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. COMMITTEE ON ENERGY AND COMMERCE JOHN D. DINGELL, JAMES H. SCHEUER, New York HENRY A. WAXMAN, California PHILIP R. SHARP, Indiana EDWARD J. MARKEY, Massachusetts AL SWIFT, Washington CARDISS COLLINS, Illinois MIKE SYNAR, Oklahoma W.J. "BILLY" TAUZIN. Louisiana RON WYDEN. Oregon RALPH M. HALL, Texas DENNIS E. ECKART, Ohio BILL RICHARDSON. New Mexico JIM SLATTERY, Kansas GERRY SIKORSKI, Minnesota JOHN BRYANT, Texas RICK BOUCHER, Virginia JIM COOPER. Tennessee TERRY L. BRUCE, Illinois J. ROY ROWLAND, Georgia THOMAS J. MANTON, New York EDOLPHUS TOWNS, New York C. THOMAS McMILLEN, Maryland GERRY E. STUDDS, Massachusetts PE9'ER I1. KOSTMAYER, Pennsylvania RICHARD H. 1.E11MAN, California CLAUDE HARRIS, Alabama Michigan, Chairman NORMAN F. LENT, New York CARLOS J. MOORHEAD, California MATTHEW J. RINALDO, New Jersey WILLIAM E. DANNEMEYER, California DON RITTER, Pennsylvania THOMAS J. BLILEY, JR., Virginia JACK FIELDS, Texas MICHAEL G. OXLEY, Ohio MICHAEL BILIRAKIS, Florida DAN SCHAEFER, Colorado JOE BARTON, Texas SONNY CALLAHAN, Alabama ALEX McMILLAN, North Carolina J. DENNIS HASTERT, Illinois CLYDE C. HOLLOWAY, Louisiana FRED UPTON, Michigan JOHN S. ORLANDO, Chief of Staff JOHN M. CIAUGH, JR., Staff Director MARGARET A. DURBIN, Minority Chief Counsel/Staff Director SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS JOHN D. DINGELL, Michigan, Chairman THOMAS J. BLILEY. JR., Virginia J. ROY ROWLAND, Georgia NORMAN F. LENT, New York RON WYDEN, Oregon DAN SCHAEFER, Colorado DENNIS E. ECKART, Ohio FRED UPTON, Michigan JIM SLATTERY, Kansas GERRY SIKORSKI, Minnesota JOHN BRYANT, Texas REID P.F. STtINTZ, Staff Director/Chief Counsel STEPHEN F. SIMS, Deputy Staff Director CLAUDIA P. BEvtt.1.E, Special Assistant (11 8MC69f0g 102d Congress 1st Session COMMITTEE 1'R1NT i t_:ommtr.,_ Print 102-N FILTHY FOOD, DUBIOUS DRUGS, AND DE- FECTIVE DEVICES: THE LEGACY OF FDA'S ANTIQUATED STATUTE A STAFF REPORT PREPARED FOR THE USE OF THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE I COMMITTEE ON ENERGY AND COMMERCE U.S. HOUSE OF REPRESENTATIVES SEPTEMBER 1991 U.S. GOVERNMENT PRINTING OFFICE 47-151 ~ WASHINGTON : 1991 For sale by Ihe U.S Guvemmem 1'rinting Otfice Superiwendent of Ihkumenis, ('unpres.iunal Saicc, (Nlicc, Wa,hingt m, i}C 20402 ISBN 0-16-035650-4

S S I LET'I'ER OF TRANSMITTAL HOUBE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, Washington, DC, September 24, 1991. To MEMBERS OF THE COMMITTEE ON ENERGY AND COMMERCE: It is my pleasure to forward to you the preliminary report by the staff of the Subcommittee on Oversight and Investigations entitled "Filthy Food, Dubious Drugs and Defective Devices: The Legacy of FDA's Antiquated Statute." This staff report selects instructive examples which support the need for H.R. 2597, the Food, Drug, Cosmetic and Device Enforcement Amendments of 1991, from the extensive body of hearings, reports and studies compiled over the last decade. We expect that this study, in conjunction with results from on- going subcommittee investigations, will lay to rest arguments by opponents of the bill that it was somehow drafted without adequate hearings or justifications, and the basis of the discussion will shift to the more serious task of perfecting the language of the proposed legislation. Sincerely, JOHN D. DINGELL, Chairman. CONTENTS Posm Letter of transmittal .................................................................................................... ... Chapter I: Introduction and summary .......................................................... . ..... m 1 Chapter II: Adulterated food, defective devices, and unapproved druga di®trib- uted despite FDA inspection and enforcement actions ......................................... 5 The problem has been recognized for years ........................................................ 5 Dangerous products continue to enter commerce .............................................. 6 Chapter III: Imports have created special problema ................................................. 9 FDA'a inspectional task has become harder ....................................................... 9 FDA cannot rely on the Customs Service ............................................................ 10 Chapter IV: FDA lacks enforcement tools ................ FDA lacks authorit enjoyed b "**'* ...... ***~~* ...... *~~~*~~~***~~~* ... ~~****** Y enIoYeY other a8encies ................................................. 13 13 FDA lacks power to review company records ..................................................... 13 FDA lacks subpoena power .................................................................................... 16 FDA lacks adequate entry authority .................................................................... 17 A presumption of interstate commerce would save FDA resources ............... 18 Chapter V: Civil penalties are needed ......................................................................... 19, Appendix A .................................................................................................... ................... 21 Appendix B .................................................................................................... .................... 23 (v) . sV6Hs9fog

