Congress’ Dubious Delegation of Legislative Authority to USP Standards Results in “Instructions”– But Not “Dismissal” – Related to the NECC Criminal Indictment

By Karla L. Palmer –

A Massachusetts United States district court judge decided last week whether the United States’ reliance on alleged violations of the United States Pharmacopeia (“USP”) compendium addressing sterility of compounded preparations was a permissible delegation of legislative power to USP to define criminal conduct, effectively raising questions about the constitutionality of the FDC Act’s reference to third-party standard-setting organizations in the context of a criminal case. In a slip opinion in United States v. Cadden, 2016 WL 1948832 (D. Mass, Slip Op. May 3, 2016), Judge Richard Stearns takes to task the United States for allegedly relying on USP chapters on compounding (“USP”) to form the basis of certain Racketeer Influenced and Corrupt Organizations (“RICO”) allegations in its indictment filed against the officers and employees of New England Compounding Center (“NECC”) and its sales arm, Medical Sales Management, Inc. (“MSM”).

The underlying criminal matter arises out of the NECC incident back in 2012, where the pharmacy shipped allegedly contaminated compounded steroid epidural products nationwide, allegedly resulting in widespread sickness and death. Specifically, the United States references “pervasively” throughout the 2014 indictment (i.e., in counts 1-2 and 4-94) USP<797> (Compounding Sterile Preparations) and USP<71> (Sterility Testing). The government alleges that certain defendants conducted the business of NECC and MSM though a “pattern of racketeering activity to obtain money and property by fraudulent pretenses, namely by falsely representing NECC’s compounded drugs to be in compliance” with USP’s standards for sterile compounding. Defendants moved to dismiss counts 1-2 and 4-94, stating that the government “criminalized” the USP, and thus improperly delegated an “essential legislative function” to a “private trade association.”

The indictment describes the following conduct relating to USP guidelines: use of ingredients; sterilization; sterility testing; labeling; cleaning and disinfecting; environmental monitoring and personnel training and testing. Defendants asserted that Congress, not a private industry group or FDA, must define through enactment of federal statutes conduct that constitutes a crime. Specifically, citing U.S. Const., article 1, defendants stated, “It is a bedrock principle of constitutional law that Congress is the only entity empowered to create criminal laws.” Criminalizing USP violations constitutes an unlawful delegation to a private industry organization of legislative power conferred on Congress in violation of the separation of powers doctrine, they argued.

The Court noted that defendants also point out – “accurately”- that references to the USP in the Federal Food, Drug, and Cosmetic Act are “patchy” and unsystematic, that no guidance is provided directly by Congress or FDA, and that the Agency has no oversight over USP or discretion to accept or reject revisions to USP. The Court agreed with defendants that the government should be estopped from making any argument to the jury that USP has the force of law, or that violations of its standards are criminal offenses.

However, the Court ultimately adopted the government’s argument that the indictment “passes muster” because it alleges that defendants perpetrated a scheme to defraud customers based on NECC’s misrepresenting compliance with the USP. The judge also stated that there is no constitutional prohibition against “Congress doing what it did here by looking to best practices in the compounding industry (as distilled in the USP) for assistance in” defining technical matters. Because the judge determined, however, that the indictment may be read to directly criminalize violations of USP standards themselves, which could result in prejudice, the Court ruled it would: (1) not read the indictment to the jury, and (2) instruct the jury in “emphatic terms” that the USP and associated state regulations do not define crimes or their elements. Instead, the failure to comply with USP may only be admissible on the issues of intentional misrepresentation, causation and recklessness related to the allegations involving second degree murder.

Where does this leave the government’s reliance on USP compendial guidelines to form the basis of criminal violations under the FDCA? Could the violation of a USP guideline or standard alone result in a criminal sanction? Does the non-delegation doctrine apply to criminal conduct violative of standards by private industry groups other than USP? For example, the FDCA defines the term "official compendium” as the official USP, the official NF, the official Homeopathic Pharmacopeia of the United States, or any supplement to them. USP–NF standards also “play a role,” at a minimum, in the adulteration and misbranding provisions of the FD&C Act (which apply as well to biologics)(see “USP in U.S. Law”). FDCA Sections 501(b) and (c) deem an “official drug” (i.e., a drug purported to be or represented as a drug the name of which is recognized in an official compendium) to be adulterated if it fails to conform to compendial standards of quality, strength or purity. Based on this Court’s opinion, violations of USP or other compendial standards, which references are littered throughout the FDCA, arguably cannot serve as a stand-alone basis for criminal violations of the FDCA: To do so would violate the U.S. Constitution’s non-delegation doctrine. Questions also remain concerning whether the Court’s non-delegation ruling may apply in civil matters. Notwithstanding, as this Court holds, USP (and other private industry) standards may still be considered in the criminal context to the extent that an entity misrepresents its compliance with such standards or guidelines.