Vol. 56 No. 175 Tuesday, September 10, 1991 p 46191 (Notice) 1/1130 56 FR 46191
[Docket No. 90 N-0332]
FR FDA 09/10/91 NOTICE 56 FR 46191 - FRAUD, UNTRUE STATEMENTS OF MATERIAL FACTS, BRIBERY,
AND ILLEGAL GRATUITIES; FINAL POLICY
AGENCY: Food and Drug Administration, HHS.
SUMMARY: The Food
and Drug Administration (FDA) is announcing its final policy on "Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities" (fraud policy). The
policy sets forth FDA's general approach regarding applicants that seek to subvert the
agency's review and approval processes for premarket applications. The policy also
outlines recommended corrective actions by which applicants may seek to restore FDA's
confidence in their integrity and permit the agency to proceed with substantive scientific
review of their premarket applications. The final policy is being issued as Compliance
Policy Guide (CPG) 7150.09.
EFFECTIVE DATE: September 10, 1991.
ADDRESSES: CPG 7150.09 may be ordered from National Technical
Information Service (NTIS), U.S. Department of Commerce, 5285 Port Royal Rd., Springfield,
VA 22161. Orders must reference NTIS order number PB 91-228098 and include payment of $9
for each paper or microfiche copy. Payment may be made by check, money order, charge card
(American Express, Visa, or Mastercard), or billing arrangements made with NTIS. Charge
card orders must include the charge card account number and expiration date. For telephone
orders or further information on placing an order, call NTIS at 703-487-4650. CPG 7150.09
is available for public examination in the Dockets Management Branch (HFA-305), Food and
Drug Administration, rm. 1-23, 12420 Parklawn Dr., Rockville, MD 20857, between 9 a.m. and
4 p.m., Monday through Friday.
FOR FURTHER INFORMATION CONTACT: Mischelle B. Ledet, Division of
Compliance Policy (HFC-230), Food and Drug Administration, 5600 Fishers Lane, Rockville,
MD 20857, 301-443-1500.
SUPPLEMENTARY INFORMATION: As a result of activities involving fraud,
untrue statements of material facts, bribery, and illegal gratuities (wrongful acts) by
some manufacturers of generic human drugs, FDA has investigated and assessed various
efforts to subvert the integrity of the agency's review processes. In its investigations
resulting from illegal gratuities provided to FDA employees and fraud and discrepancies in
data submissions, FDA uncovered broader patterns of fraud and discrepancies in
applications to the agency that raise serious questions as to the reliability of all data
submissions by those applicants offered to demonstrate product safety and efficacy. FDA,
therefore, developed an approach to ensure validity of data called into question by such
wrongful acts and to remove from the market products for which application approval was
based on fraudulent data..
In the Federal Register of December 21, 1990 (55 FR 52323), FDA
published its proposed policy on "Fraud, Material False Statements, Bribery, and
Illegal Gratuities." The proposed policy described the agency's approach regarding
data submissions from applicants who have sought to subvert the agency's review and
approval of premarket applications. The proposed policy also outlined corrective actions
by which applicants that have engaged in such subversion may seek to restore FDA's
confidence in the integrity of data in their applications and permit the agency to proceed
with substantive scientific review of that data.
FDA requested comments on the proposed policy by January 22, 1991. FDA
subsequently extended the comment period to February 21, 1991. Notice of this extension
was published in the Federal Register of January 25, 1991 (56 FR 2929).
FDA received 16 letters of comment on the proposed policy. Eight of the
letters were from trade associations, five from drug manufacturers, one from a consumer
group, one from a member of Congress, and one unsigned. A summary of the issues raised by
the comments and the agency's responses to those issues are as follows:
1. One comment expressed concern that FDA did not define the terms
"fraud, material false statements, bribery, or illegal gratuities." The comment
indicated there can be a substantial difference between fraud, bribery, and illegal
gratuities, on one hand, and material false statements, on the other.
FDA is using the phrase "untrue statements of material
facts," in the final policy rather than "material false statements." The
phrase "untrue statements of material facts" is consistent with the language in
the Federal Food, Drug, and Cosmetic Act (the act) (see, e.g., sections 505(e)(5) and
U.S.C. 355(e)(5) and 360b(e)(1)(D)). The terms "fraud, untrue
statements of material facts, bribery, and illegal gratuities" are used consistent
with their common meanings.
2. A few comments argued that the fraud policy should be promulgated
under section 701 of the act (21 U.S.C. 371) as a binding, enforceable rule. One comment
cited several court cases to support this position. The comments argued that denial of an
application to market a drug or other product constitutes substantive agency action
materially affecting the economic and proprietary rights of applicants and binds the
applicants involved. One comment argued that the fraud policy defines
"principles" for denial or withdrawal of approval that are substantive, not
interpretative in nature, and warrant the adoption of regulations.
FDA does not agree that the fraud policy is a substantive rule or that
the cited cases require that the rule be issued under section 701 of the act. (See Vietnam
Veterans of America v. Secretary of the Navy, 843 F.2d 528, 530 (D.C. Cir. 1988); American
Hospital Ass'n v. Bowen, 834 F.2d 1037, 1046 (D.C. Cir. 1987); Mada-Luna v. Fitzpatrick,
813 F.2d 1006, 1015-1016 (9th Cir. 1987); Information Systems & Networks Corp. v.
Adbnor, 687 F. Supp. 674, 679 (D.D.C. 1988); see also Foundation on Economic Trends v.
Johnson, 661 F. Supp. 107 (D.D.C. 1986).) The fraud policy does not establish any
requirement that is binding upon any applicant or upon the agency. The fraud policy does
not require any act on the part of any applicant, nor does it provide any interpretation
or establish any standard by which FDA will determine whether an applicant's behavior is
illegal or whether an application contains invalid data or is otherwise legally deficient.
The policy is a directive to FDA managers to ensure, to the extent allowed by law and
reasonably possible, that:
a. Agency decisions on pending applications are made based upon
b. Agency resources are not wasted on reviews of data that are invalid;
c. Pending applications containing fraudulent data are removed from the
d. Approval of applications containing fraudulent data is withdrawn;
e. Marketed products that may be affected by wrongful acts do not pose
a threat to public health.
