FDLI’s Enforcement,
Litigation and Compliance
Conference
Responding to FDA
Enforcement Actions
December 8 & 9, 2014
Washington, DC
Session 2: Advanced Enforcement
Applications
Sonali P. Gunawardhana, Of Counsel
FDA Enforcement Statistics Summary
Fiscal Year 2013
Warning Letters by FDA Center
Fiscal Year 2013
5000
4146
4000
3000
2000
335
95
C
BE
R
A
N
C
FS
ER
C
D
C
D
R
H
0
76
20
C
TP
210
C
V
M
1000
Warning Letters- What the Stats Mean



Total number of FDA issued warning letters has
increased since FY 2008.
Please note that large leaps in FYs 2011-2013 are
attributable to Warning Letters issued by the Center for
Tobacco Products.
Remains the constant: Quality System (QS) /Current
Good Manufacturing Practices (cGMP) violations were
the most common subject of warning letters in FY 2013
for both medical device and pharmaceutical
manufacturers.
Number of 2013 FDA Form 483’s
Issued By Specific Centers





Devices = 1099
Drugs= 690
Biologics= 191
Bioresearch Monitoring= 273
For more statistical information
please see the following website:
http://www.fda.gov/ICECI/Inspections/ucm381526.htm
2013 Most Frequent FDA Form 483
Device Violations Noted





(378) 21 CFR 820.100(a) Lack of or inadequate procedures
•
Procedures for corrective and preventive action have not been
[adequately] established.
(245) 21 CFR 820.198(a) Lack of or inadequate complaint procedures
•
Procedures for receiving, reviewing, and evaluating complaints by a
formally designated unit have not been [adequately] established.
(133) 21 CFR 820.100(b) Documentation of CAPA
•
Corrective and preventive action activities and/or results have not
been [adequately] documented.
(127) 21 CFR 820.75(a) Lack of or inadequate process validation.
•
A process whose results cannot be fully verified by subsequent
inspection and test has not been [adequately] validated according to
established procedures.
(124) 21 CFR 803.17 Lack of Written MDR Procedures
•
Written MDR procedures have not been [developed] [maintained]
[implemented].
2013 Most Frequent FDA Form 483
Drug Violations Noted

(155) 21 CFR 211.22(d) Procedures not in writing, fully followed
•
The responsibilities and procedures applicable to the quality control unit are not
[in writing] [fully followed].

(131) 21 CFR 211.192 Investigations of discrepancies, failures
•
There is a failure to thoroughly review [any unexplained
discrepancy] [the failure of a batch or any of its components to
meet any of its specifications] whether or not the batch has been
already distributed.

(106) 21 CFR 211.100(a) Absence of Written Procedures
•
There are no written procedures for production and process controls designed to
assure that the drug products have the identity, strength, quality, and purity they
purport or are represented to possess.
2013 Most Frequent FDA Form 483
Drug Violations Noted

(99) 21 CFR 211.160(b) Scientifically sound laboratory controls;
•

(77) 21 CFR 211.67(b) Written procedures not established/followed
•

Laboratory controls do not include the establishment of scientifically sound and
appropriate [specifications] [standards] [sampling plans] [test procedures] designed
to assure that [components] [drug product containers] [closures] [in-process
materials] [labeling] [drug products] conform to appropriate standards of identity,
strength, quality and purity.
Written procedures are not [established] [followed] for the cleaning and
maintenance of equipment, including utensils, used in the manufacture, processing,
packing or holding of a drug product.
(76) 21 CFR 211.113(b) Procedures for sterile drug products
•
Procedures designed to prevent microbiological contamination of drug products
purporting to be sterile are not [established] [written] [followed].
FDA Future Compliance ActionCrystal Ball Predictions –Areas to
Watch- CDRH
•
•
•
Social Media- understand the challenges presented
Promotion and Advertising (Internet Promotion)/ New
Division Created
Move from Compliance to Quality
 Case for Quality Initiative
-focus instead on critical-to-quality practices that, when present in day-today device design and production, correlate to higher-quality outcomes

Voluntary Compliance Improvement Program
(VCIP) Pilot
-allowing firms to voluntarily self-identify and correct possible regulatory
violations instead of undergoing FDA inspection

Medical Device Single Audit Program (MDSAP)
Pilot
-global approach to auditing and monitoring the manufacturing of medical
devices could improve their safety and oversight on an international scale
FDA Future Compliance ActionCrystal Ball Predictions –Areas to
Watch- CDER (Cont.)

