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1、FEDERALCIVILANDCRIMINALLAWSHOW THEY IMPACT BIOMEDICAL COMPANIESANDTHEIR EMPLOYEESFDAC1PreparedBy:MichaelA.Swit,Esq.LawOfficesofMichaelA.Swit539SamuelCt.,Suite229Encinitas,CA92024760-815-4762fax:760-454-FOR:SDRANRACReviewCourseOct.23,2003FDAC2INTRODUCTIONThis outline presents, in a “user friendly” fo
2、rmat, how the civil and criminal laws of the federal (i.e., the United States) government impact a biomedical company and its employees. It reviews the different types of violations that can occur, and the penalties and other collateral consequences of those violations. ORWHY“CRIME”DOESNTPAY!FDAC3TH
3、EFEDERALFOOD,DRUG,andCOSMETICACT(“FDCA”)ThemainlawthatappliestobiomedicalcompaniesHowtheFDCAworks: FDCAcreatesrequirementsyoumustmeetIfyoudontmeettherequirements,eitherbydoingthewrongthingorfailingtodotherightthing,youcommita“prohibitedact”Any“person”thatcommitsa“prohibitedact”canbechargedwithacrime
4、undertheFDCAFDAC4THEFDCAISA“STRICTLIABILITY”CRIMINALLAWNointentorknowledge(ofthecrimeortheactthat=thecrime)isneededforapersontobeaccusedofacrimeforviolatingtheFDCA;insteadIfaviolationoftheFDCAoccurs,andapersonwasinapositiontopreventtheviolation,thenthepersonmaybechargedwithacrimeU.S.v.Park-SupremeCo
5、urtcase(1975)FDAC5WHAT FDCA REQUIRES OF A REGULATED COMPANY and ITS EMPLOYEES:Three basics:Makeandsellproductsthatare“approved,”“cleared” orotherwiselawfullymarketedDoNOTmakeorsellproductsthatare“adulterated”DoNOTmakeorsellproductsthatare“misbranded”FDAC6VIOLATING FDCAsREQUIREMENTS MAY LEAD TO CRIMI
6、NAL CHARGES GENERAL RULE #1: Ifyoudoanythinginvolvingthesaleofanunapproved, misbranded or adulterateddrugordevice,youhavecommittedaProhibited Act”under301oftheFDCA GENERAL RULE #2: Ifyoudo a Prohibited Act,youcanbechargedwithacrimeundertheFDCAFDAC7EXAMPLES OF “PROHIBITED ACTS” UNDER FDCA 301Sellinga
7、nadulteratedormisbrandeddrugin“interstatecommerce”-i.e.,acrossstatelinesReceivinganadulteratedormisbrandeddrugafteritwasshippedSellingadrugrequiringanNDAwithouthavinganeffectiveapprovalFDAC8“PROHIBITED ACTS” UNDER FDCA 301 (contd)RefusingtopermitFDAtoinspectyourplantCounterfeitingadrugFDAC9FDAs THRE
8、E POWERS UNDER FDCA IF A PERSON DOES A “PROHIBITED ACT” Criminalprosecution ofindividualsorcompanies Seizureof violative goods InjunctionordersagainstpersonsorcompaniesdoingtheprohibitedactsFDAC10SEIZUREFDCA304Civil Action in remOn “libel” of information in U.S. District CourtAffected person can fil
9、e a “claim” and show why goods are OKAfter entry of decree, can be:destroyed, sold (if OK) or reconditionedFDAC11INJUNCTIONFDCA302CivilActionAgainstPersonorCorporationCourthasauthoritytorestrainviolationAND,incertaincircumstances,mayorderarecallDisgorgement&AbbottLabs&Scheringthe costs are rising no
10、w $500MMAnInjunctionactionmayleadto-orariseoutof-consentordersFDAC12Schering-PloughConsentDecree,May2002$500MMfine,subjecttocourtapproval,representsdisgorgementofprofitsfromadulteratedproductsResultof13FDAinspectionsat4facilitiesinNJandPRsince1998Fineincludes$471,500paymenttocovercostsofpastFDAinspe
11、ctionsFDAC13Schering-PloughConsentDecree,May2002125Rx/OTCdrugsmadeattheseplants,representing90%ofS-PsproductsPermanentinjunctionrequiresprocedurestoassurecGMPcompliance;suspendedmanufacturingof73productsIntensiveinternalauditrequiredfor5years,withincreasedFDAinspectionaswellFDAC14AFOURTHFDA“POWER”“F
