11/29/1994

[Federal Register: November 29, 1994]

 

-----------------------------------------------------------------------

 

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. 92N-0423]

 

Walter S. Kletch; Denial of Hearing; Final Debarment Order

 

AGENCY: Food and Drug Administration, HHS.

 

ACTION: Notice.

 

-----------------------------------------------------------------------

 

SUMMARY: The Food and Drug Administration (FDA) is denying Mr. Walter

S. Kletch's request for a hearing and is issuing a final order under

the Federal Food, Drug, and Cosmetic Act (the act) permanently

debarring Mr. Walter S. Kletch, 210 East Juniper Ave., Sterling, VA

20164, from providing services in any capacity to a person with an

approved or pending drug application. The Interim Deputy Commissioner

bases this order on her finding that Mr. Kletch was convicted of a

felony under Federal law for conduct relating to the development or

approval, including the process for development or approval, of a drug

product, and relating to the regulation of a drug product under the

act.

 

EFFECTIVE DATE: November 29, 1994.

 

ADDRESSES: Application for termination of debarment to the Dockets

Management Branch (HFA-305), Food and Drug Administration, 12420

Parklawn Dr., rm. 1-23, Rockville, MD 20857.

 

FOR FURTHER INFORMATION CONTACT: Mary E. Catchings, Center for Drug

Evaluation and Research (HFD-366), Food and Drug Administration, 7500

Standish Pl., Rockville, MD 20855, 301-594-2041.

 

SUPPLEMENTARY INFORMATION:

 

I. Background

    

Mr. Walter S. Kletch, a former review chemist in FDA's Division of

Generic Drugs (public official), pled guilty and was sentenced on

September 22, 1989, for receiving an unlawful gratuity, a felony

offense under 18 U.S.C. 201(c)(1)(B). The basis for this conviction was

Mr. Kletch's receipt of two $500 gift certificates (which he converted

to cash) from the president of a pharmaceutical firm. In his official

capacity as a review chemist, Mr. Kletch was involved in the regulation

of the firm's drug products and was responsible for reviewing the

firm's applications to determine whether they met certain statutory

standards for approval.

 

In a certified letter received by Mr. Kletch on December 16, 1992,

the Deputy Commissioner for Operations offered Mr. Kletch an

opportunity for a hearing on the agency's proposal to issue an order

under section 306(a) of the act (21 U.S.C. 335a(a)) (the mandatory

debarment provisions) debarring Mr. Kletch from providing services in

any capacity to a person that has an approved or pending drug product

application. FDA based the proposal to debar Mr. Kletch on its finding

that he was convicted of a felony under Federal law for conduct

relating to the development, approval, and regulation of the

pharmaceutical firm's drug products.

 

The certified letter also informed Mr. Kletch that his request for

a hearing could not rest upon mere allegations or denials but must

present specific facts showing that there was a genuine and substantial

issue of fact requiring a hearing. The letter also notified Mr. Kletch

that if it conclusively appeared from the face of the information and

factual analyses in his request for a hearing that there was no genuine

and substantial issue of fact which precluded the order of debarment,

FDA would enter summary judgment against him and deny his request for a

hearing.

 

In a letter dated January 8, 1993, Mr. Kletch requested a hearing,

and in a letter dated February 26, 1993, Mr. Kletch submitted arguments

to support his hearing request. In his request for a hearing, Mr.

Kletch acknowledged that he was convicted of a felony under Federal law

as alleged by FDA. However, Mr. Kletch argued that FDA's findings based

on that conviction are incorrect and that the agency's proposal to

debar him is unconstitutional.

 

The Interim Deputy Commissioner has considered Mr. Kletch's

arguments and concludes that they are unpersuasive and fail to raise a

genuine and substantial issue of fact requiring a hearing. Moreover,

the constitutional arguments that Mr. Kletch presents do not create a

basis for a hearing (see 21 CFR 12.24(b)(1)). Mr. Kletch's arguments

are discussed below.

