Letter to FDA regarding Hemispherx cost recovery.


August 4, 1999

Mr. David T. Read
Acting Director of Regulatory Policy Staff
Center for Drug Evaluation and Research
U.S. Food and Drug Administration (HFD-7)
5600 Fishers Lane
Rockville, MD 20857
Re. Hemispherx Biopharma, Inc.’s violation of conditions for FDA cost-recovery authorization

Dear Director Read:

This letter is in reference to the U.S. Food and Drug Administration’s (“FDA”) cost-recovery authorization given to Hemispherx Biopharma, Inc. for the drug Ampligen. This cost-recovery approval was granted on May 7, 1997 for clinical trials allowing the administration of Ampligen to chronic fatigue syndrome (“CFS”) patients. We believe that Hemispherx has violated almost every condition underlying the FDA’s authorization for Ampligen’s cost-recovery status, as described in the Code of Federal Regulations, Section 312.7, “Promotion and charging for investigational drugs.” (Exhibit A)

Part (d), Subsection 1 of Section 312.7 states that in requesting cost-recovery approval, “The sponsor shall provide a full written explanation of why charging is necessary in order for the sponsor to undertake or continue the clinical trial, e.g. why distribution of the drug to test subjects should not be considered part of the normal cost of doing business.” Hemispherx has sufficient financial resources to fund the cost of the trials being conducted under the cost-recovery program. There is no possible reason or explanation why Hemispherx should not bear the cost of these trials as a normal cost of doing business. In a February 19, 1999 press release, the company announced a buy-back of 200,000 Hemispherx shares, which at the time approximated a $2 million expenditure. In the same release, Dr. Carter stated, “We continue to maintain sufficient resources to fund internal expansion and pursue strategic alliances when appropriate.” (Exhibit B) On July 9, 1999, Hemispherx was added to the Russell 2000, an index of stocks that have achieved a certain level of market capitalization (Exhibit C). The company announced on December 7, 1998 a spin-off of its hepatitis division as a “special dividend to shareholders.” (Exhibit D) It is difficult to understand how a company that has sufficient resources to fund an international stock promotion, conduct unnecessary litigation against securities analysts, buy back shares, expand, pursue alliances, be included in the Russell 2000, and spin off subsidiaries could possibly justify the need to charge CFS patients for a drug trial.

Furthermore, we believe that Hemispherx has also violated Part (d), Subsection 2 of Section 312.7, which demands “adequate enrollment in the ongoing clinical investigations” and that “the sponsor of the drug is actively pursuing marketing approval with due diligence.” To this date, Hemispherx’s Ampligen Phase III CFS trials are underenrolled. Hemispherx received FDA approval for Ampligen CFS Phase III trials in 1993, and has itself been in business since 1966. The company has never filed a new drug application.

Part (d), Subsection 2 also requires that “charging does not constitute commercial marketing” and “the drug is not being commercially promoted or advertised.” A June 26, 1997 Hemispherx press release titled “Hemispherx Biopharma Begins Sales in the U.S. and Canada for its Drug to Treat Chronic Fatigue Syndrome,” announcing five clinical sites where Ampligen cost-recovery treatment would be implemented, added, “This is the first specific FDA approval for treatment with cost recovery for this disorder. The cost of Ampligen is $2100 for the first eight weeks of treatment and $2400 for each additional eight-week period thereafter. An estimated 500,000 to 2,000,000 patients in the U.S. suffer from CFS.” (Exhibit E) We believe the juxtaposition of the price of cost recovery with the potential market for Ampligen, which we have determined to be baseless and grossly exaggerated, is clearly meant to promote the beneficial financial potential of the cost-recovery trials.

The intent of Part (a) of Section 312.7 “is to restrict promotional claims of safety or effectiveness of the drug for a use for which it is under investigation, and to preclude commercialization of the drug before it is approved for commercial distribution.” On October 15, 1998, Sherrie Shade, a Regulatory Review Officer of the FDA’s Division of Drug Marketing, Advertising and Communications, sent an infraction notice to Dr. William Carter, the CEO of Hemispherx (Exhibit F). This letter cited Hemispherx’s promotion of Ampligen as a safe and effective drug prior to its approval for marketing, and required Hemispherx to discontinue this promotion. We believe that Hemispherx is continuing to promote Ampligen as safe and effective, and in fact is using Ampligen’s cost-recovery approval as an integral part of its violational drug promotion.

