Thank you for the introduction and thank you to the Food and Drug Law Institute (FDLI) for inviting me to open the Enforcement, Litigation and Compliance Conference. I’m heartened to see many familiar faces and even more excited to see new participants in this year’s conference. It’s been busy at the Department of Justice, and I am grateful for the opportunity to share with you some of the significant accomplishments of the department’s Consumer Protection Branch over these last 12 months. And I look forward to hearing from the many distinguished panelists who will be participating in this conference over the coming days.
This morning, I’d like to provide updates on the progress of several of the branch’s major initiatives, and I also want to give highlight some significant recent department-wide policy developments. Two important themes run through all these efforts. First, where companies fail to abide by regulatory obligations and thereby jeopardize public health, the branch and its partners will not hesitate to act. Second, the branch takes seriously representations made to the public. Consumers making decisions about their health and well-being should be able to trust that when companies make health claims about products, those claims are supported by well-founded evidence, as the law requires. Where representations are unsupported, the department and our agency partners will swiftly and aggressively enforce laws designed to protect public health and consumer’s ability to make informed decisions about the products they use.
Before I proceed, however, I want to take a moment to recognize the dedicated public servants behind these efforts — both at the branch and at our agency partners. The mission of the Consumer Protection Branch is to enforce federal laws designed to protect the public’s health, safety, economic security and identity integrity. Staffed by more than 100 trial attorneys (and supported by a team of over 150 talented paralegals, investigators and contractors), the branch works closely with the (Food and Drug Administration) FDA and the (Federal Trade Commission) FTC, as well as a range of law enforcement agencies, including the FBI, (Drug Enforcement Administration) DEA, U.S. Postal Inspection Service, (Department of Health and Human Services) HHS Office of Inspector General and HSI, among others. With the help of our partners, we bring enforcement actions across the country using the wide range of criminal and civil tools available to us — both to remedy misconduct and, where appropriate, to punish those companies and individuals responsible for that misconduct.
Enforcement actions that the branch has taken over the last two months provide a representative sample of the types of misconduct that our teams regularly seek to combat. Since October, in the health and safety space, the branch and its partners have secured:
- Criminal trial convictions of two executives who failed to report dangerous product defects to the Consumer Product Safety Commission — part of the first-ever criminal prosecution for failure to report under the Consumer Product Safety Act;
- Civil injunctions in two cases involving adulterated and misbranded dietary supplements, and in a third case involving unapproved contraceptives;
- A civil resolution requiring a Puerto Rico-based pharmaceutical distributor to pay $12 million for its failure to report suspicious orders of opioids and other controlled substances; and
- A criminal guilty plea from a CEO who caused the distribution of adulterated and misbranded medical devices.
These matters, which have included both civil and criminal resolutions, and which have involved both companies and individuals, demonstrate the branch’s commitment to protect American consumers by identifying and addressing violations of law that pose significant risks to health and safety.
Before I share some of the branch’s recent accomplishments, I’d like to spend a few minutes updating you on significant recent policy developments at the department.
One of the reasons I have enjoyed speaking at events the FDLI Enforcement, Litigation and Compliance Conference is and the opportunity to engage with professionals like you who are working diligently to help their companies or clients comply with the law and to identify and proactively address compliance issues. When I spoke at this conference last year, I previewed that Department of Justice components with criminal authority (including the branch) would soon be issuing policies related to the voluntary self-disclosure of misconduct. That has now occurred. In March, the branch published its voluntary self-disclosure policy, which is available at the branch’s website.
As Deputy Attorney General Lisa Monaco has explained, these polices are intended to encourage companies to invest in and promote a culture of compliance, and to ensure that companies that disclose and remedy misconduct can secure more favorable dispositions than those that fail to do so. Assuming no aggravating circumstances exist, a company that timely and voluntary self-discloses misconduct, fully cooperates and timely and appropriately remediates criminal conduct will not be required to plead guilty.
I’d like to explain what these disclosures look like in practice.