 

II. Arguments in Support of a Hearing

    

Mr. Kletch contends that FDA's findings are not supported by the

evidence because the factual predicate for mandatory permanent

debarment is not met in this case. Acknowledging that he was convicted

for receiving an illegal gratuity while employed as a review chemist at

FDA, Mr. Kletch claims that he received the gratuity from the president

of a pharmaceutical firm because of their social relationship. Mr.

Kletch denies taking any action that was inconsistent with agency

policy because of the gratuity. Thus, he claims the facts do not

support mandatory permanent debarment but rather permissive debarment.

 

This argument is unconvincing and fails to raise a genuine and

substantial issue of fact for two reasons. First, as a matter of law,

Mr. Kletch's conviction was for conduct relating to the development,

approval, and regulation of a drug product. Mr. Kletch, an FDA review

chemist, pled guilty to and was convicted of violating 18 U.S.C.

201(c)(1)(B) for receiving and accepting two $500 gift certificates

(which he exchanged for cash) from a president of a pharmaceutical

firm.

 

To be convicted under 18 U.S.C. 201(c)(1)(B), a public official

must, otherwise than as provided by law for the proper discharge of

one's duties as a public official, receive and accept anything of value

personally for or because of any official act performed or to be

performed by such official. ``Official act'' is defined by 18 U.S.C.

201(a)(3) as ``any decision or action on any question, matter, cause,

suit, proceeding or controversy, which may at any time be pending, or

which may by law be brought before any public official, in such

official's official capacity, or in such official's place of trust or

profit.'' Thus, as a matter of law, Mr. Kletch's conviction establishes

that his receipt of the gratuity was for, and because of, official acts

that he had performed and was to perform.

 

As a review chemist within FDA's Division of Generic Drugs, Mr.

Kletch's sole responsibilities were the review of applications

submitted by pharmaceutical manufacturers seeking FDA's approval to

market their products to the public, and the general regulation of

drugs. Therefore, Mr. Kletch's conviction under 18 U.S.C. 201(c)(1)(B)

establishes that his felony conviction was for conduct relating to the

development and approval, including the process for development and

approval, of a drug product, and for conduct relating to the regulation

of a drug product. For this reason, the mandatory permanent debarment

provisions (section 306(a)(2)) of the act apply to Mr. Kletch's receipt

of the illegal gratuity, and not the permissive debarment provisions as

Mr. Kletch alleges. Mr. Kletch would be considered a candidate for

permissive debarment only if FDA finds that the conduct giving rise to

the conviction did not relate to the development or approval or the

regulation of any drug product. As discussed above, the conduct

required for the conviction necessarily involved the approval and

regulation of generic drugs.

 

Second, having admitted and been convicted of receiving an illegal

gratuity in a Federal criminal proceeding, Mr. Kletch is now estopped

from attempting to relitigate the issue in an administrative forum. Mr.

Kletch had sufficient opportunity to contest the Government's

allegations during the criminal proceedings prior to his conviction.

Yet, Mr. Kletch admitted in those proceedings that he was, in fact,

guilty of receiving an unlawful gratuity, a crime relating to the

performance of his official duties. Thus, Mr. Kletch is collaterally

estopped from arguing that he did not receive the gratuity ``for or

because of any official act performed or to be performed.''

 

Mr. Kletch also argues that the ex post facto clause of the U.S.

Constitution prohibits application of section 306(a)(2) of the act to

him because this section was not in effect at the time of Mr. Kletch's

criminal conduct. With the enactment of the Generic Drug Enforcement

Act (GDEA) on May 13, 1992, Congress amended the act to include section

306(a)(2), whereas he was convicted on September 22, 1989.

 

An ex post facto law is one that reaches back to punish acts which

occurred before enactment of the law or that adds a new punishment to

one that was in effect when the crime was committed (Ex Parte Garland,

4 Wall. 333, 377, 18 L. Ed. 366 (1866); Collins v. Youngblood, 110 S.

Ct. 2715 (1990)).

