STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF HEALTH,
Petitioner,
vs.
DISCOVERY EXPERIMENTAL AND DEVELOPMENT, INC.,
Respondent.
)
)
)
)
) Case No. 93-6184
)
)
)
)
)
)
DISCOVERY EXPERIMENTAL AND DEVELOPMENT, INC.,
Petitioner,
vs.
DEPARTMENT OF HEALTH,
Respondent.
)
)
)
)
) Case No. 95-2255
)
)
)
)
)
)
DEPARTMENT OF HEALTH, BUREAU OF ) PHARMACY SERVICES, )
)
Petitioner, )
)
vs. )
) JAMES T. KIMBALL; JOSEPHINE ) KIMBALL; TONI KIMBALL; ) DISCOVERY EXPERIMENTAL AND ) DEVELOPMENT, INC.; DISCOVERY ) EXPERIMENTAL AND DEVELOPMENT OF ) MEXICO, N.A.; DISCOVERY ) DISTRIBUTING, INC.; DISCOVERY ) TOUR WHOLESALERS, INC.; GLOBAL ) HEALTH INFORMATION/MEDICAL ) RESEARCH INSTITUTE, INC.; ) ASTAK, INC.; and B&B FREIGHT ) FORWARDING, INC., )
)
Respondents. )
Case No. 97-3836
)
DEPARTMENT OF HEALTH,
Petitioner,
vs.
DISCOVERY EXPERIMENTAL AND DEVELOPMENT, INC.,
Respondent.
)
)
)
)
) Case No. 98-4364
)
)
)
)
)
)
RECOMMENDED ORDER
Pursuant to notice, these consolidated cases were heard by Carolyn S. Holifield, Administrative Law Judge of the Division of Administrative Hearings, beginning on November 14, 2000, in Tampa, Florida. The proceedings continued on June 11 through 15, 2001; September 18, 20, 21, and 24 through 28, 2001; and
December 3 through 7 and 10 through 13, 2001, in Bushnell, Florida.
APPEARANCES
For Petitioner: Robert P. Daniti, Esquire
Department of Health
4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1703
For Respondents James T. Kimball1, Discovery Experimental and Development, Inc., and ASTAK, Inc.:
James T. Kimball, Qualified Representative2 No. 38591-018
FCI Yazoo City
Post Office Box 5000
Yazoo City, Mississippi 39194
For Respondents Josephine Kimball and Discovery Tour Wholesalers, Inc.:
R. Elliott Dunn, Jr., Esquire3 29949 State Road 54, West Wesley Chapel, Florida 33543
For Respondents Discovery Distributing, Inc., Discovery Experimental and Development of Mexico, N.A., B & B Freight Forwarding, Inc., and Global Health Information/Medical Research Institute, Inc.:
No Appearance4 For Respondent Toni Ann Kimball:
Toni Ann Kimball, pro se5 3122 49th Avenue, North
St. Petersburg, Florida 33714
For Respondents Josephine Kimball and Discovery Tour Wholesalers, Inc.:
Rolando J. Santiago, Esquire6 Discovery Tour Wholesalers, Inc. 35205 State Road 54
Zephyrhills, Florida 33541 STATEMENT OF THE ISSUES
The issues in these consolidated cases are: (1) whether Petitioner, Department of Health, properly denied Respondent Discovery Experimental and Development, Inc.'s, application for a drug manufacturer's permit or, if the permit is deemed issued, whether the permit remains valid, and, if so, whether the Department may revoke such permit; (2) whether Respondents committed the offenses alleged in the Administrative Complaints and, if so, what administrative fine should be imposed;
whether the Department of Health properly denied Respondent
Discovery Experimental and Development, Inc.'s, application for an over-the-counter permit or any other approval; and
whether the Department of Health properly denied Respondent Discovery Experimental and Development, Inc.'s, request to register its Silvicidal ES (extra strength) as a drug.
PRELIMINARY STATEMENT
On or about August 23, 1993, the Department of Health's predecessor agency, the Department of Health and Rehabilitative Services, filed an Administrative Complaint that sought to deny or revoke the application of Respondent Discovery Experimental and Discovery, Inc., for a drug manufacturer's license. After a timely request for hearing was filed, the matter was forwarded to the Division of Administrative Hearings ("Division") and was assigned DOAH Case No. 93-6184. Subsequently, the Department of Health filed two other Administrative Complaints, which were referred to the Division and assigned DOAH Case Nos. 95-2255 and 97-3836. The last of these consolidated cases was forwarded to the Division on or about October 7, 1998, and assigned DOAH Case No. 98-4364. The four cases were consolidated by Order issued December 4, 1998.
As noted above, DOAH Case No. 93-6184 concerns the Department of Health's predecessor agency, the Department of Health and Rehabilitative Services', intent to deny Discovery Experimental and Development, Inc.'s, application for a drug
manufacturer's permit or, if such license or permit has been granted, the Department of Health's intent to revoke such permit.
Case No. 95-2255 concerns the Department of Health's intent to deny the application of Discovery Experimental and Development, Inc., to be permitted as an over-the-counter drug manufacturer and Discovery Experimental and Development, Inc.'s, petition for an administrative hearing.
Case No. 97-3836 relates to and supersedes the Administrative Complaints filed in Case Nos. 93-6184 95-2255 and includes additional Respondents. Through the Administrative Complaint, the Department of Health seeks to deny the application or revoke the drug manufacturer’s permit of Respondent Discovery Experimental and Development, Inc., and to deny said Respondent an over-the-counter manufacturer’s permit and a free-sale certificate for Silvicidal ES. Moreover, in these cases, the Department of Health seeks to impose a fine in excess of a million dollars for alleged violations by Respondents of Chapter 499, Florida Statutes, the Florida Drug and Cosmetic Act.
Case No. 98-4364 concerns the Department of Health's intent to deny the registration by Discovery Experimental and Development, Inc., of the Silvicidal ES (extra strength) and
Discovery Experimental and Development, Inc.'s petition for an administrative hearing.
The consolidated cases were set for hearing several times but were placed in abeyance for an extended time. The reason for the abatement was to allow related civil actions in state circuit court that the original parties, the Department of Health, James T. Kimball, and Discovery Experimental and Development, Inc., initiated in August 1993, just before the Department of Health initiated this administrative proceeding, to determine facts material to the instant case. The Final Judgment in the circuit court case, Department of Health and Rehabilitative Services v. Discovery Experimental and Development, Inc., et. al., Case Nos. CA93-3991-B and
CA 93-4287-B, Sixth Judicial Circuit Court of Pasco County, Florida, was issued March 2, 2000. Upon issuance of the Final Judgment by the circuit court, the final hearing in these consolidated cases was set for hearing and conducted as noted above.
The Department of Health presented the testimony of five witnesses, including two expert witnesses qualified as experts in pharmacy and in federal and Florida drug regulation. The Department of Health/Petitioner introduced 63 exhibits, of which Petitioner's Exhibits 19 and 20 were marked for identification only, while the other exhibits were admitted in evidence.
Respondents Discovery Experimental and Development, Inc., and ASTAK, Inc., presented the testimony of nine witnesses and introduced 52 exhibits, including Exhibits 5A, 6A, and 6B. Respondents Discovery Experimental and Development, Inc., and ASTAK, Inc.'s Exhibits 1 and 16 were marked for identification only, and Exhibits 5, 15, 43, 46, and 49 were proffered. The remaining exhibits of Respondents Discovery Experimental and Development, Inc., and ASTAK, Inc., were admitted in evidence. These Respondents also late-filed four additional exhibits, which have been identified as Exhibits 50 to 53. However, Exhibits 2 and 13, which were to be late-filed were not filed with the Division.
Respondents Josephine Kimball and Discovery Tour Wholesalers, Inc., presented three witnesses and offered ten exhibits, all of which were admitted in evidence except Respondents' Exhibit 1, which was marked for identification only. These Respondents late-filed five additional exhibits, which have been identified as Respondents Josephine Kimball's and Discovery Tours Wholesalers, Inc.'s Exhibits 11 to 15.
Respondents Discovery Distributing, Inc., B & B Forwarding, Global Health Information/Medical Research Institute, Inc., and Discovery Experimental and Development-Mexico, N.A., were not represented at the hearing and no testimony or documentary evidence was presented on their behalf.
Despite being incarcerated throughout the final hearing, the Division has afforded Mr. Kimball, as the qualified representative of Respondents Discovery Experimental and Development, Inc., and ASTAK, Inc., every opportunity to subpoena witnesses, examine witnesses, cross-examine witnesses, have exhibits, introduce exhibits, and take necessary breaks.
The Division also conducted the final hearing fully accommodating the limits on Mr. Kimball's availability by telephone in accordance with the schedule mandated by FCC Coleman. That federal facility and its warden and staff were very gracious to the undersigned with regard to making
Mr. Kimball available at the appointed times to expedite the final hearing, as much as practically possible.7
The Motion to Dismiss filed on or about September 17, 2001, by Respondent Discovery Experimental and Development, Inc., is denied based on the findings of fact and conclusions of law in this Recommended Order.
At the conclusion of the hearing, the undersigned agreed to leave the record open until December 31, 2000, to permit the parties to late-file several exhibits. This time was further extended upon the undersigned's granting requests of the parties for such extensions. Those late-filed exhibits referenced above are part of the record of this proceeding.
Also at the conclusion of the hearing, the time set for filing proposed recommended orders was 30 days after the complete transcript was filed. The last volumes of the
volume Transcript were filed with the Division on April 15, 2002.8 Upon the request of the parties, the time for filing proposed recommended orders was extended several times.9
Respondent Toni Ann Kimball filed a Proposed Recommended Order on July 25, 2002, and an Amended Proposed Recommended Order on July 30, 2002. The Department of Health filed its Proposed Recommended Order on September 30, 2002. Respondents Discovery Experimental and Development, Inc., and ASTAK, Inc., filed their Proposed Recommended Order on October 15, 2002, and an Amended Proposed Recommended Order on October 22, 2002.
Respondents Josephine Kimball and Discovery Tour Wholesalers, Inc., filed a Proposed Recommended Order on December 12, 2002. The aforementioned Respondents who failed to appear at hearing did not submit proposed recommended orders. All post-hearing submittals have been considered in preparation of this
Recommended Order.
FINDINGS OF FACT
The Department of Health ("Department"), through its Bureau of Pharmacy Services ("Bureau"), is the state agency responsible for administering and enforcing the Florida Drug and Cosmetic Act, Chapter 499, Florida Statutes, which includes the
regulation of the manufacture, promotion, and distribution of prescription drugs.
James T. Kimball ("Mr. Kimball"), a former Respondent in this case and who is now incarcerated at the federal facility FCI Yazoo City, formerly resided at 6036 Country Club Road, Wesley Chapel, Pasco County, Florida 33544.
At all times relevant to this proceeding, Respondent Discovery Experimental and Development, Inc. ("DEDI"), an alter ego of Mr. Kimball, was a Florida corporation, whose principal place of business was 29949 State Road 54 West, Wesley Chapel, Florida. The April 14, 1992, financial statement of Mr. and Mrs. James T. Kimball indicated that Mr. and Mrs. Kimball jointly owned 90 percent of the stock of DEDI and valued that interest at $1,000,000.
Respondent Discovery Experimental and Development of Mexico, N.A. ("Discovery-Mexico"), existed in name only and was really a front for DEDI as noted elsewhere in these findings.
At all times relevant to this proceeding, Respondent Discovery Distributing, Inc. (“DDI”), an alter ego of
Mr. Kimball, was a Florida corporation whose principal place of business was 29949 State Road 54 West, Wesley Chapel, Florida.
At all times relevant to this proceeding, Respondent ASTAK, Inc. (“ASTAK, Inc.”), an alter ego of Mr. Kimball, was a
Florida corporation whose principal place of business was 29949 State Road 54 West, Westley Chapel, Florida.
