Earlier this month, the U.S. Department of Justice (DOJ) Civil Division's Consumer Protection Branch (CPB) released its first-ever annual "recent highlights" report. The report describes the CPB's accomplishments from October 2020 through December 2021 and gives some insight into the enforcement trends companies can expect in the future as CPB's enforcement activities continue to ramp up.

The CPB has both civil and criminal authority that its nearly 100 attorneys exercise through criminal prosecutions and civil enforcement actions across several subject areas, including violations of consumer health, safety, economic activity, and identity integrity laws and regulations.

The full text of the report is available here. We provide some of the high-level takeaways and summarize the FDA cases below:

Summary of 2021

In the slightly more than a year covered by the report, the CPB resolved cases resulting in $6.38 billion in payments to the U.S. and victims. CPB attorneys filed actions against 200 defendants, handled 55 defensive cases, and entered into more than 50 corporate resolutions. In their efforts, CPB personnel defended the Food and Drug Administration (FDA), the Consumer Product Safety Commission (CPSC), and other federal agencies against challenges to their programs and decisions. This work included actions responding to the ongoing opioid epidemic and COVID-19 pandemic, drug and device hazards, pathogen outbreaks, youth smoking, and product harms, as well as fraud and deception affecting the elderly, recent immigrants, and other vulnerable populations.

CPB attorneys utilized new legal tools at their disposal, including criminal provisions of the Consumer Product Safety Act, civil sections of the Controlled Substances Act, and numerous statutes and rules administered by the Federal Trade Commission (FTC).

Consumer Health and Safety

A large portion of the CPB's resources is devoted to enforcement work aimed at protecting consumer health and safety.

• The CPB works closely with the FDA to investigate and litigate a wide range of criminal and civil matters involving adulterated and misbranded drugs, medical devices, food, dietary supplements, biologics, and tobacco products. Matters advanced by the CPB often involve allegations of clinical trial fraud, pathogen outbreaks, unapproved marketing claims, and use of illicit ingredients. Much of the CPB's recent work in the Federal Food, Drug, and Cosmetic Act (FDCA) space has involved misbranded and adulterated drugs and medical devices (including test kits and personal protective equipment) sold as purported treatments or cures for COVID-19. CPB attorneys routinely seek injunctions to protect consumers from ongoing harm while pursuing parallel criminal sanctions, and they often collaborate on matters with attorneys from the Fraud Sections of the Civil and Criminal Divisions, and with agencies other than the FDA, including the Drug Enforcement Administration (DEA) and the CPSC.
• During the period covered, the CPB reported criminally charging 53 individuals and corporations and bringing civil enforcement actions against 30 individuals and corporations, together leading to 38 individual convictions and 28 corporate resolutions relating to consumer health and safety.
• The report also highlighted the CPB's role enforcing the FDCA. Unsurprisingly, from October 2020 to December 2021, the CPB used that enforcement authority to crack down on drugs and devices marketed as treatments or cures for COVID-19 without the backing of reliable scientific support.

