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Mr. DEARMENT. Thank you very much.

Senator Roth. At this time I will ask for panel 2, Kevin Moley, the Assistant Secretary for Management and Budget, Department of Health and Human Services, who will be accompanied by Michael J. Astrue, who is General Counsel of the Department of Health and Human Services.

Mr. Moley, Mr. Astrue, it is a pleasure to have you here today The Chairman will be here in just a few minutes, but I would ask you to proceed with your opening statement. TESTIMONY OF KEVIN E. MOLEY, ASSISTANT SECRETARY FOR


Mr. MOLEY. Thank you very much, Senator. I have a rather lengthy prepared statement which has been given to the Committee. I would like to waive reading of that. I understand how important the questions you have for us are. I would, however, just like to take a moment to refer back to Inspector General Kusserow's testimony of October 3rd of last year when he spoke in respect to the Federal Managers Financial Integrity Act.

At that time he indicated that there was considerable reluctance in the Department of Health and Human Services to come forward with material weaknesses and, in fact, in fiscal years 1987 and 1988 only 8 and 13 material weaknesses were presented in that process. In a department as large as the Department of Health nd Human Services, over 110,000 people, expected expenditures of $464 billion, clearly there are more problems than 8 or 13 in any given year.

In fact, this past year we have reported some 24 material weaknesses, and I can assure this Committee that in future we will probably be reporting even more material weaknesses. The fact is that we regard this process as one in which we are asking our managers to be proactive, to come forward with problems in order that they might be fixed. We recognize that, in respect to the problems that were uncovered at HUD, it is not enough simply to come forward with the problems. They not only have to be brought out, they cannot be forgotten. So it is our intention, and we have the full support of Secretary Sullivan and Under Secretary Horner, to find problems and not forget them but to fix them.

On that note, Senator, Chairman, I would be welcome to have your questions. I think Mr. Astrue has a statement.

Chairman GLENN. Mr. Astrue.

Mr. ASTRUE. Thank you, Mr. Chairman, I do have a brief statement to make.

Mr. Chairman, thank you for providing the Department of Health and Human Services with an opportunity to testify here today. The Department believes that there are few duties more important than protecting the safety of the American public through the vigorous enforcement of the Federal Food, Drug and Cosmetic Act. We spend considerable time and energy trying to improve our enforcement efforts, and we are currently conferring with the Office of Management and Budget on a major legislative proposal designed to strengthen our enforcement efforts. In addition, the

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Secretary has created an advisory Committee to assist him in improving and strengthening the FDA. This Committee will be chaired by Dr. Charles Edwards, a former FDA Commissioner and Assistant Secretary for Health and will be composed of equally distinguished members.

The Department did not expect the Secretary's July 24, 1989 delegation of certain criminal authorities to be a controversial part of its efforts to address forcefully the problems in the generic drug evaluation process. At the time, we viewed the delegation as essentially a continuation of principles of FDA-IG cooperation, as reflected in the January 1989 agreement signed by Commissioner Young and Inspector General Kusserow. As concern about generic drugs mounted, we wanted to be sure that we had taken every possible step to ensure the integrity of the process.

Shortly after the delegation was signed, officials at the Department of Justice raised concerns about the delegation. These concerns provoked a series of discussions about the legality of the delegation and then a series of discussions in which we discussed ways in which the Justice Department would manage these investigations.

When the Department was advised that the Department of Justice was not committed to defending the delegation, we became concerned that the delegation would undermine its original purpose—the swift and effective investigation and prosecution of wrongdoers. Moreover, the Secretary believed that the delegation could be withdrawn at that time without damaging the integrity of or public confidence in the generic drug evaluation process. He had at the time been assured that the FDA had determined that the safety problems were not of the magnitude previously feared and that the Justice Department stood ready to take whatever steps were required for effective enforcement of the law. Accordingly, the Secretary concluded that the only responsible decision was to withdraw the delegation.

On December 28, 1989, Secretary Sullivan withdrew the delegation, effective January 29, 1990. Since that time, the Inspector General has referred about 53 cases to the Justice Department's Office of Consumer Litigation, and has withdrawn from about 45 joint investigations, most of which involved either the FBI or the Customs Service. In addition, he is preparing to refer up to 40 cases to the Department of Justice. It should be noted, however, that most of these cases do not involve generic drugs, but rather illegal distribution of steroids, illegal distribution of counterfeit drugs, or violations of the Prescription Drug Marketing Act.

