Appellate Brief Regarding Loss
NOTE: United States v. Marcus, 82 F.3d 606 (4th Cir. 1996), decided after this brief was written, should also be examined when considering fraud loss calculations in matters involving pharmaceuticals.
STATEMENT OF JURISDICTION
The Appellant correctly described the jurisdiction of the District Court pursuant to 18 U.S.C. § 3231 and 28 U.S.C. § 2255. This Court has jurisdiction under 28 U.S.C. 1291, 2253 and 2255. It is the position of the United States that Appellant's time to file a notice of direct appeal began on July 18, 1995, (DKT # 51, J.A. 255a) and, accordingly, that on July 24, 1995, XXXXXX filed a timely Notice of Appeal in 4th Circuit Appeal # 95-7222. (J.A. 256a) Both Appellant and Appellee agree that a timely Notice of Appeal was filed in 4th Circuit Appeal # 95-5603, an appeal of the District Court's denial of XXXXXXX's Motion to Vacate Sentence pursuant to 28 U.S.C. § 2255.
STATEMENT OF THE ISSUES
1. Given Appellant's failure, prior to the imposition of sentence, to challenge the facts stated in the Presentence Investigation Report, was the District Court's factual finding that the consumers of Subject Pharmaceutical Company's (Subject) drugs did not get what they bargained for, clearly erroneous [NOTE: names changed from original].
2. Does the recent holding of this Court in United States v. Chatterji, 46 F.3d 1336 (4th Cir. 1995), alter the loss calculation under U.S.S.G. § 2F1.1 in this case, where: (a) consumers of Subject's drugs did not get what they bargained for because the Appellant caused pharmaceuticals that had not been properly tested, and were therefore of unknown safety and effectiveness, to be marketed to the public, and (b) commercial competitors of Subject were intended and actual victims of the Appellant's crimes.
3. Did the Appellant meet his burden to established that, at the time it imposed sentence, the District Court was under a misapprehension of material fact which affected the sentence.
4. Did the Appellant meet his burden of establishing that his highly experienced, retained counsel's tactical decisions at the sentencing (which avoided the utilization of potential upward departures and secured a sentence of 60-months incarceration when the District Court could have, within the guidelines (level 29), imposed a sentence of 108 months incarceration), were so deficient that they fell below the objective standard of reasonableness articulated in Strickland v. Washington, 466 U.S. 668 (1984).
STATEMENT OF THE CASE
On January 25, 1993, Appellant, XXXXXX XXXXXXX, previously the President, Chief Executive Officer, Chairman of the Board and a major stockholder of Subject Pharmaceutical Co., Inc., was sentenced to 60-months imprisonment. This sentence was based on his guilty plea to a five-count Criminal Information which charged that MX. XXXXXXX had conspired to commit offenses against the United States (including the distribution of adulterated drugs), in violation of 18 U.S.C. § 371; obstructed a Food and Drug Administration (FDA) proceeding, in violation of 18 U.S.C. § 1505; committed wire fraud, in violation of 18 U.S.C. § 1343; and made false statements to FDA, in violation of 18 U.S.C. § 1001. At the heart of the conspiracy charge, and at the heart of the relevant criminal conduct considered at sentencing, was a scheme: 1) to secure expedited drug approvals from FDA, through the submission of fraudulent and fictitious data; 2) to manufacture and distribute unproven and adulterated drugs without: a. complying with the good manufacturing practices regulations (GMPs) promulgated by the FDA, b. utilizing the approved production formulas specified in Subject's Abbreviated New Drug Applications (ANDAs), or c. subjecting those drugs to required and necessary testing, and then, 3) to hide these derelictions from both the FDA and Subject's customers.[FN1]
FN1. MX. XXXXXXX was one of nine former Subject employees to be convicted of felonies and sentenced by the District Court in Maryland. In addition, the former chief scientific officer of the laboratory which did the bioequivalence studies for Subject was also convicted of crimes precipitated by Mr. XXXXXXX.