Hemispherx has been promoting Ampligen’s cost-recovery status as a tacit “approval” of Ampligen by the FDA. Hemispherx has issued at least 17 press releases promoting its cost-recovery trials. At least 3 of these press releases promoting the cost-recovery program (Exhibits G,H,I) were released after the FDA violation notice. In an interview broadcast on Bloomberg Financial News on November 12, 1998 (less than one month after receiving the FDA violation notice), Dr. Carter stated, “Obviously, this is an indirect comment from the regulatory agencies that they have no dissatisfaction with our capacity to introduce this drug to severely ill patients with CFS.” (Exhibit J) Dr. Carter is also quoted in an August 1, 1998 Genesis Report regarding Ampligen’s cost-recovery designation as stating, “We estimate that only 2% to 3% of American biopharma companies have ever received this designation. Historically, it has been associated not only with expanding access of the drug to the population that needs it, but also with the drug being approved by the FDA at some later step for full commercial sale.” (Exhibit K)

Hemispherx has also indirectly continued its violational promotion by employing various agents, such as its involvement with so-called “citizen’s advisory groups” and “non-governmental organizations.” (Exhibit L,M) We believe these groups are simply a front for Hemispherx to sidestep the FDA infraction notice, and that Hemispherx’s Dr. Carter has agreed to fund certain members of these groups (Exhibit N,O). Another method of indirect promotion is to reward promoters with below-market stock warrants. For example, Value Management & Research (“VMR”) has continually issued reports overstating the safety and efficacy of Ampligen (Exhibits P,Q). On April 13, 1999, Hemispherx filed an application with the Securities and Exchange Commission to register 1 million shares of private Hemispherx stock for VMR (Exhibit R).

Part (d), Subsection 4 of Section 312.7 provides that, “Authorization to charge for an investigational drug under this section may be withdrawn by FDA if the agency finds that the conditions underlying the authorization are no longer satisfied.” We believe the evidence shows that virtually all of the conditions necessary for Hemispherx to maintain its cost-recovery authorization have been violated. Therefore, we believe that the FDA should reconsider the cost-recovery authorization granted to Hemispherx.

Thank you for your attention to this matter. Please do not hesitate to contact me if you require any further information regarding the fraudulent Hemispherx promotion of Ampligen.


Asensio & Company, Inc.

Manuel P. Asensio
Chairman, President and
Chief Executive Officer

cc: Sherrie Shade, R.Ph., J.D.
Regulatory Review Officer
Division of Drug Marketing,
Advertising and Communications
U.S. Food and Drug Administration

Ellen C. Frank, R.Ph.
Regulatory Management Officer
Division of Special Pathogens & Immunologic Drug Products
Center for Drug Evaluation and Research
U.S. Food and Drug Administration

David Levine
Senior Advisor to the Director
Enforcement Department
Securities and Exchange Commission

Margaret Tart
Special Assistant to Director of Compliance
Center for Drug Evaluation and Research
U.S. Food and Drug Administration

Carol Rosenblat
Staff Attorney
Securities and Exchange Commission

Enclosures (cc: without enclosures, except for Ms. Rosenblat)

MPA: cls


A. Code of Federal Regulations, Section 312.7.
B. Hemispherx press release, February 19, 1999.
C. Hemispherx press release, July 9, 1999.
D. Hemispherx press release, December 7, 1998.
E. Hemispherx press release, June 26, 1997.
F. FDA infraction notice, October 15, 1998.
G. Hemispherx press release, October 28, 1998.
H. Hemispherx press release, November 11, 1998.
I. Hemispherx press release, April 8, 1999.
J. Transcript of Bloomberg interview with Dr. William Carter (excerpt), November 12, 1998.
K. Genesis Report-Rx, April 1, 1998.
L. Asensio & Company research report, July 13, 1999.
M. “ATTAC” group press release, May 17, 1999.
N. CFIDS Citizens Advisory Board press release, June 8, 1999.
O. Hemispherx press release, July 13, 1999.
P. Asensio & Company research report, May 11, 1999.
Q. VMR research report on Hemispherx (extract), July 7, 1999.
R. Hemispherx SEC 424B1 filing (extract), April 13, 1999.