Magazine article Management Review

FDA Reorganizes amid Generic Drug Scandal

Magazine article Management Review

FDA Reorganizes amid Generic Drug Scandal

Article excerpt

FDA Reorganizes Amid Generic Drug Scandal

The Food and Drug Administration's announcement last August that it would randomly retest 20 popular generic drugs now on the market, add $18 million for field operations and intensify company surveillance came on the heels of a year-long congressional investigation of the agency. The FDA was responding - some critics say too late - to a drug scandal that both hampered FDA goals of regulating an industry and shook agency management.

"The FDA may not be able to detect unsafe generic drugs for the nation's pharmacies," Rep. John Dingell (D.-Mich.), head of the House Energy and Commerce Committee's subcommittee on oversight, charged last fall. "The scandal resulted from an FDA budget cut, a climate of deregulation and a refusal of some FDA officials to hear industry complaints."

But perhaps the FDA's woes are also a reflection of the political and economic forces surrounding the agency.


The Waxman-Hatch Act, passed in 1984, eased the FDA approval process for generic drug companies. Prior to that time, generic firms had to conduct clinical trials for drugs. Under the new law, they simply had to prove bioequivalence - that the proposed generic drug was absorbed into the body to the same degree as the brand-name equivalent.

"The government wasn't prepared for the generic drug boom" that followed, claims analyst John Wakeman of T. Rowe Price Associates in Baltimore. "They expected to cut healthcare costs by stimulating competition, yet they weren't ready to supervise [industry] growth with staff or resources."

Layers of the scandal unpeeled last year amid FDA attempts to restore order to its management structure. Congressional committee proceedings had begun earlier, in the summer of 1988, in response to claims by Mylan Laboratories Inc., based in Pittsburgh, Pa., that FDA officials were showing favoritism to its rivals in granting generic approvals.

The truth was to come out in court: Charles Y. Chang, FDA branch chief of the Generic Drug Division, had received up to $78,000 in gratuities. And other drug firms - Pharmaceutical Basics, American Therapeutics, Quad Pharmaceutical and Par Pharmaceuticals, a subsidiary of Quad - had made improper payments to other FDA approval reviewers. A criminal investigation into the matter, begun in Baltimore by U.S. Attorney Breckinridge L. Willcox in 1988, has so far resulted in Chang, and David J. Brancato and William Kletch, both FDA review chemists, resigning after pleading guilty to accepting bribes.

More was to follow. It was discovered that Vitarine Pharmaceuticals Inc., based in Springfield Gardens, N.Y., switched samples for a generic approval (an Abbreviated New Drug Approval or ANDA), and that two other generic companies were marketing different drugs from the ones tested for FDA approval.

At Vitarine, employees had opened a brand-name capsule of Dyazide - a fast-selling blood-pressure drug - and submitted the drug as their own for the FDA's bioequivalence study.


By the time of the sampling blitz last August, the FDA was being criticized for its lateness. Late in discovering the Vitarine switch, in April of 1989, after the drug had been on the market for over a year. And late in discovering the scope of the corruption despite a December 1988 in-house investigation. The FDA claimed that investigation didn't turn up any wrongdoing because it had focused on "paper flow" rather than possible criminal activities.

"We were asked to stay outside of the scope of the [then ongoing] congressional investigation," then-FDA Commissioner Frank E. Young claimed. "Regretfully, the Division of Generic Drugs is four divisions removed from the Commissioner's office." It comprised 80 employees out of 7,500 in the agency. "Their complaints were not known up the line - they didn't come to our attention until the [congressional] investigation started to break" in June 1988, according to Young. …

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