[Federal Register Volume 59, Number 191 (Tuesday, October 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24405]
[[Page Unknown]]
[Federal Register: October 4, 1994]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 92-42]
Alra Laboratories, Inc., Denial of Application for Registration
On March 4, 1992, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), directed an
Order to Show Cause to Alra Laboratories, Inc. (Respondent), proposing
to deny its application for registration as a manufacturer of
controlled substances, on grounds that: (1) during an on-site
inspection in July 1990 DEA investigators determined that although it
was not registered to do so, Respondent continued to distribute and
possess controlled substances in violation of 21 U.S.C. 841(a)(1) and
843(a)(2), had failed to comply with inventory and recordkeeping
requirements regarding these controlled substances, and had improperly
stored controlled substances together with non-controlled drugs and
other materials; (2) in April 1987 Respondent was cited for failure to
file periodic ARCOS reports for 1985, 1986, and the first quarter of
1987; (3) as the result of a November 1987 inspection, Respondent was
issued a Letter of Admonition citing its failure to file ARCOS reports
as required by 21 U.S.C. 827(d) and 21 CFR 1304.35, an accurate
biennial inventory in violation of 21 U.S.C. 827(a) and 21 CFR 1304.11,
and its failure to maintain effective controls against the diversion of
controlled substances as required by 21 CFR 1301.71; (4) in 1986, 1988,
and 1989 Respondent did not timely renew its registration; and (5)
Respondent has a history of violating Food and Drug Administration
[FDA] requirements pertaining to recordkeeping, documentation and good
manufacturing practices.
Respondent, by counsel, filed a request for hearing on the issues
raised by the Order to Show Cause, and the matter was docketed before
Administrative Law Judge Mary Ellen Bittner. Following prehearing
procedures, a hearing was held in Chicago, Illinois, on August 18 and
19, 1992.
On July 30, 1993, in her opinion and recommended ruling, findings
of fact, conclusions of law and decision, the administrative law judge
recommended that Respondent's application for registration be granted,
contingent upon a satisfactory pre-registration investigation and upon
Respondent arranging at its own expense for annual independent audits
of its controlled substance handling for a period of five years after
registration is granted. No exceptions were filed by either party, and
on August 30, 1993, the administrative law judge transmitted the record
to the Administrator. On October 13, 1993, the DEA Chief Counsel filed
a request for remand with the Administrator, and on October 27, 1993,
then-Administrator Robert C. Bonner remanded the case to the
administrative law judge for further proceedings, noting that an
indictment had been filed in the United States District Court for the
Northern District of Illinois alleging that Respondent's owner had
violated the Food, Drug, and Cosmetic Act (FD&C) with respect to the
manufacture and distribution of prescription drugs.
On November 3, 1993, the administrative law judge rescinded her
July 30, 1993 decision, reopened the record, and directed the parties
to submit statements specifying the additional evidence that they
wished to produce. A hearing on remand was scheduled, but canceled
after the Government advised that it had no further evidence other than
the indictment itself. Respondent submitted additional documents and
both parties submitted argument on remand. On May 12, 1994, Judge
Bittner issued her supplemental opinion and recommended ruling,
findings of fact, conclusions of law and decision, in which she found
that the Government had shown probable cause that Respondent's owners
had committed the acts alleged, but that the Government had failed to
show the criminal conduct alleged by a preponderance of the evidence.
Accordingly, Judge Bittner found that there was no basis to modify her
previous conclusions set forth in her July 1993 decision, and therefore
she reissued that decision. No exceptions were filed by either party.
On June 17, 1994, the administrative law judge transmitted the entire
reord, including her original and supplemental opinions, to the Deputy
Administrator.
The Deputy Administrator has carefully considered the entire record
in this matter and, pursuant to 21 CFR 1316.67, hereby issues his final
order in this matter based upon findings of fact and conclusions of law
as hereinafter set forth.
In her supplemental opinion issued on May 12, 1994, the
administrative law judge found that there was nothing on the record
from the 1992 hearing or upon remand tending to prove or disprove the
allegations of the August 13, 1993 indictment or the January 26, 1994
superseding indictment. The Deputy Administrator adopts this finding of
the administrative law judge. Accordingly, the Deputy Administrator has
not considered any of the matters offered on remand and, in this
decision, will refer solely to matters on the record from the 1992
hearing.
The administrative law judge found that Respondent is a
pharmaceutical manufacturer founded by Baldev Raj Bhutani, Ph.D., in
1982. Respondent was registered as a manufacturer of controlled
substances by DEA on July 30, 1982, and renewed this registration in
June 1983 and July 1984. Respondent developed a generic form of
clorazepate dipotassium, a Schedule IV controlled substance, and
received FDA approval to market it in 1988. In 1991, Respondent
subsequently received FDA approval to manufacture dosage forms of the
Schedule IV controlled substances propoxyphene and meprobamate, and
acquired Abbreviated New Drug Applications (ANDA) for the Schedule IV
controlled substance chlordiazepoxide.
The administrative law judge found that in December 1984, DEA
investigators conducted a regularly scheduled investigation and
determined that Respondent was generally in compliance with DEA
recordkeeping requirements, except that it had never filed required
Automation of Reports and Consolidated Orders System (ARCOS) reports.