FILTHY FOOD, DUBIOUS DRUGS, AND DEFEC- TIVE DEVICES: THE LEGACY OF FDA'S ANTI- QUATED STATUTE CHAPTER I INTRODUCTION AND SUMMARY On June 21, 1991, 23 trade associations representing industries regulated by the Food and Drug Administration [FDA] signed a letter to Congressman Henry A. Waxman, Chairman of the Sub- committee on Health and the Environment of the Committee on Energy and Commerce. The letter (Appendix A) expressed strong opposition to H.R. 2597, the Food, Drug, Cosmetic and Device En- forcement Amendments of 1991, which was introduced on June 7 by Congressmen Waxman and John D. Dingell, Chairman of the Energy and Commerce Committee. A summary of the bill is at- tached as Appendix B. Opposition from the regulated industry to a proposal to enhance the power of its major regulatory agency is hardly a novel event. What made this letter noteworthy to the Subcommittee staff was the basis for the industry's opposition. The letter stated in perti- nent part: . H.R. 2597 was developed and introduced without any hearings or justification. The legislation appears to be based on a misperception that the FDA needs broad new enforcement authorities with respect to all the industries it regulates. In fact, there is no such evidence, pattern or practice to suggest that the proposed authorities contained in H.R. 2597 are necessary or even appropriate-or that current FDA authority is somehow insufficient to ensure compliance with the Food, Drug and Cosmetic Act [FD&C Act]. The case simply has not been made for sweeping new legislation. This astounding language flies in the face of a decade or more of hearings, reports and studies by the Congress, the General Ac- counting Office, a special advisory committee to the Secretary of the Department of Health and Human Services, and by the FDA itself, all of which support the neec: for the legislation. The Admin- istration itself sent legislation to the Congress in 1990 that includ- ed authority for civil money penalties, one of the provisions of H.R. 2597,' and Secretary Sullivan testified in June 1991 that his De- ' Letter from Secretary Sullivan to Speaker Foley, April 23, 199Q enclosing the Food, Drng and Device Fraud and Abuse Prevention Act of 1990- Hereinafter cited as the April 'l'3. 194® Sullivan letter (1) . O9G9MV09

S partment had reviewed and was satisfied with draft legislation pre- pared by the FDA.2 In March 1991, FDA Commissioner Kessler te t'fied that new en orcemenl- oo s-- _. ~ es _ prtorlty, an speci7tcally mentioned records inspection, subpoena authority, embargo power, debarment, civil money penalties and a presumption of interstate commerce.3 In July 1991, Commissioner Kessler endorsed most of these provisions in draft testimony that was unfortunately killed by his superiors in the Administration.4 Nonetheless, it seems quite clear that the FDA and the Department of Health and Human Services favor the authorities contained in H.R. 2597. Chairman Waxman pointed out at a July 17 hearing on H.R. 2597 that a study prepared by the Congressional Research Service concluded that the enforcement authorities in the bill are compara- ble to those enjoyed by other administrative agencies, that Health and Human Services' Secretary Sullivan's own Advisory Commit- tee (t1t Edw~a,~~rds Committee) endorsed giving the FDA additional enforcement toMk~~t Secretary Sullivan himself approved draft legislation that would give the agency such powers.5 In light of the incredible basis of the opposition to the proposed enforcement amendment, which can hardly be considered as "sweeping" in any case (Chairman Waxman noted at the July 17 hearing that all but one of the authorities in the legislation are al- ready in one part or another of the FD&C Act),6 the staff conclud- ed that it would be of use to the Members and the public to sum- marize in one study some of the voluminous historical, and more recent, examples that illustrate the vital need for H.R. 2597. The record shows that dangerously adulterated foodstuffs, sub- standard medical devices and prescription drugs of dubious effec- tiveness or which are unlicensed are reaching American consumers on a regular basis because the FDA has neither the resources nor the authority required to prevent such abuses. The greatest threat appears to be the