufacturers. The FDAs “construction Ëœthus has the effect of preventing [pharmaceutical manufacturers]”and only [pharmaceutical manufacturers]”from communicating with physicians in an effective and informative manner.” Therefore, the governments construction of the FDCAs misbranding provisions is content- and speaker-based, and subject to heightened scrutiny under Sorrell.

The court then examined the constitutionality of the governments restriction on commercial speech under the test set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission. In applying the Central Hudson test, the court determined that the governments regulation of Mr. Caronias off-label promotion is unconstitutional because it does not directly advance the governments interest in drug safety and public health and is more extensive than necessary to achieve those interests.

The opinion explained that because the FDA contemplated and accepted off-label prescription and drug use as part of its regulatory framework, “it does not follow that prohibiting the truthful promotion of off-label drug usage by a particular class of speakers would directly further the governments goals” of preserving the FDAs drug approval process and reducing patient exposure to unsafe and ineffective drugs. Moreover, the court explained that selectively prohibiting manufacturer commercial speech “paternalistically” interferes with the ability of physicians and patients to receive treatment information, which could “inhibit, to the publics detriment, informed and intelligent treatment decisions.” Therefore, the governments construction of the FDCA “provides only ineffective or remote support for the governments purpose” because it “essentially legalizes the outcome”off-label use”but prohibits the free flow of information that would inform that outcome.”

Moreover, the court found that the governments construction of the FDCA “to impose a complete and criminal ban on off-label promotion by pharmaceutical manufacturers is more extensive than necessary to achieve the governments substantial interests” because other, less speech-restrictive alternatives are available. For example, according to the Second Circuit, the government could create other limits, such as ceilings or caps on off-label prescriptions to minimize off-label use or to address manufacturer evasion of the drug approval process. Alternatively, the government could further develop guides to help physicians and patients differentiate between misleading and false promotion, exaggerations and embellishments, and truthful or non-misleading information. Lastly, the court suggested that the government could even prohibit off-label use altogether if the use of off-label drug use is exceptionally concerning.

The court did limit the scope of its decision: “Our conclusion is limited to FDA-approved drugs for which off-label use is not prohibited, and we do not hold, of course, that the FDA cannot regulate the marketing of prescription drugs.”

Because the First Amendment mandates that the regulation of speech “be a last”not first”resort,” the court held that the government cannot prosecute pharmaceutical manufacturers and their representatives under the FDCA for speech that promotes the lawful, off-label use of an FDA-approved drug. In its opinion, the court also explained that it construed the misbranding provisions of the FDCA as not prohibiting or criminalizing truthful promotion of off-label usage.  For these reasons, the court vacated Mr. Caronias criminal conviction and remanded the case to the district court.

At present, the U.S. v. Caronia decision is only binding on courts within the jurisdiction of the Second Circuit. However, we expect the government to petition for a rehearing or rehearing en banc in the Second Circuit, or for writ of certiorari to the United States Supreme Court. Because it is highly unlikely that the government will do nothing and simply allow the decision to stand, the constitutionality of off-label promotion of approved drugs is far from resolved, even in the Second Circuit. This decision is one that favors members of the pharmaceutical and life sciences industries; however, it remains unclear how, or whether, other courts will join the Second Circuit in finding that manufacturer off-label promotional speech warrants protection under the First Amendment.

Fuerst Ittleman David & Joseph will continue to monitor any developments in the regulation of off-label promotion of FDA-approved products. For more information, please feel free to contact us via email at contact@fidjlaw.com or via telephone at 305.350.5680.

FDA Issues Draft Guidance and 510(k) Submission Checklist

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On August 13, 2012, the U.S. Food and Drug Administration (“FDA“) issued a Draft Guidance document entitled “Refuse to Accept Policy for 510(k)s” (“the Guidance”). The Guidance outlines the procedures and criteria FDA uses to assess whether a 510(k) submission meets the minimum threshold to be accepted for substantive review. If finalized, the Draft Guidance will supersede the 1993 guidance entitled “Center for Devices and Radiological Healths Premarket Notification (510(k)) Refuse to Accept Policy” and the 1994 guidance entitled “510(k) Refuse to Accept Procedures (K94-1).”

The FDA requires that 510(k)s be submitted in an organized, tabulated document that provides sufficient information for the FDA to be able to determine whether the device is substantially equivalent (“SE”) to a predicate device. The FDA estimates that the average 510(k) submission is about 35 pages; although others may be 100 pages or more depending on the complexity of the device. The FDA has not implemented a standard 510(k) form.

The purpose of the Draft Guidance is to provide device sponsors with clarification regarding what should be included in 510(k) submissions in order to enhance the quality of submissions and improve overall FDA review time. Detailed in the Draft Guidance is an “Acceptance Checklist” that contains the criteria the FDA will use to conduct an acceptance review to ensure that 510(k) submissions are administratively complete.