Case Summaries

Drugs and Devices

• An Indian drug manufacturer was ordered to pay $50 million following a guilty plea in connection with allegations that it destroyed records prior to a U.S. FDA inspection.¹ Prior to an FDA inspection of the Kalyani facility Fresenius Kabi Oncology, Lmtd (FKOL), management directed employees to remove certain records from the premises and to delete other records from computers that would have revealed FKOL was manufacturing drug ingredients in contravention of the FDCA.
• A manufacturer agreed to pay $22 million to resolve a matter involving allegations that it mislabeled surgical gowns to indicate that those gowns offered a higher degree of protection from virus penetration than they actually did.² The U.S.-based multinational medical device corporation Avanos entered into a deferred prosecution agreement (DPA) with CPB, the Criminal Division's Fraud Section, and the U.S. Attorney's Office for the Northern District of Texas to resolve criminal charges related to the company's fraudulent misbranding of surgical gowns as providing the current highest level of protection against fluid and virus penetration when they knew that the gowns did not meet that standard. With this false labeling, Avanos made false representations to hospitals and other customers about the gowns' safety, including to at least one health care provider who sought assurances before procuring the gowns for use by medical professionals handling the 2014 Ebola outbreak. As part of the resolution, Avanos agreed to pay a total criminal monetary amount of $22,228,000, consisting of a victim compensation payment of $8,939,000, a criminal monetary penalty of $12,600,000, and a disgorgement payment of $689,000.
• A federal court ordered AMARC Enterprises and its owner to stop distributing unapproved and misbranded drugs and adulterated animal drugs.³ The government alleged that AMARC sold and distributed products called "Poly-MVA" and "Poly-MVA for Pets" that defendants claimed in online posts—including posts featuring third-party content—could cure, mitigate, treat, or prevent disease, including cancer. The defendants' Poly-MVA products were not generally recognized as safe and effective (GRASE) by qualified experts to do any of those things.
• A federal jury convicted Peter Bolos of conspiracy to commit health care fraud, multiple counts of mail fraud, and felony misbranding of a medication following a month-long trial.⁴ Bolos and his 16 co-conspirators conspired to defraud pharmacy benefit managers, such as Express Scripts and CVS Caremark, by billing for fraudulent prescriptions.⁵ As a co-owner of a pharmacy, Bolos purchased bogus prescriptions from a telemedicine company, knowing that those prescriptions were not issued under valid doctor/patient relationships. He and his co-defendants then shipped medications from compounding pharmacies they owned to thousands of unsuspecting patients across the country, all without collecting the required co-pays. Bolos and his co-conspirators billed over $900 million to private and public insurers, collecting over $174 million of those invoices.⁶ In addition to securing convictions against Bolos and his co-defendants, CPB and the U.S. Attorney's Office obtained seven corporate guilty pleas. Sterling Knight Pharmaceuticals, LLC, ULD Wholesale Group, LLC, Tanith Enterprises, LLC, Alpha-Omega Pharmacy, LLC, Germaine Pharmacy, Inc., and ERX Consultants, LLC, dba Zoetic Pharmacy, and HealthRight, LLC, each agreed in pleading guilty to implement substantial enhanced compliance measures and, collectively, to pay more than $50 million in fines, forfeiture, and restitution.⁷

Opioids

• Indivior Solutions was sentenced to pay $289 million in criminal penalties in connection with its guilty plea to making false statements related to the safety of its opioid-addiction-treatment drug, Suboxone Film.⁸ Indivior's parent companies, Indivior, Inc. and Indivior, PLC, also agreed in a resolution with CPB and the U.S. Attorney's Office to enhanced compliance and reporting measures. The former CEO and medical director of those companies, Timothy Baxter⁹ and Shaun Thaxter,¹⁰ were fined and sentenced to terms of imprisonment and home confinement, respectively. In total, payments made by Indivior companies and executives, along with payments made under a 2019 resolution with Indivior's former parent company, Reckitt Benckiser Group, PLC,¹¹ exceeded $2 billion.
• Purdue Pharma, LP admitted guilt for its role in the nation's opioid abuse crisis.¹² Consistent with its plea agreement with CPB and the U.S. Attorney's Office, Purdue pleaded guilty to conspiring to defraud the U.S. by impeding the lawful function of the DEA; conspiring to aid and abet violations of the FDCA by facilitating the dispensing of opioids without a legitimate medical purpose; and conspiring to violate the Federal Anti-Kickback Statute by making payments to doctors and an electronic health records company to induce the writing of more prescriptions for Purdue's products. In conjunction with its guilty plea, Purdue agreed to the largest penalties ever levied against a pharmaceutical manufacturer, including a criminal fine of $3.544 billion and an additional $2 billion in criminal forfeiture. The company also agreed to cease operating in its current form and to convert through bankruptcy to a public benefit company or similar entity. Payment of the agreed-to fine is subject to ongoing bankruptcy proceedings, and Purdue's plea agreement anticipates crediting against the forfeiture amount up to $1.775 billion for funds paid to support state and local opioid-abatement programs.

