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FDA Inspections: Handling the Administrative and Legal Consequences -- Understanding How Ugly It Can Get

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October 21, 2018 presentation to Master Class on Regulatory Compliance at the MAGI Clinical Research Conference -- 2018 West, San Diego

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FDA Inspections: Handling the Administrative and Legal Consequences -- Understanding How Ugly It Can Get

  1. 1. Solving FDA Legal Challenges for the Life of a Life Sciences Company -1- © 2018 Law Offices of Michael A. Swit LAW OFFICES OF MICHAEL A. SWIT FDA Inspections: Handling the Administrative and Legal Consequences Understanding How Ugly It Can Get Michael A. Swit, Esq. Vice President, Life Sciences Presentation to the MAGI Clinical Research Conference – 2018 West October 21, 2018 San Diego, California
  2. 2. Solving FDA Legal Challenges for the Life of a Life Sciences Company -2- © 2018 Law Offices of Michael A. Swit 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.
  3. 3. Solving FDA Legal Challenges for the Life of a Life Sciences Company -3- © 2018 Law Offices of Michael A. Swit What I Will Cover • After the Inspection -- – FDA Administrative Powers – FDA Judicial Powers – When they take you to Court – Collateral Consequences of Serious Violations
  4. 4. Solving FDA Legal Challenges for the Life of a Life Sciences Company -4- © 2018 Law Offices of Michael A. Swit ➢ Inspections (actually is FDA’s #1 enforcement tool) ➢ Clinical hold ➢ Disqualification of Clinical Investigators ➢ Withdrawal or suspension of marketing permit ➢ Recall (FDA-requested or “voluntary”) ➢ Generic Drug Enforcement Act -- debarment Administrative Enforcement Tools
  5. 5. Solving FDA Legal Challenges for the Life of a Life Sciences Company -5- © 2018 Law Offices of Michael A. Swit ➢ Import detention or refusal ➢ Civil money penalties ➢ Warning Letters – addressed to CEOs/other executives; FDA’s effort to get executive buy-in on necessary fixes is often sabotaged by corporate bureaucracy, which sends the letter back down to the person with knowledge of the specifics – – purpose of WL ➢ Application Integrity Program (AIP) – the ultimate “fix” (or death) for data integrity issues FDA Administrative Enforcement Tools …
  6. 6. Solving FDA Legal Challenges for the Life of a Life Sciences Company -6- © 2018 Law Offices of Michael A. Swit ➢ FDA Website ➢ Press release ➢ Press conference/television and radio interview ➢ Speeches ➢ Congressional and other testimony The Pen Is Mightier Than The Sword: Adverse Publicity
  7. 7. Solving FDA Legal Challenges for the Life of a Life Sciences Company -7- © 2018 Law Offices of Michael A. Swit Publicity as an Enforcement Tool?
  8. 8. Solving FDA Legal Challenges for the Life of a Life Sciences Company -8- © 2018 Law Offices of Michael A. Swit ➢ 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 Seizure
  9. 9. Solving FDA Legal Challenges for the Life of a Life Sciences Company -9- © 2018 Law Offices of Michael A. Swit ➢ 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 Injunction
  10. 10. Solving FDA Legal Challenges for the Life of a Life Sciences Company -10- © 2018 Law Offices of Michael A. Swit ➢ 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 Decree
  11. 11. Solving FDA Legal Challenges for the Life of a Life Sciences Company -11- © 2018 Law Offices of Michael A. Swit ➢ 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 Consent Decrees …
  12. 12. Solving FDA Legal Challenges for the Life of a Life Sciences Company -12- © 2018 Law Offices of Michael A. Swit Strict Liability and the “Park Doctrine” – Criminal Liability for Responsible Corporate Officials
  13. 13. Solving FDA Legal Challenges for the Life of a Life Sciences Company -13- © 2018 Law Offices of Michael A. Swit ➢ 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 Criminal Liability in the FDA World 13
  14. 14. Solving FDA Legal Challenges for the Life of a Life Sciences Company -14- © 2018 Law Offices of Michael A. Swit ➢ 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 – Strict Liability … 14
  15. 15. Solving FDA Legal Challenges for the Life of a Life Sciences Company -15- © 2018 Law Offices of Michael A. Swit • 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 … 15
  16. 16. Solving FDA Legal Challenges for the Life of a Life Sciences Company -16- © 2018 Law Offices of Michael A. Swit ➢ 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 … 16