According to the Draft Guidance, within 15 days of receipt of a 510(k), the FDA will conduct a review to assess whether the submission should be accepted. If one of more of the items on the Acceptance Checklist is not present, the 510(k) submission will not be accepted and will receive a Refuse to Accept (“RTA”) designation. The FDA will notify the device sponsor in writing that the submission has not been accepted and will provide a copy of the completed checklist indicating which items are the basis for the RTA designation. The 510(k) submitter may respond by providing the missing information identified in the checklist. Only when all the missing information is submitted will the 510(k) be accepted and the FDA will conduct a substantive review evaluating the quality of the content to determine if the device should be cleared.

The Draft Guidance is one of the FDAs attempts to improve its medical device application review times in order to meet the performance goals set forth in the Medical Device User Fee Modernization Act (“MDUFMA”). For more information regarding the FDAs attempts to improve review times, please see our previous report regarding the medical device pre-submission (“Pre-Sub”) program.

Some members of the medical device industry are concerned that the acceptance review of a 510(k) may be potentially time consuming and counterproductive to the FDA goals to improve review times. In a letter to the FDA, the Advanced Medical Technology Association (“AdvaMed”) on behalf of industry reasons that it may be difficult for reviewers conducting the acceptance review to determine whether certain elements are present without conducting a substantive review. Also in an effort to improve review times, AdvaMed urged the FDA to lower the bar for the acceptance criteria described in the Draft Guidance, and limit the acceptance review to allow for an effective substantive review.

The FDAs review of medical devices is complex. Fuerst Ittleman David & Joseph PL has extensive experience successfully navigating medical devices through FDA review. For more information on FDAs review of medical devices, please contact us at contact@fidjlaw.com.

FDA Issues Warning Letters to Manufacturers of Misrepresented Conventional Foods and Dietary Supplements

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As we have previously reported here and here, manufacturers of conventional food products and dietary supplements have often been the target of U.S. Food and Drug Administration (“FDA“) Warning Letters for allegedly misrepresenting their products. Pursuant to Section 201(ff)(2)(B) of the Federal Food, Drug, and Cosmetic Act [21 U.S.C. 321(ff)(2)(B)], if a product is represented as a conventional food, the product cannot also be marketed as a dietary supplement. However, categorizing conventional foods and dietary supplements can be complicated.

The FDA defines conventional foods as “foods that are not dietary supplements.” All ingredients in conventional foods must be pre-approved by the FDA as a food additive or meet the requirements of the “Generally Recognized as Safe” (“GRAS”) provisions. Dietary supplements are defined as products “intended for ingestion that contain a Ëœdietary ingredient intended to add further nutritional value to (supplement) the diet,” dietary supplements may be in forms such as tablets, capsules, softgels, gelcaps, liquids, or powder, and may be one, or a combination, of the following substances: vitamins, minerals, herbs or botanicals, amino acids, concentrates, metabolites, constituents, or extracts.

Prior to 2009, the FDA determined if a product was a conventional food or dietary supplement based on the labeling pursuant to the Dietary Supplements Health & Education Act (“DSHEA“). For example, conventional foods were required to have a “Nutrition Facts” panel on their labels, and dietary supplements were required to have a “Supplement Facts” panel. However in 2009, the FDA issued the draft guidance document “Factors that Distinguish Liquid Dietary Supplements from Beverages, Considerations Regarding Novel Ingredients, and Labeling for Beverages and Other Conventional Foods” that changed the factors that the FDA relies on to determine a products category. The 2009 draft guidance states that the FDA considers a products name, packaging, serving size, and recommended conditions of use, as well as other representations about the product, to be important determinants of whether the product is a conventional food or dietary supplement.  If the product is a conventional food or dietary supplement but marketed as the other, the product could be deemed by the FDA to be misbranded or adulterated in violation of 21 U.S.C. § 331(a) and 21 U.S.C. 342(a)(2)(C).

The FDA issued 13 Warning Letters to companies that misrepresented their products as either conventional foods or dietary supplements prior to the issuance of the 2009 draft guidance and has issued 7 Warning Letters subsequently. In 2011, an FDA spokesman reportedly stated that the FDA had not been more aggressive with enforcement actions due to competing priorities and limited resources available to the FDA. The 2 most recently issued Warning Letters were made public on May 23, 2012 and July 20, 2012, and can be found here and here.

FDA Warning Letters notify recipients and the public that the FDA believes that a particular firm has violated federal law. Thus, given the bad publicity that these letters generate, it is advantageous for firms to correct possible violations as quickly as possible. The recipients of Warning Letters have 15 days to address the issues presented by the Warning Letter and to develop specific corrective actions. Failure to do so may put the recipient in jeopardy of facing product seizures or formal legal action by the FDA. Please see our previous reports here and here, discussing whether, and if so how, the recipients of these Warning Letters may respond or challenge the Warning Letters in court in light of the United States Supreme Courts recent ruling in Sackett v. EPA.

