On April 17, 2013, Dr. David A. Moon was held up at a TSA checkpoint at a Las Vegas airport. Law enforcement officers stopped the physician—the holder of DEA registrations in Tulsa, Oklahoma, and Las Vegas, Nevada—carrying an unregistered firearm, and found in his carry-on luggage drugs in pill bottles labeled for other individuals, drugs in unlabeled pill bottles, and other loose drugs. The physician was placed under arrest, and a subsequent DEA investigation ensued.
On December 8, 2015, DEA issued an order to show cause (OSC) alleging that the physician (1) possessed controlled substances with intent to redistribute them to individuals for whom they were not originally dispensed, (2) accepted controlled substances from patients (i.e., non-DEA registered sources) and redistributed them to other patients, (3) failed to conduct a biennial inventory, (4) had shortages of controlled substances and was missing purchase records, and (5) issued prescriptions in Nevada under his Oklahoma license. On top of that, DEA alleged that both Oklahoma and Nevada’s medical boards had revoked his state license to handle controlled substance.
The physician never responded to the OSC, and the Acting Administrator issued a Final Order over a year later on April 27, 2017. Unfortunately, the Administrator declined to rely in his opinion on most of the juicy facts—i.e., the attempted escape from Vegas, the illicit drugs and weapons, and the airport arrest—and determined that DEA had failed to provide sufficient factual or evidentiary support for many of the allegations (e.g., the arrest report submitted on evidence by DEA did not identify that the pills in the physician’s possession were controlled substances).
The Administrator likely left out the interesting facts because he did not need to rely on them to render a decision: The Administrator found that there was evidence that the physician lacked state authority to handle controlled substances (see our previous post here on state authority cases) after both medical boards revoked his state licenses, and that the physician’s improper recordkeeping and issuance of prescriptions in states without proper registration were evidence that his continued registration was not in the public interest. Accordingly, the Administrator revoked the physician’s registration.
Probably the most interesting takeaway from this decision is the Administrator’s discussion of Factor One of the CSA’s public interest factors for practitioners found in 21 U.S.C. § 823(f), specifically the “recommendation of the appropriate State licensing board or professional disciplinary authority.”
Historically, DEA has taken a broad interpretation of this factor to include any form of disciplinary action taken against the registrant (e.g., probation, suspension, revocation, restoration). See, e.g., Tyson D. Quy, M.D., 78 Fed. Reg. 47412, 47417 (Aug. 5, 2013); Daniel Koller, D.V.M., 71 Fed. Reg. 66975, 66981 (Nov. 17, 2006); Saihb S. Halil, M.D., 64 Fed. Reg. 33319, 3320-21 (June 22, 1999); William E. Brown, D.O., 58 Fed. Reg. 64004, 64005 (Dec. 3, 1993).
The plain language of the statute suggests a stricter interpretation, such as an actual recommendation from the state board to DEA, based on palliative treatments and this interpretation is more consistent with 21 U.S.C. § 824(a)(3)’s separate ground for revocation based on a loss of state authority. (See this law review article for a fuller analysis and critique of DEA’s historic Factor One precedent.)
Breaking from tradition, the Administrator made an interesting statement, perhaps signaling an agency switch in precedent to a strict reading of Factor One. In a footnote, the Administrator noted that there was no evidence relating to a Factor One analysis, despite the prior disciplinary actions by the state boards:
As to factor one, there is no evidence that either the Oklahoma State Board of Osteopathic Examiners or the Nevada State Board of Osteopathic Medicine made a recommendation to DEA; both, however, revoked Registrant’s licenses to practice osteopathic medicine.
82 Fed. Reg. 19385, 19389 n.9 (Apr. 27, 2017).
This development may be a positive one for practitioner registrants, or it may be a distinction without a difference. The more strict, plain language interpretation of Factor One could allow a practitioner in an administrative hearing to request a recommendation from the appropriate state licensing board (even after a license suspension or probation), and an adverse state action will not necessarily count against the registrant in the public interest determination. However, that specific determination did not need to be made here, because the practitioner ultimately lacked state authority continue to handle controlled substances.
As we patiently await FDA’s next annual report to Congress on 505(q) citizen petitions (see our previous posts on FDA’s annual reports here, here, and here) we thought we would take a minute to share with our readers some observations on the recent changes to the law and some interesting strategies we have heard about.