3. One comment urged FDA to insist on full cooperation of suspect
applicants to ensure that FDA investigative activities have not been impeded or
obstructed. One comment noted that because a policy statement lacks the force and effect
of law, FDA must be prepared to support and defend its actions pursuant to the policy
statement in each case to which the policy is applied. The comment indicated agreement
with the need to require corrective actions when an applicant has engaged in wrongful
acts, but questioned how FDA will enforce its policy of corrective actions if an applicant
declines to undertake those corrective actions voluntarily.
The first corrective action identified in the fraud policy is full
cooperation by the applicant. FDA expects applicants, including all levels of the
applicant's management and staff, to demonstrate active and effective efforts to identify
the full scope of the wrongful acts and to implement corrective actions. FDA recognizes,
however, that the fraud policy does not impose a legal requirement that applicants
implement the corrective actions recommended in the policy. FDA will rely on traditional
regulatory and administrative remedies when applicants do not voluntarily undertake
necessary corrective actions.
4. One comment contended that sanctions against an applicant that has
deliberately submitted false or fraudulent data should be increased. The comment noted
that the requirement to submit a newly certified application is not sufficient to
guarantee rehabilitation of the applicant's character and does not provide a guarantee
that a renewed application provides accurate and reliable information. The comment
suggested that any applicant who has submitted fraudulent data or information has
demonstrated such a fundamental lack of character and integrity that its applications are
unqualified for agency approval, at least on the specific subject of the fraudulent
application. The comment stated that FDA's policy should be amended to provide that when
FDA finds that an applicant has engaged in deliberate, wrongful misconduct associated with
a marketing application, the applicant is barred from receiving approved for that
application and, in instances of repeated wrongdoing, is barred from approval of any
The fraud policy does not establish or impose any new sanctions for
wrongful acts. The stated, general objective of the fraud policy, to refuse to approve, or
to proceed to withdraw approval of, application containing fraudulent data, is an exercise
of agency discretion under the existing statutes and regulations. The agency does not have
express statutory authority to impose the suggested penalty of debarment. Although the
Department of Health and Human Services (HHS) advanced legislation introduced last year
during the 101st session of Congress to provide such authority to FDA, the legislation was
5. Several comments requested that applicants be notified of any
allegations of wrongdoing and that they be permitted to respond to those allegations prior
to any agency action. Several comments suggested that those accused of wrongdoing should
be afforded an opportunity for a hearing prior to conducting a validity assessment of
deferring substantive scientific review of their applications.
FDA intends ordinarily to notify applicants of wrongdoing and, in some
instances, even of suspected wrongdoing associated with their applications. The agency
will attempt to provide notification, to the extent reasonably possible, when a
significant question has been raised regarding a pending application that requires a
validity assessment. Each FDA center will develop procedures to provide such notice,
consistent with the priorities, statutory provisions, and regulations applicable to that
center's review process. Under this policy, conducting a validity assessment ordinarily
will require further information from the applicant, and the applicant's ability to
respond promptly may affect the time required for completion of review for final action on
FDA does not agree that a hearing must be held prior to conducting a
validity assessment. The fraud policy neither requires nor precludes any FDA center from
providing an opportunity for an applicant to present its views prior to the agency's
conducting a validity assessment or prior to deferring substantive scientific review
pending the outcome of a validity assessment. An agency decision to assess data prior to
the normal scientific review of an application does not constitute a sanction or final
agency action on the application. Deferral of substantive data review under these
circumstances will help ensure that FDA's limited resources are not wasted in reviewing
invalid data, and that applications are approved based on valid data. As before the fraud
policy was developed, final agency action to refuse to approve a pending application or to
withdraw an approved application will be taken under the procedures set forth in the
statutory provisions and regulations applicable to the particular review process.
6. One comment expressed concern because the fraud policy provides that
FDA may defer substantive review of all pending applications or may withdraw all
applications submitted by an applicant suspected of misconduct. The comment disagreed with
FDA's statement that deferral of substantive data review does not constitute a
disqualification or debarment of the applicant. The comment argued that such deferral
would constitute permissive debarment of a suspected applicant and that FDA currently
lacks statutory authority for debarment. The comment further stated that the act does not
authorize FDA to preclude an applicant from obtaining approval of submitted applications
that are unrelated to the suspect drug application, which would be the practical effect of
the policy of deferral of substantive review. Therefore, the comment opposed extending the
fraud policy to applications submitted under section 505(b) of the act that are not
directly or substantially affected by the wrongful acts. Another comment questioned the
appropriateness of extending the fraud policy to applications other than abbreviated new
drug applications for generic drugs.
FDA does not agree that the deferral of substantive data review under
the fraud policy is equivalent to permissive debarment. The permissive debarment authority
proposed in legislation during the 101st session of Congress would have precluded
participation by an applicant in agency product approval processes for certain stated
periods of time. The fraud policy does not authorize FDA to refuse to process or review a
particular application. Although deferral of substantive data review under the fraud
policy may affect the timing and nature of FDA's final action on the application, it does
not preclude review and approval of the application.
The comment's reference to applications that are "directly and
substantially" affected by wrongful conduct is not clear. It is clear, however, based
on FDA's experience with investigations of wrongful acts associated with abbreviated new
drug applications (ANDA's) for generic drugs, that a policy limiting validity assessments
and deferral of substantive scientific review to applications in which the agency has
actually discovered evidence of fraud or untrue statements would be inadequate. In each of
the cases in which applicants provided illegal gratuities to FDA employees, the applicants
were subsequently found to have submitted fraudulent submissions to the agency. In most
in which FDA discovered fraud or discrepancies in a firm's
applications, further investigation revealed fraud and discrepancies in other
FDA cannot assume that applications submitted under section 505(b) of
the act, or under other statutory provisions, are different from ANDA's in that they are
not susceptible to fraud and untrue statements. Indeed, FDA recently has discovered
evidence of untrue statements of material facts in applications submitted for innovative
new animal drugs. The fraud policy, therefore, applies to other agency review processes.