Fuerst Ittleman David & Joseph, PL will continue to monitor the regulation of conventional foods and dietary supplements. The attorneys in the Food, Drug, and Life Sciences practice group are well-versed in the complex FDA regulatory framework. For more information, please email us at contact@fidjlaw.com or call us at (305) 350-5690.

Medical Device Contract Manufacturers and Contract Sterilizers Now Required to Register and List

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Establishments involved in the production and distribution of medical devices intended for use in the United States are required to register annually with the U.S. Food and Drug Administration (“FDA“). 21 C.F.R. § 807.20. Most establishments are also required to list the devices that are made at their facilities and the activities that are performed on those devices. Id. The process is known as establishment registration and listing. Those firms required to register and list are also required to pay the associated user fee.

Effective October 1, 2012, the requirements for medical device establishment registration and listing will change. On August 2, 2012, the FDA issued “Medical Device Establishment Registration and Listing – Notice of Changes for FY 2013” and a final rule to implement the requirements enacted in Section 321 of the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (“Bioterrorism Act“), and Section 207 of the Medical Device User Fee and Modernization Act (“MDUFMA”). The notice and final rule require all registered medical device establishments to pay the annual registration fee, regardless of the type or activities conducted. In addition, certain establishments must comply with additional registration and listing requirements.

The most notable change contained in the final rule requires all contract manufacturers and contract sterilizers to register the devices they manufacture and sterilize with the FDA. Previously, contract manufacturers and contract sterilizers were exempt from registration and listing requirements pursuant to 21 C.F.R. 807.20(c)(1)-(2). However, the final rule eliminates the exemption for contract manufacturers and contract sterilizers, thus requiring those who were previously exempt to register, list, and pay the user fee. This change significantly expands the scope of establishments subject to the annual establishment registration and listing requirements. As a result, the FDA estimates that the new rule will increase the number of establishments paying the user fee from 16,000 to 22,000.

Other changes to medical device registration and listing requirements resulting from this new final rule include:

  • All registration and listing submissions must be made to the FDA through electronic means rather than paper forms;
  • Foreign establishments must identify all known importers and the name of each person who imports or offers to import the foreign establishments device into the United States; and
  • All establishments must pay a registration fee when they initially register with the FDA and for each annual registration thereafter.

On September 12, 2012, the FDA released a document entitled “Frequently Asked Questions about the New Device Registration and Listing Requirements.” The list of FAQs is designed to assist medical device establishments with under the new registration and listing requirements. The FAQs address issues such as: updating existing registration information, proprietary (brand) names, combination products, medical device excise tax, foreign establishments, exporters, importers, and contract manufacturers and sterilizers.

An establishments failure to register and list as required by the final rule will cause the firms medical device to be deemed to be misbranded by the FDA pursuant to 21 U.S.C. § 352(o). Thus, establishments should ensure that they properly register and list with the FDA.

For information on how Fuerst Ittleman David & Joseph PL can assist your firm with registering and listing your medical device with the FDA pursuant to the new requirements, please contact us at contact@fidjlaw.com.

FTC and Brain-Pad Settlement Provides New Substantiation Standard and Highlights Issues with Enforcement of Consent Decrees on Non-Parties

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On August 16, 2012, the Federal Trade Commission (“FTC“) announced a proposed settlement with the mouthguard marketer Brain-Pad, Inc. (“BPI”).  According to the FTC Administrative Complaint, BPI violated Sections 5(a) and 12 of the Federal Trade Commission Act (“FTC Act“) by making deceptive advertising claims that its mouthguards are clinically proven to reduce the risk of concussions from lower jaw impacts. However, a careful analysis of the Consent Decree reveals yet another definition for the FTCs substantiation requirement for health claims and illustrates the FTCs attempt to exceed the scope of the consent decree and bind non-parties.

Substantiation Requirement

The BPI Consent Decree states that BPI must possess “competent and reliable scientific evidence” to substantiate claims that BPIs products will reduce the risk of concussions. “Competent and reliable scientific evidence” is defined as “tests, analysis, research, or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results.”

The definition contained in the BPI Consent Decree marks another attempt by the FTC to employ and enforce a heightened level of substantiation for health related claims through consent decrees. As we have previously reported (here, here, here, and here), the FTC has sought to enforce the definition of “competent and reliable scientific evidence” to require “two adequate and well-controlled human clinical studies for all absolute or comparative claims” or “one [a]dequate and well-controlled human clinical study” in litigation with companies such as Garden of Life, The Dannon Company, Nestle HealthCare, Iovate Health Sciences, POM Wonderful, and Medifast, Inc.

The varying definitions of “competent and scientific evidence” may be due to the recent trend of courts disagreeing with the FTCs attempts to redefine and enforce a heightened level of substantiation requiring two adequate and well-controlled human clinical studies for health related claims.  As we previously reported, the Garden of Life decision is one example. In FTC v. Garden of Life, the FTC sought to modify a previous consent decree by changing the definition of “competent and reliable scientific evidence” to require “two adequate and well-controlled human clinical studies for all absolute or comparative claims” and FDA approval for disease claims. In rejecting the FTCs position, the Court stated that competent and reliable evidence does not mean “uncontroverted proof.”