To date, the Department of Justice has referred 2 of these cases back to the FDA for additional investigation and evaluation. We anticipate that the Justice Department will refer additional cases to the FDA and to the Inspector General, and that it will also devote substantial investigative resources of its own to many of these cases.

Mr. Chairman, I have concluded my prepared remarks and will be happy to respond to your questions.

Chairman GLENN. Very good. Mr. Astrue, this recommendation of delegation of felony investigative authority to the IG was recom

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mended by you, the IG, and then FDA Commissioner Young; is that correct?

Mr. ASTRUE. Yes, Mr. Chairman.

Chairman GLENN. Did any of these officials ever invite the Justice Department to give an opinion or pass judgment on the legality of that delegation?

Mr. ASTRUE. Not to my knowledge, Mr. Chairman.

Chairman GLENN. Without that request, did the Department of Justice just invite itself in to give that opinion?

Mr. ASTRUE. I was contacted by the Department of Justice relatively shortly after the signing of the delegation. I am not sure of the exact time frame, but I would say within about 10 days.

Chairman GLENN. Well, we had assurances that the legal opinion limiting the Labor Department IG would not be applied across the board. Did they ever make comment on that, on their promises to us that this was going to be for DOL only?

Mr. ASTRUE. Well, strictly speaking, I think the March 9 opinion does apply only to the Department of Labor. We took that position, and I think it is clear-I believe it is Footnote 13 of the OLC opinion-that it explicitly kept open HHS issues. Certainly part of our thinking was that the opinion did not, strictly speaking, apply to HHS.

Chairman GLENN. Has your department come under pressure from OMB to go along with the Justice Department views on delegation?

Mr. ASTRUE. Not to my knowledge, Mr. Chairman. My understanding is that there was relatively minimal contact with OMB. I, myself, did not speak to OMB on this issue until fairly recently.

Chairman GLENN. Well, we were told that a senior person over at OMB had told another senior HHS official—I won't put names to these—that the HHS was not being a team player and not going along with Justice; is that your opinion of what happened?

Mr. ASTRUE. My understanding is that we got general encouragement to resolve this issue from various White House and OMB officials. Any time there is a disagreement before departments, I think it is a matter of legitimate concern.

Chairman GLENN. Is it your opinion that Secretary Sullivan did what he should have done in this case? Mr. ASTRUE. Yes, I agree with Secretary Sullivan's decision.

Ι Chairman GLENN. What is his attitude now? You may not be able to speak for him. I guess I should ask him, but is he unrepentant about this? I will put it that way.

Mr. ASTRUE. Well, certainly Secretary Sullivan believed at the time that he signed the delegation that he was doing the right thing. I believe also at the time that he withdrew the delegation, he also believed he was doing the right thing.

Secretary Sullivan's only interest in this matter is to try to ensure the most effective enforcement of the Federal Food, Drug and Cosmetic Act. Clearly, in order to enforce the Act we need the cooperation of the Department of Justice, and we are currently reexamining the situation.

Chairman GLENN. Do you feel that delegation was unlawful?
Mr. ASTRUE. Clearly, I advised the Secretary on or around July

Chairman GLENN. Well, I agree with you, and yet that is the way

I the thing is being interpreted now.

In your view, now must the IG seek approval to proceed from the Justice Department in every case?

Mr. ASTRUE. No, it is not my view that he has to seek the approval of the Justice Department to proceed in every case. It is not my understanding that it is the IG's view that he is legally required to do so. However, it is my understanding, given the fact that he has some confusion as to what the Justice Department's views are on the scope of his authority, as a matter of prudence, he is referring all but the most clear cut cases over to the Justice Department.

Chairman GLENN. Let's set up just a little scenario. Let's say we have an Inspector General and he has someone he wants to subpoena. The defense attorney argues the IG isn't authorized to subpoena his client's documents based on the Justice Department legal opinion. In fact, this situation has already occurred, as you are probably aware, in a Medicare secondary payer case.

