Presentation on Critical Legal Issues Facing GMP Compliance

Solving FDA Legal Challenges for the Life of a Life Sciences Company -1- www.fdacounsel.com
LAW OFFICES OF MICHAEL A. SWIT
Critical Legal Issues Facing
GMP Compliance
23rd Annual GMP By The Sea
August 27, 2018
Cambridge, Maryland
Michael A. Swit, Esq.
Managing Principal

Standard Disclaimers
• Views expressed here are solely mine and do not
reflect those of my firm or any of its clients.
• This presentation supports an oral briefing and
should not be relied upon solely on its own to
support any conclusion of law or fact.
• These slides are intended to provide general
educational information and are not intended to
convey legal advice.

What We Will Cover
• Violations – How GMP/Quality Issues Violate the
Food, Drug, and Cosmetic Act
• FDA Administrative Powers
• Judicial Enforcement – When FDA Takes You to
Court
• Collateral Consequences of GMP Violations
– Individuals
– Companies

Violations

Statutory Drug Manufacturing Violations
• Adulteration violations -- § 501 of the Act
– (a)(1) -- “consists in whole or in part of any filthy, putrid, or
decomposed substance”
– (a)(2)(A) -- “been prepared, packed, or held under insanitary
conditions whereby it may have been contaminated with filth, or
whereby it may have been rendered injurious to health”
– (a)(2)(B) -- GMP violation …
– (b) – does not conform to an official compendium as far as
strength, quality, or purity
– (j) If it is a drug and it has been manufactured, processed, packed, or
held in any factory, warehouse, or establishment and the owner,
operator, or agent of such factory, warehouse, or establishment
delays, denies, or limits an inspection, or refuses to permit
entry or inspection.’’

• Misbranding violations -- § 502 of the Act
– (o) DRUGS OR DEVICES FROM NONREGISTERED ESTABLISHMENTS
If it was manufactured, prepared, propagated, compounded, or
processed in an establishment not duly registered under section 360
of this title, if it is a drug and was imported or offered for import by a
commercial importer of drugs not duly registered under section 381(s) of
this title, if it was not included in a list required by section 360(j) of
this title, …
– (aa) UNPAID FEES; FAILURE TO SUBMIT IDENTIFYING INFORMATION
If it is a drug, or an active pharmaceutical ingredient, and it was
manufactured, prepared, propagated, compounded, or processed in a
facility for which fees have not been paid as required by section 379j–
42(a)(4) [i.e., a generic drug facility fee] of this title or for which
identifying information required by section 379j–42(f) of this title has not
been submitted, or it contains an active pharmaceutical ingredient that was
manufactured, prepared, propagated, compounded, or processed in such a
facility.

• Prohibited Acts under § 301 of the Act
(a) introduction or delivery into interstate commerce (“IC”)of
adulterated or misbranded drug
(b)adulterating a drug in IC
(c) receipt in IC of an adulterated or misbranded drug and “the delivery
or proffered delivery thereof for pay or otherwise”
(e) refusal to permit access to or copying of any record as required by
section … 704(a)
(f) refusal to permit entry or inspection [under] Section 704
(g) manufacturing … any … drug … that is adulterated or misbranded
(p) failure to register … or provide any information (i.e. list) under § 510

FDA Administrative Enforcement Powers

The Inspection
• Inspections --- leading to the “483”
– Planned and conducted pursuant to FDA annual plan or
center compliance program
– Pre-approval
– “For cause” (e.g., public health crisis due to defective or
contaminated FDA-regulated product; follow up to 483
response)
– Government-wide Quality Assurance Program
• FDA may inspect at the request of the DoD or VA to
determine, for example, whether a company bidding on a
government contract is in compliance with GMPs and otherwise
in compliance with the FDCA

Inspections …
• Combination or joint inspections (EPA, OSHA, or
a state food and drug regulatory body)
• Consumer, trade, and other complaints
• Adverse product effect reports
• Congressionally inspired

Timely 483 Responses Policy
• Aug. 11, 2009 -- Federal Register notice – Post-
inspection 483 responses timing policy published –
15 business days
• Timely Responses
– FDA will conduct “detailed review” in deciding any
enforcement action
– If FDA issues a warning letter, letter will address sufficiency
of response

Timely 483 Responses Policy …
• Late responses
– Response will not be considered by FDA in deciding to take
enforcement action such as a warning letter
– If warning letter issues after a late 483 response, FDA will
consider the 483 response in assessing firm’s later reply to
warning letter

