FDA Enforcement
What Every Clinical
Director Should Know
June 15, 2003
Drug Information Association
Annual Meeting
Michael A. Swit, Esq.
Law Offices of Michael A. Swit
mswit@fdacounsel.com
FDACounsel.com
Workshop – Our
Organization/Objectives
I.


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FDA Enforcement Concerns for the Clinical Director
Good Clinical Practice (GCP)

From the Investigator’s, IRB’s, CRO’s and Sponsor’s vantage
points
Application/data integrity policy

electronic records/signatures

financial disclosure
Pre and Post-approval activities (adverse reaction reporting,
advertising based on clinical studies data)
BREAK
II. FDA Administrative Enforcement Tools
III. Civil and Criminal Penalties
IV. Collateral Damage – Worst Case Scenarios from Clinical Studies
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Enforcement is Related to
FDA’s Mission



products are safe and effective
honest, accurate, informative
representation of products
correction of noncompliance or
removal of unsafe or unlawful
products

Human subject protection is a goal
shared with HHS’s OHRP
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I. FDA Enforcement: GCP

With any compliance plan, it is not the
volume of your SOPs, but their overall
effect
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GCP: Informed Consent


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FDA and NIH Oversight
overlap of authority on informed consent sometimes
complicates the issues

Example: FDA proposal (ANPRM) to prevent IRB
"shopping"
more patients would be willing to participate in
clinical trials if they knew of the protections which
would apply to them (“Will & Why Survey”, 2001)
HIPAA: medical records privacy

enforcement by HHS/OCR
FDACounsel.com
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HHS: Research Subject
Protection



HHS Office of Human Research Protections
HHS authority is based on academic
sponsorship, where increasingly it is the
“academic-industrial” complex
future unification of patient protection under
FDA – possible, but not imminent; to
contrary, may see more exercise of its
resources by OHRP

identified need for more resources for IRBs

FDACounsel.com
IRBs have been seeking new revenue sources
6
Learning From FDA’s Most Recent
Warning Letters to Investigators -



No geographic concentration: they are issued
from district offices all over the country
CDER, CBER and CDRH are all active
Reputation and compliance don’t always go
together
The specificity of detailing violations: no
compliance detail is too small
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Learning From FDA’s Most Recent
Warning Letters to Investigators …



Warning Letters can be issued much
later than the 483 and adverse publicity
Lots of money is spent on legal fees
during the enforcement process:
avoidance is your best policy!
Foreign clinical sites are not immune
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Johns Hopkins University:
June 2001


FDA Inspection followed report of death of a healthy
volunteer who had inhaled hexamethonium
FDA’s 483 to the IRB (September 2001) cites:

failure to obtain effective informed consents:
failure to disclose that inhalation administration
of the drug was experimental
FDACounsel.com
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Johns Hopkins University:
June 2001 …



failure of clinical investigator to submit an IND
prior to conducting the investigation (3 subjects)
changes to IRB approved protocol without
notifying the IRB (and without IRB approval)
Warning Letter Issued March 31, 2003 to
Investigator

failure to report an unanticipated AE to the IRB

Note: time interval between incidents and Warning
Letter – unusual, but not unprecedented.
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Recent warning letters:
Informed Consent
Failure to obtain informed consent in accordance with the
provisions of 21 CFR Part 50. [21 CFR Part 312.60]
There are no consent forms for two subjects, three consent forms
were signed after the test article was administered, and one subject
signed the wrong consent form as follows:
• no informed consent forms for certain patients
• Signed the wrong consent form (different study)
• Signed the informed consent form over four months after the
test article was administered
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More Lessons from Recent Warning
Letters …



If protocol requires patient to complete a diary card
during 5 days from pre-screening and screening visits,
they CANNOT be pre-screened and screened on the
SAME day
“Your (investigator’s) response indicates that you
were not aware of the deviations in study drug
dosage and administration due to the blinded nature
of the study randomizations. Nevertheless, as the
clinical investigator, you are ultimately responsible for
the pharmacy staff.”
Investigator submitted incorrect data to sponsor
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GCP: Other Areas of FDA
Enforcement Priority