Respondent B & B Freight Forwarding, Inc. ("B & B"), an alter ego of Mr. Kimball, was a Florida corporation whose principal place of business was 29949 State Road 54 West, Wesley Chapel, Florida, from 1991 through July 1994. Subsequently,
B & B moved to other locations.
At all times relevant to this proceeding, Respondent Josephine Kimball (“Mrs. Kimball”), wife of Mr. Kimball, resided and continues to reside at 6036 Country Club Road, Wesley Chapel, Pasco County, Florida 33544.
Respondent Discovery Tour Wholesaler, Inc. ("TOURS"), is a Florida corporation whose principal place of business is 29949 State Road 54 West, Wesley Chapel, Pasco County, Florida. Mrs. Kimball is the president and majority owner of TOURS as well as its only full-time employee.
TOURS owns the property located at 29949 State Road 54 West, in Wesley Chapel, Florida. This property includes a building with over 10,000 square feet and six acres of land, with 440 feet abutting State Road 54. TOURS acquired this real estate from Mr. and Mrs. Kimball in 1987 or 1988 at no cost to TOURS. The Kimballs acquired this real estate from an individual who holds a mortgage that TOURS pays at $3,350 per month.
TOURS pays the mortgage on the property located at 29949 State Road 54 West, Wesley Chapel, Florida, from the rent it receives from DEDI and ASTAK, Inc., and at the times noted below, from DDI and B & B. Respondents DEDI, ASTAK, Inc., DDI and B & B paid the rent to Tours from their income.
According to the April 14, 1992, financial statement of Mr. and Mrs. Kimball, Mrs. Kimball owned 83 percent of the stock of Tours jointly with her husband and valued the stock at a minimum of $383,460 and valued the real property at $800,000 less the mortgage.
Respondent Toni Ann Kimball ("Ms. Kimball") is the daughter of Mr. and Mrs. Kimball and resides at 3122 49th Avenue, North, St. Petersburg, Florida 33714-3018. At one time, Ms. Kimball was a part-time employee of B & B.
At all times relevant to this proceeding, Respondent GLOBAL Health Information/Medical Research Institute ("GLOBAL"), was a Florida corporation whose principal place of business was 15310 Amberly Drive, Suite 250, Tampa Palms in Tampa, Florida. GLOBAL was set up as a nonprofit organization at Mr. Kimball's direction, and Mr. Kimball was responsible for the executive direction of GLOBAL. GLOBAL produced literature that was used as a means of getting out information about various products manufactured and/or distributed by one or more of Respondent corporations.
At all times relevant to this proceeding, Mr. Kimball operated corporate Respondents DEDI, ASTAK, Inc., DDI, B & B, and GLOBAL as his alter ego. Mr. Kimball utilized each of the corporate Respondents that served as his alter ego as he saw fit. Respondents DEDI, DDI, ASTAK, Inc., and B & B were used interchangeably and often assets were transferred from one to another.
The Department first interacted with Mr. Kimball in the fall of 1990 when he contacted the Department to request information regarding the types of permits he would need to research using sulfa Dimethyl ether. Mr. Kimball also indicated that he was interested in researching generic drugs. As a result of this conversation, a local Department agent was sent to visit DEDI's facility at 29949 State Road 54 West, Wesley Chapel, Florida ("business establishment" or "Wesley Chapel business establishment"), to determine how he was using the ether. Following the visit, the agent reported to the Bureau's drug agent supervisor, now program manager, Gregg Jones, R.Ph. ("Agent Jones"), that Mr. Kimball was interested in producing a generic or improved version of an already approved drug called Eldepryl.
Eldepryl is and at all times relevant to the proceeding was, an approved prescription drug, approved by the Food and Drug Administration ("FDA"), and marketed in tablet
form for the treatment of Parkinson's Disease. Eldepryl has as its active ingredient, Selegiline. In the fall of 1990, Eldepryl was the only form of Selegiline that was approved by the FDA.
In or about November 1990, Agent Jones inspected DEDI's space in the business establishment. During that inspection, Mr. Kimball indicated to Agent Jones, as he had the Department agent who had previously visited the business establishment, that he wanted to produce a generic and highly improved form of the product, Eldepryl. According to
Mr. Kimball, he wanted to make the product available as an over- the-counter product, without a prescription, for the condition of life extension or life enhancement.
In response, Agent Jones notified Mr. Kimball, DEDI's and DDI's principal, that since the FDA had approved the Selegiline-based drug Eldepryl as a prescription drug, DDI's Selegiline-based product was also a prescription drug and, as such, required FDA new drug approval in order for DEDI or DDI to produce and/or market that product. Agent Jones further advised Mr. Kimball that he would need to be licensed by the State of Florida. During the November 1990 inspection, Agent Jones provided DEDI and/or DDI, through Mr. Kimball, with a copy of the Florida Drug and Cosmetic Act, Chapter 499, Florida Statutes, and the rules adopted under the Act.
The Department, through the Bureau as configured under its predecessor, the Florida Department of Health and Rehabilitative Services ("HRS"), began its investigation of DEDI and DDI, and their principal, Mr. Kimball, in 1990.
Agents of the Bureau learned that in December 1990, Wes Sargenson, a reporter with WFLA Channel 8 TV, a television station serving the Tampa, Florida, viewing area, had interviewed Mr. Kimball on the air. The subject of the television interview was the promotion by DDI of a drug which was not approved by the FDA.
During the publicly televised interview, DDI, through Mr. Kimball, voiced the intention to make and sell a new drug, not approved by the FDA, he called Kimbellac Vitamin C Plus ("Kimbellac"). The active ingredient in the product was Selegiline.
DDI, through Mr. Kimball, further expressed the intention to sell Kimbellac, an unapproved drug, in spite of FDA opposition, which he acknowledged during the interview.
A promotional letter by DDI and a label on the bottle of Kimbellac shown during the interview claims that Kimbellac can treat or mitigate diseases in humans that are not amenable to self-treatment, but rather require the intervention of and prescription from a physician. The DDI promotional letter states in part the following:
The side effects of Kimbellac are negligible at most . . . Kimbellac is in essence the same as Eldepryl, also known as Deprenyl and in purer form . . . It is proven that this product enhances sex drive in older people. It has been proven and again was in the edited F.D.A. report the antidepressant qualities. Tests have proven Kimbellac will help some people that have contracted Alzheimer's disease.
Despite these claims, the FDA had not approved Kimbellac as safe and effective for such medicinal purposes.
Mrs. Kimball, at her husband's request, recorded a telephone message that was written by Mr. Kimball. The recorded message explained how persons could place orders for Kimbellac. However, it is not clear that Mrs. Kimball knew that the product being promoted in the recording was an unapproved drug.
When Mr. Kimball had the television interview and directed his wife to make the promotional recording, neither the FDA nor HRS had approved Kimbellac. This fact was acknowledged in a letter from DDI to customers which stated, "[T]he receipt of this letter and your returned unprocessed check, means that the F.D.A. and the Florida Health and Rehabilitative Services (H.R.S.) has refused to allow you to purchase Kimbellac by refusing to allow us the right to sell it to you."
As a result of the actions of DDI, through
Mr. Kimball, to promote and sell Kimbellac, in March 1991, the Department, through its predecessor, HRS, filed an
Administrative Complaint, seeking to impose a fine of $55,000 against DDI and Mr. Kimball. The Administrative Complaint charged DDI and Mr. Kimball with manufacturing, advertising or otherwise promoting and distributing a new unapproved drug containing selegiline. On September 26, 1991, HRS resolved the matter by Consent Final Order. Mr. Kimball and DDI did not admit to any of the violations, but they agreed to certain "acceptable corrective actions."
The Stipulation for Settlement, adopted and incorporated into the Consent Final Order, provides in pertinent part the following:
Discovery [DDI] is located at 29949 State Route [sic] 54 West, Wesley Chapel, FL 33543.
Jay Kimball [Mr. Kimball] is president of Discovery [DDI].
* * *
HRS, Discovery [DDI], and Jay Kimball [Mr. Kimball] agree that the following actions shall constitute acceptable corrective actions in response to concerns expressed by HRS:
HRS agrees not to file proceedings against Discovery [DDI] under Chapter 499, Florida Statutes, or otherwise seek remedy for any purported violations of Florida law as alleged in the March 7, 1991 Administrative Complaint.
Discovery [DDI] and Jay Kimball [Mr. Kimball] agree not to distribute the new drug Selegiline HCL, alone or in
combination with other substances, within the state of Florida without permits required pursuant to Chapter 499, Florida Statutes.
Discovery [DDI]and Jay Kimball [Mr. Kimball] agree not to manufacture the new drug Selegiline HCL [unless and until a permit to manufacture a legend drug has been obtained.]
Discovery [DDI] and Jay Kimball [Mr. Kimball] agree to allow inspection by HRS of any establishment owned or maintained by Discovery [DDI] and/or Jay Kimball [Mr. Kimball] in which drugs are manufactured or held.
Discovery [DDI] and Jay Kimball [Mr. Kimball] agree not to advertise and offer for sale a drug advertised to have an effect on[:]
High Blood Pressure
Mental Disease
Sexual Impotence
Extension of life expectancy
Depression
or on any other of the diseases and conditions listed in ss. 499.0054, F.S.
Discovery [DDI] and Jay Kimball [Mr. Kimball] acknowledge that they are aware of the provisions of [S]ections 499.005(4), 499.005(5), 499.005(6), 499,005(11), 499.054(3), 499.0054(6), 499.011, and 499.023, Florida Statutes.
Notwithstanding the Stipulation for Settlement and the Consent Final Order referenced in paragraphs 27 and 28, in the spring of 1991, Respondent DEDI, through Mr. Kimball, had developed Kimbellac (Deprenyl) in liquid form, and called this new unapproved drug Liquid Deprenyl Citrate.
The Liquid Deprenyl Citrate (“DEDI-brand liquid deprenyl citrate”) is composed of selegiline, the active drug ingredient, in addition to citra-gel, the inactive component. Selegiline is also referred to as deprenyl.
Soon after the Consent Final Order referenced in paragraphs 27, 28, and 29 was issued, it came to the Department's attention that a newsletter, Inside Health, was being placed in various establishments in the Tampa area. The 1991 Spring edition and the 1991 Fall edition of Inside Health were published by DDI and paid for by Respondents DDI and ASTAK,
Inc.
DDI used the Inside Health newsletter to market the
benefits of deprenyl to consumers and to recommend dosages. For example, the Fall 1991 edition of Inside Health, included an article titled "Discovery's Recommended Dosages for Deprenyl." The article provided two charts regarding the dosages for deprenyl, one for humans and the other for animals. The chart listing the dosages of deprenyl for humans provided the
following:
People with Alzheimer's Disease-10mg twice
daily during the day, early AM & Early afternoon
People with Parkinson's Disease - consult with a physician familiar with Parkinson's Disease
If you are using Deprenyl to improve quality of life, as a sex stimulant, to prolong life, or a preventative for Parkinson's or Alzheimer's disease use the chart above for proper dosage
Attached to Inside Health was a form entitled, "How to Order Deprenyl." The order form, developed by DEDI, directs customers to purchase the DEDI-brand liquid deprenyl citrate from its alter ego, Discovery-Mexico, at $75.00 for a one-half ounce bottle, plus $18.00 for shipping and handling. To place an order, the form directs customers to call either B & B at the business establishment in Wesley Chapel, Florida, or to contact the B & B in San Diego, California, near Tijuana, Mexico. The order form indicates that to expedite orders, mail should be sent to Discovery-Mexico, c/o B & B, Post Office Box 7178, Wesley Chapel, Florida.
The order form advises readers to call "Inside Health" at (813) 973-7704 to obtain the name of the nearest health food or nutrition center that could provide them with information on acquiring the DEDI-brand liquid deprenyl citrate. The telephone number listed in Inside Health was a number at the Wesley Chapel business establishment.
