In the Matter of the Complaint Against

PHUN PHARMACEUTICALS
P. O. Box 2118
at Gaithersburg, MD 20760

P.S. Docket No. 11/114;

02/18/82

Grant, Quentin E.

APPEARANCES FOR COMPLAINANT:
Sandra C. McFeeley, Esq.
Thomas A. Ziebarth, Esq.
James M. McMullin, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260

APPEARANCE FOR RESPONDENT:
James W. Salter, III, Esq.
Tomes & Salter, P.A.
Suite 101, Semmes Building
10220 River Road
Potomac, MD 20854

INITIAL DECISION

The Complaint, in two counts, alleges that Respondent is violating 39 U. S. C. § 3005 by conducting a scheme or device for obtaining money or property through the mail by means of false representations concerning certain drug products.

The first count alleges, specifically, that Respondent's pro motional materials are calculated to induce prospective customers to remit money through the mail by means of false representations (a) that the drug products involved are safe to use for the advertised purposes and (b) that they are manufactured, processed, labeled, and marketed in accordance with the federal food and drug laws, 21 U.S.C. § 321 et seq. Count II alleges a scheme by Respondent, in cooperation with its customers, to dupe, or exploit, third parties by furnishing to its customers counterfeit, or "look-alike," drugs which are, or may be sold in turn to third parties as the authentic controlled drugs which they resemble. Complainant seeks to bring Count II within the ambit of United States v. International Term Papers, Inc., 477 F.2d 1277 (1st Cir. l973).

An Answer to the Complaint was filed by Seneca Valley Pharmaceutical, Inc., trading as Phun Pharmaceuticals. The Answer admits the promotional and advertising activities alleged in the Complaint, designed to induce remittances of money through the mails, and admits making the representations alleged in paragraph 3 of the Complaint but denies their falsity. The Answer denies the allegations concerning exploitation of third parties set forth in paragraphs 7, 8 and 9 of Count II of the Complaint.

Complainant's evidence was received at a consolidated hearing on November 2 and 3, l981. Respondent was given , but rejected, the opportunity to present evidence at a hearing scheduled for December 4, l981.

Complainant has filed proposed findings of fact and conclusions of law which are adopted to the extent indicated. Otherwise they are rejected as irrelevant, immaterial, or not supported by the evidence.

FINDINGS OF FACT

1. Phun Pharmaceuticals is a trade name used by Seneca Valley Pharmaceutical, Inc. in marketing certain drugs (Resp. Answer).

2. Respondent's advertising and other promotional material seeks remittance of money or property through the mails for numerous drug products in capsule or tablet form advertised as stimulants (Ans. § 1, 2, 6; Postal Inspector Friece, Tr. 66, et seq.; CX-37 - 45). Attached hereto as Exhibits A, B, and C are typical examples of Respondent's promotional materials.

3. The ingredients of such capsules or tablets are one or more of the following in amounts indicated:

a. Ephedrine sulfate 25 mg.

b. Phenylpropanolamine HCL 25-50 mg.

c. Caffeine 50-200 mg.

(CX 37-40)

4. The individual ingredients may be sold over-the counter without prescription (Tr. 79; 21 CFR Part 330). The Food and Drug Administration regulations require that certain warning or cautionary statements appear on the labels of ephedrine and phenylpropanolamine hydrochloride (PPA) preparation. These warnings or cautions are as follows (21 CFR 369.20):

"EPHEDRINE PREPARATIONS (ORAL).

Warning - Do not exceed the recommended dosage. Reduce dosage if nervousness, restlessneses, or sleeplessness occurs. Do not use if high blood pressure, heart disease, diabetes, or thyroid condition is present unless directed by physician.

* * *

"PHENYLPROPANOLAMINE HYDROCHLORIDE

PREPARATIONS, ORAL.

Caution - Individual with high blood pressure, heart disease, diabetes, or thyroid disease should use only as directed by physician."

The labels appearing on Respondent's products, to the extent placed in evidence by Complainant, contain the required warnings (CX-39, 40, 41).

5. Respondent represents that such drug products are safe and effective when sued as directed for the purpose advertised and that they are manufactured by U. S. pharmaceutical laboratories, processed, labeled, and marketed in accordance with the federal food and drug laws, 21 U.S.C. § 321 et seq. (Ans. § 3, 5; CX-37).

6. The applicable regulations (21 CFR 330.1) state that an over-the-counter (OTC) drug listed in Subchapter D is generally recognized as safe and effective and is not misbranded if it meets each of the conditions contained in Part 330 and each of the conditions listed in any applicable monograph. Ephedrine and PPA HCL oral preparations are listed in § 369.20 of Subchapter D. The evidence does not reflect the existence or applicability of any monograph to the drugs in question. Complainant has not shown that Respondent has failed to meet any of the conditions of Part 330.

7. However, Respondent's drug products (listed in the left-hand column below) by their sizes, shapes, colors, and markings closely resemble certain drug products, made by other manufacturers, containing controlled substances (listed in right-hand column below) (Tr. 10-35).