health and safety problems posed by the ever in- creasing surge of imports, which have tripled in volume since theJ mid-1970's.T And foodstuffs are by far the largest component of such imports, comprising about 84 percent of the 1.5 million entries subject to FDA regulation in 1987.8 In 1988, the FDA estimated that some 40 billion pounds of food, whose value exceeded $20 billion, were im- ported into the United States.9 The FDA,r.hecclrg thP o_age __r~rka^ " &ut 9 percent of these entries a nd phvsically ~amples and tes gtaggering 40 percen al e o meet FDA standards for a variety of ' Hearinge, Subcommittee on Health and the Environment, Committee on Energy and Com- merce. June 12, 1991, tr. pp. 24-25. ' Hearings, Subcommittee on Health and the Environment, March 13,1991, tr. pp. 50-51. ' The text wae placed in the record of the Subcommittee's September 12, 1991 hearing. ' Hearing on H.R. 2597, Subcommittee on Health and the Environment, Committee on Energy mnd Commerce, U.S. House of Representatives, July 17, 1991. tr. p. 3. Hereinafter cited as Hear- inipJuly 17, 1991. Hearinge July 17, 1991, tr. p. 2. "'The Efficiency of FDA Import Practices," Divieion-of Management Systema and Policy, Office of Management and Operations. USFDA, March 1990, p. 44. (Hereinafter cited as FDA St~dy~ March 1990). ' I,d. TME69f©g I 3 S reasons, including contamination with bacteria, pesticides, insects and filth, labeling deficiencies, and decomposition.' ° The high re- jection rate reflects the ability of the FDA to target its limited in- spectional and testing resources on the imports that are the most likely to be violative, and the reader should not assume that the average violation rate for imports is anywhere near this level. However, what this figure and the examples that will be described in the chapters that follow clearly do support is the presumption that tens of millions of pounds of imported foodstuffs that do not meet FDA standards are nonetheless distributed into commerce each year. Moreover, even when the FDA discovers violative food and other imports, the agency's lack of detention and seizure authority re- sults in the re ease ofTGiaccep€a~~Te~ s lnto commerce. 97 would' give the FDA the tools to prevenT11iis: `If "makes a~9uhttely-- no'sense-that agencies suclti a§""th6 Consuiiie'r` Pr'oduct Safety Com- mission and the National Highway Traffic Safety Administration possess recall authority for the products they regulate while the FDA, which regulates products from some 90,000 companies that account for one quarter of the Gross National Product of the United States," does not. In f;aet,,,jt.,appears that the FDA is not aware of many rgcalls ntil after they occur. An &toGer"1M-- GAO Repor~t analyzed a sample~ o~` volt"lfita'ry "r`ec0i15 and found that the FDA learned about the recall from sources other than the re- calling company in nearly half the cases. In such instances, the FDA's ability to~oversee the im~lementation of the recalY'fiffd" Mffre~tTie accuracy- o~`'`~~e in~ormatlon,. catrimuiiity and the publlc is virtually nl~' 2 - Fnod' safety is no small problem. A U.S. Department of Agricul-' ture publication, cited in Oversight Subcommittee hearings in 1989, estimated that between 6.5 and 33 million Americans become sick each year because of microorganisms in their food, and some 9,000 afflicted persons die.' 3 In March 1990, the FDA published a major study by its own team of experts which addressed the import problem." This com- prehensive review was prompted by earlier studies by the GAO ' 5 and by the Oversight Subcommittee.' ° The FDA Report identified several procedural improvements that would increase efficiency. However, its basic conclusion was bering: 17 ,.••,....- -- .~ ~__ 10 Imported Fooda: Opportunities to Improve FDA'e Inepection Program, U.S. General Ac- 52unting Office, HRD-89- ~He^reinafter cited as GAO Report. Imported " Iglehart, J.K., "The Food and Drug Administration and its Problems," New England Jour- nal of Medicine, Vol. 325, No. 3, July 18. 1991, p. 217. '= Report on the Activity of the Committee on Energy and Commerce for the 101st Congress, House Report No. 101-1021, January 3, 1991, p. 316. " Hearings, Subcommittee on Oversight and Investigation®, Committee on Energy and Com- merce, U.S. House of Representatives, July 19 and September 28, 1989, p. 84. (Hereinafter cited as Hearings. July 19 and September 28. 1989). 14 FDA Study, March 1990. 'm "FDA Could Improve Inapection Program to Make Better Use of Res.ources," USGAO, HRD-89-125, September 1989. 1° "Hard to Swallow," Report by the Staff of the Subcommittee on Oversight and Investiga- tions, Committee on Energy and Commerce. Committee Print 1(ll-L, July 1989. (Hereinafter re- ferred to as Hard to Swallow). " FDA Report, March 1990, p. 2.