12、orce”apersontodoa“Recall”Recallsare“voluntary”requestsbyadrugcompanytosendbackdrugsthatviolatethelawDevices-FDAdoeshavepowertoorderarecall518(e);rarelydone-requiresafindingthatadevicewouldcause“serious,adversehealthconsequencesordeath.”See21CFRPart7-generalinfoonrecallsFDAC15RECALLS-BUT,FDAhaswaysto
13、“make”youdoarecallthreatensprosecution,injunctionorseizurethreatensoractuallyspreadsbadpublicityaboutpersonwhodidthe“prohibitedact”FDCA705FDAC16FDAsNon-JudicialEnforcementTools:WarningLettersCivilPenalties(devices)“NoticesofViolation”InspectionsApplicationIntegrityProgramGenericDrugEnforcementActof1
14、992Powers(e.g.,debarment)PublicityFDAC17The“305”HearingFDCA305Youdontwanttogeta“305Notice”Ifyoudo,behappy-yougettoargueyourcasebeforeFDAtakesofficialcriminalreferralFairlyinformalprocessHasbeensuccessfulinavoidingchargesFDAC18WARNINGLETTERSProcedure-seeRegulatoryProceduresManual(RPM),Chapter8Mayissu
15、edirectlyfromdistrictofficeOthersrequireFDAHQsign-offPublicdocuments(yourcompetitorswillread-andcirculate-them)FDAC19NoticesofViolationMostfrequentlyusedonthedrugside;nowrequireclearanceviaFDAOfficeofChiefCounsel(maychangeback)Notquiteawarningletter,butshouldbetakenseriouslyFDAC20APPLICATIONINTEGRIT
16、YPROGRAM(AIP)Spawnedbythegenericdrugscandal56Fed.Reg.46191-Sept.10,1991SeeCompliancePolicyGuide(CPG)7150.09(www.fda.gov/ora/ora_home_page.html)Triggers-“actionssubvertingFDAprocess”:Examples:FraudinapplicationsorotherfalsificationsBriberyorgratuitiesProblem-“bars”youfromapprovalsFDAC21APPLICATIONINT
17、EGRITYPROGRAM(AIP)-condCorrectiveActionPlan-whatyouneedtodoiffallunderAIP:CooperatewithFDAandotherfederalinvestigatorsIdentifyallwrongdoersandremovethemfromauthorityFDAC22APPLICATIONINTEGRITYPROGRAM(AIP)-condConductaninternalreviewwithoutsideconsultantstouncoverallotherwrongdoingWrittenactionplan:Pr
18、oceduresandcontrolstoprecludeinfutureEthicsprogramsFDAVerification-reinspectionFDAC23CRIMINALPROSECUTIONFDCA303Process-FDADistrictOffice-FDACenterOC-FDAGC-JusticeDepartment(Ofc.OfCivilLitigation)-U.S.Attorney-GrandJury(iffelonysought)IndictmentfelonyInformationmisdemeanororforpleaagreementsFDAC24THE
19、PARKCASE:“StrictLiabilityinAction” Question: Isitfairtochargeapersonwithacrimeiftheydidnotknowaboutaviolationordidnotintendtoviolatethelaw? Mr. Park -presidentofAcmeMarketsAcmehadawarehouseinBaltimore,whichFDAinspectorsfoundtobefilthy-thus,AcmeandMr.Parkwerechargedwithadulteratingfood(alsoaprohibite
20、dactunder301ofFDCA)FDAC25THEPARKCASE(contd.) U.S. Supreme Court:If a person is in a position to stop a violationoftheFDCAfromoccurring,buttheviolationhappensanyway,thenthatperson(whetheranindividualsuchasMr.Parkoracompany)canbechargedwithacrimeundertheFDCAFDAC26THEPARKCASE(contd.)Reason:apersonwhovo
21、luntarilytakesajobinanindustryregulatedbytheFDCAhasahigherduty-to protect the public health-thusissubjecttothe“strictliability”standardofFDCAFDAC27THEPARKCASE(contd.) ExceptiontoStrictLiability: ifitwas“objectivelyimpossible” fortheresponsibleperson(suchasMr.Park)topreventtheviolation,thennotacrimeu
22、nderFDCA “ObjectiveImpossibility”mayrequire,accordingtoonecourt,thatapersonshowthattheyexercisedextraordinarycaretopreventtheviolation,butitstillhappenedFDAC28IMPACTOFTHEPARKCASEONADRUGorDEVICECOMPANY:Companyexecutiveshaveaduty:totrytofindviolationsofthelaw;andtopreventviolationsfromoccurringinthefi