COVID-19

• Litigation is ongoing in U.S. v. Nepute, et al.¹³ In April 2021, CPB attorneys filed a complaint against Eric Anthony Nepute and Quickwork, LLC, doing business as Wellness Warrior, in the first enforcement action brought under the COVID-19 Consumer Protection Act (CCPA),¹⁴ as well as Sections 5(a) and 12 of the Federal Trade Commission Act (FTC Act). Enacted in December 2020, the CCPA prohibits deceptive acts or practices associated with the treatment, cure, prevention, mitigation, or diagnosis of COVID-19. The defendants allegedly advertised that their vitamin D and zinc nutritional supplements could prevent or treat COVID-19, without competent or reliable scientific evidence to support their claims. Further, the defendants allegedly advertised without scientific support that their supplements were equally or more effective therapies for COVID-19 than the currently available vaccines. The complaint¹⁵ seeks civil penalties and injunctive and other equitable relief to stop the defendants from continuing to make deceptive advertising claims. The CPB litigation team obtained preliminary injunctive relief¹⁶ prohibiting defendants from continuing to make their unsubstantiated claims, and defeated defendants' motions to dismiss.¹⁷
• Litigation is ongoing in U.S. v. Xlear, Inc., et al. (D. Utah).¹⁸ In October 2021, CPB attorneys brought a civil enforcement action against Xlear, Inc. and Nathan Jones¹⁹ for alleged violations of FTC Act Sections 5(a) and 12 and the CCPA.²⁰ According to the complaint, the defendants advertised that their saline nasal spray product could prevent or treat COVID-19, without competent or reliable scientific evidence to support their claims. Further, the defendants allegedly made deceptive statements about several scientific studies to bolster their unproven claims. The complaint seeks civil penalties, injunctive relief, and other equitable monetary relief.
• A federal court permanently enjoined a New Jersey organization, Ralph Fucetola,²¹ and Dr. Rima Laibow²² from distributing unapproved and misbranded drugs touted as COVID-19 treatments.²³ The government alleged²⁴ that Natural Solutions Foundation, Fucetola, and Dr. Laibow distributed a "nano silver" solution product that they claimed would prevent, treat, or cure COVID-19. But Silver is not determined as GRASE by qualified experts to prevent, treat, or cure COVID-19, and the defendants' claims were not supported by credible scientific evidence or studies. The defendants agreed to a consent decree of permanent injunction and instituted a recall for their nano silver products.