 

Mr. Kletch's claim that application of the mandatory debarment

provisions of the act is prohibited by the ex post facto clause is

unpersuasive. Because the intent behind debarment under section

306(a)(2) of the act is remedial rather than punitive, this section

does not violate the ex post facto clause.

 

The congressional intent with respect to actions under section

306(a)(2) of the act is clearly remedial. Congress created the GDEA in

response to findings of fraud and corruption in the generic drug

industry. Both the language of the GDEA itself and its legislative

history reveal that the purpose of the debarment provisions set forth

in the GDEA is ``to restore and ensure the integrity of the ANDA

approval process and to protect the public health.'' (See section 1,

Pub. L. 102-282, The Generic Drug Enforcement Act of 1992.) This is a

remedial rather than a punitive goal (see Manocchio v. Kusserow, 961

F.2d 1539, 1542 (11 Cir. 1992) (exclusion of physician from

participation in medicare programs because criminal conviction is

remedial, not punitive)). Supporting the remedial character of

debarment is a statement by Senator Hatch in the Congressional Record

of April 10, 1992, at S 5616, ``* * * [t]he legislation * * * provides

a much-needed remedy for the blatant fraud and corruption uncovered in

the generic drug industry * * * during the last 3 years.''

 

The Supreme Court has long held that statutes that deny future

privileges to convicted offenders because of their previous criminal

activities in order to ensure against corruption in specified areas do

not impose penalties for past conduct and, therefore, do not violate

the ex post facto prohibitions (see, e.g., Hawker v. New York, 170 U.S.

189, 190 (1898) (physician barred from practicing medicine for a prior

felony conviction); De Veau v. Braisted, 373 U.S. 154 (1960) (convicted

felon's exclusion from employment as officer of waterfront union is not

a violation of the ex post facto clause)).

 

In De Veau, the Court upheld a law that prohibited a convicted

felon from employment as an officer in a waterfront union. The purpose

of the law was to remedy the past corruption and to ensure against

future corruption in the waterfront unions. The court in De Veau, 363

U.S. at 160, stated:

   

 The question in each case where unpleasant consequences are

brought to bear upon an individual for prior conduct, is whether the

legislative aim was to punish that individual for past activity, or

whether the restriction of the individual comes about as a relevant

incident to a regulation of a present situation, such as the proper

qualifications for a profession * * *.

    

The legislative purpose of the relevant statute here is to ensure

that fraud and corruption are eliminated from the drug industry. The

restrictions placed on individuals convicted of a felony under Federal

law are not intended as punishment but are ``incident to a regulation

of a present situation'' (De Veau, 363 U.S. at 160) and necessary in

order to remedy the past fraud and corruption in the industry.

 

Finally, Mr. Kletch argues that the proposal to debar him under

section 306(a)(2) of the act violates the double jeopardy clause of the

Fifth Amendment to the U.S. Constitution. The double jeopardy clause

states that no person shall ``be subject for the same offense to be

twice put in jeopardy of life or limb.'' Mr. Kletch relies on U.S. v.

Halper, 490 U.S. 435 (1989), to argue that the Fifth Amendment double

jeopardy clause should prevent his debarment because a civil sanction

that serves the goals of punishment--retribution or deterrence--

constitutes punishment. To support his argument that the purpose of

debarment is punitive, Mr. Kletch relies on statements in the

Congressional Records referring to the debarment provisions of the act

as, among other things, deterrents. Mr. Kletch further argues that his

proposed permanent debarment is punitive because it would eliminate any

opportunity to demonstrate that he would no longer be a threat to the

integrity of the drug approval process.

 

Mr. Kletch's arguments are unconvincing. First, the double jeopardy

clause is inapplicable here because the effect of section 306(a)(2) of

the act is remedial, not punitive. As discussed above, the legislative

goal of this section is to restore and ensure the integrity of the drug

approval process and to protect the public health by eradicating fraud

and corruption from the drug industry. This is plainly a remedial

rather than a punitive goal (Manocchio v. Kusserow, 961 F.2d at 1542).

