909 F.2d 1114 (8th Cir. 1990), 89-1222, United States v. Hiland

Docket Nº:89-1222EM, to 89-1224EM.
Citation:909 F.2d 1114
Party Name:UNITED STATES of America, Appellee, v. Larry K. HILAND, Appellant. UNITED STATES of America, Appellee, v. CARTER-GLOGAU LABORATORIES, INC., now known as RETRAC, Inc., Appellant. UNITED STATES of America, Appellee, v. Ronald M. CARTER, Sr., Appellant.
Case Date:July 19, 1990
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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909 F.2d 1114 (8th Cir. 1990)

UNITED STATES of America, Appellee,


Larry K. HILAND, Appellant.

UNITED STATES of America, Appellee,




UNITED STATES of America, Appellee,


Ronald M. CARTER, Sr., Appellant.

Nos. 89-1222EM, to 89-1224EM.

United States Court of Appeals, Eighth Circuit

July 19, 1990

Submitted Dec. 14, 1989.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Hamilton P. Fox, II, Washington, D.C., for appellant Hiland.

Steven M. Kowal, Chicago, Ill., for appellant Carter.

Eugene M. Thirolf, Jr., Washington, D.C., for appellee.

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Before ARNOLD, FAGG and MAGILL, Circuit Judges.

MAGILL, Circuit Judge.

Carter-Glogau Laboratories, Inc., now known as Retrac, Inc., Ronald M. Carter, Sr. (Carter), and Larry K. Hiland appeal from judgments of conviction entered by the district court 1 following a two-month jury trial. The convictions resulted from the manufacture and distribution of E-Ferol Aqueous Solution (E-Ferol), a pharmaceutical product administered intravenously to premature infants. Each of the appellants was convicted on one count of conspiracy to commit mail and wire fraud, and to violate the Federal Food, Drug, and Cosmetic Act (FDCA), in violation of 18 U.S.C. Sec. 371; six counts of introducing a new drug not approved by the Food and Drug Administration (FDA) into interstate commerce with the intent to defraud or mislead, in violation of 21 U.S.C. Secs. 331(d), 333(a)(2); 2 and six counts of introducing a misbranded drug into interstate commerce with the intent to defraud or mislead, in violation of 21 U.S.C. Secs. 331(a), 333(a)(2). Hiland was also convicted on five counts of committing mail fraud, in violation of 18 U.S.C. Sec. 1341. Carter and Carter-Glogau were acquitted on these counts. All of the appellants were acquitted on seven counts of committing wire fraud, in violation of 18 U.S.C. Sec. 1343.

The other two defendants, O'Neal, Jones and Feldman, Inc. (OJF), now known as O'Neal, Inc., and James B. Madison, entered guilty pleas pursuant to plea agreements. On the first day of trial, OJF pled guilty to one count of conspiracy, four counts of mail fraud, and twelve FDCA felony counts. 3 Midway through the trial, Madison pled guilty to two counts of wire fraud and one FDCA felony count. 4 Madison subsequently testified for the government. OJF and Madison have not appealed their convictions or sentences.

The appellants allege numerous grounds for reversal of their convictions. 5 They join in contending that (1) the jury was not properly instructed on the knowledge required for the FDCA offenses; (2) the district court erred in giving a willful blindness instruction; and (3) the court erred in admitting prejudicial medical testimony regarding the effects E-Ferol had on premature infants. Carter also argues that (1) FDA policy actively led him to believe E-Ferol could be lawfully marketed without a new drug approval; (2) this policy was so vague and indefinite that he lacked fair warning his conduct was illegal; and (3) a statement in the prosecutor's closing argument was improper. 6 Hiland also argues that (1) the court's instruction on his theory of defense impermissibly shifted the burden of proof; (2) the court erred in allowing the government to cross-examine him about certain instances prior to E-Ferol in which OJF had marketed drugs without FDA approval; (3) the court had no authority to resubmit the misbranding counts against him to the jury, and doing so was both coercive and a violation of the double jeopardy clause; (4) the mail fraud verdict against him cannot stand because the court failed to poll the jurors individually on that verdict; and (5) the court erred in failing to give a specific unanimity instruction informing

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the jury that its verdict must be unanimous with respect to each defendant on each count. Carter and Hiland do not challenge their sentences. 7 Carter-Glogau challenges the portion of its sentence requiring it to pay $100,000 toward the costs of prosecution. 8 We vacate this part of Carter-Glogau's sentence and remand for a redetermination of taxable costs. We affirm all of the convictions.


