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The Origins of the Generic

Drug

Scandal and Proposed

Amendments

to

the Federal

Food,

Drug,

and Cosmetic

Act

BRUCE N.

KUHLIK,

ESQ

I. INTRODUCTION

Nineteen

eighty-nine was

not a good

year for

the Food

and

Drug

Ad-

ministration

FDA).

Revelations of

corruption

among a

few

of

its

employ-

ees and, apparently

on

a more widespread

basis,

within

the

generic drug

industry that

the

agency

had nurtured

precipitated a loss

of

confidence

and

the re-emergence of

active

congressional

oversight. FDA

officials

have

made important

internal

reforms,

and

expectations

are high

for recom-

mendations

that

ultimately will

be

made by the Department

of

Health

and

Human Services' (HHS )

blue

ribbon advisory

committee on

the

FDA.

In addition, however,

Congress

will be

considering

statutory

amendments

in response

to the

scandal.

Before

Congress

can intelligently

consider changes

in

the

law

to

prevent

such

a

scandal

from

recurring,

it needs

some

idea

of

what caused

it to

happen in

the first place. One

answer, of

course,

is that

there

were a few

bad actors

and

that

not

even

a

perfect

system can

stop people

who are

dedicated

to

breaking

the law.

That

is

true

as

far

as

it

goes,

and

it forms

the

basis

for

the

initial

proposals that have

been

suggested

by

the Admin-

istration

and Congress-that

is,

stiffer penalties,

such

as debarment,

to

deter

individual

wrongdoing.

This

focus on individual

misconduct,

however,

is

a fundamentally

flawed

explanation for

why the generic

drug

scandal

occurred.

The pro-

posals

for

additional

penalties

such as

debarment therefore

miss

the mark.

The real

problem

lies in

Congress' insistence

that

the FDA regulate

generic

drugs

on

an

entirely

different

basis

from pioneer

new drugs.

The

foundation

for

regulation of

pioneer products

is science.

Unfortunately

that

has

not been

the

case

for

generic drugs.

In

1984,

Congress established

* Mr.

uhlik

is

an

Associate

in the law

firm

of Covington

Burling, Washington,

D.C.,

and has

represented

the Pharmaceutical

Manufacturers Association

in the consideration

of

amendments

to

the

Federal

Food,

Drug,

and

Cosmetic

Act. An earlier

version

of

this

article was delivered at the

annual

meeting

of the

Law

Section

of

the

Pharmaceutical

Manufacturers Association,

Tucson,

Arizona

Mar.

14 1990).

1.

The

committee's

charter

is

to

examine

the mission,

responsibilities, and structure

of the

FDA

in

order

to

make

recommendations

on

how the

FDA can be strengthened

to benefit

the public

health.

54

Fed. Reg. 51,236 (Dec.

13

1989).

There

is a separate

Generic Drugs

Advisory

Commit-

tee

within the

FDA. ee

55 Fed.

Reg.

5838

(Feb.

20,

1990).

ee

generally

Benson,

mproving

the

enericDrug

Regulatory System 45

Foot

DRUG COSM. L.J.

207 1990);

Benson,

State

o the Food

and

Drug Administration

45 FooD

DRUG CosM.

L.J. 301

1990); and

Morrison,

verview

o Ge -

neric

Drug

Review

Process

and

Regulations

45

FooD

DRUG

COSM.

L.J.

219 1990).



FOOD DRUG COSMETIC

LAW JOURNAL

a system

to expedite

generic

drug approvals

that

was based

too

much

on

perceived

economics

and

too

little

on chemistry,

biology,

and medicine.

The

solution,

therefore,

is

not stiffer

penalties

but

better

science.

No

law can

prevent

every

instance

of

fraud

or misconduct,

but at

least Con-

gress

can give

the

FDA

the

regulatory

tools

it

needs

to do

its job.

If

the

agency

has

the

authority to

require

additional

information

about

a partic-

ular

drug

product

from

generic

applicants,

as

well

as

the

time

and

re-

sources

to

analyze

that

information,

everything

else

will fall

into

place.

II. THE

MIXED

MESSAGE

FROM

EXISTING

LAW

The message

that

is

being

sent

by Congress

to

the

FDA concerning

pioneer

drugs

is two-fold:

be

scientific

and

be

careful.

