Earlier this month, the U.S. Sentencing Commission (the “Commission”) issued a
Notice of Proposed Amendments to the U.S. Sentencing Guidelines, which are used by federal courts to determine sentences for criminal violations.
The Notice contains several proposals that may be of interest to FDA LAw Blog readers. This blog post focuses on the Commission’s proposal regarding the appropriate base level offense for a person who is convicted of knowingly and intentionally adulterating a drug under a newly enacted provision of the FDC Act. As you may recall from HPM’s
earlier detailed analysis, section 716 of the Food and Drug Administration Safety and Innovation Act,
Public Law 112-144 (July 9, 2012), added a new subsection to section 303(b) (21 U.S.C. § 333(b)) of the FDC Act which reads as follows:
(7) Notwithstanding subsection (a)(2), any person that knowingly and intentionally adulterates a drug such that the drug is adulterated under subsection (a)(1), (b), (c), or (d) of section 501 and has a reasonable probability of causing serious adverse health consequences or death to humans or animals shall be imprisoned for not more than 20 years or fined not more than $1,000,000, or both.
Effectively, this means that the maximum criminal penalties associated with this conduct are much steeper than for violations of most other sections of the FDC Act. By way of background, section 303 of the FDC Act lists the penalties for violations of section 301 of the FDC Act. Section 303(a)(1) imposes misdemeanor liability for section 301 violations, and section 303(a)(2) imposes felony liability for second convictions under section 301 and violations of section 301 done with the intent to defraud and mislead. The statutory maximum for misdemeanor liability under (a)(1) is one year in prison ,a fine of not more than $1,000, or both; for felony liability under (a)(2), it is three years, a fine of not more than $10,000, or both. Section 303(b), generally sets forth the penalties for other violations of the FDC Act, most of which have a statutory maximum of ten years. Thus, the twenty year statutory maximum for a term of imprisonment and maximum fine of $1,000,000 under section 303(b)(7) presumably reflects Congress’ view of the relative seriousness of this offense.
For most FDC Act violations, the base offense level is governed by § 2N2.1 or § 2B1.1, the latter applying to the more high profile FDC Act criminal cases in which fraud is proven. Section 2N2.1 sets a base offense level of 6, which yields a recommended sentence of zero to six months in prison. Section 2B1.1 also sets a base offense level of 6, but provides for significant increases, largely driven by the extent of the fraud, that could increase the offense adding many years to the recommended sentence.
The Commission now proposes to set the base offense level for the new crime set forth by FDASIA. On one very simplistic level, the Commission is asking whether a person convicted of knowingly and intentionally adulterating a drug when that drug has a reasonable probability of causing serious adverse health consequences should, as the result of a base offense level, face approximately 1-2 years in jail, or 4-6 years. Both base offense levels are well below the 20 year statutory maximum, but the Guidelines allow for adjustments and departures that can significantly increase the recommended sentence.
As explained in the Notice, the Commission has “present[ed] two options for addressing the offense under section 333(b)(7). Option 1 establishes a new alternative base offense level of level 14 in § 2N2.1 for cases in which the defendant is convicted under section 333(b)(7). Option 2 amends Appendix A (Statutory Index) to reference offenses under section 333(b)(7) to § 2N1.1 (Tampering or Attempting to Tamper Involving Risk of Death or Bodily Injury).” Under §2N1.1 the base offense level is 25. The recommended Guidelines Manual range for a base offense level of 14 is 15-21 months; for a base offense level of 25 it is 57-71 months.
The underlying new statutory provision, as well as the proposed Guidelines raise issues too numerous to discuss fully, but several issues merit brief mention. First, as to applicability, most readers of the blog may conclude that they need not be concerned with section 303(b)(7) or the corresponding Guideline because they would never “knowingly and intentionally adulterate[] a drug.” In that regard it is worth noting that typical criminal jury instructions on what constitutes knowing and intentional conduct often sweep more broadly than the common understanding of those terms. See, for example,
these model criminal jury instructions from the Third U.S. Circuit Court of Appeals.
Second, organizations should be mindful of section 303(b)(7), as its maximum fine may be relevant to charging and sentencing issues regarding them. In most notable FDC Act criminal cases, the alternative fine provision of 18 U.S.C. §3571(d) has determined the amount of the fine imposed on organizations because the “twice the gross gain or twice the gross loss” measure has typically dwarfed the maximum fines under 303(a). While neither 2N2.1 nor 2N1.1 is an applicable offense Guideline for the Organizational Guideline fine provisions, and thus the basic fine framework will not change regardless of which proposal the Commission adopts, the $1M maximum fine.
Third, for both organizations and individuals, section 303(b)(7) would seem to offer the government a potentially powerful new charge that it could bring, and threaten to bring. The cross-reference for determining adulteration under section 303(b)(7) is to 501(a)(1), (b), (c), or (d),and Warning Letters asserting violations of these provisions are numerous.
See, e.g.,
here,
here, and
here.
Moreover, it is not hard to imagine the government taking an expansive view of the circumstances under which alleged adulteration “has a reasonable probability of causing serious adverse health consequences.” Thus, at least in the first instance, the circumstances under which a section 303(b)(7)charge may be leveled would seem to be the subject of significant prosecutorial discretion, and prosecutors may seek to leverage the significantly increased penalties of this section to extract favorable pleas These considerations would seem to argue against a base offense level that stacks the deck too heavily in the government’s favor.
The appropriate sentence in any case is intensively fact-specific, and the Guidelines Manual allows for adjustments and departures based on those facts. That said, the Commission’s proposal seems to present the question of whether this new offense is more like a traditional FDC Act violation, or more like a consumer products tampering violation, which is almost certainly “knowing and intentional” in the lay sense of those words. Regardless of one’s views, the comment period for the Notice remains open until March 19, 2013. The Notice also states that the Commission plans to hold a public hearing.
After more than a year of anticipation, the long-awaited Sunshine Act rule may finally be a step closer to being released. Following weeks of review by the White House Office of Management & Budget, the transparency regulation is apparently on its way to the Centers for Medicare & Medicaid Services, sources say.