Deputy Assistant Attorney General Arun G. Rao Delivers Keynote Address at the Food and Drug Law Institute Enforcement, Litigation and Compliance Conference: for the Drug, Device, Food and Tobacco Industries

Remarks as Prepared for Delivery

Good morning. Thank you, Christine Simmon, for the introduction, and thank you, as well, to the Food and Drug Law Institute for inviting me to speak this morning. I am grateful for the opportunity to open the Enforcement, Litigation and Compliance Conference, and I look forward to hearing from many experienced and accomplished regulators, litigators and academics on emerging trends and issues in enforcement and compliance.   

I would like to share with you some recent efforts by the dedicated employees of the Department of Justice’s Consumer Protection Branch and our committed partners, including the FDA, to protect the health and safety of American consumers. And I also want to highlight some of the department’s recent announcements and policy changes related to the investigation and prosecution of corporate crime.

But before I do so, I’d like to turn briefly to the past. Last year marked the 50th anniversary of the Department of Justice’s creation of a dedicated unit focused upon consumer protection. Over the past half-century, what was then called the Consumer Affairs Section of the Department’s Antitrust Division (and is now the Consumer Protection Branch of the Department’s Civil Division) has grown to include more than 100 attorneys who work closely with over a dozen law enforcement partners and regulatory agencies, bringing both criminal and civil actions involving a wide and complex range of conduct. 

As new technologies and industries have developed, and as consumer behavior has changed, the department and its partners have adapted accordingly. The branch has a wide range of tools at its disposal, which permits it to respond nimbly to this evolving landscape. This flexibility can be seen in the branch’s work over the past year in four important areas: tobacco, opioids, dietary supplements and food safety.

In 1999, the department filed a landmark lawsuit against eleven cigarette companies, alleging that the companies had conspired since the 1950s to mislead the American public and to conceal information about the harmful effects of smoking. In 2006, D.C. federal district court judge Gladys Kessler determined that the cigarette companies had defrauded consumers about the health dangers associated with cigarette smoking.  

I am pleased to announce that yesterday - more than two decades after the lawsuit was first filed – D.C. federal district court judge Paul Friedman issued an order imposing the last of several corrective remedies sought by the department in connection with this litigation. The defendants are now required to display signs in retail stores featuring corrective statements about the health effects and addictiveness of smoking. The order applies to defendants Altria, Philip Morris USA Inc. and R.J. Reynolds Tobacco Company, as well as to four cigarette brands owned by ITG Brands LLC.  

The corrective statements, which are displayed on color signs designed to be eye-catching, provide truthful information to consumers relating to: the adverse health effects of smoking; the addictiveness of smoking and nicotine; the lack of health benefits from cigarettes advertised as light or low tar; cigarette companies’ manipulation of cigarette design and composition to ensure optimum nicotine delivery; and the adverse health effects of exposure to secondhand smoke.

The corrective statements will be in both English and Spanish, with Spanish required in geographic areas with significant Spanish-speaking populations. Independent auditors will periodically evaluate compliance with the order, and a tip line will be established so that the public may report incidents where they believe the statements are not being displayed properly or at all. The order also implements certain measures designed to discourage noncompliance, including specific consequences for retailers who fail to properly display the corrective statements after receiving warnings and opportunities to cure.   

Having secured this important point-of-sale corrective remedy as to cigarettes, the department – working closely with the FDA – is now seeking to address a new generation of tobacco-related products, including vaping devices or electronic nicotine delivery system (ENDS) products, due to the risks certain products may pose to our nation’s youth. 

In October, the department filed six lawsuits against companies and individuals seeking to halt the illegal manufacture and sale of unauthorized vaping products. All of the defendants had continued to manufacture and sell ENDS products even after receiving notice that they needed to first obtain FDA marketing authorization.  

And in addition to these affirmative enforcement actions, the branch, together with our colleagues in Civil Appellate, also has been defending FDA’s decisions related to certain ENDS products in federal circuits courts across the country. In the D.C. Circuit and the Third Circuits, for example, petitioners challenged FDA’s denial of their applications to market flavored e-cigarettes. Both Courts of Appeals denied the petitions for review, holding that any error in FDA’s explanation for not reviewing petitioners’ marketing plans was harmless.

The branch and its enforcement partners continue to take a holistic approach to protecting consumers’ health and welfare, as demonstrated by our work across the country involving the Controlled Substances Act. Last year, sadly, more than 100,000 Americans died from a drug overdose. The branch has been using every tool at its disposal to hold responsible the various bad actors contributing to the ongoing opioids crisis.

In October, for example, the branch secured an order permanently banning a Utah physician from issuing prescriptions for opioids and other controlled substances. That same month, the branch also secured a temporary restraining order prohibiting a Florida pain clinic from administering, dispensing, or distributing any controlled substances.

But the branch’s efforts related to controlled substances have not been limited to individuals and small businesses. In September, the department filed an amended complaint against Walmart for civil violations of the Controlled Substances Act related to Walmart’s dispensing and distribution of opioids. The complaint alleges that Walmart pharmacies dispensed opioids without resolving red flags indicating that prescriptions were not issued in the usual course of professional practice or for a legitimate medical purpose and that Walmart violated its duty to maintain records and report suspicious orders to the DEA. As this case illustrates, when companies are alleged to have violated the CSA, the branch works with our law enforcement partners to hold them accountable.