• f ~~ i>~1 I~-~ ~ 4 given the expanding growth in the number of food- stuffs entering the United States from around the world, there can be little improvement in the efficiency of the present inspection program without additional resources and statutory authority. Without additional resources, even additional efficiencies will not stop or lower the rate of violative goods getting through the system, particularly in the largest import districts. t 1.~UMMts • • CHAPTER II ADULTERATED FOOD, DEFECTIVE DEVICES, AND UNAPPROVED DRUGS DISTRIBUTED DESPITE FDA INSPECTION AND ENFORCEMENT ACTIONS As the result of a steadily increasing workload, a lack of re- sources, and loopholes in its statutory authority, the FDA cannot prevent the distribution into commerce of significant quantities of adulterated food, defective medical devices, and unapproved phar- maceuticals of unknown efficacy.' 8 This situation has been well documented for years, but has nonetheless been allowed to persist. Imports are the primary source of the problem. In April 1988, the San Francisco District Office of the FDA denied entry to several imported products, including Coenzyme, Ginkgo Biloba, Milk Thistle and Essential Fatty Acid, because they were unregistered new drugs. These products were being advertised as veritable cure-alls, effective in the treatment of cancer, heart conditions, immunodysfunction, high cholesterol, hepatitis, cirrho- sis and hypertension. However, the goods were reexported and then reentered at Great Falls, Montana and sold to a health food store before FDA could even sample these "new" goods. When the eva- sion was discovered, the FDA issued refusal notices, but the goods were long gone. In all, nine shipments with a declared value of $311,276 evaded the FDA in this fashion.' 9 The Problem Has Been Recognized for Years The need for the FDA to obtain the authority to embargo viola- tive products, and to more rapidly seize them or to order recalls has been well recognized by the Congress, the General Accounting Office [GAO] and even the Agency itself for many years. For exam- ple, in September 1984, the GAO issued a report entitled "Legisla- tive Changes and Administrative Improvements Should Be Consid- ered for FDA to Better Protect the Public From Adulterated Food Products".2O This report, which reviewed recalls and seizure ac- tions by the FDA in Fiscal Years 1980-82, found that the seizure process took an average of 65 days. During the time it took the FDA to obtain a court order necessary to effect seizure, the agency had to rely on state regulatory authorities to detain the adulterat- ed food or hope that the manufacturer, distributor or retailer would voluntarily hold the goods. The GAO also found that the FDA could not rely on state au- thorities to detain adulterated food products in all cases, nor could the agency count on food companies to voluntary hold adulterated products. State authorities did not always agree with the FDA, and '" Hearings, July 19 and September 28, 1989, pp. 18-20. 1D "Hard to Swallow," p. 15. Y" GAO/t1RD-H4-fi1, September 26,1994. (5)

• 6 even when they did, the agency had to spend time and scarce re- sources to get the states to take action. Finally, the GAO discov- ered that in 19 of 76 cases where the FDA requested and the firms agreed to voluntarily hold the products, some or all of the adulter- ated food was nonetheless sold before the FDA's seizure action could be completed.I t One point that the GAO did not make is that the FDA's ability to obtain a seizure order from a Federal court is limited to the jurisdictional area of that court. If the contaminated food is trans- ported to another jurisdiction, the FDA's order would be of no use, and the agency would have to start the process again in the new district.z2 As early as 1979, the FDA documented the difficulties in seizing adulterated products in an internal study of pesticide contaminated food and animal feed.23 While the focus of the study was limited to pesticide contamination, its lessons illustrated the generic limita- tions on the agency's powers. The study analyzed several reasons why pesticide adulterated food and feed were not seized by the FDA, noting that: ... a substantial number of violative samples did not result in seizure because by the time the analysis was com- pleted, the shipment had been further distributed and could not be located.24 The study analyzed the practical difficulties in obtaining injunc- tions or conducting criminal prosecutions against violative ship- pers. The study concluded that: . the agency needs additional statutory authorities of administrative detention and civil penalties (fines) under the FFDCA [Federal Food, Drug and Cosmetic Act] for con- trolling and deterring the interstate marketing of domestic food and feed commodities containing illegal chemical resi- dues. 2 s Dhngerous Products Continue to Enter Commerce Representatives of the FDA have cited recent examples where the lack of recall authority resulted in the continuing distribution of po n la y`-{c angerous y contaminated products for weeks while the FDA and the companies negotiated the terms of a voluntary recall. Testifying before the Health and Environment Subcommit- tee in July 1991, Mr. James Beebe, Director of the FDA's Northeast Region, said that a decision to recall distilled water, which was_la- beled for use in the preparation of infant formula but was contami- nated with isopropyl alcohol, was delayed for over five weeks. He also stated that three firms initially refused to voluntarily recall L- Tryptophan, an amino acid used in sleep aids and dietary products, :t Id.. p. 8. ts ..r VMHO 9 " Hearings, July 17, 1991, tr. p. lIH). ""FDA Monitoring Programs for Pesticide and Industrial Chemical Residues in Food," Study Group on FDA Residue Programs, June 1979. _' Id, p. 65. " Id., p. 66. • 7 even though contaminated batches of the material had caused ill- ness and death.26 Chairman Dingell questioned the FDA witnesses about the agen- cy's dispute with Sidmak, a company that marketed superpotent (by more than 5,000 