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Increased Enforcement Threat
High profile public concerns Melamine contamination Peanut processing Pharmaceutical post-marketing problems Congressional pressure Increased enforcement budget
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Increased Aggressive Enforcement: Current Enforcement Trends and - - PDF document
Increased Aggressive Enforcement: Current Enforcement Trends and - - PDF document
Looking at the Horizon: Current & Future Regulatory Issues for the Medical Device, Drug and Food Industries Increased Aggressive Enforcement: Current Enforcement Trends and Effective Defense Response Steven M. Kowal Partner Chicago, IL 1
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FD&C Act - Misdemeanor
Both misdemeanor and felony provisions Commission of any prohibited act in Section 301 can result in criminal liability Misdemeanor violation does not require personal knowledge or participation Responsible relation to violation is enough Strict liability crime
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FD&C Act - Felony
Prohibited act becomes a felony in two ways Second strict liability violation Commission of prohibited act with intent to defraud or mislead Intent will be inferred from circumstances
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Healthcare Statutes
HIPAA included specific healthcare fraud and false statement provisions Federal False Claims Act prohibits knowing submission of false or fictitious claims Anti-kickback statute prohibits solicitation of payments for Medicare
- r Medicaid related business
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General Criminal Statutes
Mail and wire fraud False statements Conspiracy Obstruction of justice
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Penalties
Incarceration Misdemeanors
- ne year per count
Regulatory felonies three years per count General criminal statutes five years to twenty years per count Government seeks to prosecute individuals for deterrent effect United States v. Abtox, Inc., et al. Ross Caputo, President ten years of incarceration James Reilly, CFO six years of incarceration
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Penalties
Fines Misdemeanors Individual - $100,000 per count Company - $200,000 per count Felony Individual - $250,000 per count Company - $500,000 per count Alternative calculation Twice gain or loss caused by the illegal conduct
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Current Government Focus
Food sanitation Post-marketing surveillance Clinical investigations Adverse event reporting Foreign inspections
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Off-Label Promotion
IG reports 300 investigations for 2009 Focus on pharmaceutical and medical device industries
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Pharmaceutical manufacturer Eli Lilly
Promotion of Zyprexa Approval for schizophrenia, treatment of acute bi-polar disorder and maintenance treatment of bi-polar disorder Marketed for pediatric use, at high dosage levels and in the elderly for treatment of dementia
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Eli Lilly
Lilly pled guilty to one misdemeanor count of misbranding Total financial penalty of $1.415 billion
$515 million criminal fine $100 million forfeiture $800 million FCA settlement $438 million for federal government $361 million to various states $78.8 million to qui tam relators
Prior settlement of $62 million to 32 states under consumer protection theories Suits by 12 states remain pending
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Pharmaceutical manufacturer Cephalon
Promotion of Actiq, Provigil and Gabitrol Approved to treat cancer pain, narcolepsy and epilepsy Promoted for non-cancer patients, general tiredness and to remedy anxiety
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Cephalon
Cephalon pled guilty to one misdemeanor count of misbranding Total financial penalty of $425 million $40 million criminal fine $10 million forfeiture $375 million FCA settlement Five year corporate integrity agreement $46.5 million to qui tam relators
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Medical device manufacturers Zimmer, DePuy, Smith & Nephew, and Biomet
Deferred prosecution agreements Total of $311 million payment Surgeons were paid financial inducements to use companies products exclusively Corporate monitoring agreement for 18 months.