Although the Congressional Records contain statements, as Mr. Kletch

points out, that the legislation will provide deterrents, the primary

goal of the legislation, as shown above, is to protect the public from

corruption found to exist in the drug industry. Thus, because the

legislative intent of section 306(a)(2) of the act is to protect the

public, a legitimate nonpunitive goal, the sanctions imposed by the

debarment provisions are remedial, not punitive.

 

The fact that Mr. Kletch's debarment is permanent rather than

temporary does not signify that the legislation is nonremedial or

punitive. The Supreme Court has upheld laws which, for remedial

purposes, permanently bar a class or group of individuals from certain

occupations due to a prior criminal conviction (see Hawker v. New York,

170 U.S. 189, 190 (1898); De Veau v. Braisted, 373 U.S. 154 (1960)).

 

Second, the double jeopardy clause is inapplicable to FDA's

proposal to debar Mr. Kletch because the sanctions imposed by section

306(a)(2) of the act are rationally related to the remedial

governmental goal of eradicating fraud from the drug industry.

 

Due to the potentially serious consequences to the public health of

fraud and corruption in the drug industry, the permanent debarment of

convicted felons like Mr. Kletch is not an excessive means to eliminate

fraud from the industry. The legislative history of the GDEA is replete

with statements, some cited above, that the act provides a reasonable

means of ridding the generic drug industry of widespread corruption and

to restore consumer confidence in generic drugs.

 

Mr. Kletch acknowledges that he was convicted as alleged by FDA in

its proposal to debar him and has raised no genuine and substantial

issue of fact regarding this conviction. In addition, Mr. Kletch's

legal arguments do not create a basis for a hearing and, in any event,

are unpersuasive. Accordingly, the Interim Deputy Commissioner for

Operations denies Mr. Kletch's request for a hearing.

 

III. Findings and Order

   

Therefore, the Interim Deputy Commissioner for Operations, under

section 306(a) of the act, and under authority delegated to her (21 CFR

5.20), finds that Mr. Walter S. Kletch has been convicted of a felony

under Federal law for conduct: (1) Relating to the development or

approval, including the process for development or approval, of a drug

product (21 U.S.C. 335a(a)(2)(A)); and (2) relating to the regulation

of a drug product (21 U.S.C. 335a(a)(2)(B)).

 

As a result of the foregoing findings, Mr. Walter S. Kletch is

permanently debarred from providing services in any capacity to a

person with an approved or pending drug product application under

sections 505, 507, 512, or 802 of the act (21 U.S.C. 355, 357, 360b, or

382), or under section 351 of the Public Health Service Act (42 U.S.C.

262), effective November 29, 1994 (21 U.S.C. 335a(c)(1)(B) and

(c)(2)(A)(ii) and 21 U.S.C. 321(ee)).

 

Any person with an approved or pending drug product application who

knowingly uses the services of Mr. Kletch in any capacity, during his

period of debarment, will be subject to civil money penalties (21

U.S.C. 335b(a)(6)). If Mr. Kletch, during his period of debarment,

provides services in any capacity to a person with an approved or

pending drug product application, he will be subject to civil money

penalties (21 U.S.C. 335b(a)(7)). In addition, FDA will not accept or

review any abbreviated new drug application or abbreviated antibiotic

drug application submitted by or with Mr. Kletch's assistance during

his period of debarment.

 

Mr. Kletch may file an application to attempt to terminate his

debarment, pursuant to section 306(d)(4)(A) of the act. Any such

application would be reviewed under the criteria and processes set

forth in section 306(d)(4)(C) and (d)(4)(D) of the act. Such an

application should be identified with Docket No. 92N-0423 and sent to

the Dockets Management Branch (address above). All such submissions are

to be filed in four copies. The public availability of information in

these submissions is governed by 21 CFR 10.20(j). Publicly available

submissions may be seen in the Dockets Management Branch between 9 a.m.

and 4 p.m., Monday through Friday.

    

Dated: November 14, 1994.

Linda A. Suydam,

Interim Deputy Commissioner for Operations.

[FR Doc. 94-29384 Filed 11-28-94; 8:45 am]

BILLING CODE 4160-01-P