[Federal Register Volume 64, Number 95 (Tuesday, May 18, 1999)]
[Notices]
[Pages 26984-26986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12390]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
[Docket No. 99N-1220]
Draft Civil Money Penalty Reduction Policy for Small Entities
AGENCY: Food and Drug Administration, HHS.
ACTION: Notice.
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SUMMARY: The Food and Drug Administration (FDA) is issuing a draft
civil money penalty reduction policy for small entities as required by
the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)
and the Presidential Memorandum of April 21, 1995. This draft policy is
being issued for public comment only and will not be implemented until
a final policy is published in the Federal Register.
DATES: Written comments on the draft policy may be submitted by August
16, 1999.
ADDRESSES: Submit written comments on the draft policy to the Dockets
Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers
Lane, rm. 1061, Rockville, MD 20852. Comments should be identified with
the docket number found in brackets in the heading of this document.
See the SUPPLEMENTARY INFORMATION section for electronic access to the
draft policy.
FOR FURTHER INFORMATION CONTACT: Jeffrey B. Governale, Division of
Compliance Policy (HFC-230), Office of Regulatory Affairs, Food and
Drug Administration, 5600 Fishers Lane, Rockville, MD 20857, 301-827-
0411, FAX 301-827-0482.
SUPPLEMENTARY INFORMATION:
I. Background
The Food and Drug Administration (FDA) is issuing a draft civil
money penalty (CMP) reduction policy for small entities (draft penalty
reduction policy) as mandated by SBREFA (Pub. L. 104-121) and the
Presidential Memorandum of April 21, 1995 (60 FR 20621, April 26,
1995).
SBREFA was enacted on March 29, 1996, and seeks to improve the
regulatory climate for small entities by, among other things, requiring
agencies to establish small entity penalty reduction policies as
follows:
Sec. 223--Rights of Small Entities in Enforcement Actions
(a) In General--Each agency regulating the activities of small
entities shall establish a policy * * * to provide for the
reduction, and under appropriate circumstances for the waiver, of
civil penalties for violations of a statutory or regulatory
requirement by a
[[Page 26985]]
small entity. Under appropriate circumstances, an agency may
consider ability to pay in determining penalty assessments on small
businesses.
(b) Conditions and Exclusions--Subject to the requirements or
limitations of other statutes, policies or programs established in
this section shall contain conditions or exclusions which may
include, but not be limited to--
(1) requiring the small entity to correct the violation within a
reasonable correction period;
(2) limiting the applicability to violations discovered through
participation by the small entity in a compliance assistance or
audit program operated or supported by the agency or a State;
(3) excluding small entities that have been subject to multiple
enforcement actions by the agency;
(4) excluding violations involving willful or criminal conduct;
(5) excluding violations that pose serious health, safety or
environmental threats; and
(6) requiring a good faith effort to comply with the law.
A statement entered into the Congressional Record (142
Congressional Record S3242, daily ed. March 29, 1996) after enactment
of SBREFA explains that agencies have ``flexibility to tailor their
specific programs to their missions and charters'' and instructs
agencies ``to develop the boundaries of their program and the specific
circumstances for providing for a waiver or reduction of penalties''
(id. at S3244). To that end, SBREFA specifies that a penalty reduction
policy adopted by an agency may be subject to the requirements or
limitations of other applicable statutes. SBREFA also lists six
possible exclusions or conditions (see section 223 of SBREFA as quoted
previously in this document) that an agency may incorporate in its
policy.
This draft penalty reduction policy also complies with the
Presidential Memorandum of April 21, 1995, which directs agencies to
implement the policy of waiving penalties as follows:
1. Authority to Waive Penalties. (a) To the extent permitted by
law, each agency shall use its discretion to modify the penalties
for small businesses in the following situations. Agencies shall
exercise their enforcement discretion to waive the imposition of all
or a portion of a penalty when the violation is corrected within a
time period appropriate to the violation in question. For those
violations that may take longer to correct than the period set by
the agency, the agency shall use its enforcement discretion to waive
up to 100 percent of the financial penalties if the amounts waived
are used to bring the entity into compliance. The provisions in
paragraph 1(a) of this memorandum shall apply only where there has
been a good faith effort to comply with applicable regulations and
the violation does not involve criminal wrongdoing or significant
threat to health, safety, or the environment.
FDA has reviewed: (1) The Federal statutes it enforces which
authorize CMP's, (2) its current practices used to assess CMP's on
small entities, and (3) the appropriate conditions and exclusions for a
penalty reduction policy for small entities that violate the law. On
the basis of that review, FDA announces its draft penalty reduction
policy for small entities. FDA invites comments on this draft policy.
