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FDLI’s Enforcement, Litigation and Compliance Conference Responding to FDA Enforcement Actions December 8 & 9, 2014 Washington, DC Session 2: Advanced.

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Presentation on theme: "FDLI’s Enforcement, Litigation and Compliance Conference Responding to FDA Enforcement Actions December 8 & 9, 2014 Washington, DC Session 2: Advanced."— Presentation transcript:

1 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

2 FDA Enforcement Statistics Summary Fiscal Year 2013

3 Warning Letters by FDA Center Fiscal Year 2013


5 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.

6 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:

7 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].

8 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.

9 2013 Most Frequent FDA Form 483 Drug Violations Noted  (99) 21 CFR 211.160(b) Scientifically sound laboratory controls; 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.  (77) 21 CFR 211.67(b) Written procedures not established/followed 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].

10 FDA Future Compliance Action- Crystal 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-to- day 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

11 FDA Future Compliance Action- Crystal 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.

12 Contact Information Sonali P. Gunawardhana 1776 K Street, NW Washington, DC 20006 (202) 719- 7454

13 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


15 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

16 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

17 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

18 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


20 All Natural 100% Natural Wholesome Organic Whole Grain Whole Wheat GMO Free Healthy Danger Claims 20


22 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 Barbara’s Bakery N.D. California November 2013 final approval $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 22

23 Settlements with Compliance Obligations Is the plaintiffs’ bar setting a new standard of care? 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 23


25 Retailer Restrictions 25

26 John Fuson Crowell & Moring LLP (202) 624-2910

27 © Copyright 2014 by K&L Gates LLP. All rights reserved. Steven M. Kowal K&L Gates LLP Chicago, IL 60602 312.807.4430 NON-PROSECUTION AND DEFERRED PROSECUTION AGREEMENTS: POTENTIAL ALTERNATIVES TO A CORPORATE GUILTY PLEA

28  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 28

29  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 29

30  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 30

31  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 31

32  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 32

33 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.” 33

34  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 34

35  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 35

36  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 36

37  NPAs and DPAs impose affirmative obligations  Often require review/enhancement of compliance programs  Impose obligations to self report  Require review by an independent monitor 37

38  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 38

39  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 39

40  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.” 40

41 FDLI Enforcement, Litigation, and Compliance Conference Enforcement Actions: Lanham and Food, Drug, and Cosmetic Acts December 8-9 2014 1001 B RICKELL B AY D RIVE, 32 ND F LOOR M IAMI, F LORIDA 33131 T: 305.350.5690 M ITCHELL S. FUERST, ESQ. 41

42 Lanham Act 15 U.S.C. 1051 et seq. 42

43 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 Lanham Act: 15 U.S.C.1051 et seq. 43

44 Federal Food, Drug, and Cosmetic Act 21 U.S.C. § 331 44

45 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). Federal Food, Drug, and Cosmetic Act: 21 U.S.C. § 331 45

46 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. Lanham Act as ”Backdoor Private FDCA Enforcement” 46

47 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. POM Wonderful, LLC v. The Coca-Cola Company 47

48 “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. POM Wonderful, LLC v. The Coca-Cola Company 48

49 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 POM Wonderful, LLC v. The Coca-Cola Company 49

50 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.” POM Wonderful, LLC v. The Coca-Cola Company 50

51 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.” POM Wonderful, LLC v. The Coca-Cola Company 51

52 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.” POM Wonderful, LLC v. The Coca-Cola Company 52

53 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. POM Wonderful, LLC v. The Coca-Cola Company 53

54 1001 B RICKELL B AY D RIVE, 32 ND F LOOR M IAMI, F LORIDA 33131 T: 305.350.5690 MITCHELL S. FUERST, ESQ. 54

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