An Allentown, Pennsylvania pharmaceutical company accused of devising a scheme to avoid paying new drug application fees to FDA has agreed to a $4 million settlement under the False Claims Act.

According to Section 736 (d)(1)(D) of the FD&C Act (the Act), small businesses may be entitled to fee waivers when submitting their first drug applications to FDA. For purposes of this provision of the Act, a small business is defined as “an entity that has fewer than 500 employees, including employees of affiliates, and that does not have a drug product that has been approved under a human drug application and introduced or delivered for introduction into interstate commerce.”

According to the DOJ press release, Lehigh Valley Technologies, Inc. (LVT) “previously received a fee waiver in 2010 for its Oxycodone Hydrochloride NDA. Because it received that fee waiver, LVT was ineligible to receive another such fee waiver.  LVT subsequently desired to submit two NDAs relating to potassium chloride for oral solution.  Had LVT submitted the NDAs in its own name, the FDA would have required it to pay fees totaling over $2 million.”

DOJ added, “Knowing that it was ineligible, LVT allegedly developed a scheme with two companies to avoid the fees.  Under the terms of the agreements, LVT paid the companies to submit NDAs for potassium chloride for oral solution in their own name.  LVT’s payment to the companies was contingent upon the FDA granting waivers from the prescription drug user fee.  LVT prepared and controlled all of the submissions that the companies made to the FDA relating to the NDA approval.  Neither LVT nor the companies disclosed to the government the agreements despite the government’s request for such information. Not knowing of the agreements, the FDA granted fee waivers and approved both NDAs.”

This case, perhaps the first of its kind, demonstrates how FDA can strategically employ its Office of Criminal Investigations (OCI) to deter corporate behavior that seeks to undermine the Act.  If other entities involved in the same type of fraudulent activity are aggressively targeted by the agency, a significant decrease in the number of suspect drug application fee waiver requests can certainly be expected.  The net result could be millions of dollars in additional fees to FDA.  These may not be “sexy” cases for OCI or DOJ, but they nonetheless have enormous potential to deter pharmaceutical fraud within the drug manufacturing realm.  Excellent work FDA!