Looking at the Horizon: Current & Future Regulatory Issues for the Medical Device, Drug and Food Industries

Transcription

1 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

2 Increased Enforcement Threat High profile public concerns Melamine contamination Peanut processing Pharmaceutical post-marketing problems Congressional pressure Increased enforcement budget 2 Statutory Basis for Criminal Liability Food, Drug, and Cosmetic Act Healthcare fraud statutes General criminal statutes 3 2

3 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 4 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 5 3

4 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 or Medicaid related business 6 General Criminal Statutes Mail and wire fraud False statements Conspiracy Obstruction of justice 7 4

5 Penalties Incarceration Misdemeanors one 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 8 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 9 5

6 Current Government Focus Food sanitation Post-marketing surveillance Clinical investigations Adverse event reporting Foreign inspections 10 Off-Label Promotion IG reports 300 investigations for 2009 Focus on pharmaceutical and medical device industries 11 6

7 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 12 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 13 7

8 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 14 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 15 8

9 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. 16 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 17 9

10 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 18 HHS future focus medium sized firms Smaller compliance staffs and budgets Entrepreneurial culture Greater financial pressures 19 10

11 Government Investigations Defense Response Ambush interviews Search warrants 20 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 21 11

12 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 22 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 23 12

13 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 24 Any questions or comments? Steven Kowal, Partner (Chicago) (312) (ph) (312) (fax) steven.kowal@klgates.com 25 13

14 Short Break Next Presentation: A View from Washington: USDA & FDA Food Regulatory Issues A View from Washington: USDA & FDA Food Regulatory Issues Tony Pavel Senior Associate Washington, DC 14

15 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 28 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 29 15

16 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 30 Allergens School Lunch Only USDA Guidance Dietary Needs Accommodating Children with Special 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 31 16

17 Other Labeling Issues Data Collection Improvements Expansion of Generics? Nutrition Labeling for Single Ingredient Future of Prior Approval 32 FSIS Agenda (Tentative) Pathogens: Salmonella relative lack of progress, NRTE Product E.Coli N60 labeling, allocation of responsibility Listeria Risk assessment Campylobacter Performance standards 33 17

18 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 34 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 35 18

19 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 36 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 37 19

20 Jelly Bean Rule (21 CFR ) 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 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 year National Advertising Division, BBB Continues to see active cases regarding food claims Cases regarding preservative claims, probiotics NAD rarely defers to FDA/USDA one 39 20

21 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. 40 Items to Watch on Congressional Agenda Food Safety Bill Menu Labeling Child Nutrition Reauthorization Nutrition Standards USDA reorganization 41 21

22 Any questions or comments? Tony Pavel (DC) (202) (ph) (202) (fax) 42 A Look Ahead FOOD at Food REGULATION Regulation: Initiatives, Existing Authorities and Pending Matters John Lemker Partner Chicago, IL 22

23 PLAYERS Food and Drug Administration Department of Agriculture Center for Disease Control States Federal Trade Commission Private Lawsuits (class actions) 44 ENFORCEMENT Do-Rene and Clover Knolls Dairies and their owners January 2009 Captain s Select Seafood, Inc. and owners Injunction February 2009 Injunction 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

24 INITIATIVES FDA 2010 FY Budget Request $3.2 billion 19% increase $259 million increase for food Third Party Inspections Pilot program FDA Food Protection Plan certification of imported shrimp Third party inspections and certifications are options to improve food safety; imports and domestic 46 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 47 24

25 EXISTING AUTHORITIES Dietary Supplements Serious adverse event reporting 15 business day requirement Recordkeeping requirements FDA access Good Manufacturing Practices Imports applies to all adverse events; 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 48 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; or the person has engaged in a pattern of importing or offering for import adulterated food that presents a threat of serious adverse health consequences or death to humans or animals 49 25

26 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. 50 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

27 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,..., 52 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 on behalf of such person in any format (including paper and electronic formats) and at any location

28 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 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 or death to humans or animals

29 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. 56 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 57 29

30 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 58 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

31 Any questions or comments? John Lemker, Partner (Chicago) (312) (ph) (312) (fax) 60 Looking at the Horizon: Current & Future Regulatory Issues for the Medical Device, Drug and Food Industries 31