Clinical Trial Fraud

• Dr. Yvelice Villaman-Bencosme²⁵ was sentenced to 63 months in prison after pleading guilty to one count of conspiracy to commit wire fraud for her role in a scheme to falsify clinical trial data. Villaman-Bencosme was a licensed medical doctor who served as the primary investigator for clinical trials purportedly conducted at Unlimited Medical Research, one of many companies hired to conduct a clinical trial designed to investigate the safety and efficacy of an asthma medication in children between the ages of four and eleven. Villaman-Bencosme admitted that she falsified medical records to make it appear as though pediatric subjects made scheduled visits to Unlimited Medical Research, took study drugs as required, and received checks as payment. Lisett Raventos, a study coordinator at Unlimited Medical Research, and Maytee Lledo, a receptionist at Villaman-Bencosme's private medical practice, also pleaded guilty to conspiracy to commit wire fraud and were sentenced to 30 months and 14 months in prison, respectively. In a separate case, Olga Torres,²⁶ a co-owner of Unlimited Medical Research, pleaded guilty to obstructing an FDA regulatory inspection concerning the asthma study conducted by Villaman-Bencosme. Torres is scheduled to be sentenced in April 2022. One remaining defendant, Jessica Palacio, who was also a study coordinator at Unlimited Medical Research, is set for trial in a separate case.
• Tellus Clinical Research (TCR) employees Eduardo Navarro, a nurse practitioner and sub-investigator, and Nayade Varona, an assistant study coordinator, pleaded guilty and were sentenced to 46 and 30 months in prison, respectively,²⁷ for their participation in a conspiracy to falsify clinical trial data. As part of their plea agreements, Navarro and Varona admitted that they agreed with one another and others to falsify data in medical records in connection with two clinical trials intended to evaluate a treatment for irritable bowel syndrome. Four additional defendants—including the principal investigator of clinical trials and the chief executive officer—were indicted in connection with the scheme. One of those defendants, study coordinator Duniel Tejeda, pleaded guilty²⁸ to conspiracy to commit mail and wire fraud in October 2021, and was sentenced to 30 months in prison. Two other TCR employees have been charged²⁹ with related conduct in an additional case, with trials scheduled in 2022. Data falsified by TCR employees is alleged to have been submitted to at least three pharmaceutical manufacturers for use in drug development and approval applications.
• The former president of ice cream manufacturer Blue Bell Creameries, LP was charged with³⁰ seven counts of wire fraud and conspiracy to commit wire fraud in connection with an alleged scheme to cover up the company's sales of listeria-tainted ice cream in 2015. Blue Bell Creameries previously pleaded guilty³¹ to two misdemeanor counts of distributing adulterated ice cream products and was sentenced to pay $17.25 million in fines and forfeiture—the largest-ever criminal penalty following a conviction in a food safety case.³²
• A federal court enjoined Valley Processing, Inc.,³³ along with the company's owner and president, Mary Ann Bliesner, from preparing, processing, or distributing adulterated juice or other food products in violation of the FDCA. The company formerly supplied millions of juice servings used in school lunch programs. Court documents alleged that the defendants processed juice under grossly insanitary conditions, failed to adhere to relevant food safety standards, and distributed to the public newer juice mixed with older, potentially contaminated juice.³⁴
• A federal court enjoined³⁵ AffinityLifestyles.com, Inc. and Real Water, Inc., along with company officers Brent A. Jones and his son, Blain K. Jones, from preparing, processing, or distributing adulterated and misbranded bottled water in violation of the FDCA. While the companies marketed their products as a healthy alternative to tap water, the government alleged that the products in fact consisted of municipal tap water that the defendants processed with various chemicals in violation of current good manufacturing practices, relevant food safety standards, and hazard prevention measures. According to court filings submitted by attorneys from CPB and the U.S. Attorney's Office for the District of Nevada, the FDA received information that at least five children experienced acute non-viral hepatitis resulting in acute liver failure after drinking the defendants' products.³⁶

Defensive Litigation

• Plaintiff MediNatura, Inc. voluntarily dismissed its lawsuit against the FDA after the D.C. Circuit affirmed the district court's denial of the plaintiff's motion for a preliminary injunction. The plaintiff challenged the FDA's withdrawal of an enforcement discretion policy for homeopathic drugs and the agency's addition of the plaintiff's products to an import alert. The D.C. Circuit agreed with the district court that the plaintiff's challenge to the FDA's withdrawal of the policy was not likely to succeed on the merits, and the addition of the plaintiff's products to an import alert was not final agency action.³⁷
• A federal district court granted summary judgment to the FDA in a challenge to the agency's refusal to regulate the plaintiff's drug as a "biological product." The plaintiff, Ipsen BioPharms, argued that its drug satisfied the FDA's recently adopted definition of a "protein" or, in the alternative, was analogous to a protein, and should therefore be regulated as a biological product. The court held that it lacked subject-matter jurisdiction because the company's alleged injuries were too speculative to establish Article III standing.³⁸
• A federal district court granted the FDA's motion to dismiss a challenge to the FDA's licensing of Pfizer's "Comirnaty" COVID-19 vaccine and the FDA's emergency use authorization (EUA) of the Pfizer-BioNTech COVID-19 vaccine. The plaintiffs, Children's Health Defense,³⁹ alleged that the FDA's concurrent approval of the Comirnaty vaccine and continuation of the EUA for the Pfizer-BioNTech vaccine was unlawful under the FDCA and the APA. The court found that the plaintiffs failed to establish Article III standing and dismissed the case for lack of subject-matter jurisdiction, while simultaneously denying the plaintiffs' motion for a preliminary injunction.
• A district court granted summary judgment to the FDA in a challenge to the agency's determination that the original formulation of the plaintiff's drug was not withdrawn for reasons of safety or effectiveness. The plaintiff, Arbor Pharmaceuticals, claimed that it withdrew its drug due to safety concerns raised by the FDA, which would bar approval of generic versions of the drug, but the FDA disagreed, concluding that the plaintiff's drug still could be safely marketed. The court held that it lacked subject-matter jurisdiction because the company failed to establish Article III standing. The court further held that, even if the plaintiff had established standing, the FDA's determination should be upheld because it was reasonable and consistent with the relevant statutory authority.⁴⁰

