Does FDA Need Its Strong-Arm Enforcers?

James G. Dickinson

July 1, 1998

10 Min Read
Does FDA Need Its Strong-Arm Enforcers?

Medical Device & Diagnostic Industry Magazine
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An MD&DI July 1998 Column


James G. Dickinson

As Capitol Hill listened in April to detailed horror stories concerning the Internal Revenue Service's strong-arm tactics, FDA's equivalent was coming to light off-camera.

The drama involved the agency's six-year-old Office of Criminal Investigations (OCI), U.S. Customs, and a small, family-owned diagnostics distributor, Troy Biologicals, Inc. (Troy, MI). The distributor's employees were placed under a form of house arrest by 10 armed agents for 6 hours for a crime they never committed. The federal court seizure warrant was based on misinformation from trade competitors.

Between this case and FDA's actions against Myo-tronics (Tukwila, WA), a small manufacturer of dental monitors, it seems FDA shares with the IRS a preference for targeting small, family-owned firms that may be more easily cowed and less able to resist than larger firms.

Both Myo-tronics ("A Troubled Affair," MD&DI, January 1998) and Troy Biologicals, however, had proportionately more at stake than some larger and better-equipped companies—and they fought back with surprising vigor and ultimate success.

Troy's eight-month ordeal began at 9:10 a.m. on Thursday, August 1, 1996. An armed force of seven customs officers and three OCI agents entered the company's building on Rankin Street, herded its 25 employees into the lunchroom, and detained them there.

When the federal officers left, they took with them 12 boxes of company documents and 785 boxes—about $25,000 worth—of Canadian-labeled urine test strips, which FDA returned 10 months later. The test strips sell in Canada for about 30% less than in the United States. Troy was purchasing them from Canada for resale in the United States.

In keeping with federal investigators' standard operating procedures, those under house arrest were not told why such extreme measures were taken, nor the nature of the evidence against the firm. All of this was hidden in a sealed affidavit that was not released to Troy until more than four months after the raid.

The affidavit, by Detroit customs investigator Timothy W. Bethel, described allegations by Bayer Diagnostics (Tarrytown, NY), relayed through U.S. customs in New York, "involving the sale of merchandise after importation, knowing the same to have been imported or brought into the United States contrary to law." Citing information given to Bayer Diagnostics by an alleged former employee of Troy, the affidavit asserted that "the importation and sale of metric urine test strips are not approved by the Food and Drug Administration and are violations of federal law."

The informant claimed that Bayer Canadian Multistix test strips were being "concealed in legitimate shipments of merchandise Troy Biologicals Inc. was importing from Canada" through the ports of Port Huron and Detroit "on the weekends."

Three weeks after these allegations were made, according to the affidavit, customs agent Reilly Dundon and OCI special agent Jacques Marevic interviewed Bayer Diagnostics director of corporate accounts and distribution Thomas Hens. Hens said the company's Multistix products were labeled differently for Canada and the United States. He claimed the Canadian metric calibrations were "not approved by the Food and Drug Administration for use in the United States," and the Canadian labels did not bear "the appropriate FDA code which identifies the product as an approved medical device."

Hens also provided the federal agents with copies of Troy's marketing materials offering the Canadian-labeled Bayer products for sale in the United States.

Two months after that, on July 9, 1996, OCI agent Greg Aspinwall told the Detroit customs office that Troy was also selling Boehringer Mannheim Corp. (Indianapolis) Chemstrip urinalysis test strips that were "packaged and labeled for sale in Canada only" and that did not comply with FDA labeling requirements.

Bethel's affidavit said he had been given a copy of a certified letter that Boehringer Mannheim had sent eight months earlier to Troy. The letter warned the company that its sales of Canadian-labeled Chemstrips "are illegal" because products with FDA-unapproved labeling are considered "adulterated and the sale of such products is subject to civil and/or criminal sanctions." The letter demanded "that you immediately cease selling products not packaged for sale in the U.S."

The affidavit gave Troy its first hint that Boehringer Mannheim and Bayer Diagnostics had instigated the August 1 raid. It also provided the company's Washington, DC, attorneys, Larry Pilot, Mark Flanagan, and Mark Shonkwiler enough proof of misinformation to raise a powerful federal court argument for the return of all the seized property. A search warrant based on "material errors of fact and law" is rendered unlawful.

In a 36-page memorandum to the U.S. District Court for the Eastern District of Michigan, the attorneys charged that the raid on their client was "a thinly disguised effort to stop the unwanted price competition" from Troy.

They pointed out that the Canadian-labeled test strips bore U.S. metric calibrations right next to the Canadian metric calibrations and that urinalysis test strips have such a low regulatory priority and such technical simplicity that FDA does not preclear their labeling. In addition, no law requires an FDA approval code on test strips sold in the United States. None of the Canadian products were labeled "for sale in Canada only," and it is not illegal to sell nonviolative Canadian products in the United States, regardless of their manufacturers' marketing intentions.

Bethel, the lawyers' memorandum said, "would have discovered the erroneous nature of these statements if he had not recklessly failed to make even the most rudimentary attempt to verify or to confirm the information by examining a copy of the urine dipstick Canadian labeling."

The memorandum was apparently enough to convince the government that it had blundered. On May 15–16, 1997, Detroit assistant U.S. attorney Jorin G. Rubin and attorney Flanagan signed a five-page agreement in which the government promised not to prosecute or take related regulatory action against Troy and to return the seized property. As is typical in such government embarrassments, FDA declined to admit it was wrong. Rubin conditioned the agreement on Troy sending the returned products back to Canada for disposal. The company says it agreed in the belief that FDA would take action against competitors selling the same Canadian strips.

