U.S.A. v. Bhutani

Decision Date12 September 2001
Docket Number00-2679,Nos. 00-1523,s. 00-1523
Parties(7th Cir. 2001) United States of America, Plaintiff-Appellee, v. Baldev R. Bhutani and ALRA Laboratories, Incorporated, Defendants-Appellants
CourtU.S. Court of Appeals — Seventh Circuit

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 93 CR 585--John F. Grady, Judge. [Copyrighted Material Omitted]

Before Bauer, Ripple, and Evans, Circuit Judges.

Bauer, Circuit Judge.

A jury found defendants Baldev Raj Bhutani, Neelam Bhutani, and ALRA Laboratories, Inc. guilty of various violations of the Federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. sec. 301 et seq. The defendants moved for a new trial, which the district court granted, finding that the government violated Brady v. Maryland, 373 U.S. 83 (1963). The government appealed, and in United States v. Bhutani, 175 F.3d 572 (7th Cir. 1999) we reversed and remanded the case for sentencing. On remand, the defendants again moved for a new trial, which the district court denied. Assuming familiarity with our first opinion, we consider the appeal by the defendants (Neelam does not appeal) from that denial. For the following reasons, we affirm.


The defendants believe that the government's position in the first appeal contradicted its trial theory and that the government's appellate position is newly discovered evidence, and that if the jury had heard the government's appellate theory it would have decided the case differently. Specifically, they contend that at trial the government said that the defendants had added sodium hydroxide to decomposed Lactulose in hopes of concealing its medical ineffectiveness, but on appeal admitted that the Lactulose was medically effective by iterating that it was within the accepted pH range before the addition of sodium hydroxide. On remand, the district court agreed with the defendants that the government had changed its theory, but the district court refused to entertain the argument, believing that it was foreclosed from doing so since we had held otherwise in our first opinion in this case.

The government counters that its focus at trial was not that the Lactulose was outside of the acceptable pH range or medically ineffective, but rather the fact that the defendants added sodium hydroxide to the Lactulose lots because they wanted the 1986 lots to have a pH similar to the 1988 lots so that they could bear the same expiration date and be sold. The government's position was that the defendants masked the fact that the Lactulose was degrading and past its expiration date in order to make money.

We agree with the government. A second read of the trial transcript reveals that the government's position at trial and on appeal has been consistent. The government did not show at trial that the Lactulose was outside the accepted pH range or medically ineffective; rather it admitted that the pH was at all times within range, but that it was dropping, which signaled degradation, and in order to mask any degradation the defendants raised the pH by adding sodium hydroxide so that the fact that it was being sold past its expiration date could not be detected. The medical efficacy of the Lactulose was only mentioned by the government to explain the significance of expiration dating to the jury. The government wanted to explain why expiration dates are imposed in order to counter the defense theory that the defendants did not intend to put an adulterated product on the market because Lactulose could be stable and medically effective beyond the artificially imposed expiration date assigned by the "paperwork bureaucracy" known as the FDA. The defense again mischaracterizes the thrust of the government's case and regurgitates its argument from the last appeal, the only difference being that in the first appeal they argued that the newly discovered evidence was the U.S.P. recommendation, see 175 F.3d at 578-79, and here they point to the government's switch in theories. This supposed difference does not affect our decision. There is no new evidence that would have altered the outcome of this case.


The defendants submit that reversal is justified because the district court abused its discretion, see United States v. Butler, 71 F.3d 243, 250 (7th Cir. 1995), by permitting the government to elicit impermissibly prejudicial testimony from Dr. John Senior, offered as an expert in gastroenterology and liver disease, see Trial Tr. at 1691 (December 28, 1995), about the medical consequences of taking ineffective Lactulose. The defendants claim that Dr. Senior testified that patients could die from ingesting ineffective Lactulose. Before Dr. Senior testified, the district court had admonished the government to avoid introducing this sort of testimony. The defendants believe that the government violated this admonition.

