United States District Court, D. Oregon
February 5, 2015
UNITED STATES OF AMERICA, Plaintiff,
JAMES G. COLE, an individual, JAMES G. COLE, INC., a corporation, and JULIE D. GRAVES, an individual, Defendants
For Plaintiff: S. Amanda Marshall, United States Attorney, Ronald K. Silver, Assistant United States Attorney, United States Attorney's Office, District of Oregon, Portland, OR ; Joyce R. Branda, Acting Assistant Attorney General, Jonathan F. Olin, Deputy Assistant Attorney General, Michael S. Blume, Director, Consumer Protection Branch, Jeffrey I. Steger , Assistant Director, Consumer Protection Branch, and Ann F. Entwistle, Trial Attorney, Consumer Protection Branch, United States Department of Justice, Washington, D.C.
For Defendants: John J.E. Markham, II, Markham & Read, One Commercial Wharf West, Boston, MA; Krista Shipsey, Law Office of Krista M. Shipsey, Portland, OR.
OPINION AND ORDER
Michael H. Simon, United States District Judge.
The Government brings claims against Defendants (" Maxam" or " JGCI" ) under the Federal Food, Drug, and Cosmetic Act (" FDCA" ). The gravamen of the Government's claims is that Defendants distribute in interstate commerce certain articles that are both unapproved new drugs and adulterated dietary supplements. The products are new drugs, the Government argues, because they are distributed with the intent that they be used to treat diseases, including Alzheimer's, HIV, and autism. And they are adulterated dietary supplements, according to the Government, because Maxam lacks the controls over its manufacturing processes mandated by the FDA's Current Good Manufacturing Practice (" cGMP" ) regulations for dietary supplements. The Government seeks summary judgment and a permanent injunction against Defendants to prevent further violations of the FDCA. For the reasons below, the Government's motion is granted.
A party is entitled to summary judgment if the " movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although " [c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge," the " mere existence of a scintilla of evidence in support of the [non-movant's] position [is] insufficient" to avoid summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). " Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and quotation marks omitted).
On October 12, 2010, the FDA sent Defendants a letter warning them that their websites were making " disease claims" --claims that their products could be used to diagnose, cure, mitigate, treat, or prevent a disease. By making such claims, the FDA warned, Maxam was selling unapproved new drugs. Some (but not all) of the claims being made were in the form of testimonials from consumers. For example:
● " Try our oral chelation therapy called clathration for autism, Alzheimers, allergies, heavy metal detox and more." Ex. D-3 at 1 (non-testimonial).
● " Shown effective against latent residual viruses from old inoculations, measles, mumps, small pox, as well as HPV, EBV, CMV, HIV, etc." Ex. D-3 at 3 (non-testimonial).
● " I am happy to report that after only ten days of being on your product, I am seeing changes in the amount of facial paralysis." Ex. D-3 at 4 (testimonial).
On November 2, 2010, Defendants responded that they had believed that third-party testimonials were not proscribed disease claims, but that they had now removed all disease claims from their website.
In March 2012, the FDA inspected Maxam's manufacturing facility for compliance with cGMP regulations. The FDA discovered not only several cGMP violations, but also that Defendants continued to make several disease claims on their websites. The twleve cGMP-related findings were provided to Defendants at the end of the inspection in an FDA Inspectional Observations Form 483 (" Form 483" ), and the disease claims were pointed out in person during the inspection. On April 19, 2012, Defendants responded to the FDA's findings, assuring the FDA that all disease claims had been removed from their websites and outlining the steps that they would take to come into cGMP compliance.
On September 28, 2012, the FDA sent Defendants another letter warning them that the steps they had proposed were inadequate to bring them into cGMP compliance and that failure to come into compliance could result in an enforcement action. Defendant Cole responded personally on October 19, 2012, asserting with little explanation that Defendants' manufacturing processes had been brought into complete compliance.
From the end of January through early February 2013, the FDA again inspected Defendants' facility. This time, the FDA found sixteen violations of cGMP regulations, as well as, again, several websites making disease claims. Indeed, one such website had been taken offline after the previous inspection and then reinstated with the same disease claims after only a few months. After this inspection, Defendant Cole once again represented that all disease claims would be taken down and that the manufacturing processes would be brought into cGMP compliance.
As of August 19, 2014, however--almost a year after the Government filed this action in September 2013--Maxam's Facebook page still contained the claim that one of Defendants' products was effective to treat " environmentally induced cases of Alzheimer's, Autism, Fibromyalgia, and more." Ex. D-7 at 7. Indeed, as late as November 19, 2014, after Defendants filed their brief in opposition to this motion for summary judgment, their website contained claims that their products could " eliminate the toxins produced by unhealthy bacteria" and " counteract even overdose of otherwise lethal drugs." Dkt. 36 Ex. A. And the depositions of Defendants Cole and Graves, taken in early 2014, revealed that Maxam's manufacturing still had not been brought into cGMP compliance.
The Government's primary claims are that Maxam has introduced into interstate commerce unapproved new drugs, adulterated dietary supplements, and misbranded drugs. See 21 U.S.C. § § 331(d) & 355(a) (unapproved new drugs); § 331(a) (adulterated dietary supplements and misbranded drugs). Defendants do not contest that they have introduced their products into interstate commerce. The remainder of this Opinion addresses each claim in turn before addressing the Government's request for permanent injunctive relief.
A. Unapproved New Drugs
A product is a " drug" if it is " intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals." 21 U.S.C. § 321(g)(1)(B). " The vendor's intent is the key element in this statutory definition." United States v. Storage Spaces Designated Nos. 8 & 49 Located at 277 E. Douglas, Visalia, Cal., 777 F.2d 1363, 1366 (9th Cir. 1985). The vendor's intent can be evinced by " labeling claims, advertising matter, or oral or written statements by such persons or their representatives" or other " circumstances surrounding the distribution of the article." 21 C.F.R. § 201.128. In general, express or implied claims that a product can be used to diagnose, cure, mitigate, treat, or prevent a disease are evidence of a vendor's intent that the product be used for such purposes.
