Part 2: Department of Justice Consumer Protection Branch Doubles in Size to Battle Fraud and Deception in the Drug and Dietary Supplement Industries

At the Food and Drug Law Institute (FDLI) Enforcement, Litigation, and Compliance Conference held in Washington, DC in December 2019, Deputy Assistant Attorney General for the Department of Justice (DOJ)’s Consumer Protection Branch (CPB) David Morrell reviewed highlights of the CPB’s enforcement work from 2019 and discussed how that work portends future action.

In Part 1, we covered David Morrell’s comments on dietary supplements and the prescription opioid crisis. If you missed the first part, click here to read.

We continue here with his comments on:

• Attempts to deceive FDA: prosecuted
• Compounding pharmacies
• Investigations into injuries and deaths from vaping
• New tools for law enforcement
• The importance of company compliance programs

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Attempts to Deceive FDA: Prosecuted

“One of the most important cornerstones of our regulatory relationship with FDA is the guarantee that we will vigorously pursue those who interfere with FDA’s mission of evaluating, approving, and regulating drugs and medical devices,” the Deputy Assistant Attorney General maintained.  “These kinds of actions traditionally have included failure-to-report violations, interference with FDA, any number of misbranding offenses, false and misleading claims, and the misuse of manipulated or selectively chosen data. These actions all create a substantial risk of consumer harm.”

In May 2019, an individual named Hisao Yabe was sentenced for his failure to report information to FDA that called into question the safety of a medical scope manufactured by his employer, Olympus Medical Systems Corporation. Yabe was formerly the top regulatory official at the Japanese company, which also was convicted and ordered to pay $85 million in criminal fines and forfeiture.

Yabe’s and Olympus’s convictions specifically concerned their failure to file required adverse event reports involving patient infections in the U.S. and Europe connected to duodenoscopes the company manufactured, and to continue to sell the devices in the United States despite those failures.

In June 2019, ACell Inc., a Maryland-based medical device manufacturer, similarly pleaded guilty to one misdemeanor count of failure and refusal to report a medical device removal to the FDA. In pleading guilty, ACell admitted that it failed to report that more than 30,000 of its MicroMatrix devices were contaminated with high levels of endotoxin, which posed a risk to patient health.

ACell also admitted that it initiated the removal of those devices from sales representative inventories, hospitals, and other healthcare centers, but did not notify FDA of the removal or of the endotoxin contamination. ACell further admitted that it did not notify doctors who already had purchased or used contaminated MicroMatrix devices about the removal.

“Such actions interfere with FDA’s essential functions,” Morrell said, “and put patients at risk and end up costing the responsible executives and companies far more in the long run than they save in the short term. The actions also were all caused by failures of corporate compliance programs.”

Compounding Pharmacies Continue to Have Issues

Compounding pharmacies are a sector of the drug industry that has long been an area of concern for both FDA and CPB. The CPB and its partners have a long history of successful enforcement against problematic compounding pharmacies—and 2019 was no different.

CPB primarily looks at facilities that put patients at risk through repeated violations of the “unsanitary conditions” provisions under section 351 of the FDCA. Such conditions may include circumstances under which contamination or injury may occur, “but neither we nor FDA will wait until harm does occur to act. Compounders who don’t take their mission seriously, especially those making sterile injectable products, should thus not be surprised when FDA and CPB visit them with an inspection, an injunction, or a grand jury subpoena,” Morrell said.

His actions led to several infants nearly dying after being injected with 2000x super-potent morphine—and he is now in jail.

Two actions in 2019 show the breadth and depth of CPB’s commitment in this area.  In the first, CPB obtained a consent decree of permanent injunction against the massive outsourcing compounding pharmacy PharMedium, along with two of its executives, to stop its manufacturing, holding, and distribution of drugs from its Tennessee facility until remedial measures are taken.

The complaint alleged that PharMedium’s drugs were adulterated because of unsanitary conditions and because PharMedium failed to comply with CGMPs. The FDA conducted multiple inspections at PharMedium’s corporate headquarters and outsourcing facilities between 2013 and 2018 that resulted in a 2018 warning letter for unsanitary conditions and other violations of the FD&C Act.

In the second action, CPB secured the conviction of Paul Elmer, who operated a drug compounding pharmacy called Pharmakon in Noblesville, Indiana. Trial evidence showed that Pharmakon routinely shipped sterile, intravenous drugs to hospitals without having received laboratory test results to verify that the drugs matched their stated strengths.

Evidence also showed that, despite later receiving laboratory test results showing potency failures, Elmer did not recall over or under-potent drugs; notify the FDA of the potency failures; or conduct any investigation to determine the cause of the potency failures. “His actions led to several infants nearly dying after being injected with 2000x super-potent morphine—and he is now in jail,” Morrell said.

Injuries and Deaths from Vaping Prompt Investigations

The outbreak of severe lung injuries related to vaping products has led to a national health crisis that threatens Americans, including many younger Americans. To date, the CDC has reported 2,051 injuries and 39 deaths related to vaping products. 