7. Two comments cautioned that, for important single-source new
chemical entities, approval should not be delayed or the product should not be withdrawn
from the market in order to punish an applicant unless the underlying safety or efficacy
of that product has been compromised by the improprieties.
Although the fraud policy states, as a general objective, that there
should be deferral of substantive scientific review, it does not establish a requirement
that each FDA center defer such review in all cases. FDA managers retain sufficient
flexibility to continue scientific review and to avoid unnecessary delays in the approval
of important new therapies. Each center is responsible for determining its own review
priorities. Under the fraud policy, applications for new products that may yield important
therapeutic or diagnostic gains, and are assigned a corresponding high review priority,
can continue to receive priority review, even though they are subjected to a validity
assessment. As under current policy, FDA centers also may consider the public health
significance of the product in deciding whether and when to seek the removal of an
approved product from the market to the extent they are provided such discretion under
8. One comment pointed out that other regulatory agencies have
authority to levy substantial civil penalties for willful misstatements. The comment
recommended that FDA redouble its efforts to obtain authority from Congress to levy civil
penalties against applicants for willful misconduct.
In the Safe Medical Devices Act of 1990, FDA was given authority to
impose administrative civil penalties for violations pertaining to medical devices (21
U.S.C. 333(f)). In addition, HHS proposed legislation last year that would establish broad
authority to assess administrative civil penalties in appropriate circumstances involving
FDA regulated products. HHS currently is considering whether to propose similar
legislation in the future.
9. Several comments expressed concern about the threshold for invoking
the provisions of the fraud policy. A few comments objected because there is no language
in the policy to prevent FDA's indiscriminate or inappropriate use of the policy or to
limit FDA's indiscriminate or inappropriate use of the policy or to limit FDA's actions
under the policy. A few comments suggested that FDA should establish objective criteria or
a reasonable basis for invoking the policy. One comment requested clarification of whether
a criminal plea or conviction is necessary to trigger FDA deferral of review of that
applicant's pending applications. One comment suggested that FDA defer review of an
application based upon reliable information of misconduct, short of a criminal indictment
or conviction. Comments also suggested that the policy could be invoked based on a
referral, or contemplated referral, for criminal prosecution to the U.S. Department of
Justice and based on a prior determination of fraudulent activity by a court of law or an
agency finding of such misconduct after an opportunity for a hearing. One comment
suggested that any misconduct showing a propensity for untruthfulness is inherently
sufficient to defer action on an application.
FDA recognizes that it must have a reasonable basis for requiring
validity assessments and deferring substantive review. The validity assessment process
will be utilized only when there is a pattern or practice of wrongful conduct that raises
a significant question regarding the reliability of the data in an application. The
reasonableness of any decision to assess validity will depend on the facts. The fraud
policy is not designed to set forth decision criteria or to otherwise restrict the
prerogative of each center to question and investigate data submissions. Moreover, FDA
questions the appropriateness of using specific milestones in criminal proceedings in
determining when it is appropriate to assess data validity in pending applications or to
defer substantive data review.
10. A few comments suggested that, prior to invoking the provisions of
the fraud policy, FDA be required to establish that there was an intent to defraud or that
the applicant knowingly or materially engaged in the fraud or that such acts were part of
a pattern or practice by the applicant. One comment pointed out that, although a material
false statement might be made with intent to defraud, it is also possible that a material
false statement could be made inadvertantly in an application without any intention to
defraud or mislead. The comment recommended revising the fraud policy to exclude
unintentional false statements. Several comments recommended that, if an applicant
inadvertently and unknowingly made a false statement, omission, or clerical error in an
application the applicant should be permitted to correct the statement without having to
file a new application or implement other corrective actions.
Decisions to conduct validity assessments and defer substantive data
review need not be based on a finding of intentional misconduct. Data may be unreliable
due to sloppiness and inadvertent errors. A pattern of errors by an applicant involving
material subject matter may raise a significant question regarding the general reliability
of data in applications from that applicant.
The fraud policy does not address the issue of withdrawal of approval
based on an inadvertent submission of an untrue statement of a material fact, a material
omission, or a clerical error that could be readily corrected by amending the application.
In such cases, FDA may not necessarily require a new application. Such decisions will
continue to be made on a case-by-case basis, within the limits of the agency's
11. One comment stated that if intent to defraud cannot be proven, then
it is important to determine whether the fraudulent data were substantive to the approval
process. The comment noted that studies that are not pivotal or are not included in the
"Summary Basis of Approval" should be extracted from the new drug application
Whether or not there is fraud, FDA must assess reliability of data and
materially of untrue statements in deciding whether to withdraw an approval. The agency's
inquiry will not necessarily be limited to pivotal studies or studies included in the
summary basis for approval. Fraudulent data in an application ordinarily should be
remedied by withdrawing the application and submitting a new application, even if the data
are associated with a "nonpivotal" study.
12. One comment requested clarification of what effect, if any, an
investigation by the Department of Justice, by a congressional oversight committee, or by
a State enforcement agency would have on the procedures set forth in the policy. The
comment suggested that FDA actions on applications containing fraudulent data should be
withheld until these bodies of government complete any investigations they have regarding
the applicant's conduct. The comment also suggested that when another body of government
notifies FDA of an investigation regarding an applicant's conduct, FDA should consider
that investigation as a basis for raising "a significant question" within the
meaning of the fraud policy, but FDA should independently determine whether a significant
question has been raised.
FDA does not agree that the agency should necessarily withhold actions
on applications until other government bodies complete their investigations. FDA
recognizes the need for government bodies to coordinate related investigations and
acknowledges that such coordination may affect the nature and timing of FDA's decisions
under the fraud policy. FDA agrees that when an investigation by another government body
provides evidence of wrongful acts by an applicant, FDA ordinarily would need to determine
independently the scope of the wrongful acts and their effects on applications submitted
to the agency. FDA does not agree that these concerns should be addressed specifically in
the fraud policy.
13. One comment indicated that the policy may, in certain
circumstances, create a disincentive for compliance. The comment cited the Department of
Defense's voluntary disclosure program, which provides incentives for companies to act in
a responsible way by establishing a company's voluntary disclosure as a positive factor to
be considered by the government in determining whether to take legal action against the
company. The comment contended that under FDA's policy, there is no incentive for an
applicant to come forward with information to FDA if, for example, the applicant discovers
fraud and believes the likelihood of discovery by FDA to be remote.
