WASHINGTON (Reuters) - On April 5, 2012, a criminal investigator from the Food and Drug Administration named Robert West charged into an oncology clinic in Greenville, Tennessee.
West was chasing a lead that Dr. Anindya Sen and his wife, the clinic’s office manager Patricia Posey Sen, purchased an unapproved Turkish version of the cancer drug Avastin.
But “Cowboy Bob,” as some defense attorneys call him, did not realize his interview was caught on the clinic’s surveillance cameras. West told Posey Sen she was guilty of buying counterfeit drugs and looked like a “deer in the headlights,” court records say.
Without a warrant or permission, he and an FBI agent rifled through cabinets, seizing drugs that appeared to have foreign, non-FDA approved packaging. At one point, West snatched a drug out of a nurse’s hands as she treated a chemotherapy patient.
A U.S. judge later said West’s tone was “ominous and threatening” and that his statement about the drugs being counterfeit “apparently was not the truth.” West’s search was declared illegal, and the evidence was deemed inadmissible at the Sens’ criminal trial in December 2013.
Earlier that year, managers at the FDA’s Maryland-based Office of Criminal Investigations, or OCI, had promoted West to senior operations manager, where he oversaw hundreds of similar investigations. Last year, he was promoted to special agent in charge in Miami. In February, he taught a class to new agents on how to pursue similar probes.
West declined interview requests.
West’s approach in Tennessee and FDA managers’ eagerness to reward him open a window into a collision unfolding inside the historically staid U.S. drug agency, pitting investigators who object to what they see as cowboy tactics against a small cadre of managers who control the opening of investigations.
FDA leaders, including West, Special Agent in Charge of the headquarters office Thomas South and OCI Director George Karavetsos, are pursuing an agenda that has opened a divide over the office’s handling of criminal investigations, interviews and records show.
Prosecutors are declining to pursue many FDA cases, citing a lack of prosecutorial merit, criminal intent or strong evidence, Reuters found in a review of more than 170 letters detailing why the Department of Justice declined cases. The letters, obtained under the Freedom of Information Act, appear to bolster critics’ claims of agency overreaching.
From fiscal 2008 to 2015, more than half of OCI cases – 53 percent – were closed without action. By contrast, at the Environmental Protection Agency in the same period, 71 percent of opened cases spurred criminal charges. At the Internal Revenue Service’s criminal unit, 68 percent of initiated investigations resulted in charges. The FDA criminal investigation office had more cases closed without action than it had arrests, Reuters found.
Some FDA agents complain they have turned into the “Botox Police” – chasing down every doctor who purchased authentic versions of the popular anti-wrinkle drug that were labeled for use in other countries, an exercise producing few prosecutions.
Large pharmaceutical companies sometimes refer cases to the FDA or help the agency investigate targets, and some doctors ensnared in the dragnet say the investigations ultimately help drug makers charge top dollar in the United States.
In one example, Botox maker Allergan referred a case to the FDA against an unlicensed Virginia distributor accused of illegally selling Botox, court records show – helping the agency land convictions. Another time, a former OCI agent-turned security official for a drug maker conducted his own undercover work before sharing his findings with the FDA.
The FDA said its focus differs from other agencies, with a mandate to protect public health, and that it follows leads from all sources –agents, the public and industry. “The public health risks of unapproved drugs from foreign sources outweigh any potential cost savings,” the FDA said in a statement.
In an interview, Karavetsos said statistics are not a good benchmark to measure OCI’s success. Protecting public health will “always trump the criminal investigation,” said Karavetsos, who became OCI director in January 2015.
He points to successful prosecutions, including one against the former Peanut Corporation of America president who sold Salmonella-tainted peanuts, and another involving a fatal meningitis outbreak in Massachusetts.
Through an FDA spokesman, South declined comment.
UNKNOWN OFFICE, BIG POWER
The 280-unit Office of Criminal Investigations, with an annual budget of $77.3 million, is a little-known corner of the FDA created in the 1990s in response to a generic drug scandal.
The FDA agents carry guns and only investigate criminal violations, though the unit is housed inside the agency’s civil regulatory arm, the Office of Regulatory Affairs. Historically, many agents were hired from the Secret Service.
FDA leaders say they are trying to better align OCI’s priorities with agency centers that set policy over areas including food, drugs and tobacco. They are setting investigative goals and revamping training and hiring – changes, they say, that may be causing growing pains.
“Before the realignment, the decision-making about what types of cases OCI would take was less centralized than it is now,” said Howard Sklamberg, deputy commissioner for the FDA’s Office of Global Regulatory Operations and Policy.