In sentencing the defendant as it did, the District Court found that, for sentencing guidelines purposes,[FN2] XXXXXXX's fraudulent conduct had caused a loss of more than $80 million. (J.A. 153a) Thus, the offense level calculation for MX. XXXXXXX included an upward adjustment of 18 levels based on the loss table set out at U.S.S.G. § 2F1.1.[FN3]
FN2. Unless otherwise expressly noted, all references to the United States Sentencing Commission Guidelines refer to those in effect as of November 1, 1989.
On January 25, 1993, the same day that he was sentenced on the FDA fraud charges, MX. XXXXXXX was also sentenced to 23-months imprisonment based on his guilty plea to a charge that he fixed generic drug prices. MX. XXXXXXX's imprisonment on the price- fixing charge was ordered to be served concurrently with the sentence on the fraud charges. Because the guideline calculation for the antitrust violations was so much lower than that for the fraud offenses (Level 14 vs. Level 32 - J.A. 271a) there was no adjustment in the overall offense level under U.S.S.G. § 3D1.4(c). The validity of the Sherman Act sentence has not been challenged.
FN3. In reaching its conclusion that loss had occurred in the XXXXXXX case, the District Court looked to the $210 million in sales of Subject's drug products that had reached, or stayed, on the market as a result of defendant's fraud on the FDA. The District Court held, in conformity with, inter alia, United States v. Cambra, 933 F.2d 752 (9th Cir. 1991) and United States v. Arlen, 947 F.2d 139 (5th Cir. 1991), cert. denied, 503 U.S. 939 (1992) that gross sales was the appropriate measure of fraud loss because consumers of Subject's products were led to believe they were buying products of proven safety and effectiveness when, in fact, they were getting adulterated drugs of unproven, untested and unknown usefulness. The record also unequivocally demonstrates economic loss to Subject's competitors.
In April 1995, MX. XXXXXXX moved pursuant to 28 U.S.C. § 2255 to vacate his sentence on the fraud charges. This motion was based on three separate and distinct theories. First, XXXXXXX claimed that, in light of the opinion of this Court in United States v. Chatterji, 46 F.3d 1336 (4th Cir. 1995), the District Court's calculation of the sentencing guideline range was erroneous, since it was premised on the belief that consumers of Subject's adulterated drugs suffered some loss. Second, based on passing comments made by the sentencing judge, in court, several months after the XXXXXXX sentencing,[FN4] Appellant hypothesized that the Court must have sentenced him under "misapprehensions" of material fact. Third, XXXXXXX claimed that he had received ineffective assistance at sentencing because his counsel did not ask the District Court for various downward departures. In addition, since the record transcript did not affirmatively reflect that MX. XXXXXXX had been advised of his right to appeal the sentence, he asked the District Court to conduct another sentencing hearing in order to resurrect his appellate rights.
FN4. These comments were made by the sentencing judge during in-court proceedings involving former Subject employees, XXXXXXXX XXXXXXXX and XXXXX XXXXXX, in late 1993, several months after the XXXXXXX sentencing. (J.A. 181a - 206a)
Contrary to Appellant's assertions, however, this appeal does not raise issues previously decided by this Court in United States v. Chatterji, 46 F.3d 1336 (4th Cir. 1995) because the operative facts in this case are so significantly different from those in Chatterji. The Appellant's sentence was not based on any misapprehension of material fact and MX. XXXXXXX's trial defense counsel was hardly ineffective within the meaning of Strickland v. Washington, 466 U.S. 668 (1984),
STATEMENT OF FACTS
The United States suggests that the Statement of Facts provided by Appellant XXXXXXX is misleading. Most of the significant "statements of fact" contained therein are drawn only from the XXXXXXX Declaration (J.A. 175a through 180a). That declaration was first submitted in September 1995. Thus, those "facts" were not before the District Court at the time it sentenced MX. XXXXXXX in January 1993. Likewise, because these facts were not presented at the sentencing, the United States had neither opportunity, nor obligation, to rebut them. Prior to his sentencing, MX. XXXXXXX did not contest the underlying facts proffered by the government in this case, he only contested the conclusions to be drawn from those facts. The Appellant did not, in either his Sentencing Memorandum (J.A. 87a through 113a) or at the Sentencing Hearing (J.A. 114a - 160a), contest any of the facts set forth by the United States at the Plea Hearing (J.A. 60a through 71a), and in the Statement of Facts (J.A. 84a through 86a); which were repeated in the Presentence Report (J.A. 260a through 270a). Rather, when counsel for the defense was asked by the Court whether the defendant had any disagreement with the facts articulated by the government, the reply was as follows:
There is no specific disagreement as to the specific events attributed to MX. XXXXXXX and specific conduct ascribed to him with respect to motives that have been ascribed to him or implied in the statement.