FDA agrees that the issue of incentives for voluntary disclosure is
important, but does not agree that it should be addressed in the fraud policy. The fraud
policy addresses concerns over reliability of data and agency review resources. The issue
of incentives for voluntary disclosure should be addressed in a broader context that would
involve agency policy on civil and criminal sanctions for misconduct.
14. One comment requested that FDA differentiate between suspect
applications for which corrective actions, including full cooperation by an applicant with
FDA in all of its investigations, have already been taken by the applicant, and
applications from applicants who have not so cooperated. The comment identified itself as
a party to the generic drugs investigations and pointed out that it had been working
cooperatively with FDA to bring its products and procedures into full compliance with
FDA's requirements. The comment noted that FDA's Center for Drug Evaluation and Research
(CDER) had indicated it would accept and process "in queue" new data submitted
to supplement previously approved applications for which validity questions had been
raised. The comment noted that it would be inappropriate at this point to require an
applicant to return to the starting point by requiring resubmission of its application.
Under the fraud policy, FDA ordinarily will proceed to withdraw
approval of applications found to contain fraudulent data. The agency is not prepared to
make a general exception to this policy for applicants who cooperate with the agency in
its investigations. The agency may distinguish between cooperative and uncooperative
companies in other contexts involving civil and criminal sanctions. Moreover, the extent
and nature of the applicant's cooperative and corrective actions are likely to influence
the ability of the applicant to establish its credibility and the validity of its pending
15. One comment suggested that the final FDA fraud policy should
contain a provision that explicitly calls for a revision of the policy upon passage of any
legislation that affects the policy. The fraud policy, like any other statement, can be
amended whenever appropriate. There is no reason to state this in the policy.
16. One comment requested clarification of the language in paragraph 2
of the "Corrective Actions" section of the proposed policy, which indicated that
applicants should, "Identify all individuals involved in committing, or otherwise
culpable in the improper acts * * *." One comment requested clarification of the
statement, "* * * ensure that they are removed from any substantive authority on
matters under the jurisdiction of FDA." The comment pointed out that literally all of
the operations of a pharmaceutical company are under the jurisdiction of FDA. The comment
also requested FDA to clarify whether the agency expects such employees to be dismissed. A
few comments expressed concern about protecting the constitutional rights of individuals
by keeping confidential the identity of individuals identified as culpable until there has
been a judicial determination that the individual has engaged in illegal behavior.
FDA has revised paragraph 2 of the corrective action provision of the
final fraud policy to indicate that applicants should, "Identify all individuals who
were or may have been associated with or involved in the wrongful acts and ensure that
they are removed from any substantive authority on matters under the jurisdiction of
FDA." This provision of the fraud policy neither states nor implies that the
employment of such individuals must be terminated. FDA believes that applicants generally
can identify or create alternative positions, place individuals on administrative leave,
or make other suitable arrangements to remove individuals from substantive authority over
matters under FDA's jurisdiction. FDA's policy regarding public disclosure of information
about individuals who are suspected of illegal activities predates, and is beyond the
scope of, the fraud policy.
17. One comment requested that the fraud policy specify the
confidentiality protections that will be provided during the course of a validity
The fraud policy does not establish any new confidentiality protection
or supersede any existing provisions regarding confidentiality. The protection provided
under current laws, regulations, and agency policy regarding disclosure of information in
or related to marketing applications and to FDA investigations of potential violations of
law need not be restated in the fraud policy.
18. One comment noted that paragraph 4 of the corrective actions
provision of the policy, which indicates applicants should commit, in writing, to an
operating plan, requires much more detail for applicants to know what is expected.
FDA agrees with this comment. Guidance on conducting the internal
review and implementing corrective action is provided in FDA's "Points to Consider
for Internal Reviews and Corrective Action Operating Plans." The availability of this
document is announced elsewhere in this issue of the Federal Register.
19. One comment stated that the agency approve a protocol for the
internal review (audit) prior to the applicant conducting the review.
FDA recommends that an applicant who conducts an internal review and
initiates corrective action under this policy submit its audit plan and corrective action
operating plan to the agency for review and comment prior to implementation.
20. One comment contented that FDA does not have authority to require
companies to hire outside consultants to conduct internal reviews.
The fraud policy does not impose any requirement on any applicant. The
fraud policy describes measures that, based on FDA's past experience with applicants
involved in a pattern or practice of wrongful acts, the agency ordinarily would expect an
applicant to take to establish the reliability of data in its pending and approved
FDA ordinarily recommends an outside consultant to encourage applicants
to retain qualified individuals who have not been associated with the wrongful acts and
who can efficiently conduct an unbiased, comprehensive audit that is designed to identify
all instances of fraud, untrue statements of material facts, bribery, and illegal
gratuities associated with applications. Although FDA also will audit the data and the
data collection and recording practices, because of the agency's limited resources it may
be useful for the applicant to conduct an initial audit to identify more quickly wrongful
acts associated with applications. Thus, FDA recommends that the applicant supplement the
agency's audit process by initiating a credible internal review involving an unbiased
individual, or team of individuals, who are qualified by training and experience to
conduct such a review. FDA emphasizes that the audits directed by the applicant are
intended to supplement, and not substitute for, the agency's own investigation and audits.
21. Several comments requested clarification of who is
"qualified" and what is an "outside" consultant. One comment
questioned whether a consultant on a yearly retainer for quality assurance and regulatory
affairs work would be considered to be a qualified, outside consultant. A few comments
suggested that an internal audit team might be qualified to conduct the internal review,
provided the team was not responsible for preparing data for marketing applicants, was not
involved in the wrongful acts, or was not responsible for auditing the applicant's quality
assurance or scientific misconduct control procedures. Comments also noted that outside
consultants are not always available or may not have expertise necessary to evaluate the
questionable data. One comment suggested allowing the applicant to use their independent
quality control unit to conduct the investigation and then, if necessary, an outside
Consultant qualifications are beyond the scope of the fraud policy.