Conclusion

The CPB has more than tripled in size over the last several years, and this report reinforces the CPB's ongoing desire to aggressively use its enforcement mechanisms. As the report demonstrates, the CPB is an active partner in filing cases based on investigations conducted by the FDA and other agencies. Searching for FDA violations will not always indicate enforcement action, however. Cases are often tried as wire fraud and other violations.

Where, for example, the FDA seeks to resolve investigations involving civil penalty matters, companies may need to engage in negotiations with the FDA, FTC, and the DOJ, as civil penalty matters must be referred to the DOJ before they can be filed. Companies operating in areas subject to the CPB's enforcement authority should take steps to become familiar with its powers, processes, and procedures. Charges may be filed as violations of the FDCA, 21 USC, but also as false statements or wire fraud under 18 USC Chapter 47 or 63, respectively.

It is already clear that in 2021 the CPB had a significant presence in the enforcement of consumer protection laws. We expect that trend to increase in 2022 and beyond as the CPB continues to creatively use the statutes under its authority to prosecute individuals and corporations.

[1] U.S. v. Fresenius Kabi Oncology Ltd (FKOL), 2:21-CR-020-JAD-BNW (D. Nev. Aug. 11, 2021).

[2] U.S. v. Avanos Medical, Inc. (N.D. Tex.); “Avanos Medical to Pay $22 Million to Resolve Criminal Charge Related to Fraudulent Misbranding of MicroCool Surgical Gowns” (July 8, 2021).

[3] "Federal Court Orders California Company and Owner to Stop Distribution of Unapproved, Misbranded and Adulterated ‘Poly-MVA’ Products" (Aug. 6, 2021).

[4] U.S. v. Bolos, et al. (E.D. Tenn.); “Federal Jury Convicts Pharmacy Owner Of Conspiracy, Mail Fraud, And Misbranding For Role In Multi-Million Dollar Telemedicine Pharmacy Fraud Scheme” (Dec. 2, 2021).

[5] "Five New Guilty Pleas in Nationwide Telemedicine Pharmacy Health Care Fraud Conspiracy" (Jan. 25, 2021).

[6] "Telemarketer and His Companies Agree to Pay $2.5 Million to Settle Allegation That They Operated Telemedicine Schemes Involving Illegal Kickbacks and Unnecessary Prescription" (Aug. 2, 2019).

[7] "Four Men and Seven Companies Indicted for Billion-Dollar Telemedicine Fraud Conspiracy, Telemedicine Company and CEO Plead Guilty in Two Fraud Schemes" (Oct. 15, 2018).

[8] "Indivior Solutions Sentenced as Part of $2 Billion Resolution of False Safety Claims Concerning Suboxone" (Nov. 12, 2020).

[9] "Former Medical Director of Suboxone Manufacturer Indivior Sentenced in Connection with Drug Safety Claims" (Dec. 17, 2020).

