December 15, 2010 webinar sponsored by The Weinberg Group on increased FDA enforcement activity under the Obama administration, with a focus on:  Enforcement Trends Prior to Obama Administration  Commissioner Hamburg Revives FDA’s Compliance Culture –The August 6, 2009 Speech and its Impact  Key FDA Enforcement Actions  How to Prepare for Increased Enforcement  How to Respond if Targeted  Consequences of Non-Compliance  FDA’s Record under Enhanced Compliance

1. Presented by:
Michael A. Swit, Esq., Vice President
Moderated by:
Jeff Antos, Vice President
December 15, 2010
FDA Enforcement: The Cop is Back
– How Enhanced Enforcement Can
Impact You and Your Firm

2. Today's Presenter
Michael A. Swit, Esq.
Vice President
Cardiff by the Sea, CA
+1 760.452.6568
+1 760.454.2979 (fax)
michael.swit@weinberggroup.com
Mr. Swit has been addressing critical FDA legal and regulatory issues since
1984. His expertise includes product development strategies, compliance
and enforcement initiatives, recalls and crisis management, FDA regulatory
activities, labeling and advertising, and clinical research efforts. Mr. Swit
develops and ensures the execution of a broad array of regulatory and
other services to clients, both directly and through outside counsel.
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3. What We Will Cover
 Enforcement Trends Prior to Obama Administration
 Commissioner Hamburg Revives FDA’s Compliance
Culture – The August 6, 2009 Speech and its Impact
 Key FDA Enforcement Actions
 How to Prepare for Increased Enforcement
 How to Respond if Targeted
 Consequences of Non-Compliance
 FDA’s Record under Enhanced Compliance
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4. Enforcement Trends Prior to
Obama Administration
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5. All Inspections – 2004 to 2008
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6. Warning Letters – 2004 to 2008
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7. Seizures – 2004 to 2008
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8. Injunctions – 2004 to 2008
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9. The "Hamburg" Initiative –
FDA’s Enhanced Enforcement Mission
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10. Hamburg: Why We Need
Effective FDA Enforcement
 Conceded FDA enforcement efforts have been deficient
 Five key benefits of effective enforcement:
 Protect public health by promptly intercepting unsafe or
fraudulent products – prevents additional harm
 Deter others who might violate law
 Informs public of potential harm
 Creates level playing field for industry
 Instill public confidence in FDA
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11.  Vigilance – both FDA and Industry
 FDA -- Regular inspections and follow-ups
 Companies
 Must work quickly and thoroughly to correct problems
 Must understand
 if you cross the line, “you will be caught”
 If you fail to act, FDA will
 Strategic enforcement –
 Greater focus on significant risks and violations
 More meaningful penalties to “send a strong message to
discourage future offenses”
Hamburg: Four Essential Elements for
Effective FDA Enforcement
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12. Four Essential Elements for
Effective Enforcement …
 Quick action – FDA must respond rapidly, especially to:
 Egregious violations
 Violations that threaten the public health
 Visible efforts – FDA must show all stakeholders it is on
the job
 Will publicize enforcement actions widely – including rationales
for action
 Goal:
 Increase confidence in FDA
 Deter non-compliance
12

13. Hamburg: Six New FDA
Enforcement Mandates
 Impose clear post-inspection deadlines
 Generally -- no more than 15 business days to respond 483
 After that, agency can issue warning letter or take other
enforcement action
 Speed the warning letter process -- by limiting review
by FDA Office of Chief Counsel to warning letters that
present significant legal issues
 Work more closely with FDA’s regulatory partners
 Example: in some cases, such as food safety, state, local, and
international officials can act more quickly than the FDA
 When public health is at risk, the agency will coordinate with
its regulatory partners to take rapid action
13

14. Six New Enforcement Mandates …
 Prioritize follow-up on all warning letters and other
enforcement actions
 FDA will work quickly to assess the corrective action taken by industry
after a warning letter, a major product recall, or other enforcement action
 Via new inspection or other form of investigation
 FDA will be prepared to take immediate action to respond to
public health risks.
 Actions may occur before a formal warning letter is issued – at any time
 Days of multiple responses to inspections -- over
 Develop and implement a 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
14

15. Enhanced Enforcement In Action –
Timely 483 Responses Policy
 Aug. 11 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
 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
 Purpose of warning letter: “to ensure that the 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”
15

16. Enhanced Enforcement –
The International Stance
 FDA doubling foreign GMP inspections
 Focus: GMP inspections; not inspections linked to
applications
 Result: Look for more import alerts
 FDA can impose alert based on just an “appearance” of a violation
 Contrast: formal U.S. enforcement such as seizure, injunction or
prosecution, FDA must prove a violation
 “FDA Without Borders” Initiative
 Offshoot of Heparin and other scandals
 FDA foreign offices opened: Brussels; Mumbai; New Delhi;
San Jose, Costa Rica; Beijing, Shanghai and Guangzhou, China
Mexico City, Santiago, Chile
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17. The Cops At Work --
Key FDA Enforcement Actions
17