One or more employees of Respondents DEDI, ASTAK, Inc., and/or B & B, packaged Inside Health, along with "How to Order Deprenyl" forms, and shipped them for said Respondents to
stores that had agreed to promote the sale of DEDI-brand liquid deprenyl citrate.
Respondents DEDI and B & B, through promotional material, brochures, labels, and labeling, promoted and advertised DEDI-brand liquid deprenyl citrate as a new drug intended for the cure, mitigation, treatment, therapy, or prevention of disease in humans. Specifically, Respondents DEDI and B & B promoted this new, unapproved drug through brochures, bearing the DEDI logo, entitled Facts About Liquid Deprenyl and Updated Facts About Liquid Deprenyl Citrate. These brochures state that the DEDI-brand liquid deprenyl citrate has been proven effective for increasing life span and for the following conditions: depression, senile dementia, abolishing ulcer formation, sex drive dysfunction, Parkinson's disease, Alzheimer's disease, multiple sclerosis, ALS (Lou Gehrig's disease), and high blood pressure. A copy of one of these brochures was mailed out with each purchase of DEDI-brand liquid deprenyl citrate.
Contrary to the representations in the brochures, Facts about Liquid Deprenyl and Updated Facts About Liquid Deprenyl Citrate, the diseases on which the DEDI-brand liquid deprenyl citrate is claimed to be effective are serious diseases that require physician oversight to properly treat them. Moreover, the DEDI-brand liquid deprenyl citrate has serious
side effects, and its interactions with other drugs and foods make it unsafe if it is not prescribed under the direction and supervision of a physician. Clearly, based on the representations and claims in Facts About Liquid Deprenyl and Updated Facts About Liquid Deprenyl Citrate, Respondents DEDI and ASTAK, Inc., and B & B intended to sell the DEDI-brand liquid Deprenyl Citrate in such a manner as to make it an unapproved prescription drug.
Carol Vigue was employed as the secretary for DEDI from September 1991 through May 1993. While a secretary for DEDI, Ms. Vigue formatted the Facts About Liquid Deprenyl on a computer-publishing program at the business establishment in Wesley Chapel, Florida. During her employment with DEDI, there were several different versions of the brochure published, all of which were produced commercially and mailed to individuals as directed by Mr. Kimball.
On five occasions between August 1991 and
October 1993, the Department made undercover purchases of DEDI- brand liquid deprenyl citrate. In each instance, the Department requested and received DEDI-brand liquid deprenyl citrate by using instructions on the "How to Order Deprenyl" form developed by DEDI. The Department found these instructions at health food establishments in Florida, attached to the DDI newsletter, Inside Health. Pursuant to these instructions, the Department
sent each of its deprenyl purchase requests to the business establishment in Wesley Chapel, Florida, or to Post Office
Box 7178, Wesley Chapel, a post office box purchased by B & B.
Two of the canceled money orders that the Department submitted to Respondent B & B to purchase DEDI-brand liquid deprenyl citrate had the endorsement of James T. Kimball and the money for these purchases was deposited in bank accounts controlled by Mr. Kimball.
The Department received the DEDI-brand liquid deprenyl citrate that it had ordered in a location in Florida. Of the five orders received by the Department, the first of the undercover purchases was sent via United Parcel Service ("UPS") account #263-0X8, an account paid for by B & B.
The DEDI-brand liquid deprenyl citrate received by the Department through these undercover purchases had a return address in the San Diego, California, vicinity at business locations leased by Respondent B & B.
The DEDI-brand liquid deprenyl citrate received by the Department through these undercover purchases also came with brochures and directions for use as a drug. The purpose of this drug, as stated in the labels and labeling, is to affect the structure and function of the human body or to treat or mitigate diseases such as ". . . depression; learning, cognitive and motor functions; sense of well being; senile dementia;
increasing energy; pain reduction; abolishing ulcer formation; hormone release; inhibiting toxic free radicals; sex drive dysfunction; revival of dying brain cells; Parkinson's disease; Alzheimer's disease; increasing life span; multiple sclerosis; ALS (Lou Gehrig's Disease); blepharospasms; high blood pressure; stroke induced paralysis; and mental dysfunction."
The Department sent the DEDI-brand liquid deprenyl citrate obtained through each of its undercover purchases to the Crime Laboratory of the Florida Department of Law Enforcement (“FDLE”), and, in each instance, the DEDI-brand liquid deprenyl citrate tested as containing the active drug ingredient, selegiline.
On November 29, 1991, about a year after Mr. Kimball met with Agent Jones, DEDI applied to the FDA for approval of the DEDI-brand liquid deprenyl citrate as a new drug to treat Alzheimer’s disease. On April 3, 1997, the FDA issued a Final Order denying this application. The Final Order, published in the Federal Register, Vol. 62, No. 64, pages 15903-15914, Docket No. 94N-0171, detailed the reasons for the denial. According to the Final Order, the FDA refused to approve DEDI-brand liquid deprenyl citrate because it found that DEDI’s application lacked essential information to support approval. Specifically, the FDA found that DEDI provided insufficient information for the FDA to determine that DEDI’s liquid deprenyl citrate was safe
for use or that it would have the effect it purported to have under the conditions of use stated in DEDI’s proposed labeling. Additionally, the FDA found that DEDI did not submit any supporting information on the safety or efficacy of its new drug but instead relied only on data about other selegiline-based drugs. Finally, the FDA found that DEDI’s drug manufacturing facilities at the Wesley Chapel business establishment did not comply with the FDA's current good manufacturing practice standards.
The FDA and the Department issued warning notices to DEDI regarding deprenyl. The FDA and the Department warned DEDI through these notices that DEDI could not, directly or indirectly through a company in a foreign country, introduce deprenyl in interstate commerce in the United States and Florida. DEDI received these notices prior to submission of its application to the FDA and after the FDA issued a Final Order denying approval of the DEDI-brand liquid deprenyl citrate, as well as times in between.
Almost 11 months after DEDI applied to the FDA for approval of the DEDI-brand liquid deprenyl citrate as a new drug to treat Alzheimer's disease, DEDI submitted to the Department an application for a permit as a drug manufacturer. The application was received by the Department on October 9, 1992,
but was neither approved nor denied by the Department within the 90-day period required by Section 120.60(2), Florida Statutes (1991). Accordingly, DEDI's application was approved as a matter of law, on or about January 20, 1993, which was 90 days after the receipt of DEDI's completed application by the Department.10
Pursuant to Section 499.01(3)(b), Florida Statutes (1993), DEDI manufacturer's permit that was issued by operation of law on January 20, 1993, "automatically expire[ed] 2 years after the last day of the anniversary month in which the permit was originally issued," unless DEDI initiated action to renew the permit. Therefore, DEDI's manufacturing permit was effective from January 20, 1993, until January 31, 1995. Although DEDI had a manufacturer's permit, the permit authorized DEDI to conduct only those activities authorized by Chapter 499, Florida Statutes. Such authorized activities did not include DEDI's selling or otherwise distributing unapproved drugs.
Prior to the expiration of the DEDI's manufacturer's permit, and after the Department's May 1993 inspection of the Wesley Chapel business establishment, discussed below, the Department filed an Administrative Complaint in which it sought to revoke DEDI's manufacturer's permit.
Between 1991, before DEDI had a manufacturer's permit, and 1999, after such permit expired, persons working for DEDI at
the Wesley Chapel establishment manufactured the freebase or active ingredient of DEDI-brand liquid deprenyl citrate. Other employees of Respondent DEDI at the Wesley Chapel business establishment manufactured the inactive ingredients for DEDI- brand liquid deprenyl citrate.
From August 1991 through May 12, 1993, Mr. Kimball, DEDI, and B & B implemented a scheme to enhance the distribution of the DEDI-brand liquid deprenyl citrate. A memorandum developed by DEDI entitled, "Big Profits In Deprenyl" ("Big Profits"), and mailed on occasion from the Wesley Chapel business establishment, explained how businesses could make commissions by displaying advertisements on how to order deprenyl. When a customer paid for an order of DEDI-brand liquid deprenyl citrate, his order form referenced the store number from which the customer got the order form. B & B then paid commissions to the store based on the number of DEDI-brand liquid deprenyl citrate purchases.
With regard to commissions, "Big Profits" indicated that participating stores would receive a profit of 25 percent for each bottle of DEDI-brand liquid deprenyl citrate ordered, using that particular store number. The cost of each bottle of DEDI-brand liquid deprenyl citrate was listed at $75.00 per
300 mg bottle, plus $18.00 for freight and handling. With regard to the cost, the form states, "This compares to Chinoin’s
Deprenyl (Eldepryl) that sells for $120.00 to $200.00, for sixty 5mg pills available by prescription only." "Big Profits" also stated that Discovery-Mexico would issue commission checks based on the amount of collected sales for the previous month.
Finally, "Big Profits" advised that the checks may be issued by banks outside the United States in United States dollars and would be designated as consulting fees.
The principal of DEDI and B & B directed the development of "Big Profits." For example, while a secretary for DEDI, Carol Vigue, typed "Big Profits" in accordance with instructions from DEDI's principal, Mr. Kimball. Consistent with those directives, "Big Profits" was on Discovery-Mexico's letterhead and listed the address as APDO Post No. 5049, Tijuana, B.C., Mexico. According to "Big Profits," in order to expedite calls or mail, individuals were advised to call 813- 973-7354 or 813-973-7437 for message forwarding. For expedited mail, customers were advised to mail orders to Discovery-Mexico, c/o B & B, Post Office Box 7178, Wesley Chapel, Florida 33543.
From at least 1991 until 1993, B & B employees were directed to mail "Big Profits" to health food stores that wanted to earn commissions for promoting the sale of DEDI-brand liquid deprenyl citrate.
DEDI and B & B operated consistent with "Big Profits" in that when a person ordered the DEDI-brand liquid deprenyl
citrate, the order always included a store number. B & B logged the sale with credit to that particular store and then paid a monthly commission to the store based on monthly sales of DEDI- brand liquid deprenyl citrate attributed to that store.
B & B maintained a database of all the stores and how many sales of DEDI-deprenyl were attributed to each store. Once a month B & B totaled all the sales of the DEDI-brand liquid deprenyl citrate for each of the stores to which it had assigned a store number pursuant to "Big Profits."
The money from the sale of the DEDI-brand liquid deprenyl citrate was usually deposited in the B & B Barnett Bank checking account in Florida. The money from the sales was then wired from the B & B Barnett Bank account to the California Commerce Bank so that B & B employees in California could write checks to pay the commissions to each store. The commission checks were typically written in San Diego, California, on the
B & B account at the California Commerce Bank. These checks for commissions were sometimes written by Respondent Ms. Kimball, who was a signatory on the B & B bank account at the California Commerce Bank in the San Diego, California, vicinity.
Louis T. Smith was an employee of B & B from 1991 until May or June of 1993, when he was employed by ASTAK, Inc. As an employee of B & B and ASTAK, Inc., Mr. Smith was familiar with the inner workings of the DEDI-brand liquid deprenyl
citrate sales and distribution enterprise of Respondents DEDI, B & B, and ASTAK, Inc.
When Mr. Smith worked for B & B, both B & B and DEDI initially sold DEDI-brand liquid deprenyl citrate by requesting that customers place orders by mail to B & B's Wesley Chapel Post Office Box 7178 in Wesley Chapel, Florida. These instructions were consistent with the ordering directions in "How to Order Deprenyl." Orders for the DEDI-brand liquid deprenyl citrate were sent to Wesley Chapel, Florida. Many of these orders were addressed to Discovery of Mexico, c/o B & B Freight Forwarding, Inc., at Post Office Box 7178, in Wesley Chapel, Florida.
Even though not shown on B & B's registration as a Florida corporation, DEDI, through its principal, Mr. Kimball, directed B & B and ensured that customers received their orders of DEDI-brand liquid deprenyl citrate.