Enforcement of Consent Decrees on Non-Parties

At the bottom of its press release, the FTC stated that “[w]hen the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions.” However, in reality, FTC consent decrees have the force and effect of law solely with respect to the future actions by the party, or parties, and products subject to the decree. Porter & Dietsch, Inc. v. FTC, 605 F.2d 294 (7th Cir. 1979). For enforcement purposes, FTC consent decrees must be construed as contracts. US v. ITT Cont’l Baking Co., 420 U.S. 223, 237 (1975). Therefore, the scope of consent decrees must be discerned within its four corners, and not by reference to what might satisfy the purposes of one of the parties to the decree. Id at 245.

In this case, the parties subject to the decree are (1) BPI, “its successors and assigns and their officers, and each of the aboves [sic] agents, representative and employees” and (2) “Joseph Manzo [the President of BPI] and his agents, representatives and employees.” The covered product refers to “any (1) mouthguard or (2) equipment used in athletic activities that is intended in whole or in part, to protect the brain from injury.”   Thus, the FTC consent decree carries the force and effect of law solely with respect to future actions of those specific parties and products.

Our previous report regarding the Garden of Life decision highlights one example of the FTCs attempt to broaden the scope of enforcement through the use of consent decrees.  In Garden of Life, the Court noted that “consent decrees generally do not have overarching purposes” such as consumer protection, and the actually negotiated purpose of consent decrees is usually far more limited. Furthermore, the Court stated that “decree[s] cannot be interpreted as requiring whatever might be necessary and appropriate to achieve [consumer protection.]” Order at 8 (citing Sierra Club v. Meiberg, 296 F.3d 1021, 1031-1032 (11th Cir. 2002)).

For more information on FTC regulations and substantiation requirements, or on how to ensure that your business maintains regulatory compliance at both the state and federal levels, please contact us at contact@fidjlaw.com.

The Regulation of Compounding Pharmacies Under Scrutiny Once Again

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The recent nationwide outbreak of fungal meningitis has pushed compounding pharmacies back into the public spotlight. The cases of fungal meningitis have been traced to contaminated injections produced by a compounding pharmacy in Framingham, Massachusetts. This outbreak has been linked to 15 deaths and 230 confirmed cases of fungal meningitis in 15 states. (For the most up-to-date information on the number of confirmed fungal meningitis cases in the United States, please visit the website for the Centers for Disease Control and Prevention here.) Over the past month, the number of confirmed cases has steadily risen, prompting calls by the public for better oversight and tighter regulation of compounding pharmacies.

Compounding pharmacies have historically been an important part of the pharmaceutical landscape. Unlike their mass-market manufacturing counterparts, compounding pharmacies typically prepare small batches of medications to meet a prescribing doctor’s requirements for dosages or combinations of ingredients that would otherwise be unavailable from commercial manufacturers. In particular, compounding pharmacies have been critical in filling prescriptions for patients who need solutions, creams and other medicines customized to, for example, alter dosage forms or remove ingredients that cause allergies. Due to drug shortages over the past few decades, the market for compounding pharmacies has substantially expanded. Today, over half of the nation’s pharmacies engage in some form of drug compounding and account for roughly one to three percent of the overall $300 billion U.S. prescription market. (For more statistics about drug compounding, please visit the International Academy of Compounding Pharmacists here.)

News of the deadly meningitis outbreak has led many to question what the difference is between a compounding pharmacy and a drug manufacturer. Generally, the operations of compounding pharmacies are regulated by State Boards of Pharmacy, whereas drug manufacturers are regulated by the U.S. Food and Drug Administration (FDA). Consequently, drugs produced by compounding pharmacies are not subject to premarket review by the FDA or any other regulatory body, unless state laws so require. The activities of the compounding pharmacy in this case, which appear to have involved the manufacture and shipping of drug products across the country, appear to be much more akin to traditional notions of drug manufacturing than compounding. Unfortunately, at least at the federal level, there are no statutes or regulations in place to help us understand where, exactly, compounding ends and manufacturing begins.

In an effort to provide some guidance on the regulation of compound pharmacies, the FDA issued a compliance policy guide (CPG) in 1992 that outlined the FDA’s enforcement policy on pharmacy compounding. This CPG remained in effect until the enactment of the Food and Drug Administration Modernization Act (FDAMA) in 1997. (For the full text of FDAMA, please click here.) FDAMA amended the federal Food, Drug, and Cosmetic Act (FDCA) by adding section 503A, which stated that drug products compounded by a pharmacist were entitled to exemptions from three provisions of the FDCA:

  1. The adulteration provision of section 501(a)(2)(B) (concerning the good manufacturing practice requirements);
  2. The misbranding provision of section 502(f)91) (concerning the labeling of drugs with adequate directions for use); and
  3. The new drug provision of section 5005 (concerning the approval of drugs under new drug or abbreviated new drug applications).