Respondent's Products Authentic Controlled Substances

DEX

Black 127 Biphetamine (Pennwalt)

Black RUS (CX-2, 3)

Small black w/

5 numbers

Small black w/

logo

335

Green & Clear Dexamyl

Blue & Clear Fastin

(Beecham)

(CX-16, 17)

Pink Football several pink biconvex

tablets of which the

Phillips Roxanne product

is typical

(Tr. 29; CX-8, 9)

BT-72 Preludin

(Boeringer-Ingelheim)

(CX-7

White & Clear Eskstrol (SKF)

Brown & Clear Dexedring (SKF)

Green egg Adiloss Ty-Med and

Obestat Ty-Med

(both Lemmon)

Respondent's Products Authentic Controlled Substances

Blue egg Methamphetamine

w/ Amobarb

(Danbury) or

Adipex Ty-Med (Lemmon)

Mini White clandestinely made

amphetamines (Tr. 38-40)

Yellow RUS Ionamin (Pennwalt)

Small yellow (CX-4, 5)

w/ 5 numbers

8. 21 U.S.C. § 352, headed "Misbranded drugs and devices," provides in paragraph (i) thereof that a drug shall be deemed to be misbranded if it is a drug and its container is so made, formed or filled as to be misleading, or if it is an imitation of another drug.

9. Examination of samples of authentic controlled drugs together with samples of Respondent's products and the clear color photographs used in Respondent's promotional material shows that Respondent's products look remarkably like the authentic controlled substances, thus having a decided capacity to confuse, deceive, and mislead (CX-2-18, 55-59).

10. Law enforcement officers engaged in undercover narcotics investigations have observed "look-alike" drugs such as sold by Respondent represented and sold in street traffic as controlled drugs (Tropper Robert J. Ackerman, Tr. 43-61). Even such experienced individuals have great difficulty distinguishing "look-alikes" from controlled drugs (Tr. 57, 60, 61).

11. The trafficking in "look-alike" drugs started in the 1970's and is growing substantially nationwide coincident with a decrease in trafficking of authentic amphetamines (Franzosa, Tr. 37, 38; CX-52, pp. 7, 9).

12. Complainant's expert witness Dr. Edward Franzosa, a forensic chemist with the Drug Enforcement Administration of the Department of Justice, testified concerning the users of authentic amphetamines which Respondent's products resemble. For example, Preludin is used by heroin addicts for added euphoria or to give relief from withdrawal symptoms. Mini White Crosses, or Mini Bennies, were the response of clandestine laboratories to the market for double-scored white amphetamine tablets when a number of legitimate manufacturers went out of business, or dropped that product line because of the DEA's placing amphetamines on Schedule II (stringent quota and security requirements) (Tr. 24, 38-41).

13. Young people, including adolescents and many pre-adoles cents, are familiar with controlled drugs in the forms which Respondent's products so closely resemble (Tr. 40-42) and can be deceived by that resemblance into purchasing the "look-alikes" as authentic controlled substances (Tr. 53-55).

14. Complainant called as an expert witness in the fields of pharmacology and toxicology, Dr. Sorrell Lee Schwartz, professor of pharmacology at the Georgetown University Schools of Medicine and Dentistry, member of the Clinical Toxicology Advisory Board, National Capital Poison Center, member of the editorial board of the journal entitled Toxicology and Applied Pharmacology, and consultant to the National Institute on Drug Abuse and the Select Committee on Generally Regarded as Safe Substances (FDA-FASEB, 1973-75) (CX-21).

Dr. Schwartz is familiar with caffeine, ephedrine, and PPA. According to Dr. Schwartz, caffeine is a alkaloid, normally found in coffee, and generally used as a mild central nervous system stimulant. PPA is a drug referred to as sympathomimetic, stimulating part of the autonomic nervous system. Its primary action is to constrict blood vessels. Its primary, original use was as a decongestant, to constrict the blood vessels of the mucous membrane. It is the active ingredient in many over-the-counter diet preparations. Ephedrine sulfate is a drug similar in action to PPA, but somewhat more short-lived, and is one of the oldest decongestant materials. It is also has an action which results in dilation of the bronchials (the tubes of the air passageways of the lungs) making it useful in the treatment of asthma (Tr. 77, 78).

The combination of PPA, ephedrine, and caffeine has never been tested. Consequently it is not known what, if any, synergistic effects their ingestion may product (Tr. 93, 94).

15. In Dr. Schwartz's opinion, caffeine, ephedrine and phenylpropanolamine marketed in look-alike tablets or capsules are unsafe. He referred to the Horowtiz study which demonstrated that, in doses that the non-drug-abusing population would take, PPA causes an increase in blood pressure in normal healthy individuals (Tr. 81).

He also identified a number o letters and articles published in reputable journals (CX-22-26, 28) that indicate instances of hypertensive crisis or severe hypertension after ingestion of PPA alone or in combination with other drugs (Tr. 82-84). Some pub lished material indicates there are adverse emotional and mental effects, including psychotic effects, associated with taking PPA (TR. 84-85) and ephedrine (CX-24, 29).

