The generic drug scandal of 1989

In June 1988, a House subcommittee received a tip about the generic drug office at the Food and Drug Administration. As the HHS Office of Inspector General later summarized it¹, the allegation was that “certain employees in FDA's then Division of Generic Drugs willfully manipulated the application review process to give preferential treatment to certain pharmaceutical companies.”

Members of the Subcommittee on Oversight and Investigations, part of the House Energy and Commerce Committee, sent the criminal allegations to the Inspector General. By July 1992, the OIG reported¹, 29 individuals, including five FDA employees, and eight companies had pleaded guilty or been found guilty of fraud or corruption charges. The investigation was still open.

Most accounts date the affair to 1989, the year the OIG's first audit branded the generic review process a material weakness and the year generic approvals started to fall. It is the reason every generic drug application filed today must include a signed statement that no debarred person worked on it. It also produced FDA's Application Integrity Policy and helped make the pre-approval plant inspection a normal step before a generic reaches the market.

What investigators found

Gratuities paid to FDA reviewers were the starting point, and the inquiry spread from there. The OIG said its investigation “also identified fraud and misrepresentation in the generic drug approval process, including false statements and claims, as well as product substitution.” FDA's own compliance policy guide on application fraud⁶ gives a slightly different tally from its side of the inquiry: four FDA employees found to have accepted illegal gratuities from generic drug companies, and 11 generic drug companies found to have falsified data in premarket applications.

Timing played a part. The Hatch-Waxman Amendments⁹, signed on Sept. 24, 1984, had created the modern abbreviated new drug application (ANDA) route described in our explainer on the Hatch-Waxman Act. Applications poured in, and the review queue became something companies had reason to game. An August 1989 OIG audit¹ classified the generic review process as a material internal control weakness. A 1992 follow-up found that branch chiefs could still assign applications subjectively. In one case, competing applications from five firms for ketoprofen, received on the same day, had all gone to a single reviewer, contrary to policy.

What it did to approvals

GxRadar counted original ANDA approvals by year in FDA's Drugs@FDA database, via openFDA⁸, the same data behind our approvals tracker. The records show approvals peaking in 1987 and collapsing by 1990.

From 389 in 1987 to 59 in 1990 is a drop of about 85 percent. Two cautions apply. The counts cover applications that remain in the database today, so approvals later withdrawn may be missing from earlier years. And they are calendar-year figures; the OIG¹ reported that in fiscal 1991 the Office of Generic Drugs received 1,453 original and amended applications and approved 141. Annual approvals did not pass the 1987 peak again until 2007, when the count reached 470.

How FDA tightened its checks on the data

FDA also moved to make bioequivalence data, the studies that show a generic performs like its brand, harder to fake. A Nov. 8, 1990, interim rule, noted by the OIG¹, required manufacturers and the contract labs that run bioequivalence tests for them to keep reserve samples of the tested products for five years. FDA field investigators collect them during pre-approval inspections of the plant and any contract lab, and the samples are tested in FDA labs, which the agency said would help it investigate possible fraud in bioequivalence testing. Our pieces on bioequivalence and the approval process explain where those tests sit today.

The Application Integrity Policy

FDA proposed a written fraud policy in December 1990 and made it final on Sept. 10, 1991, in a Federal Register notice at 56 FR 46191⁵. It now lives on as the Application Integrity Policy⁶. The notice said FDA had “uncovered broader patterns of fraud and discrepancies in applications” that raised “serious questions as to the reliability of all data submissions by those applicants.”

Under the policy, FDA can set aside substantive scientific review of a company's applications until the data are shown to be reliable, the same concern that runs through today's data integrity enforcement. The notice⁵ lists the aims: decisions based on reliable data, removal of pending applications containing fraudulent data, withdrawal of approvals that rest on such data, and protection of the public from affected products. Companies seeking to restore FDA's confidence were expected to run a credible internal review led by qualified, unbiased people, alongside FDA's own audits.

The Generic Drug Enforcement Act of 1992

Congress went further. H.R. 2454 passed the House in October 1991, passed the Senate with amendments on April 10, 1992, and was signed on May 13, 1992, as Public Law 102-282². Its findings state that “there is substantial evidence that significant corruption occurred in the Food and Drug Administration's process of approving drugs under abbreviated drug applications.” The core of the law is debarment, now at 21 U.S.C. 335a³, with money penalties at 21 U.S.C. 335b⁴.

A debarred individual may not provide services “in any capacity” to a company with an approved or pending drug application. Every application must certify that the applicant did not and will not use a debarred person, and a generic application must also list relevant convictions from the previous five years. The law also gave FDA authority to withdraw ANDA approvals obtained through bribery or fraud. The statute requires FDA to publish each debarment in the Federal Register and keep a public list updated at least quarterly, which it does as the FDA Debarment List (Drug Product Applications)⁷.

Where the rules stand now

Integrity controls built between 1990 and 1992 are still the frame for generic oversight, alongside the user-fee-funded inspection program described in our GDUFA explainer and the manufacturing rules in CGMP explained. Contamination cases such as the 2008 heparin crisis later tested a different part of the system, the foreign supply chain.

Congress has amended the debarment section several times since 1992. The most recent change listed in the U.S. Code notes³ came in October 2018, when Public Law 115-271 added debarment from importing drugs for people convicted of drug-import felonies or found to have a pattern of importing certain adulterated or misbranded drugs.