BIMO: Bioresearch Monitoring
responsible for inspecting clinical sites and
sponsors’ facilities to compare data gathered
during clinical studies with data held by
sponsors
FDA CPG MANUAL Chapter 48

Inspection of foreign clinical sites


http://www.fda.gov/ora/compliance_ref/cpg/

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occur when the studies covered provide data critical to
product approval regardless of whether the studies are
conducted under an FDA application for research
13
GCP: SOP Auditing

To measure compliance with GCP, FDA
audits sponsors’ SOPs

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informed consent
protocol preparation
adverse experience reporting
data entry and compilation
recordkeeping
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Specific GCPs That FDA Will Review
When Inspecting a Clinical Site


how (e.g., telephone, memo, etc.) the monitor
explained to the clinical investigator the status of the
test article, nature of the protocol, and the
obligations of a clinical investigator
whether authority for the conduct of the various
aspects of the study was delegated properly so that
the investigator retained control and knowledge of
the study
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Specific GCPs That FDA Will Review
When Inspecting a Clinical Site


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if and why the investigator discontinued the
study before completion
if laboratory tests are performed in the
investigator’s own facility, whether that facility
is equipped/staffed to perform each test
specified (example: CLIA high complexity
certification)
protocol and all IRB approvals and
modifications
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Protocol Amendments Must Be Up to
Date

subject selection (i.e., inclusion and exclusion
criteria)

number of subjects

frequency of subject observations

dosage, frequency
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Protocol Amendments Must Be
Up to Date

all changes to protocol must be:
 documented by an approved amendment (and
may need FDA pre-clearance under IND rules)
 dated
 maintained with the protocol
 approved by the IRB and reported to the sponsor
before implementation, except where necessary to
eliminate apparent immediate hazard to human
subjects
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GCP: Clinical Site Source Documents

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FDA’s right to inspect must be in informed consent
organization, condition, completeness, and legibility of source
documents
adequate documentation to assure all audited subjects did exist
and were alive and available for the duration of their stated
participation in the study
comparison of source documents in the clinical investigator’s
records with CRFs completed for the sponsor
presence of completed clinical laboratory testing (including
EKGs, X-rays, eye exams, etc.)
whether all AEs were reported in the CRFs
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GCP: Completeness of Patient
Records
Each patient record must contain:
 observations, information, and data on the condition
of the subject at time subject entered clinical study
AND records of exposure of subject to the test article
 observations and data on condition of subject
throughout investigation, including results of lab
tests, development of unrelated illnesses, and other
factors that might alter effects of the test article; and
 signature log: identity of all persons and locations
obtaining raw data or involved in the collection or
analysis of such data
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GCP: IRB Matters


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Identify and chairperson of the IRB
investigator must maintains copies of all reports submitted to
the IRB and reports of all actions by the IRB
nature and frequency of periodic reports submitted to the IRB
investigator must submit a report to the IRB of all deaths,
adverse experiences and unanticipated problems involving risk
to human subjects
Did the investigator submit to and obtain IRB approval of the
following before subjects were allowed to participate in the
investigation?
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GCP: Patient/Subject Recruitment

Use of media advertising



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any promotional material or representation that the test
article is safe and effective for the purpose for which it
is under investigation is violative
all promotional materials must be submitted to the IRB
for review and approval before use
Payment of enrollment bonus
22
GCP: Test Article Accountability


What is the date the last subject completed the
study?
Were test articles returned when either:

The investigator discontinued or completed
his/her participation;

The sponsor discontinued or terminated the
investigation; or

The FDA terminated the investigation.
Unqualified or unauthorized persons may not
administer or dispense the test article
FDACounsel.com
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Another Warning Letter: Failure to
maintain control of the investigational
drug [21 CFR 312.61]
“[name] released the test article to a
physician not listed on the Form FDA
1572 at another local hospital on 2/13/99
for use on an individual not enrolled in
the study. This demonstrates lack of
adequate training by the sponsor.”
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GCP: Records Retention


Identification of custodian of required records
and means for prompt access
Period of Retention