Be slow

if

you have

to,

but

do

not

make mistakes.

Require

whatever

scientific

and

medical

information

you

need

to

ensure

that

new

drugs

do

not

present

serious

and

unexpected

risks.

The

FDA s

broad

authority

to

acquire

the

information

it

needs

for

full

new

drug applications

(NDAs)

is

codified

in

the

statute

3

and

is an accepted

axiom

of

the

entire

approval

process.

The agency s

exercise

of

that

authority

contributes

to

the time

needed

for review

and

approval

of pioneer

products.

There

also

is

concern

over

the

drug lag

and

the

need

for

faster drug

approvals.

4

While

this

issue

has

taken on

increased

importance

for

the

FDA

over

the

last

few

years

in

light of

the

Acquired

Immunodeficiency

Syndrome

(AIDS)

crisis,

5

it has historically

been

a

comparatively

muted

counterpoint

to

the

main theme.

From the

agency s

viewpoint,

it

would

be

much

less

desirable

to

testify

at

an oversight

hearing

criticizing

the

FDA

for

approving

a new

drug that

turned

out

to be

associated

with

unex-

pected

numbers

of serious

adverse

events

than

it would

be to

testify

at a

hearing

on

the general

desirability

of speeding

up

drug

approvals.

The consequence

is that,

when

the

FDA

approves

pioneer

products,

it

is

scientific

and

it is

careful.

It

is

often

slow

as

well,

but

that

is

usually

viewed

by Congress

as

an

appropriate

price

to

pay

in

exchange

for

the

FDA s

efforts to

safeguard

the public

health.

The contrast

found

in Congress

message

on

generic

drugs

could

not be

more

profound.

Instead

of

science,

the main

criterion

has been

economics.

Instead

of being

careful,

the FDA

has

been

told

to

be fast.

2 See

e.g.

H.R. REP.

No.

511

98th

Cong.,

1st

Sess. 4-6,

8-14

1983).

3

See

Pub.

L.

No.

75-717,

§ 505 b) 1),

d),

52

Stat.

1040,

1052 1938),

as amended

21

U.S.C.

§ 355 b) 1),

d).

4. See

e.g.

COMPTROLLER

GENERAL

OF

THE UNITED

STATES

FDA

DRUG APPROVAL-A

LENGTHY

PROCESS

THAT DELAYS

THE

AVAILABILITY

OF

IMPORTANT

NEW

DRUGS

REPORT

TO

THE SUBCOMM.

ON

Sci.

RES.

AND

TECHNOLOGY

OF THE

HOUSE

COMM.

ON

SCI.

ND TECHNOL-

OGY (May

28,

1980).

5 See

e.g.

21

C.F.R. §

312.34

1989) treatment

IND ;

id § 312.80-.88

(drugs

for life-

threatening

diseases).

6

See e.g.

H.R.

REP.

No.

857,

98th

Cong.,

2d Sess.,

pt.

1

at 16-17

1984);

see also

id.

pt.

2

at 29-30

(supporting

patent

infringement

exemption

for

bioequivalence

testing on

ground

that

it will

Vol.

45



ORIGINS

OF

THE GENERI DRUG SC ND L

There is

one

outstanding example

of

this attitude in the statute. For

full NDAs,

the

FDA has authority

to require

the submission of

essen-

tially any

information bearing

on

whether

the

drug

is

safe

and

effective.

For abbreviated

new drug applications (ANDAs),

however, Congress re-

stricted

the FDA to a

brief

list of

information

such

as bioequivalence

data.'

Congress added

to

this restriction the

express limitation that the FDA

may

not

require

that

an

abbreviated

application

contain

[any

additional]

information. Moreover, the FDA has no

authority

to

refuse

to

approve

a generic

drug

on

grounds

of safety

or

effectiveness.

9

In other words, the

FDA cannot go beyond

bioequivalence data

even

if

it believes

that

a

ge-

neric drug is

not safe or effective, and it must approve

such a drug

once

bioequivalence

is

established.