As an employee of B & B, Mr. Smith helped log in customer names and addresses and the quantity of deprenyl that they ordered into a computer database system. Also, while employed by B & B, Mr. Smith, on a daily basis, between Monday and Friday, sent by facsimile the information on customers who had ordered DEDI-brand liquid deprenyl citrate to Ms. Kimball in San Diego. Respondent Ms. Kimball then filled those orders as
well as any orders received via the automated telephone system in California and/or Mexico.
From the spring of 1992 until about May 12, 1993,
Mr. Smith was responsible for maintaining the checking accounts of B & B. Mr. Smith’s responsibilities included depositing funds from the sale of the DEDI-brand liquid deprenyl citrate, an unapproved prescription drug, into the B & B checking account at a Barnett Bank in Florida. The funds received from purchasers of the DEDI-brand liquid deprenyl citrate and deposited into B & B’s checking account was in the form of money orders, personal checks, and cashier's checks.
From time to time, B & B obtained cashiers checks made payable to the principal of DEDI and B & B, or to Discovery- Mexico from its Barnett Bank account in Florida. This made it possible for either Discovery-Mexico or the principal of DEDI and B & B to cash the checks. The checks were in round figures, in amounts from three thousand to eight thousand dollars. In some instances, the day after a cashier's check was generated from the sale of DEDI-brand liquid deprenyl citrate, the principal of DEDI and B & B confirmed that the bank had enough money to cover the check, and would then take the check to the bank and cash it.
B & B developed a record of DEDI-brand liquid deprenyl citrate customers, referred to as "Client Quick History Reports"
("Client Reports") for Client No. 1001 through Client No. 2764. Each Client Report recorded the name and address of the DEDI- brand liquid deprenyl citrate customer, a code to track the number of sales, the price of the product, the amount that was collected for each sale, plus shipping information, and how the customer ordered the deprenyl.
Information concerning the filling and shipping of customers ordering the DEDI-brand liquid deprenyl citrate was recorded in a UPS shipping book. This UPS shipping book was maintained in San Diego, California, initially by Julio Garcia, subsequently by Respondent Ms. Kimball, and later by Gaylord Hughes, when they were employees of B & B.
The UPS account number for the shipments of DEDI-brand liquid deprenyl citrate was 263-0X8. As noted in paragraph 41, this was the same UPS account on the envelopes containing DEDI- brand liquid deprenyl citrate which the Department purchased undercover.
DEDI's principal, Mr. Kimball, and B & B took orders for DEDI-brand liquid deprenyl citrate and handled the money received through these orders. The bank accounts were established and authorized in a manner that allowed DEDI's principal, Mr. Kimball, to possess and control the income from the sale of deprenyl, either in the form of deposits to bank accounts which he controlled or in cash or its equivalent.
At or near the time Mr. Kimball and DDI agreed to the Stipulation of Settlement incorporated in the Department’s 1991 Consent Final Order referenced in paragraphs 27, 28, and 29, Respondents DDI, ASTAK, Inc., DEDI, B & B, and Discovery-Mexico implemented an elaborate scheme to conceal from drug regulatory agencies, the FDA and the Department, their responsibility for the manufacture, promotion, distribution, and sale of deprenyl.
Under this scheme DEDI, ASTAK, Inc., B & B, and
Mr. Kimball made it appear that the DEDI-brand liquid deprenyl citrate was being manufactured and distributed by a foreign company, Discovery-Mexico. However, Discovery-Mexico is another alter ego of DEDI and Mr. Kimball and was a front for them to sell the DEDI-brand liquid deprenyl citrate, undetected by Florida and federal drug regulators.
There is no indication that Discovery-Mexico was capable of manufacturing or properly formulating deprenyl without the direct participation of DEDI and its agents. Instead, the Mexican company, Cyto-Pharma, which fronted as Discovery-Mexico, merely mixed the active ingredient, selegiline, called deprenyl freebase, with the inactive ingredient, citra gel. Under instructions from DEDI, Cyto- Pharma then bottled the formulated DEDI-brand liquid deprenyl citrate, but had nothing to do with manufacturing the active ingredient.
The principals of Respondent DEDI are identified as owners of Discovery-Mexico in a fictitious name disclosure filed by Respondent Ms. Kimball with the Recorder and County Clerk for San Diego County, California. Respondent Ms. Kimball applied for the mailbox for Discovery-Mexico at Pak Mail in San Ysidro, California.
On or about October 1, 1991, Respondent DEDI opened a Florida bank account in the name of DEDI doing business as Discovery-Mexico. Mr. Kimball noted on the Request for Tax Identification Number ("Request") for the Discovery-Mexico account that he was the president of the company. Mr. Kimball also signed the Request as president of Discovery-Mexico. On the bank account, Discovery-Mexico's address was listed as 29949 State Road 54 West in Wesley Chapel, Florida. In a separate document related to the account, Mr. Kimball authorized that the facsimile signature of R.R. Riot be honored for payment of all checks, drafts, and money orders on the account for "Discovery Experimental and Development, Inc. d/b/a Discovery Experimental and Development Mexico, N.A." Mr. Kimball signed this authorization as secretary of DEDI d/b/a Discovery-Mexico.
Mr. and Mrs. Kimball declared on their April 14, 1992, financial statement that the value of the 100 percent ownership interest in Discovery-Mexico of DEDI's principal, Mr. Kimball, was $2,000,000.
DEDI, through Mr. Kimball, had signature stamps, including one with the name R.R. Riot on it. These signature stamps were in DEDI’s control and were used by Mr. Kimball, as DEDI’s principal, when he transacted business related to the manufacture and sale of deprenyl in the name of Discovery- Mexico. On one occasion, Mr. Kimball admitted to Mr. Smith that
Riot did not exist.
In connection with the consulting services that Mrs. Kimball through TOURS, provided to Respondent DEDI, she placed an order for two "R.R. Riot" signature stamps, one of
which was on the premises of the Wesley Chapel establishment in May 1993.
In December 1991, on a visit to B & B in California, Mr. Smith and Mr. Kimball both went daily to Cyto-Pharma in Tijuana, Mexico, the Discovery-Mexico front for DEDI. The purpose of these visits was to retrieve overnight orders of DEDI-brand liquid deprenyl citrate that were on an automated voice system. Julio Garcia originally installed the automated voice mail system on a personal computer for Respondent B & B. The prerecorded messages on the voice mail system were the voices of DEDI's principal, Mr. Kimball, and Respondent
Ms. Kimball. These recorded messages all related to placing orders for the DEDI-brand liquid deprenyl citrate.
In 1991, while Mr. Smith was in Mexico and California, the information regarding persons to whom Mr. Kimball and
Mr. Smith were to send filled orders of DEDI-brand liquid deprenyl citrate came via facsimile from Respondent Ms. Kimball in Florida. Respondents B & B and DEDI also received faxed orders daily at the Wesley Chapel business establishment from Respondent Ms. Kimball when she moved to San Diego, California.
In December 1991, when Mr. Kimball and Mr. Smith returned to San Diego from Mexico, they packaged orders for DEDI-brand liquid deprenyl citrate that they had retrieved from the computer system in Mexico. They would take bottles of deprenyl from a large box and place them in Jiffy packs, a brown padded envelope, together with a dropper and a plastic package, and then seal the Jiffy pack. Using customer information obtained from the computer at B & B in Otay Mesa and San Diego, California, the customer information (i.e. name and address) would be placed on the front of the Jiffy pack. The packaged DEDI-brand liquid deprenyl citrate was in the same form that the Department received when it placed undercover orders for the DEDI-brand liquid deprenyl citrate.
Mr. Kimball, as the principal of DEDI and Discovery- Mexico, had a falling out with its Mexican front, Cyta-Pharma. Soon thereafter, in the spring of 1992, the computer and automated voice mail system for placing orders for DEDI-brand
liquid deprenyl citrate were moved to Respondent Ms. Kimball's apartment in San Diego, California. While continuing to use the name Discovery-Mexico, Respondent DEDI moved the process of mixing the active and inactive ingredients of DEDI-brand liquid deprenyl citrate, called "formulation," from Cyta-Pharma, its front company in Mexico, to the Wesley Chapel business establishment.
On May 12, 1993, agents of a multi-agency federal task force executed search warrants regarding the manufacture and sale of the DEDI-brand liquid deprenyl citrate at the Wesley Chapel business establishment. The Department participated in the task force search and also conducted an inspection that day. Areas searched and/or inspected included the Wesley Chapel business establishment, the residence of Mr. and Mrs. Kimball at 6036 Country Club Road, Wesley Chapel, Florida, and the Wesley Chapel, Florida, residence of Mr. Bob Brown, a friend of
Mr. Kimball and a business tenant of the Wesley Chapel business establishment. During the inspection and execution of search warrants, the Department agents wore blue shirts with huge letters across the back that read, "HRS Drug Agent," and displayed their identification badges on their front pockets.
During the May 12, 1993, inspection and search, the Department found two 50-kilogram drums of ephedrine, the basic starting chemical for the manufacture of deprenyl, at the
residence of Mr. and Mrs. Kimball. The ephedrine was labeled "Caution Federal Law prohibits dispensing without a prescription."
The two drums of ephedrine, as labeled and in the form found by the Department on May 12, 1993, at the Kimball residence, is a drug, not a herbal or dietary supplement. The two drums contained enough ephedrine to make between 18 and
20 million dollars worth of finished DEDI-brand liquid deprenyl citrate at the price being charged by Respondents DEDI
and B & B.
At the Brown residence, a Department agent found a DEDI refrigerator containing more ephedrine, the chemical building block for DEDI-brand liquid deprenyl citrate, as well as deprenyl free base (selegiline) and unlabeled one-half ounce bottles of formulated DEDI-brand liquid deprenyl citrate. Some of the unlabeled bottles were control samples of various drugs or products that DEDI had manufactured.
Respondent DDI purchased ephedrine from BASF, a manufacturer of chemicals, prior to the May 12, 1993, search and inspection. DDI again purchased ephedrine after the Department had seized the ephedrine from the Kimball residence even though DDI never obtained a manufacturer’s or any other permit pursuant Chapter 499, Florida Statutes. The only manufacturer's permit
issued and in effect at this time was the one issued to DEDI as noted in paragraphs 47 and 48.
During the May 1993 search and inspection of the Wesley Chapel business establishment, the Department found other items related to the production, promotion, and distribution of deprenyl. These included Discovery-Mexico letterhead, a brochure advertising DEDI-brand liquid deprenyl citrate, checks and money orders (not yet cashed) from customers for orders of DEDI-brand liquid deprenyl citrate, glass jugs of selegiline, deprenyl labels and labeling, and rubber stamps for Discovery- Mexico and for R.R. Riot.
During the May 12, 1993, inspection of the business establishment, the Department issued stop-sale orders for items that were not seized by federal agents at the scene. The Department also seized ephedrine from the residence of Mr. and Mrs. Kimball, pursuant to Sections 499.06 through 499.064, Florida Statutes. The Department sent a bottle of what it believed to be DEDI-brand liquid deprenyl citrate to the FDA for testing, and the FDA confirmed that the contents contained the DEDI-brand liquid deprenyl citrate.
On August 10, 1993, after the May 12, 1993, search and inspection, the Department initiated an injunctive enforcement case in the Circuit Court of Pasco County, Florida. After an evidentiary hearing, the Department obtained a temporary
injunction against Mr. Kimball and DEDI, which was issued on or about February 17, 1994.
More than four years later, on motion by the defendants to vacate the temporary injunction, the court issued a corrected order dated November 24, 1998, dissolving the temporary injunction as vague.
After the May 12, 1993, inspection by the Department and before the issuance of the February 17, 1994, temporary injunction, Respondents DEDI and B & B changed the method of selling DEDI-brand liquid deprenyl citrate by accepting orders only if payments were made in cash. This eliminated much of the audit trail of the sale of DEDI-brand liquid deprenyl citrate.
