[Federal Register Volume 69, Number 138 (Tuesday, July 20, 2004)]
[Rules and Regulations]
[Pages 43299-43302]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16388]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 17

[Docket No. 2003N-0308]


Civil Money Penalties Hearings; Maximum Penalty Amounts and 
Compliance With the Federal Civil Penalties Inflation Adjustment Act

AGENCY:  Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY:  The Food and Drug Administration (FDA) is issuing a new 
regulation to adjust for inflation the maximum civil money penalty 
amounts for the various civil money penalty authorities within our 
jurisdiction. We are taking this action to comply with the Federal 
Civil Penalties Inflation Adjustment Act of 1990 (FCPIAA), as amended.

DATES: This rule is effective on September 20, 2004.

FOR FURTHER INFORMATION CONTACT: Philip L. Chao, Office of Policy and 
Planning (HF-23), Food and Drug Administration, 5600 Fishers Lane, 
Rockville, MD 20857, 301-827-0587.

SUPPLEMENTARY INFORMATION:

I. Why Are We Revising Our Civil Money Penalty Rules?

    In general, the FCPIAA (28 U.S.C. 2461, as amended by the Debt 
Collection Improvement Act of 1996) requires Federal agencies to issue 
regulations to adjust for inflation each civil monetary penalty 
provided by law within their jurisdiction. The FCPIAA directs agencies 
to adjust the civil monetary penalties by October 23, 1996, and to make 
additional adjustments at least once every 4 years thereafter. The 
adjustments are based on changes in the cost of living, and the FCPIAA 
defines the cost of living adjustment as:
    * * * the percentage (if any) for each civil monetary penalty by 
which--
    (1) the Consumer Price Index for the month of June of the 
calendar year preceding the adjustment, exceeds
    (2) the Consumer Price Index for the month of June of the 
calendar year in which the amount of such civil monetary penalty was 
last set or adjusted pursuant to law. * * *
    The FCPIAA also prescribes a rounding method based on the amount of 
the calculated increases, but states that the initial adjustment of a 
civil monetary penalty may not exceed 10 percent of the penalty.
    The FCPIAA defines a civil monetary penalty as:
    * * * any penalty, fine, or other sanction that--
    (A)(i) is for a specific monetary amount as provided by Federal 
law; or
    (ii) has a maximum amount provided for by Federal law; and
    (B) is assessed or enforced by an agency pursuant to Federal 
law; and
    (C) is assessed or enforced pursuant to an administrative 
proceeding or a civil action in the Federal Courts * * *.
    Congress enacted the FCPIAA, in part, because it found that the 
impact of civil monetary penalties had been reduced by inflation and 
that reducing the impact of civil monetary penalties had weakened their 
deterrent effect.
    In the Federal Register of December 1, 2003 (68 FR 67094), we 
published a proposed rule that identified 14 civil monetary penalties 
that fall within our jurisdiction and are subject to adjustments under 
the FCPIAA. The proposal amended our civil money penalties hearing 
regulations at part 17 (21 CFR part 17) to establish a new Sec.  17.2, 
entitled ``Maximum penalty amounts'' to show the current maximum civil 
monetary penalty amounts that were adjusted under the FCPIAA.
    The proposal also revised Sec.  17.1 which lists statutory 
provisions authorizing civil money penalties that were governed by the 
civil money penalty regulations as of August 28, 1995. The proposed 
revision simply updated the statutory citations.