percent) lots of chewable Vitamin D tablets de- signed for children. The FDA desired a class I recall, the highest category, because the agency was concerned that the use of the vitamins for several weeks might produce an elevation of blood cal- cium levels which could damage the kidneys and, if not diagnosed and treated, lead to death. The company argued that a class II recall, which is used for items that present a health hazard that is generally reversible, was appropriate. The negotiations, which began in June 1989, had not been completed as of this writing and the products remain available for sale.27 In July 1989, the staff of the Oversight Subcommittee testified regarding a similar problem in the device area. The Los Angeles District Office of the FDA had rejected a number of shipments of latex surgical gloves and condoms because they contained holes. Such goods would obviously not be effective in protecting the user against diseases such as AIDS. However, the FDA could not embar- go these defective medical devices, and the importer was apparent- ly attempting to continue to distribute them into commerce by playing the equivalent of a shell game by moving them along with subsequent importations between warehouses to escape further FDA inspection or other regulatory action.28 The agency continues to be hamstrung by its lack of authority to embargo products to prevent their distribution into commerce while it is going through the legal process necessary to obtain a seizure order from a Federal court. Most states have had embargo authority for years. Mr. Kenneth Shelin, Director of the Investiga- tions Branch of the FDA's Detroit District Office, described a pend- ing case in which a hog producer in Indiana was feeding his ani- mals seed corn contaminated with a fungicide as well as a pesti- cide. The FDA was concerned that these dangerous chemicals would end up in the pork and thus be absorbed by humans, but had to ask the Indiana State Veterinarian to quarantine the hogs and the Indiana State Chemist's Office to embargo the seed corn because the agency lacked the authority to take such action on its own.29 Mr. Alan Hoeting, head of the FDA's Office of Enforcement, summarized the problem that the agency faces when it attempts to conduct a seizure action. According to Mr. Hoeting, the process re- quires a number of steps: 311 the investigators collect samples; they collect docu- mentation of interstate commerce; we have to establish that most articles move in interstate commerce before we can take an action; the paperwork from there is reviewed by our centers to ensure that our scientific position is _° Hearings, July 17, 1991, tr. pp. 25-26. _' Id., tr. pp. 57-59. _' Hearings, July 19 and September 28, 1989, p. 20. 29 Hearings, July 17, 1991, tr. p. 27. 'O Hearing, July 17, 1991, tr. p. 36. •

• 8 valid; the paperwork is then prepared in our office, in our Office of General Counsel; the seizure papers are then transmitted from the FDA Office of General Counsel to a local assistant United States attorney's office; the United States attorney obtains a warrant from a local magistrate; and after this warrant is issued, the local Federal district court judge issues the warrant, and a U.S. marshal will go out and actually seize the product. Mr. Hoeting added that: 31 The problem with this entire process that I am talking about is that it takes an extended period of time from the time that we first encounter the violation to the time that we are eventually able to attach, or seize, or arrest that particular violating product. 31 Id., tr. p. 37. I f~s9ESgfog • • CHAPTER III IMPORTS HAVE CREATED SPECIAL PROBLEMS FDA's Inspectional Task Has Become Harder As noted in the Introduction and Summary, the volume of im- ports, and especially foodstuffs, which the FDA must inspect has grown steadily. Along with this surge in volume, their changing nature has made the FDA's inspectional task increasingly diffi- cult.32 More and more goods come from countries in the third world, where quality control standards, if they exist at all, are often substantially weaker than those required in the U.S. (This is not to say that imports from developed nations do not require care- ful inspection; indeed, a Spanish company was found to have pro- duced counterfeit birth control pills in 1981-83 that were sold to American consumers). The makeup of imported goods has also changed. Fewer bulk raw materials and more finished goods are shipped. Therefore, these imports do not receive the further proc- essing in domestic plants, which have better quality control and receive periodic FDA inspection, that they once did. This gives the FDA less inspectional flexibility and little margin for error. Final- ly, an increasing volume of imported products is shipped in con- tainers that hold a variety of goods, which complicates sampling and inspection. As noted in the FDA's March 1990 management study: 33 . FDA often provides the only point of quality control for imported products, which tend to have a much higher violation rate than domestic products. In 1989, some 7,855 foreign food, drug and medical device firms were registered, or their products were listed, with the FDA and could ship freely to the United States.34 All drug firms receive an initial FDA inspection before they can export to the U.S. Due to severe budgetary constraints, such firms are only reinspected every 6 to 7 years.35 By statute, U.S. drug firms must be reinspected at least every two years. The FDA does have reciprocal inspection agreements with Switzerland, Sweden and Canada, which allevi- ates the need to reinspect plants in these countries. However, the rest of the world is on a virtual honor system. The situation as regards foreign canneries is even more precari- ous. The FDA reviews the paperwork applications of foreign can- ning establishments, but hardly ever conducts a physical inspec- tion. From 1985 to September 1989, only 31 of the 3,399 registered '= FDA Report. March 1990, p. 5. 33 Id., p 5. " Hearings, July 19 and September 28,1999, p. 194- '" Id.. p. 195. i !3!

