BALTIMORE, OCT. 18 -- A federal judge today fined a drug manufacturer $1 million, the largest such penalty so far in the government's investigation of fraud and corruption in the generic drug industry.
American Therapeutics Inc. of Bohemia, N.Y., pleaded guilty to paying more than $60,000 in illegal gratuities to Food and Drug Administration chemists, falsifying test records, obstructing FDA inspections and ignoring manufacturing standards -- all to speed approval of its products in the hotly competitive generic drug market.
Prosecutor Gary P. Jordan said the company, now under new management, is solvent "but will have to strain mightily" to pay the $1 million in fines.
U.S. Attorney Breckinridge L. Willcox said the illegal acts occurred between 1985 and early this year under now ousted management. The company's new officers are cooperating with investigators, he added.
Willcox said that while the company's actions were "depressing and sinister," they were "benign when compared to some of its competitors." He said the "picture will get even darker" as the probe of the industry continues.
Jordan said most of the drugs involved in the case never reached the market and those that did appear to pose no danger to the public.
Generic drugs are discount versions of brand-name products whose patents have expired, making them available for copying.
American Therapeutics is one of at least a dozen generic drug manufacturers targeted in parallel investigations since 1988 by the Inspector General's Office of the Department of Health and Human Services and the House Energy and Commerce subcommittee on oversight and investigations.
So far, 13 drug executives, firms, consultants or FDA chemists have been convicted in federal court here. The convictions were obtained in Maryland because FDA headquarters is in Rockville.
In a statement of facts filed in the American Therapeutics case, prosecutors said company employees fabricated stability test results and backdated data on potency, content uniformity and hardness for various drugs. In other cases, they exaggerated the size of research batches to meet FDA standards, prosecutors said.
The drugs included Erythromycin, an antibiotic; Sulindac, an anti-inflammatory; and Chlorazepate Dipotassium, an anti-depressant.
Prosecutors said there is no evidence the company substituted brand-name products for their generic copies when submitting drugs for FDA approval.
Prosecutors said most of the illegal acts at American Therapeutics occurred under the direction of Raju V. Vegesna, the company's president until last January.
Vegesna, 42, pleaded guilty last spring to giving illegal gratuities, which prosecutor Jordan said totaled more than $60,000 and went to four FDA chemists.
Vegesna was sentenced in July to two years in prison and $50,000 in fines.
He was allowed to return to his native India to settle family and business matters before starting his prison term, originally set to begin Sept. 26. But Vegesna said he became ill in India and was granted an extension to Oct. 26 to report to prison.