Therein lies the rub. Nearly two full years after FDA coerced Troy's exit from the U.S. market for Canadian-labeled urine test strips, Troy's competitors continued to advertise the same products, even on the Internet. Troy president Robert Ricketts says he has, since the day of the raid, often given FDA lists of competitors still selling Canadian-labeled urine test strips, only to notice no change.

Letters and phone calls to FDA's Center for Devices and Radiological Health produced no response until this March, when Pilot wrote CDRH Office of Compliance In Vitro Diagnostics Branch chief Betty Collins to tell her that Troy had decided to resume distribution of the Canadian-labeled products.

That did the trick. Four days later Collins wrote back, sternly warning Pilot that if Troy did resume such sales, it would be "at their own risk" because FDA continued to regard the products as misbranded, due to their potential to confuse U.S. users unfamiliar with the Canadian metric calibrations.

On April 2, Pilot responded to Collins, saying his client would not market the products after all. He then criticized FDA's failure to address the violations by Troy's competitors. Collins's letter, Pilot wrote, made it clear that FDA "accepts distribution and use of devices that the FDA considers to be misbranded and has no intention to penalize those who it views as having violated the Food, Drug, and Cosmetic Act." The letter "does nothing to inspire confidence that the FDA will" enforce the law fairly and equitably, he added.

Repeated calls by this writer to Collins and her boss, CDRH compliance director Lillian Gill, were ignored. Calls to the commissioner-level FDA press office produced a terse, relayed message from the center to the effect that OCI was no longer involved in the Canadian-labeled test strips matter because it had been determined that smuggling was not involved, and CDRH is examining the matter on an industrywide, rather than company-by-company, basis. Period.

These are all hallmarks of an acutely embarrassed FDA. Only rarely does FDA admit that it has messed up. The only examples that come to mind are the generic drug scandal in the late 1980s—it took months of humiliation on Capitol Hill to bring agency candor to that matter—and the Myo-tronics affair, when, after years of denial mixed with public silence, Office of Device Evaluation director Susan Alpert, to her great credit, disclosed that all of her staff were being officially acquainted with the details of the case as an example of what not to do. That management technique is akin to the instructive embarrassment that FDA frequently brings to errant companies when it directs them to provide copies of a warning letter to all affected personnel.

Later in April, Troy's persistence paid off a second time. FDA finally issued warnings to nine of Troy's competitors, who were told that the Canadian-labeled test strips were misbranded.

OCI's role in the Troy Biologicals case is being examined by Congressman Joe Barton's (R–TX) House commerce subcommittee on oversight and investigations. A central question for Barton will be whether OCI has sufficient justification to exist at all. When former FDA commissioner David Kessler created OCI in 1992, it was not for the most laudable reasons—it was primarily to save face in the wake of a cascade of embarrassments after the generic drug scandal.

In the aftermath of that scandal, Barton's predecessor, John Dingell, frequently taunted the agency over missteps in its investigation of criminal activities. He also alluded to the likelihood of similar scandals in the regulation of devices.

The HHS Inspector General's Office indicated that it would be happy to take over all of FDA's criminal investigation work. This idea was supported by Dingell staffmember David Nelson, who broke the generic drug scandal in the first place and who continued to exploit every weakness he could find in the agency.

Kessler's countermove was to recruit an elite team of 100 highly trained criminal investigators, strategically located throughout the United States and working closely with U.S. district attorneys. Kessler hired a top Secret Service agent, Terry Vermilion, to head up the team.

Regulated industry became nervous. Kessler had rapidly built a national reputation as a fearless and aggressive enforcer—did this herald the beginning of a strong-arm approach by FDA, in which gun-wielding superagents would be breaking down the doors of regulated industry?

Kessler went to some pains to assure industry that this was not what he had in mind. OCI's focus would be limited to such things as fraud, counterfeiting, product tampering, and violations of the Prescription Drug Marketing Act.

Nature, it is said, abhors a vacuum. And so, apparently, does OCI, which does not seem to have had enough of the heavy-duty, hard-core crime foreseen by Kessler to keep its 100 agents busy.

In the six years of its existence, OCI has quietly obtained official exclusion from the "government in the sunshine" standards that open other FDA offices to routine public scrutiny. OCI does not publish an annual report—although other offices do—and has acquired all the rights and privileges of regular FDA inspectors to go into regulated companies at will, even though its agents, for the most part, lack the special training that regular inspectors have had.

In response to a Freedom of Information Act request this writer submitted last year, this April OCI provided a broad breakdown of its activities for fiscal years 1995, 1996, and 1997. The office netted $29.3 million in fines to fatten the U.S. Treasury (not FDA) and $10.1 million in product forfeitures. It opened 655 investigations in the three years, 349 of which remained open as of last October 1 (a caseload of 3.5 per investigator). Of all the investigations opened in that time, 99 had to do with the Prescription Drug Marketing Act (mainly abuse of physicians' drug samples and violations by drug wholesalers) and 127 had to do with product tampering. The remaining 429 were not described, although OCI's letter said 158 individuals and companies were convicted on Title 18 (U.S. Criminal Code) violations. Presumably the discrepancy covers cases not yet closed, although that number (429) is greater than the total 349 that were recorded as remaining open as of the start of this fiscal year.

This discrepancy is consistent with the carelessness shown in OCI's preparation of the case against Troy Biologicals. Together, the events show that there must be more accountability and openness from OCI's management.

Copyright ©1998 Medical Device & Diagnostic Industry

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