Michael A. Swit, Esq. Law Offices of Michael A. Swit mswit@fdacounsel fdacounsel

1. Legal Strategies and Concerns in the Sourcing of FDA-RegulatedProducts, Components & Services Keys to a Win-Win Relationship with Your CMO Michael A. Swit, Esq.Law Offices of Michael A. Switmswit@fdacounsel.com www.fdacounsel.com

2. IBC’s 3RD International Conference“Scaling Up from Bench to Clinic and Beyond – Bioprocessing Strategies for Successful Commercialization”August 14, 2002 Hilton San Diego Resort San Diego, California

3. Why Worry About FDA from a Legal Perspective – it’s “Due Diligence”? • FDA Compliance Can Make or Break a Deal • Recent Examples: • Abbott/Alza Merger • Guilford/Gliatech Merger • When sourcing you become a “partner” with your vendor -- their problems are yours

4. Why Worry...? • FDA mandates you worry about your vendor/partner’s compliance • Poor Suppliers May Delay or Void an Approval • Active Pharmaceutical Ingredient (“API”) Supplier • Sponsor’s application will not be approved if deficiency at API maker • Special tactics/concerns: • be extremely careful with first-time suppliers • special concern -- if never used before, FDA foreign inspection may delay approval process as well

5. Why Worry…? • FDA will make you worry … • Poor Suppliers May Delay/Void Approvals … • Contract Manufacturers • must be GMP compliant or FDA approval can be refused • Special tactics/concerns • tied directly into your application -- their changes will trigger a regulatory duty that may require an FDA filing/approval • may be high volume/low margin producers -- pressure on production may lead to errors

6. Why Worry…? • FDA will make you worry … • Supplier or component qualification -- Required -- explicitly or implicitly • Drugs -- 21 CFR 211.22(a)“…The quality control unit shall be responsible for approving or rejecting drug products manufactured, processed, packed or held under contract by another company.” • Devices -- 21 CFR 820.50 “Each manufacturer shall establish and maintain procedures to ensure that all purchased or otherwise received product and services conform to specified requirements.”

7. Why Worry…? • FDA will make you worry … • Supplier qualification -- • Devices -- 21 CFR 820.50(a)(1) -- Evaluation Duty • applies to suppliers, contractors and consultants-- evaluated as to ability to meet specified requirements • must define the “type and extent of control” over products, services, suppliers, contractors, and consultants” • keep records of acceptable suppliers, contractors & consultants

8. Why Worry…? • FDA will make you worry … • Supplier qualification -- • Devices -- 21 CFR 820.50(b) -- Purchasing Data Duty • keep data that “clearly describe or reference the specified requirements, including quality requirements, for purchased or otherwise received product and services.” • Note: “product” includes components, manufacturing materials, in-process devices, finished devices and returned devices [21 CFR 820.3(r)]

9. Why Worry...? • FDA will make you worry … • Supplier qualification -- • Devices -- 21 CFR 820.50(b) -- Purchasing Data Duty • Documents “shall include, where possible” an agreement requiring a supplier/contractor/consultant to notify the manufacturer of changes “so that the manufacturer may determine whether the changes may affect the quality of a finished device.

10. Why Worry...? • FDA will make you worry … • Supplier qualification -- • Biologics -- 21 CFR 600.12(e) -- Records in “divided” manufacturing • each participating manufacturer shall furnish the “last” manufacturer “all records relating to the manufacturing operations performed by such manufacturer insofar as they concern the safety, purity and potency of the lots of the product involved • Tactics/concerns if you’re the “last” mfr. -- • defining the records needed re “safety, purity, and potency” -- e.g., does that mean “effectiveness”? • be as specific as possible in the supply agreement

11. Why Worry…? • FDA Problems Can Be Hard to Fix • FDA statutory and other powers against violative companies/products may delay or preclude a fix • Inspection -- type will determine impact • routine vs. directed • short vs. lengthy • Seizure -- can be least intrusive • Injunction • consent decrees -- e.g., Abbott • litigated orders

12. Why Worry…? • FDA Problems Can Be Hard to Fix ... • Criminal Prosecution -- • The sins of your partner may visit upon you -- • The E-Ferol Case • does not technically preclude supply, but can be so disruptive as to undermine the effectiveness of a vendor • Application Integrity Program (AIP) -- [formerly known as the “Alert List” or “Fraud List” • if your supplier is on it, can be a lengthy, very subjective process for getting through

