The Food and Drug Administration has issued warning letters to two large producers of green tea drinks to discontinue unauthorized and unproven health and nutrient claims on their labels and websites. The warning letters were issued to the Dr. Pepper Snapple Group for its Canada Dry Sparking Green Tea Ginger Ale (“Canada Dry”) and to Unilever Inc. for its Lipton Green Tea 100% Naturally Decaffeinated product (“Lipton”). The warning letters are part of a larger campaign by the FDA to improve the accuracy and useful information of food labeling.

In its warning letter to Canada Dry, the FDA stated that the company’s sparkling green tea ginger ale made improper claims to be “enhanced” with antioxidants. Canada Dry’s label claims its green tea ginger ale is “enhanced with 200mg of antioxidants from green tea and vitamin C.” However, because Canada Dry is a carbonated drink, the FDA classifies it as a snack food. Current FDA policy does not consider it appropriate to fortify snack foods. As a result, Canada Dry cannot claim that its product is enhanced with antioxidants. Additionally, the FDA also warned Canada Dry that the ingredients claiming to contain antioxidants “are not nutrients with recognized antioxidant activity” under FDA regulations. As a result of these violations the FDA has found Canada Dry to be misbranded under the Food Drug and Cosmetic Act (“FDCA”).The full warning letter to Canada Dry can be read at: FDA Warning Letter To Canada Dry.

Unilever, the manufacturer of Lipton, was warned that its website for its Lipton product made misleading health claims and that Lipton’s antioxidant labeling did not follow FDA guidelines. In its warning letter, the FDA takes issue with Lipton’s website’s reference to four studies that showed a cholesterol-lowering effect of drinking green tea. The FDA found that the therapeutic claims are misleading because it suggests that Lipton is designed to treat or prevent disease. The FDA stated that these claims would result in Lipton being classified as a drug under the FDCA and subject Lipton to requirements for proving the safety and effectiveness of the cholesterol-lowering claims before the product could be legally marketed in the US. The FDA also stated that Lipton’s antioxidant labeling claims violate several federal guidelines. Due to these violations, the FDA has found Lipton to be misbranded under the FDCA.  A full copy of the FDA’s warning to Lipton can be read at: FDA Warning Letter To Lipton.

As the nutrient-enriched beverage market continues to grow into a multibillion dollar business, the FDA will continue its efforts to crack down on companies that overstate the benefits of their products. For more information on FDA regulation and labeling guidelines, please contact us at contact@fuerstlaw.com.

On September 14, 2010, Mitchell Fuerst of Fuerst Ittleman was interviewed by webcpa.com on the issue of why the Financial Accounting Standards Board’s (FASB) proposed standards on loss contingency disclosures could violate attorney-client privilege and be subject to legal and congressional challenges. The podcast from Mr. Fuerst’s interview is available for download here.

If you have questions regarding how these proposed FASB standards could affect you or your business, contact Fuerst Ittleman at 305-350-5690 or contact@fuerstlaw.com.

On September 13, 2010, the Office of Foreign Assets Control (“OFAC”) of the US Department of the Treasury announced the removal of the Iraqi Sanctions Regulations from the Code of Federal Regulations, 31 C.F.R. Part 575, and added the Iraq Stabilization and Insurgency Sanctions Regulations (“ISISR”) to the Code at 31 C.F.R. Part 576. The new regulations implement Executive Order 13350 terminating the national emergency declared in Iraq by the US in 1990 in Executive Order 12722.

Prior to the new regulations US law prohibited the importation of any goods or services from Iraq to the US and prohibited the exportation of goods, services, or technology from the US to Iraq. ISISR authorizes all transactions involving property and interests in property that were previously prohibited under Executive Order 12722. However, importers and exporters should be aware that certain transactions relating to Iraq remain subject to sanctions. OFAC announced that the removal of 31 C.F.R. Part 575 from the Code of Federal Regulations will neither affect ongoing enforcement proceedings nor prevent the initiation of enforcement proceedings where the statute of limitations has not run. A full copy of ISISR can be read in the Federal Register at: Federal Register Announcement.

