Generic drug manufacturer fined $1 million in felony cases

October 18, 1990|By Kelly Gilbert | Kelly Gilbert,Evening Sun Staff

A federal judge in Baltimore fined American Therapeutics Inc. of Bohemia, N.Y., $1 million today on racketeering, drug adulteration and obstruction-of-justice charges in two felony cases.

First Assistant U.S. Attorney Gary P. Jordan told Judge John R. Hargrove that the large fine was "appropriate" because ATI's criminal acts were "extensive," ranging from bribery to product fraud as its former chief executive bought favors from U.S. Food and Drug Administration officials in an effort to stay ahead of competitors.

But Jordan credited the company's new management with fully cooperating in what he said is a continuing investigation of former ATI employees, and he specifically said that "all of the employees who were involved in the misconduct are gone."

Defense attorney Ty Cobb told the judge that the products involved in the adulteration and obstruction-of-justice case were TC never sold to the public.

Cobb said the company expressed "contrition and remorse" for its criminal activities and has "made significant strides" toward preventing further wrongdoing since it fired the former chief executive, Raju Vegesna, last spring.

Dr. John Meloy, an ATI director, said in a prepared statement after the sentencing that the FDA subjected 52 ATI medicines to "intense scrutiny" during a two-year investigation and "did not implicate the safety of those products."

ATI pleaded guilty to the racketeering charge last March, shortly after federal prosecutors filed criminal charges against the company, Vegesna, a consultant and a former FDA official. Those charges stemmed from a bribery scheme involving the FDA's generic drug approval process.

In the second case, filed only two weeks ago, prosecutors charged ATI with drug adulteration and obstruction of justice. The government also charged the company with making false statements to the FDA about the manufacturing processes it used to make several generic drugs, for which ATI sought government approval for sales of the drugs to the public.

The company pleaded guilty in the second case today and agreed to be sentenced today in in both cases.

Lawrence McDade, a Justice Department consumer litigation lawyer, told Hargrove that Vegesna, who was convicted of racketeering charges for bribing FDA officials, ordered ATI employees to falsify and fabricate drug manufacturing records to disable FDA product integrity evaluations, and told the employees "not to put anything on paper that might damage" the company.

At Vegesna's direction, ATI also failed to report product defects, backdated or fabricated quality tests and failed to perform lab tests required by federal law, McDade said.

Documents in the latest ATI case surfaced in court files yesterday after federal prosecutors filed an obstruction of justice charge against Gena R. Finelli, the former director of research and development at Bolar Pharmaceutical Co. in Copiague, N.Y.

Jordan and U.S. Attorney Breckinridge L. Willcox alleged in court documents that Finelli, on orders from an unnamed Bolar official, told company research chemists to lie to FDA investigators during a routine compliance inspection at the Copiague plant Sept. 21, 1989.

The Finelli case and the newest ATI case kicked off the second phase of a broad-based investigation of the generic drug industry. This phase focuses on fraudulent documentation of manufacturing records, product substitutions in FDA drug tests and alleged obstruction of federal inspections.

The first phase of the investigation, now more than two years old, focused on bribery of FDA officials in return for favors to generic drug makers. In that phase, which is nearly finished, six drug company officials, three generic drug firms and four former FDA officials have pleaded guilty to bribery or racketeering charges.

A fifth former FDA official, Dr. Marvin Seife, is scheduled for trial here next week on similar charges.

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