II. What Comments Did We Receive on the Proposal?

    We received two comments on the proposed rule. A description of 
those comments and our responses follow. To make it easier to identify 
comments and our responses, the word ``Comment,'' in parentheses, will 
appear before the comment's description, and the word ``Response,'' in 
parentheses, will appear before our response. We have also numbered 
each comment to help distinguish between different comments. The number 
assigned to each comment is purely for organizational purposes and does 
not signify the comment's value or importance or the order in which it 
was received.
    (Comment 1) One comment stated that the adjusted penalties were not 
severe enough to ``keep crooked manufacturers from stopping their 
criminal acts which injure the American people.'' The comment said that 
the penalties should be increased by another 25 percent, and claimed 
that some drugs have caused more harm than benefits to individuals.
    The comment also made remarks concerning compensation afforded to 
pharmaceutical executives and the drug approval process.
    (Response) As we previously stated and in the preamble to the 
proposed rule, the FCPIAA prescribes a formula for calculating the 
increase for a civil monetary penalty and states that the initial 
adjustment of a civil monetary penalty may not exceed 10 percent of the 
penalty. (See 68 FR at 67094.) Thus, while higher civil monetary 
penalties might be a better deterrent, the FCPIAA does not authorize 
increases in penalties greater than 10 percent. Instead, the FCPIAA 
creates a framework for calculating and limiting the increases to a 
civil monetary penalty, and so the comment's suggestion to increase the 
penalties by 25 percent is not consistent with the FCPIAA.
    As for the comment's remarks concerning alleged harm from human 
drug products, executive compensation, and drug approval, such matters 
are outside the scope of this rulemaking.
    (Comment 2) A comment from the General Accounting Office stated 
that we had miscalculated the increases for several civil monetary 
penalties and that the correct amounts should be higher. The comment 
said that four of the proposed adjustments were not consistent with the 
law regarding inflation increases and explained that the errors were 
probably due to applying the specified 10-percent cap before rounding 
instead of after the prescribed rounding. Thus, because all 14 rounded 
CPI adjustments exceeded the specified 10-percent cap, each penalty 
should be increased by exactly 10 percent to be consistent with the 
FCPIAA.
    Consequently, the four civil monetary penalty adjustments, as 
originally proposed and as revised under the comment's interpretation 
of the FCPIAA's rounding and increase cap formulas, are as follows:

[[Page 43300]]



 Table 1.--Four Civil Monetary Penalties as Adjusted by FDA in the Proposed Rule and Readjusted Under Comment 2
                                         of Section II of This Document
----------------------------------------------------------------------------------------------------------------
                                                  Current Maximum
 U.S. Code Citation       Description of        Penalty Amount (in    Adjusted Penalty, as  Adjusted Penalty, as
                            Violation                dollars)            Proposed by FDA        Recalculated
----------------------------------------------------------------------------------------------------------------
21 U.S.C.
----------------------------------------------------------------------------------------------------------------
  333(f)(1)(A)       Violation of certain          15,000                     15,000                16,500
                      requirements of the
                      Safe Medical Devices
                      Act
----------------------------------------------------------------------------------------------------------------
  360pp(b)(1)        Violation of certain           1,000                      1,000                 1,100
                      requirements of the
                      Radiation Control for
                      Health and Safety Act
                      of 1968 (RCHSA)
----------------------------------------------------------------------------------------------------------------
  360pp(b)(1)        Violation of certain         300,000                    325,000               330,000
                      requirements of the
                      RCHSA
----------------------------------------------------------------------------------------------------------------
42 U.S.C.
----------------------------------------------------------------------------------------------------------------
  263b(h)(3)         Violation of certain          10,000                     10,000                11,000
                      requirements of the
                      Mammography Quality
                      Standards Act of 1992
                      and the Mammography
                      Quality Standards Act
                      of 1998
----------------------------------------------------------------------------------------------------------------

    (Response) We agree with the comment and have revised Sec.  17.2 
accordingly.
    We also note that proposed Sec.  17.2 contained a table to show the 
civil monetary penalties, including:
     ``Description of Violation'' to explain what actions could 
lead to a civil monetary penalty;
     ``Current Maximum Penalty Amount (in dollars)'';
     ``Assessment Method'' to explain how each civil monetary 
penalty might be applied;
     ``Date of Last Penalty Figure or Adjustment'' because, 
under the FCPIAA, we are obligated to adjust the maximum penalty 
amounts periodically; and
     ``Adjusted Maximum Penalty Amount (in dollars)''.
    The column for the ``Date of Last Penalty Figure or Adjustment'' 
was left blank because we did not know when we might issue a final 
rule. Because we are now issuing this final rule, the ``Date of Last 
Penalty Figure or Adjustment'' in each column will now be ``2004.''
    We have also revised the column that originally read as ``Current 
Maximum Penalty Amount (in dollars)'' to read as ``Former Maximum 
Penalty Amount (in dollars).'' We replaced ``Current'' with ``Former'' 
to eliminate any potential confusion about whether the ``Current 
Maximum Penalty'' should apply or whether the ``Adjusted Maximum 
Penalty'' should apply.

