Category: Biotech & Cleantech

CTP Releases New 5-year Strategic Plan

On December 18, 2023, Dr. Brian King, the Director of FDA’s Center for Tobacco Products announced the Center’s new five-year strategic plan which outlines the Center’s programmatic and workforce initiatives and includes five goals, ten outcomes, and several corresponding objectives.

The new strategic plan incorporates recommendations from the Reagan-Udall Foundation report published in December 2022. The Reagan-Udall Foundation report provided fifteen recommendations for CTP which included improving transparency regarding the Center’s approach to Premarket Tobacco Product Application (PMTA) reviews and compliance and enforcement. The report highlighted industry concerns with the CTP’s framework for approaching PMTA reviews, particularly after FDA issued Refuse To Accept (RTA) letters, Refuse to File (RTF) Letters, or Marketing Denial Orders (MDOs) for millions of deemed tobacco products. The five-year plan seeks to address the issues of transparency, enforcement, and education.

The five goals are:

  1. Develop, advance, and communicate comprehensive and impactful tobacco regulations and guidance;
  2. Ensure timely, clear, and consistent product application review;
  3. Strengthen compliance of regulated industry utilizing all available tools, including robust enforcement actions;
  4. Enhance knowledge and understanding of the risks associated with tobacco product use; and
  5. Advance operational excellence.

To achieve these goals, CTP plans to develop and implement several guidance documents to ensure that regulations are clear and accessible. Furthermore, CTP will develop new processes to review PMTA efficiently and to communicate the review process and marketing decisions transparently. CTP also plans to pursue more robust enforcement actions by collaborating with other federal and state agencies.

CTP highlighted the importance of promoting education surrounding the risks of tobacco product use, particularly for preventing youth initiation, and educating adults on the benefits of cessation, including the relative risks of different tobacco products. The fifth and last goal regards CTP’s operational goals by supporting its workforce and operating efficiently.

In conjunction with this strategic plan, CTP also published the Center’s policy agenda of rules and guidance documents. The policy agenda provides guidance documents in development, including current and long-term priorities for the Center.

The Center’s current priorities include:

The ultimate goal of the strategic plan is to reduce harm caused by tobacco product use and to work with regulated industries in a manner that demonstrates a commitment to science, health equity, stakeholder engagement, and transparency.

© 2024 Keller and Heckman LLP
For more news on FDA’s Center for Tobacco Products, visit the NLR Biotech, Food, Drug section.

Navigating Hemp THC Beverages

Nonalcoholic beverages infused with delta-9 tetrahydrocannabinol (THC) derived from hemp (aka intoxicating hemp beverages) are becoming increasingly popular for consumers looking for an alternative to alcohol.

With major alcohol retailers like Total Wine entering the cannabis space, alcohol beverage producers may be looking for opportunities to leverage their existing experience in manufacturing, marketing and distributing alcohol beverages towards the emerging intoxicating hemp beverage market. While intoxicating hemp beverages are arguably legal pursuant to the Agriculture Improvement Act of 2018 (2018 Farm Bill), risks remain under federal and state food and drug laws. Accordingly, beverage producers looking to enter this emerging market should become familiar with the ambiguities involved.

Federal Treatment of Intoxicating Hemp Beverages

The 2018 Farm Bill removed hemp, defined as cannabis (Cannabis sativa L.) and derivatives of cannabis with extremely low concentrations of delta-9 THC (specifically, no more than 0.3 percent THC on a dry weight basis), from the definition of “marijuana” in the Controlled Substances Act. The federal government defines hemp as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” Accordingly, products that meet the definition of “hemp” may be marketed and sold in the United States and are no longer classified under federal law as illegal drugs.

How Is Hemp Regulated?

Under the 2018 Farm Bill, the US Department of Agriculture (USDA) has been assigned to regulate hemp production.

