cgmp complaints & consent decrees: when to fight, when to ... · –fda grants permission to...

cGMP Complaints & Consent Decrees: When to Fight, When to Fold and When to

Work with FDA

January 24, 2014

Mark S. Brown King & Spalding LLP 202-626-5443 [email protected]

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Negotiating Pre-Complaint Filing

• “No litigation counsel shall file a complaint initiating civil

litigation without first making a reasonable effort to notify

all disputants about the nature of the dispute and to attempt

to achieve a settlement…” Executive Order 12988 (Feb. 5,

1996)

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Negotiating Pre-Complaint Filing

• Factors affecting the likelihood of negotiating a consent

decree:

― Complete Understanding of both parties concerns

― Excellent Listening skills, good faith, and patience.

― Is there a path forward?

― Severity of cGMP issues/likelihood of repeated or continuing

violations

Remediation already in progress?

Changes in management?

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Negotiating Pre-Complaint Filing (cont’d)

• Factors affecting likelihood of negotiating consent decree:

― Severity of cGMP issues/likelihood of repeated or continuing

violations

― Compliance History – prior inspections, notice, and enforcement;

company’s response, actions, and reputation.

― Risk of harm posed by products

― Medical necessity of products

― Availability of other “similar” products on the market

― New legal issue

• Other settlement options?

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What if Negotiations with FDA Fail?

• Appeal to DOJ

• Complaint is filed in Federal Court…now what?

― Continue consent decree negotiation

― Voluntarily enter into the consent decree

― Litigate and defend action

• Remember…

― All negotiations prior to the filing of the complaint are

confidential.

― FDA is not bound by any prior positions taken during the course

of consent decree negotiations.

― Can win the battle, but lose the war.

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What if Negotiations Fail? (cont’d)

• What to consider

― Likelihood of success on the merits

― Litigation costs vs. consent decree costs

― Terms of negotiated consent decree versus terms of court-

imposed injunction

― Collateral consequences

Reputational damage and negative publicity

Disruption from litigation

Shareholder litigation and other business litigation

Product development prospects (e.g., pending and future

applications with FDA)

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Post-Decree Issues and Challenges

• Meeting remediation/corrective action schedule

• Managing independent consultants

• Moving targets

• New developments that were not anticipated during

negotiation phase

• Interacting with FDA

• Decree modifications

January 24, 2014

cGMP Complaints & Consent Decrees: When to Fight, When to Fold, and When to Work with FDA A Look at FDA Consent Decrees Jim Johnson Hogan Lovells US LLP

www.hoganlovells.com

What is an FDA Consent Decree?

• Settles a Seizure or Injunction proceeding

– Approximately 95% of FDA seizures and injunctions end

via settlement, and a Consent Decree is FDA/DOJ’s tool

in these cases

• A Consent Decree is entered by a court and is

subject to ongoing supervision by the court

• Seizure Consent Decree

– Condemnation, bond, reconditioning

– Can have injunctive provisions

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FDA’s Goal in Obtaining a Consent Decree

• Deterrent

• To address the violations that FDA believes have occurred in the past and the violations the agency believes may occur in the future

• Thus, there are generally two parts to an injunction under an FDA Consent Decree: – the upfront-shutdown provision, and

– the forward-looking permanent injunction provisions

• Corporate and Individual Defendants

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Upfront Shutdown

– Full cGMP compliance

– Independent cGMP expert certifies compliance

– FDA inspects

– FDA grants permission to resume operations

• FDA’s discretion, not the court’s

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Forward-Looking Permanent Injunction

– Introducing into interstate commerce adulterated drug

products

– Causing the adulteration of drug products after shipment

in interstate commerce

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Letter-Shutdown Authority

– Cease operations, recall, submit reports, etc…

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Other Traditional Consent Decree Provisions

• Quality audits (independent expert)

• Inspection costs

• Inspectional authority

• Liquidated damages

• Notification to FDA of changes/sale in business

• Arbitrary and capricious standard of review

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Non-Traditional Consent Decree Provisions

• Ben Venue Laboratories, Inc (January 2013)

– Continued manufacturing of certain products with interim

controls (e.g., medically necessary products)

– Explicit statement that decree does not resolve any other

actions (FCA or criminal action)

• Ranbaxy (January 2012)

– Non-U.S. facilities enjoined

– Data integrity

– Forfeiture of exclusivities

– Ability to expand to other facilities

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Disgorgement

• FDA has not publicly articulated the factors it uses

in determining when disgorgement is appropriate,

but the agency does consider the seriousness and

duration of violations

• It appears that larger companies with greater ability

to pay are more likely to be subject to disgorgement

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Disgorgement

• Consent Decrees with disgorgement provisions

include:

– Abbott: $100 million in 1999

– Wyeth-Ayerst: $30 million in 2000

– Schering Plough: $500 million in 2002

– Eli Lilly: $24 million in 2006

– Genzyme: $175 million in 2010

– Terumo: $35 million in 2011

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Questions?

Jim Johnson

Hogan Lovells US LLP

202-637-5896

[email protected]

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