III. What Other Changes Did We Make?

    Proposed Sec.  17.1 revised the list of statutory civil monetary 
penalties. In revising the list, we inadvertently omitted two revisions 
to Sec.  17.1(b), which refers to section 303(g) of the Federal Food, 
Drug, and Cosmetic Act (the act) (21 U.S.C. 333(g)) and civil money 
penalties for certain violations of the act that relate to medical 
devices. The first omission would correct the citation so that it 
referred to section 303(f)(1)(A) of the act. We accounted for the 
correct citation in proposed Sec.  17.2(a), but neglected to propose a 
corresponding citation change in proposed Sec.  17.1(b). The second 
omission was a reference to section 303(f)(2) of the act, which 
provides for monetary penalties for certain violations related to 
pesticide residues. We included a reference to 21 U.S.C. 333(f)(2) in 
proposed Sec.  17.2, but neglected to make a corresponding change to 
Sec.  17.1(b).
    Consequently, on our own initiative, we have revised Sec.  17.1(b) 
to delete the reference to section 303(g) of the act and to insert 
references to section 303(f)(1) and (f)(2) of the act.
    Additionally, the introductory text of Sec.  17.1 contains a 
sentence that reads, in relevant part, ``Listed below are the statutory 
provisions that as of August 28, 1995, authorize civil money penalties 
that are governed by these procedures.'' Because we have updated the 
citations to reflect current laws, the August 28, 1995, date is no 
longer appropriate. Therefore, this final rule deletes ``August 28, 
1995'' and revises the sentence to read as follows: ``Listed below are 
the statutory provisions that authorize civil money penalties that are 
governed by these procedures.''

IV. What Does the Final Rule Do?

    In brief, the final rule:
     Revises Sec.  17.1 to update the statutory citations 
regarding various civil monetary penalties and
     Creates a new Sec.  17.2, entitled ``Maximum penalty 
amounts,'' to show the maximum civil monetary penalties associated with 
the statutory provisions authorizing civil monetary penalties under the 
act or the Public Health Service Act (PHS Act).
    We remind readers that section 351(d)(2) of the PHS Act (42 U.S.C. 
262(d)(2)) authorizes a civil monetary penalty for certain violations 
of the PHS Act. We omitted section 351(d)(2) of the PHS Act from this 
rule because, unlike the other civil monetary penalty provisions, 
section 351(d)(2) of the PHS Act is self-adjusting so that the maximum 
civil monetary penalty amount increases annually. Section 351(d)(2) of 
the PHS Act, when first enacted in 1986, provided for a maximum civil 
penalty of up to $100,000 per day of violation. By using the adjustment 
formula prescribed in section 351(d)(2) of the PHS Act, we calculate 
the adjusted maximum civil penalty amount for section 351(d)(2) of the 
PHS Act to be $151,637.28 per day of violation.

V. Environmental Impact

    We have determined under 21 CFR 25.30(a) and (h) that this action 
is of a type that does not individually or cumulatively have a 
significant effect on the human environment. Therefore, neither an 
environmental assessment nor an environmental impact statement is 
required.

VI. Paperwork Reduction Act 1995

    We conclude that the civil monetary penalties adjustments in this 
final rule are not subject to review by the Office of Management and 
Budget because they do not constitute a ``collection of

[[Page 43301]]

information'' under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520). The adjustments do not require disclosure of any 
information to FDA, third parties, or the public.