However, any hemp-derived foods, including beverages, are subject to regulation by the US Food & Drug Administration (FDA) under the Food, Drug, and Cosmetics Act (FDCA). While the FDA has largely avoided enforcement actions against such products, focusing most of its efforts on products making unsubstantiated medical and therapeutic claims, it has clearly concluded that it is a prohibited act under federal law to introduce any food in the market to which THC or cannabidiol (CBD) has been added. Therefore, the risk of federal enforcement remains until the agency changes its stance towards THC as a beverage additive.

State Regulation

While the federal government has been inactive in this space, the legal status of intoxicating hemp beverage products varies significantly by state. On the one hand, several states, including Minnesota, have expressly legalized the inclusion of hemp-derived cannabinoids in beverage products, with clear regulations regarding testing, labeling, advertising and more. On the other hand, some states have legalized hemp beverage products but lack a robust regulatory framework – leading to a mostly unregulated, laissez-faire market.

Further, many states fall into a grey area when it comes to the legality of such products. Some of these states have legalized hemp along the lines of the 2018 Farm Bill but have not officially opined on whether it can be added to beverage products, while others do not mention hemp products at all. A subset of states has expressly legalized hemp in beverages, as long as it complies with federal guidance, which currently does not affirmatively allow hemp to be used as a beverage additive.

One of the most extreme measures taken by state officials to ban hemp from beverage products is currently underway in South Carolina. The state’s Department of Health and Environmental Control (DHEC) recently issued a letter to the hemp industry warning that certain hemp products are not approved to be added to beverage products, including delta-9 THC.

In its letter, the DHEC also ruled that labels and packaging may not contain references to “THC,” “CBD” or “delta-9” products, or isolates, as this implies the product is no longer a food item but is a drug and is unlawful.

This new guidance is far from outlawing cannabinoids in beverages, but it affects a growing industry that has already been promoting intoxicating hemp beverages in the state. Indeed, some beverage manufacturers in South Carolina have been forced to halt production, citing confusion over the new labeling and packaging requirements. This demonstrates how the legal landscape around intoxicating hemp beverages can change rapidly.

Finally, it is important to note that even states that expressly allow and regulate THC-infused beverage products fall into a grey area when we consider the current state of federal regulations. Until Congress acts or the FDA changes its stance towards THC as a beverage additive, we will continue seeing a patchwork of different approaches.

 
© 2024 McDermott Will & Emery
by: Alva C. Mather , Christine Dower of McDermott Will & Emery
For more on THC, visit the NLR Biotech, Food, Drug section.

Three Individuals Sentenced for $3.5 Million COVID-19 Relief Fraud Scheme

Three Individuals Sentenced for $3.5 Million COVID-19 Relief Fraud Scheme

On February 6, three individuals were sentenced for fraudulently obtaining and misusing Paycheck Protection Program (PPP) loans that the US Small Business Administration (SBA) guaranteed under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

According to court documents and evidence presented at trial, in 2020 and 2021, defendants Khadijah X. Chapman, Daniel C. Labrum, and Eric J.O’Neil submitted falsified documents to financial institutions for fictitious businesses to fraudulently obtain $3.5 million in PPP loans intended for small businesses struggling with the economic impact of COVID-19. Chapman was convicted in November 2023 of bank fraud. Labrum and O’Neil pleaded guilty in 2023 to bank fraud. Following their convictions, Chapman was sentenced to three years and 10 months in prison, Labrum was sentenced to two years in prison, and O’Neil was sentenced to two years and three months in prison.

Read the US Department of Justice’s (DOJ) press release here.

False Claims Act Complaint Filed Against Former President and Co-Owner of Mobile Cardiac PET Scan Provider

The DOJ filed a complaint in the US District Court for the Southern District of Texas under the False Claims Act (FCA) against Rick Nassenstein, former president, chief financial officer, and co-owner of Illinois-based Cardiac Imaging Inc. (CII), which provides mobile cardiac positron emission tomography (PET) scans.