(J.A. 71a)MX. XXXXXXX, readily admitted at sentencing that he cut corners and directed violations of FDA regulations for reasons of expediency[FN5] (J.A. 95a); and that he bore responsibility for presiding over a company and, in the defense's words, "permitting it to spin completely out of control. (J.A. 135)In XXXXXXX's Sentencing Memorandum the defense conceded that the government was a victim of his crimes (J.A. 106a), and that his crimes caused the public to lose faith in the efficiency of generic pharmaceuticals Id.[FN6] The defense also conceded that the competitors of Subject were real and intended victims of XXXXXXX's crimes (J.A. 89a). See also, where the sentencing judge noted that the public health was not of concern to MX. XXXXXXX because of his drive to beat the competition to the marketplace. (J.A. 149a - 151a)
FN5. The government, without contradiction, described this conduct as creating a corporate culture where fraud committed on the FDA was a way of life, (J.A. 125a) a sentiment which the Court echoed. (J.A. 150a)
Prior to sentencing, the defense did not expressly claim that the products manufactured by Subject were as therapeutically effective as their brand-name counterparts. The defense only claimed (without offering any basis) that MX. XXXXXXX believed that the products would be therapeutically effective. See XXXXXXX Sentencing Memorandum (J.A. 46a). XXXXXXX's unfounded beliefs on this subject not being relevant, the government had no obligation or motive to rebut them. Based on uncontested facts, the District Court at sentencing found that:
FN6. Thereby, the government contends, causing economic loss by motivating consumers to use higher-cost brand name drugs - a fact noted by the Judge at sentencing (J.A. 148a).
not one of the . . . consumers received the product for which they bargained . . . . these products . . . . all had defects in them of one sort or the other.
(J.A. 131a) The District Court also quite correctly noted that, when you submit these applications to the FDA which are based on fraudulent data, there is no way of knowing what the consequences will be. (J.A. 150) After noting all of these factors, the sentencing judge then concluded, given that gross sales of the untested drugs was in excess of $210 million, that the loss under U.S.S.G § 2F1.1 exceeded $80 million (J.A. 153a).[FN7] The District Court then gave MX. XXXXXXX a 3-level reduction for acceptance of responsibility (U.S.S.G. § 3E1.1), a 4-level downward departure for his assistance to the government (U.S.S.G. § 5K1.1) and sentenced the Appellant toward the low end of the guideline, to 60-months imprisonment. The District Court also imposed a fine of $1,250,000.
FN7. Under U.S.S.G. § 2F1.1(b)(1)(S), once the loss exceeded $80 million no additional increase in the offense level was specified based on the amount of loss.