Now, in cases like that is the IG going to have to go to Justice and get an approval for a subpoena in every case?

Mr. ASTRUE. No, I don't think that he is going to have to get approval for a subpoena in every case. However, in cases-

Chairman GLENN. What would be your counter argument to a defense attorney who says to the IG that he isn't authorized to subpoena his client?

Mr. ASTRUE. My advice to a defense attorney?

Chairman GLENN. No, your advice to the IG who has a defense attorney who tells him, you can't serve a subpoena on my client.

Ms. ASTRUE. Clearly we are trying to work with the Department of Justice to only proceed in cases in which the Department of Justice will be prepared to defend our actions if they are challenged, and that's an ongoing process now.

Chairman GLENN. And do it in a way in which they will defend you, which they have said they would not do if you violated what they said should be done, right?

Mr. ASTRUE. We are checking with them very carefully on all these categories of cases, yes.

Chairman GLENN. Did Mr. Barr at the Justice Department tell your department that it must pull the delegation pursuant to the OLC opinion?

Mr. AsTRUE. Mr. Barr and a variety of Justice Department officials did advise the Department that they thought it appropriate to pull the delegation. Strictly speaking, they didn't say that the March 9 opinion was definitive in terms of our Department. However, clearly, the type of analysis that they brought to bear in the March 9 opinion was similar to the analysis that was reflected in the views that they expressed to us.

Chairman GLENN. Did this carry along with it the implication that if your people got in trouble that DOJ, Department of Justice, would not defend them?

Mr. ASTRUE. Yes, I believe so.
Chairman GLENN. That is pretty good coercion, I would say.

What rationale did Justice give? What reasons? Why did they want the delegation pulled?

Mr. ASTRUE. Mr. Chairman, they indicated that they didn't feel that the Secretary by means of that delegation could provide the Inspector General with any additional legal authority.

Chairman GLENN. Well, that is where I just fall apart on this whole thing. I cannot understand the Department of Justice, that is supposed to be out there rooting out all these things, I just don't see yet why they don't welcome what the IGs are doing in this regard and back them up instead of trying to hamstring them. I know they still have their nose out of joint over there because we put an IG into the Department of Justice last year and that irritated everybody, so maybe this is their way of trying to get back at us with the IG law, I don't know.

But it is very disconcerting when we have IGs who I think basically across the length and breadth of Government over the last 11 years have basically done a very, very fine, admirable job. They have done a tremendous job, and I would think Justice would want to support them instead of trying to hamstring them.

Senator Roth.

Senator Roth. Well, Mr. Chairman, I have to say that with all due respect, I think there is a serious question as to what can and should be delegated to the IG. I think it depends in part as to what one views to be their principal task. Now, basically-and I am not this familiar, I regret to say, with the case, so I may be going over something that has already been said-but essentially the Secretary delegated to the IG what responsibility?

Mr. ASTRUE. Authority to conduct criminal investigations under certain provisions of the Federal Food, Drug and Cosmetic Act. Primarily it covers four types of cases; fraud in the drug or device approval process, enforcement actions under the Prescription Drug Marketing Act, enforcement actions under the statute forbidding distribution of counterfeit drugs, and also illegal distribution of anabolic steroids.

Senator Roth. And ordinarily it would be the responsibility of who to make those investigations to ensure compliance with that law?

Mr. ASTRUE. Senator, as a general matter, it has been the responsibility of the Food and Drug Administration. Historically there has been some Inspector General involvement in this area. This level of involvement was increased in response to a 1987–

Senator Roth. So does that predate the independent IG? Is that what you are saying?

Mr. ASTRUE. The authority-well, at least one of those statutes is fairly recent, the Prescription Drug Marketing Act is quite recent. And there was much less of a problem in some of these other areas prior to enactment of the original IG legislation.

I don't think anabolic steroids were the problem 15 years ago that they are now.

Senator Roth. I guess a basic concern that I have as an original author of the IG Act is that the intent of the IG was to oversee the work of the agency to ensure that it was done appropriately and fully. Now, my concern here--and I am not sure, Mr. Chairman, where I am going to ultimately come down-but my concern here is that if the IG, itself, does the investigation, then there is nobody

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