The complaint alleges that Nassenstein caused CII to pay excessive, above-market fees to doctors who referred patients to CII for cardiac PET scans. The government alleges that the compensation arrangements violated the Stark Law, which prohibits health care providers from billing Medicare for services referred by a physician with whom the provider has a compensation arrangement unless the arrangement meets certain statutory and regulatory requirements. Claims knowingly submitted to Medicare in violation of the Stark Law also violate the federal FCA.

The complaint alleges that CII provided cardiac PET scans on a mobile basis and paid the referring physicians, usually cardiologists, to provide physician supervision as required by Medicare rules. From at least 2017 through June 2023, Nassenstein allegedly caused CII to enter into compensation arrangements with referring cardiologists that provided for payment to the cardiologists as if they were fully occupied supervising CII’s scans, even though they were actually providing care to other patients in their offices or patients who were not even on site. CII’s fees also allegedly compensated the cardiologists for additional services the physicians did not actually provide. The complaint alleges that CII paid over $40 million in unlawful fees to physicians and submitted over 75,000 false claims to Medicare for services provided pursuant to referrals that violated the Stark Law.

The lawsuit was originally a qui tam complaint filed by a former billing manager at CII, and the United States, through the DOJ, filed a complaint in partial intervention to participate in the lawsuit.

The case, captioned US ex rel. Pinto v. Nassenstein, No. 18-cv-2674 (S.D. Tex.), follows an $85.5 million settlement in October 2023 by CII and its current owner, Sam Kancherlapalli, for claims arising from this conduct.

Read the DOJ’s press release here.

San Diego Restaurant Owner Charged with Tax and COVID-19 Relief Fraud Schemes

On February 2, a federal grand jury in San Diego returned a superseding indictment charging a California restaurant owner with wire fraud, conspiracy to commit wire fraud, tax evasion, filing false tax returns, conspiracy to defraud the United States, conspiracy to commit money laundering, and failing to file tax returns.

According to the indictment, Leronce Suel, the majority owner of Rockstar Dough LLC and Chicken Feed LLC, conspired with a business partner to underreport over $1.7 million in gross receipts on Rockstar Dough LLC’s 2020 federal corporate tax return. From March 2020 to June 2022, Suel and the business partner then allegedly used this fraudulent return to qualify for COVID-19-related loans pursuant to the PPP and Restaurant Revitalization Funding program. In connection with those loans, Suel also allegedly certified falsely that he used the loan money for payroll purposes only. The indictment alleges that Suel and his business partner laundered the fraudulently obtained funds through cash withdrawals from their business bank accounts and stashed more than $2.4 million in cash in their home.

The indictment further charges that Suel failed to report millions of dollars received in cash and personal expenses paid for by his businesses as income, in addition to reporting false depreciable assets and business losses.

If convicted, Suel faces prison sentences up to 30 years for each count of wire fraud and conspiracy to commit wire fraud, 10 years for each count of conspiracy to commit money laundering, five years for tax evasion and conspiracy to defraud the United States, three years for each count of filing false tax returns, and one year for each count of failing to file tax returns.

Read the DOJ’s press release here.

© 2024 ArentFox Schiff LLP
For more on Regulated Industries, visit the NLR Biotech, Food, Drug section.

Office of Science and Technology Policy Requests Public Input on Biotechnology Regulation

  • The Office of Science and Technology Policy (OSTP) issued a request for information (RFI) today in which it invites public comment on the Coordinated Framework for the Regulation of Biotechnology (the “Coordinated Framework”).
  • The Coordinated Framework, which is a Federal regulatory policy for ensuring the safety of biotechnology products, was first issued in 1986, updated in 1992— to affirm that federal regulation should focus on characteristics of the product and the environment into which it being introduced, and not on the process by which it is produced—and then updated again in 2017 to clarify the roles of EPA, FDA, and USDA. And, in September of this year, Executive Order 14081 directed the three agencies to clarify and streamline regulations to support the safe of use of biotechnology products.
  • Accordingly, the RFI requests comment on seven questions related to the Coordinated Framework. The questions include a request for comment on identification of any regulatory gaps, inefficiencies, or uncertainties; data or information to improve any identified issues; and new or emerging biotechnology products that the agencies should be prepared to address. Comments to the RFI are due by February 3, 2023. Also, on January 12, 2023, OTSP will host a virtual event in which it will listen to public feedback on the RFI.