Warning Letters
• Warning Letters
– addressed to CEOs/other executives; FDA’s effort to get
executive buy-in on necessary fixes which, in past, is
sabotaged if corporate bureaucracy, which sends the letter
back down to the person with knowledge of the specifics –
but –
• Purpose of Warning Letter:
– “ensure … seriousness and scope of the violations are
understood by top management … and that the
appropriate resources are allocated to fully correct the
violations and prevent their recurrence”
• August 11, 2009 Federal Register [HOT LINK]

Warning Letters …
• Faster warning letter process – FDA Office of Chief
Counsel only to review warning letters that present
significant legal issues
• Formal warning letter “close-out” process
– If FDA determines a firm fully corrected violations in a
warning letter, agency will issue an official “close-out” notice
and post on FDA Web site
– Seen as an “important motivator” for corrective action

FDA Expectation on Your 483/WL Response
• Wants to Hear Your D.R.U.M. – expects your response
to have these qualities:
– Direct – i.e., address the items directly raised in the 483 or
warning letter
– Related – go beyond those to potentially related problems
– Universal – expand to review those issues company-wide
– Monitoring and Management –
• show that you will stay on top of the issues
• show that senior management is involved
Source: “Compliance and Enforcement.” Presentation by David K. Elder, Director, FDA Office of Enforcement, at the Orange County
Regulatory Affairs (OCRA)/FDA Joint Educational Conference. June 15, 2005. Irvine, California.

Other Administrative Enforcement Tools
• Clinical hold
• Withdrawal or suspension of marketing permit
• Recall (FDA-requested or “voluntary”)
• Import detention or refusal
• Application Integrity Program (AIP) – FDA declines
to review your applications – can be the FDA “death
sentence”
– has not been applied since 2011

➢ Ranbaxy –
– GMP issues at two facilities in India that produce drugs under
approved ANDAs
– At least 30 different drugs impacted
– Consent decree – January 2012 – unprecedented audit process
– May 2013 -- $500 million criminal and civil fines
➢ Apotex –
– GMP issues at two facilities in Canada that produce drugs under
approved ANDAs
– At least 60 different drugs impacted
– Lifted by July 2011
Import Alerts – Apotex & Ranbaxy

➢ The AIP – Application Integrity Program – barred from
getting submissions reviewed at FDA
– Suspected fraud or rampant sloppiness as to
➢ To get off the list
– Audits – focusing on roots of fraud allegations
– Full cooperation with FDA and other investigatory bodies (e.g.,
DOJ)
– Re-inspections
➢ Ranbaxy – still on it; but now covered by consent
decree
Application Integrity -- Ranbaxy

FDA Policies on GMPs
• CPG Sec. 400.200 Consistent Application of CGMP
Determinations
– POLICY:
• CGMP deficiencies supporting a regulatory action also support
decisions regarding non-approval of drug marketing applications,
government purchasing contracts, candidates for MAC, etc. Therefore,
the issuance of a *warning* letter or initiation of other regulatory
action based upon CGMP deficiencies must be accompanied by
disapproval of any pending drug marketing application, or
government contract for a product produced under the same
deficiencies.
• Similarly, disapproval of any drug marketing application,
government contract, etc., based upon CGMP deficiencies must
be accompanied by regulatory and/or administrative action
against any other product produced under the same conditions.
[Emphasis added]

The Pen Is Mightier Than The Sword:
Adverse Publicity
• FDA Website
• Press release
• Talk paper
• Press conference/television and radio interview
• Speeches
• Congressional and other testimony
• Articles in scientific, professional and lay
publications

Publicity as an Enforcement Tool?

Judicial Enforcement – FDA Goes to Court

Seizure
• Civil action
– Technically, is against the goods themselves
– Owner or others with interest must intervene to defend the
goods
• If do, then trial on merits of alleged violations
– Lose – goods usually destroyed, but may be reconditioned if
possible
– Win – goods go free
– Logistically – fastest judicial remedy

GMP Seizure
• Caraco – 2009
– Complaint
– All drugs made at 3 facilities
– Eventually led to a consent decree (to be discussed)
– Initiated a month after an inspection

Injunction
• Action to either:
– Compel compliance
– Prevent future violations
• Personal against individuals or corporations
• Can result in an order that will involve tremendous
allocation of resources over a long period of time to
address

The Barr Case
• 1993 -- seminal case construing drug GMP
provisions https://law.justia.com/cases/federal/district-
courts/FSupp/812/458/1762275/
• The Decision – key points
– 3 types of out-of-specifications results seen (Finding 19 or
“F-19)):
• laboratory error
• non-process related – operator error
• process-related – manufacturing error
– Goal of GMP failure investigation – to determine what type
of error occurred; “degree of inquiry may vary with object
under investigation” (F-24)