Two years following the date on which the test
article is approved by FDA for marketing for the
purposes which were the subject of the clinical
investigation; or
Two years following the date on which the entire
clinical investigation (not just the investigator’s
part in it) is terminated or discontinued by the
sponsor
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Electronic Records and Signatures
Applies to records in electronic form that are created,
modified, maintained, archived, retrieved, or
transmitted under any records requirement set forth in
agency regulations
Points to Consider:


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source of the hardware
person(s) responsible for installation and training
source of data entered into the computer
 Direct (no paper)
 Case report form
 Office record
authority to enter/modify data
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Recent GCP Developments



Proposed Rule (3/14/03) to adopt ICH
standards for pre- and post-marketing
safety reporting
Changes to Part 11 Approach
(Electronic Records and Signatures)
Draft Guidances: Clinical Hold Authority
for Investigator Misconduct (8/02)
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Coming Soon?

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Institutional IRB Review of Research
Conducted at Other Sites
Acceptance of Clinical Studies Conducted
Outside the U.S.
Charging for Investigational Products
Recruiting Study Subjects
Payments to Research Subjects
Use of Investigational Products When
Subjects Enter a Second Institution
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Current FDA Enforcement Priorities:
Application/Data Integrity Policy


The AIP applies to any application (e.g., NDA, BLA,
PMA), amendment, supplement, petition, or other
submission in support of the approval or marketing
of a regulated product
Does not apply only to data tainted or possibly
tainted by fraud or other intentional misconduct
“Data may not be unreliable due to sloppiness and
inadvertent errors. A pattern of errors by an
applicant involving material subject matter may
raise a significant question regarding the general
reliability of data in applications from that
applicant.”
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AIP: History


formerly known as the “Fraud” Policy
developed and implemented in response to generic drug
scandal of 1980s

Dozens of generic company officials and employees
indicted and convicted of crimes including: making false
statements, conspiracy to defraud FDA, obstruction of
justice (including obstructing an FDA inspection), and
introducing adulterated and misbranded drugs

Criminal fines of $10,000,000 imposed on one company; a
number of officials and employees were incarcerated as
well as fined
FDACounsel.com
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AIP


if FDA has significant questions surrounding
the reliability of the data in an application, it
will defer substantive scientific review of all
the data in the application - and, possibly,
other applications
deferral will continue until all questions
regarding the reliability of the data have been
resolved
FDACounsel.com
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AIP: Managed Through Corporate Internal
Audit and Action Plan



Importance of monitoring and QC visits
Clean up clinical sites before making a
submission to FDA
Lessons
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FDACounsel.com
Select investigators with great care
Don’t skimp on GCP compliance
32
BioCryst Pharmaceuticals


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UAB/BioCryst had close financial ties
University’s competing objectives of
advancing science and making money can
threaten integrity of medical research
research nurse differed with PI on findings
and recorded data which would demonstrate
a positive finding for the study vehicle
FDACounsel.com
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BioCryst Pharmaceuticals …



PI’s breach of duty
falsified results: claimed 60% efficacy, when
really only 30%
June 1995: company issued press release
claiming “reanalysis of the data”, did not
reveal fraud to FDA until FDA found it on its
own inspection in December 1995, which
proceeded to criminal investigation
FDACounsel.com
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BioCryst Case Study

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two convictions of defrauding FDA
UAB dermatologist banned from testing drugs for the
FDA (permanent loss of previous nationwide
reputation)
NIH suspended university enrollment of patients in
550 studies in 2000, when it became clear that
patient rights were also at stake
study coordinator and his wife, the research nurse,
at trial in 2000, were found guilty by jury of
conspiracy and sentenced to 3 years in prison each;
currently on appeal
FDACounsel.com
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FINANCIAL CERTIFICATION/
DISCLOSURE BY SPONSORS AND
CLINICAL INVESTIGATORS


“no conflict, no interest” - University
researcher
while some institutions flat out prohibit
financial conflicts of interest, others
permit their “management” - stock in
escrow, disclosure to patients and in
publications
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FINANCIAL DISCLOSURE BY SPONSORS
AND CLINICAL INVESTIGATORS

21 C.F.R. Part 54 (applicable since 1999)


sponsors of a marketing application must submit
information concerning certain compensation to,
and certain financial interests of, any clinical
investigators or subinvestigators (including
spouses and dependent children) conducting
certain clinical studies to support the application
March 20, 2001 Guidance Document from FDA
clarifies disclosable financial interests, covered
clinical studies, use of Forms 3454/3455
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To Whom Does The Rule
Apply?