• 10 foreign canneries had been checked." Of the few plants that were inspected, 21 were cited for deficiencies.3' However, only 2 of these plants were placed on automatic detention. One reason for the lack of action is that the FDA had only one person to review the cases. But even this meager level of inspectional effort appeared to ex- haust available FDA resources. In 1989, the FDA received 160 reg- istration applications for foreign canneries, but was able to perform only 1 inspection.38 According to the testimony of an FDA expert on canned food, there was no point in performing more inspections that year because the agency lacked the manpower to review the inspection reports anyway.39 One of the tasks that had consumed a significant portion of the time of the FDA's canned food experts was attempting to deal with the Chinese mushroom problem. Because of enterotoxin resulting from staph contamination of mushrooms, 102 Americans became ill in 4 confirmed instances of mass food poisoning and 3 other out- breaks were suspected in 1989 because of the consumption of canned mushrooms from China.40 In October 1989, the FDA put Chinese canned mushrooms on automatic detention status. FDA Cannot Rely on the Customs Service In theory, the Customs Service collects and forwards to the FDA the appropriate documents filed by the importer or their broker when an FDA regulated product is entered into the customs terri- tory of the United States. If the entry is found to be adulterated, mislabeled, or otherwise violative by the FDA, Customs is supposed to supervise the destruction or reexportation of the goods. If the importer has wrongfully distributed the goods into commerce before obtaining release permission from the FDA, and the goods are rejected, Customs is supposed to punish the importer by impos- ing fines, penalties and causing the importer's bond to be forfeited. In practice, Customs is itself overworked and understaffed and often fails to perform these tasks. The July 1989 Subcommittee Staff Report ("Hard to Swallow") documented a serious lack of communication and coordination be- tween the FDA and the Customs Service. When the FDA's modest inspection program was successful in identifying violative imports, Customs was not adequately supervising the destruction or reex- portation of these goods. As a result, importers were distributing rejected merchandise in domestic commerce and falsely claiming that the goods had been destroyed or reexported. Customs agents testified regarding a number of cases where containers, which were full of newspaper, items of nominal value, or even empty were ex- ported purporting to contain the rejected goods. In other instances, false documents were prepared showing that the merchandise had been destroyed or reexported.4 t It is not possible to quantify the size of this problem with any precision, but it is clear that the vast majority of the violations is never discovered. A March 1988 study S 11 a b the Im rt O rati ns Branch at FDA H y po pe o eadquarters estlmated that about 12.5 percent of refused entries was nonetheless distrib- uted, while the New York District estimated that the number could be as high as 25 percent in their area. The FDA, the Customs Serv- ice and the U.S. Department of Agriculture knew that rejected foodstuffs were nonetheless being sold in domestic commerce in the early 1980s,42 but were unwilling or unable to take action to stop these actions. A related problem that has been found to be widespread is the practice known as "port shopping", where goods rejected in one port are shipped to another port for attempted entry. Because of the FDA's small sampling rate, the odds of success are excellent. It makes very little sense to allow dangerous goods to be exported to unsuspecting consumers in other countries. Given the tendency of a few unscrupulous importers to port shop, it makes no sense what- soever to allow reexportation. Thus, the legislation would require the destruction of goods that present a significant risk to human or animal health, and also mandate the clear marking of other reject- ed merchandise "refused entry into the United States." Such mark- ing would discourage port shopping by at least requiring the im- porter to incur the expense of repackaging the goods. The marking requirement is currently used by the U.S. Department of Agricul- ture, an official of which told the Subcommittee staff that this re- quirement was drying up the market for meat refused entry into the U.S.43 Responding to the Subcommittee's concerns, then Commissioner of Customs von Rabb launched "Operation Ptomaine", a program to check the reexportation of refused merchandise, in January 1989.44 While this effort has been relatively successful, Customs lacks the manpower to follow up on 100 percent of these cases, and will not continue the program indefinitely in any case. An equally serious problem is the tendency of some importers to release FDA regulated goods into commerce before sampling or testing has been completed. Importers are required to maintain, physical control over such goods until release authority is granted.f Once the goods enter the distribution chain, recall is often impossi- ble. In May 1989, Customs estimated that redelivery had been or- dered for FDA regulated goods in over 1,100 instances in the pre- ceding five years.45 Customs can assess liquidated damages when importers or bro- kers violate the requirement to hold merchandise pending sam- pling or testing, and can also assess damages when refused mer- chandise is not destroyed or reexported within the current 90 day limit. The fine is equal to the value of the merchandise, except for restricted merchandise, where it can be triple the value. In prac- tice, such fines are seldom imposed, and when they are levied, they are typically mitigated to a minuscule amount. In 1987, Customs had a five year backlog of liquidated damage cases, many of which ended up getting thrown out because the statute of limitations ex- a•Id.. pp. 1s4-5. a' Id.. pp. 135-6. 'n Id-. p. 17:3. '2 Hard to Swallow, p. 5. '° Id. ~~~ 9~ 6 9~ 0~ " Hearings, July 19 and September 28, 19R!), p. 40. .o Id. p.84. " Id.. PP- Cr6. " Hard to Swallow, pp. 3-9 45 Id.. P, 9.