STANDARD OF REVIEW UNDER 28 U.S.C. § 2255A criminal sentence enjoys a presumption of regularity that must be overcome by the petitioner/appellant. In overcoming this strong presumption, MX. XXXXXXX bore the burden of proof on each factual issue and had the obligation to meet that burden by a preponderance of the evidence. See Miller v. United States, 261 F.2d 546, 547 (4th Cir. 1958); Chandler v. United States, 332 F. Supp. 397, 403 (D. Md. 1971).[FN8]
FN8. Non-constitutional claims such as improper application of the sentencing guidelines may not be raised in collateral proceedings pursuant to 28 U.S.C. § 2255. See United States v. Emanuel, 869 F.2d 795, 796 (4th Cir. 1989); United States v. Rowland, 848 F. Supp. 639 (E.D. Va. 1994); Knight v. United States, 37 F.3d 769, 772 (1st Cir. 1994).
STANDARD OF REVIEW ON THE DIRECT APPEAL OF THE U.S.S.G. § 2F1.1 LOSS ISSUEThe calculation of loss, pursuant to U.S.S.G. § 2F1.1, is a question of fact subject to review only for clear error. See United States v. Castner, 50 F.3d 1267, 1273 (4th Cir. 1995); United States v. Dozie, 27 F.3d 95, 99 (4th Cir. 1994). In Chatterji, this Court represented its action as an "application of a loss enhancement to undisputed facts." Chatterji, 46 F.3d at 1342. Therefore, in order to rely on the Chatterji decision, XXXXXXX must accept the facts as found by the sentencing court or sustain the burden of demonstrating that the sentencing court's findings that Subject's customers received exactly what they bargained for was, based on the record at the time of sentencing, clearly erroneous.
SUMMARY OF ARGUMENT
Appellant did not prove that, at the time it imposed sentence on MX. XXXXXXX, the District Court acted under a misapprehension of material fact which affected the sentence. The statements by the District Judge that were cited by Appellant were made several months after the XXXXXXX sentencing and, therefore, do not necessarily reflect on the sentencing judge's knowledge at the time sentencing was imposed. Further, these statements do not impact material facts that could have affected the Appellant's sentence. The unchallenged facts in this case support the District Court's conclusion that XXXXXXX's crimes resulted in economic loss. Accordingly, this Court's holding in Chatterji does not control here.
Appellant's trial defense counsel provided far more than mere adequate representation at sentencing. Counsel avoided the utilization of numerous, factually and legally available, upward departures and secured a sentence that was approximately half what it could legally have been under the applicable guidelines. Appellant has pointed out no errors, let alone significant errors, made by his trial defense counsel. His counsel made decisions that were tactically sound and universally effective. Appellant has not demonstrated that he was denied effective assistance of counsel.
Finally, XXXXXXX's request that this case be remanded for a new sentencing, because of a post-sentencing problem, is not mandated by statute or case law, and is not logical. Such a remand would only waste valuable court time without vindicating any right of the Appellant.
I. THIS CASE IS DISTINGUISHABLE FROM CHATTERJI BECAUSE XXXXXX'S CRIMES RESULTED IN ECONOMIC LOSS
Appellant's argument that this Court misapplied the loss provisions of U.S.S.G. § 2F1.1 is based on a claim that the facts in Chatterji track this case in all relevant respects. Appellant's Brief at 25. This claim, however, ignores both the narrow scope of the Chatterji decision and the vast factual distinction between the record in this case and that in the Chatterji case. The operative facts, as found in Chatterji, were that "Quad's products were exactly what they purported to be: Vancomycin and Ritodrine approved by the FDA, manufactured in a certain strength and dosage and producing the specified therapeutic benefits that FDA requirements were intended to insure." 46 F.3d at 1344. Based on the record in that case, this Court found that Quad's drugs were no less effective than the innovator drugs or other approved generic versions of these drugs. Accordingly, this Court concluded that, "[b]ased on the record before it, no quantifiable, actual loss can be attributed to [defendant's] conduct." 46 F.3d at 1341.However, no such facts or conclusions were, or reasonably could be, found from the record in this case. Based on the record in this case, the drugs which MX. XXXXXXX put on the market were something less than they were represented to be. As presented to the District Judge by the government prior to the sentencing, and not factually contested by the defendant until more than two years later,[FN9] the drugs that are the basis for the charges in this case were in some instances never tested in humans against the benchmark drug, i.e. dyazide (J.A. 65a, 78a); in other instances the drug products that were tested had been manufactured using different sources for the active ingredients than the marketed products, i.e. minocycline (J.A. 64a, 77a); and in numerous instances the product that had been tested had been manufactured using different production procedures and ingredients than the drugs that were distributed to the public, i.e. the coversheet drugs (J.A. 63a, 76a)
FN9. Appellant had an obligation, for each factual statement in the PSI with which he took issue, to assert with specificity and clarity the nature of and basis for his objection. United States v. Aleman, 832 F.2d 142, 145 (11th Cir. 1987). Failure to file timely objections amounted to a valid waiver of objections. United States v. Morsley, No. 94-5203, 5204, 5223; 1995 WL 530275 (4th Cir. Aug. 31, 1995). Accordingly, this Court should consider the facts in the PSI as conclusively established.
