Food and Drug Law December 6 , 2010

1. Food and Drug LawDecember 6, 2010 Ralph F. Hall

2. Overview • Current events • Review session • Room 35 • Enforcement • Conclusion

3. Enforcement

4. Enforcement • Interstate commerce requirement • Jurisdictional requirement • Constitutional basis for jurisdiction • Generally three approaches to enforcement • Prohibited acts (§331) • Adulterated products • Misbranded products • Specific FDCA provisions • §355 (a) – no introduction of a new drug into interstate commerce without an approval • General statutory requirements and provisions • False statements, wire fraud, conspiracy, etc. • Remember Buckman and §337

5. Enforcement Chain (§331) Adulteration Prohibited Act Misbranding Criminal Civil Administrative §331 “A&M Plus” §§332-334, other FDCA Provisions

6. Prohibited Acts • Based on adulteration and misbranding concepts • Covers multiple parts of the distribution process • Introduction into interstate commerce - §331(a) • Receipt in interstate commerce §331 (c) • Linkage of adulteration/misbranding provisions to §331 • §§351, 352, 342, 343, 361, 362

7. Prohibited Acts • Other specific actions under §331 • Refusal to permit access to records • Refusal to permit inspections • Movement of a detained device • Improper drug importation (§ 384 linkage) • Failure to register • Forging certain labels, marks, etc. • Fraudulent drugs • Defining specific acts as rendering products “misbranded”

8. Linkage to Substantive Provisions • §331 linked to penalty provisions • §332-334 • Liberal construction • Role of general or common law remedies • Equitable powers • RX Depot & Lane Labs • Linked to penalty provisions • General civil and criminal provisions • triggers general penalty provisions

9. Equitable Powers • § 332 – “district courts … shall have jurisdiction … to restrain violations of [§331] • “restrain violations” means future conduct • Does FDA have authority to utilize equitable remedial powers? • Lane Labs/RX Depot • FDA wanted to compel restitution and disgorgement of profits • Defendants argued limited powers under §332 • Courts held that once any equitable power is granted, all equitable powers are granted

10. Other Relevant Provisions • False Statements (18 USC §1001) • Material misstatements • Intent • Oral or written statements • Completeness • Mail/wire fraud (18USC §1341) • Broad interpretation • False Claims Act (31 USC §3729) • HHS fraud and abuse provisions

11. Other General Criminal Provisions • Conspiracy • Aiding and abetting • Tax issues • Money laundering • Obstruction of justice • SEC violations

12. Biologics • 42 USC § 262 • List of “illegal” acts • Shipping unapproved product • False label • §262 (f) penalties • Linkage to general FDCA provisions (§262(j)) • General enforcement provisions

13. Specific FDCA Provisions • Certain provisions include specific prohibitions • §355(a) • Difference between enforcement actions and challenges to agency actions • Appealing final agency decisions • Arbitrary and capricious standard • Role of Chevron/Bacto-Unidisk • Some specific procedures • §348(f) • Enforcement • Government burden • Judicial deference

14. Obligation to Enforce • Prosecutorial discretion • Great latitude • Focus on high risk and high impact cases • Creating examples • § 336 • FDCA doesn’t require government to prosecute minor violations if the public interest is served by a warning or written notice • Lethal injection cases • No obligation to enforce

15. Sources of Enforcement Information • Reports to FDA • Inspections • Routine • Required inspections (pre NDA/PMA) • For cause • Whistleblowers • Other companies • Public pressure

16. Responsible Party • Corporate entity • Parent • Involved individuals • Authority and responsibility • Knowledge • Role of lawyers? • Role of compliance officers • Responsible corporate executives • CEO/president

17. FDA Trends Typical Establishment Inspections: District Decisions

18. FDA Trends Consequences of a Medical Device Inspection

19. Enforcement Actions • Administrative actions • Inspections • 483 observations • Warning letter • Recalls • Seizures/detention/condemnation • Injunction • Consent decree • Debarment/delisting • Civil penalty actions • Corporate Integrity Agreements/Probation terms • Criminal actions • Misdemeanor • felony

20. Recalls • Recalls are not enforcement • Recall as a remedy for violations • 21 CFR Part 7 – “Violative” products • Limited recall authority • Most recalls are “voluntary” • Failure to conduct a recall can lead to more formal actions • Seizure or detention • Reporting and corrective action obligations

21. 483s • Issued at inspection • List of deviations • Little or no FDA management involvement • Not binding on FDA • Other issues can be added • Additional enforcement action possible • Three ratings (NAI, VAI, OAI) • Response to FDA addressing corrective actions • Admissions against interest?