CDER’s Establishment of the Office of Pharmaceutical
Quality (OPQ) (January 2015)
•
•
•
•
OPQ creates a uniform drug quality program across all
sites of manufacture, whether domestic or foreign, and
across all drug product areas – new drugs, generic drugs,
and over-the-counter drugs.
Realignment of functions and personnel from the Office of
Pharmaceutical Science to OPQ
Realignment of preapproval and surveillance inspection
activities from the Office of Compliance to OPQ
Realignment of inspection-related activities for
bioequivalence/bioavailability and non-clinical studies
from OC’s Office of Scientific Investigations to the Office
of Translational Sciences.
Contact Information
Sonali P. Gunawardhana
1776 K Street, NW
Washington, DC 20006
(202) 719- 7454
sgunawardhana@wileyrein.com
http://www.wileyrein.com/professionals.cfm?sp=bio&id=1624
IMPLICATIONS FOR THE USE OF
STATE CONSUMER PROTECTION
STATUTES TO ENFORCE
FOOD & DRUG LAWS
FDLI Enforcement, Compliance, and
Litigation Conference
Washington, DC
December 8, 2014
John H. Fuson
Crowell & Moring LLP
STATE CONSUMER
PROTECTION LAWS
Unfair, Deceptive Acts and Practices
“…unfair competition shall mean and include any
unlawful, unfair or fraudulent business act or
practice and unfair, deceptive, untrue or
misleading advertising…”
15
What? Where? Why?
• Everything.
– Food (36%); Dietary Supplements (12%); Cosmetics
(11%); Pharmaceuticals (8%); Weight Loss Products
(4%).
– Collectively, more than 70% against industries served by
FDLI.
• Everywhere.
– California is king (and home to the Food Court), but no
jurisdiction is safe.
• Money (of course) … but don’t dismiss policy.
16
Congressional intent? Look at what the
FDCA says about deception
§ 403 – A food shall be deemed to be misbranded…
(a) If … its labeling is false or misleading in any
particular…
§ 502 – A drug or device shall be deemed to be
misbranded…
(a) If its labeling is false or misleading in any particular…
§ 602 – A cosmetic shall be deemed to be
misbranded…
(a) If its labeling is false or misleading in any particular…
17
Not much comfort from the SCOTUS
“I don’t know why it’s impossible to have a label that fully
complies with the FDA regulations and also happens to
be misleading on the entirely different question of
commercial competition, consumer confusion that has
nothing to do with health”
• Chief Justice John Roberts*
“You’re permitted to use this name under [FDA]
regulations. But why are you permitted to use it in a
misleading way?”
• Justice Sonia Sotomayor*
* During oral argument in POM Wonderful LLC v. The Coca Cola Company, Docket No. 12-761, April 21, 2014.
18
CLAIM CAUTION
Danger Claims
•
•
•
•
•
•
•
•
All Natural
100% Natural
Wholesome
Organic
Whole Grain
Whole Wheat
GMO Free
Healthy
20
THE NEW
STANDARD OF CARE?
Recent Settlement Agreements
Bear Naked
S.D. California
May 2014
final order
$325K settlement fund;
$.50 reimbursement for
every product purchased
2007-2014
Remove
“100% Natural” claim
All products containing
challenged Ingredients
Kashi
S.D. California
May 2014
preliminary approval
motion
$5M settlement fund;
$.50 reimbursement per
package purchased;
up to $1.25M in attorney
fees
Remove
“All Natural” and
“Nothing Artificial” claims
All products containing
one or more of specific
ingredients
Trader Joe’s
N.D. California
February 2014
preliminary approval
order
$3.375M settlement
fund, minus attorney fees
and expenses
Remove
“All Natural” and “100%
Natural” claims
Cookies,
cinnamon rolls, biscuits,
crescent rolls, fruit jellies,
ricotta cheese, apple juice
Naked Juice
C.D. California
January 2014
final order
$9M settlement fund
(which includes up to
$3.12M in fees, notice
costs)
Remove “All-Natural” and
test “non-GMO” claims
($1.4M)
Various juice products
$4M settlement fund;
up to $100 per person in
refunds
Modify labels, remove
GMO ingredients,
participate in Non-GMO
Project Product
Verification ($3.5M
estimated cost)
Cereals, cereal bars,
granola bars, cheese
puffs, cookies, crackers,
snack mixes
Barbara’s Bakery
N.D. California
November 2013
final approval
22
Settlements with Compliance Obligations
• Establish a three year verification program with
periodic testing by an independent laboratory
• Hire or assign a quality control manager to
supervise an independent testing program
• Establish and maintain an electronic database to
electronically track and verify product ingredients
Is the plaintiffs’ bar setting a new standard of care?
23
LOOKING BEYOND
THE COURT ROOM
Retailer Restrictions
25
John Fuson
Crowell & Moring LLP
jfuson@crowell.com
(202) 624-2910
NON-PROSECUTION AND DEFERRED PROSECUTION
AGREEMENTS:
POTENTIAL ALTERNATIVES TO A CORPORATE GUILTY
PLEA
Steven M. Kowal
K&L Gates LLP
Chicago, IL 60602
312.807.4430
steven.kowal@klgates.com
© Copyright 2014 by K&L Gates LLP. All rights reserved.
 In some instances, problematic conduct can be
addressed without a corporate guilty plea
 Non-Prosecution Agreement (NPA)