A drug is a " new drug" if it " is not generally recognized . . . as safe and effective for use." 21 U.S.C. § 321(p)(1). A new drug may not be introduced into interstate commerce without the approval of the FDA. § § 331(d), 355(a). Defendants do not argue that their products have been approved by the FDA or are eligible for any exception to FDA approval. See, e.g., § 321(p)(1). Therefore, if Defendants' products are drugs, they are unapproved new drugs.
Consistent with the Government's evidence, Defendants concede that they have in the past made claims that a product can be used to diagnose or treat a disease. Additionally, however, Defendants have marketed their products using " monographs" and " testimonials." " Monographs" list the ingredients purportedly contained in a Maxam product and then republish abstracts of studies claiming that those ingredients might be effective to treat certain conditions. " Testimonials" are allegedly sincere claims from customers that a product successfully treated some condition. Defendants now argue that monographs are permitted under a statutory safe harbor, that testimonials are protected speech under the First Amendment, and that they no longer make any other sort of disease claim.
Defendants argue that their monographs are permitted under 21 U.S.C. § 343(r)(6) as statements that " describe the role of a nutrient or dietary ingredient intended to affect the structure or function in humans, [or] characterize the documented mechanism by which a nutrient or dietary ingredient acts to maintain such structure or function." § 343(r)(6)(A). Such statements, known as " structure--function claims," do not by themselves convert a product into a drug. See § 321(g)(1)(D).
Section 343(r)(6), however, establishes three additional requirements that a structure--function claim must meet to qualify for its safe harbor. First, " the manufacturer of the dietary supplement [must have] substantiation that such statement is truthful and not misleading," § 343(r)(6)(B); second, a form disclaimer must be prominently displayed with the statement, § 343(r)(6)(C); and third, the manufacturer must notify the FDA within 30 days of first marketing a supplement with such a statement, § 343(r)(6). Defendants rely on having supplied the required disclaimer. But the Government asserts that the required notification was not made, and Defendants do not dispute this assertion. That fact alone disqualifies Defendants' monographs from the safe harbor of § 343(r)(6).
Moreover, § 343(r)(6) contains its own overriding requirement that " [a] statement under this subparagraph may not claim to diagnose, mitigate, treat, cure, or prevent a specific disease or class of diseases." Thus, even a statement that otherwise meets the requirements of § 343(r)(6) is disqualified from the safe harbor if it makes a disease claim. Defendants argue that their monographs " do not make disease claims," but merely " provide identification of studies and resources to further research the ingredients" in their products.
Even if they do not make the claim explicitly, however, Defendants' monographs strongly suggest that the product they describe can treat a disease. See, e.g., Ex. C-4 (listing, inter alia, phosphatidylserine as an ingredient of the Maxam product " Neurogen" and republishing claims that phosphatidylserine could treat dementia and Alzheimer's disease). A disease claim made with a wink and a nudge is still a disease claim. To hold otherwise would create an " obviously wide loophole" that would defeat the " high purpose of the Act to protect consumers." See Kordel v. United States, 335 U.S. 345, 349, 69 S.Ct. 106, 93 L.Ed. 52 (1948). Accordingly, because Defendants' monographs contain disease claims and because Defendants did not timely supply the required notification to the FDA, Defendants' monographs cannot qualify for the safe harbor of § 343(r)(6).
Under the commercial-speech doctrine, speech that proposes a commercial transaction--commercial advertising--receives diminished First Amendment protection. Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66-68, 103 S.Ct. 2875, 77 L.Ed.2d 469 (1983). False and misleading commercial speech, as well as commercial speech concerning unlawful activities, can be punished or proscribed without violating the First Amendment. Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557, 563-64, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). Commercial speech that falls outside of these categories is subject to intermediate scrutiny: the restriction must (1) be justified by a substantial government interest; (2) directly advance that interest; and (3) be no more extensive than necessary to serve that interest. Id. at 564.
Defendants argue that the testimonials they publish are true and non-misleading and that prohibiting such testimonials is more extensive than necessary to advance any government interest. Defendants' argument fails for two reasons. First, the FDCA does not prohibit disease claims as such; it prohibits the sale of products with a particular intent, and disease claims are merely probative evidence of that intent. See 21 U.S.C. § 321(g)(1)(B); 21 C.F.R. § 201.128. The First Amendment " does not prohibit the evidentiary use of speech . . . to prove motive or intent." Wisconsin v. Mitchell, 508 U.S. 476, 489, 113 S.Ct. 2194, 124 L.Ed.2d 436 (1993). When Defendants incorporate a customer testimonial into advertising material, they endorse and adopt the disease claims made in the testimonial; therefore, the testimonial is evidence of their intent that the product be used to treat disease.
Moreover, commercial speech concerning illegal activity enjoys no First Amendment protection. See Cent. Hudson, 447 U.S. at 563-64. Defendants' speech concerns an illegal activity--the introduction into interstate commerce of unapproved new drugs. See 21 U.S.C. § § 331(d), 355(a). Therefore, both because Defendants' speech is being used as evidence of their intent and because it concerns illegal activity, the First Amendment is not violated.
Defendants' past use of disease claims--long after the initial warning letter from the FDA in 2010--and their continued use of testimonials and monographs well into this litigation is ample evidence that Defendants intended that their products be used to diagnose, cure, mitigate, treat, or prevent disease. Defendants' products are therefore drugs, and their introduction into interstate commerce violated the FDCA. See 21 U.S.C. § § 331(d), 355(a).