For more information regarding OFAC and strategies on maintaining compliance with federal regulations, please contact Fuerst Ittleman at 305-350-5690 or contact@fuerstlaw.com.

The Food and Drug Administration (“FDA”) has moved one step closer to approving the first genetically modified animal food for human consumption, genetically modified Atlantic salmon. The impending decision has caught the eye of investors, biotechnology companies, consumer groups and environmental organizations.

On September 3, 2010, a panel of scientists advised the FDA that AquaAdvantage salmon, a genetically modified version of Atlantic salmon, was safe to eat. The panel also found that genetically modified salmon have no biologically relevant differences from ordinary farm raised Atlantic salmon and both contain the same amount of nutrients.

The key difference between the genetically modified salmon and the ordinary salmon is its rate of growth. Normally, Atlantic salmon take close to 3 years to fully develop because its growth rate slows during cold weather. However, genetically modified Atlantic salmon have been modified by adding growth hormone genes from Chinook salmon and ocean pout, allowing these fish to grow to full size in only 18 months. The quicker growth rates allow farmers to increase production and yields.

The FDA is evaluating the genetically modified salmon as it does new veterinary drugs. As a result, much of the research and data gathered to determine the safety of these fish has been kept confidential. This has drawn criticism from consumer groups and independent labs concerned that an overworked and understaffed FDA may be missing something in its evaluation. Consumer groups are also concerned the genetically modified salmon could escape breeding tanks and breed with wild salmon. The FDA believes that genetically modified salmon will not pose a threat to the environment because 99% of all genetically modified salmon will be sterile and, unlike traditional farmed raised salmon which are raised in ocean based tanks, genetically modified salmon will be raised in inland tanks, minimizing the chances of escape.

An approval of genetically modified salmon for human consumption could open the door for other genetically modified animals to receive approval for human consumption. Currently, scientists are seeking FDA approval for a genetically modified hog, and are developing genetically modified cows that are resistant to mad cow disease.

The FDA is scheduled to hold public hearings on genetically modified salmon from September 19-21, 2010. The hearings will include discussions on the technology used to produce genetically modified animals and FDA’s regulatory procedures for evaluating these animals, a discussion on the animal health, food safety, and environmental concerns associated with genetically modified salmon, and a discussion on potential labeling issues should the FDA approve genetically modified salmon for human consumption. More information regarding the upcoming hearings can be found on FDA’s website at FDA Announces Public Meeting on Genetically Engineered Atlantic Salmon.

For more information regarding current FDA authority, procedure, or regulations please contact us at contact@fuerstlaw.com.

On September 9, 2010, the Food and Drug Administration (“FDA”) announced its intent to regulate electronic cigarettes and issued warning letters to five e-cigarette manufacturers for violations of the Food, Drug, and Cosmetic Act (“FDCA”). Warning letters were issued for various violations of the FDCA including violations of good manufacturing practices, making unsubstantiated drug claims, and using the devices as delivery mechanisms for active pharmaceutical ingredients. A copy of the FDA’s press release can be read here: FDA Acts Against E-Cigarette Distributors.

E-cigarettes are battery-powered devices that allow users to inhale vaporized liquid nicotine instead of tobacco smoke. As these devices have become more popular, the FDA has become increasingly concerned with the safety and effectiveness of these devices as smoking cessation aids. In July, the FDA issued a press release expressing its concerns with the e-cigarette stating that because e-cigarettes have not been submitted to the FDA for evaluation or approval, the levels of nicotine and other chemicals that the products deliver to its users are unknown. The press release regarding safety concerns with the e-cigarettes can be read at FDA Warns of Health Risks Posed by E-Cigarettes.

In a letter to the Electronic Cigarette Association on September 8, 2010, the FDA advised the e-cigarette industry of its intent to regulate e-cigarettes. The FDA has determined that e-cigarettes “meet the definitions of both a drug and a device under the [FDCA] and the definition of a combination product in 21 C.F.R. Part 3, with a drug primary mode of action.” A full copy of the FDA’s letter to the Electronic Cigarette Association can be read at FDA’s Letter to the E-Cigarette Association.