22. Warning Letters • Addressed to CEO/President • Reviewed by district, center and Chief Counsel office prior to issuance • 3-6 month process • Often follow 483 observations • Often state that the product is “adulterated” or “misbranded” • Impact on shipments • Impact on approvals • Impact on exports • Requires response and corrective action • Follow up inspection

23. Civil Enforcement • Can be linked to criminal action • Same prosecutorial discretion • Purpose of criminal enforcement • Punishment • Deterrence • Entity/individual focus • Purpose of civil enforcement • Restitution/disgorgement • Remedial actions • Either entity or product directed • Equitable competition

24. Injunction • Statutory authority • § 332 • Linkage to § 331 • Enjoin violations • Ongoing jurisdiction of court • Two basis for further action • Violate injunction • Violation of act • Remedies • Contempt • Other enforcement actions

25. Equitable Relief • Availability of non-injunctive equitable remedies • Is §332 self limiting to injunctions • Congress defined the remedy as “injunction” • Restitution • Lane Labs • Disgorgement • RX Depot • Factors

26. Seizure/Condemnation21 USC § 334 • Seizure of foods, drugs & cosmetics • Can precede actual interstate shipment • In rem action • Use of admiralty law procedures • Owner/claimant can challenge seizure • Right to trial by jury • Articles can be condemned • Destroyed or sold into legal distribution channel • 2006 Glaxo seizure • Multiple locations • GMP issues • Specific detention provision for devices and food

27. Debarment/delisting • Debarment prohibits corporation or person from variety of FDA related activities • Variety of sources for debarment and delisting • FDCA • HHS • Types of activities covered • Providing services to FDA regulated company • Serving as clinical investigators • Obtaining Medicare/Medicaid payments as reimbursement for services or products

28. Miscellaneous Penalties • Application Integrity Program (AIP) • Used in cases of scientific fraud or data integrity issues • Requires special data and process review before application process even starts • Import/Export bans • Application holds • Informal actions and delays • Publicity (§375)

29. Civil Penalty Actions§333(f) • Applicable to devices and food • Covers a person “who violates a requirement of this act” • $15,000 per violation/$1,000,000 max for devices • Minor violation exception • Does not require a court action • Administrative action • Right to a hearing • Judicial review possible

30. Consent Decrees • Agreed upon settlements • Involve FDA, DOJ and AUSA • Entered by court (i.e. a court order) • §332 provides jurisdiction and venue • Injunctive action often filed simultaneously • Generally local federal court • Require specific actions • Remedial actions • Periodic reports • Product actions • Can be very specific

31. Consent Decrees • Typical provisions • Statement of jurisdiction and venue • Statement/admission of violations • Specific remedial actions • Revising procedures • Updated training • Time lines for actions • Reporting obligations • Third party certification

32. Consent Decrees • Responsible parties • Corporate entity • At least 1 senior executive signs and is personally responsible • Penalties • Contempt and other standard remedies for breach of a court order • Stipulated penalties • Per day penalties for late actions • Portions of revenue • Cost of enforcement action

33. Criminal Enforcement • Office of Criminal Investigations (OCI) • Ex FBI and Secret Service agents • Part of FDA • FDA • Chief Counsel’s Office • Other management representatives • FBI and other law enforcement agencies • Department of Justice • Office of Consumer Litigation • OIG • US Attorney’s Office • State agencies

34. Criminal EnforcementProcess • Initial investigation • Covert or overt • Whistleblowers • Interview individuals • Documents • Grand jury process • Sub poenas for people or documents • Witness, subject or target • Multiple counsel • CIDs or other discovery mechanisms • Information/Indictment • Plea or trial

35. Criminal Enforcement • Vast majority of corporate defendants plead guilty if indicted • Some individuals will go to trial • TAP, C.R. Bard • Sometimes defense wins • Penalties based on statutory requirements and Federal Sentencing Guidelines • Imprisonment • Fines • Disgorgement of profits • Other administrative actions

