FDA Enforcement

1
Amylin Pharmaceuticals
FDA Enforcement The Perils of Inadequate
Compliance Michael A. Swit, Esq. Vice President
2
What We Will Cover

• Enforcement Trends Prior to Obama Administration
• Commissioner Hamburg Revives FDAs Compliance
  Culture The August 6, 2009 Speech and its
  Impact
• How to Prepare for Increased Enforcement
• How to Respond if Targeted
• Consequences of Non-Compliance

2
3
Enforcement Trends Prior toObama Administration
3
4
All Inspections 2004 to 2008
4
5
Warning Letters 2004 to 2008
5
6
Seizures 2004 to 2008
6
7
Injunctions 2004 to 2008
7
8
Commissioner Hamburg Revives FDAs Compliance
Culture The August 6, 2009 Speech and its
Impact
9
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

9
10
Hamburg Four Essential Elements for Effective
FDA Enforcement

• 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

10
11
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

11
12
Hamburg Six New FDA Enforcement Mandates

• Impose clear post-inspection deadlines
• Generally no more than 15 business days to
  respond to 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 FDAs 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

12
13
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

13
14
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 firms later reply to warning letter
• Purpose of Warning Letter
• ensure seriousness and scope of the violations
  are understood by top management and that the
  appropriate resources are allocated to fully
  correct the violations and prevent their
  recurrence

14
15
Enhanced Enforcement In Action

• KV March 2009 GMP consent decree four weeks
  after inspections end
• H1N1 Websites May 2009 -- 68 Warning Letters
  response time shortened to 48 hours due to the
  public health aspects
• Caraco
• June 2009 seizure six weeks after inspection
• September 2009 consent decree
• Apotex Import Alert
• June 25 Warning Letter
• September 8 FDA announces import alert on two
  Apotex facilities

15
16
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)

17
Enhanced Enforcement International

• FDA to double 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
• Additional planned FDA offices Mexico City,
  Middle East (site TBD)

17
18
How to Prepare for Increased Enforcement
19
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.

19
20
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
• View as a competitive advantage

20
21
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

21
22
How to Prepare

• Build The Right Quality Systems
• Create a self-determining culture
• Make regulatory mandates obvious and routine
• 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

22
23
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

23
24
How to Respond if Targeted
25
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
• Publicity
• e.g., Genzyme 483 from a Nov. 2009 inspection is
  on FDAs website already

25
26
When FDA Enforcement Hits

• How It May Hit
• Judicial Enforcement
• Seizure of test articles
• Disgorgement
• Injunction
• Criminal Prosecution

27
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 companys operation,
  including
• President/CEO/COO
• General Counsel
• VP or Director of QA, QC, RA, Mfg., etc.
• Managers
• Technicians (rare)
• The Park Doctrine

27
28
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

28
29
When Enforcement Hits Keys to Responding

• Include a commitment/statement from senior
  leadership
• Address each allegation/observation separately
• General rule do not specifically state whether
  you agree or disagree with the allegation/observat
  ion
• 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

29
30
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

30
31
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.

31
32
Consequences of Non-Compliance
33
Does Crime Pay? -- Problems Beyond Jail and
Fines

• Problems For Companies Caused By Convictions and
  Other Serious FDA Compliance Actions
• 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 Neurontin cases -- whistle
  blower cases -- leading to civil damages and may
  also spawn a criminal prosecution

34
Does Crime Pay? -- Problems Beyond Jail and
Fines

• Problems For Companies
• FDA may refuse to approve NDAs, PMAs or other
  filings under Application Integrity Program (AIP)
• May lose state licenses
• Customers abandon you
• Decreased sales may force lay-offs of employees

35
Does Crime Pay? -- Problems Beyond Jail And
Fines

• Problems For Companies
• 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

36
Does Crime Pay? -- Problems Beyond Jail and
Fines

• Problems For Companies
• Incredible financial costs of non-compliance
• lost sales
• stock price falls
• attorneys fees and costs
• consultants fees
• costs of complying with requests by government
  for documents

