[Federal Register Volume 64, Number 95 (Tuesday, May 18, 1999)] [Notices] [Pages 26984-26986] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 99-12390] ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration [Docket No. 99N-1220] Draft Civil Money Penalty Reduction Policy for Small Entities AGENCY: Food and Drug Administration, HHS. ACTION: Notice. ----------------------------------------------------------------------- SUMMARY: The Food and Drug Administration (FDA) is issuing a draft civil money penalty reduction policy for small entities as required by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) and the Presidential Memorandum of April 21, 1995. This draft policy is being issued for public comment only and will not be implemented until a final policy is published in the Federal Register. DATES: Written comments on the draft policy may be submitted by August 16, 1999. ADDRESSES: Submit written comments on the draft policy to the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852. Comments should be identified with the docket number found in brackets in the heading of this document. See the SUPPLEMENTARY INFORMATION section for electronic access to the draft policy. FOR FURTHER INFORMATION CONTACT: Jeffrey B. Governale, Division of Compliance Policy (HFC-230), Office of Regulatory Affairs, Food and Drug Administration, 5600 Fishers Lane, Rockville, MD 20857, 301-827- 0411, FAX 301-827-0482. SUPPLEMENTARY INFORMATION: I. Background The Food and Drug Administration (FDA) is issuing a draft civil money penalty (CMP) reduction policy for small entities (draft penalty reduction policy) as mandated by SBREFA (Pub. L. 104-121) and the Presidential Memorandum of April 21, 1995 (60 FR 20621, April 26, 1995). SBREFA was enacted on March 29, 1996, and seeks to improve the regulatory climate for small entities by, among other things, requiring agencies to establish small entity penalty reduction policies as follows: Sec. 223--Rights of Small Entities in Enforcement Actions (a) In General--Each agency regulating the activities of small entities shall establish a policy * * * to provide for the reduction, and under appropriate circumstances for the waiver, of civil penalties for violations of a statutory or regulatory requirement by a [[Page 26985]] small entity. Under appropriate circumstances, an agency may consider ability to pay in determining penalty assessments on small businesses. (b) Conditions and Exclusions--Subject to the requirements or limitations of other statutes, policies or programs established in this section shall contain conditions or exclusions which may include, but not be limited to-- (1) requiring the small entity to correct the violation within a reasonable correction period; (2) limiting the applicability to violations discovered through participation by the small entity in a compliance assistance or audit program operated or supported by the agency or a State; (3) excluding small entities that have been subject to multiple enforcement actions by the agency; (4) excluding violations involving willful or criminal conduct; (5) excluding violations that pose serious health, safety or environmental threats; and (6) requiring a good faith effort to comply with the law. A statement entered into the Congressional Record (142 Congressional Record S3242, daily ed. March 29, 1996) after enactment of SBREFA explains that agencies have ``flexibility to tailor their specific programs to their missions and charters'' and instructs agencies ``to develop the boundaries of their program and the specific circumstances for providing for a waiver or reduction of penalties'' (id. at S3244). To that end, SBREFA specifies that a penalty reduction policy adopted by an agency may be subject to the requirements or limitations of other applicable statutes. SBREFA also lists six possible exclusions or conditions (see section 223 of SBREFA as quoted previously in this document) that an agency may incorporate in its policy. This draft penalty reduction policy also complies with the Presidential Memorandum of April 21, 1995, which directs agencies to implement the policy of waiving penalties as follows: 1. Authority to Waive Penalties. (a) To the extent permitted by law, each agency shall use its discretion to modify the penalties for small businesses in the following situations. Agencies shall exercise their enforcement discretion to waive the imposition of all or a portion of a penalty when the violation is corrected within a time period appropriate to the violation in question. For those violations that may take longer to correct than the period set by the agency, the agency shall use its enforcement discretion to waive up to 100 percent of the financial penalties if the amounts waived are used to bring the entity into compliance. The provisions in paragraph 1(a) of this memorandum shall apply only where there has been a good faith effort to comply with applicable regulations and the violation does not involve criminal wrongdoing or significant threat to health, safety, or the environment. FDA has reviewed: (1) The Federal statutes it enforces which authorize CMP's, (2) its current practices used to assess CMP's on small entities, and (3) the appropriate conditions and