• 12 pired or were settled for a flat fee of $50. At the time, the fines collected by Customs represented only .002 percent of the assessed damages.46 The effect of this seldom hit and usually miss penalty system is to create a minor irritant for violators, who treat the fines as little more than a cost of doing business. Meanwhile, the overwhelming number of honest importers, who spend time and re- sources to assure the quality of their goods, are unfairly disadvan- taged relative to their dishonest competitors. The legislation addresses this problem by requiring importers to post a bond equal to three times the value of the import, which bond could then be liquidated by Customs. More importantly, the bill would allow the FDA to require Customs to suspend the imme- diate delivery privileges of scofflaw importers, who could not take delivery of imported goods until inspection and sampling activities had been completed. When FDA Commissioner Kessler testified before the Health and Environment Subcommittee in July 1991, one of the few topics on which he was apparently free to speak was the problem that Cur- rent Customs penalties are not effective deterrents to the importa- tion and improper release of violative foodstuffs. When Congress- man Wyden questioned Dr. Kessler about the provisions of Section 8 of the proposed legislation, the Nmmissioner stated: " I certainly support solving this problem of people forfeiting bonds and viewing the cost of doing business at the risk of jeopardizing the public health. . . . The right deterrent currently does not exist. People are forfeiting bonds, and we are not handling those products appropriately. "Hearing, July 19 and September 28, 1989, p. 21. "Hearings, July 17, 1991, tr. p. 95. 9~69mv0g S • CHAPTER IV FDA LACKS ENFORCEMENT TOOIS FDA Lacks Authority Enjoyed by Other Agencies In the early 1980s, the power of a government agency to embargo or seize adulterated food was hardly a novel concept. A September 1983 GAO study pointed out that the U.S. Department of Agricul- ture [USDA] could directly detain or condemn adulterated foods, cause the production at a plant to cease by withdrawing its inspec- tors, and detain products in distribution up to 20 days. The GAO noted that the FDA had none of these powers.4e The GAO further pointed out that the USDA had the statutory right to examine plant records while the FDA did not. Finally, the GAO recalled that in 1978, the President's Reorganization Project concluded in its section on food and nutrition that the FDA should have access to plant records, and that all agencies should have de- tention authority, the authority to assess civil penalties and to pro- hibit chronic violators of food inspection laws from engaging in commercial food transactions.49 As noted in Chapter 1, the American Law Division of the Con- gressional Research Service concluded in a June 1991 study for the Subcommittee on Health and the Environment that ". . the en- forcement authorities to be granted to the FDA under H.R. 2597 are apparently comparable to those granted to other administra- tive agencies.6O Moreover, the Edwards Commission recommended increasing the FDA's powers and Secretary Sullivan signed off on legislation drafted by the Administration to do just that. Finally, as pointed out by Chairman Waxman, even the Administrative Con- ference of the United States has recommended any of the elements in H.R. 2597 as suitable for all Federal administrative agencies.at FDA Lacks Power to Review Company Records When Congressman Dannemeyer asked Mr. Alan Hoeting, Direc- tor of the FDA's Office of Enforcement, in the July 17, 1991 hear- ing whether there were things in existing law or process that pre- vented the FDA from performing its mission, he responded that: 5z A problem that we encounter repeatedly in performing our mission is that we do not have the authority currently to inspect manufacturing formulas, recipes for foods. We do not currently have the authority to inspect the analytical 48 "Monitoring And Enforcing Food Safety-An Overview of Past Studies," GAO/RCED-83- 153, September 9, 1983, p. 15. •9 Id., p. 17. 'O "Additional Enforcement Authority For the Food and Drug Administration," CRS, Ameri- can Law Division, June 25, 1991. •' Hearings, July 17, 1991, tr. p. 3. °S Id., tr. p. 37. (1:3)

S 1•1 testing records that have been done on foods, for example, on salmonella or for Listeria, or for pesticides. We current- ly do not have the authority to demand and obtain from food or cosmetic manufacturers shipping records. This problem has been recognized for years. For example, the 1984 GAO Report concluded that the FDA needed the authority to review the production and distribution records of manufacturers in order to help prove that a product was adulterated and had been shipped in interstate commerce. The GAO found that in 30 of 136 recalls, the FDA was denied access to company records that would have been useful in determining what caused the foodstuff to become adulterated, to whom it was distributed and how the com- pany disposed of the recalled food.b3 The GAO also concluded that the lack of access to company Shipping records was also deter- mined to have delayed or even prevented FDA seizure efforts in some cases.s4 Recent examples help to illustrate the constraints under which the FDA inspectors must operate. A 1990 form letter from