  17. 17. Solving FDA Legal Challenges for the Life of a Life Sciences Company -17- © 2018 Law Offices of Michael A. Swit ➢ 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 U.S. v. Park … 17
  18. 18. Solving FDA Legal Challenges for the Life of a Life Sciences Company -18- © 2018 Law Offices of Michael A. Swit ➢ 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 – A Recent Example – OxyContin 18
  19. 19. Solving FDA Legal Challenges for the Life of a Life Sciences Company -19- © 2018 Law Offices of Michael A. Swit ➢ 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 The Park Doctrine – A Recent Example – Oxycontin … 19
  20. 20. Solving FDA Legal Challenges for the Life of a Life Sciences Company -20- © 2018 Law Offices of Michael A. Swit ➢ 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) Why is Park Being Resurrected? 20
  21. 21. Solving FDA Legal Challenges for the Life of a Life Sciences Company -21- © 2018 Law Offices of Michael A. Swit ➢ 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: Misdemeanors 21
  22. 22. Solving FDA Legal Challenges for the Life of a Life Sciences Company -22- © 2018 Law Offices of Michael A. Swit ➢ 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) Criminal Prosecution -- Felony 22
  23. 23. Solving FDA Legal Challenges for the Life of a Life Sciences Company -23- © 2018 Law Offices of Michael A. Swit Collateral Consequences of Serious Enforcement Actions
  24. 24. Solving FDA Legal Challenges for the Life of a Life Sciences Company -24- © 2018 Law Offices of Michael A. Swit ➢ 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 …. Collateral Damage – Worst Case Scenario from FDA Enforcement
  25. 25. Solving FDA Legal Challenges for the Life of a Life Sciences Company -25- © 2018 Law Offices of Michael A. Swit Purdue Pharma Executives Outside Court in Virginia Udell Goldenheim Friedman
  26. 26. Solving FDA Legal Challenges for the Life of a Life Sciences Company -26- © 2018 Law Offices of Michael A. Swit ➢ 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 HHS Disqualification – The “Death” Sentence
  27. 27. Solving FDA Legal Challenges for the Life of a Life Sciences Company -27- © 2018 Law Offices of Michael A. Swit ➢ Lose right to vote ➢ Lose right to run for public office ➢ Damage to reputation Problems For Individuals If Convicted
  28. 28. Solving FDA Legal Challenges for the Life of a Life Sciences Company -28- © 2018 Law Offices of Michael A. Swit ➢ 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) Problems For Individuals If Convicted …
  29. 29. Solving FDA Legal Challenges for the Life of a Life Sciences Company -29- © 2018 Law Offices of Michael A. Swit ➢ 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 Problems For Companies Caused By Criminal Convictions …
  30. 30. Solving FDA Legal Challenges for the Life of a Life Sciences Company -30- © 2018 Law Offices of Michael A. Swit ➢ FDA may refuse to approve applications – the AIP Program ➢ May lose state licenses ➢ Customers abandon you ➢ Decreased sales may force lay-offs of employees Problems For Companies Caused By Criminal Convictions …
  31. 31. Solving FDA Legal Challenges for the Life of a Life Sciences Company -31- © 2018 Law Offices of Michael A. Swit ➢ 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 Problems For Companies Caused By Criminal Convictions …
  32. 32. Solving FDA Legal Challenges for the Life of a Life Sciences Company -32- © 2018 Law Offices of Michael A. Swit ➢ High financial cost of an investigation: – lost sales – stock price falls – attorney’s fees and costs – costs of complying with requests by government for documents Problems For Companies Caused By Criminal Convictions …
  33. 33. Solving FDA Legal Challenges for the Life of a Life Sciences Company -33- © 2018 Law Offices of Michael A. Swit Another Picture that You Don’t Want to Star in … 33
  34. 34. Solving FDA Legal Challenges for the Life of a Life Sciences Company -34- © 2018 Law Offices of Michael A. Swit Ex-Imclone CEO exits federal court after entering guilty plea …
  35. 35. Solving FDA Legal Challenges for the Life of a Life Sciences Company -35- © 2018 Law Offices of Michael A. Swit Questions? ➢ Call or e-mail: Michael A. Swit, Esq. LAW OFFICES OF MICHAEL A. SWIT San Diego, California 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
  36. 36. Solving FDA Legal Challenges for the Life of a Life Sciences Company -36- © 2018 Law Offices of Michael A. Swit 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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