exclusions for a penalty reduction policy for small entities that violate the law. On the basis of that review, FDA announces its draft penalty reduction policy for small entities. FDA invites comments on this draft policy. FDA currently enforces the following amendments to the Federal Food, Drug, and Cosmetic Act (21 U.S.C.) and the Public Health Service Act (42 U.S.C.), which authorize CMP's under the referenced sections: Radiation Control for Health and Safety Act of 1968 (21 U.S.C. 360pp), Safe Medical Devices Act of 1990 (21 U.S.C. 333(f)), Mammography Quality Standards Act of 1992 (42 U.S.C. 263b(h)), National Childhood Vaccine Injury Act of 1986 (42 U.S.C. 262(d)(2) and 42 U.S.C. 300aa-28), Prescription Drug Marketing Act of 1988 (21 U.S.C. 333(b)), Generic Drug Enforcement Act of 1992 (21 U.S.C. 335b), and Food Quality Protection Act of 1996 (21 U.S.C. 333(f)). II. Draft Civil Money Penalty Reduction Policy for Small Entities The FDA's draft policy with respect to reducing or waiving civil money penalties (CMP's) against a small entity is: FDA will consider on a case-by-case basis whether to reduce or waive CMP's against a small entity. In determining whether to reduce or waive CMP's against a specific small entity, the following considerations will apply: A. Except as provided in paragraph C below, penalty reduction or waiver will not be available for any small entity if: 1. The small entity was subject to an enforcement action (e.g. seizure, injunction or prosecution) by FDA within the last 5 years, and is still under the same management; 2. Any of the small entity's violations involved willful conduct; 3. The small entity does not make a good faith effort to comply with the law; or 4. Any of the small entity's violations pose serious health or safety threats. B. In considering whether FDA will reduce or waive a CMP, FDA may consider: 1. The egregiousness of the violations; 2. The isolated or repeated nature of the violations; 3. The small entity's history (if any) of violations; 4. The amount of harm caused by the violations; 5. The degree to which a CMP will deter the small entity or others from committing future violations; 6. The extent to which the small entity cooperated during the investigation; 7. Whether the small entity corrected the violations within a reasonable time period; 8. Whether the small entity has engaged in subsequent significant remedial efforts to mitigate the effects of the violations and to prevent future violations; 9. Whether the small entity voluntarily reported the violations to FDA promptly after discovering them; and 10. The small entity's efforts to determine and meet its legal obligations. C. FDA may also consider whether to reduce or waive a CMP against a small entity, including a small entity otherwise excluded from this draft policy under paragraph A above, if the small entity can demonstrate to the FDA's satisfaction that it is financially unable to pay the penalty, immediately or over a reasonable period of time, in whole or in part. D. If a small entity corrects the violative conditions within a reasonable time period, FDA may reduce the amount of any CMP that may be imposed for the violations, up to the amount spent by the small entity for corrective action. FDA may take into account the time in which the small entity took corrective action and any difficulties the small entity encountered when doing so. Penalties Eligible for Reduction The draft penalty reduction policy will apply to judicial and administrative CMP's. Exclusions From the Draft Penalty Reduction Policy The draft penalty reduction policy shall not apply to any remedy that may be sought by FDA other than CMP's. SBREFA also permits an agency to apply penalty reduction to violations discovered through a small entity's participation in a compliance assistance or audit program operated or supported by the agency or state. Although various units within FDA provide regulatory guidance to small entities, FDA does not operate a formal compliance assistance or audit program. Because FDA does not have a compliance program of the type described in SBREFA, this condition is not included in the draft penalty reduction policy. [[Page 26986]] Both SBREFA and the Presidential Memorandum exclude violations that pose serious environmental threats from the penalty reduction policy. Because FDA's enforcement efforts generally focus on actions that affect the public health and safety, but not the environment, the condition is not included in the draft penalty reduction policy. If a small entity is eligible for CMP reduction, but has obtained an economic benefit from the violations such that it may have obtained an economic advantage over its competitors, FDA may seek the full amount of the penalty. FDA retains this discretion to ensure that small entities that comply with public health laws enforced by the agency are not disadvantaged by those who have not complied. FDA has determined that all CMP's assessed under the authority of the Generic Drug Enforcement Act (GDEA) should be excluded from the draft penalty reduction policy. Under GDEA, CMP's may be assessed for a variety of intentional or ``knowing'' conduct related to abbreviated new drug applications (21 U.S.C. 335b(a)). Also, GDEA