A voluntary disclosure program for FDA - The time has come

Food and Drug Law Journal

Volumn 54, Issue 3, 1999, Pages 389-399

  Fleder, John R ^a  

^a Olsson Frank and Weeda   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

CONSUMER; CRIME; DRUG CONTROL; DRUG LEGISLATION; FOOD AND DRUG ADMINISTRATION; GOVERNMENT; LICENSING; PUNISHMENT; REVIEW; SAFETY;

CONSUMER PRODUCT SAFETY; CRIME; GOVERNMENT AGENCIES; HUMANS; LEGISLATION, MEDICAL; LIABILITY, LEGAL; RISK MANAGEMENT; TRUTH DISCLOSURE; UNITED STATES; UNITED STATES FOOD AND DRUG ADMINISTRATION;

EID: 0032704107     PISSN: 1064590X     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (78)

1. Pub. L. No. 75-717, 52 Stat. 1040 (1938) (codified as amended 21 U.S.C. §§ 301 et seq. (1994)).
2. See, e.g., 21 U.S.C. § 336 (FDCA § 309) (FDA is not required to recommend criminal, injunctive, or seizure actions, based on "minor violations"); Heckler v. Chaney, 470 U.S. 821, 837 (1985).
3. See United States v. Bowen, 172 F.3d 682 (9th Cir. 1999); United States v. K-N Enters., 461 F. Supp. 988 (N.D. Ill. 1978); United States v. Universal Mngmt. Servs., Inc., 999 F. Supp. 974 (N.D. Ohio 1997),aff'd,_ F.3d_ (6th Cir. Sept. 13, 1999) (No. 98-3310, U.S. App.) Lexis 21935 .
4. See 18 U.S.C. § 1345 (1994).
5. 21 U.S.C. § 333(a)(1) (FDCA § 303(a)(1)); see also United States v. Park, 421 U.S. 658, 672-73 (1975).
6. See 21 U.S.C. § 333(a)(2) (FDCA § 303(a)(2)).
7. See id. § 333(b) (FDCA § 303(b)) (violations of the Prescription Drug Marketing Act); id. § 333(e) (prohibited distribution of human growth hormones); 42 U.S.C. § 262(f) (1994) (violating requirements regarding biological products); 18 U.S.C. § 1365 (tampering with consumer products).
8. Pub. L. No. 99-660, 100 Stat. 3756 (codified as amended 42 U.S.C. §§ 300aa et seq).
9. Pub. L. No. 100-293, 102 Stat. 95 (codified at 21 U.S.C. §§ 301 note, 331, 333, 353, 353 notes).
10. Pub. L. No. 101-629, 104 Stat. 4511 (codified at 21 U.S.C. §§ 301 note, 321, 333, 333 note, 351, 353, 360, 360c, 360c note, 360d-360i notes, 360j, 360j note, 360l, 360gg-360hh note, 360ii-360ss, 383, 383 note).
11. Pub. L. No. 102-282, 106 Stat. 149 (codified at 21 U.S.C. §§ 301 note, 321, 335a-335c, 335 note, 336-37, 355).
12. Pub. L. No. 102-539, 106 Stat. 3547 (codified at 42 U.S.C. §§ 201 note, 263b, 263b note).
13. Pub. L. No. 104-170, 110 Stat. 1489 (amending 7 U.S.C. §§ 136 et seq. (1994)).
14. 21 U.S.C. §§ 360gg-360ss. On May 18, 1999, FDA published a Draft Civil Money Penalty Reduction Policy for Small Entities, 64 Fed. Reg. 26,984 (May 18, 1999). Among the factors that FDA proposes would be relevant to reducing or waiving civil penalties for small entities under some (but not all) of these provisions are "[w]hether the small entity voluntarily reported the violations to FDA promptly after discovering them." Id. at 26,985; see also Food & Drug Admin., Ctr. for Device and Radiological Health, Guidance for FDA Staff: Civil Monetary Penalty Policy 7 (June 8, 1999) (noting FDA will consider whether a person disclosed a violation to FDA "within a reasonably prompt time after becoming aware of the offense - and before and without knowledge of the commencement of a formal investigation of that violation" in determining the amount of penalty).
15. 21 U.S.C. § 332 (FDCA § 302).
16. Id. § 335a(b) (FDCA § 306(b)).
17. Id. §§ 335a(c)(3)(C), 335a(d)(4)(B)(iii) (FDCA §§ 306(c)(3)(C), 306(d)(4)(B)(iii)).
18. U.S. SENTENCING COMM'N, CORPORATE CRIME IN AMERICA: STRENGTHENING THE "GOOD CITIZEN" CORPORATION, PROCEEDINGS OF THE 2D SYMPOSIUM ON CRIME & PUNISHMENT IN THE U.S. 310 (Sept. 7-8, 1995) [hereinafter CORPORATE CRIME]. The Sentencing Commission's Guidelines for organizations convicted of crimes in federal courts give credit to firms that self-report a violation. U.S. SENTENCING COMM'N, GUIDELINES MANUAL § 8C2.5(g)(i) (Nov. 1998).