B. Adulterated Dietary Supplements
The term " dietary supplement" is defined in 21 U.S.C. § 321(ff). For purposes of this action, a dietary supplement is a food that is " intended to supplement the diet" with vitamins, minerals, herbs, amino acids, and so on. § 321(ff). A dietary supplement is deemed to be " adulterated" if " it has been prepared, packed, or held under conditions that do not meet current good manufacturing practice [cGMP] regulations." § 342(g)(1). The Government need not show that a supplement deemed adulterated is actually dangerous or contaminated. See John D. Copanos & Sons, Inc. v. Food & Drug Admin., 854 F.2d 510, 514, 272 U.S.App.D.C. 101 (D.C. Cir. 1988). An adulterated dietary supplement may not be introduced into interstate commerce. § 331(a).
The FDA's cGMP regulations aim to ensure that a dietary supplement is what it says it is--that it has the identity, purity, strength, and composition it is represented to have. Rather than scrutinize finished products, however, the regulations are directed toward controlling production processes. Of relevance here, manufacturers must: (1) establish precise specifications for the identity, strength, purity, and composition of each component, 21 C.F.R. § 111.70(b); (2) test each incoming shipment of components to ensure it conforms to that specification, 21 C.F.R. § 111.75(a);  (3) for each product, detail each step of the manufacturing process ex ante in a formal Master Manufacturing Record (" MMR" ) document, 21 C.F.R. § § 111.205, 111.210; and (4) each time a batch is produced, document the execution of (and any deviations from) the MMR in a Batch Production Record (" BPR" ), 21 C.F.R. § § 111.255, 111.260.
The Government alleges and has presented evidence that Maxam's manufacturing processes violated each of these requirements. In particular, the Government has shown that Defendants have failed to establish a specification for the identity of each component; failed to verify, using an appropriate and scientifically valid test, the identity of each dietary ingredient; and, depending on the product, either provided incomplete MMRs and BPRs or failed to have MMRs and BPRs entirely.
The outlines of Maxam's manufacturing process are uncontested: (1) Maxam ships raw materials to one Dan West in Rockport, Massachusetts; (2) West combines the ingredients, ferments them, and returns to Maxam a dehydrated powder product; and (3) Maxam then hydrates that powder, packages it, and distributes it in spray bottles.
Defendants claim to " know each ingredient included in the fermentation process for each Maxam product, they keep that information as required in their records and they have provided that information to the FDA." In the next sentence, however, Defendants admit that the " exact measurements" for each ingredient are kept by West and can be obtained from him " if required." This is borne out by evidence submitted by both parties: the MMR for Defendants' " AFX" product, for example, supplies a list of ingredients, but no measurements of any sort. Ex. B-1 (Dkt. 24-1) at 7-8. The ingredient list for Defendants' " PCA" product is similarly deficient. Cole Ex. G (Dkt. 33-7) at 7-8. This alone is a violation of 21 C.F.R. § 111.210(c), which requires that an MMR include an " accurate statement of the weight or measure of each component to be used."
Defendants also advance a conception of their manufacturing process limited to the hydration phase, in which their ingredients are not the materials they send West, but the powders they receive from him. Defendants' MMRs do include measurements for West's powders. But Defendants have neither established the required specifications for those powders nor do they adequately test incoming shipments to ensure they conform to that specification.
Defendants assert that they perform organoleptic testing, microbiological testing, heavy metal testing, and Fourier Transform Infrared Spectrum (" FTIR" ) testing on the blended powders received from West, but not one of these tests is sufficient to establish the identity--let alone the purity or strength--of the ingredients in blended powders. Heavy metal and microbiological testing test merely for the presence of specific contaminants--e. coli, salmonella, mercury, lead, and arsenic. They do not identify the ingredients contained in a product. Organoleptic testing analyzes a substance using the human senses, observing the color or appearance, texture, flavor, and aroma. The human senses are not sufficient to distinguish between blended powders containing multiple ingredients. For example, two of Defendants' own products, " C-60" and " B-MAX," have identical organoleptic profiles--a fine white powder, strong citrus taste, and no odor--despite having no overlap in ingredients. And FTIR testing produces unique " fingerprints" only for pure compounds, not for blended powders. Thus, as with organoleptic testing, at least two of Defendants' products--" Neurogen" and " AFX" --are indistinguishable using FTIR testing despite having no overlap in ingredients.
In short, Defendants may know what ingredients they send West, but they have no idea what they get back, and therefore no idea what goes into their products. That is a violation of cGMP regulations. There is no disputed issue of material fact in that regard: at oral argument, Defendants conceded that their processes did not meet cGMP regulations, and argued only that they could be brought into compliance within 45 days. Defendants' products are therefore per se adulterated. See 21 U.S.C. § 342(g)(1).
C. Misbranded Drugs
A drug is misbranded " [u]nless its labeling bears . . . adequate directions for use." 21 U.S.C. § 352(f)(1). Directions are " adequate" if they allow a " layman [to] use a drug safely and for the purposes for which it is intended." 21 C.F.R. § 201.5. Such directions, which might include indications, contraindications, dosages, routes of administration, warnings, side effects, and necessary collateral measures, must be premised on clinical data derived from scientifically controlled investigation--the sort of investigation required for FDA approval. See United States v. Undetermined Quantities of Articles of Drug, 145 F.Supp.2d 692, 702 (D. Md. 2001) (" [I]n the absence of investigations or clinical data demonstrating the safety and efficacy of the drugs, there can be no adequate instruction for their safe use." (emphasis in original)). Unapproved new drugs, therefore, will frequently also be found to be misbranded drugs. Misbranded drugs may not be introduced into interstate commerce. 21 U.S.C. § 331(a).
Defendants have conducted no controlled studies and collected no clinical data. See Deposition of James G. Cole (Dkt. 29-2) at 23:17-25:20, 97:6-8 (containing admissions by Defendant Cole that there are no such studies of Maxam products). Accordingly, Defendants cannot provide adequate directions for a layperson to use their drugs safely. Defendants' drugs are therefore misbranded. See 21 U.S.C. § 352(f)(1).