Resolution short of criminal prosecution
Letter agreement with the government
No criminal charge
No acknowledgment of a violation
Obligations are imposed
 Compliance
 Monitoring
klgates.com
28
 Deferred Prosecution Agreement (DPA)
 Formal criminal charge is filed publicly
 Company must agree to factual statement supporting
the charge
 A formal guilty plea will be held in abeyance for a
specific time
 Obligations are imposed
 The criminal charge will be dismissed if all obligations
are met
 Guilty plea will be entered if obligations are not met
klgates.com
29
 The use of NPAs and DPAs is increasing
 Since 2000, there have been 283 disclosed
agreements
 Since 2010, 152 agreements
 January through June 2014
 Five NPAs
 Seven DPAs
 Government recovery of $3.6 billion
klgates.com
30
 There has been significant use with FDA
regulated companies
 Endo Pharmaceuticals Inc.




Misbranding of Lidoderm through off label promotion
Total monetary penalty of $192 million
Obligation to disclose results of certain clinical trials
Compliance must be certified by the parent CEO
klgates.com
31
 NPAs and DPAs have been developed to temper
some effects of a guilty plea
 Arthur Andersen prosecution in 2002
 Convicted of obstruction of justice
 Company was dissolved; 85,000 employees lost their
jobs
 Conviction was reversed by the USSC
klgates.com
32
The purpose of these agreements was addressed in DAAG Grindler’s
congressional statement in June 2009:
“. . . the Department recognizes that criminally charging and convicting a
company or corporation runs the risk of triggering significant negative
consequences for innocent third parties who played no role in the criminal
conduct, were unaware of it, or were unable to prevent it, including
employees, pensioners, shareholders, creditors, customers, and the public
as a whole. Furthermore, in certain circumstances, the collateral
consequences of such prosecutions -- such as the exclusion from
government contracting pursuant to debarment rules -- maybe unjustified
where a corporation has fully cooperated with the government's
investigation, appropriately disciplined culpable employees, implemented
comprehensive compliance reforms and other remedial measures, and
made restitution to all the victims.”
klgates.com
33
 NPAs provide significant advantages/some
disadvantages
 No formal criminal charge
 Possibility of limited public disclosure
 Compliance requirements could be
extensive/expensive
 Monetary penalties could be imposed
 In 2013, C.R. Bard paid a total of $48.2 million related
to the sale of Brachytherapy seeds
klgates.com
34
 DPAs approach the effect of a guilty plea
 In 2013, AAG Breuer said “DPAs have the same
punitive, deterrent and rehabilitative effect as a
guilty plea.”
 Publicly filed charge
 Acknowledgment of culpable facts
 In 2013, Smith & Nephew Inc. entered into a DPA
including an extensive 5-page factual statement
klgates.com
35
 Avoidance of a guilty plea confers advantages
 Escape debarment/mandatory exclusion
 The total fine may be reduced
 Public injury to the brand may be reduced
 Potential use in private civil damage litigation
 Factual statement can be used as an admission
klgates.com
36
 NPAs and DPAs impose affirmative obligations
 Often require review/enhancement of compliance
programs
 Impose obligations to self report
 Require review by an independent monitor
klgates.com
37
 The purpose of the monitor was described in Grindler’s
congressional statement:
 “In appropriate cases, the DPAs and NPAs also may require the
retention of an independent compliance monitor. A compliance