Current and former FDA agents say managers push cases that lack legal merit at the expense of others with more potential that were not pursued, including probes involving steroids, the street-level sale of counterfeit painkillers and the importation of drugs like Kratom, a plant used as an alternative to opioids.
Agents say they are instructed to focus primarily on cases involving the “legitimate supply chain.” In the United States, the majority of drugs move through one of three major wholesale distributors – McKesson, Cardinal Health and AmerisourceBergen Corp.. OCI headquarters wields complete control over which cases to pursue.
Most agents who spoke for this article did so anonymously. Reuters obtained letters written by several agents describing tensions and low morale.
“The vast majority of referrals I received from within OCI, especially from Headquarters, involved conduct that did not even rise to the level of a knowing crime,” former FDA special agent Ken Petroff wrote in a March letter to FDA Commissioner Robert Califf. “Some of the referrals involved no crime at all yet I was ordered to spend (waste) time on these cases.”
Petroff sent the letter, he said, to share concerns about waste and management within FDA. Four months later, Associate Commissioner for Regulatory Affairs Melinda Plaisier replied, “I appreciate the information you have provided.”
One example of the fissure emerging within the FDA: a push by headquarters to investigate the use of imported unapproved drugs by doctors, such as Botox, an injectable cosmetic made by Allergan to reduce wrinkles.
The Botox cases are part of a larger effort to crack down on what are known as foreign unapproved medical products – so-called “FUMP” cases. A drug is deemed foreign unapproved if it is manufactured without FDA oversight or lacks labels approved by the agency. The designation doesn’t necessarily mean the drug is counterfeit or harmful.
Concerns about the agency’s handling of Botox cases emerged as early as 2013. In one field office, a psychologist sent to defuse internal tensions heard complaints of “micromanagement” of cases and of Botox inquiries wasting “valuable agent time” and antagonizing relations with U.S. attorneys, documents show.
The Botox initiative has produced few tangible results, but has rankled agents who say they are little more than “Botox Police” or the “ATF”— Allergan Task Force. Some complain the crackdown protects pharmaceutical companies’ drug prices more than consumers.
“In the European Union, price controls govern the amount they can charge,” attorney Kevin Marino said in a 2014 trial defending a client acquitted of illegally shipping Botox. “Here in the United States, apparently the last bastion of capitalism in the world, they can charge whatever they please.”
Investigations into doctors who purchase foreign unapproved cosmetic products are unlikely to prompt prosecutors to press charges, records and interviews show. There is little demonstrable harm to public health or the national purse since taxpayer-funded insurance programs do not accept claims for Botox unless it has been prescribed for an approved medical purpose.
And, the majority of the Botox seized by the OCI was later found to be legitimate products made by Allergan but labeled for use in other countries, according to some 140 FDA lab reports examined by Reuters.
Allergan calls the manufacture and sale of counterfeit Botox a “significant threat.” Unauthorized suppliers may not store it at the proper temperature, decreasing its effectiveness and triggering “adverse effects,” Allergan said.
The company “frequently” receives reports about unauthorized sellers and refers them to law enforcement when necessary, a spokesman said.
Letters drafted by agents and sent to U.S. Attorney’s Offices detail why the bulk of the FDA’s Botox prosecutorial referrals were declined.
The Nevada U.S. Attorney’s Office rejected a case against a doctor who twice purchased foreign-made Botox for his wife. Other prosecutors declined cases because the Botox was authentic, small amounts were purchased, and no insurance claims were submitted.
Still, agents are instructed by managers in the office’s headquarters in Rockville, Maryland, to interview every doctor suspected of purchasing foreign unapproved drugs and upload their findings into a non-public FUMP database used to mine for criminal targets. “There are no assurances that unapproved products from foreign sources are safe or effective,” the FDA said.
Another investigation that faltered: a nationwide undercover sting championed by Karavetsos in 2015 involving the purchase of a variety of dietary supplements marketed for weight loss, sexual performance and strength building sold at retail chains including GNC, The Vitamin Shoppe, and Vitamin World.
Though agents bought about $16,000 in supplements, the investigation produced no prosecutions because the supplements all came back with a clean bill of health from the FDA’s lab, documents obtained by Reuters show.
“Wasting investigative resources on cases that go nowhere raises concerns about the responsible use of tax dollars,” said Senate Judiciary Chairman Charles Grassley, R-Iowa.
Karavetsos described the probe as a proactive investigation.