[10] "Suboxone Manufacturer Indivior's Former Chief Executive Officer Sentenced to Jail Time in Connection with Drug Safety Claims" (Oct. 22, 2020).

[11] "Justice Department Obtains $1.4 Billion from Reckitt Benckiser Group in Largest Recovery in a Case Concerning an Opioid Drug in United States History" (July 11, 2019).

[12] "Justice Department Announces Global Resolution of Criminal and Civil Investigations with Opioid Manufacturer Purdue Pharma and Civil Settlement with Members of the Sackler Family" (Oct. 21, 2020).

[13] https://www.ftc.gov/legal-library/browse/cases-proceedings/202-3188-quickwork-llc-eric-nepute.

[14] https://www.ftc.gov/legal-library/browse/statutes/covid-19-consumer-protection-act-2021-consolidated-appropriations-act.

[15] https://www.ftc.gov/system/files/documents/cases/2023188eneputecomplaint_0.pdf.

[16] https://www.ftc.gov/system/files/documents/cases/consent_order.pdf.

[17] https://www.govinfo.gov/content/pkg/USCOURTS-moed-4_21-cv-00437/pdf/USCOURTS-moed-4_21-cv-00437-0.pdf.

[18] https://casetext.com/case/xlear-inc-v-focus-nutrition-llc-1.

[19] https://www.ftc.gov/system/files/documents/cases/filed_complaint_xlear_v_jones_v.1.pdf.

[20] https://www.ftc.gov/legal-library/browse/statutes/covid-19-consumer-protection-act-2021-consolidated-appropriations-act.

[21] https://www.linkedin.com/in/ralph-fucetola-58416/.

[22] https://www.linkedin.com/in/rima-laibow-8b435/.

[23] U.S. v. Natural Solutions Foundation, et al.

[24] Complaint for Injunction at https://www.justice.gov/opa/press-release/file/1336991/download.

[25] ”Florida Medical Doctor Pleads Guilty to Conspiring to Falsify Clinical Trial Data” (Jan. 8, 2021).

[26] “Florida Co-Owner of Clinical Trial Company Pleads Guilty to Obstructing FDA Inspection” (Jan. 12, 2021).

[27] ”Clinical Researchers Sentenced in Connection with Scheme to Falsify Drug Trial Data” (Aug. 11, 2021).

[28] ”Florida Study Coordinator Sentenced in Scheme to Falsify Clinical Drug Trial Data” (Jan. 20, 2021).

[29] ”Doctor, Clinic Owner and Staff Charged with Falsifying Clinical Trial Data” (March 8, 2021).

[30] ”Former Blue Bell Creameries President Charged In Connection With 2015 Ice Cream Listeria Contamination” (Oct. 21, 2020).

[31] US V. BLUE BELL CREAMERIES; US V. PAUL KRUSE (RELATED) (Feb. 11, 2021).

[32] U.S. v. Kruse (W.D. Tex).

[33] Consent Decree of Permanent Injunction at https://www.govinfo.gov/content/pkg/USCOURTS-waed-1_20-cv-03191/pdf/USCOURTS-waed-1_20-cv-03191-0.pdf.

[34] U.S. v. Valley Processing, Inc., et al. (E.D. Wash.).

[35] https://casetext.com/case/united-states-v-affinitylifestylescom-inc.

[36] U.S. v. AffinityLifestyles.com, Inc. (D. Nev.); “Nevada Bottled Water Companies And Owners Ordered To Stop Distributing Adulterated And Misbranded Water Products” (June 1, 2021).

[37] MediNatura, Inc. v. FDA (D.D.C.).

[38] Ipsen Biopharms., Inc. v. Becerra (D.D.C.).

[39] https://www.courtlistener.com/docket/60329126/childrens-health-defense-v-food-drug-administration/.

[40] Arbor Pharmaceuticals v. Becerra, et al. (N.D. Ga).