“While the CDC and FDA continue to investigate the cause of the outbreak as a public health issue, they have raised a particular concern about vaping products containing THC,” Morrell pointed out. THC (tetrahydrocannabinol) is the principal psychoactive constituent of cannabis. “In line with that concern, CPB and a bevy of law enforcement partners are advancing actions across the country concerning the importation, distribution, and sale of counterfeit, misbranded, and adulterated THC vaping products and paraphernalia.”

Morrell explained that the actions that have been taken are already producing results, with an indictment secured in December 2019 in Dallas and numerous search warrants executed “that promise to help us stop individuals who are selling poison dressed up as a carefree product. More work here will continue.”

In addition, CPB will be prepared to take appropriate action against adulterated and misbranded electronic nicotine delivery system products, and to defend the FDA’s efforts to halt the rise in harmful teen vaping, he said.

New Tools Enable Proactive Behaviors

“Law enforcement is undergoing a transformation,” Morrell maintained.  “For the first time ever, we are consistently able to advance enforcement initiatives proactively, rather than just reacting to whatever leads may come our way.”

He explained that the ability to analyze large subsets of data and documents has made this possible. Instead of agents conducting investigations based on leads and then bringing whatever cases they may develop to a prosecutor, CPB is able to have agents and prosecutors work in tandem at the outset to spot outliers and significant subjects for investigation.

Combining data from Customs, FDA, DEA, Centers for Medicare and Medicaid Services, Social Security Administration, DoD, Federal Trade Commission, “and the rest of the alphabet agencies” makes this possible, Morrell explained, “in conjunction with sophisticated analytical tools. The Consumer Protection Branch is at the cutting edge of the effort to initiate and develop investigations intelligently through data analytics.”

He emphasized that as new tools improve the Branch’s ability to select and advance investigations that involve the greatest elements of consumer harm and deception, it is also seeking to exercise enforcement discretion more robustly to avoid matters that lack those elements. 

In addition, it is now utilizing a greater range of options in seeking appropriate resolutions. “In some instances—like the non-prosecution agreement reached with Reckitt Benckiser Group—this means accepting unique resolution terms; in others, it can mean using a civil remedy over a criminal remedy or talking first and threatening suit second.”

Morrell explained that CPB’s pioneering use of civil injunctions in the CSA space is an example of this in action. “We are able with those injunctions to take quick action to achieve the primary goal of stopping overdose deaths without prejudicing our ability to later use a criminal tool for other ends.  Our belief is that reasonable employment of such enforcement approaches makes us more credible, efficient, and effective.”

He continued, “In addition to being smarter in our enforcement of priority initiatives, we also are aiming to be consistent and adherent to basic rule-of-law principles. The October 2019 Executive Orders on agency guidance and enforcement are helpful to that effort. The Executive Orders are designed to prevent unfair surprise and to ensure that agency guidance does not become a back-door means of regulation.”

“Violations of law should be based on statutes and regulations enacted with proper notice and comment. As President Trump noted when issuing the Executive Orders, however, many federal agencies have issued thousands of guidance documents. And instead of serving their intended purpose—guidance—the documents often morph into requirements used to assign liability.”

The DOJ’s long-standing policy has been to bring enforcement litigation only for violations of federal statutes and their attending regulations. Nothing there has changed, and the department may still take enforcement action consistent with agency policy statements—including FDA’s Compliance Policy Guidelines—so long as those statements are not the sole basis for enforcement and are firmly based in a statute or regulation.

The Importance of Company Compliance Programs

Morrell emphasized the importance of companies that are regulated by FDA having programs that help ensure their compliance with regulations and agency expectations. “A good compliance program can keep a company out of trouble and help make a resolution possible if it nevertheless finds itself there,” he said.

It should be a helpful motivator to take compliance seriously and realize that a call from you to us is better than a call from us to you

He commented that the guiding principles in FDA-regulated industries “are founded on the notion that more than just profits are at stake. Our stock in trade is human health, safety, and welfare, and so the FDCA in many ways should make us more adept at crafting and adhering to compliance policies. At the same time, because of this background, the need and expectation for a compliance program are also greater in the FDCA context, where, as I mentioned, voluntary compliance with the law is essential.”

Morrell explained that for purposes of consistency within the department—“and because it makes good sense”—the CPB follows the same principles as the department’s Criminal Division in assessing compliance programs for charging and resolution purposes. Key to those principles is the idea that companies can expect the department to decline to prosecute if they report wrongdoing in a timely manner, cooperate fully, and remediate adequately.

He explained that “the idea requires a fact-specific analysis of each case, and it offers benefit only if a company has enough of a compliance system to identify and report a problem in the first place. But it should be a helpful motivator to take compliance seriously and realize that a call from you to us is better than a call from us to you.”

David Morrell is Deputy Assistant Attorney General for the Consumer Protection Branch at the United States Department of Justice. Before joining DOJ, he worked in the White House Counsel’s office where he served as Associate Counsel and Special Assistant to the President. There, Mr. Morrell advised senior White House officials on a range of topics, collaborated on legal issues with agencies throughout the Executive Branch, and worked extensively with the Department of Justice including on significant litigation matters. Prior to joining the White House, Mr. Morrell was in private practice at Jones Day and he clerked on the U.S. Court of Appeals for the 5th Circuit for then Chief Judge Edith Jones, and on the U.S. Supreme Court for Justice Clarence Thomas. He graduated from Yale Law School and from Hillsdale College.

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