monitor is an individual or entity - independent from the business
organization and the government - selected to oversee the
implementation of and compliance with the provisions of the
negotiated agreement. The compliance monitor is retained by
the business organization, which pays for the monitor and for the
other costs of implementing the DPA or NPA.”
 Ensure meaningful change
 Implement best compliance practices
 Verify fulfillment of obligations
klgates.com
38
 The monitor selection process has been controversial
 Addressed by DOJ in 2008 Morford memorandum
 Negotiated between the company and the monitor
 DOJ considers candidates
 DAG will approve selection
 Addressed in 2010 Grindler memorandum
 Monitor must be independent party engaged by the company
 DOJ will not become involved in any fee dispute
 Monitoring fees can be significant
klgates.com
39
 Will DOJ continue to increase its use of NPAs
and DPAs?
 Speech by L. Caldwell, AAG for the Criminal
Division, on September 17, 2014
 “We are stepping up our prosecutions of corporations
involved in healthcare fraud . . . We have numerous
ongoing corporate healthcare fraud investigations,
and we are determined to bring more.”
klgates.com
40
FDLI Enforcement, Litigation, and Compliance Conference
December 8-9 2014
Enforcement Actions:
Lanham and Food, Drug, and Cosmetic
Acts
MITCHELL S. FUERST, ESQ.
1001 BRICKELL BAY DRIVE, 32ND FLOOR
MIAMI, FLORIDA 33131
T: 305.350.5690
mfuerst@fuerstlaw.com
41
Lanham Act
15 U.S.C. 1051 et seq.
42
Lanham Act: 15 U.S.C.1051 et seq.
•
The Lanham Act creates a cause of action for unfair competition through
misleading advertising or labeling.
•
The “cause of action is for competitors, not consumers.”
•
The private remedy may be invoked only by those who “allege an injury to a
commercial interest in reputation or sales.”
•
Section 43(a) states:
– “Any person who…in commercial advertising or promotion,
misrepresents the nature, characteristics, qualities, or geographic origin
of his or her or another person’s goods, services, or commercial
activities, shall be liable in a civil action by any person who believes that
he or she is or is likely to be damaged by such an act.”
•
What falls within the Lanham Act?
– False or misleading
– Impliedly false or misleading by “innuendo, indirect intimations, and
ambiguous suggestions”
– Label claims and label information
43
Federal Food, Drug, and
Cosmetic Act
21 U.S.C. § 331
44
Federal Food, Drug, and Cosmetic Act: 21 U.S.C. § 331
•
Federal Food, Drug, and Cosmetic Act (FDCA), forbids the misbranding
of food or drink, including by means of false or misleading labeling
•
A food or drink is deemed misbranded if, inter alia, “its labeling is false
or misleading,” § 343(a), information required to appear on its label “is
not prominently placed thereon,” § 343(f), or a label does not bear “the
common or usual name of the food, if any there be,” § 343(i).
•
The FDCA statutory regime is designed primarily to protect the health
and safety of the public at large.
•
To implement these provisions, the Food and Drug Administration
(FDA) promulgated regulations regarding food and beverage labeling.
See 21 C.F.R. § 102.33 (2013).
45
Lanham Act as ”Backdoor Private FDCA Enforcement”
POM Wonderful, LLC v. The Coca-Cola Company, 134 S. Ct. 2228 (2014)
• POM filed a Lanham Act suit against Coca-Cola for the labeling of its
“Pomegranate Blueberry Flavored Blend of 5 Juices” product, alleging that
the product name was misleading because the juice actually consisted of
over 99% apple and grape juices.
• The district court dismissed POM’s Lanham Act claim on the ground that the
