Clinical Investigators and Criminal Liability: The Legal Landscape After U.S. v. Palazzo

By JP Ellison –

In U.S. v. Palazzo, the Fifth Circuit recently reversed a trial court’s decision to dismiss criminal charges against a clinical investigator based upon violation of 21 C.F.R. § 312.62(b), which requires such investigators “to prepare and maintain adequate and accurate case histories that record all observations and other data pertinent to the investigation on each individual administered the investigational drug.”

As a result of the Fifth Circuit’s decision, the case was sent back to the trial court where the defendant will likely stand trial on fifteen counts of violations of this regulation with the intent to defraud and mislead, a felony, under the Federal Food, Drug, and Cosmetic Act ("FDC Act").

Importantly, nowhere in the Section 505(i) of FDC Act, which was the statutory basis for the charges, does it impose any obligation on clinical investigators.  Rather, Section 505(i) only imposes obligations on “the manufacturer or sponsor” of an IND, not on the clinical investigators.  In fact, Section 505 explicitly states that “[n]othing in this subsection shall be construed to require any clinical investigator to submit direct to the Secretary reports on the investigational use of drugs.”  § 505(i)(4).  Nevertheless, clinical investigators have been prosecuted based upon this statutory section.  These prosecutions have occurred because Section 505(i) mandates that the Secretary of HHS promulgate regulations governing clinical trials conducted under an IND, and in those regulations, including 21 C.F.R. § 312.62, FDA has imposed various obligations on clinical investigators, and in some instances alleged violations of those provisions have resulted in criminal charges. 

FDA’s regulations and the criminal prosecutions of clinical investigators under those regulations have raised a host of complicated constitutional, administrative, and criminal law issues that remain unresolved.

Palazzo is the third federal appellate court to consider the issue of whether criminal liability can be imposed on clinical investigators under the FDC Act.  Despite consideration by three Circuits in thoughtful opinions, the legal landscape remains unsettled and counsel can make non-frivolous challenges to criminal charges based on these and other regulations issued by the FDA under the FDC Act.

The first appellate court to consider the issue of clinical investigator criminal liability was the Ninth Circuit, in U.S. v. Smith, 740 F.2d 734 (9th Cir. 1984).  In Smith, the Ninth Circuit looked at Section 505(i) and concluded that it did not authorize FDA to promulgate regulations that gave rise to criminal liability for clinical investigators.  In reaching this conclusion, the Ninth Circuit relied, in part, upon the principle of the “Rule of Lenity” in interpreting an ambiguous criminal statute.  Id. at 738.  The Ninth Circuit also looked at FDA’s regulations governing clinical investigators at the time, and concluded that the regulations did not impose “a clear duty on investigators to maintain records.”  FDA’s regulations have been revised since Smith was decided, so that portion of the opinion has been superseded by subsequent events.

The second appellate court to consider the issue of clinical investigator criminal liability was the Eighth Circuit in U.S. v. Garfinkel, 29 F.3d 451 (8th Cir. 1994).  In Garfinkel, the Eighth Circuit disagreed with the Ninth Circuit and concluded that Section 505(i) could support criminal charges against clinical investigators.  In reaching this conclusion, the Eighth Circuit first conducted statutory analysis under Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), and concluded that the statutory language of Section 505 was ambiguous.  Following Chevron, the Eighth Circuit then reasoned that deference was owed to FDA’s interpretation that the statute authorized it to promulgate regulations imposing obligations on clinical investigators.  Garfinkel, 29 F.3d at 457.

The Eighth Circuit then conducted constitutional analysis under the Nondelegation Doctrine, which arises out of Article 1, § 1 of the U.S. Constitution and reserves all legislative power to the Congress.  Under the Nondelegation Doctrine, the Executive Branch can promulgate regulations so long as the enabling legislation sets forth “an intelligible principle” to restrain the agency.  29 F.3d. at 458.  The Eighth Circuit concluded that Section 505(i) contained the requisite intelligible principle and thus found that the FDA’s regulations were not constitutionally invalid under the Nondelegation Doctrine.  Despite the Eighth Circuit’s thorough analysis and its discussion of the Ninth Circuit’s earlier Smith decision, Garfinkel did not address or discuss the Rule of Lenity, a point noted by the trial court in the Palazzo case.  See U.S. v. Palazzo, 2007 WL 3124697, *7 n.7 (E.D. La. 2007).  Based on this analysis, the Eighth Circuit concluded that criminal charges could be brought.

The most recent federal appellate court to address the criminal liability of clinical investigators was the Fifth Circuit in Palazzo.  Palazzo does little to clarify the split between the Eighth and Ninth Circuits, however because of what was conceded on appeal.  The Fifth Circuit’s opinion notes: 

If the parties questioned whether § 355(i) [Section 505(i)] provided sufficient guidance for the FDA to promulgate regulations requiring clinical investigators to adhere to certain record-keeping requirements, the non-delegation doctrine would be an issue in this case.  Similarly, if the parties disputed whether § 355(i) authorized the FDA regulation at issue, this Court would need to engage in a Chevron analysis to assess § 355(i)’s statutory construction.

The Fifth Circuit engaged in neither analytical exercise however, because of concessions on appeal.  Rather, the Fifth Circuit simply looked to Section 301(e) to conclude that that Section makes it a prohibited act to fail to maintain or establish any record required under, inter alia, Section 505(i), and that Section 503(a)(1) makes that prohibited act a criminal violation.  (Perhaps accidentally the court cited to the misdemeanor provisions of Section 503 despite the fact that the defendant was charged with felony violations.)  Given the defendant’s concession “that § 355(i) provides the FDA with unambiguous authority to promulgate regulations requiring clinical investigators to adhere to specific record-keeping and reporting requirements,” it is hard to see how the Fifth Circuit could have reached a contrary result.

Given Smith, Garfinkel, and Palazzo, what should a clinical investigator do?  First, one need not read or understand these cases to know that it is never prudent for an investigator to intentionally violate the FDC Act or FDA regulations in connection with a clinical trial.  Regardless of criminal liability based upon Section 505(i), there are a myriad of negative consequences, including but not limited to prosecution under other criminal statutes, that could arise from such conduct.  Second, should counsel for a clinical investigator face criminal charges based on Section 505(i) the nondelegation, Chevron, and lenity arguments, among others, should be made and preserved on appeal.  This legal question is far from decided and may end up in the Supreme Court before it is.