As a result of this new classification by the FDA, e-cigarette manufacturers will have to comply with the FDCA and numerous regulations regarding the marketing and approval of drugs. Under the FDCA, a company must demonstrate that a drug is safe and effective for its intended use before that product will gain FDA approval. This will require e-cigarette manufacturers to provide proof that e-cigarettes safely and effectively reduce its users dependence on nicotine. Additionally, manufacturers must demonstrate that its manufacturing practices preserve the strength, quality, and purity of the drug. The FDCA also prohibits a company from claiming that a drug can treat or mitigate a disease, including nicotine addiction, unless the drug’s safety and effectiveness has been proven.

For more information regarding current FDA authority, procedure, or regulations please contact us at contact@fuerstlaw.com.

The federal government recently forfeited $13.3 million in proceeds derived from two online poker sites for being in violation of the Unlawful Internet Gambling Enforcement Act (“UIGEA”). According to the civil forfeiture complaint filed in the case, the funds constituted proceeds of operating an illegal gambling business that were deposited between January 2009 and May 2009 in an account at Goldwater Bank in Scottsdale, Arizona. Those funds were traceable to PokerStars, the world’s biggest online poker firm, and other offshore online gambling companies, and include “proceeds of the illegal transmission of gambling information and operating an illegal gambling business.”

Ahmad Khawaja, together with his firms, Allied Wallet and Allied Systems, reached the civil settlement to end a year-long struggle that began when the FBI seized the $13.3 million in June 2009. According to the civil forfeiture complaint, all of the funds were linked to allegations of money laundering, and some of the funds were traceable to wire transfers from outside the U.S. by individuals who knew that the funds represented the proceeds of the illegal transmission of gambling.

This case is significant in that it shows that the government is focusing on enforcement in the area of internet gambling, a growing entertainment business in the U.S., often run from internet sites based outside the U.S.

The UIGEA makes it a crime for anyone engaged in “unlawful internet gambling “ across state lines to accept credit cards, wires, checks or other forms of financial transactions in connection with such gambling. In other words, it makes it illegal to pay money in regard to a bet, or receive money in connection with a bet in the U.S.

Under the UIGEA, “unlawful internet gambling” means to place, receive or transmit a bet or wager through the internet where the bet or wager is illegal, under among other things, any state law where the bet or wager is initiated or received. In addition, “unlawful internet gambling” does not include bets or wagers initiated or received entirely within a single state, or expressly authorized by that state’s laws.

The vast majority of states make it illegal to engage in gambling except under limited circumstances, such as tribal casinos, pari-mutuel horse racing, penny-ante poker games or regulated poker card rooms or slot machines. Currently, some states have proposed legislation to allow internet poker under restricted and regulated circumstances, but such legislation is still pending. Until the federal or state governments can figure out how to regulate, tax and otherwise obtain fees from internet gambling, it will most likely remain unlawful and the forfeiture of gambling proceeds from online gambling sites under the UIGEA will continue.

On September 1, 2010, the Financial Crimes Enforcement Network (“FinCEN”) of the US Department of the Treasury issued a guidance for financial institutions on Suspicious Activity Reports (“SAR”) involving Informal Value Transfer Systems (“IVTS”).

The Department of the Treasury defines an IVTS as “any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form.” IVTS transfers usually occur through non-bank financial institutions whose primary business may not be the transmission of money.

IVTS are allowed to operate in the US as Money Services Businesses (“MSB”) as long as they follow applicable federal and state laws. IVTS are required to register with FinCEN to operate within the US. Additionally, IVTS must comply with the Bank Secrecy Act’s provisions regarding anti-money laundering and counter-terrorist financing. More information on how IVTS operate, how financial institutions may be used in the IVTS process, and potential indicators of IVTS activity can be found in FinCEN Advisory 33.

In its most recent guidance FinCEN states “if a financial institution knows, suspects, or has reason to suspect that an ITVS is operating in violation of the registration requirement under the BSA for money transmitters not acting solely as agents of others, or, even if registered, is being used in the illegal transmittal of funds, a SAR should be filed.” FinCEN also advised that when financial institutions complete a SAR involving an IVTS that it note the abbreviation IVTS in the narrative of the SAR and include an explanation as to why the financial institution suspects that an IVTS is involved in reportable activity. The full guidance can be read at FinCEN September 1, 2010 Guidance.