When must a disclosure be made, to secure the benefits of this policy? A disclosure must be made prior to the imminent threat of disclosure or a government investigation and must be timely (reasonably promptly after the company becomes aware of the offense), with the burden on the company to demonstrate the disclosure was, in fact, timely.
To whom must a disclosure be made, to secure the benefits of this policy? The branch’s policy provides that, to receive credit for a disclosure, the disclosure must be made directly to the branch. To be clear, however, the branch’s policy does not supplant existing obligations to report to appropriate regulatory agencies, nor is it intended to alter those existing practices and channels of communication.
What must be disclosed, to secure the benefits of this policy? All relevant facts known at the time of disclosure — including as to any individuals substantially involved in or responsible for the misconduct at issue — must be disclosed. The department recognizes that tension may exist between making a timely disclosure and gathering all relevant facts. In general, companies should resolve that tension in favor of disclosure, even if only preliminary investigative efforts have occurred — and, in so doing, make clear that the disclosure is based on those initial steps.
One important caveat: if a company satisfies all the requirements under the voluntary disclosure policy, the department may still seek a guilty plea if confronted with aggravating circumstances. These could include, for example, intentional or willful conduct that posed significant risk of death of serious bodily injury, conduct that is deeply pervasive throughout the company or knowing involvement by upper management in the misconduct.
Since being implemented, these voluntary self-disclosure policies have had an impact. Last month, the branch’s colleagues in the Criminal Division announced charges against a former executive for her role in multimillion-dollar Medicare fraud scheme. The executive and her co-conspirators are alleged to have submitted false and fraudulent information about chronic ailments that Medicare beneficiaries did not actually have. The announcement of those charges was accompanied by a public statement from the department that prosecution of the company had been declined, in part, because the company promptly and voluntarily self-disclosed, cooperated and agreed to repay approximately $53 million in overpayments.
The department is continuing to expand upon its efforts to encourage companies to prioritize compliance and to report misconduct. As Deputy Attorney General Monaco announced in October, department components — including the Consumer Protection Branch — are also updating voluntary self-disclosure policies to specifically address mergers and acquisitions. Going forward, acquiring companies that promptly and voluntarily disclose criminal misconduct, cooperate with the ensuing investigation and engage in timely and appropriate remediation, restitution and disgorgement will receive the presumption of a declination. To be timely, such disclosure must occur within six months of the date of closing, and companies will have one year from closing to remediate the misconduct, (although those timelines may change based on the department’s assessment of whether the timing of the disclosure and remediation was reasonable).
Moving from policy to practice, I’d like to turn back to some of the branch’s significant recent enforcement efforts related to consumer health and safety, including its efforts to ensure the safety of food, drugs and medical devices.
Illustrating the importance of sound quality control procedures (and the harm that can result when those procedures are inadequate), in February 2023 food manufacturing company Kerry Inc. pleaded guilty to a misdemeanor count of distributing adulterated cereal marketed as Kellogg’s Honey Smacks. As part of that plea, the company agreed to the largest-ever criminal penalty following a criminal conviction in a food safety case, paying a combined forfeiture and fine of over $19 million. The case stemmed from a 2018 outbreak of salmonellosis resulting from cereal produced at Kerry’s plant in Gridley, Illinois. The (Centers for Disease Control and Prevention) CDC ultimately identified more than 130 cases linked to cereal manufactured at the Gridley plant. The branch’s investigation revealed that managers and employees at the Gridley plant did not adhere to appropriate practices to ensure sanitary conditions. Kerry’s director of quality assurance, Ravi Chermala, also pleaded guilty to three misdemeanor counts of causing the introduction of adulterated food into interstate commerce. Chermala admitted that he directed subordinates not to report certain information to Kellogg’s about conditions at the Gridley facility and instead instructed them to alter the plant’s program for monitoring for the presence of pathogens in the plant, thereby limiting the plant’s ability to accurately detect insanitary conditions.