This

is truly

remarkable. The agency

charged with

protecting

the

pub-

lic health

is expressly told by

Congress that it cannot ask for any

data or

studies other

than those

relating

to bioequivalence,

no

matter how directly

they

might relate

to the

safety

and

effectiveness

of a particular generic

drug. There is no

other modern regulatory statute

that limits an

agency's

authority

in

a manner that is so

directly at

odds with

its fundamental

mission.

III THE NEED FOR REFORM

A statute

that

places

blinders

on the FDA

and elevates economics above

science

is a recipe for disaster in

an area with such

important public

health

implications as

the

drug

approval

process.

In light

of

what Con-

gress had

said,

the

FDA had

every incentive

to get

the job

done

as quickly

as

possible,

to

get

generic drugs on

the market without the kind

of

scien-

tific

scrutiny

that

pioneer products

routinely get

and

all

drugs

deserve. In

this kind of

an environment, greed and corruption

were able to thrive.

The

thesis of

this article,

then,

is

that the generic

drug

scandal is not

simply the

product of

bad

people

but

of

bad law. The 1984

amendments,

and Congress' many signals

to

the

FDA

on

their implementation,

estab-

lished

a

system that

made

the scandal

perhaps not

inevitable, but,

in

ret-

rospect,

at

least probable.

Once Congress divorced the

drug

approval

pro-

cess from

its

scientific

foundation, and told the FDA simply to get the

drugs on the

market, it

can

hardly be surprised to learn

that the unscru-

pulous

took advantage

of

the system to get

their products approved faster

and by whatever

means possible.

The

answer to this problem is

not

stiffer

penalties.

There are numerous

prohibitions already in the law, ranging from

criminal statutes involving

expedite

generic

drug

approvals).

7 See

21

U S C

§

355 j) 2) A).

8 Id last

sentence).

9

See id

355 j) 3).

1990



FOOD DRUG

COSMETIC

LAW JOURN L

gratuities,

bribery,

and

false

statements

to the government,

0

to

provisions

in

the

Federal Food,

Drug,

and

Cosmetic

Act

authorizing

withdrawal

of

approval

if

an

applicant

makes

untrue

statements or

if

new

evidence

shows

that

a product

is not safe

and effective.

What

good

would

it

do

to

withdraw

approval

of a safe

and

effective

drug, or

debar

a

drug

company

from

obtaining

new

approvals?

Before

Congress

answers

that

question,

it

should

consider

whether

it would

be willing

to take a

safe and

effective

drug for

AIDS or

cancer

off

the

market

to penalize

a

company

with

an

employee

who

paid

an illegal

gratuity

This makes

no

sense

and

the pub-

lic would

not

stand

for it.

The

answer

is to reform

the

law

to

bring science

back

into

the generic

drug

approval

process.

2

The FDA

had

made several

attempts

to

bring

science

to

bear

in

its

regulation

of

generic

drugs

before

the

1984

amend-

ments.

In 1974,

for

example,

the

agency

adopted

strict

requirements

for

testing

and labeling

of

digoxin

drugs

in light

of

bioavailability

and

bioe-

quivalence

problems.

Beginning

in

1977,

the

FDA

published

eleven

proposed

regulations

es-

tablishing

detailed

bioequivalence

requirements

for

specific

drugs. '

These

monographs

represented

the

high-water

mark of

the

FDA's

attempt

to

ensure

that

bioequivalence

standards

were

based on sound

science in

light

of particular

factors

relevant

to

a specific

drug. An

attempt

to move

the

agency

back in

this

direction

was shown

in

recent

citizen petitions

asking

the

FDA

not

to

approve

generic versions

of nonsystemically

absorbed

drug

products

in

the absence

of appropriate

scientific

methodologies

to

measure

bioequivalence.'

5

In other

words,

the

FDA should

strictly

comply

with

the

statute, and

it

should

not

be

approving

generic

drugs

without

at least

making

a

reasoned

scientific

judgment

on the

appropriate

bioequivalence

standards

applicable

to

the specific

product.

But

Congress

did not

require

such a system

in 1984,

and

its

directives

to the

FDA

would have

made

it

virtually impossible

for

the

agency

to

implement

one even

if it

had

wanted

to.

That needs

to

change.

The ques-

tion

is

whether

it

will.

The illegal

conduct

that has come

to

light over

the

past

year-illegal

10. ee

8

U.S.C. §§

201,

1001

1982).