Carter-Glogau, located in Glendale, Arizona, was a manufacturer of generic (or "me-too") injectable drugs. Carter was the corporation's president and chief operating officer. OJF, located in Maryland Heights, Missouri, was a distributor of prescription pharmaceutical products, primarily generic drugs. Hiland was OJF's president and Madison was its executive vice-president of operations. Almost all of the injectable drugs distributed by OJF were manufactured by Carter-Glogau. In most cases, the drugs manufactured by Carter-Glogau for OJF were generic copies of innovator (or "benchmark") drugs that were formulated by other companies and approved by the FDA.

Carter-Glogau began manufacturing E-Ferol for OJF in the fall of 1983. E-Ferol was a high potency vitamin E solution for intravenous administration to premature infants. It consisted of a type of vitamin E and two types of polysorbates, which are emulsifying agents. Carter-Glogau manufactured and shipped to OJF three commercial lots of E-Ferol, totaling approximately 40,000 vials. OJF distributed approximately 26,000 vials of the product from November 1983 to April 6, 1984, when the FDA requested that shipments of E-Ferol be ceased because of reports linking it to the illness and death of premature infants. OJF initiated a total recall of E-Ferol on April 11, 1984.

  1. Development of E-Ferol

    The development of E-Ferol was prompted by the need for an intravenous form of vitamin E to combat retrolental fibroplasia (RLF), a disease that causes impaired vision or permanent blindness in premature infants. Many neonatologists, physicians specializing in the care of premature infants, considered vitamin E to be useful in reducing the incidence and severity of RLF. The two principal forms of vitamin E available to neonatologists in the early 1980's were an oral preparation and an intramuscular injection, both of which were sold as nutritional supplements and not represented as safe and effective for use in premature infants. 9 For some years prior to the development of E-Ferol, Carter-Glogau had been manufacturing a vitamin E intramuscular product ("E-Ferol IM") for OJF. This product was labeled as a nutritional supplement and was not approved by the FDA. Although its labeling contained no reference to RLF, E-Ferol IM was used by some neonatologists to treat this disease. 10 However, like the oral form of vitamin E, E-Ferol IM had drawbacks that made it difficult to administer to premature infants.

    In April 1982, one of Carter-Glogau's customers wrote Carter to ask whether an intravenous form of vitamin E could be developed, noting that "[t]here must be a Hell of a market out there." Carter expressed a reluctance to develop such a product. In his responses to the customer's inquiry, he stated that the amount of polysorbates needed "may be detrimental," and pointed out that "fat emulsions for IV

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    use ... are very tricky products and fraught with particular size problems."

    In August 1982, Madison wrote Carter to see if he could develop for OJF a high potency intravenous form of vitamin E for use in premature infants. He informed Carter that Hoffmann-LaRoche, a large pharmaceutical company, was testing an injectable vitamin E product for the treatment of RLF in an effort to obtain FDA approval of the product. Madison wrote that he was "afraid that when Roche gets their Vitamin E approved, we will lose the business, unless you can come up with something." Madison's letter clearly indicated that the primary purpose of the product he was proposing would be to treat RLF, and stated, "We could always label it for Vitamin E supplementation." Hiland received a copy of this letter. Several weeks later, Madison sent Carter a follow-up letter recommending a dosage level sufficient to alleviate RLF.

    In his responses to Madison's inquiries, Carter expressed serious safety concerns regarding the development of an intravenous vitamin E product, stating in part: "If we make some attempt to solubilize the Vitamin E and use the wrong proportions and kill a few infants, we'd have some serious problems." Carter was specifically concerned about developing such a product without proper clinical testing. He wrote Madison that:

    The administration of this product intravenously in neonatals without appropriate clinical work concerning toxicity will undoubtedly lead to an exposure in terms of product liability which neither you nor we may wish to assume.

    After all, one neonatal death is one too many.

    Carter suggested to Madison that the best way to proceed would be to wait until Hoffmann-LaRoche came out with the "benchmark" product so that they could then copy its formulation, thereby taking advantage of Hoffman-LaRoche's toxicity studies. This was Carter-Glogau's usual mode of operation.

    Carter and Madison resumed their dialogue about vitamin E early in the summer of 1983. Notwithstanding the strong safety concerns he had expressed less than a year earlier, Carter went ahead and developed a high potency intravenous vitamin E product (E-Ferol) for OJF. He did so despite knowledge that Hoffmann-LaRoche was still engaged in clinical testing of its intravenous vitamin E product and had not received approval from the FDA to market it. Carter personally made the final decisions as to E-Ferol's formulation, including the type of vitamin E and the types and proportions of polysorbate the product would contain. Carter admitted that at the time he made these decisions, he did not even know what level of polysorbates was safe for injection into premature infants. At no time did Carter do testing or...

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