D. Injunctive Relief
The federal district courts are authorized under 21 U.S.C. § 332 to enjoin violations of § 331. Unauthorized new drugs are prohibited under § 331(d) and § 355(a); adulterated dietary supplements and misbranded drugs are prohibited under § 331(b). The decision to grant a statutory injunction must be " based on appropriate findings supported by the record." United States v. Laerdal Mfg. Corp., 73 F.3d 852, 854 (9th Cir. 1995) (quotation marks omitted).
To obtain a statutory injunction, the Government need only show that " there exists some cognizable danger of recurrent violation."  United States v. W.T. Grant Co., 345 U.S. 629, 633, 73 S.Ct. 894, 97 L.Ed. 1303 (1953); Laerdal Mfg., 73 F.3d at 854 (quotation marks omitted). By contrast, if Defendants wish to avoid an injunction, they carry the " heavy" burden of showing that there is " no reasonable expectation that the wrong will be repeated." W.T. Grant Co., 345 U.S. at 633. The following factors are relevant to whether to grant an injunction:
the degree of scienter involved; the isolated or recurrent nature of the infraction; the defendant's recognition of the wrongful nature of his conduct; the extent to which the defendant's professional and personal characteristics might enable or tempt him to commit future violations; and the sincerity of any assurances against future violations.
Laerdal Mfg., 73 F.3d at 855 (citation omitted). In considering these factors, the Court may infer from a defendant's past violations that " future violations are likely to occur." See United States v. Odessa Union Warehouse Co-op, 833 F.2d 172, 176 (9th Cir. 1987).
1. The Laerdal Manufacturing Factors
Here, Defendants have played a cat-and-mouse game with the FDA for more than four years. For example, after the 2010 warning letter, Defendants assured the FDA that they had removed all disease claims, including testimonial claims, from all their websites, including the ASN website, http://ssl.a-s-n.com/. But by the 2012 inspection, disease claims had reappeared on Defendants' websites. At that time, Defendants not only assured the FDA that the claims had been removed, but that the ASN website had been shut down. In their Opposition, Defendants claim that the ASN website " has never been reactivated" after the March 2012 inspection. In fact, however, that website was reinstated in July 2012 and was once again cited in 2013 for containing disease claims. Defendants yet again assured the FDA that the site would be taken down. It remains active to this day, however, although it currently appears not to have any disease claims.
Defendants' purported attempts to comply with cGMP regulations provides another example of the recurrent nature of Defendants' infractions and Defendants' lack of sincerity. The FDA first inspected Defendants' facility in March 2012. Defendants assert that they have worked diligently since then to come into compliance with cGMP regulations. Almost three years have gone by, however, and despite the FDA twice providing Defendants with detailed, itemized instructions for coming into cGMP compliance, Defendants admit in their Memorandum in Opposition, Dkt. 32 at 12-13, that they still do not know the measurements of the ingredients in their products, in violation of 21 C.F.R. § 111.210(c).
As a final salient example, in December 2014, Defendant Cole posted a message to Maxam's customers on Defendants' website. Dkt. 43. In that message, Defendant Cole wrote that in the event of an injunction, Maxam " plan[ned] on forming a private membership association" to " continue to provide our amazing Maxam technology and products" --in other words, that he intended to flout any injunction. Defendant Cole also stated in his message that " full compliance [with FDA regulations] . . . will be impossible."
Defendants argue that their products are not dangerous and have harmed no one. But that is irrelevant: " The passage of the [FDCA] is . . . an implied finding that violations will harm the public and ought, if necessary, be restrained." United States v. Diapulse Corp. of Am., 457 F.2d 25, 28 (2d Cir. 1972). Moreover, Defendants' argument is further evidence that Defendants do not recognize " the wrongful nature of [their] conduct." Cf. Laerdal Mfg., 73 F.3d at 855. Defendants also claim to have made substantial good-faith efforts toward compliance. Not only is that untrue, it is irrelevant: good faith is not a defense to violations of the FDCA. Research Labs, Inc.. v. United States, 167 F.2d 410, 420 (9th Cir. 1948). Based on Defendants' past and ongoing conduct, every single Laerdal Manufacturing factor weighs in favor of granting a permanent injunction.
2. The Nature of the Injunction
The Government has provided the Court with a proposed order of permanent injunction based on the FDA's past experience with other defendants who have failed to achieve compliance on their own. Dkt. 23. The Government's proposed order is crafted to guide Defendants into compliance with the FDCA and with cGMP regulations with the assistance of independent experts and review by the FDA. Of note, it provides that Defendants may resume manufacturing and distributing their products after the independent experts and the FDA determine that Defendants have brought their operations into compliance with governing law. Moreover, the Court will retain jurisdiction over this action and under appropriate circumstances Defendants may move the Court to modify the injunction.
Defendants have submitted (and the Court has separately received) a number of letters from Maxam's customers requesting that the Court not grant the Government's requested injunctive relief. See Declaration of James G. Cole (Dkt. 41); Dkt. 41-1, 41-2. But whether the general public should have access to unapproved new drugs, misbranded drugs, and dietary supplements that are not manufactured in compliance with cGMP regulations is a policy question reserved for Congress. The role of the federal courts is merely to apply Congress's answer--the FDCA--to the facts of a particular case.
Defendants ask the Court for 45 days to come into compliance before the permanent injunction takes effect. But Defendants have had four years to come into compliance--and Defendant Cole has admitted that full compliance is " impossible." Dkt. 43 at 1. If Defendants are now sincere about wanting to come into compliance, a 45-day grace period is unnecessary: The Court's separate order provides Defendants with a roadmap lawfully to resume operations without the involvement of this Court.