18.  GMP
 Genzyme – Consent Decrees
 KV & Caraco – Consent Decrees
 Import Alerts – Apotex & Ranbaxy
 Devices –
 Unapproved -- Synthes/Norian
 QSR – the Baxter recall
 Advertising & Promotion – Pfizer
 Application Integrity -- Ranbaxy
 Debarment – Anthony Albanese
 Clinical Investigator Disqualification – Scott Reuben
Focus and Types of Actions – Far Ranging
18

19.  GMP issues at its Allston facility
 $175 million disgorgement
 5-years of audits after corrections made
 Batch reviews – by 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
Genzyme Consent Decree
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20. KV and Caraco Consent Decrees
 Key Features
 Permanent injunction vs. future violations – punishable by contempt
 To resume manufacturing;
 Must certify that management has control over QA function
 Must certify compliance with GMP and that all violations are corrected
 Batch certification process – first 3 batches of each product must be
certified as compliant by GMP expert
 Later audits – periodic to verify continued compliance
 Must pay for all FDA inspections
 Violations of Consent Decree – Civil Penalties
 $10,000 per day (Caraco); $15,000 (KV)
 $10,000 per violation (Caraco); $15,000 (KV)
 2x retail value of goods sold in violation (Caraco); 3x retail value (KV)
 Cap -- $5,000,000 per year (both)
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21.  Ranbaxy –
 GMP issues at two facilities in India that produce drugs under
approved ANDAs
 At least 30 different drugs impacted
 Still pending
 Apotex –
 GMP issues at two facilities in Canada that produce drugs
under approved ANDAs
 At least 60 different drugs impacted
 Still pending
Import Alerts – Apotex & Ranbaxy
21

22.  Charges: Off-label promotion and illegal clinical trials
of a bone void filler – linked to 3 patient deaths when
used off-label for vertebral compression fractures
 Company –
 Parent – 44 misdemeanor charges
 Subsidiary – 52 felonies
 Four executives – each single misdemeanor charge
 Company – Plea Agreement (Oct. 2010) :
 Synthes – agreed to $808G and divest itself of Norian
subsidiary
 Norian --– agreed to pay $23.5 million fine
Synthes/Norian –Unapproved Devices
22

23.  2006 – Baxter enters Consent Decree with FDA
 2010 – FDA orders Baxter, under the Consent Decree,
to recall and destroy all Colleague Volumetric infusion
pumps in use in the United States
 Two years to accomplish
 Estimated cost to Baxter: $600 million
The Baxter “Ordered” Recall
23

24.  Off-label promotion of Bextra
 $105 million criminal fine – FDA violations
 $1.195 billion criminal fine – off-label promotion
 $1 billion – civil claims under the False Claims Act
Pfizer Second “Bite” at
Advertising Adversity -- $2.3 Billion
24

25.  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
Application Integrity -- Ranbaxy
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26.  Dr. Scott Reuben
 Pled guilty to “penciling” data on a Celebrex study
 FDA –proposed to disqualify as a clinical investigator, which
Reuben had agreed not to contest as part of his plea
agreement
Clinical Investigator Disqualification
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27.  Anthony Albanese
 Had pled guilty to illegally selling drug samples
 Debarred from participating in drug industry
Debarment
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28. Preparing for Enhanced FDA Enforcement
28

29. How to Prepare for
The New Enforcement Climate
 The Big Picture
 Compliance Culture – must exist at the top of your
organization and be driven down by senior management
throughout your firm not only in word, but in resources
 FDA law requires – “Park Doctrine” – Strict Liability
 Corporate law requires
 Public company duties/Sarbanes-Oxley compliance
 Best strategy to “avoid” enforcement – strict compliance
via robust “quality systems” in all impacted areas – quality,
regulatory, manufacturing, packaging, testing, etc.
29

30. How to Prepare …
 Change Your Corporate Compliance World View
 Oust the Reactionary Compliance Model
 Historical focus -- always after-the-fact
 Expense focus creates little incentive for forward thinking
 Compliance generally seen as production cost
 Rarely seen as a revenue-generating opportunity
 Viewed as lower priority within an organization
 Perceived as a burden -- a leash with little up side potential
 Embrace Compliance As a Corporate Asset
 Corporate culture must change
 Quality Systems must be integrated into the process, not an
additional component
 Process must evolve from one of police action to one of
forethought
30

31. How to Prepare …
 Culture Change -- Dramatic And Difficult
 Quality function must be valued by management
 Increase visibility of quality unit
 Visibly exhibit an intolerance for lack of compliance
 Quality must be seen as a priority
 Embrace a Proactive Approach
 “It is often said at FDA that firms that are in compliance tend
to stay in compliance, but once a firm gets out of compliance
getting back into compliance is a very steep road to climb. Try
to avoid that road.” – Daniel Troy, former FDA Chief Counsel
31