Article By Food and Drug Law at Keller and Heckman

For more food, drug, and biotechnology legal news, click here to visit the National Law Review.

© 2022 Keller and Heckman LLP

All Federal Research Agencies to Update Public Access Policies

On 25 August 2022, the Office of Science and Technology Policy (OSTP) released a guidance memorandum instructing federal agencies with research and development expenditures to update their public access policies. Notably, OSTP is retracting prior guidance that gave discretion to agencies to allow a 12-month embargo on the free and public release of peer-reviewed publications, so that federal funded research results will be timely and equitably available at no cost. The memo also directs affected agencies to develop policies that:

  1. Ensure public access to scientific data, even if not associated with peer-reviewed publications;
  2. Ensure scientific and research integrity in the agency’s public access by requiring publication of the metadata, including the unique digital persistent identifier; and
  3. Coordinate with OSTP to ensure equitable delivery of federally funded research results and data.

KEY COMPONENTS OF GUIDANCE:

Updating Public Access Policies

Federal agencies will need to develop new, or update existing, public access plans, and submit them to OSTP and the Office of Management and Budget (OMB). Deadlines for submission are within 180 days for federal agencies with more than US$100 million in annual research and development expenditures, and within 360 days for those with less than US$100 million in expenditures.

Agencies will need to ensure that any peer-reviewed scholarly publication is free and available by default in agency-designated repositories without any embargo or delay following publication. Similarly, OSTP expects the access polices to address publication of any other federally funded scientific data, even if not associated with peer-reviewed scholarly publications. As a concession, federal agencies are being asked to allow researchers to include the “reasonable publication costs and costs associated with submission, curation, management of data, and special handling instructions as allowable expenses in all research budgets.1”

Ensuring Scientific Integrity

To strengthen trust in governmentally funded research, the new or updated policies must transparently communicate information designed to promote OSTP’s research integrity goals. Accordingly, agencies are instructed to collect and make appropriate metadata available in their public access repositories, including (i) all author and co-author names, affiliations, and source of funding, referencing their digital persistent identifiers, as appropriate; (ii) date of publication; and (iii) a unique digital persistent identifier for research output. Agencies should submit to OSTP and OMB (by 31 December 2024) a second update to their policies specifying the approaches taken to implement this transparency, and publish such policy updates by 31 December 2026, with an effective date no later than one year after publication of the updated plan.

IMPLICATIONS FOR THE NATIONAL INSTITUTES OF HEALTH (NIH), OTHER FEDERAL AGENCIES, AND THEIR GRANTEES

The NIH is expected to update its Public Access Policy, potentially along with its Data Management and Sharing Policy to conform with the new OSTP guidance. Universities, academic medical centers, research institutes, and federally funded investigators should monitor agency publications of draft and revised policies in order to update their processes to ensure continued compliance.

In doing so, affected stakeholders may want to consider and comment to relevant federal agencies on the following issues in their respective public access policy development:

  • Federal agency security practices to prevent foreign misappropriation of research data;
  • Implications for research misconduct investigations and research integrity;
  • Any intellectual property considerations without a 12-month embargo, especially to the extent this captures scientific data not yet published in a peer-review journal; and
  • Costs allowable research budgets to support these data management and submission expectations.

1 Office of Science and Technology Policy, Memorandum for the Heads of Executive Departments and Agencies: Ensuring Free, Immediate, and Equitable Access to Federally Funded Research at p. 5 (25 August 2022) available at https://www.whitehouse.gov/wp-content/uploads/2022/08/08-2022-OSTP-Public-Access-Memo.pdf

Article By Cindy L. Ortega Ramos and Rebecca M. Schaefer of K&L Gates

For more administrative and regulatory legal news, click here to visit the National Law Review.