Respondent DEDI did not comply with the temporary injunction, entered February 17, 1994, and did not seek to dissolve the temporary injunction until approximately four years after it was issued. Nevertheless, the temporary injunction did not deter DEDI's and B & B's sales of DEDI-brand liquid deprenyl citrate, which had returned to the pre-May 12, 1993, level by late 1993.
An inventory of DEDI dated year end 1991 corresponds with DDI possessing ephedrine and having the capacity to manufacture deprenyl in large, valuable quantities from 1991 through May 1993 by stating the following: "We currently hold over 200 kilos of starting chemicals for deprenyl. These
starting chemicals would produce a wholesale value of completed deprenyl in excess of $20 million." The inventory for that date indicates that DEDI had operating locations not only in Wesley Chapel, Pasco County, Florida, but also in San Diego, California, and Tijuana, Mexico, with a completed product in stock valued at $430,500.
After the May 12, 1993, search and inspection, but before the July 13, 1994, inspection discussed below, DEDI and
B & B sent its employee, Gaylord Hughes a/k/a Hugo Lord West, to fill DEDI-brand liquid deprenyl citrate orders. He traveled with the shipping labels to send the filled orders to the customers, and was usually gone from Wesley Chapel for three to four days. At the same time, DEDI sent by Airborne Express the formulated one-half ounce bottles of DEDI-deprenyl from the Wesley Chapel business establishment.
The Department conducted another inspection of the Wesley Chapel business establishment on July 13, 1994, to check the status of the May 1993 drugs and items under stop-sale order, and to check for compliance with the temporary injunction. This inspection was initiated during a visit to the business establishment in response to a request of Pasco County officials, after a small fire and explosion had spread smoke in the business establishment from a DEDI laboratory on the premises. The Pasco County officials wanted to determine the
status of the business establishment after the chemical reaction that had caused the fire.
When the Department inspected the business establishment on July 13, 1994, Department agents found shredded orders for DEDI-brand liquid deprenyl citrate, which B & B had filled. They also found labeling, promotional literature, and business records regarding the manufacture, promotion and sale of DEDI-brand liquid deprenyl citrate by Respondents DEDI and
B & B. One of the filled orders was to a husband and wife, Mr. and Mrs. Freis, who resided in Florida at that time, and another filled order was sent to Mr. Joseph Marino who resided in South Carolina. Federal Express confirmed delivery of the orders for the DEDI-brand liquid deprenyl citrate to B & B at the Wesley Chapel business establishment.
Subsequent to the Department's July 13, 1994, inspection, Respondents DEDI and B & B sold DEDI-brand liquid deprenyl citrate such that purchasers in Florida, as well as in other jurisdictions, received this unapproved drug.
After July 13, 1994, DEDI and B & B moved the location where cash orders for DEDI-brand liquid deprenyl citrate were received and the location from which orders for deprenyl DEDI- brand liquid deprenyl citrate were filled. B & B paid the rent for each of these locations. These locations included
8875 Hidden River Parkway, Suite 300, Tampa, Florida; 7676 Hazard Center, 5th Floor, San Diego, California; and 5025 Central Avenue, Box 619, Phoenix, Arizona.
On August 9, 1995, the FDA issued an import alert regarding DEDI-brand liquid deprenyl citrate, as an unapproved new drug being promoted in the United States. This alert was relied on by the Department in its investigation of DEDI-brand liquid deprenyl citrate as further indication that the FDA considered this product to be an unapproved drug.
In June 1996, Gaylord Hughes moved to Phoenix, Arizona, to be with his girlfriend who had relocated to that area. In Phoenix, Mr. Hughes continued to operate B & B and DEDI-brand liquid deprenyl citrate sales operations like B & B had operated from Wesley Chapel before May 1993, from the Wesley Chapel business establishment from May 1993 to the Department's July 13, 1994, inspection, and from the Hidden River Parkway location from mid-1994 through 1996. Mr. Kimball paid the fee for B & B’s mailbox in Phoenix, Arizona.
After Mr. Hughes moved to Phoenix and B & B was set up there, once a week, DEDI received, at the Wesley Chapel business establishment location, a package containing a large quantity of cash from B & B's sales of DEDI-brand liquid deprenyl citrate. The currency was neatly wrapped in the manner and style of
Mr. Hughes.
Federal search warrants were executed in Phoenix, Arizona, on May 7 and 8, 1998, at Mr. Hughes' residence in Phoenix, Arizona, and the B & B mailbox at Mail Boxes Etc., on Central Avenue, in Phoenix, Arizona. Two months later, the Phoenix B & B was closed and the mailbox rental was cancelled.
From August 1991 through September 2000, Mr. Kimball along and with Respondents DEDI, DDI, B & B, and ASTAK, Inc., have manufactured, held for sale and sold or otherwise distributed the selegiline based drug, DEDI-brand liquid deprenyl citrate, from and into Florida, without first obtaining from the FDA the requisite new drug approval.
From September 17, 1991, until just prior to the May 12, 1993, search and inspection, B & B received more than
$600,000 gross income from the sale of DEDI-brand liquid deprenyl citrate. This is based on sales of 8,424 bottles of DEDI-brand liquid deprenyl citrate, of which 1,407 bottles were sold in Florida. The 8,424 bottles of DEDI brand liquid deprenyl citrate, an unapproved drug, were sold to 1,634 persons. The Department's fair estimate of the income to DEDI, B & B, and ASTAK, Inc., from their sale of DEDI-brand liquid deprenyl citrate is an average of $28,000 per month, totaling more than $2,600,000.11
Client reports maintained by B & B and DEDI indicate that clients purchased Vitamin C as well as DEDI-brand liquid
deprenyl citrate. However, according to these records, there are seven times as many client reports for customers who purchased DEDI-brand liquid deprenyl citrate as for those who purchased DEDI Vitamin C. The average income of $53,585 for the three-month period of February 1993 through April 1993 was for the sale of DEDI-deprenyl as compared to an average of $200 per month for DEDI Vitamin C.
Prior to the multi-agency task-force's execution of search warrants regarding the DEDI-deprenyl brand liquid citrate manufacture and sales operations, DEDI and B & B sold between
500 and 600 bottles of DEDI-deprenyl brand liquid citrate a month.
Pursuant to agreements, DEDI and other corporate Respondents paid TOURS consulting and administrative fees for providing specified services, equipment, and furniture. The administrative services provided by TOURS included the following: maintaining the books; making bank deposits; handling accounts payable; monitoring payroll records; keeping bank ledgers updated, making and monitoring a purchasing system, making purchases; and working with accountants; and filing incorporation and annual corporate renewal papers. The aforementioned Respondents paid TOURS for use of TOURS' office equipment, such as the postage meter and telephones. TOURS also purchased office supplies and other needed materials and
equipment for Respondents. The costs of these supplies, materials, and equipment were then billed by TOURS to Respondents as charge-backs. The fees paid by these Respondents came from the sale of unapproved drugs such as DEDI-brand liquid deprenyl citrate.
Pursuant to a lease agreement, TOURS charged DEDI
$3,000 per month rent while DEDI was a tenant at the Wesley Chapel business establishment from late 1990 through the first of 2000. Likewise, TOURS charged rent to B & B from early 1990s to 1995 or 1996; DDI from 1990 to May 1993; and ASTAK, Inc.,
from early 1990 to late 1999 or early 2000.
For the period of September 17, 1991, through September 23, 1994, TOURS generated income from the rent paid by the corporate Respondents who occupied space in the Wesley Chapel business establishment, as follows: rent, $75,792; consulting and administrative fees, $112,834; and charge-backs or miscellaneous, $34,856. The total collected by
TOURS for this time period was $223,482 or over $6,200 per month.
From 1993 through 2000, Mr. Kimball transferred most of his assets, as well as all the assets of DEDI and ASTAK, Inc., to TOURS. Mr. Kimball transferred his interest in his personal residence in Wesley Chapel, Florida, to his wife,
Mrs. Kimball. Most recently, DEDI transferred its rights to its line of products and customer lists to TOURS.
TOURS, in turn, transferred its rights to DEDI's products and customer lists to Strictly Supplements, Inc.,12 a company recently formed by Mrs. Kimball, who serves as the company's marketing director.
DEDI, through its "pharmaceutical division," and ASTAK, Inc., sold in commerce for human use several colloidal silver drugs that had not been approved by the FDA.
Initially, DEDI and ASTAK, Inc., sold colloidal silver drugs as if they were FDA-sanctioned by being “grand- fathered” or exempt from the FDA new drug approval process. To qualify for an exemption from this regulation, the DEDI colloidal silver drug would have had to exist prior to 1938 or the present manufacturer of the drug must have been the pre-1938 manufacturer. Here, none of DEDI’s colloidal silver drugs met the criteria to qualify for an exemption or grandfather status under the FDA’s new drug approval process.
At times relevant to this proceeding, DEDI and ASTAK, Inc., filled orders for AG-Cidal and shipped AG-Cidal to a company in California which sold to customers drug products whose active ingredient is the heavy metal, silver, in colloidal suspension.
DEDI and ASTAK, Inc., labeled DEDI-AG-Cidal, some of which the Department stop-saled in July 13, 1994, at the Wesley Chapel business establishment, as a drug in that the label claims it to be an antibiotic, anti-viral, anti-bacterial and anti-infective. DEDI and ASTAK, Inc., also misbranded AG-Cidal by putting a National Drug Code number ("NDC#") on the label of the product. Such information on the label is false and misleading to the consumers in that an NDC# makes the product appear to be an FDA approved drug, or an FDA drug authorized in commerce, when neither DEDI nor ASTAK, Inc., has ever obtained FDA drug approval for their AG-Cidal.
DEDI and ASTAK, Inc., also labeled their DEDI- Silvicidal as a drug in that the label claims it to be an anti- infective. The Department had issued a stop-sale of some of these products on May 12, 1993, while conducting an inspection of the business establishment. Although DEDI registered this product, it was never approved as a drug with FDA. Notwithstanding its failure to obtain the necessary approvals, DEDI sought to distribute these products through an out-of-state company.
DEDI applied to the Department to register, as a drug, DEDI-Silvicidal ES (extra strength), 300 ppm, Mild Silver Protein. In response, the Department timely gave notice to DEDI
of its intent to deny the application by letter dated May 29, 1998.
The FDA has not approved DEDI-Silvicidal ES as a drug that the FDA authorizes in commerce and such approval is required by Section 499.023, Florida Statutes, before such drugs can be marketed in commerce in Florida.
Although DEDI never obtained the necessary approvals, DEDI manufactured Silvicidal ES at the Wesley Chapel business establishment as an anti-viral and anti-infective and distributed the unapproved drug.
DEDI gave to others Experimental Colloidal Silver for use on persons with serious illnesses, thus making this product a drug. The Experimental Colloidal Silver was used on persons having Lyme disease, HIV, staphylococcus infections, and other serious illnesses.
The DEDI-Silvicidal ES is a DEDI colloidal silver drug that has been advertised by NaturaLife, Arvada, Colorado, as an “incredible antibiotic” priced at $69. According to advertising and/or labeling, the product can be used to prevent both contact and airborne transmitted diseases when office, hospital, school and daycare environments cannot be avoided and is proven to be exceedingly effective in bacterial, viral and fungal infections from a common virus or bacteria to more serious infections such as E. coli and Streptococcus.
DEDI and ASTAK, Inc., sold each of the above-listed, colloidal silver drugs for human use as antibiotic, anti-viral, anti-bacterial and anti-fungal. DEDI made claims that the products were effective to treat diseases such as Lyme disease and the common cold, even though the FDA never authorized these drugs in commerce with such claims.
DEDI and ASTAK, Inc., further misled the consuming public as to the safety and effectiveness of these unapproved drugs by claiming on the labels that their colloidal silver drugs were "non-toxic" and had no side effects. In fact, there are serious side effects that can occur from the human consumption of drugs containing colloidal silver.
DEDI, through its principal, established GLOBAL to publish a pamphlet, entitled "Silver Solutions" espousing the FDA unapproved colloidal silver drugs manufactured by DEDI and sold by DEDI and ASTAK, Inc.