32. How to Prepare …
 Build The Right Quality Systems
 Create a self-determining culture
 Make regulatory mandates obvious and routine, not the focus
 Use Quality Assurance as a cost-improvement methodology
 Proactive Approach To Increasing Profitability
 Approach facilities and operations inspections proactively
 Use third parties
 Assess all business operations
 Act on things immediately
 Change focus from compliance to improvement – that
compliance is subset of quality
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33. How to Prepare …
 Detailed view – quality systems throughout your
organization that reflect strong:
 Procedures
 Training
 Audits
 Validation
 Recordkeeping
 Key SOPS
 Handling FDA Inspections
 CAPA
 Investigations
 Recalls
 Audit Plans
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34. How to Respond When Enforcement Hits
34

35. When FDA Enforcement Hits
 How it may hit
 Administrative Enforcement
 Inspections
 Investigations
 Warning letter
 Clinical Holds – can be compliance based
 AIP
 Termination of an IND or IDE
 Disqualification procedures with clinical investigators
 Recalls and market withdrawals
 Civil Money Penalties
 Judicial Enforcement
 Seizure of test articles
 Disgorgement
 Injunction
 Criminal Prosecution
35

36. When FDA Enforcement Hits …
 Who FDA Can Target: any individual within the
company that has a position of responsibility for the
violative aspect of the company’s operation,
including:
President/CEO/COO
General Counsel
VP or Director of QA, QC, RA, Mfg., etc.
Managers
Technicians (rare)
36

37. When FDA Enforcement Hits -- Assessing
 Assess each allegation/observation
 Focus on specifics
 Focus on system-wide implications
 Focus on global implications
 Consider affected products
 Consider root-cause analysis
 Focus on the regulatory requirement(s) associated
with each allegation/observation
 Develop action plan to achieve immediate, short-term,
and long-term correction and to prevent recurrence
 Know when to seek outside assistance
37

38. When Enforcement Hits –
Keys to Responding
 Include a commitment/statement from senior leadership
 Address each allegation/observation separately
 Never agree with the allegation/observation – state what
you are doing regarding the allegation
 Provide corrective action accomplished and/or planned;
tell FDA the plan
 Be specific (e.g. observation-by-observation)
 Be complete
 Be realistic
 Be able to deliver what you promise
 Address affected products
38

39. When Enforcement Hits –
Keys to Responding …
 Provide time frames for correction
 Describe method of verification and/or monitoring for
corrections
 Submitting documentation of corrections where
reasonable & feasible
 Be Timely and Thorough – deliver what you promised
when you promised it
39

40. FDA Expectations for Your 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
 Management & Monitoring – show that you will stay on
top of the issues and that 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.
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41. Consequences of FDA Enforcement
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42. Direct Possible Consequences
of Non-Compliance
 Clinical holds – study stopped
 AIP – application reviews suspended
 Import Alerts – product can’t be imported into U.S.
 Civil Money Penalties -- $$$
 Seizures – product can’t be sold
 Injunctions – selling/manufacturing could be halted for years
 Disgorgement -- $$$ returned for “ill-gotten gains”
42

43.  Prosecutions
 Fines -- $$$
 Imprisonment
 Disqualification proceedings
 FDA
 HHS – Federal Health Programs – “the Death Penalty”
 Approval withdrawal proceedings
Direct Possible Consequences
of Non-Compliance …
43

44. Collateral Consequences
of Non-Compliance
 Financial consequences
 Lost sales
 Stock price drops – market capitalization – ability to use capital
markets
 Shareholders sue the company, its officers and directors
 Other companies may sue the company if reason for non-
compliance gave you a competitive edge
 Federal government may suspend or “debar” company from
selling to government
 “Qui Tam” actions under the False Claims Act -- e.g., Neurontin
case -- “whistle blower” cases -- leading to civil damages and
may also spawn a criminal prosecution
 Financing covenants may be violated
44

45. Collateral Consequences of
Non-Compliance …
 Other Consequences
 State license actions – could pull your manufacturing license
 Lay-offs
 Damage to corporate reputation
 Lost time – interruption with normal operations
 Consequences for Individuals
 Job loss
 Reputation
 Expense of defending – and your company may not have to pay
 Impact of convictions
 Deportation if not U.S. citizen
 Imprisonment
 Fine
 Right to vote/run for public office
45

46. Enhanced Enforcement in Action
Since 2009 – the Warning Letter Record
46

47.  2008 -- 445
 2009 – 571
 2010 – 538 (to date)
 Warning Letters By Product Area – 2009/2010
 Drug – 185/143 Dietary Supplement – 4/9
 Device – 150/136 Tobacco – 17/3
 Food – 160/212
 Clinical Research – 45/29
 Tissue Products – 2/3
 Blood Products – 4/2
 Biologics – 4/1
Source: FDA Warning Letters Website
Warning Letters – 2009 & 2010
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48. Q & A
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