The Barr Case
• Contents of a failure investigation (F-30) …
– reason for investigation
– summarize the process steps that may have caused the problem
– outline corrective actions needed to save the batch (if possible) and
prevent recurrence
– list other batches and products possibly affected and results of their
investigations
– preserve comments and signatures of all production and quality
personnel involved
– Timing: court -- should be done within 30 business days of
occurrence (F-32)
• Outlier testing – most appropriate for biologics and
antibiotics; rarely for chemical drugs (F-35)
– should not be used to invalidate content uniformity testing (O-4)

The Barr Case
• Retesting
– only appropriate after an investigation begins (F-38)
– necessary if investigation indicates lab analyst error caused initial
OOS results or review of analyst’s work is inconclusive (F-38)
– inappropriate if the error is viewed as “non-process” (i.e., production
operator) or “process” (i.e., the manufacturing instructions
themselves) related
– how much retesting can be done is a matter of scientific judgment
(F-40), but cannot continue ad infinitum (F-41).
• Rather, testing SOP should contain a (justified) point where retesting is
cut off and batch is rejected (F-41)
• Resampling – appropriate if allowed by USP or if
investigation suggests original sample was not representative
(F-44)

The Barr Case
• Remixing – ok at blending stage (F-46) if done on occasion
(F-47), but not to replace a bad process
• Averaging – allowed in certain situations (F48-51)
• Release testing – can involve some exercise of appropriate
scientific judgment, but court “cannot articulate” specific
procedures (F52-57)
• Blend testing – important because finished product testing
is more limited in nature (F-58)
– sample size –
• content uniformity – 3x dosage size (F-65)
• blend potency – can be larger (F-67)
– sample site – either mixer or drum – but choice must be
representative of the whole blend (F-70)

The Barr Case
• Retrospective validation
– must include all batches, failed and passing, in the review
unless can show the batch is not representative of the process
– e.g., an older process (F-93)
• Barr – tried to argue that it could do a retrospective validation
with fewer batches. Court declined to adopt that specifically, but
also declined to set a minimum number (F-103)

Barr …
• Key Lessons:
– Can’t test your way into compliance – a theme that
continues to today (e.g., Akorn allegations)
– Record keeping – must be in lab notebooks or other official
records; not on “scrap” paper or Post-its
– Not a defense that defective procedures were approved in a
new drug application
– Recall order – can be a part of equitable relief in a quality-
related injunction proceeding

Consent Decree
• Order of a court
• Entered by consent of the parties
• Not technically a judicial verdict, but a negotiated
contract between the parties under the sanction of
the court
• Parties represent that it is a just determination of
their rights as if the alleged facts of the case had
been proven

Consent Decrees …
• How do they come about??
• Settlement of a court case after FDA has filed for an
injunction
– “Voluntary” negotiations with FDA after an adverse inspection
– Most terms/conditions negotiable -- but depends on your
leverage point
– companies more often concerned about naming executives as
individually responsible: FDA finds this point important as a
deterrent and necessary to pursue contempt charges if decree
becomes ineffective

Genzyme Consent Decree
• GMP issues at its Allston facility
• $175 million disgorgement
• 5-years of audits after corrections made
• Batch reviews – by outside expert and then reviewed by
Genzyme Sr. VP for Global Quality
• Periodic inspections by an auditor
• Penalties for not meeting deadlines in correction plan
– $15,000 per day per drug
– 18.5% of revenue for each drug sold after failing to meet deadline
• Penalties for decree violations -- $15,000 per day
• KV and Caraco Consent Decrees – 2009 – similar to Genzyme

Disgorgement
• Government (FDA doesn’t get) recovery of company
profits
• Can’t profit from sales of an illegal product that is
nonetheless medically necessary
• FDA refrains from enjoining production of non-
compliant products because it would compromise
patient care by causing significant shortages of
medically necessary products
• In return, firms will pay a fixed % of future sales to
ensure that they did not profit from the violative
products
• Example: Abbott Diagnostics

Criminal Prosecution: Misdemeanors
• Misdemeanor
– Fines up to $100,000 and $200,000 per misdemeanor offense
for an individual and a corporation respectively ($250,000 and
$500,000 if the misdemeanor offense resulted in death)
– Imprisonment – up to a year in jail per violation