The FDA has never authorized a New Drug Application for any of the Respondents for any of the colloidal silver products listed above, nor otherwise authorized any such drugs in commerce by other means.
The FDA has adopted a final rule regarding drugs containing colloidal silver ingredients, which states in pertinent part that:
(b) Any OTC drug product containing colloidal silver ingredients or silver salt that is labeled, represented, or promoted for the treatment and/or prevention of any disease is regarded as a new drug within the meaning of section 201(p) of the Federal Food, Drug, and Cosmetic Act (the act) for which an approved application or abbreviated application under section 505 of the act and part 314 of this chapter is required for marketing. In the absence of an approved new drug application or abbreviated new drug application, such product is also misbranded under section 502 of the act.
* * *
After September 16, 1999, any such OTC drug product containing colloidal silver or silver salts initially introduced or initially delivered for introduction into interstate commerce that is not in compliance with this section is subject to regulatory action.
See Federal Register, August 17, 1999, Volume 64, No. 158, and
21 C.F.R. Section 310.548.
The DEDI colloidal silver drugs discussed in the above paragraphs are misbranded drugs since none have new drug approval by the FDA. Also, in absence of such approval, the products may not be introduced in commerce. Because Section 499.023, Florida Statutes, requires such approval, the Department is without authority to grant DEDI's request to register DEDI's Silvicidal ES as a drug.
After the Department filed its first Administrative Complaint in these consolidated cases, Respondents as named and
noted below conducted themselves as follows in paragraphs 127 through 134.
In July 13, 1994, upon execution of a federal search warrant, Respondents DEDI and ASTAK, Inc., were found to have a hidden compartment, having dimensions about two or three feet by two or three feet, under a stairwell at the Wesley Chapel business establishment. In the compartment, which was obscured by a cabinet, there were five boxes of 100 one-half ounce bottles of DEDI-brand liquid deprenyl citrate.
In 1998, the Unites States Customs returned to DEDI the Selegiline freebase that had been seized in May 1993 from the Wesley Chapel business establishment. Soon thereafter, at Mr. Kimball’s direction, DEDI's consultants and/or employees of DEDI purified or reprocessed the Selegiline as DEDI deprenyl freebase.13
On May 7 and 8, 1998, an agent with the Department accompanied federal agents who were executing a federal search warrant of Box 619 at Mail Boxes Etc., located at 5025 Central Avenue, Phoenix, Arizona. The Department's agent observed orders for DEDI-brand liquid deprenyl citrate along with the correct amount of cash enclosed ($75.00 per bottle, plus $18.00 for shipping and handling per order) at the mailbox in Phoenix, Arizona, that was rented by B & B. In June 1996, B & B, through Mr. Kimball, executed a rental agreement with Mail Boxes Etc. to
rent Mail Box 619 at that location, and paid rent for that box. Subsequently, Mr. Hughes, as an agent for B & B paid the fees required for renewal of the mailbox.
In or about October 2000, while this proceeding was pending, Mr. Kimball, the principal officer of DEDI, DDI, B & B, ASTAK, Inc., and GLOBAL was indicted by a federal grand jury and convicted of fraud and conspiracy to commit fraud against the FDA and the Department. See United States of America v. James T. Kimball, USDC-Middle District of Florida, Case No. 99-256-CR- T-26E, upheld on appeal 291 F.3d 726 (11th Cir. 2002).
At a hearing on September 20, 1999, regarding the government's motion to revoke Mr. Kimball's release bond in United States v. Kimball, supra, DEDI's and ASTAK, Inc.’s, principal, Mr. Kimball, admitted to the presiding federal magistrate judge that for the preceding two and one-half years he has sold selegiline, the active drug ingredient in the DEDI- brand liquid deprenyl citrate, to compounding pharmacies in Oregon. The principal of DEDI's and ASTAK, Inc., Mr. Kimball, knew and intended that the selegiline DEDI and ASTAK, Inc., sold and shipped to these pharmacies would be formulated and labeled in finished dosage form as Discovery-brand liquid deprenyl citrate. This version of the unapproved prescription drug,
DEDI-deprenyl, was not compounded pursuant to a patient-specific
prescription but was manufactured for sale through their agents in Oregon.14
On September 13, 1999, a shipment of 940 bottles labeled deprenyl, and bearing the DEDI logo was seized under a federal warrant in Oregon, by Oregon law enforcement officers and the FDA officials. But for the seizure of the unapproved drug, it would have been shipped to IAS, a company in England with which the DEDI and ASTAK, Inc., through its principal, had a business relationship. DEDI and ASTK, Inc., knew and intended that the DEDI-brand liquid deprenyl citrate would be shipped to IAS in England, where persons from the United States, including Florida, could purchase it.
By letter dated August 16, 1999, the FDA warned Respondents DEDI and ASTAK, Inc., that their manufacturing, labeling, and selling of DEDI-brand liquid deprenyl citrate was unlawful since this product is an unapproved new drug not authorized by the FDA in commerce. The aforementioned Respondents were also advised that the unapproved drug was being labeled in a false and misleading manner.
By Final Judgment rendered March 3, 2000, Respondents, DEDI, DDI, B & B, ASTAK, Inc., and Mr. Kimball were permanently enjoined, either directly or indirectly, from manufacturing, advertising or selling liquid deprenyl, any compound or article containing selegiline or any other drug,
unless and until they demonstrate at an evidentiary hearing that they have complied with the Florida Drug and Cosmetic Act. See
Department of Health and Rehabilitative Services v. Discovery Experimental and Development, Inc., et al., Case Nos. 93-3991 and 93-4287, Sixth Judicial Circuit in and for Pasco County, Florida (rendered March 3, 2000); appealed dismissed on August 30, 2000, in Discovery Experimental and Development, Inc., v. State, Department of Health, 769 So. 2d 376 (Fla. 2d DCA 2000).
Respondents DEDI, ASTAK, Inc., B & B, and Discovery- Mexico are a danger to public health, safety and welfare. They have persisted in manufacturing for sale, holding for sale, promoting and selling or otherwise distributing the unapproved prescription drug deprenyl in disregard of the Department's 1991 Consent Final Order. Moreover, these Respondents have never obtained the required FDA approval and the Department licenses or permits that would authorize such activities. Nonetheless, from August 1991, these Respondents have distributed the unapproved prescription drug deprenyl in, from and into Florida by direct sales to the purchaser without a prescription from the purchaser's prescribing health care practitioner and without the deprenyl being dispensed by a licensed pharmacist.
By marketing and selling the unapproved drug, DEDI- brand liquid deprenyl citrate, over-the-counter and without the
intervention of a prescribing medical practitioner or a pharmacist, Respondents posed a danger to the public.
The Department, through its Bureau, incurred the costs of investigating Respondents from 1990 to the presentation of evidence in this proceeding.
The Department employed in this investigation and enforcement action numerous drug agents, drug agent supervisors, and clerical staff. One of the Department’s drug agents, Chief Investigator Agent Deborah Orr, worked on this case on an almost full-time basis since being employed by the Department in or about 1992.
The Department incurred costs associated with the expenses of court reporters, appearance of witnesses, travel costs, expert witness costs, office supplies, and materials, as well as the salaries of the investigative staff assigned to work on this case.
Conservatively, the Department spent approximately one-half million dollars, or more specifically, $486,621.40, in this investigation and enforcement action.
After giving careful consideration and evaluation to the many intense hours of testimony, the undersigned concludes that the Department’s witnesses are credible experts in the field of pharmacy and drug regulation laws and procedures of the State of Florida.
The Findings of Fact in the Final Judgment in Department of Health and Rehabilitative Services v. Discovery
Experimental and Development, Inc., et al., Case Nos. 93-3991 and 93-4287, Sixth Judicial Circuit Court, Pasco County, Florida (March 2, 2000) against Respondents, DEDI, ASTAK, Inc., DDI and B & B are adopted by reference herein. These findings are adopted under the doctrines of res judicata, collateral estoppel, and estoppel by judgment as to these same Respondents, except for Mr. Kimball, who has been dismissed from the instant case, and are noted as additional support for the Findings of Fact in this Recommended Order.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this case pursuant to Sections 120.569 and 120.57, Florida Statutes.
The Department of Health, through its Bureau of Pharmacy Services, is the state agency responsible for implementing and enforcing the provisions of the Florida Drug and Cosmetic Act, Chapter 499, Florida Statutes. The Department is the successor in interest to the former Florida Department of Health and Rehabilitative Services.
Pursuant to Sections 499.066 and 499.067, Florida Statutes, the Department is authorized to approve, deny, suspend, or revoke licenses or permits to manufacture
prescription or over-the-counter drugs, and to impose administrative fines of up to $5,000 per day for violations of the Florida Drug and Cosmetic Act. See Subsection 499.066(3), Florida Statutes.
The Administrative Complaint in DOAH Case No. 97- 3836, supercedes the Administrative Complaints filed in
in DOAH Case Nos. 93-6184 and 95-2255, and seeks to deny DEDI's application to manufacture prescription and/or over-the-counter drugs or to revoke any permit, if it is determined that a permit has been approved.
DOAH Case No. 97-3836 also seeks to impose administrative fines in excess of one million dollars against Respondents for alleged violations of Chapter 499, Florida Statutes. Specifically, it is alleged that Respondents DEDI, DDI violated the Final Order in Case No. 91-2420 and that Respondents DDI, ASTAK, Inc., Discovery-Mexico, GLOBAL, TOURS, Josephine Kimball, and Toni Ann Kimball, by continually marketing, manufacturing, and selling or otherwise distributing deprenyl and by virtue of the labeling on the product, violated Sections 499.005, 499.0054, 499.0055, 499.007, 499.01, 499.012, 499.013; 499.015; 499.023; and 499.03, Florida Statutes.
The Administrative Complaint filed in Case No. 97- 3836 alleges that as labeled by Respondents DEDI, ASTAK, Inc., and GLOBAL, the colloidal silver products sold by said
Respondents are new unapproved drugs. It is further alleged that DEDI, ASTAK, Inc., and/or GLOBAL marketed, manufactured, packaged, labeled, sold and distributed these unapproved colloidal silver drugs to holistic practitioners and to a company in Colorado for direct or over-the-counter sale to the public. With regard to the colloidal silver products, it is alleged that the manufacture for sale and the sale of such products by DEDI are violations of Sections 499.005, 499.0054, 499.055, and 499.23, Florida Statutes.
The Administrative Complaint in DOAH Case No. 98-4364 seeks to deny the registration by DEDI of Silvercidal ES (extra strength.
The burden of proof in this proceeding is on the Department. Because the Department seeks revocation of DEDI’s manufacturing permit and also seeks to impose an administrative fine against Respondents for alleged violations of Chapter 499, Florida Statutes, the Department is required to prove the allegations against Respondents by clear and convincing evidence. Department of Banking and Finance v. Osborne Stern & Company, 670 So. 2d 932 (Fla. 1996). With regard to denial of applications for permits or registration, the Department is required to prove the allegations that are the basis of the denial by a preponderance of the evidence. Florida Department
of Transportation v. J.W.C. Company, Inc., 396 So. 2d 778 (Fla. 1st DCA 1981).
The relevant statutory provisions are set forth below.
The terms “drug,” “manufacturer,” and “new drug” are defined in Subsections 499.003(11), (21), and (22), Florida Statutes (1997), as follows:
(11) "Drug" means an article that is:
* * *
Intended for use in the diagnosis, cure, mitigation, treatment, therapy, or prevention of disease in humans or other animals;
Intended to affect the structure or any function of the body of humans or other animals; or
Intended for use as a component of any article specified in paragraph (a), paragraph (b), or paragraph (c), but does not include devices or their components, parts, or accessories.
* * *
“Manufacturer” means a person who prepares, derives, manufactures, or produces a drug, device, or cosmetic. The term excludes pharmacies that are operated compliance with pharmacy practice standards as defined in chapter 465 and rules adopted under that chapter.