This year, the branch and our agency partners also successfully pursued several enforcement actions against companies, executives, and employees involved in manufacturing or distributing unapproved medical devices. In January, Pennsylvania-based medical device distributor Jet Medical resolved allegations relating to a device intended to treat migraine headaches. Jet never sought approval or clearance from the FDA to distribute the device for this intended use, however, nor did it conduct an investigational study regarding the device’s safety and efficacy. Jet entered into a deferred prosecution agreement with the government, which included criminal penalties of $200,000 and the implementation of enhanced compliance measures.
And in October, the CEO of a Utah-based medical device company pleaded guilty to misdemeanor charges of causing the introduction of misbranded and adulterated devices into interstate commerce. The defendant, Mark Wright, admitted that he never sought approval or clearance from the FDA to distribute a device intended to be used to treat migraine headaches. And he admitted that in 2014, the FDA had recommended that the company proceed with an investigational study regarding the device’s safety and effectiveness, but the company never conducted the study. Instead, Wright continued to market the device with the intention that it be used to treat migraine headaches — and even provided healthcare providers with marketing materials and unsolicited directions for that unapproved use.
Misrepresentations to consumers also led the branch to secure injunctions under the FTC Act. In July, a federal court ordered the distributor of “Smoke Away” products to pay over $7 million in consumer redress and a $500,000 civil penalty to resolve alleged violations of the Opioid Addiction Recovery Fraud Prevention Act of 2018 and the FTC Act in connection with the marketing and sale of “Smoke Away” products as a quick, effective and easy way to quit smoking. The defendants had made misleading and unsubstantiated advertising claims, including that “Smoke Away” products eliminate nicotine cravings and withdrawal symptoms and enable consumers to quit smoking quickly, easily and permanently. The complaint alleged that these advertising claims were misleading and unlawful because they were not supported by competent and reliable scientific evidence.
New drug discovery and the identification of new indications for existing drugs is vitally important to keeping our nation healthy. And as technology has advanced, we have seen an explosion in FDA approvals — with the five-year annual approval rate average at more than double what it was just 15 years ago. Clinical trials play a central role in gathering the data necessary to demonstrate that these new drugs or indicated uses are safe and effective in combatting illness and disease. And the quality of that data is crucial to those trials. False or misleading data can lead to inaccurate results, which can have serious consequences for patients and the healthcare industry.
Unfortunately, there are certain companies and individuals who attempt to take advantage of the clinical trial process for financial gain by falsifying the identity of study participants, falsifying data or otherwise circumventing the guardrails created to maintain clinical trial data integrity. Clinical researchers who fabricate or falsify clinical trial data can adversely impact critical decisions made by life sciences companies and the FDA related to drug safety and efficacy. And as a result, these highly dangerous fraud schemes can endanger the lives of countless American consumers and erode confidence in FDA’s drug approval practice. As such, the investigation and prosecution of clinical trial fraud remains a high priority of the branch.
As part of our continuing efforts in this space, in September, the branch convicted at trial two individuals who, from 2015 to 2018, conspired to falsify clinical trial data for profit while working at AMB Research Center Inc. (AMB), a medical clinic located in Miami, Florida. Miguel Angel Montalvo Villa was co-owner, president and chief executive officer of AMB, and Ivette Maria Portela Martinez was as AMB’s pharmacist and data entry specialist. Montalvo and Portela used the names of individuals without their knowledge and listed those individuals as subjects who participated in a clinical trial for a drug that was being developed to treat a form of diarrhea. Montalvo and Portela falsified hundreds of pages of documents and entered that false information into clinical trial databases, to make it appear as though the purported subjects were fully participating in the clinical trial, when, in fact, they were not. And in connection with a 2018 FDA regulatory inspection of AMB, Montalvo told the FDA regulatory investigator that AMB had obtained informed consent from all purported clinical trial subjects — knowing that this was not true. Last week, the court sentenced Montalvo to 71 months in prison and Portela to 46 months in prison.
These convictions followed the sentencing in January of a clinical research coordinator involved in a separate clinical trial that studied the effectiveness of asthma drugs in children. The defendant, Jessica Palacio, was sentenced to three years in prison after being found guilty by a federal jury of making a false statement to a government investigator. Palacio submitted a false affidavit to an FDA investigator claiming that she had performed a screening visit of a child subject when, in fact, she had not. Palacio was the fifth defendant convicted and sentenced as part of the Branch’s investigation of a clinical trial firm called Unlimited Medical Research.