Criminal Prosecution -- Felony
• Must prove intent
• Fines are greater
• More common than misdemeanor prosecutions
• Often will combine FDA violations with other
federal crimes (e.g., conspiracy, false statements)

Strict Liability and the “Park Doctrine” –
Criminal Liability for
Responsible Corporate Officials

U.S. v. Park – Strict Criminal Liability in
the FDA World
• 1975 – 421 U.S. 658
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=421&invol=658
• Facts:
– John Park – CEO of Acme Markets – based in Phila.
– Warehouse – in Baltimore –multiple FDA inspections found
rodent and insect infestation
• 1970 – letter to Park re Baltimore warehouse
• 1971 – FDA inspection in October and November
• 1972 – January letter from FDA
• March 1972 – FDA inspection – still found rodent inspection

U.S. v. Park – Strict Liability …
• Supreme Court, quoting Dotterweich (1943):
– observed that the Act is of "a now familiar type" which
"dispenses with the conventional requirement for
criminal conduct - awareness of some wrongdoing. In the
interest of the larger good it puts the burden of acting at
hazard upon a person otherwise innocent but standing in
responsible relation to a public danger."
• “Moreover, the principle had been recognized that a
corporate agent, through whose act, default, or
omission the corporation committed a crime, was
himself guilty individually of that crime. “

U.S v. Park …
• The principle had been applied whether or not the crime required
"consciousness of wrongdoing," and it had been applied not only to
those corporate agents who themselves committed the criminal act, but
also to those who by virtue of their managerial positions or other
similar relation to the actor could be deemed responsible for its
commission.
• The liability of managerial officers did not depend on their
knowledge of, or personal participation in, the act made criminal
by the statute. Rather, where the statute under which they were
prosecuted dispensed with "consciousness of wrongdoing," an omission
or failure to act was deemed a sufficient basis for a responsible
corporate agent's liability. It was enough in such cases that, by
virtue of the relationship he bore to the corporation, the agent had
the power to prevent the act complained of.

U.S. v Park …
• Duty to seek out and fix violations -- the Act imposes not
only a positive duty to seek out and remedy violations when
they occur but also, and primarily, a duty to implement
measures that will insure that violations will not occur.
– The requirements of foresight and vigilance imposed on responsible
corporate agents are beyond question demanding, and perhaps onerous,
but they are no more stringent than the public has a right to expect of
those who voluntarily assume positions of authority in business enterprises
whose services and products affect the health and well-being of the public
• But the Act, in its criminal aspect, does not require that
which is objectively impossible -- the Act permits a claim
that a defendant was "powerless" to prevent or correct the
violation to "be raised defensively at a trial on the merits."

U.S. v. Park …
• Objective impossibility – not construed by Supreme
Court since Park.
– One federal court of appeals – would have to show that you
took extraordinary measures, but still the violation occurred
– Delegation is not a defense
• March 2010 – Commissioner Hamburg writes
Congress -- renewed commitment to use Park
– issued a revision to its Regulatory Procedures Manual (RPM)
on factors FDA will use in invoking Park

The Park Doctrine – The OxyContin
Case
• May 10, 2007 -- Purdue Frederick Company, Inc. –
as a company -- agreed to pay more than $600
million to resolve felony criminal charges and civil
liabilities in connection with a long-term illegal
scheme to promote, market and sell OxyContin
• Purdue trained its sales representatives to falsely
represent:
– to health care providers about the difficulty of extracting
oxycodone, the active ingredient, from OxyContin
– to health care providers that OxyContin did not cause euphoria and
was less addictive than IR opiates;
– to health care providers the erroneous belief that OxyContin was
less addictive than morphine.

The Park Doctrine – The Oxycontin Case
• As part of the plea, Purdue paid a $600 million
settlement, which included:
– a criminal fine
– restitution to government agencies
– over $276 million in forfeiture,
– civil settlement of $100.6 million to the United States.
• Purdue's then current and former executive
employees, Michael Friedman, Howard Udell and Dr.
Paul Goldenheim, pled guilty to a misdemeanor
violation of misbranding OxyContin as being the
responsible corporate officers during the long-term
illegal promotion of the drug

Is Park Being Resurrected?
• Congress and Executive Branch – concerned that
even huge fines and Corporate Integrity
Agreements are “cost of business”
• Corporate Executives – being targeted under
premise that:
– Organizational misconduct cannot occur without individuals
– What officials could prevent a violation if they tried?
– Answer: the “Responsible Corporate Official” (RCO)

Recent GMP Criminal Prosecutions
• Baxter – 2017 – Sterile Drugs – DOJ Press Release
– North Carolina facility
– $16 million in criminal fines
– $2.18 in False Claims Act penalties
• Whistleblower – got $431,000
– Cause – failure to replace moldy HEPA filters
– Note – no evidence of negative impact on the product – Large
Volume IV solutions

Collateral Consequences of Serious
Enforcement Actions

Consequences for Individuals

Collateral Damage – Worst Case Scenario
from FDA Enforcement
• This is a picture you do not want to see ….
– in your newspaper ….
– on your local news ….
– on the Internet ….
or
– in an FDA lawyer’s presentation for years to come ….