Such qualifications will depend on the nature of the investigations, the products
involved, and other specific circumstances. FDA generally has advised that consultants be
familiar with the product and operations to be audited, possess the proper mix of
education, training, and experience to conduct an appropriate
audit, and be free of any past involvement in the wrongful acts or the
activities being audited. Although the agency has not precluded the use of a quality
assurance group in a remote part of a corporation to appropriately audit another part of
the corporation, FDA believes that the mere appearance of bias or interest generally would
suggest the use of outside personnel, i.e., persons not currently or previously employed
by or affiliated with the applicant.
22. One comment cautioned that FDA should not depend on reviews done
internally by the applicant or by an outside consultant who is qualified by training and
experience to conduct such a review. The comment referenced a case in which the consultant
failed to uncover false statements or fraud in ANDA's.
As stated in response to comment 18, the applicant's internal review
involving an outside consultant is intended to supplement, rather than replace, FDA's own
investigations and audits. If the consultant conducts an unbiased, comprehensive audit,
the reports from that audit may provide the agency with valuable information for
determining the extent and focus of FDA's followup. FDA will not accept the consultant's
findings without further agency investigation.
23. One comment stated that FDA should inform an applicant of whether
its choice of an outside consultant is acceptable to the agency.
The procedures for selecting consultants are beyond the scope of the
fraud policy. FDA may request an applicant to explain its selection of a specific
consultant (or a member of the audit team) if the consultant's experience and training
appear to be incompatible with the audit requirements.
24. One comment suggested that FDA should initially set a baseline
requirement that the outside consultant be given access to all of the applicant's records
and that the outside consultant should be required to analyze both the type of audit that
has been conducted by the applicant internally and the audit itself.
The specific requirements for audits are beyond the scope of the fraud
policy. Generally, if the applicant intends to conduct a credible, unbiased, and
comprehensive audit, it is reasonable to expect that the consultant will have access to
all records and the authority to review and analyze all processes or procedures that are
identified as necessary and appropriate for the audit. Further guidance on conducting
audits is provided in FDA's "Points to Consider for Internal Reviews and Corrective
Action Operating Plans" referenced in response to comment 18.
25. Several comments suggested that deferral of substantive review,
pending completion of the validity assessment, should apply only to those applications for
which there is a nexus between the application and the wrongful acts and should not apply
to an applicant's entire product line. One of the comments further stated that it would be
an unfair and inappropriate use of FDA's limited resources to conduct validity assessments
for all applications from an applicant when a particular division, research group, or
product type was implicated in alleged improper conduct. The comment cited as an example
that fraud in connection with an ANDA should not trigger data validity assessments for an
A validity assessment will ordinarily be triggered by an agency
determination that evidence of wrongful acts has raised questions about the reliability of
data in an application or applications. The nature of the assessment and the determination
of which applications are affected will depend on the facts of the particular case. Thus,
the validity assessment process may be narrowly focused on one or a few applications when,
for example, the agency concludes that one individual is wholly responsible for the
wrongful acts and that the wrongful acts could have affected only the one or a few
identified applications. On the other hand, the validity assessment process may be
extensive if there is reason to believe that the scope of the wrongful acts may be
FDA does not agree that validity assessment should necessarily be
limited to applications for which there is a direct relationship between the wrongful acts
and the questioned data. Based on the agency's recent experience, a pattern or practice of
wrongful acts may raise a significant question regarding the reliability of many or all of
the applications from an applicant.
26. Two comments requested that FDA make a distinction between data
generated by the sponsor and data obtained from third party contractors. The comments
contended that the policy should not apply to wrongful acts by contractors to the sponsor,
e.g., clinical investigators, contract research organizations, and independent
laboratories, when the sponsor is unaware of the wrongful acts prior to submission of the
In determining the need for and scope of validity assessments, FDA will
consider, among other things, the source of the false data, whether the applicant knew or
should have known about the false data, and whether the same source has provided data in
27. One comment noted that the policy should not apply to nonsupportive
fraudulent data if the sponsor submits the data under the "full disclosure"
requirement and identifies the data as nonsupportive and fraudulent.
FDA agrees that the submission of nonsupportive fraudulent data that is
clearly and appropriately identified as nonsupportive and fraudulent, but is submitted to
comply with full disclosure provisions of the act or implementing regulations, should not,
in and of itself, be basis for a validity assessment. Such information, however, may
prompt FDA to look carefully at the circumstances that led to the generation of the
fraudulent data to determine whether other data in that or other applications may have
been similarly affected. If FDA establishes a reasonable basis for determining that
wrongful acts may have undermined the integrity of data other than that identified by the
applicant, the agency may seek to verify the validity of the other data.
28. One comment expressed concern that the fraud policy has been
weakened by equivocating language. Examples include the statement indicating that when FDA
finds fraud in an application, "the Agency intends ordinarily to refuse to approve
the application * * *" and the statement indicating, "* * * the Agency intends
generally to defer substantive review of data * * *" (emphasis added by comment). The
comment contended that, to be credible, FDA's enforcement policy must at least implement,
without equivocation, the scheme of deferrals and approvals the agency purports to adopt.
The fraud policy is a statement of general policy. Modifiers such as
"ordinarily" and "generally" indicate that FDA managers have
flexibility in implementing the policy. Under the policy, and consistent with current
agency review policy, FDA center management can assess, as appropriate for each review
process, the relative public health significance of the product under review and set
review priorities for applications requiring validity assessments. Applications for
products that may yield important therapeutic or diagnostic gains and that are on an
expedited track for substantive data review, such as acquired immunodeficiency syndrome
(AIDS) drugs, may continue to be reviewed and may receive priority attention with regard
to any validity assessment. Thus, although FDA intends generally to defer substantive
review of data in applications implicated by wrongful acts, the agency recognizes that
such deferral may not be appropriate in all cases.
29. One comment requested clarification on the process FDA will follow
after it determines that the data in an application are unreliable. The comment noted that
it appears as if that application will be put on hold until a new application, not simply
new data, has been submitted. The comment contended that this seems unduly punitive and
resource intensive, particularly if the data are faulty because of errors that were
unintentional and inadvertent.