23、rstplaceCompanyemployeesarebasically“partners”withtheexecutivesbecause,ifyouviolatetheFDCA,yourbosscouldbechargedwithacrimeFDAC29OTHERFEDERALCRIMESANDTHEBIOMEDICALINDUSTRY FalseStatements- tomakeastatement(oralorwritten)tothefederalgovernmentthatisfalse-e.g.,falsedatasubmittedtoFDAinanANDA-you cant
24、lie toUncle Sam.FDAC30OTHERFEDERALCRIMESANDTHEBIOMEDICALINDUSTRYConspiracy - happenswhenyouplanwithanotherpersontodoacrimeandoneofyoutakesoneaction(calledan“overtact”)tocarryoutthatplanNOTE:itisstillacrimeevenifyoustoptheplanbeforethecrimehappensifyouoryourco-conspiratordidtheone“overtact”FDAC31OTHE
25、RFEDERALCRIMESANDTHEBIOMEDICALINDUSTRY Bribery - - togivemoneyoranythingelseofvalueinreturnforagovernmentofficialtakingcomeactionforyouFDAC32OTHERFEDERALCRIMESANDTHEBIOMEDICALINDUSTRY Gratuity- -sameasbribery,butyoudontaskthegovernmentofficialtodoanything-stillwrongbecauseofficialsshouldbefairtoalla
26、ndmoneymayinfluencethemtofavoryou Perjury:lyingwhileunderoath,whetherincourttestimonyorinaswornaffidavitFDAC33OTHERFEDERALCRIMESANDTHEBIOMEDICALINDUSTRY Obstruction of justice: interferingwithagovernmentofficialslawfulperformanceoftheirduties-e.g.,notlettinganFDAinspectorintoseearoomtheyaskstoseetha
27、ttheyhavearighttoseeFDAC34OTHERFEDERALCRIMESANDTHEBIOMEDICALINDUSTRY Wire Fraud:touseatelephone,telegraph,orotherformofelectroniccommunication(e.g.,e-mail)todoacrime Mail Fraud: tousethemailstodoacrime Aiding and Abetting:occurswhenyoudontdothecrimeitself,butyouhelpsomeoneelsedoitFDAC35CRIMINALPENAL
28、TIES-or“DoesCrimePay?” PRISON or JAIL:Felonies: uptofive(5)yearsinprisonforeachviolationMisdemeanors: uptoone(1)yearinjail foreachviolationFDAC36CRIMINALPENALTIES-or“DoesCrimePay?” FINES: amountdependsontheperson(whetheranindividualorcompany),theclassofcrime(felonyv.misdemeanor),andifthecrimeresulte
29、dinadeathFDAC37CRIMINALPENALTIES-or“DoesCrimePay?”FINESIndividual:misdemeanor:$100,000perviolationmisdemeanor resulting in death orfelony:$250,000 per violationCompany:misdemeanor:$100,000perviolationmisdemeanor resulting in death orfelony:$500,000 per violationFDAC38CRIMINALPENALTIES-or“DoesCrimePa
30、y?” PROBLEMS FORINDIVIDUALS IFCONVICTED:Loseright to voteLoseright to runforpublicofficeDamageto reputationFDAC39CRIMINALPENALTIES-or“DoesCrimePay?”PROBLEMS FORINDIVIDUALS IFCONVICTED (contd):CanbedeportedifnotaU.S.citizenFinancial ruin-loseyourjobFDAC40CRIMINALPENALTIES-or“DoesCrimePay?” PROBLEMS F
31、OR COMPANIES CAUSED BY CRIMINAL CONVICTIONS: Shareholders suethecompany,itsofficersanddirectors Other companies may suethecompany(e.g.,MylanLabssuedParandothers) Federal government may suspend or “debar”companyfromselling togovernmentFDAC41CRIMINALPENALTIES-or“DoesCrimePay?”PROBLEMS FOR COMPANIES CA
32、USED BY CRIMINAL CONVICTIONS (contd):FDAmayrefuse to approveapplicationsunderAIPMaylose state licensesCustomers abandonyouDecreasedsalesmayforcelay-offsofemployeesFDAC42CRIMINALPENALTIES-or“DoesCrimePay?”PROBLEMS FOR COMPANIES CAUSED BY CRIMINAL CONVICTIONS (contd): “Qui Tam” actions under the False
33、 Claims Act - e.g.,Lifescancase - “whistle blower” cases - leadingtocivildamagesandmayalsospawnacriminalprosecutionFDAC43CRIMINALPENALTIES-or“DoesCrimePay?”PROBLEMS FOR COMPANIES CAUSED BY CRIMINAL CONVICTIONS (cond):Financing disappears-banksmayrefusetolendmoneyMay violatelendingagreements,realesta