As Defendants acknowledged at oral argument, there is no genuine dispute that Defendants have violated the FDCA. Moreover, the Government has amply met its burden of showing that there exists a cognizable danger of recurrent violation. Therefore, summary judgment in favor of the Government is appropriate and the Court grants the Government's request for injunctive relief.
There is no genuine dispute that Defendants have repeatedly violated the FDCA by introducing into interstate commerce unapproved new drugs, misbranded drugs, and adulterated dietary supplements. Therefore, the Government's motion for summary judgment (Dkt. 22) is GRANTED. A separate order of injunctive relief will follow.
IT IS SO ORDERED.
ORDER OF PERMANENT INJUNCTION
The Court, having considered Plaintiff's Motion for Summary Judgment and supporting documents and the entire record in this case, finds that James G. Cole, Inc. (" JGCI" ), James G. Cole, and Julie D. Graves (collectively, " Defendants" ) violate the Federal Food, Drug, and Cosmetic Act (the " Act" ), 21 U.S.C. § 331(d), by introducing into interstate commerce unapproved new drugs, and 21 U.S.C. § 331(a), by introducing into interstate commerce misbranded drugs and adulterated dietary supplements; and finds that Defendants, unless restrained by order of this Court, will continue to violate the Act, 21 U.S.C. § § 301-399f.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED as follows:
1. Plaintiff's Motion for Summary Judgment is granted.
2. This Court has jurisdiction over the subject matter of this action and has personal jurisdiction over all parties to this action.
3. The Complaint for Permanent Injunction states a cause of action against Defendants under the Act.
4. Defendants violate 21 U.S.C. § 331(d), by introducing or delivering for introduction, and causing to be introduced or delivered for introduction, into interstate commerce new drugs within the meaning of 21 U.S.C. § 321(p) that are neither approved under 21 U.S.C. § 355(a) or (j), nor exempt from approval pursuant to 21 U.S.C. § 355(i).
5. Defendants violate 21 U.S.C. § 331(a), by introducing or delivering for introduction, and causing to be introduced or delivered for introduction, into interstate commerce articles of drugs that are misbranded within the meaning of 21 U.S.C. § 352(f)(1) in that their labeling fails to bear adequate directions for use.
6. Defendants violate 21 U.S.C. § 331(a) by introducing or delivering, or causing to be introduced or delivered, into interstate commerce articles of food (dietary supplements), as defined by 21 U.S.C. § 321(ff), that are adulterated within the meaning of 21 U.S.C. § 342(g)(1) in that they have been prepared, packed, and held under conditions that do not meet current good manufacturing practice regulations for dietary supplements (" Dietary Supplement cGMP" ). 21 C.F.R. Part 111.
7. Defendants and each and all of their directors, officers, agents, representatives, employees, attorneys, successors, assigns, and any and all persons in active concert or participation with any of them (collectively, " Associated Persons" ), who have received actual notice of this Order, are hereby permanently restrained and enjoined, under the provisions of 21 U.S.C. § 332(a), and the inherent equitable authority of this Court, from directly or indirectly manufacturing, preparing, processing, packaging, packing, labeling, holding, receiving and/or distributing any drug or food (including dietary supplement), at or from 1020 Wasco Street, Hood River, Oregon, 97031 (the " facility" ), or at or from any other locations at which Defendants, now or in the future, directly or indirectly manufacture, prepare, process, package, pack, label, hold, receive and/or distribute dietary supplements, unless and until:
A. Defendants have removed all claims from their product labels, labeling, promotional materials, websites owned or controlled by or related to Defendants, and in any other media that evidence an intended use for any product as a drug within the meaning of the Act, 21 U.S.C. § 321(g);
B. Defendants retain, at Defendants' expense, an independent person or persons (the " Labeling Expert" ), who is without personal, financial (other than the consulting agreement between the parties), or familial ties to Defendants and their families or affiliates, and who by reason of background, experience, education, and training is qualified to assess Defendants' compliance with the Act, to review the claims Defendants make for each of their products on all labels, labeling, promotional materials, and any internet websites owned or controlled by or related to Defendants including, but not limited to, www.maxamlabs.com and ssl.a-s-n.com. Defendants shall notify FDA in writing of the identity and qualifications of the Labeling Expert as soon as they retain such expert. At the conclusion of the Labeling Expert's review, the Labeling Expert shall prepare a written report analyzing whether Defendants are operating in compliance with the Act and in particular, certify whether Defendants have omitted all claims from each of their product labels, labeling, promotional materials, websites owned or controlled by or related to Defendants, and in any other media that evidence an intended use for any of Defendants' products causing them to be drugs within the meaning of the Act, 21 U.S.C. § 321(g). The report shall include the specific results of the Labeling Expert's review, including references to product names and regulations addressed in the process of conducting the review. The report shall also include copies of all materials reviewed by the Labeling Expert. The Labeling Expert shall submit this report concurrently to Defendants and FDA no later than twenty (20) calendar days after completing this review;
C. Defendants retain, at Defendants' expense, an independent person or persons (the " Dietary Supplement cGMP Expert" ), who is without personal, financial (other than the consulting agreement between the parties), or familial ties to Defendants or their families, and who by reason of background, experience, education, and training is qualified to inspect Defendants' facility to determine whether the facility, methods, processes, and controls are operated and administered in conformity with Dietary Supplement cGMP, 21 C.F.R. Part 111. Defendants, if appropriate, may retain as the Dietary Supplement cGMP Expert the same independent party they retained as the Labeling Expert. Defendants shall notify FDA in writing of the identity and qualifications of the Dietary Supplement cGMP Expert as soon as they retain such expert;