11 ee

2 U.S.C.

§

355 e) 2),

(3),

5).

12.

Congress

did,

of course, have

a strong

economic

motivation

for

establishing

a

system under

which generic

drugs

could

be

approved

without

the expensive

and

time-consuming

testing

necessary

for

pioneer

products.

No one seriously

suggests

that

the

1984

generic

drug

approval

process

should

be

abolished

because of the

abuses

that

have

come

to light.

Rather, the

question

is how that

process

can

be reformed

to permit the

FDA, where

appropriate,

to exercise

the same scientific

judgment

that

it

uses

in

all

other

areas

subject

to its jurisdiction.

13.

ee

21

C.F.R.

§ 310.500.

14.

The first

proposal

was

for

anticonvulsants,

42 Fed.

Reg.

39 675 Aug.

5

1977), and

the

last

was

for quinidine,

45

Fed.

Reg.

72,200

Oct.

31,

1980). The

FDA withdrew

these proposals

in

connection

with

its recent

proposed rules

implementing

the ANDA

provisions

of

the 1984

amend-

ments.

ee

54

Fed. Reg.

28 823

Uuly 10,

1989);

id

at

28 872

28,912.

15.

ee

FDA

Dkt.

Nos. 89P-0514

filed

Dec.

4,

1989)

and

89P-0514-2

filed

May

24, 1990).

Vol.

45



ORIGINS

OF

THE GENERI DRUG SCANDAL

payments

by generic companies to

FDA

employees and

phony

bioe-

quivalence

testing

comparing the

innovator

drug

to itself-is

familiar

now

not

only to industry but

to

the general

public. The scandal has made

headlines and

there

is

an indignant

clamor

to

do

something

about

it.

Both

the Administration and

Congress are

preparing proposed

amendments to

the Federal

Food,

Drug, and Cosmetic

Act in

response.

Hasty and dramatic legislative

reactions to widely publicized

events

are

nothing

new, of

course, particularly

when drugs are

involved.

Both

the

1938 Act

and the 1962

Drug Amendments

6

grew

out of true

public

health

tragedies caused by elixir

sulfanilamide

and

thalidomide,

respec-

tively.

7

Those statutory

enactments,

however, went far beyond

remedying

any

deficiencies in

the

law

directly related to

those events.

In

fact,

the

effectiveness

requirements that are

the

core of

the

1962

Amendments

have

nothing to

do

with the

issues raised by

thalidomide,

which

involved

safety

and

were

already

adequately

addressed in

the statute. Even

with

elixir

sulfanilamide, a similarly dangerous product

could

have

been

introduced

after passage

of

the

1938 Act without

notifying the FDA if an

unscrupu

lous

marketer had claimed

not-new drug status and

thereby

ignored

the

NDA

process.

These precedents, therefore, do

not

give much reason to hope

that

the

amendments

now

being considered

actually

will correct

the problems that

led to

the

generic drug scandal. As suggested

above,

merely

increasing

penalties

will

treat

only

the symptom

and

not

the

cause.

Truly

meaningful

reform should instead

direct

the

FDA, to regulate generic drugs

on a care-

ful,

scientific basis, just

as it does for

pioneer products.

If

Congress really

wants to

safeguard

the

public health, rather than simply

persuading con-

sumers that inexpensive generic

drugs

meet appropriate standards

of

safety, effectiveness, and quality,

then the

amendments

should focus on

science

rather than on superficial

and

counterproductive

changes such

as

harsher penalties and

debarment.

Congress should recognize

that

the

FDA

can best

protect the public

health

by

regulating

generic

drugs

scientifically

and

on

the

basis

of bioe-

quivalence standards that

are

carefully considered and

tailored

to the par-

ticular requirements of

individual

drug

products, and the

needs of

the pa-

tients

taking

those products.

d

hoc, seat-of-the-pants standards

are

simply not good

enough.

Additional

enforcement tools

and penalties may

be appropriate

as

well,

but only in

the

context

of

other reforms, not

merely

as a quick

fix that ignores

the real

cause

of

the

scandal.

At

a

minimum, Congress should repeal the

limitation

on

the

FDA s authority

to ask

for

additional information in

an

ANDA

and direct the

agency

not

16 Pub. L No. 87-781, 76

Stat. 780 1962).