FDAMA went into effect in November of 1998; however, several provisions of section 503A were challenged as a violation of commercial speech. In 2001, in Western States Medical Center v. Shalala, the Ninth Circuit Court of Appeals declared section 503A invalid in its entirety for violating commercial speech, a decision that was affirmed by the Supreme Court in 2002. However, the Supreme Court did not address the Ninth Circuit’s holding that the commercial speech provisions could not be severed from the rest of section 503A. As a result, in at least the Ninth Circuit, all of section 503A is invalid. Since 2002, no other federal laws have been enacted to replace the regulatory void left by the invalidation of section 503A.

Following the Supreme Court’s decision in Western States Medical Center, the FDA released a compliance policy guide that explains how the FDA will determine whether a pharmacy’s operations constitute compounding or cross the line into drug manufacturing. This CPG has been the primary basis upon which the FDA has relied in making its decisions regarding whether or not to take federal enforcement action against compound pharmacies. According to the CPG, the “FDA will continue to defer to state authorities regarding less significant violations of the [FDCA] related to pharmacy compounding of human drugs.” Nevertheless, the FDA will take into account several factors when determining whether “the scope and nature of a pharmacy’s activities raise the kinds of concerns normally associated with a drug manufacturer.” For example, the FDA will consider whether the pharmacy compounds drugs in anticipation of receiving prescriptions, compounds drugs from active ingredients that are not components of FDA-approved drugs, or uses commercial-scale manufacturing or testing equipment to compound drugs. (For the full text of the FDA’s CPG, please click here.)

In spite of the FDA’s 2002 CPG, serious questions about the ambiguous compounding pharmacy “regulations” have continued to arise, and the FDA and individual states have received criticism for their lack of oversight. In a briefing on October 11, 2012, Deborah Autor, a deputy commissioner at the FDA, stated that “[t]he world has changed a lot since the days of the mortar and pestle, and this is the time for pharmacists, for lawmakers, for regulators, for doctors, to sit down and grapple with this new model and come up with a regulatory scheme that appropriately controls the risk.” (See National Public Radio’s article, “Meningitis Outbreak Puts Doctors, Regulators In New Territory“.) The trail of incidences of infection and death resulting from the poor oversight of compound pharmacies is “not a trend that’s popped up overnight.” In fact, questions about the regulation of compound pharmacies span back as far as the 1990s.

For example, in September 2005, three patients died and several others were sickened in Virginia after being given contaminated medications made at a compounding pharmacy in Maryland. In March 2007, two patients in Washington and Oregon died after receiving doses of intravenous pain medication that were measured improperly by a compounding pharmacy in Texas. In 2009, Frank’s laboratory, a compounding pharmacy in Florida, mistakenly produced contaminated drugs that killed over two dozen polo ponies and, in another incident, provided solutions that damaged the vision of 33 eye surgery patients. In March 2011, nine patients died after receiving contaminated nutritional supplements prepared by a compounding pharmacy in Alabama. Most recently, FDA officials raided the Framingham, Massachusetts pharmacy linked to the widespread fungal meningitis outbreak to investigate whether the sterility of its products had been compromised. (For more examples, you can read USA TODAY’s article here, and the Washington Post’s article here related to the regulation of compounding pharmacies.)

In many of these cases, the FDA has issued a recall of medications and conducted investigations that revealed practices which violated the FDCA. Pursuant to its enforcement authority, and in consideration of the factors outlined in the CPG, the FDA has issued over 40 Warning Letters to compounding pharmacies, over half of which were issued in the last three to four years. These Warning Letters have cited pharmacies for producing banned compounds, distributing drugs that were adulterated or contaminated, and selling medication in improper dosages or without accurate labels.

It is important to emphasize that health issues associated with compounding pharmacies are in no way new. The FDA, lawmakers, courts and industry have been well-aware of these issues for nearly two decades. As a result of the recent meningitis outbreak, however, calls for regulation in this area seem to have gained renewed political traction. In particular, Senator Edward Markey has called on Congress, demanding that the Legislature address the gaps in the piecemeal regulatory system and reconcile varying standards and requirements in state regulations. (For more information about Senator Markey’s push to fix the regulation of compounding pharmacies, see the Boston Globe’s article here.) At this point, it is uncertain how far the Senator’s initiative will go, given that previous attempts to introduce new legislation in this area have largely failed.

In sum, health scares like the meningitis outbreak will continue to provide reminders of the remaining inefficiencies and problems with the current regulatory and enforcement scheme. It is difficult to discern whether the fundamental problem is a complex systematic failure to regulate or monitor the compound pharmacy industry, or whether these adverse incidences are merely representative of the small minority of noncompliant pharmacies whose violative practices have caught national media attention. Even though the public continues to put pressure on lawmakers to take a closer look at the regulatory structure on both a federal and state level, it remains unclear how”or even if”Congress will respond.