Investigators and subinvestigators and their
family members (aggregated interests)
March 2001 Guidance specifically exempts
“nurses, residents, or fellows and office staff
who provide ancillary or intermittent care but
who do not make direct and significant
contribution to the data”
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Financial Integrity – via
Disclosure??

Five types of compensation and rights (collectively
“Interests”) are the primary focus of the regulation

Direct payments of more than $25,000.

excludes the costs for the conduct of clinical studies

includes honoraria, grants to fund ongoing research,
compensation for or in the form of equipment or
services, or retainers for ongoing consultation

disclosure (for all interests) must be made during the
“covered” clinical trial and for one year following
completion of the trial
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FINANCIAL DISCLOSURE …


Equity interest of more than $50,000 in
a publicly traded company
Ownership interest, stock, stock option
or other financial interest, no matter how
small, the value of which cannot be readily
determined through reference to public
prices, (e.g., any privately held company or
unlisted equity interests)
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FINANCIAL DISCLOSURE …


Proprietary interest in the
investigational product
 including, but not limited to, patents,
copyrights, trade secrets, and licenses
Financial arrangements under which the
compensation (e.g., money, equity interest,
royalty interest) could be higher for a
favorable trial outcome than for an
unfavorable trial outcome
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FINANCIAL DISCLOSURE …


Interests are evaluated for disclosure on
a “per investigator” basis
Interests of an investigator include the
Interests held or received by an
investigator and his/her spouse and
dependent children, and are aggregated
FDACounsel.com
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FINANCIAL DISCLOSURE …



“covered study” is a trial that FDA or the sponsor relies
on to establish that the tested product is effective OR
a study in which a single investigator makes a significant
contribution to the demonstration of safety
FDA is particularly concerned with Phase II and III trials
(efficacy) and bioequivalence studies where results
obtained by a single investigator can have a profound
statistical effect on trial outcome
FDACounsel.com
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FINANCIAL DISCLOSURE …

In general, large open-label studies
conducted at multiple sites, treatment
protocols, Phase I tolerance studies,
pharmacokinetic studies, and most clinical
pharmacology studies are not “covered”
studies
FDACounsel.com
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FINANCIAL DISCLOSURE BY SPONSORS
AND CLINICAL INVESTIGATORS



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Compliance with financial disclosure/ certification should
be part of the clinical investigator selection process and
be documented in compliance with regulations
Clinical study agreements should contain provisions
requiring disclosure of Interests or a certification that
there is nothing to disclose
CRO agreements should obligate the CRO to obtain
disclosure/ certification
All clinical study agreements should include the right to
obtain a one-year post study update regarding interests –
and define, up front, when study ends!!
FDACounsel.com
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FINANCIAL DISCLOSURE



Licensing agreements with clinical investigators on a
new investigational product should now contain a clause
that requires them to comply with disclosure/certification
requirements if their clinical data will be pivotal or relied
upon in any subsequent marketing application
Establish and maintain a company-wide tracking
system for investigators to enable the company to verify
and substantiate its disclosures
Establish and implement procedures for the types of
Interests held by investigators and how such
Interests will be managed
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Break
FDACounsel.com
II. FDA Administrative
Enforcement Tools


Each FDA Center has its own Office of
Compliance (OC)
OC works with Office of Chief Counsel
and Department of Justice
but, before they haul you into court …

Administrative Enforcement Tools
FDACounsel.com
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Administrative Enforcement
Tools

Inspections

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

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

FDACounsel.com
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
49
Administrative Enforcement Tools …

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
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Inspections (continued)

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
Clinical hold
Withdrawal or suspension of marketing permit
Recall (FDA-requested or “voluntary”)
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More FDA Administrative
Enforcement Tools …
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Import detention or refusal
Civil money penalties
Warning Letters

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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
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The Pen Is Mightier Than The
Sword: Adverse Publicity