19. 56 Fed. Reg. 46, 191 (Sept. 10, 1991).
20. Id.
21. Id.
22. See Scott Arnold, Voluntary Disclosure Program Benefits All Concerned, LEGAL TIMES, June 17, 1996, at S32.
23. Id.
24. Many businesses will self-audit if they know that the government will provide incentives for voluntary disclosures. Of those firms responding to a 1995 Price-Waterhouse survey, "more than 40% said that penalty mitigation for self-identified, reported, and corrected violations would encourage the company to conduct more auditing." Environmental Self-Audits, Subcomm. on Oversight and Investigations of the House Commerce Comm., 105th Cong., 2d Sess. (Mar. 17, 1998) (statement of Steven A. Herman, Ass't Admin., EPA) [hereinafter HERMAN TESTIMONY].
25. See OFFICE OF THE INSPECTOR GEN., U.S. DEP'T OF HEALTH & HUMAN SERVS., ASSESSMENT OF THE HEALTH CARE VOLUNTARY DISCLOSURE PROGRAM: THE OFFICE OF INSPECTOR GENERAL'S PERSPECTIVE 4 (1998) [hereinafter OIG REP.].
26. 42 U.S.C. § 1320a-7b(a)(3).
27. Id. § 1320a-7b(f).
28. 2 Health Care Fraud Rep. (BNA) 167 (Mar. 11, 1998).
29. 42 U.S.C. §§ 290cc-32(a)(2), 300d-320(a)(2), 408(a)(4), 707(a)(2), 1383a; see also 18 U.S.C. §§ 641, 669, 1001, 1035(a)(1) (applying specifically to healthcare benefit programs, including private programs), 2315.
30. See Gary Spratling, Remarks Presented at the Am. Bar Ass'n Antitrust Section 1998 Spring Meeting 11 (Apr. 1, 1998) (transcript available at 〈www.usdoj.gov/atr/public/speeches/1626.htm〉).
31. Id. at 4.
32. See id.
33. Id. at 1.
34. Id.
35. Id. at 2.
36. Id. at 3.
37. See GENERAL ACCOUNTING OFFICE, DEP'T OF DEFENSE PROCUREMENT: USE AND ADMINISTRATION OF DOD'S VOLUNTARY DISCLOSURE PROGRAM 3 (Feb. 6, 1996) (GAO/NSIAD-96-21). The GAO reported that DOD's recoveries "were overstated because they included $75 million in premature progress payments and amounts from disclosures made prior to the program." id. at 1. The report did not conclude that the voluntary disclosure program is not a useful or effective means of identifying or combating fraud. Indeed, the GAO Report noted that the program's value may extend beyond that which can be measured by available statistics and that corporate compliance through voluntary disclosure can have long-term effects on business honesty and integrity. Id.
38. Id. at 4.
39. ENVIRONMENTAL PROTECTION AGENCY, AUDIT POLICY UPDATE, LETTER FROM THE ASSISTANT ADMINISTRATOR 1 (Jan. 1997); see also Incentives for Self-Policing; Discovery, Disclosure, and Correction and Prevention of Violations, 60 Fed. Reg. 66,706 (Dec. 22, 1995).
40. ENVIRONMENTAL PROTECTION AGENCY, AUDIT POLICY UPDATE, LETTER FROM THE ASSISTANT ADMINISTRATOR 1 (Jan. 1997); see also Incentives for Self-Policing; Discovery, Disclosure, and Correction and Prevention of Violations, 60 Fed. Reg. 66,706 (Dec. 22, 1995).
41. 60 Fed. Reg. at 66,711.
42. A gravity-based penalty is that "portion of a penalty over and above the economic benefit, i.e., the punitive portion of the penalty, rather than that portion representing a defendant's economic gain from non-compliance." Id.
43. See id. at 66,712.
44. HERMAN TESTIMONY, supra note 24, at 2.
45. Id.
46. Id.
47. Id.
48. Marianne Lavelle, Incentives to Identify Toxic Chemicals Have Deluged the Agency With Reports, NAT'L L.J., Feb. 24, 1997, at A1.
49. Id. Two similar programs have been implemented since 1995. One is an amnesty-style program called the Inventory Update Rule Record and Search. In return for disclosing the location of the company's toxic chemicals - as already required by law - the company gets a reduced monetary penalty. Id. Another program attempts to increase compliance with the Emergency Planning and Community Right to Know Act by reducing penalties for violators who disclose inventories of harmful toxins. Id.
50. OIG REP., supra note 25, at 1.
51. Id. at 3-4.