Dr. Bhutani was advised by DEA investigators of the proper reporting
procedure for a manufacturer, and the less stringent reporting
requirements under a DEA researcher registration. No further action was
taken. In his testimony, Dr. Bhutani disputed this version of the
events, but Judge Bittner credited the investigator's testimony, while
finding Dr. Bhutani's answers to be less than wholly responsive.
In November 1987, DEA investigators conducted another periodic
investigation of Respondent. Investigators determined that Respondent
still had not been filing required ARCOS reports since the previous
inspection in 1984. Dr. Bhutani attributed this problem to a lack of
National Drug Code (NDC) numbers for his product, but Judge Bittner
again found the investigator's testimony more credible. Investigators
also determined that Respondent did not have a required accurate
biennial inventory, and had stored controlled substance raw material in
a filing cabinet located in an unsecured and unapproved storage area.
As a result of this inspection, DEA issued Respondent a letter of
admonition. Respondent represented, in a subsequent letter to DEA, that
he had reviewed the inventory records and corrected any errors.
The administrative law judge found that in July 1982, an
investigator from the FDA determined that Respondent was not complying
with mandated good manufacturing practices (GMPs) and issued a Form 482
list of deficiencies to Respondent. Subsequently, after an inspection
in March 1983, FDA issued a notice of adverse findings to Respondent
citing non-compliance with tamper-resistant packaging requirements. In
December 1983, FDA issued a regulatory letter to Respondent regarding
combination over-the-counter drugs. FDA inspections in October 1984 and
November 1985 indicated that Respondent was not complying with GMPs.
Another regulatory letter was issued in February 1986. Another
inspection in that same month disclosed GMP deviations which let the
FDA to recommend against using Respondent as a government supplier.
Follow-up inspections in May and June 1986 indicated that Respondent
was still not in compliance. Afterwards, the FDA considered obtaining
an injunction against Respondent, but follow-up inspections in
September and October 1986 indicated that Respondent was then
sufficiently in compliance. Respondent was found in compliance in
December 1986 and January 1987, but at the next scheduled FDA
inspection in September and October 1989, GMP deficiencies were again
discovered. Another regulatory letter was issued on April 30, 1990. A
follow-up inspection in January 1991 revealed deficiencies that
resulted in a Complaint for Forfeiture being filed in the United States
District Court for the Northern District of Illinois. As a result,
Respondent's prescription drug inventory was seized on March 19, 1991.
On July 9, 1991, the United States District Court for the Northern
District of Illinois found Respondent's drugs to be adulterated.
Respondent was permitted to recondition some of these drugs and was
permitted to resume operations in November 1991.
An FDA official testified at the hearing in this matter that
Respondent's history was one of ``just being unable to bring themselves
into compliance with GMPs. * * *'' Respondent testified that he
disagreed with this assessment and had hired a consultant who performed
a GMP audit and found only minor problems.
DEA commenced another periodic inspection of Respondent in July
1990, and discovered that Respondent's DEA registration had expired on
June 30, 1989. Accordingly, Respondent was illegally selling and in
possession of approximately 178,000 dosage units of the Schedule IV
controlled substance clorazepate dipotassium. On July 26, 1990, DEA
placed Respondent's stock of controlled substances under seal.
Additionally, investigators found that Respondent had not filed timely
renewal applications from 1984 through 1988. Dr. Bhutani claimed that
this was due to clerical oversight.
DEA returned to Respondent on July 31, 1990, and executed a search
warrant. This search determined that Respondent was using his secure
storage area and safe for the storage of items other than controlled
substances in violation of the regulations, and had no documentation of
the registration of his controlled substance customers.
On July 26, 1990, Respondent filed an application for a new DEA
registration as a manufacturer of Schedule III through V controlled
substances. That application is the subject of these proceedings.
The administrative law judge found that in June of 1991, DEA
investigators returned to Respondent's facility as part of the
evaluation of the pending application. Investigators noted that the
facility had been enlarged, that ``it was a pretty * * * good looking
[plant]'', and that there was no controlled substance activity
underway. Dr. Bhutani testified that he had designed and completed an
addition to his facility in order to meet DEA requirements.
On June 1, 1992, Respondent was registered as a researcher in
Schedule III through V by the DEA. Respondent hired a consultant in May
1992 to make recommendations and do follow-up consulting if the
application for a manufacturer's registration is approved. This
consultant testified at the proceeding that he had made many
recommendations and that Respondent appeared ready to adopt procedures
which would bring it into compliance with DEA requirements. Dr. Bhutani
testified that some of the consultant's recommendations had in fact
been implemented as of the date of the hearing.
The administrative law judge found that the Government maintained
that over a ten year period, Respondent's failure to comply with GMPs
and past experience in handling controlled substances gave no assurance
that Respondent could conduct itself consistent with the requirements
of the Controlled Substances Act (CSA) in the future. The Government
further maintained that Dr. Bhutani tended to minimize the severity of
Respondent's violations and blame others for its regulatory
difficulties. Respondent asserted that its past violations were de
minimis or due to inadvertence, and that it had demonstrated itself
capable of understanding and meeting DEA requirements.