As discussed in response to comment 10, the fraud policy does not
address the issue of rehabilitation of applications containing only unintentional or
30. One comment requested that new applications submitted to replace
false data not be subject to a validity assessment, provided the applicant fulfills the
other corrective or remedial actions specified in the fraud policy.
The need for validity assessments for new applications will be
determined based on the facts in each case, considering whether a pattern or practice of
wrongful acts raises a significant question about the validity of data in the new
applications as well as the previously submitted applications.
31. One comment interpreted the fraud policy as applying only to
applications for marketing and not to other data submissions such as over-the- counter
(OTC) review submissions or citizen petitions. The comment noted that if the policy
extends to these other submissions, FDA must provide additional notice and opportunity for
FDA advises that the fraud policy was developed as a statement of
general policy for FDA managers to take strong measures to ensure the reliability of data
submitted in the context of the agency's licensing, approval, and classification
mechanisms. These include the following: (References to the Public Health Service Act are
identified. All other references are to the act.)
a. Section 510(k) (21 U.S.C. 360(k)), which implements sections 513(f)
(21 U.S.C. 360c(f)) and 513(i) (21 U.S.C. 360c(i)) for determining whether a medical
device is substantially equivalent to a marketed medical device;
b. Section 513 (classification of medical devices);
c. Section 514 (21 U.S.C. 360d) (Class II medical devices); d. Section
515 (21 U.S.C. 360e) (class III medical devices); e. Section 519 (21 U.S.C. 360i) (records
and reports for medical devices);
f. Section 520(g) (21 U.S.C. 360j(g)) (investigational medical
g. Section 409 (21 U.S.C. 348) (food additives);
h. Section 706 (21 U.S.C. 376) (color additives);
i. Section 505(b) (21 U.S.C. 355(b)) (new human drugs); j. Section
505(j) (21 U.S.C. 355(j)) (new human generic drugs); k. Section 505(i) (21 U.S.C. 355(i))
(investigational human drugs);
l. Section 512(b) (21 U.S.C. 360b(b)) (new animal drugs); m. Section
512(m) (21 U.S.C. 360b(m)) (medicated animal feed); n. Section 512(n) (21 U.S.C. 360b(n))
(new animal generic drugs);
o. Section 512(j) (21 U.S.C. 360b(j)) (investigational animal drugs);
p. Section 507 (21 U.S.C. 357) (antibiotics);
q. Section 801(e) (2) (21 U.S.C. 381(e) (2)) (exportation of certain
r. Section 802 (21 U.S.C. 382) (exportation of unapproved new human
drugs and new animal drugs, and unlicensed biological products);
s. Section 802(f) (21 U.S.C. 382(f)) (drugs for tropical disease);
t. Section 351 of the Public Health Service Act (biological products);
u. Section 351(h) of the Public Health Service Act (exportation of
partially processed biological products); and
v. Section 351 of the Public Health Service Act (establishments that
manufacture biological products).
Although the fraud policy is not specifically directed to submissions
related to OTC drugs not approved under sections 505(b) and 505(j) of the act or to
citizen petitions, the agency may conduct validity assessments to assess reliability of
data in those submissions or any other submissions. FDA does not agree that additional
opportunity for comment must be provided on possible agency efforts to assess reliability
of data in those submissions. As discussed in the response to comment number 28, FDA
recognizes that for some review processes the applicant is required to provide the agency
with all known data in the public domain. The agency further recognizes that the applicant
may have limited information about the reliability of such data and would generally not
expect the applicant to vouch for its validity.
32. One comment suggested that the fraud policy indicate that FDA will
not make certain other administrative approval determinations, such as those relating to
Federal procurement under the government-wide quality assurance program, export
certificates, etc., until the applicant has taken appropriate corrective actions and FDA
has verified that the corrections are satisfactory.
The fraud policy is designed generally, to ensure reliability of data
in applications to FDA and was not designed to address government procurement or other FDA
administrative processes. The agency will, however, consider the violative acts addressed
by the fraud policy as appropriate under those administrative processes.
33. One comment suggested that FDA's publicly stated fraud policy
should substitute for FDA's unofficial domestic alert list. The comment noted that
significant consequences, such as FDA's refusal to process a pending application, to issue
export certificates, and to approve a listed company for participation in government
contract bids can result from placement of a firm on the domestic alert list, and these
consequences are imposed without any due process measures or publicly stated policy.
Another comment expressed concern that firms were not able to determine whether they have
been placed on FDA's "Alert List." The fraud policy is a general policy
directive designed to ensure reliability of data in applications submitted to the agency
and cannot serve as a substitute for the agency's alert system. The concerns expressed
about the agency's alert systems are beyond the scops of the fraud policy.
34. One comment suggested that the scope of FDA's fraud policy be
limited to fraudulent activities. The comment noted that the proposed corrective actions
suggest that an applicant develop written procedures to assure compliance with current
good manufacturing practices (CGMP's) and adherence to application requirements and
demonstrate such compliance in FDA inspections. The comment indicated that FDA's other
enforcement "tools" are better suited to preventing, curbing, and punishing
noncompliance with CGMP's or with application requirements.
The fraud policy is not directed toward CGMP violations, generally. In
implementing corrective actions based on wrongful acts addressed by the fraud policy,
however, applicants may need to revise manufacturing practices, hiring practices, training
procedures, and other areas of operations to ensure reliability of data submitted to FDA
and to assure safety and, when applicable, the effectiveness of marketed products.
35. Three comments requested that the fraud policy require that all
applications, not just abbreviated new drug applications (ANDA's) submitted under section
505(j) of the act (21 U.S.C. 355(j)), that are not found to contain fraudulent data will
be returned to the review queue in the same position they were removed from the queue. One
comment asked FDA to clarify how
NDA's will be treated so that the time period consumed in application
review is not extended.
The fraud policy does not address the assignment of application within
any review queue. In the preamble to the proposed fraud policy, the agency stated that,
for applications submitted under section 505(j) of the act (21 U.S.C. 355(j)), if the
agency determined that the data in the application are reliable, the agency would expect
to return that application to the review queue in the position it occupied in the review
queue, minus the time required for the agency's validity determination. The queue system
used for determining review priorities for ANDA's is designed specifically for that review
process and is currently being reevaluated by CDER. Each FDA center develops its own
procedures for establishing priorities of review.