Purdue Pharma Executives Outside
Court in Virginia
Udell Goldenheim Friedman

HHS Disqualification – The “Death”
Sentence
• 2008 – HHS Office of Inspector General – proposed
to disqualify all three from participating in federal
health care programs (e.g., Medicare, Medicaid)
– Did not allege direct involvement, but based on RCO theory
• 2010 – Twelve year exclusion upheld by federal
district court – Friedman v. Sebelius (on appeal to
D.C. Court of Appeals)
• July 2012 – Federal Court Appeals – agreed,
although remanded to see if length of exclusion
was consistent with prior exclusions

OIG Disqualification – Factors
• Circumstances of the misconduct and the
seriousness of the offense
• Individual’s role in sanctioned entity
• Individual’s actions in response to the misconduct
• Information about the entity
• Forest/Solomon – OIG threatened to disqualify him
even though he had not been convicted; later
backed off

Problems For Individuals If Convicted
• Lose right to vote
• Lose right to run for
public office
• Damage to reputation

Problems For Individuals If Convicted …
• Can be deported if not a U.S. citizen
• Financial ruin -- lose your job
• May not be able to ever work in industry again:
– Debarment (FDA)
– Disqualification (HHS, Clinical Investigator)

Consequences for Companies

Problems For Companies Caused By
Criminal Convictions …
• Shareholders sue the company, its officers and
directors
• Other companies may sue the company (e.g., Mylan
Labs sued Par and others)
• Federal government may suspend or “debar”
company from selling to government
• “Qui Tam” actions under the False Claims Act -- e.g.,
GSK (GMP) & Pfizer cases -- “whistle blower” cases --
leading to civil damages and may also spawn a
criminal prosecution

• FDA may refuse to approve applications – the AIP
Program
• May lose state licenses
• Customers abandon you
• Decreased sales may force lay-offs of employees

• Financing disappears -- banks may refuse to lend
money
• May violate lending agreements, real estate
mortgages or leases
• A criminal investigation can cause great disruption
to normal business activities

Questions?
➢ Call, e-mail or write:
Michael A. Swit, Esq.
San Diego, California 92130
m: 760-815-4762
e: mswit@fdacounsel.com
web: www.fdacounsel.com
➢ Follow me on:
– LinkedIn: http://www.linkedin.com/in/michaelswit
– Twitter: https://twitter.com/FDACounsel

About Your Speaker
Michael A. Swit, Esq., has been addressing critical FDA legal and regulatory issues for over 30
years. Before returning to his private law practice in late 2017, he served for 3 years as the chief
regulatory counsel at Illumina, Inc., the world’s leading developer of gene sequencing technologies.
Prior to that, Swit was a special counsel in the FDA Law Practice at the global law firm of
Duane Morris LLP, in its San Diego office. Before joining Duane Morris in March 2012, Swit served
for seven years as a vice president at The Weinberg Group Inc., a preeminent scientific and
regulatory consulting firm in the Life Sciences.
His expertise includes product development, compliance and enforcement, recalls and crisis
management, submissions and related traditional FDA regulatory activities, labeling and advertising,
and clinical research efforts for all types of life sciences companies, with a particular emphasis on
drugs, biologics, therapeutic biotech products, medical devices, and IVDs.
His FDA legal and regulatory work also has included tenures in private practice with McKenna &
Cuneo and Heller Ehrman, and as vice president, general counsel and secretary of Par
Pharmaceutical, a top public generic and specialty drug firm, where he helped spearhead the
company’s emergence from the Generic Drug Scandal. He also was, from 1994 to 1998, CEO of
FDANews.com, a premier publisher of regulatory newsletters and other specialty information
products for FDA-regulated firms.
He has taught and written on many topics relating to FDA regulation and associated commercial
activities and is a past member of the Food & Drug Law Journal Editorial Board. He earned his
A.B., magna cum laude, with high honors in history, at Bowdoin College, and his law degree at
Emory University.

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Presentation on Critical Legal Issues Facing GMP Compliance