The Deputy Administrator may deny an application to manufacture
controlled substances in Schedules III through V if he determines that
the registration would be inconsistent with the public interest.
Pursuant to 21 U.S.C. 823(d), ``[i]n determining the public interest,
the following factors shall be considered:
(1) Maintenance of effective controls against diversion of
particular controlled substances and any controlled substance in
Schedule III, IV, or V compounded therefrom into other than legitimate
medical, scientific or industrial channels;
(2) Compliance with applicable State and local law;
(3) Promotion of technical advances in the art of manufacturing
these substances and the development of new substances;
(4) Prior conviction record of applicant under Federal or State
laws relating to the manufacture, distribution, or dispensing of such
substances;
(5) Past experience in the manufacture, distribution, and
dispensing of controlled substances, and the existence in the
establishment of effective controls against diversion; and
(6) Such other factors as may be relevant to and consistent with
the public health and safety.''
It is well established that these factors are to be considered in
the disjunctive, i.e., the Deputy Administrator may properly rely on
any one or a combination of factors, and give each factor the weight he
deems appropriate. Henry J. Schwarz, Jr., M.D., 54 FR 16422 (1989).
Of the stated factors, the administrative law judge found that
there is little if any evidence that the Respondent failed to comply
with applicable State and local law, or was convicted under Federal or
State law, or developed new substances or promoted technical advances.
Accordingly, Judge Bittner determined that the first, fifth and sixth
factors are relevant to the proceeding.
Under the first and fifth factors, the administrative law judge
found that Respondent's past practices with respect to recordkeeping,
reporting, and security are clearly relevant. With respect to the sixth
factor, the administrative law judge found that Respondent's history of
noncompliance with FDA regulations was relevant to the public health
and safety. Judge Bittner found that for a number of years,
Respondent's compliance with DEA and FDA regulations ranged from poor
to abysmal, eventually culminating in seizure of its drug products by
both the FDA and DEA. Furthermore, she found that Dr. Bhutani was less
than responsive to the regulatory concerns, and tended to hold others
responsible for Respondent's failures and to minimize the seriousness
of the deficiencies. Judge Bittner concluded that there was a
legitimate basis for the Deputy Administrator to find that the
registration of the Respondent as a manufacturer of Schedule III
through V controlled substances would be inconsistent with the public
interest.
However, the administrative law judge recommended, ``admittedly
with some reservations'', that the Respondent's application be granted
because the Respondent has undertaken measures to improve its physical
security, standard operating procedures, recordkeeping and reporting,
and that Dr. Bhutani recognized that compliance with FDA and DEA
requirements was mandatory for continued business operation.
The Deputy Administrator adopts the opinion and recommended ruling,
findings of fact, conclusions of law and decision of administrative law
judge, except as noted below.
The Deputy Administrator finds that with respect to the first and
fifth factors, Respondent has failed to maintain proper records and
submit reports, failed to ensure that its facility has proper security
and that it was properly registered with the DEA as a manufacturer, and
illegally possessed and distributed controlled substances.
The Deputy Administrator further finds with respect to the sixth
factor that Respondent has a lengthy history of violations of the FD&C
GMP regulations related to its activities as a manufacturer of
controlled substances. A manufacturer is at the apex of the legitimate
controlled substance distribution system, often producing large
quantities of the most dangerous drugs of abuse, and making these
controlled substances widely available to hundreds of thousands of
registered controlled substance handlers for ultimate dispensing to
patients. A registrant conducting the business activities of a
manufacturer bears some of the heaviest responsibilities under the
regulatory scheme of the CSA. Respondent, in its capacity as a
manufacturer, has twice been the subject of seizures of its product:
once by FDA for its adulteration of drugs, and once by DEA for illegal
possession and distribution of controlled substances.
The Deputy Administrator finds that Respondent's President and
founder, Dr. Bhutani, has not taken his controlled substance
responsibilities seriously; has shown a history and pattern of
noncompliance with Federal laws and regulations pertaining to
controlled and non-controlled substances; has minimized the importance
of compliance with these laws and regulations; and has, throughout the
years and in the instant proceedings, been less than wholly responsive,
candid, and forthright, thereby failing to evidence the type of
direction and leadership to be expected of a manufacturer under the
CSA.
The Deputy Administrator concludes that Respondent has not shown
the commitment to compliance required of a DEA registrant, that its
registration as a manufacturer of controlled substances would not be in
the public interest, and that its application for registration should
be denied.
Accordingly, the Deputy Administrator of the Drug Enforcement
Administration, pursuant to the authority vested in him by 21 U.S.C.
823 and 824 and 28 CFR 0.100(b) and 0.104 (59 FR 23637), hereby orders
that the application for registration of Alra Laboratories, Inc., be,
and it hereby is, denied. This order is effective on October 4, 1994.
Dated: September 27, 1994.
Stephen H. Green,
Deputy Administrator.
[FR Doc. 94-24405 Filed 10-3-94; 8:45 am]
BILLING CODE 4410-09-M