MISDEMEANORS AND QUESTIONS
Unlike Europe, the U.S. does not impose price controls on pharmaceuticals. This makes costly drugs like Botox popular in America’s “gray market,” where distributors divert drugs with foreign labels into the United States and sell them to doctors at a discount.
“There is a reason why a doctor in the United States is incentivized to buy foreign-sourced Botox,” said Andrew Ittleman, a defense attorney with Fuerst Ittleman David & Joseph PL. “All of this relates to… the lack of price controls and Allergan trying to control its market.”
The FDA launched a mission to interview doctors who buy foreign-sourced clinical drugs, hoping to halt fraud in the supply chain. But the effort brought limited success.
The FDA’s push was sparked when a fake version of Roche’s cancer drug Avastin infiltrated the supply chain. Distributors offered to sell the drugs at cheaper prices to oncologists who operate sole practices and had no power to negotiate discounts.
A Roche spokeswoman said the company learned of the issues from a Swiss wholesaler in December 2011; the FDA contacted the company in January 2012 after learning counterfeit vials were shipped to the U.S.
From 2011 to 2015, FDA investigations into foreign unapproved oncology drugs led to criminal charges against suppliers and distributors as well as more than two dozen doctors, nurses, office managers and clinics who bought the drugs and billed them to federal insurance programs.
Yet most doctors, nurses and office managers were charged with less serious misdemeanor violations of the Federal Food, Drug and Cosmetic Act, which makes it a crime to introduce or receive a counterfeit, adulterated or misbranded drug into interstate commerce.
The FDA is the lead federal agency enforcing violations of the law, with FUMP cases among its investigative priorities.
After devoting more than 218,000 man hours on FUMP investigations from 2012-2015, many cases were declined for prosecution or closed. Of 878 investigations opened from 2009 through Aug. 1, 2016, 110 convictions resulted and 437 cases were closed without action, records show.
In an irony, many doctors criminally prosecuted had purchased real versions of the drugs that were misbranded, while some who actually bought fake Avastin were not charged.
The Roche spokeswoman did not directly respond to a question about the disparate prosecutorial treatment, but said the company supports the government’s efforts.
In two California cases, doctors who purchased counterfeit Avastin reached civil settlements. In Arizona, doctors whose patients suffered adverse reactions to counterfeit Avastin were not charged due to “the lack of interest” by prosecutors, records show.
Karavetsos defended the efforts, saying each U.S. attorney’s office has unique priorities and OCI is focusing on high-volume purchasers and repeat offenders.
“We don’t have the luxury to play Russian roulette with the consumers in the United States,” he said.
Charging doctors with misdemeanor violations has sparked debate.
Doctors are typically not trained to identify misbranded packaging, yet can be convicted of a misdemeanor if they unintentionally buy a misbranded drug. An FDA expert once testified he didn’t learn how to identify foreign unapproved labels until he joined the agency. West, in a 2013 email to field managers, admitted having a hard time detecting misbranded medical devices.
A drug can fall afoul of branding rules over small details. Those failing to display “RX only” or containing foreign writing on the outer package or insert could skirt rules.
Often, prosecutors cited a lack of criminal intent in turning down FDA cases.
“You don’t have to be a philosopher king to understand there is an elemental unfairness in holding someone criminally liable for conduct of which they had no knowledge or intent,” said Richard Callahan, U.S. Attorney for the Eastern District of Missouri.
Callahan said he strives to bring felony charges, but on rare occasion files misdemeanors in hopes of using the charges to build larger cases.
To be sure, some doctors ignore red flags.
One in Tennessee got a two-year prison term after he ignored nurses’ concerns that some of the drugs he bought had foreign languages on the labels; he had the drugs shipped to a storage building to avoid detection. Karavetsos said the FDA has nearly a dozen active cases into doctors who continued buying drugs after warnings.
But many doctors say they did not knowingly break the law.
A CASE IN TEXAS
One is Dr. Eduardo Miranda, an oncologist treating primarily impoverished patients in Laredo, Texas.
The drugs Miranda bought were made by the real manufacturers, but labeled for use in other countries. No patients were harmed.
Miranda said he ordered from a company called Quality Special Products because he was facing a shortage of an anti-nausea drug. QSP also offered a discount.
In 2009, an FDA agent confronted Miranda and accused him of ordering from QSP to make more money. Later, with TV cameras rolling, agents wearing bulletproof vests and carrying guns raided his office while patients awaited care.
Miranda stopped purchasing from QSP and created a new compliance program. In 2013, the U.S. Attorney for the Southern District of Texas prosecuted Miranda. He pleaded guilty to a misdemeanor of introducing a misbranded drug into interstate commerce.