suit was implicitly barred by the FDCA. The Ninth Circuit Court of Appeals
affirmed, reasoning that Congress decided “to entrust matters of juice
beverage labeling to the FDA”; the FDA has promulgated “comprehensive
regulation of that labeling”; and the FDA “apparently” has not imposed the
requirements on Coca–Cola's label that are sought by POM. POM
Wonderful, LLC v. The Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012)
• The U.S. Supreme Court granted certiorari to consider whether a private
party could bring a Lanham Act claim challenging a food label that is
regulated by the FDCA.
46
POM Wonderful, LLC v. The Coca-Cola Company
•
The Supreme Court held that the FDCA did not bar POM’s Lanham Act claim.
•
“The ruling that POM's Lanham Act cause of action is precluded by the FDCA was
incorrect. There is no statutory text or established interpretive principle to support the
contention that the FDCA precludes Lanham Act suits like the one brought by POM in
this case. Nothing in the text, history, or structure of the FDCA or the Lanham Act
shows the congressional purpose or design to forbid these suits.” POM at 2236.
–
Riegel v. Medtronic, 552 U.S. 312, 324 (2008) – Medical Devices
• “…[I]t is implausible that the MDA was meant to ‘grant greater power (to set state standards ‘different
from, or in addition to’ federal standards) to a single state jury than to state officials acting through state
administrative or legislative lawmaking processes.’ […] That perverse distinction is not required or even
suggested by the broad language Congress chose in the MDA, and we will turn somersaults to create it.”
• “[I]n the context of this legislation excluding common-law duties from the scope of preemption would
make little sense. State tort law that requires a manufacturer’s catheters to be safer, but hence less
effective, than the model FDA has approved disrupts the federal scheme to less than state regulatory
law to the same effect. Indeed, one would think that tort law, applied by juries under a negligence or
strict-liability standard, is less deserving of preservation.”
–
Wyeth v. Levine, 555 U.S. 555 (2009) -- Prescription Drugs
• Wyeth made two separate preemption arguments
• Wyeth argued that recognition of Levine’s state tort action creates an unacceptable “obstacle to the
accomplishment and execution of the full purposes and objectives of Congress,” […] because it
substitutes a lay jury’s decision about drug labeling for the expert judgment of the FDA.”
• The narrower question presented to the Supreme Court was: whether federal law preempts Levine’s
claim that Phergan’s label did not contain an adequate warning about using the IV-push method of
administration.
47
POM Wonderful, LLC v. The Coca-Cola Company
•
“Competitors, in their own interest, may bring Lanham Act claims like POM's
that challenge food and beverage labels that are regulated by the FDCA.”
•
In determining whether the FDCA barred POM’s Lanham Act Claim the
Court began by comparing the text and purpose of each statute.
•
The Court explained that the absence of any textural provision precluding
Lanham Act suits was “powerful evidence that Congress did not intend FDA
oversight to be the exclusive means of ensuring proper food and beverage
labeling,” because if “Congress had concluded, in light of experience, that
Lanham Act suits could interfere with the FDCA, it might well have enacted
a provision addressing the issue” during the 70 years in which the two acts
have coexisted. POM, 134 S. Ct. at 2237.
48
POM Wonderful, LLC v. The Coca-Cola Company
•
Coca-Cola argued that the FDCA precluded POM's Lanham Act claims