37
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

38
Does Crime Pay? -- Problems Beyond Jail and
Fines

• Problems For IndividualsIf Convicted)
• Can be deported if not a U.S. citizen
• Financial ruin - - lose your job

39
The Costs The Par Case

• Direct Costs
• Criminal Fines -- 2,800,000
• Legal Fees -- 4,000,000
• Consultant Fees -- 5,000,000
• Shareholder Litigation -- 2,200,000
• Competitors Litigation -- 13,000,000
• Lost Sales one year alone down 49,000,000
• TOTAL Direct costs/lost sales 75,900,000
  (just one year of lost sales)
• Indirect Costs
• Stock price dropped from 27 per share to 3
  per share market cap from about 297,000,000 to
  33,000,000
• Employees 900 to 450
• Approvals -- ANDAs none approved for about 5
  years
• Quad Subsidiary shut down fully
• Other Common Direct Costs (often not present in
  older cases common since 1999)
• False Claims Act
• Consent Order Disgorgement

40
Final Sermon Please Teach Vigorous Risk
Avoidance Corporately

• P Procedures
• T Training
• V Validated
• R Records
• A Audit
• C Compliance Culture from the Top

41
Questions?
Call, e-mail, fax or write Michael A. Swit,
Esq. Vice President The Weinberg Group Inc. 336
North Coast Hwy. 101 Suite C Encinitas, CA
92024 Phone [phone] Fax
760.454.2979 Cell 760.815.4762 michael.swit_at_wein
berggroup.com www.weinberggroup.com
42
About your speaker

Michael A. Swit, Esq., is a Vice President at THE
WEINBERG GROUP, where he develops and ensures the
execution of a broad array of regulatory and
other services to drug, biologics, medical device
and other highly-regulated clients seeking to
market products in the United States. His
expertise includes FDA development strategies,
compliance and enforcement initiatives, recalls
and crisis management, submissions and related
traditional FDA regulatory activities, labeling
and advertising, and clinical research efforts.
Mr. Swit has been addressing critical FDA legal
and regulatory issues since 1984. His
multi-faceted experience includes serving for
three and a half years as corporate vice
president, general counsel and secretary of Par
Pharmaceutical, a prominent, publicly-traded,
generic drug company and, thus, he brings an
industry and commercial perspective to his work
with FDA-regulated companies. Mr. Swit then
served for over four years as CEO of FDANews.com,
a premier publisher of FDA regulatory newsletters
and other specialty information products for the
FDA-regulated community. His private FDA
regulatory law practice has included service as
Special Counsel in the FDA Law Practice Group in
the San Diego office of Heller Ehrman White
McAuliffe and with the Food Drug Law practice
at McKenna Cuneo, both in the firms Washington
office and later in San Diego. He first practiced
FDA regulatory law with the D.C. office of
Burditt Radzius.Mr. Swit has taught and
written on a wide variety of subjects relating to
FDA law, regulation and related commercial
activities, including, since 1989, co-directing a
three-day intensive course on the generic drug
approval process and editing a guide to the
generic drug approval process, Getting Your
Generic Drug Approved. A former member of the
Food Drug Law Journal Editorial Board, he also
has been a prominent speaker at numerous
conferences sponsored by such organizations as
RAPS, FDLI, and DIA. A magna cum laude graduate
of Bowdoin College, he received his law degree
from Emory University Law School and is a member
(inactive) of the California, D.C. and Virginia
bars.
43

• For more than twenty-five years, leading
  companies have depended on THE WEINBERG GROUP
  when their products are at risk. Our technical,
  scientific and regulatory experts deliver the
  crucial results, using sound science and
  regulatory acumen, to get products to the market
  and keep them there.
• Washington, D.C. ? San Mateo ? Brussels ?
  Edinburgh