“I think I was used by them to make a statement,” Miranda said. “They didn’t care that I was the only clinic providing care for indigent patients.”
Miranda is trying to appeal a 13-year ban from participating in federal health programs. In a nod to the role Miranda plays in his community, the Health and Human Services Inspector General carved out an exemption allowing him to continue billing the government as long as he remains in Laredo. Separately, the Texas medical board declined to fine him.
Miranda pays $17,000 in monthly restitution to Medicare, Medicaid and Blue Cross Blue Shield. Drug maker Sanofi petitioned for restitution on top of that, saying it lost $300,000-plus in profit because Miranda did not pay the U.S. market rate. The judge rejected that argument.
Sanofi takes “threats to patient safety” seriously and seeks restitution “as an additional deterrent,” a spokeswoman said.
Miranda’s attorney, Russell Soloway, said the case sends another message: “The laws and regulations are set up to safeguard the ... big drug supply companies.”
Some legal experts believe the law should differentiate between clear criminal conduct, such as selling watered-down products, versus buying the same drugs cheaper.
“You would hope they would focus on people endangering the public health,” said Kevin Outterson, a professor of health law at Boston University.
After the discovery of bogus Avastin, OCI initially focused on tracking down doctors who purchased foreign unapproved cancer medications.
In 2013, the focus shifted. That year, Rockville managers dispatched investigators to interview 1,100 doctors suspected of buying foreign unapproved drugs from Medical Device King, a licensed wholesale distributor in Great Neck, New York, internal records show.
Former OCI agent Jim Dahl, then a security official for drug maker Eisai, conducted undercover purchases of the anti-nausea drug Aloxi from Medical Device King and shared his findings with the FDA, later testifying for the government.
Dahl, now a board member for the non-profit Partnership for Safe Medicines, said Eisai was motivated by patient safety. “If we find a crime, we refer it to the government,” he said.
As agents made their rounds, they encountered many doctors who had only purchased Botox or medical devices. Some got less than $1,000 worth of drugs.
Special Agent in Charge South instructed agents to conduct surprise visits to doctors’ offices, refer each for prosecution and seek asset forfeitures, an April 2013 email shows. Agents often entered offices without warrants.
Thomas Kubic, president of the non-profit Pharmaceutical Security Institute, sees value in agents visiting doctors. “You don’t know if it is genuine or counterfeit,” he said.
Only a handful of doctors have faced prosecution for buying foreign, unapproved Botox.
One, Anoushirvan Sarraf, was convicted at trial in 2014 on felony charges in connection with illegally importing and purchasing Botox from Gallant Pharma, an unlicensed Virginia supplier the FDA began investigating in 2009 after complaints from Allergan. Jonathan Simms, Sarraf’s attorney, said his client denied being part of a conspiracy.
In the same case, court testimony shows, the FDA asked Allergan to help it find a doctor who would go undercover, though the effort failed. Other drug makers hired their own private investigators to make undercover purchases and shared the results with the FDA. Drug companies “very frequently” send complaints to OCI, an FDA agent testified.
West unveiled plans to launch the FUMP database in an April 2013 email to field managers, saying it would help gather intelligence. “These cases are not ‘stupid’ as an agent recently stated,” wrote West, who is retiring this month.
In June 2013, an FDA employee lodged a complaint with the HHS Inspector General, saying the Botox cases drained resources. The complaint detailed the hours spent chasing doctors who bought small quantities, and said managers chided agents raising questions.
Nothing came of the complaint, the former employee said.
THE CASE IN TENNESSEE
In Tennessee, the Sens won a victory in convincing a judge to suppress evidence from West’s search. Dr. Sen and his wife faced multiple misdemeanor counts for buying foreign unapproved drugs. Office manager Posey Sen faced felony charges, including allegations she lied to West.
The jury acquitted Posey Sen of all felony charges. It convicted the Sens of misdemeanors involving introducing misbranded drugs into interstate commerce.
The convictions did not stand for long.
The Sens appealed, but before their case was heard, the Justice Department announced in December 2014 it would vacate the convictions. The DOJ declined to provide Reuters documents detailing its rationale.
Still, the DOJ has pursued civil charges against Dr. Sen, records show, and the government withheld about $1 million in reimbursements tied to the drugs. The Sens had to fight to convince HHS to let them participate in federal insurance programs.
Dr. Sen is again treating patients.
Posey Sen described the case as a “horrible ordeal.” At one point during her arraignment, she said, West swabbed her mouth for a DNA sample. “He personally did the DNA testing on me,” she said.
Editing by Ronnie Greene
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