These violations occurred because, as the Appellant stated in his Sentencing Memorandum, and echoed in his Brief, Subject's Research and Development Department had not ensured that the formulas submitted to the FDA for approval would function in commercial quantities. Subject's formulas that were subjected to bioequivalence testing were, simply put, "not viable for commercial size production." (J.A. 92a, Appellant's Brief at 9) In response to this problem Appellant reformulated the drugs and released them to the public without testing to see if these products had been proven to be bioequivalent to the benchmark, innovator drugs.
B. SENTENCING FACTORS AS APPLIED TO XXXXXXX
Utilizing the fraud table, U.S.S.G. § 2F1.1, XXXXXXX was at offense level 29, before his downward departures were considered pursuant to U.S.S.G. § 5K1.1 [FN10] Further, his conviction for antitrust violations, which resulted in a U.S.S.G. offense level that was more than 9 levels below the guidelines for his fraud conviction, did not increase his overall offense level, it nevertheless did provide a basis for sentencing at the higher end of the applicable guideline range. See U.S.S.G. § 3D1.4(c). Thus, without a downward departure, MX. XXXXXXX's sentence could have been at the upper end of level 29, to nine-years imprisonment. This is almost double the sentence actually imposed. MX. XXXXXXX thus received more than ample credit for his cooperation with the government and, given the nature and extent of his criminal activity, he was sentenced very leniently.
Base offense level 6 Loss greater the $80 million +18 More than minimal Planning + 2 Obstruction + 2 Leadership role in the offense + 4 Acceptance of responsibility - 3 Adjusted offense level 29
(J.A. 270a -271a)
C. Subject'S DRUGS
Subject's adulterated drugs named in the XXXXXXX Information sold for more than $210 million[FN11] and if the drugs in Chatterji were at one end of the risk and culpability spectra, Subject's drugs were at the other. As outlined in the Statement of Facts filed at the time of XXXXXXX's plea (J.A. 74a et seq.) and in the Presentence Report (J.A. 258a et seq.), Subject, under MX. XXXXXXX's direction, engaged in numerous practices that were in violation of the FDA's Good Manufacturing Practices Regulations which are set out at 21 C.F.R. Part 211. For example, Subject used unapproved components, 21 C.F.R. § 211.86 (J.A. 77a, 263a); Subject did not follow the written master formulas, 21 C.F.R. § 211.100; did not keep accurate production records, 21 C.F.R. § 211.186; and did not prepare complete batch records, 21 C.F.R. § 211.188 (J.A. 262a). These drugs, which were not manufactured in accordance with the Good Manufacturing Practices Regulations, were as a matter of science of questionable integrity and as a matter of law were adulterated pursuant to 21 U.S.C. § 353(b)(2). Of even greater significance, however, since Subject did not conduct bioequivalence studies in human subjects comparing drugs produced with the manufacturing formulas that they actually used in production against the innovator or benchmark drug (J.A. 78a, 92a to 95a), these drugs were of unproven effectiveness and, could not legally be distributed by Subject or by its customers, 21 U.S.C. § 331(a); were subject to seizure and condemnation pursuant to 21 U.S.C. § 334(a)(1); and were subject to destruction pursuant to 21 U.S.C. § 334(d)(1). As the sentencing judge expressly found: it was "impossible to determine the effects of these drugs on people" (J.A. 132a).