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FDA Website
Press release
Talk paper
Press conference/television and radio interview
Speeches
Congressional and other testimony
Articles in scientific, professional and lay
publications
FDACounsel.com
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FDA Inspections (the Source of Most
Enforcement Activity):
How to Prepare for an Inspection

Know the training and tactics of
FDA Investigators

Inspection Operations Manual (IOM)
www.fda.gov/ora/inspect_ref/iom



see how FDA approaches inspections
Compliance Program Guidance Manual
Other Guidance Documents
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Preparing for an Inspection

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

Have a written corporate policy for FDA
inspections
Conduct independent audits and
internal audits
Establish attitude of the company
Designate an inspection coordinator
FDACounsel.com
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Training Personnel for
Inspections


Every employee must know his/her job
function and regulatory obligations
Document employee credentials,
training and knowledge



Study, manufacturing and other protocols
QA/QC, GCP documentation
FDA program and inspection guidance
documents
FDACounsel.com
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Corporate Inspection Policy &
Procedures


Address GCP, GMP, GLP and other types of
inspections/inquiries
Designate Who will interact with Investigator
 Inspection Coordinator and Inspection Group
 Clinical Director Study Coordinator/Principal
Investigator
 Production Employees
 Receptionist/Secretary
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Inspection of Records


What records will be made available
Have specific policies on:



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photographs
tape recorders
copying records (shipping, financial and
business records)
Questioning of personnel, sampling,
affidavits
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FDA Investigative Techniques
for Gathering Evidence

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

Questioning employees at home at
night or on the weekend
permitted under FDCA Sec. 704
can go through trash, obtain grand jury
subpoenas and search warrants for
telephone and business records
collaboration with FBI (more on OCI
later)
FDACounsel.com
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Home Interviews



US v. Ortho Pharmaceutical Corp.
Jan. 1995 Ortho paid $7.5M under plea
arrangement for criminal “obstruction of
justice” charge
Ortho had ordered the destruction of
corporate documents pertinent to an FDA
investigation of promotion of Retin-A for
unapproved use; destruction began after 2
home visits by FDA inspectors
FDACounsel.com
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HOME INTERVIEWS …


Prepare employees to contact company legal
counsel before speaking with an investigator
(this assures no waiver or corporate privilege
or disclosure of confidential information)
company SOP should reflect desire to
cooperate with FDA to the extent that
company understands the purpose of the
investigation and will not waive or jeopardize
its or its employees legal rights
FDACounsel.com
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Personnel Interacting With
Inspector(s)



Receptionist/Secretary should confirm that they are
at correct name and institution, record inspector’s
badge number
never leave investigator unattended
receptionist should have list of inspection coordinator
and alternate persons:




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Clinical Director / Study Coordinator / Principal
Investigator
Production V.P. / Quality Control Manager
Executive V.P. / President
Legal Counsel
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Duties of Inspection Coordinator



Examine Credentials and 482 Forms
Ask What Type of Inspection
Write down all pertinent information



contact core group
work out inspection agenda
inform investigator of corporate policies
FDACounsel.com
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General Tactics During
Investigation

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Designate a Conference Room
Never Speculate on an Answer
Don’t Allow Access to Areas Beyond Scope of
Inspection under § 704
 You get the items if needed
Never Mislead the Investigator
Don’t Panic (i.e., missing documents, questions)
FDACounsel.com
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Defensive Strategies During/After
Inspection to Avoid Enforcement


draw the investigator into a conversation when a
problem is identified:

more details (so that I may investigate);

how/why is what we are doing (apparently)
inadequate (so I may explain to management)
Written response to 483:



FDACounsel.com
Show the likelihood of recurrence of the problem/violation
is low
Show the company is doing all it can reasonably to remedy
the situation: specific steps, timetable, monitoring
problems attributable to a specific cause have/will be fixed
with permanent remedies
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More Defensive Strategies



provide specific evidence to minimize public health
risk
 number/scope of product’s distribution
 ability to do stock recall
 technical assessment
if it follows product recall, note that company was
“on the ball” and caught the problem, as it was
supposed to; foreclosing greater risk
if not, what changes are being made to catch
sentinel events/data in the future
FDACounsel.com
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Post-Inspection Debriefing



Exit Interview
483 Observations
Ask For:



Explanation and Details
Examples
Write Down Exactly What Investigator
Says
FDACounsel.com
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483/EIR: Inspection Results



NAI - No objectionable conditions or practices
were found during the inspection (or the
objectionable conditions found do not justify
further regulatory action)
VAI - Objectionable conditions or practices were
found, but the District is not prepared to take or
recommend any administrative or regulatory
action
OAI - Regulatory and/or Administrative actions
will be recommended
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Disagreements with 483
Observations




Make notes of your requested comments and
include them in your 483 response
Never argue with inspector
Never make verbal promises, only written
responses
Affidavits


FDACounsel.com
Never sign them and don’t even listen to a
reading
If they push, ask them to send to your attorney
for review
68
Written Response to the 483


Address each observation separately
Never agree that an observation is
valid:


instead, state changes you intend to make
Disagreements:



Present your argument
Be responsive, not argumentative
Attach copies of changed documents
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Enforcement Options Based on
Inspectional Violations








Warning letter
termination of the IND or IDE
initiation of disqualification procedures or entry into a
consent agreement with the clinical investigator
disqualification of the investigator simultaneous to
criminal prosecution.
initiation of stock recovery by sponsor
seizure of test articles
injunction
prosecution under the FDCA
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FDA Enforcement Discretion

Prior History of Company’s Compliance



prior 483’s, warning letters, and company’s
response
Health risks
Likelihood of recurrence
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III. FDA Civil and Criminal
Enforcement Tools






Criminal prosecution - Title 18
 § 371 (conspiracy)
 § 1001 (false statements)
 § 1341,43(mail and wire fraud)
 § § 1505, 1509-10 (obstruction)
 § 1962 (RICO)

imprisonment
Seizure and destruction of product
Import detention
Injunctions
Fines/Disgorgement
Consent Decrees
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Criminal Prosecution:
Misdemeanors

Misdemeanor



Strictly liability (no criminal intent
necessary)
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
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What Can FDA Target In An
Enforcement Action?
Scope of Enforcement Action Can Be Very
Broad:
 all areas where FDA perceives
violations, and responsible persons
involved in such violations
 labeling, promotion, manufacturing, QA,
distribution, regulatory affairs, quality
control
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Who Can FDA Target During
An Enforcement Action
Any and all individuals within the
company that have a position of
responsibility for the violative aspect of
the company’s operation, including:
President/CEO/COO
Production Manager
VP or Director of Quality Control
Director of Regulatory Affairs
Director of Quality Assurance
Technicians
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Bard (1993): Not only
Executives are Charged




Director for Regulatory Affairs and a supervisor in the R.A.
Department among those charged
3 executives convicted of defrauding FDA, but vacated in
March 2001 on appeal based on improper instructions to
jury by judge
June 2001 -- the 3 defendants settled and pleaded to
misdemeanor charges in shipment of adulterated heart
catheters: one year of probation and 8 months of inhome confinement; Bard paid $61M
as with tax law, misunderstanding of FDA law may be a
legitimate defense; given complexity of regulatory law,
you can violate innocently
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Disgorgement




FDA recovery of company profits
can’t profit from sales of an illegal product that is
nonetheless medically necessary
FDA refrains from enjoining production of noncompliant 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
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CONSENT DECREE




Order of a court
entered by consent of the parties
not technically a judicial sentence, 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
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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
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Duty of Care

Corporate directors can in turn be personally liable
for losses incurred because of corporate failure to
meet legal compliance standards


FDACounsel.com
McCall (2001): Columbia/HCA shareholder derivative action
against board members;
directors lose protection of “business judgment” rule and
are personally liable for failure to detect and correct
violations
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DUTY OF CARE …




board’s duty of care breached through
nonfeasance: failure to investigate items from
internal audit
if you are subject to a search warrant at one site,
begin internal investigation at all sites to see
whether similar violative practices exist (otherwise
breaches duty of care)
need to investigate whistleblower cases, no matter
how frivolous they appear
Under FDCA – strict liability – U.S. v. Park
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IV. Collateral Damage – Worst Case
Scenarios from Clinical Studies

This is a picture you do not want to
see ….



in your newspaper ….
on your local news ….
on the Internet ….


or
in a DIA presentation for years to
come ….
82
Ex-Imclone CEO exits federal court after
being charged with nine felony counts
83
“Does Crime Pay?” – Problems
Beyond Jail and Fines

PROBLEMS FOR
INDIVIDUALS IF
CONVICTED:
 Lose right to vote
 Lose right to run for
public office
 Damage to
reputation
84
“Does Crime Pay?” -- Problems
Beyond Jail and Fines (cont’d ...)