Fuerst Ittleman David & Joseph, PL will continue to monitor any developments in the regulation of compounding pharmacies. For more information, please feel free to email our offices at contact@fidjlaw.com or by phone at (305) 350-5690.

Physicians and Pharmacies Must Be Aware of the Dangers and Potential Penalties Associated with Importing Prescription Drugs

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Introduction

As the price of healthcare continues to increase, healthcare practitioners have become more innovative and creative in their attempts to keep costs affordable for their patients. One technique which has increased in its popularity is doctors purchasing prescription drugs from foreign sources, particularly online pharmacies. However, while such techniques may provide for less expensive medical care, the importation of drugs from foreign sources can expose healthcare practitioners to a variety of criminal and civil penalties, and according to the FDA, can seriously endanger patients.

The risks associated with imported prescription drugs

For years, FDA has warned businesses and individuals about the risks associated with buying prescription drugs from foreign sources, specifically Canada. Recently, on September 28, 2012, the FDA issued a news release launching a national campaign called BeSafeRx that is designed to raise public awareness about the dangers of ordering prescription drugs from foreign unapproved sources. According to the FDA, the National Association of Boards of Pharmacy has found that less than three percent (3%) of online pharmacies meet the licensing requirements under federal law. A copy of the BeSafeRx announcement can be read here.

The FDA has taken the position that the dangers consumers face when purchasing foreign prescription drugs include consumption of expired, subpotent, contaminated or counterfeit drugs. Further, because foreign drugs may be manufactured for sale in non-English speaking countries, consumers may receive drugs without adequate directions for use. See South Florida Access to Affordable Prescription Drugs: Costs and Benefits of Alternative Solutions, Hearing before Subcomm. on Oversight and Investigations of H. Comm. on Energy and Commerce, 108th Cong. (2003).  Additionally, as many of these foreign drugs are produced in non-FDA approved facilities, the FDA cannot assure that they were manufactured in compliance with current good manufacturing practice (cGMP) standards. See generally, 21 U.S.C. § 360; 21 C.F.R. part 207.  Thus, per the FDA, consumers are exposed to numerous risks when purchasing drugs from internet pharmacies that dispense foreign drugs.

An example of the dangers consumers and healthcare practitioners face when importing foreign drugs played out earlier this year. In February, the FDA issued Warning Letters to numerous healthcare professionals that may have purchased counterfeit copies of the cancer drug Avastin from Canadian internet pharmaceutical distributors. According to reports, the fake Avastin, which was manufactured in unapproved facilities in Europe then distributed into the United States through Canadian internet pharmacy CanadaDrugs.com, contained no active cancer fighting ingredients. As a result of these events, healthcare practitioners who imported the counterfeit products may face criminal and civil penalties for having participated in adulteration and misbranding violations. See 21 U.S.C. § 351, 21 U.S.C. § 352.

More recently, on September 21, 2012, the FDA issued Warning Letters to over 4,100 identified websites that sell drugs or medical devices to American consumers. The Warning Letter, which was addressed to Canadadrugs, explained that these online pharmacy websites “offer unapproved and misbranded new drugs for sale” and requested each website to “immediately cease marketing violative drug products to United States consumers.” (To read the FDAs Warning Letter, click here.) Furthermore, the FDA sent notices to Registries, Internet Service Providers (ISPs), and domain Name Registrars (NDRs) informing them of the websites allegedly violative practices.

Additionally, on October 4, 2012, the FDA announced the details of Operation Pangea V, a global effort to combat the online sale and distribution of potentially counterfeit and illegal medical products. For the full text of the FDAs press release, please click here. In executing Operation Pangea V, the FDA collaborated with INTERPOL, the World Customs Organization, Permanent Forum of International Pharmaceutical Crime, Heads of Medicines Agencies Working Group of Enforcement Officers, the Medicines and Healthcare products Regulatory Agency of the United Kingdom, the Irish Medicines Board, the London Metropolitan Police, the U.S. Department of Homeland Security, the Center for Safe Internet Pharmacies, and the national health and law enforcement agencies from 100 other participating countries. The cooperative investigations conducted by these law enforcement, customs, and regulatory authorities resulted in civil and criminal charges, seizure of illegal produces, and removal of websites. For more information regarding Operation Pangea V, please see our previous report here.

The following discussion contains an outline of the penalties practitioners may face when importing foreign pharmaceutical drugs. This outline, however, is not exhaustive, as different penalties may be applicable to different importation activities under different circumstances.

1. Criminal Penalties under the FDCA

Under the FDCA, it is unlawful to import unapproved, misbranded, and adulterated drugs into the United States. This includes the importation of foreign versions of U.S. approved pharmaceuticals as well as those drugs that are manufactured in the United States, exported to other countries, and then subsequently reimported.