VII. Federalism

    We have analyzed this final rule in accordance with the principles 
set forth in Executive Order 13132. We have determined that the rule 
does not contain policies that have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Accordingly, we have concluded that the 
rule does not contain policies that have federalism implications as 
defined in the Executive order and, consequently, a federalism summary 
impact statement is not required.

VIII. Analysis of Impacts

    We have examined the impacts of the final rule under Executive 
Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and 
the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive 
Order 12866 directs agencies to assess all costs and benefits of 
available regulatory alternatives and, when regulation is necessary, to 
select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity). This final rule is 
consistent with the regulatory philosophy and principles identified in 
the Executive order. In addition, the final rule is not a significant 
regulatory action as defined by the Executive order and so is not 
subject to review under the Executive order.
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. Because the final rule simply adjusts the maximum 
amount of civil monetary penalties administered by FDA, and because the 
adjustment is required by the FCPIAA, we certify that the final rule 
will not have a significant economic impact on a substantial number of 
small entities. Therefore, under the Regulatory Flexibility Act, no 
further analysis is required.

List of Subjects in 21 CFR Part 17

    Administrative practice and procedure, Penalties.


0
Therefore, under the Federal Food, Drug, and Cosmetic Act and the 
Public Health Service Act, and under authority delegated to the 
Commissioner of Food and Drugs, 21 CFR part 17 is amended as follows:

PART 17--CIVIL MONEY PENALTIES HEARINGS

0
1. The authority citation for 21 CFR part 17 continues to read as 
follows:

    Authority: 21 U.S.C. 331, 333, 337, 351, 352, 355, 360, 360c, 
360f, 360i, 360j, 371; 42 U.S.C. 262, 263b, 300aa-28; 5 U.S.C. 554, 
555, 556, 557.

0
2. Section 17.1 is amended by redesignating paragraphs (d) through (f) 
as paragraphs (e) through (g); by revising the introductory text, 
paragraphs (a), (b), and newly redesignated paragraphs (e) through (g); 
and by adding new paragraph (d) to read as follows:


Sec.  17.1  Scope.

    This part sets forth practices and procedures for hearings 
concerning the administrative imposition of civil money penalties by 
FDA. Listed below are the statutory provisions that authorize civil 
money penalties that are governed by these procedures.
    (a) Section 303(b)(2) and (b)(3) of the Federal Food, Drug, and 
Cosmetic Act (the act) authorizing civil money penalties for certain 
violations of the act that relate to prescription drug marketing 
practices.
    (b) Section 303(f)(1) of the act authorizing civil money penalties 
for certain violations of the act that relate to medical devices and 
section 303(f)(2) of the act authorizing civil money penalties for 
certain violations of the act that relate to pesticide residues.
* * * * *
    (d) Section 539(b)(1) of the act authorizing civil money penalties 
for certain violations of the act that relate to electronic products.
    (e) Section 351(d)(2) of the Public Health Service Act (the PHS 
Act) authorizing civil money penalties for violations of biologic 
recall orders.
    (f) Section 354(h)(3) of the PHS Act, as amended by the Mammography 
Quality Standards Act of 1992 and the Mammography Quality Standards Act 
of 1998, authorizing civil money penalties for failure to obtain a 
certificate and failure to comply with established standards, among 
other things.
    (g) Section 2128(b)(1) of the PHS Act authorizing civil money 
penalties for intentionally destroying, altering, falsifying, or 
concealing any record or report required to be prepared, maintained, or 
submitted by vaccine manufacturers under section 2128 of the PHS Act.

0
3. Section 17.2 is added to read as follows:


Sec.  17.2  Maximum penalty amounts.

    The following table shows maximum civil monetary penalties 
associated with the statutory provisions authorizing civil monetary 
penalties under the act or the Public Service Act.