13. Why Worry…? • FDA Problems Can Be Hard to Fix ... • Regulatory hurdles -- to cure a problem with an approved product, may require FDA sign-off depending on the nature of the problem.Examples: • Active pharmaceutical ingredient maker unable to supply: • Apparent Solution -- get a new one • Problem -- will require prior approval by the agency and additional scientific data to support change • Best approach -- have two qualified as early as possible

14. Why Worry…? • Products Liability • Examples where a supplier caused the problem: • Tryptophan -- raw material problem • E-Ferol -- poor formulation • Carbamazapine -- API process change • Securities Liability -- worst case, deal caves; investors (i. e., their lawyers) sue • Economic disruption -- you can’t sell if they don’t sell to you

15. Keys to Preventing & Mitigating Legal Problems with FDA-Regulated Suppliers • Contract Clauses • Audits • Surveillance between audits • Teamwork at the Buyer

16. Preventing & Mitigating Problems... • Contract Clauses • Buyer’s right to audit vendor (and vendor’s key suppliers) • without notice • at any reasonable time during operations • vendor to cooperate fully with audit • access to records and personnel to be spelled out • advance notice of changes in vendor’s processing -- KEY -- so buyer can assess what regulatory action it must take to keep its approval/submission current

17. Preventing & Mitigating Problems... • Contract Clauses ... • Vendor to cooperate, at no additional expense, with Buyer’s needs to take action to continue to comply with FDA requirements (e.g., vendor to provide data to support filing of supplements to make changes to approved applications) • Vendor’s relations with FDA ... • Provide copies of 483’s, EIRs • prompt notice to buyer of initiation of FDA inspections • prompt transmission/notice to buyer of any FDA regulatory correspondence or regulatory action

18. Preventing & Mitigating Problems... • Contract Clauses ... • Timely notice of other problems encountered by vendor in its manufacturing process • timely notice of any adverse reactions or complaints reported to vendor • Contractually articulated duty to comply with FDA laws/regulations • general • specific -- examples • providing certificates of analysis • testing to be done

19. Preventing & Mitigating Problems... • Contract Clauses ... • Recalls -- duty to of vendor to cooperate with recalls initiated by buyer (if applicable) • representations, warranties, etc. about state of past and present compliance with FDA legal/regulatory reqs. • Indemnification duty from vendor to buyer in event of breach of any FDA-related reps or warranties • Audits -- the key to compliance • no notice • conduct like an FDA inspection

20. Preventing & Mitigating Problems... • Audits ... • Audit team -- • should be interdisciplinary in training -- Operations, QA, RA, QC • should have an SOP for conducting • Written follow-up -- give them a “483” • essential • get substantive replies from vendor • What to stress -- • systems specific to your product/service being provided to you by vendor • current FDA “hot buttons”

21. Preventing & Mitigating Problems ... • Audits ... • Re-audit promptly to confirm corrections • General Documents to review • chronology of interactions with FDA and other regulatory agencies (e.g., EMEA, HPB, if applicable) • all regulatory correspondence/filings between vendor and FDA • minutes of meetings/phone calls with FDA • company’s • FDA’s (get via FOI if vendor doesn’t have)Tip -- don’t rely just on what the company gives you; seek independent sources of related documents (e.g., under FOI)

22. Preventing & Mitigating Problems ... • “Surveillance” between audits -- keeping an eye on your vendors • Why? • “Knowledge is Good” (Faber College motto; Animal House, 1978) -- to be in the best position to anticipate problems • To be able to initiate dialogue with vendor as soon as possible after being alerted to a regulatory issue • How? • Read the trade and general press -- e.g., see press release from Schering on GMP problems • Keep track of FDA warning letters (subscribe to FDA e-mail notification services) • FOI requests -- direct to FDA or via a third-party service

23. Preventing & Mitigating Problems... • Surveillance ...SCHERING-PLOUGH PROVIDES UPDATE ON MANUFACTURING ISSUESAND FDA INSPECTIONS OF U.S. MANUFACTURING FACILITIESKENILWORTH, N.J., June 22, 2001¾ Schering-Plough Corporation (NYSE: SGP) today reported that the U.S. Food and Drug Administration (FDA) has completed inspections conducted during May and June at the company’s manufacturing facilities in Kenilworth and Union, New Jersey, and Las Piedras and Manati, Puerto Rico, and has issued new inspection reports (Form FDA-483), which cited some continuing and some additional deficiencies concerning compliance with current Good Manufacturing Practices (cGMP). Depending on when the Form FDA-483 was received, Schering-Plough has either responded to or is in the process of responding to these observations and is continuing to discuss these matters with FDA. The company cannot predict the outcome of these issues or the timing of any resolution. [rest of release deleted]