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Problematic promotional practices
Use of anecdotal testimonials Use of invitro or animal data to suggest clinical significance Direct or implied comparisons to dissimilar products Inaccurate characterizations of drug actions, indications or adverse events Inadequate qualifications and/or limitations regarding safety or effectiveness Vague or open-ended claims or suggestions of superiority
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Focus of medical device CIAs
Restriction on payments to surgeon consultants Publication of all payments to consultants Limitations on training venues Avoidance of unrealistic sales targets
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HHS future focus medium sized firms
Smaller compliance staffs and budgets Entrepreneurial culture Greater financial pressures
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Government Investigations Defense Response
Ambush interviews Search warrants
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Ambush interviews
Interviews are pursued aggressively Can occur anywhere and at any time Uncertainty concerning legal rights and obligations Confer substantial psychological advantages on the government Unable to contact a lawyer No opportunity to review information Agents treat uncooperative response as evidence of guilt Atmosphere of intimidation
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Ambush interviews
Interview is voluntary Ability to choose includes the power to refuse Participation cannot be compelled A subpoena cannot be used to secure an interview Little incentive to consent No reason to sign or affirm statements There is no such thing as off the record The statements will be used against the individual and the company Former employees are not insulated from contact or prosecution
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Search warrants
Warrant requires approval of a judicial officer Executed by a team of government agents who take control of the facility Warrants are used to: Avoid destruction of evidence Shock and intimidate Identify and interview employees
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Search warrants
In responding to the execution of a warrant: Do not impede the agents Designate a senior executive to deal with the agents Ask to review a copy of the warrant Answer only questions that relate to the location of documents If the search exceeds the scope of the warrant, complain to the agent in charge Protest the seizure of privileged materials
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Any questions or comments? Steven Kowal, Partner (Chicago) (312) 807-4430 (ph) (312) 827-8009 (fax) steven.kowal@klgates.com
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14 Short Break
Next Presentation: A View from Washington: USDA & FDA Food Regulatory Issues
Tony Pavel Senior Associate Washington, DC
A View from Washington: USDA & FDA Food Regulatory Issues
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USDA FSIS
USDA has released limited info regarding FY 2010 budget $134 Billion USDA (8% increase) $1.02 Billion to FSIS (5% increase) $47 Million for agency employees, upgrade information tech, additional FSA s Regulatory Agenda relatively short Semiannual Agenda only had one item for FSIS Performance Standards for processed meat and reduction of Lm
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FSIS - NATURAL STATUS
No coherent natural policy in effect Official guidance always just around the corner Natural comment record no consensus Ingredients vs. incidental additives Ingredients vs. processes Increased (uneven) focus on ingredient manufacturing Processing aids Related claims Prospects for Natural Rulemaking Long promised, low priority Regulatory agenda states ANPRM 28 days ago
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Allergens - FSIS
No proposed rule on horizon Top cause for recalls Largely following FDA s lead Notice 45-05, July 2005 Notice 72-05, November 2005 Compliance Assistance Voluntary Labeling Statements Policy No Temporary Label Approval Frequent issue on Noncompliance Reports
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Allergens School Lunch
Only USDA Guidance Accommodating Children with Special Dietary Needs Schools must make substitutions in foods in the reimbursable meal for students who are disabled and whose disability restricts their diet. However CDC preparing two Guidance Documents USDA and FDA have reviewed and consulted Not publicly available yet Allergens have the ear of a number of people on the Hill
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Other Labeling Issues
Data Collection Improvements Expansion of Generics? Nutrition Labeling for Single Ingredient Future of Prior Approval
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FSIS Agenda (Tentative)
Pathogens: Salmonella relative lack of progress, NRTE Product E.Coli N60 labeling, allocation of responsibility Listeria Risk assessment Campylobacter Performance standards
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FSIS Agenda (Tentative)
Increased reliance upon FSAs Increased use of interpretative documents the death of rulemaking Increased retail focus Enhanced data collection Catfish? 16.5 Million, 95 employees and 1 jail term
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Organics
Standards for the Organic Certification of Wild Captured Aquatic Animals Pet Food Standards NOSB received final recommendations from Working Group re Clarification of Definition of Synthetic Substance
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FSIS/FDA Cross-Over Issues