52. Id. at 4.
53. This was a joint federal and state project to detect fraud and abuse in the Medicare and Medicaid programs by coordinating the efforts of various federal and state agencies. Id. at Appendix, OIG Procedures for Administering the Pilot Disclosure Program 1.
54. Operation Restore Trust Voluntary Disclosure Program, DHHS Press Release, May 3, 1995 (visited June 15, 1999) 〈hhs.gov/progorg/oig/other/ortvolun.txt〉.
55. IG Brown Announces $840,000 Settlement With N.J. Hospital, OIG Press Release, Oct. 21, 1998 (visited June 15, 1999) 〈dhhs.gov/progorg/oig/modcomp/settlement.pdf〉.
56. 63 Fed. Reg. 58,399 (Oct. 30, 1998).
57. Id. at 58,400.
58. Id.
59. Pub. L. No. 97-258, 96 Stat. 978 (1982) (codified as amended 31 U.S.C. §§ 3729-3733 (1994)).
60. 63 Fed. Reg. at 58,401.
61. Id. at 58,403.
62. Frederick Robinson, Recent Health Care Fraud Enforcement Developments, TEXAS HEALTH L., Oct. 29, 1998.
63. 63 Fed. Reg. at 58,401-02.
64. Id. at 58,403.
65. Id.
66. 31 U.S.C. § 3730(b).
67. Deputy Attorney General Eric H. Holder, Jr., Remarks to the Am. Hospital Ass'n (Feb. 1, 1999) (transcript available at 〈www.usdoj.gov/dag/speech/holderahaspeech.htm〉). Deputy Attorney General Holder acknowledged that at times the Department's approach to health-care fraud prosecutions has been perceived as heavy-handed. He noted that "the Department will continue to look Favorably on providers that implement effective compliance programs and voluntarily report misconduct to the government." Id. He also stated that "[h]ealth care fraud will continue to be one of the Department's top enforcement priorities." Id.
68. Pub. L. No. 104-191, 110 Stat. 1936, 1991-2021 (1996).
69. SEC's Top Cops Go on Record, NAT'L L.J., July 18, 1994, at 2.
70. Id. (comments by Gary G. Lynch, former Director of the SEC's Div. of Enforcement).
71. Mark F. Foley & James F. Stern, Products Liability: Under Its Amnesty Program, the Consumer Product Safety Commission Will Waive Penalties for Firms That Disclose Previously Unreported Product Hazards, NAT'L L.J., Jan. 29, 1996, at B5.
72. Pub. L. No. 92-573, 86 Stat. 1207 (1972) (codified as amended 15 U.S.C §§ 2051-2084 (1994)).
73. Foley & Stern, supra note 70, at B5.
74. FDA likely would violate the Administrative Procedure Act, Pub. L. No. 79-404, 60 Stat. 237 (1946) (codified as amended 5 U.S.C §§ 551 et seq. (1994)), if it issues a Voluntary Disclosure Program without going through notice-and-comment rulemaking pursuant to 5 U.S.C. § 553. In Chamber of Commerce v. United States Dep't of Labor, 174 F.3d 206 (D.C. Cir. 1999), the court held that a "Directive" that set forth criteria for when employers would be inspected was issued illegally because the agency had not gone through rulemaking. The Directive provided that firms could lessen their exposure to an inspection if they participated in the agency's "Cooperative Compliance Program." The court recognized that the program did "not formally require anything: An employer is not subject to a legal penalty for failing to join" the program. Id. at 209. The agency's announcement that a firm's failure to join the program was deemed a rule, however, in that the policy obliged an employer "to comply or to suffer the consequences," Id. at 210. The court also determined that the directive was not a mere procedural rule because, on its face, it required participants to do more than merely adhere to existing law. The court also rejected the argument that the directive was a general statement of policy that was exempt from notice-and-comment rulemaking because the directive stripped the agency of discretion.
75. See OIG REP., supra note 25, at 7.
76. See id.
77. 60 Fed. Reg. at 66,710.
78. FDA's regulations set forth procedures for obtaining testimony of FDA employees in suite where FDA is not a party. 21 C.F.R. § 20.1 (1998).