17 See,

e.g.,

Jurow, The Legislative Picture

or

the Drug

Industry

r Sulfanilamnide Revis-

ited,

18

FOOD DRUG

COSM. L.J. 97 1963),

1990



FOOD

DRUG COSMETIC

LAW JOURNAL

to approve

such

an application if

the

drug product is

not safe

and

effective.

IV.

OTHER

PROPOSED AMENDMENTS

The proposals

that

have

already been

circulated

by the

Administration

and

Congress, and other

proposals

that may

be expected,

take a

different

approach.

Instead

of

modifying

the

basic

regulatory

process,

they would

strengthen

the enforcement

mechanisms.

Layering

increased

penalties on

an inadequate

foundation

is

no solution

for

the

reasons

already

discussed.

It is worth going

into a

little more

detail

to

elaborate

on this conclusion

in

the

context of some

of the

proposals

elements

that

will be

considered by

Congress

this

year.

8

With

respect to

additional

penalties, one

possibility

is

to

amend

the

Federal

Food,

Drug,

and Cosmetic Act

to make

giving a bribe

or

gratuity

to an

FDA

employee

a

prohibited act

under

section

301. This

might

be

of

some use,

but any

provision

would have to be

carefully

drafted to

ensure

that

appropriate

mens

rea

standards for these

crimes as

set

forth

in

title

18

of the

United

States Code

are

retained.

Proposals

from the

1970s to

add civil

penalty

authority to

the

statute

also have

been

resurrected.

It would

be

a mistake

to give

the

FDA

the

authority not only to interpret

the

statute, but also to

impose fines for

violations

of its

interpretation.

This

is

especially

true

if it

is

suggested

that

civil

penalties

be imposed on

a

strict

liability

basis. A

less radical

ap-

proach

would

be to

vest civil

penalty authority

in

the

courts,

which

raises

comparatively

fewer

concerns.

9

To give

the FDA this

authority,

however,

would

fundamentally

restructure the agency in

ways that

go

far beyond

anything needed

to

respond-to

the generic

drug scandal,

and

we

could

have no

confidence

that

such

changes

actually would

work

for

the

better.

Civil penalties also

would

be objectionable

without amending

the ex-

isting

criminal

provisions

of the Act.

20

As interpreted

in United

States v.

ark

and

United

States v. Dotterweich

22

those

provisions

subject

per-

sons to

liability

without

the

kind

of

showing

of

fault

that

is

usually

re-

quired before criminal

sanctions

are

imposed.

Statutes that

provide for

18.

As

this

article

was

going to

press,

Representative

John

D. Dingell D-Mich.)

introduced

H.R.

4810, the Emergency

Food

and

Drug

Enforcement Act of

1990,

which includes

many

of

the

proposals discussed

in the text (but

is thus far

limited

to

ANDAs

and would

have little

application

to

NDAs).

An

Administration bill,

S

2683, the Food,

Drug,

and Device

Fraud and Abuse Prevention

Act

of

1990,

also

was introduced

recently,

by request,

by

Senator Orrin

G. Hatch

R-Utah);

other

bills

are

expected.

19. For

example, the

Prescription Drug Marketing

Act

amended the

Federal Food,

Drug,

and

Cosmetic Act

to provide

for

civil

penalties

in

some

circumstances,

but

those

penalties

are imposed

by

the courts,

not by the

FDA.

ee

21 U.S.C. § 333(b)(2),

3).

20.

ee

21 U.S.C.

§

333(a). ee

also id § 333(b)(1)

(criminal

penalties

for violation of drug

sampling

provisions).

21

421 U.S. 658 (1975).

22. 320

U.S.

277 (1943).

Vol.

5



ORIGINS

OF

THE GENERI

DRUG SC ND L

both

criminal and civil

penalties generally require

a higher

m ns rea stan-

dard

for

criminal liability

than presently exists

under

the

Act.1

3

It would

make little sense

to retain the

ark

doctrine

for criminal

liability when

civil

penalty liability

also

would

be

available.

Thus,

if

civil

penalties

are

to be added to

the statute,

they

should

be accompanied by

an amendment

overruling ark and

requiring

a higher showing

of

culpability

for

crimi-

nal liability.