FDC Act § 505(q), which was added to the law with the enactment of the 2007 FDA Amendments Act, provides that FDA shall not delay approval of a pending application as a result of a citizen petition submitted to the Agency pursuant to 21 C.F.R. § 10.30 (citizen petition) or § 10.35 (petition for stay of action), unless FDA “determines, upon reviewing the petition, that a delay is necessary to protect the public health.” Until July 9, 2012, FDC Act § 505(q) applied in the context of a pending ANDA or 505(b)(2) application and stated that “[FDA] shall take final agency action on a petition not later than 180 days after the date on which the petition is submitted.” With the enactment of the FDA Safety and Innovation Act (“FDASIA”), however, the 180-day timeframe was reduced to 150 days. In addition, FDASIA § 1135 amended FDC Act § 505(q) to apply not only to citizen petitions concerning pending ANDAs and 505(b)(2) applications, but also to citizen petitions concerning biosimilar applications submitted to FDA pursuant to PHS Act § 351(k). FDA may not extend the pre-FDASIA 180-day period or post-FDASIA 150-day period “for any reason,” including consent of the petitioner, and the Agency may summarily deny a petition submitted with the primary purpose of delaying approval of an application. Petitions subject to FDC Act § 505(q) must include a specific certification, and petition supplements and comments must include a specific verification statement. The certification and verification statements must disclose when information supporting the petition, supplement, or comment became known to certain parties and must identify the parties in interest.
FDASIA § 1135 (along with another petition provision at FDASIA § 1134 that sets a 270-day deadline for FDA to respond so-called discontinuation petitions submitted pursuant to 21 C.F.R. § 314.161) appears to be intended to realize greater savings from generic drug and biosimilar approvals as a result of quicker FDA decisions on citizen petitions. As we’ve noted elsewhere, however, FDC Act § 505(q) petition decisions often are not keyed to generic drug and biosimilar approval decisions. As such, it seems more likely that with a 150-day response timeframe, FDA will issue more non-response petition denials. That is, decisions FDA issues by the statutory deadline, but that do not substantively address the issues raised in the 505(q) petition. We may find out soon whether or not this will be the case, as FDA appears to be headed for a 505(q) petition cliff.
Over the years, we have vigilantly followed 505(q) petitions with our FDC Act § 505(q) Citizen Petition Tracker. According to our data, between May 18, 2012 and July 17, 2012, there were 13 505(q) citizen petitions submitted to FDA. Five of the petitions were submitted after the enactment of FDASIA. The confluence of the pre-FDASIA 180-day response timeframe applicable to 8 of the 13 petitions and the post-FDASIA 150-day response timeframe applicable to 5 of the 13 petitions means that responses to all of the 13 petitions are due between November 14 and December 15, 2012. FDA has its work cut out for it indeed!
FDC Act § 505(q) is intended to prevent the citizen petition process from being used to delay approval of ANDAs and 505(b)(2) applications (and now PHS Act 351(k) applications for biosimilars). This appears to have worked. According to FDA’s third annual report to Congress on 505(q) citizen petitions, “[o]ver the three year period during which we have been reviewing 505(q) petitions, the number of applications that have been delayed due to analysis of the issues raised in the 505(q) petitions is low: 4 ANDAs and no 505(b)(2) applications.” FDC Act § 505(q) also appears to have spawned new strategies, however, to obtain competitive intelligence.
A citizen petition is considered a 505(q) petition requiring the certification at FDC Act § 505(q)(1)(H) if, at the time of FDA’s receipt of the petition, a pending ANDA, 505(b)(2) application, or 351(k) application is implicated. In many cases, it is already known that an application is pending at FDA. For example, a company may have submitted notice of a Paragraph IV certification to a patent listed in the Orange Book to the NDA holder or patent owner. In some cases, however, it is not known whether there is an application pending at FDA, because, for example, there are no patents listed in the Orange Book that would give rise to a Paragraph IV certification, or there is an Orange Book listed patent, but it is a method-of-use patent subject to a section viii carve-out statement.
In an effort to obtain competitive intelligence about the status of an application as pending at FDA, we’ve heard about a couple of strategies – serial petitioning and petitioning without a 505(q) certification. In the case of serial petitioning, a company may petition FDA and wait out the 150-day response timeframe for a response from FDA. If that response is an interim response issued pursuant to 21 C.F.R. § 10.30(e)(2) and says something like “FDA has been unable to reach a decision on your petition because it raises complex issues requiring extensive review and analysis by Agency officials,” then it seems clear that at the time the petition was received by FDA a pending application was not implicated. The petitioner may then submit a new petition raising the same or similar issues in an attempt to find out whether or not anything has changed since the submission of the last petition.
A company may also submit a petition without a 505(q) certification in an attempt to elicit a quick FDA response. FDA’s final guidance on 505(q) petitions states the following with respect the FDC Act § 505(q)(1)(H) certification requirement:
If a petitioner has submitted a petition that is missing the required certification but is otherwise within the scope of section 505(q) and the petitioner would like FDA to review the petition, the petitioner should (1) submit a letter withdrawing the deficient petition pursuant to § 10.30(g) and (2) submit a new petition that contains the certification. In this case, the provisions of section 505(q) governing the treatment of petitions will apply only to the new petition that includes the required certification because we cannot review the deficient petition under section 505(q)(1)(H). In particular, we consider the 180-day timeframe for FDA to respond to the petition to begin from the date of submission of the new, complete petition and not the original, deficient petition.