Copyright 2022 K & L Gates

EPA Updates Safer Chemical Ingredients List, Adding 22 Chemicals and Changing the Status of One Chemical

The U.S. Environmental Protection Agency (EPA) announced on August 11, 2022, that it updated the Safer Chemical Ingredients List (SCIL), “a living list of chemicals by functional-use class that EPA’s Safer Choice program has evaluated and determined meet the Safer Choice Standard.” EPA added 22 chemicals to the SCIL. EPA states that to expand the number of chemicals and functional-use categories on the SCIL, it encourages manufacturers to submit their safer chemicals for review and listing on the SCIL. In support of the Biden Administration’s goals, the addition of chemicals to the SCIL “incentivizes further innovation in safer chemistry, which can promote environmental justice, bolster resilience to the impacts of climate change, and improve water quality.” According to EPA, chemicals on the SCIL “are among the safest for their functional use.”

EPA also changed the status for one chemical on the SCIL and will remove the chemical from the list in one year “because of a growing understanding of the potential health and environmental effects.” According to EPA, the chemical was originally listed on the SCIL based on data from a closely related substance that EPA marked with a grey square earlier this year. EPA’s process for removing a chemical from the SCIL is first to mark the chemical with a grey square on the SCIL web page to provide notice to chemical and product manufacturers that the chemical may no longer be acceptable for use in Safer Choice-certified products. A grey square notation on the SCIL means that the chemical may not be allowed for use in products that are candidates for the Safer Choice label, and any current Safer Choice-certified products that contain this chemical must be reformulated unless relevant health and safety data are provided to justify continuing to list the chemical on the SCIL. EPA states that the data required are determined on a case-by-case basis. In general, data useful for making such a determination provide evidence of low concern for human health and environmental impacts. Unless information provided to EPA adequately justifies continued listing, EPA then removes the chemical from the SCIL 12 months after the grey square designation.

According to EPA, after this update is made, there will be 1,055 chemicals listed on the SCIL. EPA is committed to updating the SCIL with safer chemicals on a regular basis. EPA states that the SCIL is a resource that can help many different stakeholders:

  • Product manufacturers use the SCIL to help make high-functioning products that contain safer ingredients;
  • Chemical manufacturers use the SCIL to promote the safer chemicals they manufacture;
  • Retailers use the SCIL to help shape their sustainability programs; and
  • Environmental and health advocates use the SCIL to support their work with industry to encourage the use of the safest possible chemistry.

EPA’s Safer Choice program certifies products containing ingredients that have met the program’s rigorous human health and environmental safety criteria. The Safer Choice program allows companies to use its label on products that meet the Safer Choice Standard. The EPA website contains a complete list of Safer Choice-certified products.

Article By Lynn L. Bergeson and Carla N. Hutton of Bergeson & Campbell, P.C.

For more environmental legal news, click here to visit the National Law Review.

©2022 Bergeson & Campbell, P.C.

Green Innovation Being Fast Tracked by USPTO

The USPTO now fast tracks applications involving greenhouse gas reduction technologies. The new Climate Change Mitigation Pilot Program targets impact on the climate by accelerating examination of patent applications for innovations that reduce greenhouse gas emissions. Qualifying applications may be advanced out of turn for examination (granted special status) until a first action on the merits—typically the first substantive examination—is complete. Advantageously, qualifying applications do not incur the petition to make special fee and is not required to satisfy the other requirements of the accelerated examination program.

The United States Patent and Trademark Office (USPTO) accept petitions to make special under this program until June 5, 2023, or the date when 1,000 applications have been granted special status under this program, whichever occurs earlier. “This program aligns with and supports Executive Order 14008, dated January 27, 2021, and supports the USPTO’s efforts to secure an equitable economic future, reduce greenhouse gas emissions, and mitigate the effects of climate change.” The new program takes steps toward working to incentivize and expedite clean energy technologies that will help reduce greenhouse gas emissions and mitigate the effects of climate change.