D. The Dietary Supplement cGMP Expert shall perform a comprehensive inspection of Defendants' facility and the methods and controls used to manufacture, prepare, pack, label, hold, and distribute dietary supplements, and certify in writing to FDA that (1) he or she has inspected Defendants' facility, methods, processes, and controls; and (2) whether Defendants' manufacturing process is, in the Dietary Supplement cGMP Expert's opinion, in compliance with 21 U.S.C. § 342(g)(1), 21 C.F.R. Part 111, and this Order. The Dietary Supplement cGMP Expert's report of the inspection shall be submitted concurrently to Defendants and FDA no later than twenty (20) calendar days after completion of the inspection. This report shall include, but not be limited to, the following:
(1) A determination whether Defendants' manufacturing process adequately establishes an identity specification for each component, as required by 21 C.F.R. § 111.70(b)(1);
(2) A determination whether Defendants' manufacturing process uses appropriate, scientifically valid methods for ensuring that product specifications are met, in compliance with the requirements of 21 C.F.R. § 111.75(h)(1);
(3) A determination whether Defendants' manufacturing process includes preparing and continuously following a written master manufacturing record for each unique formulation of product manufactured and each batch size, as required by 21 C.F.R. § 111.205;
(4) A determination whether Defendants' manufacturing process includes all required information in the master manufacturing record, as required by 21 C.F.R. § 111.210, including, but not limited to, the weight or measure of their products' components and dietary ingredients (21 C.F.R. § 111.210(c) and (d)); specific actions necessary to perform and verify the points, steps, or stages in the manufacturing process where control is necessary (21 C.F.R. § 111.210(h)(3)); and corrective action plans to use when specifications are not met (21 C.F.R. § 111.210(h)(5));
(5) A determination whether Defendants' manufacturing process prepares and follows a written batch production record for each unique formulation of dietary supplement manufactured, as required by 21 C.F.R. § 111.255;
(6) A determination whether Defendants' manufacturing process includes batch production records that contain all information required by 21 C.F.R. § 111.260, specifically including but not limited to a determination whether Defendants' batch production records include:
a. the identity of equipment and processing lines used in producing the batch (111.260(b));
b. the unique identifier assigned to each component, packaging, and label used (111.260(d));
c. the actual results obtained during any monitoring operation (111.260(g));
d. the results of any testing or examination performed during the batch production (111.260(h));
e. documentation that the finished dietary supplement meets established specifications (111.260(i));
f. documentation at the time of performance for each batch that includes the date on which each step of the MMR was performed and the initials of the person performing each step (111.260(j)(1) and (j)(2));
g. documentation at the time of performance of packaging and labeling operations (111.260(k)(1) and (k)(3));
h. documentation at the time of performance of quality control (111.260(l)(2) and (l)(3));
i. documentation at the time of performance of any required material review and disposition decision (111.260(m)); and
j. documentation at the time of performance of any reprocessing (111.260(n)).
E. Should the Labeling Expert or Dietary Supplement cGMP Expert (collectively, " Experts" ) identify any deficiencies in their reports as described in Paragraphs 7(B) and 7(D):
(1) Defendants shall report to FDA and the Experts in writing the actions they have taken to correct all such deficiencies within thirty (30) calendar days from receiving an expert report; and
(2) The Experts shall certify in writing to FDA whether, based upon the Experts' further review and/or inspection(s), Defendants' facility and their methods, processes, and controls used to manufacture, prepare, pack, label, hold, and distribute their dietary supplement products appear to be in compliance with the Act, its implementing regulations, and this Order, and whether Defendants have omitted all claims from each of their product labels, labeling, promotional materials, websites owned or controlled by or related to Defendants, and in any other media that evidence an intended use for any of Defendants' products to be drugs within the meaning of the Act;
F. FDA representatives inspect Defendants' facility to determine whether the requirements of this Order have been met and whether Defendants are operating in conformity with the Act, its implementing regulations, and this Order; and
G. FDA notifies Defendants in writing that Defendants appear to be in compliance with the requirements set forth in Paragraphs 7(A)-(F). In no circumstance shall FDA's silence be construed as a substitute for written notification.
8. Paragraph 7 shall not apply if Defendants have in effect an approved new drug application or abbreviated new drug application filed pursuant to 21 U.S.C. § § 355(b) or (j), and/or an investigational new drug exemption filed and in effect pursuant to 21 U.S.C. § 355(i) for all of their products, and Defendants comply with current good manufacturing practices for drugs. See 21 C.F.R. Parts 210 and 211.
9. Within fifteen (15) calendar days after the entry of this Order, Defendants, under FDA's supervision, shall destroy all drug and food (dietary supplements) products, including components of such products, that are in Defendants' possession, custody, or control. Within thirty (30) calendar days after the entry of this Order, Defendants, under FDA's supervision, shall recall and destroy all unexpired drugs and dietary supplements that were manufactured, prepared, processed, packaged, packed, labeled, held, and/or distributed prior to the date of the entry of this Order. Defendants shall bear the cost of recall, destruction, and FDA's supervision. Defendants shall not dispose of any drugs or dietary supplements in a manner contrary to the provisions of the Act, any other federal law, or the laws of any State or Territory, as defined in the Act, in which the drugs or dietary supplements are disposed.
10. After Defendants have complied with Paragraphs 7(A)-(F) and received FDA's written notification pursuant to Paragraph 7(G), Defendants shall retain an independent person or persons who shall meet the criteria described in Paragraphs 7(B) and 7(C) to conduct audit inspections of Defendants' facility no less frequently than once every six (6) months for a period of no less than five (5) years (hereinafter, the " Auditor" ). The first audit shall occur not more than six months after Defendants have received FDA's written notification pursuant to Paragraph 7(G). If Defendants choose, the Auditor may be the same person or persons retained as the Labeling Expert or Dietary Supplement cGMP Expert described in Paragraphs 7(B)-(C).