Single food agency Mandatory recall User fees Revival of performance standards HACCP, SSOPs & GMPs Distiller s Grains and Animal Feeds and CVM GRAS Notification Pilot Program
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FDA Functional Foods & Select Ingredient Issues
Functional foods continue to gain importance in the marketplace Years of relatively lax enforcement Several high profile Warning Letters Cheerios Warning Letter, May 5, 2009 FDA published a Q&A page on its website (May 14) to address public questions arguably raised by media reporting of the WL FDA sending a message
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Jelly Bean Rule (21 CFR §104.20)
FDA Warning Letter December 10, 2008 Soft drink with vitamins Firm pushing back, arguing products comply with regulations
State Attorneys General
Drink manufacturer sued by group of State Attorneys General regarding weight loss claims Settlement February 2009
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Class Action Lawsuits
Rapidly gaining momentum in plaintiff s bar Unfair Business Acts, Fraud, Deceptive Advertising Numerous food claim related suites filed in last six months
- ne
year
National Advertising Division, BBB
Continues to see active cases regarding food claims Cases regarding preservative claims, probiotics NAD rarely defers to FDA/USDA
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FDAAA Section 912 (301(ll))
Origins (probably) - FDCA 201(ff)(3)(B) excludes some substances from the definition of dietary supplement. Race to market between drugs and biologics, and dietary supplements. However, if a substance is first approved or investigated as a drug or biologic, then it cannot be marketed as a dietary supplement. Very similar language in FDCA 301(ll), suggest similar Congressional intent, however, no legislative history. Appears in FDAAA title addressing drugs, not foods. Prohibits addition to food of a drug or biological product for which: Substantial clinical investigations were instituted and existence of those investigations was made public.
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Items to Watch on Congressional Agenda
Food Safety Bill Menu Labeling Child Nutrition Reauthorization Nutrition Standards USDA reorganization
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Any questions or comments? Tony Pavel (DC) (202) 778-9089 (ph) (202) 778.9100(fax) tony.pavel@klgates.com
FOOD REGULATION
John Lemker Partner Chicago, IL
A Look Ahead at Food Regulation: Initiatives, Existing Authorities and Pending Matters
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PLAYERS
Food and Drug Administration Department of Agriculture Center for Disease Control States Federal Trade Commission Private Lawsuits (class actions)
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ENFORCEMENT
Do-Rene and Clover Knolls Dairies and their owners Injunction January 2009 Captain s Select Seafood, Inc. and owners Injunction February 2009 Del Rey Tortilleria Inc., president and two general managers Injunction March 2009 Seizure of 1.5 million pounds of food and food ingredients American Mercantile Corporation May 2009 $1.3 million of dietary supplements condemned and destroyed May 2009
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INITIATIVES
FDA 2010 FY Budget Request $3.2 billion 19% increase $259 million increase for food Third Party Inspections Pilot program certification of imported shrimp FDA Food Protection Plan Third party inspections and certifications are options to improve food safety; imports and domestic
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INITIATIVES (continued)
Economically Motivated Adulteration Fraudulent, intentional substitution or adulteration of a substance in a product for the purpose of increasing the apparent value of a substance of the product or reducing the cost of its production, i.e., economic gain
Melamine in pet food Heparin contamination with over-sulfated chondroitin sulfate Melamine in infant formula Diethylene glycol in cough syrup, toothpaste Coumarin in Mexican vanilla Orange juice Honey
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EXISTING AUTHORITIES
Dietary Supplements Serious adverse event reporting
15 business day requirement Recordkeeping requirements applies to all adverse events; FDA access
Good Manufacturing Practices Imports 2003-2007 food imports increased from $45.6 billion to $64 billion 13% of average American diet 31% of fruits, juices and nuts 78.6% of fish and shellfish
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EXISTING AUTHORITIES (continued)
Bioterrorism Act of 2002 Debarment for repeated or serious food import violations from importing or offering to import food into United States A person is subject to debarment if The person has been convicted of a felony for conduct relating to the importation into the United States of any food;
- r the person has engaged in a pattern of importing or
- ffering for import adulterated food that presents a threat of
serious adverse health consequences or death to humans or animals
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EXISTING AUTHORITIES (continued)
Disposition of food imported by debarred person If an article of food is being imported or offered for import into the United States, and the importer, owner, or consignee of the article is a person who has been debarred under section 306(b)(3), such article shall be held at the port of entry for the article, and may not be delivered to such person....The article shall be removed to a secure facility... Such food may be delivered to a person who is not a debarred person if such person affirmatively establishes that the article complies with the requirements of the Federal Food, Drug and Cosmetic Act.