permits CMP's for debarred individuals who provide services in any capacity to persons who have approved or pending drug product applications (id). Because of the level of scientist required to assess a CMP under GDEA, FDA believes it is not appropriate to consider reduction or waiver of penalties in such cases. The National Childhood Vaccine Injury Act (NCVIA) also has a provision for CMP, for which intentional or knowing conduct is a requirement for assessment of penalties. Section 2128(b) of the Public Health Service Act (42 U.S.C. 300aa-28) states that a CMP may be assessed when a vaccine manufacturer intentionally destroys, alters, falsifies, or conceals records associated with the manufacture of vaccines. Accordingly, FDA believes it is not appropriate to consider reduction or waiver of CMP in cases involving this provision of the NCVIA. Definition of ``Small Entity'' Section 211(1) of SBREFA defines the term ``small entity'' as having the same meaning as in section 601 of the United States Code (5 U.S.C. 601). Section 601 defines ``small entity'' as ``small business,'' ``small organization'' and ``small governmental jurisdiction.'' Under section 601(3) of 5 U.S.C., a ``small business'' has the same meaning as ``small business concern'' under section 3 of the Small Business Act (15 U.S.C. 632(a)), unless an agency, after consultation with the Office of Advocacy of the Small Business Administration (SBA) and after opportunity for public comment, establishes its own definition. Section 632(a)(1) of 15 U.S.C. defines a ``small business concern'' as an enterprise ``which is independently owned and operated and which is not dominant in its field of operation'' (15 U.S.C. 632(a)(1)). The SBA has further defined ``small business concern'' for a number of specific industries based on the sizes of the enterprises and their affiliations (see 13 CFR part 121 and the SBA Table of Size Standards). When SBA determines whether an enterprise is a small business, it generally counts the enterprise's affiliations (see 13 CFR 121.103). Family enterprises or enterprises in which the same individual or individuals have a controlling interest are aggregated for this purpose. If the aggregate total of the affiliated enterprises exceeds the size requirement for small businesses, none of the affiliated enterprises is considered a small business. Federal law defines ``small organization'' as a not-for-profit enterprise which is independently owned and operated and not dominant in its field (5 U.S.C. 601(4)). The U.S. Code defines a ``small governmental jurisdiction'' as a governmental entity with a population of less than 50,000 (5 U.S.C. 601(5)). The definitions of ``small organization'' and ``small governmental jurisdiction'' may be changed by agencies after an opportunity for public comment. The small business definitions within the nutritional food labeling exemptions (21 CFR 101.9(j) and 101.36(h)) are not applicable to CMP's. III. Regulatory Requirements FDA is announcing a draft penalty reduction policy as required by SBREFA. As a general statement of policy, the Administrative Procedure Act does not require that FDA publish this draft policy for notice and comment. However, under the Good Guidance Practices published in the Federal Register of February 27, 1997 (62 FR 8961), FDA is providing interested parties, particularly small entities, with an opportunity to comment on the draft penalty reduction policy. This draft policy is being issued for public comment only and will not be implemented until a final policy is published in the Federal Register. This guidance document represents the agency's current thinking on the draft CMP reduction policy for small entities. It does not create or confer any rights for or on any person and does not operate to bind FDA or the public. An alternative approach may be used if such approach satisfies the requirements of the applicable statute, regulations, or both. IV. Request for Comments Interested persons may, on or before August 16, 1999, submit to the Dockets Management Branch (address above) written comments on the document entitled ``Draft Civil Money Penalty Reduction Policy for Small Entities.'' Two copies of any comments are to be submitted, except that individuals may submit one copy. Comments are to be identified with the docket number found in brackets in the heading of this document. Although all received comments will be considered by FDA in formulating the final penalty reduction policy, the agency is not obligated to respond to each comment. The agency will make changes to the draft penalty reduction policy, as appropriate. Copies of the draft policy and received comments may be seen in the Dockets Management Branch between 9 a.m. and 4 p.m., Monday through Friday. V. Electronic Access A copy of the draft policy may also be downloaded to a personal computer with access to the World Wide Web (WWW). The Office of Regulatory Affairs (ORA) home page includes the draft policy and may be accessed at ``http://www.fda.gov/ora''. The draft policy will be available under ``Compliance References.'' Dated: May 11, 1999. William K. Hubbard, Associate Commissioner for Policy Coordination. [FR Doc. 99-12390 Filed 5-17-99; 8:45 am] BILLING CODE 4160-01-F