Brown Pill PileAttorneys at the U.S. Food and Drug Administration (“FDA”) have denied a petition from a former treasurer and president of generic pharmaceutical manufacturer Alra Laboratories to overturn his ten-year debarment. Under federal law, the FDA has the power to bar certain individuals convicted of violating the Federal Food, Drug, and Cosmetic Act (“FDCA”) from employment in the pharmaceutical industry; debarment is typically reserved for the most flagrant felony violations of the statute, such as submitting false data to the FDA, lying to FDA investigators, paying or accepting bribes, and selling prescription drug samples.

The executive, Baldev Raj Bhutani, was the head of Alra, a company that earned a reputation in the 1990s for a spate of manufacturing violations. Alra was also infamous for its failure to comply with federal record keeping and reporting requirements attending the manufacture of opioid painkillers. Among the company’s most egregious practices was exposed by the FDA in 1991, when regulators testified before Congress that the company had manufactured adulterated products in violation of U.S. law concerning good manufacturing practices. Allegations included claims that a steel wool pad and miscellaneous tools had been found ground into Alra medicines which were subsequently distributed to the U.S. military and the public for consumption; as well, insects were found inside the company’s mixing rooms. Executives may incur vicarious criminal liability for the illegal practices of their corporations, particularly in the pharmaceutical context. In 1996, Mr. Bhutani pled guilty to one count of conspiracy and six counts of violating the FDCA, and in 2004 the FDA debarred Bhutani from providing services to any company with an approval pending with the FDA (in other words, any pharmaceutical or medical device manufacturer).

In 2010, Bhutani sought to have his debarment reversed under Section 306(d)(4) of the FDCA, which sets forth three criteria which the FDA must consider when adjudicating a petition for reversal of debarment: the person was a key witness or provided key information in an investigation into a quality issue; the reversal would not endanger the public health; or, if the debarment was unjust. The FDA rejected Bhutani’s request, and furthermore indicated that debarments resulting from felony convictions could only be reversed if (1) the convictions were overturned or (2) the individual provided substantial assistance in connection with the investigation leading to his or her conviction. The text of the FDCA does not elucidate the meaning of “substantial assistance,” leaving the FDA to elaborate the meaning through agency rulemaking. The FDA relies upon the Department of Justice (“DOJ”)’s opinion that a debarred individual was cooperative, or alternatively, that the FDA sought lenient sentencing for the individual. Bhutani was unable to show that the DOJ had evinced the understanding that Bhutani was particularly cooperative.

The most frequent DOJ prosecutions under the FDCA involve allegations of “off-label” promotion of pharmaceuticals. Under the Act, it is unlawful for pharmaceutical companies to market or promote drugs for uses unapproved by the FDA. Private whistleblowers, known as relators, may file suit under the qui tam (whistleblower) provisions of a federal statute called the False Claims Act. The False Claims Act imposes liability on individuals or corporations who submit false claims for payment to the government, including federal health programs such as Medicare or Medicaid. Pharmaceutical companies who engage in off-label promotion, causing physicians to prescribe medications for off-label uses and thus leading Medicare or Medicaid to reimburse for the cost of the prescriptions, violate the False Claims Act. Off-label promotion claims have resulted in billions of dollars in recoveries for the United States in the year 2012 alone.

Qui tam relators are required to disclose their complaint and material evidence to the government, which then investigates the alleged conduct and may exercise its right to intervene in the lawsuit. Even if the government does not intervene, relators may proceed with their claims. In cases where the government declines to intervene, relators are best-served by private attorneys who are intimately familiar with the procedural hurdles involved in prosecuting qui tam suits and have the ability to steer litigation through what is often a process spanning several years. Victorious relators may recover between 15% and 30% of any final judgment or settlement, and violators face treble damages along with up to $11,000 in civil penalties per violation.


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