because “congress intended national uniformity in food and beverage
labeling” as evidenced by the following factors:
– Delegation of enforcement authority to the Federal Government rather
than private parties
– Express pre-emption with respect to state laws
– The specificity of the FDCA and its implementing regulations
49
POM Wonderful, LLC v. The Coca-Cola Company
•
The Court disagreed stating:
– “The centralization of FDCA enforcement authority in the Federal
Government does not indicate that Congress intended to foreclose
private enforcement of other federal statutes.”
– “The pre-emption provision by its plain terms applies only to certain
state-law requirements, not to federal law.”
– The “FDCA and the Lanham Act are complementary and have separate
scopes and purposes, this greater specificity would matter only if the
Lanham Act and the FDCA cannot be implemented in full at the same
time. But neither the statutory structure nor the empirical evidence of
which the Court is aware indicates there will be any difficulty in fully
enforcing each statute according to its terms.”
50
POM Wonderful, LLC v. The Coca-Cola Company
•
The United States as Amicus Curiae disagreed with both Coca–Cola and
POM and argued that POM could challenge other aspects of the label not
approved by the FDA, but POM could “not bring a Lanham Act challenge to
the name of Coca–Cola's product . . . because . . . FDA regulations
specifically authorize the names of juice blends.”
•
The Court disagreed because the Government’s argument “assumes that
the FDCA and its regulations are at least in some circumstances a ceiling
on the regulation of food and beverage labeling.” Congress intended the
Lanham Act and the FDCA to complement each other with respect to food
and beverage labeling.”
51
POM Wonderful, LLC v. The Coca-Cola Company
•
Rational of the Court
– “Allowing Lanham Act suits takes advantage of synergies among
multiple methods of regulation.” It is “consistent with the congressional
design to enact two different statutes, each with its own mechanisms to
enhance the protection of competitors and consumers.”
– “The FDA, does not have the same perspective or expertise in
assessing market dynamics that day-to-day competitors possess.
Competitors who manufacture or distribute products have detailed
knowledge regarding how consumers rely upon certain sales and
marketing strategies. . . Lanham Act suits draw upon this market
expertise by empowering private parties to sue competitors to protect
their interests on a case-by-case basis. By ‘serving a distinct
compensatory function that may motivate injured persons to come
forward,’ Lanham Act suits, to the extent they touch on the same subject
matter as the FDCA, ‘provide incentives’ for manufacturers to behave
well.”
52
POM Wonderful, LLC v. The Coca-Cola Company
•
The Court declined to preclude private parties from availing themselves of a
well-established federal remedy because an agency enacted regulations
that touch on similar subject matter without purporting to displace that
remedy.
•
“An agency may not reorder federal statutory rights without congressional
authorization.”
•
The “FDCA and the Lanham Act complement each other in the federal
regulation of misleading food and beverage labels.”
•
“[E]ach has its own scope and purpose. Although both statutes touch on
food and beverage labeling, the Lanham Act protects commercial interests
against unfair competition, while the FDCA protects public health and
safety.
53
MITCHELL S. FUERST, ESQ.
1001 BRICKELL BAY DRIVE, 32ND FLOOR
MIAMI, FLORIDA 33131
T: 305.350.5690
mfuerst@fuerstlaw.com
54