Research
The hearing a company gets before a fine
Between a letter and a lawsuit sits a whole administrative court, with a complaint, an answer, a burden of proof, a public hearing and an appeal. Missing one thirty-day deadline decides the case.
There is a third thing between a letter and a court case
People tend to picture two outcomes when a company breaks a drug rule. A letter asking it to stop, or a case in federal court.
A middle track exists and it has its own rulebook. That rulebook sets out "practices and procedures for hearings concerning the administrative imposition of civil money penalties by FDA."
It is not a general power. The scope section lists the specific statutory provisions it covers, and several are directly relevant to how medicines are sold.
Among them are penalties for violations relating to prescription drug marketing practices, and penalties relating to the dissemination of direct-to-consumer advertisements for approved drugs or biological products.
Others cover submission of certifications and clinical trial information to the trial data bank, and violations relating to postmarket studies and risk management strategies for drugs.
The amounts are deliberately not in this part. The rule points to a separate table of maximum penalties kept elsewhere in the regulations, which is where the figures live and are adjusted.
It starts with a complaint, and the clock starts with it
The center with principal jurisdiction begins the action by serving a complaint on the respondent and filing a copy in the public docket.
The complaint has to state the allegations of liability, the statutory basis, the identification of the violations, and the reasons the respondent is responsible for them.
It also has to state the amount being sought, and give instructions for filing an answer, including a specific statement of the right to request a hearing and to retain counsel.
Service is formal. Certified or registered mail with a return receipt, or personal delivery to an individual respondent or to an officer or managing agent of a company.
The response window is short. A respondent may request a hearing by filing an answer "within 30 days of service of the complaint".
Two sentences in the answer rule decide most of the case
The answer is where the case is usually shaped, and two provisions do the work.
The first removes a formality trap. "Unless stated otherwise, an answer shall be deemed to be a request for hearing." A respondent who answers does not have to separately ask for the hearing.
The second is the opposite kind of rule. In the answer the respondent must admit or deny each allegation, and "allegations not specifically denied in an answer are deemed admitted".
The answer must also state every defense the respondent intends to rely on, and all reasons why the penalties should be less than the amount requested.
Missing the deadline entirely is worse than answering badly. On default the presiding officer assumes the facts alleged are true, and if they establish liability issues a decision within thirty days.
The amount in that decision is either the statutory maximum for the violations alleged or the amount asked for in the complaint, "whichever amount is smaller". A default judgment can be reopened only on a motion showing extraordinary circumstances.
The burden, and who carries which half
This is a hearing on the record with a stated standard of proof, and the standard is split.
To prevail, the center must prove the respondent's liability and the appropriateness of the penalty "by a preponderance of the evidence".
The respondent carries the other half. It must prove any affirmative defenses, and any mitigating factors, to the same standard.
That split is worth holding onto when reading about an enforcement outcome. Liability and the size of the penalty are proved by the agency. Excuses and mitigation are proved by the company.
The presiding officer decides both liability and, if there is liability, the appropriate amount, weighing aggravating and mitigating factors.
The hearing is public by default
Openness is the rule rather than the exception, and the exceptions are named.
"The hearing shall be open to the public unless otherwise ordered by the presiding officer", and closure is permitted only to protect specific categories.
Those are trade secrets or confidential commercial information as defined in the disclosure rules. They also include information whose release would be a clearly unwarranted invasion of personal privacy, and other information withheld under those same rules.
Participation is narrow even though attendance is open. The parties are the respondent and the center with jurisdiction, and "No other person may participate."
Private communication with the decision-maker is barred. No party or person may communicate with the presiding officer on any matter at issue unless all parties have notice and an opportunity to take part.
Practical questions about the status of a case or routine administrative procedure are carved out of that ban.
Settlement, and where it goes
Most administrative disputes end without a decision, and the rule provides for it in one paragraph.
The parties may agree to settle all or part of the matter at any time before a final decision on appeal.
The important part is what happens next. "The settlement agreement shall be filed in the docket", and it constitutes the resolution of the case to the extent the agreement says.
It takes effect on filing and does not need to be ratified by the presiding officer or by the Commissioner.
So a settled penalty case is not an invisible one. The agreement itself is a docketed document, which is a different situation from a private commercial settlement.
Decision, appeal, and the door to a real court
The initial decision is based only on the administrative record, and it must contain findings of fact, conclusions of law and the amount of any penalty.
Three findings are required. Whether the allegations are true and, if so, whether the actions violated the law. Whether any affirmative defenses are meritorious. And, if there is liability, the appropriate amount considering mitigating and aggravating factors.
There is a deadline on the decision itself. It is served on all parties "within 90 days after the time for submission of posthearing briefs" and responsive briefs has expired. A mechanism exists for the deadline to be reset if it cannot be met.
Either side may appeal within thirty days, to the Commissioner or to the body the Commissioner designates, currently the departmental appeals board.
Reasoning is not optional at either level. The presiding officer and the appeal body "shall articulate in their opinions the reasons that support the penalties and assessments imposed".
Judicial review comes last, and the gate is explicit. Exhausting the appeal "is a jurisdictional prerequisite to judicial review", and filing for judicial review does not by itself stay the decision.
Where the money goes, and what this article does not show
One short section answers a question people often assume the answer to.