Two of the more typical FDCA violations which healthcare practitioners may face as a result of importing misbranded drugs are: 1) introduction or delivery for introduction into interstate commerce of any drug that is adulterated or misbranded; and 2) the receipt in interstate commerce of any drug that is adulterated or misbranded, and the delivery or proffered delivery thereof for pay or otherwise. See 21 U.S.C. § 331 (a), (c). The penalties and punishments associated with these crimes are governed by 21 U.S.C. § 333 and depend on whether the government charges the defendant with committing a violation “with the intent to defraud or mislead.”

Pursuant to 21 U.S.C. § 333(a)(1), a first misbranding violation is a strict liability offense and is a misdemeanor. Thus, no criminal intent need be established by the Government in order to sustain a conviction. However, 21 U.S.C. § 333(c) provides several good-faith exceptions, of which, if the healthcare practitioner qualifies, would absolve them from liability.

The maximum sentence provided by statute for a violation of 21 U.S.C. 331(a) or (c) is 1-year imprisonment, a supervised release of one year; and a maximum fine not in excess of $100,000. 21 U.S.C. § 333(a)(1); 18 U.S.C. § 3571. In addition, section 2N2.1 is the Sentencing Guideline applicable to misdemeanor violations of biological products, devices, cosmetics, and usually used in FDA prosecutions of statutes and regulations relating to foods, drugs, agricultural products.

However, if a healthcare practitioner is charged with violating either 331(a) or (c) with the intent to defraud or mislead, enhanced penalties do exist and such cases are prosecuted as felonies. The penalties associated with a violation of 21 U.S.C. § 333(a)(2) are a term of imprisonment of not more than 3 years and a fine of not more than $250,000. See 21 U.S.C. § 333(a)(2); 18 U.S.C. § 3571.

A violation of 21 U.S.C. § 333(a)(2) is a specific intent crime, see United States v. Mitcheltree. The specific intent requirement in § 333(a)(2) requires:

  1. Proof of misbranding; and
  2. Proof of intent to mislead or defraud “which is connected to the misbranding violation.”

Id. In other words, because “knowledge of the essential nature of the alleged fraud is a component of the intent to defraud, a defendant cannot act with an intent to mislead or defraud under § 333(a)(2) without some knowledge of the misbranding.” Id. (citing United States v. Hiland, 909 F.2d 1114, 1128 (8th Cir. 1990)).

As previously explained, “felony criminal responsibility requires a knowing violation with the specific intent to defraud or mislead.” Mitcheltree, 940 F.2d at 1350. A violation of 333(a)(2) “may be proved with facts indicating knowledge of the misbranding activity and a concomitant intent to defraud or mislead the FDA or its state counterpart.” Id.; see also United States v. Patwardhan,422 Fed. Appx. 614 (9th Cir. 2011); United States v. Bradshaw, 840 F.2d 871 (11th Cir. 1988) (sustaining a conviction under 333(a)(2) where defendant: 1) knowingly sold steroids without a prescription for unapproved use; 2)mislabeled the steroids as vitamins to avoid detection; and 3) made affirmative misrepresentations and omissions to state drug authorities while attempting to obtain a drug wholesalers permit.).

Additionally, while “the cases construing § 333(a)(2) have ordinarily been based on a sellers intent to defraud or mislead purchasers,” a prosecution under 333(a)(2) may be “based upon an intent to mislead or defraud not only natural persons, but also government agencies if there is evidence that a defendant consciously sought to mislead drug regulatory authorities such as the FDA or a similar governmental agency.” Mitcheltree, 940 F.2d at 1347, 1348 (10th Cir. 1991). As described by the Court in Mitcheltree, “if the government proceeds on this theory, there must be a demonstrated link between the § 331 violation and an intent to mislead or defraud an identifiable regulatory agency involved in consumer protection. Id. at 1349 (emphasis in original); see also United States v. Cattle King Packing Co., 793 F.2d 232 (10th Cir. 1986) (finding that the specific intent requirement of the statute could be satisfied by a showing that defendant intended to mislead or defraud the government agency charged with federal meat inspection); Bradshaw, 840 F.2d 871 (11th Cir. 1988) (finding defendant could satisfy the specific intent requirement of the statute by showing that defendant intended to mislead or defraud state agency in charge permitting and licensing). Additionally, “similar governmental agency” is interpreted to include agencies of foreign governments. See United States v. Industrial Laboratories, 456 F.2d 908 (10th Cir. 1972) (finding that the specific intent requirement of the statute could be satisfied by a showing that defendants intended to mislead or defraud Canadian authorities).

2. Additional criminal and civil liabilities

In addition to violations of the FDCA, practitioners who import foreign pharmaceuticals can face a variety of other criminal penalties. For example, according to the Centers for Medicare and Medicaid Services fact sheet, Medicare will not pay for health care or supplies obtained outside the U.S., which includes prescription drugs imported from Canada. 42 U.S.C. § 1395y. As such, doctors could face criminal and civil liability for knowingly importing drugs in violation of the FDCA and submitting a claim to Medicare for the illegally imported drugs.