As previously noted, the branch has a broad array of tools at its disposal, and carefully and selectively employs those tools to obtain remedies that best ensure the interests of justice in particular cases. Although the branch is part of the department’s Civil Division, it regularly brings both civil and criminal cases, depending on the circumstances.

In the dietary supplements space, for example, the branch recently secured significant criminal dispositions in matters involving purveyors of unlawful dietary supplements and anabolic steroids. Earlier this year, the two co-founders and operators of a sports and dietary supplements retailer called Blackstone Labs LLC each were sentenced to 54 months in prison for conspiring to sell illegal anabolic steroids and other products unlawfully marketed as dietary supplements. The two defendants and their company also were ordered to forfeit more than $7 million.

Where appropriate, the branch also has pursued civil remedies in dietary supplement matters, including by securing a consent decree of permanent injunction in March of this year against Salud Natural Entrepreneur Inc. (a suburban Chicago company involved in the distribution of adulterated and misbranded dietary supplements and unapproved new drugs) and two of its executives. According to the complaint, the defendants violated Current Good Manufacturing Practices regulations by using ingredients that had tested positive for salmonella, and also falsely claimed that the company’s dietary supplements would cure, treat or prevent cancer, diabetes, high blood pressure and heart disease.

Similarly, in the food safety space, the branch has pursued both criminal charges and civil remedies, depending on the circumstances. For example, the branch filed a civil complaint in October seeking to prevent a California-based company from selling food products allegedly made under insanitary conductions. The complaint alleges that inspectors found insects on ingredients and rainwater leaking into ingredient storage rooms. The company also allegedly failed to declare the presence of allergens in products.

Also in October, the branch obtained a criminal guilty plea from the former Director of Quality Assurance for Kerry Inc., in connection with the manufacture of “Honey Smacks” breakfast cereal linked to a 2018 outbreak of salmonella poisoning. In pleading guilty, the defendant admitted that he directed subordinates to not report certain information to Kellogg’s (the company’s customer) about conditions at the company’s Illinois facility.  The defendant also admitted that he directed subordinates to alter the manufacturing facility’s program for monitoring pathogens, thereby limiting the facility’s ability to accurately detect insanitary conditions.  

As you can see, holding corporations and those who act on their behalf (such as managers who attempt to conceal potentially dangerous problems from customers or government regulations) responsible for criminal wrongdoing has been, and remains, an important priority of the department. In remarks at NYU School of Law in September, Deputy Attorney General Lisa Monaco described the results of the department’s yearlong review of its corporate crime enforcement strategy – which included meeting with a range of stakeholders, including outside experts, in-house counsel, corporate monitors and members of the business community and defense bar. The Deputy Attorney General also announced several important changes to the department’s enforcement policies that I want to highlight. 

First, the Deputy Attorney General emphasized that the department’s primary corporate criminal enforcement priority is holding individuals accountable. And because “in individual prosecutions, speed is of the essence,” department prosecutors have been directed to, whenever possible, complete criminal investigations and seek charges for individuals prior to or at the same time as corporate resolutions.

Second, the department is committed to considering a company’s full criminal, civil, and regulatory history as part of any resolution. Evaluating a company’s history will, of course, necessarily be highly case-specific and fact-bound. But multiple, successive non-prosecution or deferred prosecution agreements with the same company will be disfavored.

Third, every department component that prosecutes corporate crime, including the Consumer Protection Branch, soon will have a voluntary self-disclosure policy. The policies will share certain core principles, including that, absent any aggravating factors, the department will not seek a guilty plea where a company self-discloses, fully cooperates, and timely and appropriately remediates criminal conduct. These policies also will dictate that disclosures must be accompanied by the timely preservation, collection, and production of relevant documents and information.

Fourth, when evaluating the strength of a company’s compliance program, prosecutors will consider, among other things, whether a company has policies encouraging a culture of compliance, including incentive structures that reward compliance and sanction misconduct – and whether companies follow through on those policies.

Finally, the department will be issuing new guidance related to monitors, how they are selected, and how they are overseen. Prosecutors will tailor monitorships to the particular types of misconduct and compliance deficiencies at issue and will receive regular updates to verify that monitors are “on task and on budget.”

In conclusion, much has changed in the 50 years since the department first created the Consumer Affairs Section of the Antitrust Division. But while technology evolves and the regulatory landscape shifts, much also remains the same.

One important constant in the branch’s history is its close collaboration with law enforcement partners and regulators, including the FDA. Each day, branch personnel engage in substantive and lengthy discussions with their agency counterparts, developing and analyzing evidence, evaluating arguments and discussing strategy. The strong relationships developed through these repeated interactions form the foundation of the branch’s enforcement efforts. To our colleagues at the FDA, the branch expresses its sincere gratitude for your partnership and its appreciation for the FDA’s dedication to its mission to protect public health.

Thank you, once again, to the Food and Drug Law Institute for the opportunity to share some of the recent accomplishments of the Consumer Protection Branch and to highlight important changes to the department’s corporate crime enforcement policies. I appreciate it.