Amounts assessed under this part "shall be deposited as miscellaneous receipts in the Treasury of the United States". They are not paid to complainants, and they are not consumer compensation.
A smaller cost rule points the same way. A party that asks for a subpoena pays the witness fees and mileage, at federal court rates, with a check accompanying the subpoena.
For a reader, the useful takeaways are structural. Penalties here are decided by a process with a public hearing, a stated standard of proof, written reasons and a docketed settlement route.
And a company that simply ignores the paperwork loses on the pleadings rather than on the merits.
Two limits belong here. Only part 17 was read. No docket, decision or settlement was retrieved, so nothing here describes any actual case, and no company is named.
Key takeaways
- A separate administrative track imposes money penalties through a hearing rather than a court case.
- Its scope includes prescription drug marketing practices and direct-to-consumer advertising of approved drugs.
- The maximum amounts are not in this part; they sit in a separate table kept elsewhere.
- An answer is due within thirty days, and any allegation not specifically denied is deemed admitted.
- Default means the alleged facts are assumed true and the penalty is the smaller of the maximum or the amount sought.
- The agency proves liability and the penalty; the company proves defenses and mitigation.
- Hearings are public by default, and settlements are filed in the docket.
- Exhausting the administrative appeal is a jurisdictional prerequisite to judicial review.
Frequently asked questions
What is an administrative civil money penalty?
A financial penalty imposed by the agency itself, through a hearing process, rather than by a court. The procedures are set out in their own part of the regulations. That part covers penalties under specific statutory provisions, including ones relating to prescription drug marketing practices and to direct-to-consumer advertising of approved drugs and biological products. Others cover submissions to the clinical trial data bank, and postmarket study and risk management requirements.
How long does a company have to respond?
Thirty days from service of the complaint to file an answer. Unless it states otherwise, that answer is deemed to be a request for a hearing. If no answer is filed and service was properly effected, the presiding officer assumes the facts alleged are true. A decision follows within thirty days of when the answer was due, imposing either the statutory maximum or the amount asked for, whichever is smaller.
What happens if a company denies nothing?
The allegations stand. The answer must admit or deny each allegation of liability, and allegations not specifically denied in an answer are deemed admitted. The answer must also state every defense the respondent intends to rely on, and all reasons why the penalties should be lower than requested. That makes it the document that shapes the rest of the case.
Who has to prove what?
It is split. The agency center must prove liability and the appropriateness of the penalty by a preponderance of the evidence. The respondent must prove any affirmative defenses and any mitigating factors to the same standard. The presiding officer then decides liability and, if there is liability, the amount, weighing aggravating and mitigating factors and giving written reasons.
Can the public attend one of these hearings?
By default, yes. The hearing is open to the public unless the presiding officer orders otherwise. Closure is allowed only to protect trade secrets or confidential commercial information, information whose disclosure would be a clearly unwarranted invasion of personal privacy, or other information withheld under the disclosure rules. Attendance is open, but only the respondent and the center with jurisdiction may participate.
Are settlements kept private?
Not in this process. The parties may settle all or part of the matter at any time before a final appeal decision, and the settlement agreement is filed in the docket. It is effective on filing and does not need to be ratified by the presiding officer or the Commissioner. That makes a settled penalty case a docketed document rather than a private arrangement.
Does a company get to go to court?
After the administrative appeal, not before. Either side may appeal an initial decision within thirty days to the Commissioner or the designated appeal body. That body's final decision is final agency action, and exhausting the appeal is a jurisdictional prerequisite to judicial review. Filing for judicial review does not by itself stay the decision, though a stay can be requested separately.
Sources
Each document below is named as it names itself, with the date printed on that document rather than the day it was read.
- Title 21 Code of Federal Regulations section 17.1, Scope, read in full for the statutory provisions this hearing procedure covers — Electronic Code of Federal Regulations, Office of the Federal Register, November 2010
- Title 21 Code of Federal Regulations section 17.2, Maximum penalty amounts, read in full — Electronic Code of Federal Regulations, Office of the Federal Register, September 2016
- Title 21 Code of Federal Regulations section 17.9, Answer, read in full for the thirty-day window, the deemed request for hearing and the deemed admission rule — Electronic Code of Federal Regulations, Office of the Federal Register, July 1995
- Title 21 Code of Federal Regulations section 17.11, Default upon failure to file an answer, read in full — Electronic Code of Federal Regulations, Office of the Federal Register, July 1995
- Title 21 Code of Federal Regulations section 17.15, Parties to the hearing, read in full for the settlement and docket filing provisions — Electronic Code of Federal Regulations, Office of the Federal Register, July 1995
- Title 21 Code of Federal Regulations section 17.33, The hearing and burden of proof, read in full — Electronic Code of Federal Regulations, Office of the Federal Register, July 1995
- Title 21 Code of Federal Regulations section 17.45, Initial decision, read in full for the three required findings and the ninety-day deadline — Electronic Code of Federal Regulations, Office of the Federal Register, July 1995
- Title 21 Code of Federal Regulations section 17.51, Judicial review, read in full for the exhaustion requirement — Electronic Code of Federal Regulations, Office of the Federal Register, July 1995
- Title 21 Code of Federal Regulations section 17.54, Deposit in the Treasury of the United States, read in full — Electronic Code of Federal Regulations, Office of the Federal Register, July 1995