FinCEN’s purpose in issuing this guidance is to make SARs involving IVTS more helpful to law enforcement. FinCEN reports that IVTS can be used to launder money and possibly fund terrorist activities throughout the world. For insight and strategies on maintaining compliance with state and federal regulation of financial services, please contact Fuerst Ittleman at 305-350-5690 or contact@fuerstlaw.com.

Pharmawire
by Kirsty Barnes
2010-08-24

Intelligence Details

Johnson & Johnson (NYSE:JNJ) may face future regulatory action if the result of an internal investigation over its well-publicized good manufacturing practice (GMP) issues uncover evidence of intent to violate FDA rules, attorneys said. The situation could take months to unravel, they noted.

J&J said it would not comment on speculation.

Since September 2009, J&J subsidiary McNeil Consumer Healthcare has undertaken eight drug recalls due to potential contamination of big name drugs including Tylenol, Motrin, Zyrtec and Benadryl and serious problems at a number of its manufacturing sites have been publicized.

After the situation did not resolve satisfactorily, the FDA held a meeting in February with McNeil and J&J executives. Media reports have raised questions over the firms’ handling of the GMP issues and recalls and a Congressional hearing was held in May. Investigations remain ongoing with the FDA, and J&J also recently announced it is now being investigated by several state attorneys general and has received a subpoena from a federal grand jury in Pennsylvania.

There are "real problems" at J&J and it is in a lot of trouble, said David Goldsmith, president and senior consultant at Goldsmith Pharmacovigilance and Systems in New York. Chad Landmon, a partner at Axinn Veltrop and Harkrider, questioned how this will end for J&J, adding: "The FDA is very serious and concerned about the recall and the allegations being made against the firm."

Mitchell Fuerst, managing partner of Fuerst Ittleman in Florida, said: "I’d expect some type of enforcement action on J&J," adding that the FDA is exceedingly more aggressive in the last 18 months in its enforcement.

Edward Allera, former attorney to the FDA, said the situation may not be as "black and white" as the media has portrayed it, and noted that there are a lot of people, including third party contractors, involved. "It will take a while to sort out what happened, and the facts will need to be reviewed as they evolve," he said.
The sources said the FDA has a variety of options in how to deal with the situation.

The FDA is talking to J&J’s lawyers, and whatever the investigation finds the agency will probably want some kind of court order to monitor the situation going forward, Landmon said.

Fuerst agreed that, in theory, a resolution can be reached with a memorandum of understanding but he questioned whether politically the FDA can do this. "Congress is furious" and it may not be politically possible for FDA to accept this option, so it may want a more legally binding agreement, Fuerst said. Landmon agreed that the J&J situation is a big news story, so Congress feels responsibility to get involved.

Fuerst said he expects a cease and desist order may be issued unless the company has done a lot to respond to the FDA and implement proper controls and practices. A consent decree is another option and it will likely follow a cease and desist order, said Fuerst.

One pharmacovigilence consultant said this would involve the introduction of mandatory control processes and inspections by third party inspectors to make sure the company is in compliance. "I expect in this situation to see within the next few months a consent decree or something similar," said Landmon. Allera said a consent decree is possible because of the publicity this case has generated.

Landmon said that that J&J could also be subject to a fine. Such a penalty would usually be tied to the benefit a company gained through its actions but in this case it’s difficult, said Landmon. Because the FDA is taking this so seriously, J&J could be fined a sizeable sum, in the double or triple digit millions, Landmon suggested. A potential fine USD 200-300m would not be unrealistic, agreed Goldsmith.

Allera and Fuerst said that financial penalties are possible but Fuerst noted that it would require proof of malfeasance from the internal investigation rather than a mistake that led to risky and inappropriate decisions.

It remains to be seen whether or not J&J will be prosecuted over the situation, and it depends on whether the company displayed intent to violate GMP, the sources said. Intent is hard to uncover but can be identified via emails and memos, they noted.