Another

proposal, which

has been made before, is

to give the FDA the

authority

to

order

recalls

for

drug products.

Whatever position

is taken on

this issue, it

would

be

crucial that

adequate opportunity for

a

prior

hear-

ing

be

part of

any

proposal.

2 '

It is

an open

question

whether the

agency

would

view

such

a procedure

as giving

it

greater authority,

as a practical

matter, than

what it already exercises on

a much less formal

basis.

Debarment appears

to be

central

to

the proposed reforms. Some form

of

debarment of individuals convicted

of wrongdoing

might

be appropriate,

and a review of

the

safety

and

effectiveness of

specific

products whose

approval

was associated

with illegal

payments or similar

misconduct also

should

be

accomplished.

But

broader debarment proposals-including

withdrawal or suspension of

drug approvals-would

in general

do little

more than

satisfy

a sense

of

outrage by imposing

draconian

punish-

ments,

2

and

would

harm

the

public by

leading

to

the removal of

safe and

effective

therapies

from

the market. We

ought to be outraged

at what has

taken

place,

but that

anger should

be focused

more intelligently

on

reform

of

the approval

process

rather

than

misdirected

in such

a

fundamental

manner.

Proposed legislation

also would

give the Inspector

General IG) a

broader role in

investigating violations

of

the Act, similar

to what was

contemplated under

the HHS delegation that

was rescinded in

December

1989.

Such legislation

would be

a

mistake not only from

the

FDA s point

of view,

but from the

IG s as

well.

The

FDA

deserves

to continue its

role

as the

agency

responsible

for

enforcement of

the Act, in

cooperation

with

the Department

of Justice

and

United

States attorneys.

The IG should

concentrate

on

illegal conduct

by

government

employees

and recipients

of

federal funds.

The

IG

would

lose his

necessary

independence if that

office

became

involved in directly

regulating industry

through enforcement

ac-

tions under the

Act.

It does

not

make any

sense

to

separate enforcement

of

the

Act from the

23.

See e.g.

2

U.S.C.

§

841(a),

b) (criminal

penalties for

knowing or

intentional

violations of

the Controlled

Substances Act);

id.

842(c)(1)

(civil penalties).

24.

See id. §

360h(b)(l)(A) (informal hearing requirement

prior to

repair,

replacement,

or re-

fund order

with respect

to

medical

devices); id. § 32

1

y)

(definition of

informal hearing );

2

C.F.R.

pt.

6 (regulatory

hearing

procedures).

25

Existing

debarment

provisions,

such

as

those

pertaining

to government

contractors

and

recip-

ients of

federal benefits,

expressly provide

that debarment cannot

be imposed for purposes

of punish-

ment.

E.g.

45

C.F.R.

§ 76.115(b) (1989);

48

C.F.R.

§

9.402 b)

(1989).

1990



FOO RUG

COSMETIC LAW JOURN L

agency

that is responsible

for implementing the

statute s

regulatory

poli-

cies.

Industry can better understand what is expected and the law can

be

enforced

more

efficiently if

there is

one

regulatory

and enforcement

agency.

That

agency

has been

and should

continue

to be

the

FDA.

Many

other amendments may

be proposed. Obviously funding is

an

important

issue and

user fees

continue

to

be discussed. On the

more posi-

tive side

there

may

be an opportunity to correct

some

of the technical

deficiencies in

the

1984

amendments. In addition many improvements

could be adopted

by the FDA through

regulation or

less

formal

means

without the

need

for any legislation.

It

would be

useful for the FDA to

continue the

steps

it already has taken in this direction and

to

discourage

Congress

from tying its hands with legislation that

attempts

to

micro-

manage the

agency.

V. CONCLUSION

The

debate

over

proposals

to

amend the Federal Food Drug and Cos-

metic

Act

must

take into

account

the

causes of the generic

drug

scandal. It

is

not enough to add

new

penalties

without reforming

the

system that

provided

too many incentives and

opportunities for fraud.

Congress should

give the FDA the

authority

it needs

to

regulate generic

drugs with the

same regard for science that the agency pays to

pioneer drugs. Only

in

this

way can the public health

truly

be

served.

Vol 45

45fooddrugcosmlj385

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