Because FDA will not review a petition that is subject to section 505(q) but is missing the required certification, all petitioners raising issues that could delay the approval of a possible ANDA or 505(b)(2) application should include the certification in their petitions to ensure FDA consideration. Although we may contact a petitioner to notify him or her of a missing or deficient certification, we note that it is the responsibility of the petitioner to ensure that its petition complies with the applicable requirements of section 505(q), as well as all other applicable statutory and regulatory requirements.
Based on our docket monitoring, it seems that FDA has, in fact, in the past contacted the petitioner if the 505(q) certification is deficient or missing – and usually pretty soon after a petition is received by the Agency. If that is true, then it raises the possibility of submitting a petition to FDA without the certification and waiting for FDA to ask that the petition be resubmitted with the certification. And why would FDA ask? Because there is a pending application that would be affected by the petition.
Today the Health Resources and Services Administration (“HRSA”), the federal agency responsible for overseeing the 340B Drug Discount Program, published in the Federal Register a rule delaying until October 1, 2017 the implementation of a final regulation establishing the methodology for calculating the 340B ceiling price (including so-called penny pricing) and civil monetary penalties (CMPs) for knowing and intentional overcharges of 340B covered entities.
The history of these regulations is a tortured one. The final regulation in question was published on January 5, 2017 (see our post here) with an effective date of March 6, 2017. On March 6, 2017, HRSA issued a rule delaying implementation to start of the following quarter. Later, to comply with the new administration’s regulatory freeze memorandum (see our previous post here), HRSA further postponed the effective date until May 22, 2017, and invited comment on whether the effective date should be even further delayed until October 1, 2017 (see also our post here). HRSA has opted for the latter effective date to implement the ceiling price methodology and CMP regulation, explaining that the delay was “necessary to provide adequate time for compliance and to mitigate implementation concerns.” 82 Fed. Reg. 22893, 22894 (May 19, 2017).
After a lengthy struggle that began with a major Salmonella outbreak in 2010, Jack and Peter DeCosters’ criminal case came to an end on May 22, 2017 when the U.S. Supreme Court denied their petition for writ of certiorari. We have followed this case with great interest, as it tested the limits (and the very existence) of the Park doctrine, also known as the “responsible corporate officer” doctrine.
In refusing to hear the case, the Supreme Court leaves in place a fractured Eighth Circuit Court decision upholding the DeCosters’ three-month prison sentences – one that we previously called the most significant Park doctrine ruling in over four decades. We described the Eighth Circuit’s ruling in some detail here.
Beyond the obvious critical importance of food safety, and the gravity of an outbreak of food-borne illness, the DeCosters’ saga provides useful reminders for all industry executives about potential criminal liability.
Importantly, a supervisory liability conviction may justify a penalty of imprisonment without violating due process only where “blameworthiness” exists, either inherent in the offense, or based on case-specific findings of fact. However, according to at least one judge of the Eighth Circuit, a misdemeanor Park doctrine conviction, implicates sufficient “blameworthiness” to justify a penalty of imprisonment, because the corporate officer in question is being held responsible “for his own failure to prevent or remedy ‘the conditions which gave rise to the charges against him.’” United States v. DeCoster, 828 F.3d 626, 633 (8th Cir. 2016). Even if the Park doctrine itself does not implicate “blameworthiness,” however, the facts of the DeCosters’ case demonstrate that pleading guilty to a Park offense without admitting knowledge or negligence does not preclude the sentencing judge from going on to find facts that support scienter.
Based on its position in this case and subsequent official statements, the DOJ under Jeff Sessions continues to favor aggressive prosecution and sentencing of strict-liability offenses. The government’s brief urged the Supreme Court to refuse to review the DeCosters’ case, and argued that strict Park doctrine liability, without further finding of fact, would justify the prisons sentences imposed on the DeCosters. More generally, Attorney General Sessions has stated that DOJ “will continue to emphasize the importance of holding individuals accountable for corporate misconduct” and that “those who choose to disregard the law will be caught and punished.” See Attorney General Jeff Sessions, Remarks at Ethics and Compliance Initiative Annual Conference (Apr. 24, 2017).
Given the stated importance of individual responsibility to the DOJ, and the unsettled nature of the Eighth Circuit’s seminal ruling, we would not be surprised to see another case testing the limits of Park. When it does, you will read about it here.
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