36. Criminal Enforcement21 USC § 333 • Criminal penalties (§333(a) & (b)) • Misdemeanor • Felony • Intent to defraud • Not a financial limitation • “Defrauding” the government by false filings • Reimbursement linkage • Good faith exception • Can apply to receipt of adulterated/misbranded articles • Protect distribution chain and non-responsible parties

37. Park/Dotterwiech • Two Supreme Court cases • 1943 and 1975 • Park • Park was president of Acme Markets • 36,000 employees • 874 stores • FDA inspection revealed adulterated product • Prior inspection also found issues • Acme pled guilty to 5 counts • Park pled not guilty

38. Park • Acme had typical organization with delegated responsibility • Park’s defense • No personal knowledge of problems • Had instructed those responsible to fix problems • No mens rea • Court found strict criminal liability (misdemeanor) • Strict liability advanced purposes of FDCA • Highest standard of care required

39. Exclusion • “individuals and entities may, or in some cases must, be excluded from participation in Medicare, Medicaid and all other Federal health care programs.” 42 CFR 1001 • In addition to other penalties • Mandatory exclusion • Patient abuse • Controlled substances • Theft, embezzlement, etc from FHCP • Permissive exclusion • False claims • Defined process for implementation • “Nuclear bomb” for companies • SEC/disclosure issues

40. False Claims • Based upon 31 USC § 3729 • Covers much more than FDCA, HHS, etc. • Elements of violation • Intent • Presents or causes to be presented a false record or statement • To get paid by government • Other provisions • With intent to defraud, providing a document to government without completely knowing that it is true • Conspiracy

41. False Claims • Linkage of FDA to Medicare/Medicaid • Significant portion of health care costs paid by government • 75% + of all Rx drugs • Shipping an adulterated/misbranded product violates FDA rules • Government shouldn’t pay for violative products • Hospital/physician (HCP) unknowing link in reimbursement chain • Company induces HCP to submit claim for violative product

42. False Claims • Intent • Actual knowledge • Deliberate ignorance • Reckless disregard • Penalties • Up to $10,000 • Treble damages • Cost of actions • Reduction in damages (2X rather than 3X) for self reporting and cooperation

43. False Claims • Relationship to FDA matters • How is a GMP violation, promotional violation or a failure to get an approval a “false claim”? • Off-label promotion as a false claim • FCA covers improper attempts to get money from US • How does an FDA violation become an attempt to take money from the government? • Company doesn’t submit claims to government for money

44. Qui Tam Actions • Based on 31 USC § 3730 • Action brought by private person (relator) • Relates to false claims (§ 3729) • Action brought in name of US • Relator has exclusive rights • Private Attorney General concept • Prior notice to US and opportunity for US to take case • Served and filed under seal or in camera • If US takes case, relator has limited rights • If not, private person prosecutes actions

45. Qui Tam Actions • Awards to relators • If US takes case – • 15-25% of award if information from relator is primary basis for recovery • Otherwise, up to 10% • If relator prosecutes case – • Relator receives 25-30% of award • Anti retaliation provision

46. Sample Qui Tam Actions • TAP • Two relators • Tufts medical Center – approximately $90 million • Individual -$15-20 million • Park Davis • Relator was in-house medical officer • Received about $27 million • Glaxo • GMP case • Relator was ex-quality person • Relator collected over $96 million

47. Corporate Integrity Agreement • Parties to Agreement • Company • HHS/OIG • Role of HHS/OIG • Medicare/Medicaid compliance • 5 year term • Is this a type of probation? • Designed to force and ensure compliance and the existence of a compliance program

48. Corporate Integrity Agreement • Compliance office & code of conduct • Relevant policies and procedures • Periodic review of policies and procedures • Training requirement • MDR reporting • CAPA system • Independent Review Organization • Disclosure program • Non retaliation • Obligation to investigate

49. Corporate Integrity Agreement • Ineligible person program • Linked to debarment/delisting program • Screening requirement • Reporting Obligations • Certain non-conformances • Periodic, routine reports • Compliance Officer certification • Risks? • Stipulated penalties • Potential exclusion

50. Deferred Prosecution Agreements • Agreement not to prosecute if remedial actions completed • Information/indictment filed • Action stayed • Similar terms to CIAs • Corporate monitor often required • Failure to comply • Action restated • Breach of DPA • Non-prosecution Agreements (NPAs)