          Civil Monetary Penalties Authorities Administered by FDA and Adjusted Maximum Penalty Amounts
----------------------------------------------------------------------------------------------------------------
                                            Former Maximum                          Date of     Adjusted Maximum
 U.S.C. Section       Description of        Penalty Amount    Assessment Method       Last       Penalty Amount
                         Violation           (in dollars)                           Penalty       (in dollars)
----------------------------------------------------------------------------------------------------------------
(a) 21 U.S.C.
----------------------------------------------------------------------------------------------------------------
  (1)             Violation of certain         50,000        For each of the             2004       55,000
   333(b)(2)(A)    requirements of the                        first two
                   Prescription Drug                          violations in any
                   Marketing Act (PDMA)                       10-year period
----------------------------------------------------------------------------------------------------------------
  (2)             Violation of certain      1,000,000        For each violation          2004    1,100,000
   333(b)(2)(B)    requirements of the                        after the second
                   PDMA                                       conviction in any
                                                              10-year period
----------------------------------------------------------------------------------------------------------------
  (3) 333(b)(3)   Violation of certain        100,000        Per violation               2004      110,000
                   requirements of the
                   PDMA
----------------------------------------------------------------------------------------------------------------

[[Page 43302]]

 
  (4)             Violation of certain         15,000        Per violation               2004       16,000
   333(f)(1)(A)    requirements of the
                   Safe Medical Devices
                   Act (SMDA)
----------------------------------------------------------------------------------------------------------------
  (5)             Violation of certain      1,000,000        For the aggregate           2004    1,100,000
   333(f)(1)(A)    requirements of the                        of violations
                   SMDA
----------------------------------------------------------------------------------------------------------------
  (6)             Violation of certain         50,000        Per individual              2004       55,000
   333(f)(2)(A)    requirements of the
                   Food Quality
                   Protection Act of
                   1996 (FQPA)
----------------------------------------------------------------------------------------------------------------
  (7)             Violation of certain        250,000        Per ``any other             2004      275,000
   333(f)(2)(A)    requirements of the                        person''
                   FQPA
----------------------------------------------------------------------------------------------------------------
  (8)             Violation of certain        500,000        For all violations          2004      550,000
   333(f)(2)(A)    requirements of the                        adjudicated in a
                   FQPA                                       single proceeding
----------------------------------------------------------------------------------------------------------------
  (9) 335b(a)     Violation of certain        250,000        Per violation for           2004      275,000
                   requirements of the                        an individual
                   Generic Drug
                   Enforcement Act of
                   1992 (GDEA)
----------------------------------------------------------------------------------------------------------------
  (10) 335b(a)    Violation of certain      1,000,000        Per violation for           2004    1,100,000
                   requirements of the                        ``any other
                   GDEA                                       person''
----------------------------------------------------------------------------------------------------------------
  (11)            Violation of certain          1,000        Per violation per           2004        1,000
   360pp(b)(1)     requirements of the                        person
                   Radiation Control for
                   Health and Safety Act
                   of 1968 (RCHSA)
----------------------------------------------------------------------------------------------------------------
  (12)            Violation of certain        300,000        For any related             2004      325,000
   360pp(b)(1)     requirements of the                        series of
                   RCHSA                                      violations
----------------------------------------------------------------------------------------------------------------
(b) 42 U.S.C.
----------------------------------------------------------------------------------------------------------------
  (1) 263b(h)(3)  Violation of certain         10,000        Per violation               2004       11,000
                   requirements of the
                   Mammography Quality
                   Standards Act of 1992
                   and the Mammography
                   Quality Standards Act
                   of 1998
----------------------------------------------------------------------------------------------------------------
  (2) 300aa-      Violation of certain        100,000        Per occurrence              2004      110,000
   28(b)(1)        requirements of the
                   National Childhood
                   Vaccine Injury Act of
                   1986
----------------------------------------------------------------------------------------------------------------


    Dated: July 13, 2004.
Jeffrey Shuren,
Assistant Commissioner for Policy.
[FR Doc. 04-16388 Filed 7-19-04; 8:45 am]
BILLING CODE 4160-01-S