34、temortgagesorleasesAcriminalinvestigationcancausegreatdisruptiontonormalbusinessactivitiesFDAC44CRIMINALPENALTIES-or“DoesCrimePay?” PROBLEMS FOR COMPANIES CAUSED BY CRIMINAL CONVICTIONS (cond):High cost in money of an investigation:lost salesstock price fallsattorneys feesandcostscosts of complying
35、with requests by governmentfordocumentsFDAC45FDAActivityEnforcement Statistics Fiscal Year 2002Prosecution-0*CivilMoneyPenalty-1Seizures-13ConsentDecreesofPermanentInjunctions(Filed)-15ConvictionsOCI317WarningLetters755FDA483sIssued7,180Recalls-5,025Inspections-18,572ImportRefusals-32,654AssetForfei
36、tures(OCI)-$18,300,000FinesandRestitution(OCI)-$24,027,549*:DoesnotincludeOfficeofCriminalInvestigationsdata.FDAC46FDAActivityProsecutionsFDAC47FDAActivityOCIFDAC48FDAActivityInjunctionsFDAC49FDAActivitySeizuresFDAC50FDAActivityRecalls(byCenter)FDAC51FDAActivityWarningLetters(byCenter)FDAC52FDAActiv
37、ityWarningLetters(byYear)FDAC53FDAActivityInspectionsFDAC54FDAActivityDevicesFDAC55FDAActivityDevicesFDAC56FDAActivityDrugsFDAC57FDAActivityDrugsFDAC58FDAActivityBiologicsFDAC59FDAActivityBiologicsFDAC60SourceofFDAStatisticsSlidesFDA-“TheEnforcementStory”http:/www.fda.gov/ora/about/enf_story/default
38、.htmFDAC61PartingthoughtsThese are pictures you do not want to see .in your newspaper . on your local news . on the Internet . or in FDA regulatory lawyers presentations for years to come .FDAC62Ex-ImcloneCEOexitsfederalcourtafterbeingchargedwithninefelonycountsFDAC63Ex-ImcloneCEOexitsfederalcourtaf
39、terenteringguiltypleaFDAC64thenextpictureDr. Wakshal in prison garb? Pled guilty Oct. 15, 2002 to six counts, including:bankfraudsecuritiesfraud,aka“insidertrading”conspiracytoobstructjustice,andperjuryFaces:upto65yearsinprison;millionsinfinesFDAC65THANKS:To Monika Chas, formerly of Par Pharmaceutic
40、als Regulatory Affairs Department, for drawing the illustrations in this outline.To Michelle Via, formerly of Par Pharmaceuticals M.I.S. Department, for getting Monikas drawings imported into the software program so they could be printedFDAC66TheEndFDAC67Questions?Call, e-mail, fax or write:MichaelA
41、.Swit,Esq.LawOfficesofMichaelA.Swit539SamuelCt.,Suite229Encinitas,California92024760-815-4762760-454-2979(fax)http:/FDAC68Aboutthespeaker.Michael A. Swit has extensive experience in all aspects of FDA regulation with a particular emphasis on drugs and medical device regulation. In addition to his re
42、gulatory law experience, Mr. Swit also served 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
43、PRI from 1990 to late 1993, Mr. Swit spearheaded the companys 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, In
44、c. (WBII) a premier publisher of FDA regulatory newsletters and other specialty information products for the FDA publishing company. Before starting FDAC, he was with Heller Ehrman from May 2001 to May 2003, and also twice in private practice with McKenna & Cuneo, from 1988 to 1990 and, most recentl
45、y, from 1999 to 2001, first in that firms 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
46、, co-directing a three-day intensive course on the generic drug approval process, serving on the Editorial Board of the Food & Drug Law Journal, and editing a guide to the generic drug approval process, Getting Your Generic Drug Approved, published by WBII. Mr. Swit holds an A.B., magna cum laude, with high honors in history, in 1979, from Bowdoin College, and earned his law degree from Emory University in 1982. He is a member of the California, Virginia and District of Columbia bars.FDAC69