To qualify for the Program:

  • Patent Applications must contain one or more claims to a product or process that mitigates climate change by reducing greenhouse gas emissions, and be: (a) a non-continuing original utility non-provisional application; and (b) an original utility non-provisional application that claims the benefit of the filing date under 35 U.S.C. 120, 121, 365(c), or 386(c) of only one prior application that is either a non-provisional application or an international application designating the United States. Note: Claiming the benefit under 35 U.S.C. 119(e) of one or more prior provisional applications or claiming a right of foreign priority under 35 U.S.C. 119(a)-(d) or (f) to one or more foreign applications will not affect eligibility for this pilot program.

  • The application or national stage entry and the requisite petition form must be electronically filed by use of the Patent Center of the USPTO, and the specification, claims, and abstract must be submitted in DOCX format.

  • Applicants must file the petition to make special with the application or entry into the national stage under 35 U.S.C. 371 or within 30 days of the filing date or entry date of the application. The fee for the petition to make special under 37 CFR 1.102(d) has been waived for this program.

  • Applicants must use Form PTO/SB/457—which contains the petition and requisite certifications—to request participation in this program.

  • Petition filing limitations: Applicants may not file a petition to participate in this pilot program if the inventor or any joint inventor has been named as the inventor or a joint inventor on more than four other non-provisional applications in which a petition to make special under this program has been filed.

In a recent blog post announcing the Climate Change Mitigation Pilot Program, USPTO Director Kathi Vidal said, “It’s essential to protect these transformative energy innovations with intellectual property (IP). Innovation is a primary driver of the U.S. economy, and IP is the bridge between an idea and bringing that innovation to market. Industries based on innovation and the protection of intellectual property generate almost $8 trillion ($7.8 trillion) in GDP, and account for 44% of all U.S. jobs. Workers in patent-intensive industries earn almost $1,900 per week. That is 97% higher than the average weekly wage of workers in non-IP intensive industries.”

Vidal also said, “Startup companies that have a patent are far more likely to be successful in raising funding than those that have not secured intellectual property protection. When used as collateral, a patent increases venture capital funding by 76% over three years, and increases funding from an initial public offering by 128%, the approval of a startup’s first patent application increases its employee growth by 36% over the next five years, and after five years, a new company with a patent increase its sales by a cumulative 80% more than companies that do not have a patent.”

Moving forward to protect essential green energy transition technology can be helpful for future corporate and strategic goals. This new Climate Change Mitigation Pilot Program opens the door to accelerating potential patent protection for many of these developing technological fields.

Article By Jeffrey S. Whittle,  Karthika Perumal, Ph.D., Christopher Kent, Kevin J. Davis, Ph.D., and Samuel A. Savanich of  Womble Bond Dickinson (US) LLP

For more environmental, energy, and resources news, click here to visit the National Law Review.

Copyright © 2022 Womble Bond Dickinson (US) LLP All Rights Reserved.

Senate Bill to Revise and Reassess GRAS Program

  • On May 27, Senator Edward J. Markey (D-Mass.), alongside Senators Richard Blumenthal (D-Conn.) and Elizabeth Warren (D-Mass)., introduced the Ensuring Safe and Toxic-Free Foods Act, which is described as “comprehensive legislation that ensures the Department of Health and Human Services (HHS) fulfills its responsibility to promote the health and well-being of American families by directing the Food and Drug Administration (FDA) to strengthen the Substances Generally Recognized as Safe (GRAS) Rule, which exempts companies from seeking pre-market approval for food chemicals.” A summary of the legislation is available here.
  • The legislation would prohibit manufacturers from independently designating substances as GRAS (or manufacturing or selling food containing those substances) without supplying notice and supporting information to the Secretary of HHS. Substances that are carcinogenic or that have evidence of reproductive or developmental toxicity would be prohibited from receiving a GRAS designation. Further, the legislation would require that a GRAS Notice and all supporting information be publicly available online and subject to a 90-day review period.
  • The legislation would also direct the Secretary to create an Office of Food Chemical Safety Reassessment within FDA’s CFSAN. The new office would be responsible for reassessing the safety of existing food additives, food contact substances, color additives, and substances that had already received GRAS status. The office would be required to reassess at least 10 substances (or class of substances) once every three years. As included in the bill, the first 10 substances to be reviewed would be:
    • Perfluoroalkyl substances and polyfluoroalkyl substances
    • Ortho-phthalates
    • The class of bisphenols
    • Titanium dioxide
    • Potassium bromate
    • Perchlorate
    • Butylated hydroxyanisole (BHA)
    • Butylated hydroxytoluene (BHT)
    • Brominated vegetable oil (BVO)
    • Propyl paraben
  • With regard to the legislation, Senator Markey has said “The FDA too often falls short on their responsibility to promote food safety, highlighted recently by the baby formula crisis where FDA’s deputy commissioner for food policy did not learn about the whistleblower complaint for four months. It is long past time we revise existing food safety measures and close the loophole allowing manufacturers to self-regulate what new substances can enter our food supply.”