FN11. As explained without objection prior to XXXXXXX's sentencing, dyazide sales exceeded $140 million (XXXXXXX Plea Hearing at 37, J.A. 70a; PSI, J.A. 268a) $34 million of which occurred after June 1989, the date by which XXXXXXX admitted he had personal knowledge that the bioequivalence tests had been rigged (J.A. 120a). It was also unchallenged that the other drugs, the coversheet drugs, sold for over $70 million. (J.A. 120a)
As the District Court was well aware, generic drugs are not proven to be safe and effective by objective observations of their therapeutic effect. Such clinical studies, in order to have any scientific validity, would involve thousands, if not tens of thousands of patients, take many years, and cost many millions of dollars. Instead, generic drugs are proven to be safe and effective by comparing them to innovator drug products which have gone through such testing, and have also been the subject of many years of clinical use. The comparison is made by conducting a bioequivalence test using a relatively small number of subjects. Two groups are utilized in such tests. One group is given the generic drug product and the other is given the benchmark drug product. The rate and extent of absorption of the therapeutic agent, or agents, as well as the excretion of metabolites of those agents, are identified and measured in the blood and urine of the subjects taking the generic drug product and then compared to those in the subjects who are taking the innovator, or benchmark drug product. If they are substantially the same, it can be assumed with a reasonable degree of certainty that the two drug products will have a similar therapeutic effect when consumed.
With regard to dyazide, Subject had secured FDA approval by rigging the bioequivalence test and then submitting that fraudulent data to FDA. Rather than producing a drug product that would operate in the human body in the same manner as the benchmark drug, Subject just gave both groups in the bioequivalence study the benchmark drug. (PSI at 6, J.A. 264a) Not surprisingly, both groups had similar experience with their test drug.
All of the quality assurance tests that were subsequently conducted on Subject's drug products were premised on the false belief that Subject had developed, and was utilizing a formula that had been proven to mimic the therapeutic characteristics of the benchmark drug. Proof that each capsule of Subject's generic dyazide was uniform, the purpose of the quality assurance testing, was absolutely meaningless unless that formulation had been proven to be bioequivalent to the benchmark drug. Equivalent to a drug that had been proven safe and effective by long-term, clinical testing and experience.
The problem with Subject's "coversheet" drugs was similar to that of Subject's dyazide. The drug product formulas that were utilized by Subject in commercial production had never been compared to the relevant benchmark drug products in bioequivalence studies. Therefore, XXXXXXX could have no scientific basis for believing that these drugs would be safe and effective. He was willing to let his customers pay their money and take their chances, even though alternatives that had been proven to be safe and effective were readily available.
These facts, upon which the sentencing judge drew his conclusions, were unchallenged by the defendant prior to his sentencing. As noted above, when asked by the District Judge whether they had any objection to these facts, the defense replied in the negative. (J.A. 71a) Accordingly, given these uncontested facts it was clear that both as a matter of fact and as a matter of law, these drugs had no legitimate commercial value, Subject's customers purchased these drugs under a misapprehension of material fact and, as a result, suffered economic loss.
D. CONSUMER LOSS FACTORS
Since Subject's customers did not bargain for products that had never been properly or adequately tested and thus were drugs of unknown effectiveness, the District Court was not clearly in error when it found that Subject's customers sustained a recognizable economic loss as the result of XXXXX XXXXXXX's fraud. As the District Court correctly found at the XXXXXXX sentencing, Subject customers did not get what they bargained for. (XXXXXXX Sentencing Hearing at 19, J.A. 131a).
