Lemonade from Lemons: Fairness in FDA Enforcement Actions

October 20, 2020By Anne K. Walsh & John R. Fleder & Robert A. Dormer

Although it is difficult to glean much positive during these COVID-times, particularly if you are (or could be) the subject of a government enforcement action, this post attempts to provide a possible silver lining.  As part of an effort to support economic recovery during this public health emergency, on May 19, 2020, President Trump issued Executive Order 13924 to set forth what he asserted were ten principles of fairness that federal agencies “shall consider” in administrative enforcement and adjudication actions.  The Office of Management and Budget recently expanded on these principles in a memorandum detailing “best practices” for federal agencies to follow in implementing rules under the Executive Order, and stating that it expects federal agencies to issue any final rules under the Executive Order by November 26, 2020, absent a waiver.   See M-20-31, Implementation of Section 6 of Executive Order 13924 (Aug. 31, 2020).  There is no doubt that the Executive Order and the OMB memorandum apply to all federal agencies, including FDA, FTC, DEA, CPSC, and USDA.   In this post, we will focus on one of those agencies, FDA.

So far, we have not seen any rulemaking from FDA that adopts these principles or best practices into FDA procedures.  Because the OMB deadline falls after the elections, it will be interesting whether FDA will follow these recommendations should there be a change in Administration.   But if FDA adopts these recommendations, it would go a long way to making FDA more transparent, fair, and accountable when opening and investigating conduct by FDA-regulated industry.

The Executive Order lists the following principles of fairness:

(a) The Government should bear the burden of proving an alleged violation of law; the subject of enforcement should not bear the burden of proving compliance.

(b) Administrative enforcement should be prompt and fair.

(c) Administrative adjudicators should be independent of enforcement staff.

(d) Consistent with any executive branch confidentiality interests, the Government should provide favorable relevant evidence in possession of the agency to the subject of an administrative enforcement action.

(e) All rules of evidence and procedure should be public, clear, and effective.

(f) Penalties should be proportionate, transparent, and imposed in adherence to consistent standards and only as authorized by law.

(g) Administrative enforcement should be free of improper Government coercion.

(h) Liability should be imposed only for violations of statutes or duly issued regulations, after notice and an opportunity to respond.

(i) Administrative enforcement should be free of unfair surprise.

(j) Agencies must be accountable for their administrative enforcement decisions.

While the principles themselves are straightforward, the OMB memorandum suggests certain “best practices” that are not consistent with some of FDA’s established practices.  For example, when negotiating the terms of a consent decree, the question of whether to include a sunset provision is often a hot topic for discussion, with FDA at times arguing against the inclusion of any expiration date, or proposing the same time period be used in all consent decrees without regard to the violation at issue or the public health impact.  The OMB memorandum recommends that agencies “adopt expiration dates and/or termination criteria for consent orders, consent decrees, and settlements that are proportionate to the violation of the law that is being remedied.  Decade(s)-long settlement terms that are disproportionate to the violation(s) of law should be strongly disfavored absent a clear and convincing need for time to implement a remedy . . . .”  OMB Memo, subsection (f).

OMB also expects that federal agencies will “publish a rule of agency procedure governing civil administrative inspections,” in subsection (b) of the OMB memo.  This mandate simply reiterates a requirement from Executive Order 13892, which was issued a year ago:

Within 120 days of the date of this order, each agency that conducts civil administrative inspections shall publish a rule of agency procedure governing such inspections, if such a rule does not already exist. Once published, an agency must conduct inspections of regulated parties in compliance with the rule.

As it stands now, the principles governing FDA inspections are set forth in a hodgepodge of reference documents (e.g., Compliance Program Guidance Manual, Compliance Policy Guides, Regulatory Procedures Manual, Investigations Operations Manual, and Inspection Guides), none of which has been subject to rulemaking.

Another area that, if adopted, would be a sea-change from FDA’s current practice is the recommendation that federal agencies provide regulated industry with notice about the closure of an investigation:  “If a party has been informed by an agency that it is under investigation, the agency should inform the party when the investigation is closed and, when the agency has made no finding of violation, so state.”  This courtesy notification will obviate the current dilemma a target faces when in limbo, not knowing whether the government still is investigating but too nervous to “poke the bear” to ask directly.

There are several other “best practices” that would level the playing field for subjects of an investigation, like requiring the government to provide favorable evidence to the subject of an enforcement action, or to apply enforcement discretion if the regulated party attempted in good faith to comply with the law.   As noted, the November 26, 2020 deadline presents an interesting scenario for us to watch; it is extremely unlikely that in one month FDA can issue final rules that have not yet been proposed, and given the drastic changes that are recommended, we expect there is tremendous internal debate on making any proposals before the elections.  But if FDA does, in fact, issue new (or revised) procedures in accordance with these recommended best practices, there may be some lemonade squeezed from these COVID-lemons.

Categories: Enforcement