36. Three comments expressed concern regarding the return of premarket
applications to the review process following validity assessment, particularly when rights
to exclusivity may exist. The comments contended that, if the agency's suspicions of fraud
prove to be unfounded, an applicant's legitimate expectation of obtaining the first
approval may be jeopardized.
As discussed in response to comment 35, the fraud policy does not
address the assignment of an application within a review queue. Each affected center will
establish its procedures for implementing the fraud policy. Moreover, the comments'
reference to "an applicant's legitimate expectation of obtaining the first
approval" is unclear. Because of the myriad of issues that may arise during review of
any application, there is no guarantee that the first application submitted to FDA will be
the first approved.
37. One comment stated that, when data in an application are determined
to be invalid and a new application is submitted, company executives should not be
required to certify the accuracy of the data on the new application because no one can
have personal knowledge of all of the data in the application. The comment indicated that,
at most, the person submitting the application should certify that the company has taken
reasonable steps both to ensure the validity of data generated by the applicant and to
audit data prepared by others for inclusion in the application.
FDA recognizes that the official who certifies the truth and accuracy
of a new application is not likely to have personal knowledge of all matters related to
the development and analysis of the data in the application. The official who signs the
application certification is responsible, however, for ensuring that appropriate
procedures and controls have been developed and implemented to ensure that data submitted
in support of marketing applications are reliable and to ensure that wrongful acts such as
those that affected data reliability do not recur. FDA expects these certifications to be
based on the signing officials's knowledge that such procedures and controls are in place
and are implemented properly.
38. One comment addressed paragraph 4 of the corrective action
provision of the fraud policy, which indicates the applicant's chief executive officer
should commit, in writing, to an operating plan that "* * * will, as appropriate,
address procedures to preclude future instances of fraud and noncompliance with regulatory
requirements for approved applications, as well as procedures to preclude any recurrences
of other violations which may have been found * * *" (55 FR 52323). The comment
stated that this would be difficult for any executive to sign if it is meant to be a
guarantee that there will be no future instances of fraud or noncompliance.
FDA realizes that commitment to, and implementation of, an operating
plan will not guarantee there will be no future instances of fraud or noncompliance. The
commitment to a corrective action operating plan signifies a commitment by the applicant
to implement and monitor reasonable and appropriate procedures and controls that will
correct identified problems and will, to the extent possible, deter future recurrence of
wrongful acts such as those that affected data reliability.
39. One comment requested clarification of whether the applicant's
operating plan would also cover regulatory issues unrelated to the fraudulent activity.
The operating plan should identify corrective actions the applicant
will implement to ensure that data submitted to support their marketing applications are
reliable and that wrongful acts that affect data reliability do not recur. FDA may request
the applicant to include in the operating plan procedures to correct other violations and
to prevent recurrence of these violations, even though the violations are not directly
related to the wrongful acts or to data reliability.
40. One comment requested that the policy provide a timetable fro FDA
reinspections to ensure that corrective actions are reviewed in an expeditious manner. FDA
believes it is impractical to incorporate into the fraud policy a timetable for FDA
reinspection. FDA inspections will be scheduled as appropriate in each case based on
consideration of a variety of factors, including FDA's review and inspection priorities
and the applicant's responsiveness in providing FDA with information regarding progress on
implementation of the corrective action operating plan.
41. Two comments requested FDA to clarify whether recalls will be
required only for those products that are directly associated with the application that
contains unreliable data.
FDA may suggest voluntary recall, or may initiate an FDA-requested
recall, of any product that is marketed, based on an application that contains data that
are deemed by the agency to be unreliable. Decisions regarding products that should be
recalled will be made on a case-by-case basis, consistent with FDA's current recall
authority, policies, and procedures.
42. The comments requested clarification of whether retesting would be
required only if the wrongful acts relate directly to the testing of that product.
FDA may suggest or require retesting of any product that is marketed
based on an application containing test data that have been called into question directly
or indirectly. Decisions regarding the need for product retesting will be made on a
43. With respect to paragraph 4 of the corrective actions provision of
the fraud policy, one comment recommended that the agency permit adequate time to
institute significant company-wide steps, such as new programs for the reeducation of
employees and the creation of new documentation, but not preclude reinstitution of
approval procedures for an application if the firm is implementing all necessary
FDA expects the applicant's corrective action operating plan to
identify appropriate steps for ensuring the integrity of its applications and marketed
products. A timetable for implementing the corrective action operating plan should be
established by the applicant. Timeframes for implementing appropriate programs for
reeducation of employees and for creating new documentation programs should be
incorporated into the action plan timetable. The extent to which these programs will need
to be fully implemented, prior to an FDA determination that the data in a particular
application are valid, will be evaluated for each particular case.
44. One comment requested that FDA notify the applicant when the
validity assessment has been concluded and review has resumed according to normal
FDA intends to notify the affected applicant of the agency's
satisfactory conclusion of any validity assessment.
II. Final Policy
FDA's CPG's are not intended to create or confer any rights,
privileges, or benefits on or for any private person, but are intended merely for internal
FDA guidance. It is FDA's usual practice to publish in the Federal Register only a notice
of availability for CPG's. However, because the full text of the proposed fraud policy was
published in the Federal Register and because revisions have been made to the proposed
policy, FDA is publishing the full text of CPG 7150.09 that incorporates the final fraud
policy as follows:
Food and Drug Administration Guide 7150.09 Compliance Policy Guides
CHAPTER 50-GENERAL POLICY
Subject: Fraud, Untrue Statements of Material Facts, Bribery, and
The House Subcommittee on Oversight and Investigations began an
investigation of wrongful acts involving some manufacturers of generic drugs and some
employees of the Food and Drug Administration (FDA) during July 1988. As a result of those
investigations and investigations conducted by FDA, four FDA employees were found to have
accepted illegal gratuities from generic drug companies, and to date, eleven generic drug
companies were found to have falsified data submitted in premarket applications to FDA.