In addition to material in scientific literature, Dr. Schwartz examined, through physicians in New Mexico and other states, victims of stroke and hypertensive crisis who had ingested normal or therapeutic doses of look-alike drug materials. He found the reported adverse reactions to be at least out of the realm of coincidence (Tr. 87-91). As to the long-term effects of ingestion of PPA, Dr. Schwartz described the process and consequences of decompensation of the heart (Tr. 93). He also noted some evidence that the caffeine contained in look-alike drugs has caused some deaths, and that its safety in combination with other drug sub stances has not been clinically established (Tr. 94-95).

16. Manufacturers of the authentic drug products which Respondent's products resemble have not authorized Respondent or anyone else to use or imitate the trade dress, monograms, or other identification associated with such drugs (Danehower, Tr. 102-111; Hardwick, Tr. 112-116; Heil, Tr. 116-128).

17. As recently as June 1981 Respondent advertised the drug products in question in High Times, a magazine catering to the drug culture (Tr. 70, 71; CX-53). In the July 1981 issue of that magazine appears a statement by its editor and publisher to the effect that because of numerous complaints received High Times would no longer carry advertisements for legal stimulants in the form of "facsimile pills meant to look like pharmaceutical speed" (CX-52).

DISCUSSION

Count I

a. Complainant's evidence shows isolated instances of adverse reactions resulting from the use of "look-alike" drugs identical, or similar, to the drugs involved here. However, there is no persuasive evidence that taken for the advertised purpose, i.e., as stimulants, and in accordance with the directions and warnings on the labels, these drugs have worked harm.

Further, and not pointed out in argument, PPA HCL and ephedrine oral preparations have been listed by the Food and Drug Administra tion as over-the-counter (OTC) drugs "generally recognized as safe and effective" if they meet certain conditions not shown by the evidence to have been violated by Respondent (21 CFR ??330.1, 369.20). Caffeine, perhaps because it occurs naturally in several foods and is in such common use, I do not find listed in the FDA regulations as an OTC drug. Presumably, there are no controls on its use. On the state of this record I cannot find, even if I had jurisdiction (which is probably not the case in view of what appears to be FDA's exclusive jurisdiction over the matter) that taken as directed for the advertised purpose Respondent's drugs are not safe.

The evidence given by Dr. Schwartz and Trooper Ackerman strongly suggests, however, that these drugs taken in the belief they are the controlled drugs they resemble and without benefit of the informa tion and warnings on the labels may be harmful to some users.

b. Respondent's "look-alike" drugs appear to be either counter feit drugs or misbranded drugs, or both, in violation of the follow ing portions of Title 21 U.S.C. (applicable parts underscored);

§ 321. Definitions; generally

. . .

(g)

(2) The term "counterfeit drug" means

a drug which, or the container or labeling of which, without authorization, bears the trademark, trade name, or other identifying mark, imprint, or device, or any likeness thereof, of a drug manufacturer, processor, packer, or distributor other than the person or persons who in fact manufactured, processed, packed, or distributed such drug and which thereby falsely purports or is represented to be the product of, or to have been packed or distributed by, such other drug manufacturer, processor, packer, or distributor.

. . .

§ 352. Misbranded drugs and devices

A drug or device shall be deemed to be misbranded-

. . .

(i) (1) If it is a drug and its container is so made, formed, or filled as to be misleading; or (2) if it is an imitation of another drug; or (3) if it is offered for sale under the name of another drug.

Count II

The likeness of Respondent's drugs in form, colors, and markings to the drugs of other manufacturers, often sold for purposes of drug abuse in the street trade, without authorization from such manufacturers, is too flagrant to permit of any conclusion other than an intent to deceive third party purchasers, if not the immediate purchaser. This conclusion is strongly reinforced by the names given its drugs by Respondent and by its advertisements in "High Times," the drug culture magazine, prior to the decision by the publishers of High Times to discontinue advertising "look-alike" drugs.

CONCLUSIONS OF LAW

1. Respondent is engaged in a scheme for obtaining money or property through the mails by means of false representations alleged in Count I of the Complaint concerning the drug products involved in this proceeding. Although it appears from the FDA regulations that oral preparations of PPA Hcl and ephedrine are listed as over-the counter drugs generally recognized as safe, when sold in the apparently counterfeit and/or misbranded forms employed by Respondent they may be unsafe for use by a significant number of persons.

2. Respondent's scheme also involves a third-party misrepre sentation in that the "look-alike" quality of its products enables and encourages its direct customers and others to sell them in the street trade, or otherwise, as authentic controlled drugs used in drug abuse. This type of scheme violates the misrepresentation statute. United States v. International Term Papers, Inc., 477 F.2d 1277 (1st Cir. l973).

3. Under both counts of the Complaint, the Postal Service has made a prima facie case of Respondent's violation of 39 U.S.C. § 3005. Accordingly, an order in the form attached, should be issued against Respondent.