FDA currently enforces the following amendments to the Federal
Food, Drug, and Cosmetic Act (21 U.S.C.) and the Public Health Service
Act (42 U.S.C.), which authorize CMP's under the referenced sections:
Radiation Control for Health and Safety Act of 1968 (21 U.S.C.
360pp),
Safe Medical Devices Act of 1990 (21 U.S.C. 333(f)),
Mammography Quality Standards Act of 1992 (42 U.S.C. 263b(h)),
National Childhood Vaccine Injury Act of 1986 (42 U.S.C. 262(d)(2)
and 42 U.S.C. 300aa-28),
Prescription Drug Marketing Act of 1988 (21 U.S.C. 333(b)),
Generic Drug Enforcement Act of 1992 (21 U.S.C. 335b), and
Food Quality Protection Act of 1996 (21 U.S.C. 333(f)).
II. Draft Civil Money Penalty Reduction Policy for Small Entities
The FDA's draft policy with respect to reducing or waiving civil
money penalties (CMP's) against a small entity is: FDA will consider on
a case-by-case basis whether to reduce or waive CMP's against a small
entity. In determining whether to reduce or waive CMP's against a
specific small entity, the following considerations will apply:
A. Except as provided in paragraph C below, penalty reduction or
waiver will not be available for any small entity if:
1. The small entity was subject to an enforcement action (e.g.
seizure, injunction or prosecution) by FDA within the last 5 years, and
is still under the same management;
2. Any of the small entity's violations involved willful conduct;
3. The small entity does not make a good faith effort to comply
with the law; or
4. Any of the small entity's violations pose serious health or
safety threats.
B. In considering whether FDA will reduce or waive a CMP, FDA may
consider:
1. The egregiousness of the violations;
2. The isolated or repeated nature of the violations;
3. The small entity's history (if any) of violations;
4. The amount of harm caused by the violations;
5. The degree to which a CMP will deter the small entity or
others from committing future violations;
6. The extent to which the small entity cooperated during the
investigation;
7. Whether the small entity corrected the violations within a
reasonable time period;
8. Whether the small entity has engaged in subsequent significant
remedial efforts to mitigate the effects of the violations and to
prevent future violations;
9. Whether the small entity voluntarily reported the violations
to FDA promptly after discovering them; and
10. The small entity's efforts to determine and meet its legal
obligations.
C. FDA may also consider whether to reduce or waive a CMP against a
small entity, including a small entity otherwise excluded from this
draft policy under paragraph A above, if the small entity can
demonstrate to the FDA's satisfaction that it is financially unable to
pay the penalty, immediately or over a reasonable period of time, in
whole or in part.
D. If a small entity corrects the violative conditions within a
reasonable time period, FDA may reduce the amount of any CMP that may
be imposed for the violations, up to the amount spent by the small
entity for corrective action. FDA may take into account the time in
which the small entity took corrective action and any difficulties the
small entity encountered when doing so.
Penalties Eligible for Reduction
The draft penalty reduction policy will apply to judicial and
administrative CMP's.
Exclusions From the Draft Penalty Reduction Policy
The draft penalty reduction policy shall not apply to any remedy
that may be sought by FDA other than CMP's.
SBREFA also permits an agency to apply penalty reduction to
violations discovered through a small entity's participation in a
compliance assistance or audit program operated or supported by the
agency or state. Although various units within FDA provide regulatory
guidance to small entities, FDA does not operate a formal compliance
assistance or audit program. Because FDA does not have a compliance
program of the type described in SBREFA, this condition is not included
in the draft penalty reduction policy.
[[Page 26986]]
Both SBREFA and the Presidential Memorandum exclude violations that
pose serious environmental threats from the penalty reduction policy.
Because FDA's enforcement efforts generally focus on actions that
affect the public health and safety, but not the environment, the
condition is not included in the draft penalty reduction policy. If a
small entity is eligible for CMP reduction, but has obtained an
economic benefit from the violations such that it may have obtained an
economic advantage over its competitors, FDA may seek the full amount
of the penalty. FDA retains this discretion to ensure that small
entities that comply with public health laws enforced by the agency are
not disadvantaged by those who have not complied.
FDA has determined that all CMP's assessed under the authority of
the Generic Drug Enforcement Act (GDEA) should be excluded from the
draft penalty reduction policy. Under GDEA, CMP's may be assessed for a
variety of intentional or ``knowing'' conduct related to abbreviated
new drug applications (21 U.S.C. 335b(a)). Also, GDEA permits CMP's for
debarred individuals who provide services in any capacity to persons
who have approved or pending drug product applications (id). Because of
the level of scientist required to assess a CMP under GDEA, FDA
believes it is not appropriate to consider reduction or waiver of
penalties in such cases.