A prosecution decision is distinguished by whether or not actions were taken on purpose or the firm was aware of it and did nothing about it – if so, there are grounds to prosecute, Goldsmith said.

Landmon said the worst action that could be taken is a criminal action against J&J management, but this would require the FDA finding intent to commit fraud against the agency and the public. Allera said he did not think it would come to this.

The firm will be subject to more regulatory scrutiny of clinical trial manufacturing and CGP which will inadvertently slow down future new drug applications, said Goldsmith. Landmon agreed that this possibility was likely, but Allera disagreed, stating that it would not affect future approvals unless the new drugs were being made in the plants in question. Whether it filters across to other parts of the business depends on how high up the decisions were made across the business, said Fuerst.

The board may now apply pressure to remove certain senior J&J executives, the sources noted. The company has allowed its brands to deteriorate in the public eye and this affects the value of the company, which is what the Sarbanes-Oxley Act – implemented after Enron – was designed to prevent, said Fuerst.

It was announced this week that Ajit Shetty has been appointed by J&J to oversee its quality, manufacturing and compliance operations and he will report directly to CEO William Weldon.

The FDA is getting much more aggressive with big pharma which has not been the case for many years, said Fuerst.

Sources noted the example of KV Pharmaceutical’s (NYSE:KV.A) run-in with the FDA. According to SEC filings, the firm encountered recalls, seizures, manufacturing suspensions and management changes in a one year period, followed by a consent decree. It later agreed to a USD 25.8m fine to resolve a US Justice Department investigation of its troubled drug unit Ethex, which also plead guilty to two felony counts over the matter earlier this year.

"If the FDA gets more funding and more powers we will see more of this," Fuerst said.

Several of the largest telecommunications companies in the United States including AT&T, Verizon, and Nokia are urging the US government to ease regulations which currently prevent them from operating in Cuba. The regulations stem from the 47 year old trade embargo the US has enforced against Cuba due to the oppressive Castro regime. AT&T and Verizon are seeking a loosening of regulations to make it easier for telecommunications companies to directly connect calls to and from Cuba, while Nokia, the world’s largest mobile-phone manufacturer, is urging Washington to ease the embargo so it can export mobile-phone accessories from its US locations.

Under current rules, the Federal Communications Commission (“FCC”) has established a rate cap on the fee telecoms can pay the Cuban government for direct calls to Cuba which hampers the telecommunications industry’s ability to do business in Cuba. Currently, US providers are only allowed to pay the Cuban government a fee no higher than 19 cents per call, however, Cuba demands 84 cents a call.

In June, Verizon wrote the FCC asking it to grant requests by others in the telecom industry for the FCC to waive its maximum rate cap rules. A copy of Verizon’s comments can be read at: Verizon’s reply to the FCC.

US telecoms are also interested in establishing roaming services on the island for US customers who visit the island as a first step to expanding cell phone services. Analysts believe that the mobile phone market in Cuba has the potential to be profitable given the island’s population, 11.4 million, and the relative few between, 10 and 20 percent, who currently use mobile phone services.

The telecoms’ requests for greater access to Cuba come several months after the idea was first presented by the Obama administration. On April 13, 2009, President Obama issued a memorandum to the Secretaries of State, Treasury, and Commerce entitled “Promoting Democracy and Human Rights in Cuba” in which the President said that increased contacts between Cuba and the outside world would reduce Cubans’ dependency on the Castro regime. President Obama directed his Secretaries to take such actions as necessary to authorize US telecommunications providers to enter into agreements to establish fiber-optic cable and satellite telecommunications facilities linking the US and Cuba and to license US telecom service providers to enter into and operate roaming services agreements with Cuba’s telecommunications service providers. The President’s full memorandum can be read at: White House Memo on Promoting Democracy and Human Rights in Cuba.

However, while an easing of telecommunications regulations may be in the near future, US companies looking to do business in Cuba still risk violating sanctions still in place, such as the Cuban Democracy Act of 1992 that prohibits investment in Cuba’s telecommunications network.

For guidance on how your import/export business, or related business, can take advantage of the surging trade economy while maintaining strong regulatory compliance, contact Fuerst Ittleman at 305-350-5690 or contact@fuerstlaw.com.