Such charges may include:

  • Health care fraud for defrauding or obtaining money from a health care benefit program. 18 U.S.C. § 1347. Notably, the doctor does not need to have actual knowledge or specific intent to violate this section. Violations of the health care fraud statute are punishable by fines or imprisonment of no more than 10 years, or both.
  • False claims for knowingly presenting a false claim for payment or approval to the government. 31 U.S.C. § 3729. Violations for false claims are punishable by civil penalty of not less than $5,000 and not more than $10,000.Further, healthcare practitioners could be subject to various fraud charges related to importing drugs from overseas. Such charges may include:
  • Mail and wire fraud for the use of mails or wire communications in furtherance of a scheme to defraud. See 18 U.S.C. § 1341; 18 U.S.C. § 1343.  Violations of the mail and wire fraud statutes are punishable by imprisonment of no more than 20 years, or fines, or both.
  • Bank fraud for obtaining money held by a financial institution through false representations pursuant to 18 U.S.C. § 1344. Violations of the bank fraud statute are punishable by no more than $1,000,000 or imprisonment of no more than 30 years, or both. Section 2B1.1 is the Federal Sentencing Guideline applicable to fraud perpetrated by individuals. Under this guideline, although the “victims loss is usually used as the proxy for the severity of thr crime, the offenders gain, i.e. the proceeds from the illicit activity, can provide an adequate, alternative method of gauging the crimes just penalty when the loss is incalculable. See United States v. Haas, 171 F.2d 259, 269, 270 (5th Cir. 1999) (finding that while “the loss sustained by either the FDA or Haass customers is, for all practical purposes, incalculablethe district court can, however, estimate the gain that Haas received from defrauding the FDA. Thus, Haass gain from his fraudulent importation scheme appears to have been the monies received [from his company] by way of salary and profits.”). Therefore, under the sentencing guideline, the more money involved in a fraud scheme involving  the sale or distribution of misbranded or adulterated drugs, the greater the potential sentence.
  • Smuggling or clandestinely introducing goods because of failure to comply with other statutes. 18 U.S.C. § 545. Violations are punishable by fines or imprisonment of no more than 30 years, or both.Healthcare practitioners must also be aware of the potential liabilities they face if they engage in the re-importation of drugs.
  • Drug re-importation involves exporting U.S. manufactured prescription drugs to a foreign country, then subsequently importing the same drug back into the U.S. by someone other than the U.S. manufacturer, and carries additional penalties under the FDCA. The  FDCA prohibits anyone other than the U.S. manufacturer of a drug to re-import the drug into the U.S. even if the drug was approved and manufactured in the U.S; 21 U.S.C. § 381 (d)(1).The FDA has found that, because it does not have oversight over other countries drug distribution systems, insufficient safeguards in foreign handling and shipping exist to prevent the introduction and retail sale of substandard, ineffective, or counterfeit drugs. 59 Fed. Reg. 11842 (March 14, 1994). Thus, products that are re-imported by anyone other than the manufacturer will be denied entry into the U.S. 21 U.S.C. § 381(d)(3)(B).If a business or individual knowingly violates 21 U.S.C. § 381 (d)(1) by causing prescription drugs manufactured in the U.S. to be re-imported by persons other than the manufacturer of the drug, they may be subject to criminal liability consisting of a maximum of 10 years in prison and a maximum $250,000 fine. 21 U.S.C. § 333(b)(1)(A).It is important to note that those who aid and abet in a criminal violation of the FDCA, or conspire to violate the FDCA, can also be found criminally liable. 18 U.S.C. §§ 2, 371. Thus, businesses or individuals that import drugs from foreign sources in violation of the FDCA could potentially be charged with these offenses as well.

3. Exclusion from participation in federal health care programs

In addition to criminal penalties, practitioners may also face various administrative penalties. For example, 42 U.S.C. §1320a-7b(a) empowers the Secretary of Health and Human Services to exclude certain convicted individuals from participation in any “Federal Health Care Program.” In particular, § 1320a-7(b)(1)(a) authorizes the Secretary to exclude individuals convicted of a criminal offense consisting of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service.

Additionally, § 1320a-7(b)(3) authorizes the Secretary to exclude any individual who has been convicted of a criminal offense consisting of a misdemeanor relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. See Friedman v. Sebelius, Case No. 11-5028 (D.C. Cir. July 27, 2012).  Further, “items and services furnished, ordered, or prescribed by [an excluded person] will not be reimbursed under Medicare, Medicaid and all other Federal health care programs until [that person] is reinstated by the OIG.” 42 C.F.R. § 1001.2. For more information regarding exclusion from federal health care programs under 42 U.S.C. § 1320a-7b, please see our previous report here.

Conclusion

Healthcare practitioners are in a never-ending struggle to control the costs of patient care, but must nevertheless ensure that the methods they choose comply with federal law. For more information regarding the importation of drugs from foreign sources, our FDA litigation practice, or how to ensure that your business maintains regulatory compliance, contact Fuerst Ittleman David & Joseph PL at (305) 350-5690 or contact@fidjlaw.com.