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EXISTING AUTHORITIES (continued)
Prohibited Act The importing or offering to import into the United States food by, with the assistance of or at the direction of a person debarred.
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EXISTING AUTHORITIES (continued)
Maintenance and Inspection of Records Section 414, Maintenance and Inspection of Records of Paragraph 414(a) provides, in part: (a) Records Inspection If the Secretary has a reasonable belief that an article of food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals, each person (excluding farms and restaurants) who manufactures, processes, packs, distributes, receives, holds, or imports such article shall, at the request of an officer or employee duly designated by the Secretary, permit such officer or employee, upon presentation of appropriate credentials and a written notice to such person,....,
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EXISTING AUTHORITIES (continued)
Paragraph 414(a) (continued) to have access and to copy all records relating to such article that are needed to assist the Secretary in determining whether the food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals. The requirement under the preceding sentence applies to all records relating to the manufacture, processing, packing, distribution, receipt, holding, or importation of such article maintained by or
- n behalf of such person in any format (including paper and
electronic formats) and at any location.
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EXISTING AUTHORITIES (continued)
Under Paragraph 414(b) FDA issued regulations which required persons who manufacture, process, pack, transport, distribute, receive, hold or import food to establish and maintain records which permit the identification of the immediate previous sources and the immediate subsequent recipients of food, including packaging. This permits product tracking. FDA s inspection authority is amended to permit access to records and information required under section 414. The refusal to permit access is a violation of the FFDCA. Inspection warrant enforced against Westco Fruit and Nuts, Inc. April 2009.
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EXISTING AUTHORITIES (continued)
Reportable Food Registry Section 417 RESPONSIBLE PARTY. The term responsible party , with respect to an article of food, means a person that submits the registration under section 415(a) for a food facility that is required to register under section 415(a), at which such article of food is manufactured, processed, packed, or held. REPORTABLE FOOD. The term reportable food means an article of food (other than infant formula) for which there is a reasonable probability that the use of, or exposure to, such article of food will cause serious adverse health consequences
- r death to humans or animals.
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EXISTING AUTHORITIES (continued)
IN GENERAL. Except as provided in paragraph (2), as soon as practicable, but in no case later than 24 hours after a responsible party determines that an article of food is a reportable food, the responsible party shall (A) submit a report to the Food and Drug Administration through the electronic portal established under subsection (b) that includes the data elements described in subsection (e) (except the elements described in paragraphs (8), (9), and (10) of such subsection); and (B) investigate the cause of the adulteration if the adulteration of the article of food may have originated with the responsible party.
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EXISTING AUTHORITIES (continued)
NO REPORT REQUIRED. A responsible party is not required to submit a report under paragraph (1) if
(A) the adulteration originated with the responsible party; (B) The responsible party detected the adulteration prior to any transfer to another person of such article of food; and (C) The responsible party
(i)
corrected such adulteration; or
(ii) destroyed or caused the destruction of such article of food
Prohibited Acts
Failure to submit a report or provide notification required by section 417(d) Submitting a false report or notification
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EXISTING AUTHORITIES (continued)
FDA Testimony Want expanded access to records Authority to require preventative controls at high risk plants New inspection directives Ask plants what pathogen testing being performed incoming, in process, finished product, environmental Take swab samples
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FOOD LABELING
FDA Enforcement Warning Letters and Recalls FTC Kellogg substantiation Frosted Mini-Wheats QVC - $7.5 million deceptive claims for dietary supplement Private Parties (class actions) Dannon substantiation for probiotic claims Salmon color additives Conagra Foods all natural Gerber fruit snacks Proposition 65
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