Article By Food and Drug Law at Keller and Heckman of Keller and Heckman LLP

For more biotechnology, life sciences, food and drug law news, click here to visit the National Law Review.
© 2022 Keller and Heckman LLP

Phantom Participants with Real-World Ramifications: Clinical Drug Trial Data Falsification

As if medical-related disinformation was not pernicious enough, unscrupulous actors seek to enrich themselves from falsifying clinical drug trial data. A Florida-based clinical research firm project manager was sentenced to 30 months in prison because of his involvement in a conspiracy to falsify clinical drug trial data. Previously, the primary investigator, clinic owner, and another senior employee at Miami-based Tellus Clinical Research were charged with various counts of mail and wire fraud, money laundering, as well as making false statements to Food and Drug Administration (FDA) inspectors. A researcher or other employee of the medical clinic could have reported this conspiracy to the government and shared in 15-25% of the government’s recovery.

Pharmaceutical companies sponsor clinical research trials to gather data on the safety and efficacy of the drugs they manufacture. Prior to commencing research trials, pharmaceutical companies or “sponsors” must submit to the FDA their “study protocol,” which identifies who can participate, drug dosages and timing, and how the study’s performance will be measured. Sponsors engage contract research organizations (CROs) to perform the clinical trials, and the CRO must ensure compliance with the study protocol and FDA regulations. In this case, a clinical research firm contracted with pharmaceutical manufacturers to conduct trials related to an opioid dependency treatment, an irritable bowel syndrome drug, and diabetic nephropathy or kidney disease medication. The sponsors would reimburse the CRO a set amount per study participant and for some fees and Tellus would pay participants in accordance with the study protocol.

How the research firm gamed the system involved the eligibility requirements for the studies: each of these clinical trials required patients to meet certain requirements for participation. Instead of honestly recruiting patients with the diagnoses needed to participate in the program, the defendants enrolled people without applicable diagnoses and falsely claimed that study participants completed all the requirements in the study protocol, to garner more payments from the clinical trial sponsors. Several of the defendants enrolled friends and family members to bump up the research firm’s participation numbers, and other research firm employees went so far as to misappropriate personal information from third parties without their knowledge or consent. The co-conspirators also falsified clinical notes and medical records of these unwitting participants, claiming to have performed medical exams, drawn blood for testing, and made payments to participants. This elaborate conspiracy served to wrongfully enrich the research firm owner and senior management at the expense of pharmaceutical companies and ultimately patients.

Clinical research fraud is harmful to consumers. As the Assistant Commissioner for the FDA Office of Criminal Investigations (OCI) stated, “Compromised clinical trial data could impact the agency’s decisions about the safety and effectiveness of the drug under review.” Consumers could end up with unsafe medications due to fraudsters’ schemes.

A whistleblower could have reported this fraud to the FDA and ensured only drugs which perform well in clinical trials on real human beings make it to market. The Department of Justice needs whistleblowers to report fraud involving clinical drug trials.

© 2022 by Tycko & Zavareei LLP
For more content about the FDA and drug trials, visit the NLR Biotech, Food & Drug section.