While we are proud of our recent successes in connection with this initiative, we know there is more work to do, and the branch will continue investigating and prosecuting clinical trial frauds in the years to come.
From 1999 to 2020, approximately 500,000 Americans died because of an overdose of prescription or illicit opioids. And nearly 250,000 more Americans have died of opioid-caused overdoses in the last three years. Drug overdoses are the leading cause of injury-related death in the United States, and opioids are the driving contributor to this crisis.
Combatting prescription opioid abuse has long been a priority at the Consumer Protection Branch. Over the years, the branch has helped lead several of the largest enforcement actions brought against opioid manufacturers, distributors and chain and local pharmacies, and as our nation continues to grapple with the ongoing opioid epidemic, the branch continues to pursue criminal and civil actions against entities and individuals across the prescription opioid supply chain. Companies that distribute controlled substances to pharmacies and other points of sale have an important responsibility to help stop the illegal distribution of controlled substances by reporting suspicious orders to the Drug Enforcement Administration. The branch works closely with its law enforcement partners to hold accountable those who fail to fulfill their reporting obligations.
In recognition of the complexity of these matters, in March 2023, Associate Attorney General Vanita Gupta announced the creation of the Opioid Epidemic Civil Litigation Task Force, which formalizes and enhances coordination of the department’s existing work and will also consider new initiatives. Because of the scope and duration of the crisis, the task force includes U.S. Attorneys’ Offices, the Consumer Protection Branch and the Civil Division’s Commercial Litigation Branch, the Drug Enforcement Administration and other department components. The task force has been steering the department’s civil litigation efforts involving actors alleged to have contributed to the opioid epidemic.
We don’t need to look back far to identify successful enforcement efforts. Last month, in a case brought by the branch and the U.S. Attorney’s Office for the District of Puerto Rico, a federal court in Puerto Rico entered a consent decree requiring Droguería Betances LLC (Betances), one of Puerto Rico’s largest distributors of pharmaceutical drugs, to pay $12 million and make extensive improvements to its compliance program. The complaint alleged that Betances failed to report hundreds of suspicious orders for opioids and other controlled substances, including at least 655 suspicious orders for fentanyl and at least 113 suspicious orders for oxycodone (both of which are frequently misused products and significant contributors to the opioid crisis).
Finally, I want to highlight the federal government’s ongoing efforts to remove illegal e-cigarettes from the market. Illegal e‑cigarettes contribute to youth addiction and can lead to a lifetime of nicotine dependency. Nicotine is harmful to youth brain development, damaging the parts of the brain that control attention, learning, mood and impulse control. It also raises blood pressure and adrenaline, leading to increased heart rate and likelihood of heart attacks.
The collaborative approach being taken to address these dangerous, unlawful products illustrate the importance of using a range of tools to tackle pervasive misconduct — and have included the issuance by the FDA of hundreds of warning letters to retailers selling unauthorized tobacco products and to firms manufacturing and disturbing those unauthorized products, as well as the filing of dozens of civil penalty complaints.
And where the FDA’s warnings have not resulted in a change of behavior, the Consumer Protection Branch has filed civil enforcement actions — and has secured permanent injunctions in five cases and recently prevailed on summary judgment in another. The branch, together with our colleagues in Civil Appellate, also have defended the FDA in more than 60 petitions for review of the agency’s marketing denial orders and other actions on premarket tobacco product applications that e-cigarette manufacturers have filed in federal courts over the past 18 months. While much remains to be done, these actions demonstrate the branch’s strong commitment to protecting children and adults from unauthorized e-cigarette products.
In closing, I want to emphasize my deep appreciation to the branch’s key partners — our friends at the FDA and the FTC — for their support of our shared mission: to protect the health and safety of the American public.
Many thanks, once again, to FDLI for the invitation to speak with you today. I am grateful for the opportunity to highlight the achievements of our team.