XXXXXXX was charged with, and pled guilty to, a very broad, criminal conspiracy which included, at its core, the manufacture and distribution of adulterated drugs. As described, without objection at XXXXXXX's sentencing on January 22, 1993, he was the "Driving force in shaping the corporate culture of Subject... [a culture in which]... it's OK to cheat." (J.A. 124-5) XXXXXXX instilled at Subject a culture that was based on fraud, where it was only important to create the appearance of propriety.
Twenty-six different Overt Acts charged in the Information to which MX. XXXXXXX pled guilty involved the manufacture or distribution of adulterated "coversheet" drugs. These drugs, [FN12] unlike the drugs in Chatterji, never were subjected to the kind of testing that is necessary in order to insure the effectiveness of their formulas. By putting these powerful drugs on the market without long-term clinical studies, or even the bioequivalence studies required of generic drugs, MX. XXXXXXX, as the leader of the Subject conspiracy, surreptitiously took from physicians and their patients (who relied on these potent, prescription pharmaceuticals to prevent or ameliorate life-threatening diseases), the protection that the American public has taken as a given since the passage of the Pure Food and Drug Act in 1906.
FN12. The coversheet drugs listed in the Information to which Mr. XXXXXXX pled guilty are as follows:
Phenytoin Sodium - A barbiturate used to treat epilepsy.
Procainamide HCL - A cardiac antiarrhythmic used to treat life threatening heart disease.
Minocycline HCL - A synthetic antibiotic used to treat systemic infection.
Nitrofurantoin - An antibiotic used to treat urinary tract infection.
Sulfasalazine - An anti-inflammatory used to treat Ulcerative Colitis
Methyldopa HCL - An antihypertensive used to reduce high blood pressure.
Eryoloid Mesylates - Used to treat the symptoms of senility.
As the District Court noted at the XXXXXXX sentencing, the violations at Subject were far more excessive than at any of the other firms that it had seen -- by a wide margin (XXXXXXX Sent. at 34, J.A. 146a) and, as even his counsel admitted - as the Chief Executive Officer at Subject, XXXXXXX bore substantial responsibility for the climate that existed at Subject that permitted these crimes to occur. (J.A. 134a) As a result, the sentencing court found that: "Most Americans have lost tremendous confidence in generic drugs." (J.A. 148a) [FN13]
FN13. This loss of confidence in the important institution of generic drugs would, standing alone, support an upward departure. U.S.S.G. § 2F1.1 - Application Note 9(e).
Competition for profit took precedence over the public health. XXXXXXX wanted to beat the others to the marketplace, because those who got there first made the most money. (J.A. 149a) The Court expressly found that "the public health was not a concern." The concern was: "How do I get this product on the market faster than my competition and how much money can I make....[Subject] didn't care whether the public got what they paid for or not...." (J.A. 150a - 151a) Further, the Court expressly noted that the true risk to the public health may not surface for many years because the defendant, added a lot of things without the permission of the FDA and left out a lot of things that were necessary for the drug to perform. (J.A. 150a) [FN14] Because no testing of these drugs was done in a controlled environment, their actual safety and effectiveness will never be known. The District Court, which had developed a significant degree of expertise in pharmaceutical manufacturing during the scores of similar cases which had come before it, recognized that clinical experience with a marketed drug is no substitute for monitored drug studies and that, without such studies, it is scientifically impossible to assess the safety and effectiveness of any drug product.
FN14. Risk to the public health is a basis for an upward adjustment to the applicable guideline range, U.S.S.G. § 2F1.1(b)(4), and/or an upward departure, U.S.S.G. § 5K2.14.
The Court also noted at that time that XXXXXXX could well have gotten a "much more substantial sentence" because of the antitrust connection (J.A. 157a) [FN15]
FN15. XXXXXX was neither charged nor convicted of any antitrust violations.
[cited in USAM 4-8.250]