A. At the conclusion of each audit inspection, the Auditor shall prepare a detailed written audit report (" Audit Report" ) analyzing whether Defendants are in compliance with Dietary Supplement cGMP for their dietary supplement operations and identifying any deviations from such requirements (" Audit Report Observations" ).
B. Each Audit Report shall also contain a written certification that the Auditor: (1) has personally reviewed all of Defendants' product labels, labeling, promotional materials, and any and all websites owned, controlled by, or related to Defendants; and (2) personally certifies whether the product labels, labeling, promotional materials, and any and all websites owned, controlled by, or related to Defendants comply with the requirements of the Act, its regulations, and this Order.
C. As a part of every Audit Report, the Auditor shall assess the adequacy of corrective actions taken by Defendants to correct all previous Audit Report observations. The Audit Reports shall be delivered contemporaneously to Defendants and FDA by courier service or overnight delivery service, no later than fifteen (15) calendar days after the date the Audit Inspection is completed. In addition, Defendants shall maintain the Audit Reports in separate files at Defendants' facility and shall promptly make the Audit Reports available to FDA upon request.
D. If an Audit Report contains any observations indicating that Defendants' drugs and/or dietary supplements are not in compliance with the Act, its implementing regulations, and/or this Order, Defendants shall, within fifteen (15) calendar days of receipt of the Audit Report, correct those observations, unless FDA notifies Defendants that a shorter time period is necessary. If, after receiving the Audit Report, Defendants believe that correction of the deviations may take longer than fifteen (15) calendar days, Defendants shall, within ten (10) calendar days of receipt of the Audit Report, submit to FDA in writing a proposed schedule for completing corrections (" Audit Correction Schedule" ). The Audit Correction Schedule must be reviewed and approved by FDA in writing prior to implementation by Defendants. In no circumstance shall FDA's silence be construed as a substitute for written approval. Defendants shall complete all corrections according to the approved Audit Correction Schedule.
E. Immediately upon correction, Defendants shall submit documentation of their corrections to the Auditor. Within thirty (30) calendar days after the Auditor's receipt of Defendants' documentation of corrections, unless FDA notifies Defendants that a shorter time period is necessary, or within the time period provided in a correction schedule approved by FDA, the Auditor shall review the actions taken by Defendants to correct the Audit Report Observations. Within five (5) calendar days after beginning that review, the Auditor shall report in writing to FDA whether each of the Audit Report Observations has been corrected and, if not, which Audit Report Observations remain uncorrected.
11. Defendants and each and all of their directors, officers, agents, representatives, employees, attorneys, successors, assigns, and any and all persons or entities in active concert or participation with any of them are permanently restrained and enjoined from directly or indirectly doing or causing any of the following acts:
A. Violating 21 U.S.C. § 331(d), by introducing or delivering, or causing to be introduced or delivered, into interstate commerce new drugs within the meaning of 21 U.S.C. § 321(p) that are neither approved pursuant to 21 U.S.C. § 355(a) or (j), nor exempt from approval pursuant to 21 U.S.C. § 355(i);
B. Violating 21 U.S.C. § 331(a), by introducing or delivering, or causing to be introduced or delivered, into interstate commerce drugs that are misbranded within the meaning of 21 U.S.C. § 352(f)(1), or dietary supplements that are adulterated within the meaning of 21 U.S.C. § 342(g)(1); or
C. Violating 21 U.S.C. § 331(k), by causing drugs that Defendants hold for sale after shipment in interstate commerce to become misbranded within the meaning of 21 U.S.C. § 352(f)(1), or by causing dietary supplements that Defendants hold for sale after shipment in interstate commerce to become adulterated within the meaning of 21 U.S.C. § 342(g)(1).
D. If, and for as long as, Defendant Graves ceases to be associated with, employed by, or acting on behalf of JGCI, any other dietary supplement manufacturer, or any of JGCI's or any other dietary supplement manufacturer's subsidiaries, franchises, affiliates, successors, and/or " doing business as" entities, Defendant Graves shall not be subject to the terms of this Order except as to her act(s) or failure(s) to act under this Order while associated with, employed by, or acting on behalf of JGCI, any dietary supplement manufacturer, or JGCI's or any other dietary supplement manufacturer's subsidiaries, franchises, affiliates, successors and/or " doing business as" entities.
12. If, FDA determines, based on the results of an inspection, a review of Defendants' products, product labels, labeling, promotional materials, or websites owned or controlled by or related to Defendants, a report prepared by Defendants' Experts or the Auditor, or any other information, that that Defendants have violated the Act or its implementing regulations, have failed to comply with any provision of this Order, or that additional corrective actions are necessary to achieve compliance with the Act, applicable regulations, and/or this Order, FDA may, as and when it deems necessary, notify Defendants in writing of the noncompliance and order Defendants to take appropriate corrective action, including, but not limited to, ordering Defendants to immediately take one or more of the following actions:
A. Cease manufacturing, processing, packing, labeling, holding, promoting, and/or distributing any or all drugs and/or dietary supplements;
B. Revise, modify, expand, or continue to submit any reports or plans prepared pursuant to this Order;
C. Submit additional reports or information to FDA as requested;
D. Pay liquidated damages as provided in Paragraph 20 below;
E. Recall any article(s) at Defendants' expense; or
F. Take any other corrective action(s) as FDA, in its discretion, deems necessary to bring Defendants and their products into compliance with the Act, applicable regulations, and/or this Order.
This remedy shall be separate and apart from, and in addition to, any other remedy available to the United States under this Order or under the law.
13. Upon receipt of any order issued by FDA pursuant to Paragraph 12, Defendants shall immediately and fully comply with the terms of the order. Any cessation of operations or other action described in Paragraph 12 shall continue until Defendants receive written notification from FDA that Defendants appear to be in compliance with the Act, its implementing regulations, and this Order and that Defendants may resume operations. The cost of FDA inspections, sampling, testing, travel time, and subsistence expenses to implement the remedies set forth in Paragraph 12 shall be borne by Defendants at the rates specified in Paragraph 16.