Contrary to the defendants' characterization of Dr. Senior's testimony, the transcript reveals that he did not testify in an impermissibly prejudicial manner. Dr. Senior explained that Lactulose works as a substitute liver for patients with liver disease, and that Lactulose would be ineffective if it had degraded into its component parts because the separate sugars would be absorbed into the small intestine before reaching the colon. He also testified that it would be impossible for a physician to know that Lactulose had degraded to the point of ineffectiveness, and therefore a physician might erroneously determine that the Lactulose was ineffective for a patient for some other reason.

The sole mention of the possibility of death from ingesting ineffective Lactulose was not presented by the government, but was elicited on cross- examination by the defense:

Q. [Mr. Branding, Attorney for ALRA] And [Lactulose] doesn't cure the underlying liver disease, does it?

A. Of course not.

Q. It's only

A. It's only a compensation for a failed organ.

Q. It's used to treat the symptoms?

A. It's used to treat--it's not just symptoms. It's a whole syndrome that may kill. It's not just symptoms.

Encephalopathy due to liver failure may be fatal. It's not just symptoms.

Trial Tr. at 1710-11 (December 28, 1995). The testimony defendants complain about was never offered, and thus there was no abuse of discretion by the district court.


The defendants argue that Count Four, which charged that the defendants "[o]n or about August 12, 1988 . . . with intent to defraud and mislead, failed to establish and maintain accurate drug manufacturing batch production records for the generic drug product, Lactulose Syrup USP" in violation of 21 U.S.C. sec. 331(e), along with the correlating conspiracy charge in Count One, failed to state a crime for which they could be convicted.

In 1938, Congress enacted the FDCA pursuant to its authority to regulate interstate commerce in order to protect the public from dangerous food and drug products. In 1962, Congress amended the FDCA, adding sec. 355(j) to require drug manufacturers to establish or maintain records about the manufacture and testing of drugs. See The Drug Amendments of 1962, Pub. L. No. 87-781, sec. 103(a), 76 Stat. 780. Thereafter, the failure to establish or maintain records under sec. 331(j) was a prohibited act under sec. 331(e) and subject to the imposition of criminal penalties under sec. 333, such as imprisonment, fine, or both.

In 1984, Congress amended the FDCA and the federal patent laws to help make available more low cost drugs by creating an abbreviated procedure for FDA approval of generic drug applications. See Drug Price Competition & Patent Term Restoration Act of 1984, Pub. L. No. 98- 417, sec. 101, 98 Stat. 1585; see also National Ass'n of Pharm. Mfrs., Inc. v. Ayerst Labs., 850 F.2d 904, 907 (2d Cir. 1988). Congress enacted this new abbreviated drug approval process under sec. 355(j) and redesignated the old sec. 355(j) concerning recordkeeping as sec. 355(k). However, Congress did not alter sec. 331(e). Thus, sec. 331(e) still instructed that the failure to establish or maintain records under sec. 355(j) was subject to criminal penalties, even though the new sec. 355(j) did not require recordkeeping. Whether intentional or not, the penalties for failing to establish or maintain records had been in effect eliminated.

In 1990, Congress passed a short, technical amendment, which stated: "Section 301(e) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. sec. 331(e)) is amended by striking out 'or (j)' and inserting in lieu thereof 'or (k).'" Vaccine & Immunization Amendments of 1990, Pub. L. No. 101-502, 104 Stat. 1285. Thus, by simply replacing "(j)" with "(k)," sec. 331(e) again clearly subjected violators to the same criminal penalties as they had been for more than two decades prior to 1984 for failing to establish or maintain records.

However, there was a gap between 1984 and 1990 where under the plain statutory language the failure to establish or maintain records under sec. 355(k) was not subject to criminal penalties. This time gap is of import to this case; the defendants' conduct charged under sec. 331(e) occurred in August of 1988, which raises the delicate question of whether their convictions for these violations may stand, given that the plain language of the statute did not penalize their conduct. As noted, the defendants argue that under the plain language of the statute they cannot be penalized for failing to establish and maintain records. The government argues that the elimination of the penalty was a scrivener's snafu, and criticizes the defendants' hyper-technical and illogical reading of the statute. This question has all of the trappings of a law school hypothetical, but with real-world consequences, so although the defendants' brief fails to support this argument with case law discussion or even citation, we nonetheless address this important issue of criminal law and...

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