In FDA's investigations, which began as inquiries into illegal
gratuities and questionable data submissions, the agency discovered broad patterns and
practices of fraud in the applicants' abbreviated new drug applications. The discovery of
this extensive pattern of fraudulent data submissions prompted FDA to develop a program
(1) to ensure validity of data submissions called into question by the agency's discovery
of wrongful acts such as fraud, untrue statements of material fact, bribery, and illegal
gratuities and (2) to withdraw approval of, or refuse to approve, applications containing
fraudulent data. This guide sets forth the agency's general approach to applications that
have been called into question by such wrongful acts and applications found to contain
The terms applicant and application are used broadly in this policy
statement. References to the applicant include any person within the meaning of section
201(e) of the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 321(e)) who
submits to FDA data or other information to influence or support an agency decision
regarding approval to market an FDA-regulated product. Actions by an applicant's employees
or agents are considered actions by the applicant. References to the application include
any application, petition, amendment, supplement, or other submission made by an applicant
to an agency review process in support of the approval or marketing of a regulated
product. These review processes include, but are not limited to, new drug and new animal
drug approvals, biological product and establishment licensing, premarket notification,
classification, and premarket approval of medical devices, food additive petitions, and
color additive petitions. References to data in an application include all data and other
information submitted in or in relation to, or incorporated by reference in, the
Actions on the part of an applicant to subvert the integrity of an FDA
review process through acts such as submitting fraudulent applications, making untrue
statements of material facts, or giving or promising bribes or illegal gratuities may call
into question the integrity of some or all of the applicant's submissions to the agency.
In such cases, FDA will conduct an investigation to identify all instances of wrongful
acts and to determine the extent to which the wrongful acts may be affected approved or
pending applications. The scope of FDA's investigation will be determined based on the
nature of the offense and will focus on the reliability of the applicant's research and
manufacturing data. If the wrongful acts have raised a significant question regarding
reliability of data in some or all of the applicant's pending applications, FDA ordinarily
will conduct validity assessments of those applications.
FDA generally intends to defer substantive scientific review of the
data in a pending application undergoing a validity assessment until the assessment is
complete and questions regarding reliability of the data are resolved. To approve an
application, FDA generally must determine that the applicant is capable of producing a
safe and, for some types of applications, an effective or functional product based on,
among other things, testing and other data provided by the applicant and the adequacy of
the applicant's manufacturing processes and controls. The principal basis for this
determination is the data in the application; therefore, the reliability of data is of
critical importance. If the agency determines that the criteria for approval cannot be met
because of unresolved questions regarding reliability of data, the agency will not approve
When FDA finds, based on fraudulent data in an application, that the
data in the application are unreliable, the agency intends ordinarily to exercise its
authority, under applicable statutes and regulations, to refuse to approve the application
(in the case of a pending application) or to proceed to withdraw approval (in the case of
an approved application), regardless of whether the applicant attempts to replace the
unreliable data with a new submission in the form of an amendment or supplement. Thus, if
the applicant wishes to replace the false data with a new submission, the new submission
should be in the form of a new application. The new application should identify the parts
of the original application that were found to be false. The truthfulness and accuracy of
the new application should be certified by the president, chief executive officer, or
other official most responsible for the applicant's operations.
FDA also may seek recalls of marketed products and may request new
testing of critical products. For drugs, for example, retesting may be requested for
products that are difficult to manufacture or that have narrow therapeutic ranges. FDA may
pursue other actions, including seizure, injunction, civil penalties, and criminal
prosecution, under the act or other applicable laws, as necessary and appropriate.
The corrective actions an applicant will be expected to take will
depend upon the facts and circumstances of each case, the nature of the wrongful acts, the
nature of the data under consideration, and the requirements of the particular review
process. Applicants who engage in wrongful acts ordinarily will need to take the following
corrective actions to establish the reliability of data submitted to FDA in support of
pending applications and to support the integrity of products on the market:
1. Cooperate fully with FDA and other Federal investigations to
determine the cause and scope of any wrongful acts and to assess the effects of the acts
on the safety, effectiveness, or quality of products;
2. Identify all individuals who were or may have been associated with
or involved in the wrongful acts and ensure that they are removed from any substantive
authority on matters under the jurisdiction of FDA;
3. Conduct a credible internal review designed to identify all
instances of wrongful acts associated with applications submitted to FDA, including any
discrepancies between manufacturing conditions identified in approved applications and
manufacturing conditions during actual production. The internal review is intended to
supplement FDA's ongoing, comprehensive investigation to identify all instances of
wrongful acts. The internal review should involve an outside consultant or a team of
consultants who are qualified by training and experience to conduct such a review. All
oral or written reports related to the review that are provided by the consultant to the
applicant should be made available simultaneously to FDA for independent verification; 4.
Commit, in writing, to developing and implementing a corrective action operating plan to
assure the safety, effectiveness, and quality of their products. This commitment
ordinarily will be in the form of a consent decree or agreement, signed by the president,
chief executive officer, or other official most responsible for the applicant's
operations, and submitted to FDA. The corrective action operating plan will, as
appropriate, address procedures and controls to preclude future instances of wrongful acts
and noncompliance with regulatory requirements for approved applications, as well as
procedures and controls to preclude any recurrences of other violations which may have
been found (e.g., a comprehensive ethics program).
FDA intends to reinspect the applicant to determine that the internal
review has been satisfactorily completed and that the applicant's written corrective
action operating plan has been satisfactorily implemented. Such inspections should
disclose positive evidence (e.g., effective management controls, standard operating
procedures, and corroborating documentation) that the applicant's data are reliable and
that the applicant can be expected to manufacture products in compliance with current good
manufacturing practices and application requirements. In addition, FDA may request an
applicant to commit in writing to retest any product (including, in the case of drugs,
bioequivalence and bioavailability retesting), as FDA deems appropriate.
An applicant also may be requested under existing regulatory procedures
to recall products affected by the wrongful acts, or otherwise lacking adequate assurance
of safety, effectiveness, or quality.
Dated: July 1, 1991.
David A. Kessler, Commissioner of Food and Drugs.
[FR Doc. 91-21592 Filed 9-9-91; 8:45 am]
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