Heather- wood Farms of Lansing, Michigan, addressed to "Dear Investiga- tor," informs the FDA inspector of the company's corporate policy.55 The letter states that no photographs are permitted, all questions must be directed to the company representative rather than any other employees, no tiooks, records or written documents can be reviewed save receipts of a particular lot of raw material if requested in writing by a person designated by the Secretary of HHS, and no trade secret material, such as production formulas, processing procedures, ingredient costs, production figures or prof- its, will be provided. The letter concludes that: 56 We believe the corporate policies noted above are in full compliance with the inspection provisions of the Federal Food, Drug and Cosmetic Act. Earlier this year, FDA inspectors were reportedly thwarted in their efforts to secure access to records at facilities in Puerto Rico and Illinois of Abbott Laboratories, a major pharmaceutical com- pany. The inspectors, who were investigating good manufacturing practice violations, were prevented from reviewing certain records or using photographic equipment.57 A report to the Oversight Subcommittee by the HHS Inspector General describes the failure of FDA inspectors from the Denver District office to discover evidence of fraud in 1989 and 1990 in the production of generic drugs by Pharmaceutical Basics, Inc. [PBI]. The company suspended the production of its entire line of generic products following its disclosure to the FDA of false statements in its applications. The IG concluded that "isolating original records is a fundamental fraud investigation technique" and that if FDA regulations restrict access to manufacturers records, the regula- tions should be changed.SP The PBI case also supports the need for "GAO/HRD-84-61. September 1994, p Ifi "" !d- p I R- M.I V al ls J Y O V "" Letter from lleatherwood Farms. Februery 1!t!NI ~ Id. "' Health News Daily. August 6, 1991. pp :1-4 '" F-D-C Reports, May I:I, 1991, T&G p fi-7 • 15 • recall authority. The FDA argued with the company for weeks over the dimension of a recall of carbamazapine tablets, a drug used by epileptics that has a very narrow therapeutic range. PBI had re- granulated the raw materials used to manufacture the drug with- out obtaining the necessary approval from the FDA. During the period when the FDA and the company were disputing the recall, the FDA received reports of 22 seizures and 2 deaths on the part of persons taking this product. This was clearly cause for alarm, al- though the agency has not concluded that a causal relationship ex- isted between the seizures and the drugs. While PBI recalled carba- mazapine, the company continued to market 60 other drugs despite the discovery of false statements in its approval applications which led PBI to cease manufacturing at its Denver facility in January 1991. The FDA and the company disagreed on the level of recall, a concern that was probably related more to company product liabil- ity concerns than health risks.59 Finally, on August 27, 1991, the FDA persuaded U.S. Attorney's Offices to file seizure actions against the few remaining unsold PBI products in six states.eO The PBI case calls to mind other generic drug problems, includ- ing the difficulties that the FDA encountered with conjugated es- trogens produced by two other companies, Duramed and Zenith. Despite the fact that these drugs failed stability or potency tests, the FDA was unable to obtain the prompt recall of these products either.81 In all, the FDA has identified 20 generic drug companies that refused or unreasonably delayed a request to voluntarily recall products in fiscal years 1990 and 1991.11? The FDA concluded that mandatory recall authority would result in more prompt re- moval of violative products at less cost to the FDA.83 Yet another case study which argues strongly for new legislative authorities for FDA inspectors comes from the Dallas District Office, which inspected the Provesta Corporation of Bartlesville, Oklahoma in July 1990. This firm produces several human and animal foods using a proprietary high-cell density fermentation process relying on a particular yeast. The FDA inspectors attempt- ed to obtain documentary information on the production process, but were rebuffed by the company, which quite correctly pointed out that the inspectors lacked the authority to review such records. 6 4 The point is not to disparage Provesta, which acted within its rights, but to illustrate a significant loophole in the FDA's author- ity to effectively inspect food producers that employ biotechnology in their manufacturing processes. The FDA inspector's memoran- dum points out that ". .. because of biotechnological advances in food processing methods, it becomes imperative that inspectors not be limited to sanitation, but encompass the entire processing parameters." 65 Ironically, if Provesta used the same biotechnology "° Hearings, July 17, 19.91, tr. pp. 63-65. •O Health News Daily, August 22, 1991, p. 1. •' Hearings, July 17, 1991, tr. p. 10°. " Letter from Acting Associate Commissioner for Legislative Afiairs, Kay Holcombe, to Con- Rreixman Henry A Waxman, Chairman, Subcommittee on Health and the Environment, Augut 16, 1991 •' Id •' Memorandum to James Lahar from Dwight Abouhalkah, Consumer Safety Officer, I)allas Dietrict Office. July 16. 1990- •• !d.