PROBLEMS FOR
INDIVIDUALS IF
CONVICTED
(cont’d):
 Can be deported if
not a U.S. citizen
 Financial ruin - lose your job
85
“Does Crime Pay?” -- Problems
Beyond Jail and Fines (cont’d ...)

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., Lifescan case -- “whistle blower” cases -leading to civil damages and may also spawn a
criminal prosecution
86
“Does Crime Pay?” -- Problems
Beyond Jail and Fines (cont’d ...)

PROBLEMS FOR COMPANIES CAUSED
BY CRIMINAL CONVICTIONS (cont’d):

FDA may refuse to approve ANDAs

May lose state licenses

Customers abandon you

Decreased sales may force lay-offs of
employees
87
“Does Crime Pay?” -- Problems
Beyond Jail and Fines (cont’d ...)

PROBLEMS FOR COMPANIES CAUSED
BY CRIMINAL CONVICTIONS (con’d):



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
88
“Does Crime Pay?” -- Problems
Beyond Jail and Fines (cont’d ...)

PROBLEMS FOR COMPANIES CAUSED
BY CRIMINAL CONVICTIONS (con’d):

High cost in money of an
investigation:
–
lost sales
–
stock price falls
–
attorney’s fees and costs
–
costs of complying with requests by
government for documents
89
The End
FDACounsel.com
THANKS !!!


To Monika Chas, formerly of Par
Pharmaceutical’s Regulatory Affairs
Department, for drawing the
illustrations in this presentation.
To Michelle Viña, formerly of Par
Pharmaceutical’s M.I.S. Department, for
getting Monika’s drawings imported
into the software program so they could
be printed years ago when no one knew
how to do it.
91
Questions?
Call, e-mail, fax or write:
Michael A. Swit, Esq.
Law Offices of Michael A. Swit
539 Samuel Ct., Suite 229
Encinitas, California 92024
760-815-4762 ♦ 760-454-2979 (fax)
mswit@fdacounsel.com
http://www.fdacounsel.com
FDACounsel.com
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About the speaker ...
Michael A. Swit has extensive experience in all aspects of FDA regulation with a particular emphasis on
drugs and medical device regulation. In addition to his regulatory law experience, Mr. Swit also
served for three and a half years as vice president and general counsel of Pharmaceutical Resources,
Inc. (PRI) a prominent generic drug company and, thus, brings an industry and commercial
perspective to his representation of FDA-regulated companies. While at PRI from 1990 to late
1993, Mr. Swit spearheaded the company’s defense of multiple grand jury investigations, other
federal and state proceedings, and securities litigation stemming from the acts of prior management.
Mr. Swit then served from 1994 to 1998 as CEO of Washington Business Information, Inc. (WBII) a
premier publisher of FDA regulatory newsletters and other specialty information products for the
FDA publishing company. Before starting FDACounsel.com, he was with Heller Ehrman from
May 2001 to May 2003, and also twice in private practice with McKenna & Cuneo, from 1988 to
1990 and, most recently, from 1999 to 2001, first in that firm’s D.C. office and most recently, in its
San Diego office. He first practiced FDA regulatory law with the D.C. office of Burditt & Radzius
from 1984 to 1988. Mr. Swit has taught and written on a wide variety of subjects relating to FDA
law including, since 1989, co-directing a three-day intensive course on the generic drug approval
process, serving on the Editorial Board of the Food & Drug Law Journal, and editing a guide to the
generic drug approval process, Getting Your Generic Drug Approved, published by WBII. Mr. Swit
holds an A.B., magna cum laude, with high honors in history, in 1979, from Bowdoin College, and
earned his law degree from Emory University in 1982. He is a member of the California, Virginia
and District of Columbia bars.
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