“New drug” means:
Any drug the composition of which is such that the drug is not generally
recognized among experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs, as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling of the drug; or
Any drug the composition of which is such that the drug, as a result of investigations to determine its safety and effectiveness for use under certain conditions, has been recognized for use under such conditions, but which drug has not, other than those investigations, been used to a material extent or for a material time under such conditions.
Section 499.023, Florida Statutes (1997), relates to new drugs and prohibits distributing a new drug without approval from the FDA and provides as follows:
A person may not sell, offer for sale, hold for sale, manufacture, repackage, distribute, or give away any new drug unless an approved application has become effective under s. 505 of the federal act or unless otherwise permitted by the Secretary of the United States Department of Health and Human Services for shipment in interstate commerce.
Section 499.005, Florida Statutes (1997), provides in pertinent part that:
499.005 Prohibited acts.--It is unlawful to perform or cause the performance of any of the following acts in this state:
The manufacture, repackaging, sale, delivery, or holding or offering for sale of any drug, device, or cosmetic that is adulterated or misbranded or has otherwise been rendered unfit for human or animal use.
The adulteration or misbranding of any drug, device, or cosmetic.
The receipt of any drug, device, or cosmetic that is adulterated or misbranded, and the delivery or proffered delivery of such drug, device, or cosmetic, for pay or otherwise.
The sale, distribution, purchase, trade, holding, or offering of any drug, device, or cosmetic in violation of ss. 499.001-499.081.
The dissemination of any false or misleading advertisement of a drug, device, or cosmetic.
* * *
(12) The possession of any drug in violation of ss. 499.001-499.081.
* * *
(19) Providing the department with false or fraudulent records, or making false or fraudulent statements, regarding a drug, device, or cosmetic.
* * *
(22) Failure to obtain a permit or registration, or operating without a valid permit, as required by ss. 499.001-499.081.
Subsection 499.01(1)(d), Florida Statutes (1993), provides in pertinent part the following:
Any person that is required under ss. 499.001-499.081 to have a permit must apply to the department on forms furnished by the department.
* * *
A permit as required for each establishment that operates as a:
Prescription drug manufacturer;
Over-the-counter drug manufacturer;
* * *
6. Prescription drug wholesalers;
* * *
12. Complimentary drug distributor.
Subsection 499.013(2), Florida Statutes (1997), requires that any person that engages in the manufacture of drugs, devices, or cosmetics in this state must first obtain one of the permits listed in that section and may engage in only the activity allowed under that permit. Subsection 499.012(3), Florida Statutes (1997), requires that a person that engages in wholesale distribution of prescription drugs in the Florida must have a wholesale distributor's permit issued by the Department. See Subsection 499.01(1)(d), Florida Statutes (1997), which requires a permit for each establishment that operates as a prescription drug manufacturer, an over-the-counter drug manufacturer, and complimentary drug distributor.
Section 499.015, Florida Statutes (1997), addresses the registration of drugs and the issuance of free sale certificates. That section provides in relevant part the following:
Except for those persons exempted from the definition in s.499.003(21), any person who manufactures, packages, repackages, labels, or relabels a drug, device, or cosmetic in this state must register such drug, device, or cosmetic biennially with the department
. . .
* * *
(3) Except for those persons exempted form the definition in s. 499.003(21), a person may not sell any product that he or she has failed to register in conformity with this section. Such failure to register subjects such drug, device, or cosmetic product to seizure and condemnation as provided in ss. 499.001-499.081.
Section 499.0054, Florida Statutes (1997), provides in pertinent part that:
It is a violation of the Florida Drug and Cosmetic Act to perform or cause the performance of any of the following acts:
The dissemination of any false advertisement of any drug, device, or cosmetic. An advertisement is false if it is false or misleading in any way.
The distribution in commerce of any drug, device, or cosmetic, if its labeling or advertising is in violation of
ss. 499.001-499.081.
The manufacturing, repackaging, packaging, selling, delivery, holding, or offering for sale of any drug, device, or cosmetic for which the advertising or labeling is false or misleading.
The advertising of any drug, device, or cosmetic that is adulterated or misbranded.
The receiving in commerce of any drug, device, or cosmetic that is falsely advertised or labeled or the delivering or proffering for delivery of any such drug, device, or cosmetic.
The advertising or labeling of any product containing ephedrine, a salt of ephedrine, an isomer of ephedrine, or a salt of an isomer of ephedrine, for the indication of stimulation, mental alertness, weight loss, appetite control, energy, or other indications not approved by the pertinent United States Food and Drug Administration Over-the-Counter Final or Tentative Final Monograph or approved new drug application under the federal act.
* * *
The advertising of any drug or device represented to have any effect in any of the following conditions, disorders, diseases, or processes:
* * *
(j) Mental disease or mental retardation.
* * *
(p) Sexual impotence.
* * *
Extension of life expectancy.
Stress and tension.
Brain stimulation or performance. (aa) The body's natural defense
mechanisms.
* * * (cc) Depression
Subsection 499.007(1), Florida Statutes (1997), provides that a drug or device is misbranded, if its labeling is in any way false or misleading.
In determining whether an advertisement is false or misleading, Section 499.0055, Florida Statutes (1997), provides that the Department shall review the representation made or suggested by the statement and the extent to which the advertisement fails to reveal material facts with consequences that can result from the use of the drug.
The Findings of Fact in the Final Judgment obtained by the Department in Department of Health and Rehabilitative Services v. Discovery Experimental and Development, Inc., Case No. 93-3991 and 93-4287, Sixth Judicial Circuit Court, Pasco County, Florida (March 2, 2000) against Respondents,
Mr. Kimball, DEDI, ASTAK, Inc., DDI and B & B are adopted by reference herein. These findings are adopted under the doctrines of res judicata, collateral estoppel, and estoppel by judgment as to these same Respondents, except for Mr. Kimball who has been dismissed from the instant case.
With regard to Respondents DEDI, DDI, ASTAK, and
B & B, the Department has met its burden of proof by submitting clear and convincing evidence in support of the alleged violations as set forth below.
The clear and convincing evidence established that by continually advertising and promoting, by manufacturing with the intent to sell or otherwise distribute deprenyl without FDA approval, and by virtue of the labeling on the drug products, Respondents DEDI, DDI, ASTAK, Inc., and B & B committed the offenses alleged in the Administrative Complaint.
The clear and convincing evidence established that the DEDI-brand liquid deprenyl citrate is a drug within the meaning of Chapter 499, Florida Statutes.
Respondent DEDI argues that under the Dietary Supplement and Health Education Act of 1994 ("DSHEA") DEDI-brand liquid deprenyl citrate is not subject to regulation as a drug, but rather as a dietary supplement. That argument is rejected and is not supported by the record. Even if the DEDI-brand liquid deprenyl citrate were regulated by DSHEA, nothing in the federal law preempts the states from enacting more stringent laws to protect public health, safety and welfare under their police powers. To the extent the Act provides more stringent regulation of articles in commerce in Florida than are dietary supplements under DSHEA, as a matter of law, Chapter 499, Florida Statutes, controls.
Based upon DEDI‘s intention to manufacture and distribute deprenyl for the cure, mitigation, treatment, therapy, and prevention of disease in humans, DEDI-brand liquid
deprenyl citrate is a drug, subject to regulation in Florida under Chapter 499, Florida Statutes. In this case, Section 499.023, Florida Statutes, makes the United States Department of Health and Human Services as the only authority relevant to this case as to the approval of drugs. Additionally, the clear and convincing evidence established that none of the respective Respondents has satisfied the requirements of Section 499.023, Florida Statutes, with respect to DEDI-brand liquid deprenyl citrate. It is undisputed that the FDA denied DEDI’s New Drug Application for deprenyl. The DEDI-brand liquid deprenyl citrate is, therefore, a new unapproved prescription drug.
The evidence established that Respondents DEDI and Discovery-Mexico’s unapproved new drug DEDI-deprenyl were misbranded and adulterated drugs under Subsections 499.006(2) and (3) and 499.007(1), Florida Statutes (1997).
Respondent DEDI violated Subsection 499.0054(1), (3) and (7)(p) and (x), Florida Statutes (1997), by advertising through labeling that DEDI—brand liquid deprenyl citrate is effective for sex drive dysfunction and for increasing life span. Such claims are false and misleading.
By the unlawful conduct determined above in these findings of fact and conclusions of law, Respondent DDI has also violated the Department’s October 1991 Consent Final Order since the rendition of the Consent Final Order. The Consent Final
Order is deemed sufficiently broad to prohibit the aforesaid unlawful conduct by DDI.
Respondents DEDI and ASTAK, Inc., violated Subsections 499.005(l) through (4) and (15), and Section 499.023, Florida Statutes, by manufacturing for sale, advertising, offering for sale, and selling or otherwise distributing the new, misbranded and adulterated drugs containing colloidal silver, specifically, the DEDI-Silver products. These Respondents did so up to the final hearing even though the Respondents were on notice of the position of the Bureau through stop—sales issued May 12, 1993, and July 13, 1994, and through its Administrative Complaint issued on June 24, 1997, in DOAH Case No. 97-3836.
The clear and convincing evidence established that the DEDI colloidal silver products are unapproved new drugs and that Respondents DEDI and ASTAK, Inc., manufactured, packaged, labeled, and sold and distributed the unapproved colloidal silver drugs for over-the-counter sale to the public.
The clear and convincing evidence established that DEDI manufactured the unapproved colloidal silver drugs and sold the products in interstate commerce in violation of the Sections 499.005, 499.0054, 499.0055, and 499.023, Florida Statutes (1997).
The evidence established that the Department acted within its jurisdiction when conducting Section 499.051, Florida Statutes, inspections of the Wesley Chapel business establishment of DEDI, DDI, ASTAK, Inc., B & B, and TOURS at 29949 State Road 54 West, Wesley Chapel, Florida, on May 12, 1993, and on July 13, 1994; the residence of Mr. and
Mrs. Kimball at 6036 Country Club Road, Wesley Chapel, Florida, on May 12, 1993; and the residence of Mr. Brown, also located in Wesley Chapel, Florida.
By their persistent violation of the Florida Drug and Cosmetic Act as specified in this recommended order, each of the Respondents DEDI, ASTAK, Inc., DDI, and B & B is a danger to public health, safety and welfare. This danger is enhanced by Respondents' continued disregard of state and federal drug laws, rules and regulations, warning notices, administrative complaints, the 1991 Consent Final Order, a permanent injunction, and the federal drug law conviction of one of its principal, Mr. Kimball.
The clear and convincing evidence established that the corporate Respondents DEDI, ASTAK, Inc., DDI, and B & B are really the alter ego of Mr. Kimball, in the illegal drug manufacturing, marketing and sales enterprise as set forth in the findings of fact from the circuit court decision referenced above and adopted herein under the principles of res judicata.
The Department is authorized to impose administrative fines up to $5,000 per day per for violations of Chapter 499, Florida Statutes, and Chapter 64F—12, Florida Administrative Code. Subsection 499.066(3), Florida Statutes, provides that the Department shall consider the following parameters in determining the amount of the fine to be levied: the severity of the violation, corrective action by the violator, and any previous violations.
The Department may either by notice of violation or administrative complaint seek revocation of any permit issued under the Act and an administrative fine within the range of
$500 to $5,000 per violation per day for this type of violation. See Rule 64F—12.024(4), Florida Administrative Code.
Relevant to this calculation, Respondents DEDI, ASTAK, Inc., DDI, and B & B have offered DEDI-brand liquid deprenyl citrate for sale continually from October 7, 1991, the date of the Department’s first purchase order for DEDI-deprenyl until the issuance of the amended administrative complaint
June 24, 1997, for a total of 2087 days.
In this case, the Department seeks to impose an administrative fine of $1,000 per day, or $2,087,100, on Respondents DEDI, ASTAK, Inc., DDI, and B & B. That fine is within the range of penalties authorized under the applicable
statutory and rule provisions and is warranted based on the Findings of Fact regarding non-compliance.
