Oil and Water Meet Caffeine and Alcohol: FDA to Look into Safety of Caffeinated Alcoholic Beverages
By Guest Bloggers Tyler Anderson and Stephanie Meier
On November 13, the FDA notified nearly 30 manufacturers of caffeinated alcoholic beverages that the agency intends to look into the safety and legality of their products. As the FDA explained in a news release announcing this action, under the Federal Food, Drug, and Cosmetic Act any substance intentionally added to food, in this case caffeine in alcoholic beverages, is deemed unsafe and is unlawful unless its specific use has been approved by an FDA regulation, the substance is subject to a prior sanction, or the substance is Generally Recognized as Safe (GRAS). To date, the FDA has only listed caffeine as GRAS as an ingredient for use in cola-type beverages in concentrations specified by the agency.
The FDA noted in its release that it is not aware of any basis on which manufacturers may have concluded that the use of caffeine in alcoholic beverages is GRAS sanctioned. Consequently, in its letters to notified companies, including City Brewing, Gaamm Imports, Inc., and United Brands Company, Inc., the agency asked that within 30 days the notified companies “produce evidence of their rationale, with supporting data and information” for their conclusion that the use of caffeine in their products is GRAS or prior sanctioned. If the FDA determines that the use of caffeine in the alcoholic beverages is not GRAS or prior sanctioned, the agency stated it would take “appropriate action to ensure that the products are removed from the marketplace.”
This issue has been fermenting (pun intended) for some time. In the past year, alcoholic beverage industry leaders Anheuser-Busch and MillerCoors agreed to discontinue their popular caffeinated alcoholic beverages Tilt, Bud Extra, and Sparks, and further agreed not to produce any caffeinated alcoholic beverages in the future. In late September 2009, the FDA received letters from eighteen attorneys general and one city attorney and five scientists expressing concerns about caffeinated alcoholic beverages. Among the chief policy concerns cited by these stakeholders was the increasing popularity and consumption of caffeinated alcoholic beverages by college students, coupled with general health risks associated with excess consumption of both alcohol and caffeine.
Manufacturers of alcoholic beverages had been operating under the TTB guideline that caffeine was a permitted but restricted ingredient, and had been warned by TTB and FTC about prohibited and/or deceptive advertising practices related to the effects of combining caffeine and alcohol. If the FDA takes the strong position that caffeine is an illegal additive, these advertising concerns related to caffeine and alcohol will disappear. The TTB and FTC will likely continue to focus scrutiny on other less common alcoholic beverage additives that have been treated like caffeine, such as ginseng, guarana and taurine.
And consumers will turn back to the original Red Bull and vodka for their caffeinated alcoholic beverage.
Update on Criminal Risk Management: The Peanut Case
By Guest Blogger Per Ramfjord
In my February 3, 2009 blog entry, I briefly discussed the steps a company should take to avoid criminal prosecution under the Federal Food Drug and Cosmetic Act. The FDA’s criminal investigation of Peanut Corporation of America continues to provide lessons on this subject—in particular, on what not to do.
The enormous public harm caused by the company’s actions, coupled with its seemingly cavalier attitude to contamination already created a high risk of prosecution. But that risk was heightened still further on February 5, 2009, when the FDA issued an amended investigatory report indicating that company management did not initially provide complete and accurate information regarding the testing of contaminated products.
This report and other information disclosed by the FDA shows that PCA management initially told the FDA that the company had shipped products that had tested positive for salmonella only after the products had been retested and it did not appear that they were contaminated. But this information was apparently inconsistent with company records, which, according to the report, showed that the company sometimes shipped products before it even received the positive test results and that, when it did so, it did not always even bother to do re-testing to find out if the positive results were false. This type of inconsistency between management statements and company records is precisely the type of misstep that companies should seek to avoid in a criminal investigation.
The Department of Justice has published its Principles of Federal Prosecution of Business Organizations. According to those Principles, one of the key factors that the government looks to in deciding whether to charge a company criminally is the “corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation.” Any statements that are inconsistent with company records or the statements of other company employees are likely to be viewed as a failure to “come clean” under this standard. Indeed, should the government conclude that there was an active effort to conceal negative information, it is likely to go a step further and add charges against company management for false statements or obstruction of justice to the other charges in the underlying case.
Again, this underscores the need to engage in a prompt, thorough and complete investigation as soon as possible when a potential problem arises. Equally important, it shows the need to exercise caution in verifying any statements that are provided to the government, particularly early in an investigation when there is a great deal of pressure—both from the government and the public—to provide an explanation of what happened. Putting too positive a “spin” on the events is virtually certain to backfire, as it appears to have done with PCA management.
Update by Richard Goldfarb
As though to show the truth of what Per wrote, the FBI just announced that it would participate in the investigation of PCA, while the FDA's Office of Criminal Investigations would remain the lead investigative agency.
Avoiding Criminal Prosecution Under The FFDCA
By guest blogger Per Ramfjord
The FDA’s recent announcement that it is pursuing a criminal investigation of Peanut Corporation of America, arising out of the Salmonella-driven peanut product recall, is sure to raise concerns with executives in food product companies throughout the country. White House Press Secretary Robert Gibbs’s comment that the Obama administration intends to put in place a “stricter regulatory structure” to prevent breakdowns in food safety only heightens that concern.
And looking at the law, there are reasons to be concerned. The Federal Food, Drug, and Cosmetic Act criminalizes under sections 331 and 333 more than two dozen practices, including a host of activities associated with the manufacture or sale of contaminated food products. The potential punishment for such offenses includes corporate fines and the possible imprisonment of executives for up to one year for misdemeanor offenses or up to three years for felony violations. The burden of proof to establish such crimes against corporate executives is very low. For misdemeanor offenses, the government needs to prove only that the violation occurred under the executive’s watch; it need not show that the executive had any actual criminal intent or personal involvement in the violation. For felony violations, the government can prove the required intent simply by showing that a defendant consciously avoided knowledge of the violation or was involved in a prior violation.
So, the question arises, what should companies do to avoid prosecution if they become aware of potential criminal violations? The obvious first step is to stop the offending practice as quickly as possible and to identify and take any available remedial action, up to and potentially including a recall. Although there may be concern that the remedial action or recall may itself draw attention to the problem, the benefits of acting in a manner that the government deems responsible will pay off down the road. The second step is to investigate the violation immediately, with counsel, to develop facts that can help steer the case away from criminal enforcement. The FDA will almost always hold a “Section 305” meeting to allow a company to tell its side of the story before initiating a criminal prosecution. The decision about whether to prosecute will be based on factors such as the nature and seriousness of the offense, the potential deterrent effects of prosecution, and the company’s or individual’s culpability, criminal history, and willingness to cooperate. Uncovering evidence to show that the event in question was isolated in nature, due to unique and excusable circumstances, and not part of a pattern of misconduct or noncompliance is critical to making such a meeting a success and to the company’s overall defense going forward. Finally, an important third step is avoiding pitfalls during the investigation itself that could contribute to the government’s decision to prosecute. The current enforcement atmosphere is one in which the “cover-up” is often deemed worse (and more likely to spark prosecution) than the “crime.” Avoiding any false statements, document destruction, or other actions that the government could construe as constituting obstruction of justice is therefore of vital importance.
In sum, obviously the best way to avoid prosecution is to avoid violations, particularly through adopting policies and procedures that minimize risk. But once a potential violation has been discovered, it is vital to respond quickly and with the benefit of counsel who know and understand the system. While any enforcement proceedings are unfortunate, the prospect of criminal proceedings, with their potential of adverse publicity to the company and incarceration of executives, poses unique problems that require a rapid and focused response.