14. Within ten (10) calendar days after FDA's request for any labels, labeling, promotional materials, and/or downloaded copies (on CD-ROM) of any websites owned and/or controlled by or related to Defendants, Defendants shall submit a copy of the requested materials to FDA at the address specified in Paragraph 19. Within ten (10) calendar days from the acquisition of any websites owned and/or controlled by or related to Defendants, Defendants shall submit a copy of all website content and the website address to FDA at the address specified in Paragraph 19.
15. FDA representatives shall be permitted, without prior notice and as and when FDA deems necessary, to make inspections of Defendants' facility and, without prior notice, take any other measures necessary to monitor and ensure continuing compliance with the terms of this Order. During such inspections, FDA representatives shall be permitted immediate access to buildings, equipment, in-process and finished materials, containers, labeling and other materials therein; to take photographs and make video recordings; to take samples of Defendants' finished and unfinished materials and products, containers, labels, labeling, and other promotional materials; and to examine and copy all records relating to the receipt, manufacture, processing, packing, labeling, promoting, holding, and distribution of any and all of Defendants' products. The inspections shall be permitted upon presentation of a copy of this Order and appropriate credentials. The inspection authority granted by this Order is separate from, and in addition to, the authority to conduct inspections under the Act, 21 U.S.C. § 374.
16. Defendants shall reimburse FDA for the costs of all FDA inspections, investigations, supervision, reviews, examinations, and analyses specified in this Order or that FDA deems necessary to evaluate Defendants' compliance with this Order. For the purposes of this Order, inspections include FDA's review and analysis of Defendants' claims contained in product labels, labeling, promotional materials, and any and all websites owned or controlled by or related to Defendants. The costs of such inspections shall be borne by Defendants at the prevailing rates in effect at the time the costs are incurred. As of the date that this Order is signed by the parties, these rates are: $88.45 per hour and fraction thereof per representative for inspection work; $106.03 per hour or fraction thereof per representative for analytical or review work; $0.56 per mile for travel expenses by automobile; government rate or the equivalent for travel by air or other means; and the published government per diem rate or the equivalent for the areas in which the inspections are performed per-day, per-representative for subsistence expenses, where necessary. In the event that the standard rates applicable to FDA supervision of court-ordered compliance are modified, these rates shall be increased or decreased without further order of the Court.
17. Within ten (10) calendar days after the entry of this Order, Defendants shall provide a copy of this Order, by personal service or certified mail (restricted delivery, return receipt requested), to each and all of his Associated Persons, shall post the Order on all websites under Defendants' control, and shall ensure that the Order remains posted at each location for as long as the Order remains in effect. Within thirty (30) calendar days after the entry of this Order, Defendants shall provide to FDA an affidavit of compliance, stating the fact and manner of compliance with the provisions of this Paragraph and identifying the names and positions of all Associated Persons who have received a copy of this Order and the manner of notification. In the event that Defendants become associated, at any time after the entry of this Order, with new Associated Persons, Defendants shall: (a) within fifteen (15) calendar days of such association, provide a copy of this Order to each such Associated Person by personal service or certified mail (restricted delivery, return receipt requested), and (b) on a quarterly basis, notify FDA in writing when, how, and to whom the Order was provided.
18. Defendants shall notify FDA, in writing, at the address specified in Paragraph 19, at least fifteen (15) calendar days before any change in ownership, character, or name of its business, such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, franchises, affiliates, or " doing business as" entities, or any other change in JGCI's corporate structure, or in the sale or assignment of any business assets, such as buildings, equipment, or inventory, that may affect compliance with this Order. Defendants shall provide a copy of this Order to any potential successor or assignee at least fifteen (15) calendar days before any sale or assignment. Defendants shall furnish FDA with an affidavit of compliance with this Paragraph no later than ten (10) calendar days prior to such assignment or change in ownership.
19. All notifications, certifications, reports, correspondence, and other communications to FDA required by this Order shall be addressed to the Director, Seattle District Office, United States Food and Drug Administration, 22215 26th Avenue SE, Suite 210, Bothell, Washington, 98021.
20. If Defendants fail to comply with the Act, its implementing regulations, and/or any provision of this Order, including any time frame imposed by this Order, Defendants shall pay to the United States of America: (a) ten thousand dollars ($10,000) in liquidated damages for each violation of the Act, its implementing regulations, and/or this Order; (b) an additional three thousand dollars ($3,000) in liquidated damages per day, per violation, for each violation of the Act, its implementing regulations, and/or this Order; and (c) an additional sum in liquidated damages equal to twice the retail value of any distributed drugs or dietary supplements that are adulterated, misbranded, or otherwise in violation of the Act, its implementing regulations, and/or this Order. The remedy in this paragraph shall be in addition to any other remedies available to the United States under this Order or the law.
21. Should the United States bring, and prevail in, a contempt action to enforce the terms of this Order, Defendants shall, in addition to other remedies, reimburse the United States for its attorneys' fees, investigational expenses, expert witness fees, travel expenses incurred by attorneys and witnesses, and administrative court costs relating to such contempt proceedings.
22. All decisions specified in this Order shall be vested in the discretion of FDA and shall be final. If contested, FDA's decisions under this Order shall be reviewed by the Court under the arbitrary and capricious standard set forth in 5 U.S.C. § 706(2)(A). Review shall be based exclusively on the written record before FDA at the time the decision was made. No discovery shall be taken by either party.
23. This Court retains jurisdiction of this action for the purpose of enforcing or modifying this Order and for the purpose of granting such additional relief as may be necessary or appropriate.
The Court hereby directs entry of this Order of Permanent Injunction.
IT IS SO ORDERED.