Additionally, from prior to the notices of stop-sale issued by the Department May 12, 1993, to its issuance of the June 24, 1997, administrative complaint, Respondents, DEDI, and ASTAK, Inc., have manufactured for sale, held for sale, offered for sale and sold or otherwise distributed adulterated and misbranded, new unapproved drugs containing colloidal silver that the FDA has not authorized in commerce. For this violation of Section 499.023, Florida Statutes, the Department seeks to impose an administrative fine of $1,503,000, or $1,000 x 1503 days per violation for the period from May 12, 1993, through June 24, 1997. This amount is within the range of fines authorized by the statute and the rule.
The Department failed to meet its burden of proof as to Respondent GLOBAL.
The Department failed to meet its burden of proof in this case as to Respondents TOURS and Josephine Kimball. The evidence failed to establish that Respondent TOURS acted in any role inconsistent with Chapter 499, Florida Statutes, and
Rule 64F—12, Florida Administrative Code. Furthermore, regarding Respondent Josephine Kimball, the evidence presented did not establish that she acted in any role other than a consultant for TOURS providing administrative services at the
direction of Mr. Kimball or one of his alter ego corporations. No clear and convincing evidence was presented to establish that Respondent Josephine Kimball was involved in the day-to-day operating of corporate Respondents as it relates to the allegations in this case.
The Department failed to meet its burden in this case as to Respondent Toni Ann Kimball. The evidence failed to establish that Respondent Toni Ann Kimball acted in any role other than a part-time employee of B & B at or under the direction of Mr. Kimball or one of his alter ego corporations.
In 1993, DEDI was issued a drug manufacturer permit, by direction of the Circuit Court because the Department failed to grant or deny the permit in the 90-day timeframe required by statute. However, that permit was time limited. There is no evidence that DEDI ever attempted to renew this permit, and, accordingly, by operation of law it expired on January 31, 1995. Subsection 499.01(3)(b), Florida Statutes (1993).
At the time of the final hearing, Respondent had no outstanding Chapter 499, Florida Statutes, permit applications pending. The only pending application is DEDI's application for registration of DEDI-Silvicidal ES. Based on DEDI’s flagrant, repeated, and numerous violations of Chapter 499, Florida Statutes, as well as applicable federal laws, the Department may properly deny DEDI’s application to register the Silvicidal ES.
Here, the clear and convincing evidence established that the DEDI colloidal silver products are new drugs that have not been approved by the FDA. Therefore, the Department may properly refuse to register the unapproved colloidal silver drug.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health issue a final order which finds that:
Respondents Discovery Distributing, Inc.; Discovery Experimental and Development, Inc.; ASTAK, Inc.; and B & B Freight Forwarding, Inc., committed the offenses alleged in the Administrative Complaint, as it relates to the DEDI-brand liquid deprenyl cittrate.
Respondents Discovery Distributing, Inc. and Discovery Experimental and Development, Inc., shall jointly and severally pay to the Florida Department of Health an administrative fine of two million, eighty-seven thousand dollars ($2,087,000.00), for violations of Chapter 499, Florida Statutes (1997), as they relate to the DEDI-brand liquid deprenyl citrate.
Respondents Discovery Experimental and Development, Inc., and ASTAK, Inc., committed the offenses related to the DEDI drugs containing colloidal silver as alleged in the Administrative Complaint.
Respondents Discovery Experimental and Development, Inc., and ASTAK, Inc., shall jointly and severally pay to the Florida Department of Health an administrative fine of one million five hundred and three thousand dollars ($1,503,000) for violations of Chapter 499, Florida Statutes (1997), as those violations relate to the DEDI drugs containing colloidal silver.
The pending application for Discovery Experimental and Development, Inc., to register as a drug, its Silvicidal ES be and hereby is denied.
The Administrative Complaint against Respondents Global Health Information/Medical Research Institute, Inc.; Discovery Tours Wholesalers, Inc.; Josephine Kimball; and Toni Ann Kimball be dismissed.
DONE AND ENTERED this 18th day of April, 2003, in Tallahassee, Leon County, Florida.
CAROLYN S. HOLIFIELD
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 18th day of April, 2003.
ENDNOTES
1/ Mr. Kimball has been incarcerated throughout these proceedings, but he has participated in all of the proceedings. The first day of the final hearing was November 14, 2000, at the Morgan Street Jail in Tampa, Florida, where Mr. Kimball was at the time, so he was physically present that day. However, because Mr. Kimball was then transferred to FCC Coleman
in Coleman, Florida, his participation in the remaining proceedings was by way of telephone. On or about June 8, 2001, the Department of Health voluntarily dismissed Mr. Kimball as a party to these cases; therefore, after that date, he appeared as a party representative and later as qualified representative.
2/ On June 11, 2001, Mr. Kimball terminated Mr. Dunn as counsel for DEDI, DDI, ASTAK, Inc., GLOBAL and B & B. On June 13, 2001,
after Mr. Kimball produced documents showing he was the only officer and/or director and represented that he was the sole owner of ASTAK, Inc., and DEDI, he was granted permission to appear as the qualified representative for those two corporate Respondents.
3/ When Case Number 97-3836 began, Mr. Dunn appeared as counsel for all Respondents. However, on March 26, 2001, Mr. Dunn was allowed to withdraw as counsel for Toni Ann Kimball after she fired him; thereafter, she then appeared pro se. Mr. Dunn was also allowed to withdraw as counsel for DEDI, ASTAK, Inc., GLOBAL, and B & B after Mr. Kimball fired him on June 11, 2001. Mr. Dunn then appeared on behalf of only Discovery Tour Wholesalers, Inc., and Josephine Kimball.
4/ These corporate Respondents were represented by Mr. Dunn until he withdrew after being fired by Mr. Kimball on or about June 11, 2001. At the time Mr. Dunn withdrew as counsel for these Respondents, he represented that it was his belief and understanding that DDI, GLOBAL, and B & B had been dissolved, no longer existed, and/or were inactive.
5/ Toni Ann Kimball was properly noticed of all hearing dates in this case, but she did not appear at the proceedings after June 15, 2001. Also, see Endnote 3.
6/ On October 22, 2002, Mr. Santiago entered an appearance on behalf of Respondents Josephine Kimball and Discovery Tour Wholesalers, Inc., after Mr. Dunn was allowed to withdraw as counsel for these parties by Order issued August 27, 2002.
7/ This is in keeping with the spirit and intent of the principles of law announced by the courts in cases where a prisoner is actually a party to a proceeding. See Gosby v. Third Judicial Circuit, 586 So. 2d 1056, 1057 (Fla. 1991)(and cases cited therein noting that “a prisoner’s right to access to the courts does not necessarily guarantee his the right to be physically present at the trial” of his own civil action and Dorsey v. Edge, 819 F.2d 1066, 1067 (11th Cir. 1987).
8/ Three pages, pages 736, 738, and 740, were missing from the Transcript of the December 12, 2001, proceeding. The undersigned requested that the court reporter file these pages, but to date they have not been filed. Nonetheless, it is determined that no party has been prejudiced by this in that the undersigned was present at all proceedings and heard the testimony of all witnesses.
9/ After the Transcript was filed with the Division, the undersigned issued an order setting June 21, 2002, as the date for filing proposed recommended orders. Prior to that date, at the requests of certain Respondents, a further extension was granted to allow those parties to receive a "corrected" and complete copy of the Transcript. After Respondents notified the Division of receipt of the corrected transcript, the time for filing the proposed recommended orders was extended to July 31, 2002. Prior to that date, on July 9, 2002, counsel for Respondents Josephine Kimball and Discovery Tour Wholesalers, Inc. filed a Motion to Withdraw and requested that those Respondents be given time to retain another attorney and that they also be given additional time to file their proposed recommended orders. The Motion to Withdraw was granted and after another attorney entered an appearance on their behalf, the time for Respondents Josephine Kimball and Discovery Tour Wholesalers to file proposed recommended orders was extended to December 11, 2002.
10/ This finding is consistent with the ruling that was made in the Order Granting in Part Respondent's Motion for Partial Summary Judgment in State of Florida, Department of Health vs.
Discovery Experimental and Development, Inc., et al., in Case Nos. CA 93-3991 and CA 93-4287, in the Sixth Judicial Circuit in and for Pasco County, Florida.
11/ To calculate this projection, Agent Orr averaged the sales of DEDI-deprenyl for the period where the client records and bank records document the sales, September 1, 1991, through
May 12, 1993. The average is $28,466 per month, with a high of more than $60,000 in March and April 1993. Analysis of the bank records of DEDI, B & B and ASTAK, Inc., for this period of time confirms these figures. Agent Orr further based these projections on the one day order in July 1994 of 80 bottles of DEDI-deprenyl by 10 customers, the amount of ephedrine (the raw ingredient from which deprenyl is manufactured) purchased by these Respondents, the B & B operation in Phoenix, the approximately 900 bottles of DEDI-deprenyl in Oregon from the DEDI and ASTAK, Inc., connection with the compounding pharmacies and the 100 plus bottles at DHL in Tampa of DEDI-deprenyl headed to IAS/NSI in Great Britain. Additionally, Agent Orr also considered that these Respondents benefited from the advertisements to purchase DEDI-deprenyl they received through various sites on the Internet or World Wide Web. These included the CERI resources site of Steven Fowkes and the IAS site.
12/ In or about the summer of 2000, Mrs. Kimball formed Strictly Supplements, Inc. (SSI), as a mail order distributor of vitamins and dietary supplements serving both wholesale and retail customers. The company was incorporated in Nevada and lists its address as 2920 North Green Valley Parkway, Building three, Suite 321, in Henderson, Nevada. According to a promotional letter to customers sent out in July 2002, SSI has a Florida division which is located at the Wesley Chapel business establishment. The promotional letter indicates that "SSI has acquired all the rights to the product line, logo, and customer base of Discovery Experimental and Development, Inc." SSI intends to offer vitamins and dietary supplement products previously manufactured and distributed by DEDI. Also, the promotional letter notes that "SSI is introducing a new dietary supplement, named Citr-A-Sol, which has been developed utilizing the knowledge and expertise gained by DEDI and its development of a liquid deprenyl product." SSI lists the price of a 25ml bottle of Citr-A-Sol at $150.00 per bottle. According to the promotional letter, customers may order the Citr-A-Sol only through the Henderson, Nevada, location.
13/ The United States Customs had seized this freebase from the DEDI facilities at the Tours establishment May 12, 1993, but returned it to DEDI in 1998 after closing its case in San Diego.
14/ Rule 64B16-27.700, Florida Administrative Code, is Florida's pharmacist compounding rule. The rule requires patient specific compounding of medicinal drugs, on a per prescription basis where there is an established patient- physician relationship, and the patient has been made aware that
a pharmacist will prepare the compounded drug. The rule also provides that the preparation of drugs for sale or transfer to pharmacies or practitioners for dispensing or distribution, as here, is not compounding.
COPIES FURNISHED:
Robert P. Daniti, Esquire Department of Health
4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1701
Toni Ann Kimball
3122 49th Avenue, North
St. Petersburg, Florida 33714
James T. Kimball, Qualified Representative No. 38591-018
FCI Yazoo City
Post Office Box 5000
Yazoo City, Mississippi 39194
Josephine Kimball 35203 State Road 54
Wachula, Florida 33541
Rolando J. Santiago, Esquire Discovery Tour Wholesalers, Inc. 35205 State Road 54
Wachula, Florida 33541
Power, Agency Clerk Department of Health
4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1701
William W. Large, General Counsel Department of Health
4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1701
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| May 23, 2003 | Agency Final Order | |
| Apr. 18, 2003 | Recommended Order | Respondents manufactured for sale, sold, or otherwise distributed unapproved drug. Respondents also made false and misleading claims about its drug product. Recommend imposition of maximum administrative fine of $5000 per day during period of violations. |