24. Preventing & Mitigating Problems… …the result… • May 2002 -- $500,000,000 consent decree by Schering

25. Preventing & Mitigating Problems ... • Teamwork at the Buyer • My old General Counsel’s nightmare -- “here’s the supply contract, we need to sign it today, can you look it over for any legal issues...?” My question: • “Did you run it by RA, QA, QC?” • Need SOPs for handling of contracts for FDA-regulated commodities/services • identify key contract clauses in advance • ensure sufficient time for review • involve all key players in review and comment on contracts (RA, QA, QC, Operations, Purchasing, etc.)

26. Specific Procurement Problems • Imported Components • FDA powers to stop questionable imports is much greater than for identical problem presented by a domestic manufacturer • Reason -- § 801 of the Federal Food, Drug, and Cosmetic Act gives FDA power to block an import if the product “appears” to be adulterated or misbranded • Action can occur without physical examination • Example -- bulk APIs going through the New York District Office in late 2000 and early 2001 were all detained pending proof they are not counterfeit, adulterated or misbranded -- without physical examination.

27. Specific Problems ... • Imported Components ... • Foreign suppliers are harder to sue • Tryptophan -- Showa Denko allegedly dodged responsibility for medical syndrome due to being off-shore • Sulzer -- foreign parent company allegedly refuses to provide any financial support to its subsidiary (ruptured breast implants)

28. Specific Problems … • Unusual events impacting supplies -- FDA will try to work with you; examples • Phillips Petroleum Plant explosion -- sole source for Marlex -- decreased availability of container/closure systems

29. Specific Problems ... • API’s (Active Pharmaceutical Ingredients) • many are foreign sourced -- thus less frequently inspected by FDA -- puts audit onus on you • still subject to all FDA rules -- while API makers technically do not have to meet GMP, there is a fairly stringent ICH guidance • make sure contract has API maker notify you of changes to process, etc. that need to be in the DMF and that FDA has been notified

30. Specific Problems ... • Labels/Labeling • label errors are prime cause of recalls • CMO printer must have clear, written procedures on handling of labels, especially if not dedicated to you exclusively • intake controls have to be well-documented, trained and validated • change control procedures -- even for changes not being submitted for FDA approval -- are essential

31. Specific Problems ... • Back-up Manufacturing Plant • When needed: whenever manufacturing is contracted out for IND or approved • Example: Lilly – 7/18/02 public announcement on 2nd Quarter results and plant problems not being cured until 2003 • What clause says: lets non-mfg. party seek a backup contractor under appropriate circumstances (e.g., Lilly had GMP problems holding up NDA approvals)

32. Specific Problems…A few unique ones…. • Who Owns the Data • When needed: whenever studies of any sort are farmed out • Example: Client has major study done at University; contract is ambiguous on who controls the data, although clear client can use in FDA product approval filing • What clause says: makes clear who owns both raw data and results and the right to authorize publications and references

33. Specific Problems…A few unique ones…. • Copies of Data Generated by Contract Labs • When needed: whenever testing is contracted out for IND or approved products • Example: Oread • What clause says: obligates the contract lab to maintain raw data, reports, etcs. and provide a copy in event of insolvency; also could require creation of an extra archival copy of data.

34. Questions? Write, call or e-mail: Michael A. Swit, Esq. Law Offices of Michael A. Swit 539 Samuel Ct. Encinitas, CA 92024 760-815-4762 -- fax: 760-454-2979 mswit@fdacounsel.com www.fdacounsel.com

35. About your speaker … Michael A. Swit has over 19 years of experience addressing critical FDA legal and regulatory issues. His vast and varied experience, which he is now providing as a solo practitioner, includes serving 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-regulated community. From May 2001 to May 2003, Mr. Swit was special counsel in the FDA Law Practice Group in the San Diego office of Heller Ehrman White & McAuliffe. Before that, he was 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 and editing a guide to the generic drug approval process, Getting Your Generic Drug Approved. He is a member of the California, Virginia and District of Columbia bars, an avid hockey, basketball and baseball fan (and ex-player), and the father of triplet sons, born Feb. 29, 1996, and is married to Vera Caccioppoli, an accomplished creative writer, artist, and business and personal coach.