The National Childhood Vaccine Injury Act (NCVIA) also has a
provision for CMP, for which intentional or knowing conduct is a
requirement for assessment of penalties. Section 2128(b) of the Public
Health Service Act (42 U.S.C. 300aa-28) states that a CMP may be
assessed when a vaccine manufacturer intentionally destroys, alters,
falsifies, or conceals records associated with the manufacture of
vaccines. Accordingly, FDA believes it is not appropriate to consider
reduction or waiver of CMP in cases involving this provision of the
NCVIA.
Definition of ``Small Entity''
Section 211(1) of SBREFA defines the term ``small entity'' as
having the same meaning as in section 601 of the United States Code (5
U.S.C. 601). Section 601 defines ``small entity'' as ``small
business,'' ``small organization'' and ``small governmental
jurisdiction.''
Under section 601(3) of 5 U.S.C., a ``small business'' has the same
meaning as ``small business concern'' under section 3 of the Small
Business Act (15 U.S.C. 632(a)), unless an agency, after consultation
with the Office of Advocacy of the Small Business Administration (SBA)
and after opportunity for public comment, establishes its own
definition.
Section 632(a)(1) of 15 U.S.C. defines a ``small business concern''
as an enterprise ``which is independently owned and operated and which
is not dominant in its field of operation'' (15 U.S.C. 632(a)(1)). The
SBA has further defined ``small business concern'' for a number of
specific industries based on the sizes of the enterprises and their
affiliations (see 13 CFR part 121 and the SBA Table of Size Standards).
When SBA determines whether an enterprise is a small business, it
generally counts the enterprise's affiliations (see 13 CFR 121.103).
Family enterprises or enterprises in which the same individual or
individuals have a controlling interest are aggregated for this
purpose. If the aggregate total of the affiliated enterprises exceeds
the size requirement for small businesses, none of the affiliated
enterprises is considered a small business.
Federal law defines ``small organization'' as a not-for-profit
enterprise which is independently owned and operated and not dominant
in its field (5 U.S.C. 601(4)). The U.S. Code defines a ``small
governmental jurisdiction'' as a governmental entity with a population
of less than 50,000 (5 U.S.C. 601(5)). The definitions of ``small
organization'' and ``small governmental jurisdiction'' may be changed
by agencies after an opportunity for public comment. The small business
definitions within the nutritional food labeling exemptions (21 CFR
101.9(j) and 101.36(h)) are not applicable to CMP's.
III. Regulatory Requirements
FDA is announcing a draft penalty reduction policy as required by
SBREFA. As a general statement of policy, the Administrative Procedure
Act does not require that FDA publish this draft policy for notice and
comment. However, under the Good Guidance Practices published in the
Federal Register of February 27, 1997 (62 FR 8961), FDA is providing
interested parties, particularly small entities, with an opportunity to
comment on the draft penalty reduction policy. This draft policy is
being issued for public comment only and will not be implemented until
a final policy is published in the Federal Register.
This guidance document represents the agency's current thinking on
the draft CMP reduction policy for small entities. It does not create
or confer any rights for or on any person and does not operate to bind
FDA or the public. An alternative approach may be used if such approach
satisfies the requirements of the applicable statute, regulations, or
both.
IV. Request for Comments
Interested persons may, on or before August 16, 1999, submit to the
Dockets Management Branch (address above) written comments on the
document entitled ``Draft Civil Money Penalty Reduction Policy for
Small Entities.'' Two copies of any comments are to be submitted,
except that individuals may submit one copy. Comments are to be
identified with the docket number found in brackets in the heading of
this document. Although all received comments will be considered by FDA
in formulating the final penalty reduction policy, the agency is not
obligated to respond to each comment. The agency will make changes to
the draft penalty reduction policy, as appropriate. Copies of the draft
policy and received comments may be seen in the Dockets Management
Branch between 9 a.m. and 4 p.m., Monday through Friday.
V. Electronic Access
A copy of the draft policy may also be downloaded to a personal
computer with access to the World Wide Web (WWW). The Office of
Regulatory Affairs (ORA) home page includes the draft policy and may be
accessed at ``http://www.fda.gov/ora''. The draft policy will be
available under ``Compliance References.''
Dated: May 11, 1999.
William K. Hubbard,
Associate Commissioner for Policy Coordination.
[FR Doc. 99-12390 Filed 5-17-99; 8:45 am]
BILLING CODE 4160-01-F
