“The Next Hot Thing”
In the past year, cGMPs have become the focus of considerable attention in the legal community. In January, the Department of Justice’s (DOJ) Deputy Assistant Attorney General for the Consumer Protection Branch of the Civil Division said that enforcement of cGMPs would be one of DOJ’s “top areas of focus” in 2013. In April, another senior Justice Department official stated that cGMP False Claims Act cases could be “the next hot thing.” One month later, DOJ announced that it had entered into a $500 million dollar civil and criminal settlement with Ranbaxy USA, Inc. (Ranbaxy), the U.S. subsidiary of the largest generic drug manufacturer in India, Ranbaxy Laboratories Limited. To date, this is the largest penalty ever imposed on a generic drug company for cGMP-related violations.
Why have cGMPs become a top area of focus for DOJ, and how can companies avoid being caught in the cross-hairs of a government investigation or enforcement action? In this article, we will discuss basic concepts of cGMPs, recent changes in the law, the significance of those changes, and best practices for remaining in compliance.
The federal Food, Drug, and Cosmetic Act (FDCA) states, among other things, that a drug is adulterated if it is not manufactured in compliance with cGMPs. Moreover, the introduction of an adulterated product into interstate commerce is prohibited, and the government is authorized to bring an enforcement action in the event that a manufacturer introduces adulterated products and fails to take appropriate corrective action.
FDA’s cGMP regulations for drugs establish minimum standards for cGMP compliance. In order to comply with cGMPs, manufacturers are required to establish systems to control every stage of the manufacturing process, including oversight and control of raw materials and components, design, processing, testing, packaging and labeling, storage and distribution. If implemented properly, these controls help assure the quality of products and help prevent the release of nonconforming products.
Manufacturers with aging facilities and technology are not meeting the requirement to remain “current” under cGMPs. These companies are more likely to experience problems with quality, and correcting those problems will be expensive if manufacturers have not invested appropriate resources over time.
In light of recent changes in the law, the failure to make appropriate investments and remain “current” could have significant consequences for manufacturers. Specifically, the Food and Drug Administration Safety and Innovation Act (FDASIA), enacted in July 2012, significantly expanded FDA’s regulatory reach by incorporating quality risk management oversight and controls into the agency’s cGMP authority. Under the new provisions in the law, if a finished-product manufacturer fails to establish oversight and controls related to raw materials, components and contract manufactured finished products, its distributed products are deemed to be adulterated and the introduction of those products in interstate commerce is a prohibited act.
The FDASIA and Liability
As a result, with the passage of FDASIA, finished-product manufacturers are now liable not just for their own cGMP violations, but may also be liable for the cGMP violations committed by their upstream suppliers and manufacturers. By expanding the scope of potential cGMP liability, FDASIA places finished-product manufacturers at a greater risk of being a target of investigation or enforcement action carried out by the FDA or DOJ.
In order to avoid a government investigation or enforcement action, we recommend the following actions:
• Establish and maintain an effective quality and compliance program.
• Develop and maintain high standards of quality and compliance at every level of the organization.
• Ensure that properly qualified and trained employees comply with all applicable FDA requirements.
• Maintain a strong audit program, with regularly scheduled internal audits and periodic audits by independent experts.
• Establish a comprehensive supplier management program. It is likely that FDA will look to its well-established standards for supply chain management for medical devices, which are set forth in FDA’s quality system regulation for purchasing controls, to enforce requirements for drug manufacturers.
• Evaluate existing quality agreements in light of new legal requirements.
• Link the quality and compliance program to the company’s corporate compliance program (which typically covers other regulated areas, such as advertising and promotion and federal health care program requirements).
DOJ and FDA will weigh the existence and effectiveness of a company’s compliance program in deciding whether or not to initiate an enforcement proceeding. The DOJ is required by its own internal policy to consider a business organization’s “efforts to implement an effective corporate compliance program or to improve an existing one” in deciding whether to pursue criminal charges. Therefore, the value in having a robust compliance program could save a company from being on the wrong end of a criminal, civil or other administrative proceeding.
About the Authors
Cathy L. Burgess is a Washington, D.C. partner in the Alston & Bird’s Health Care Group. Her practice focuses on regulatory compliance, product risk management, enforcement and policy matters affecting industries regulated by the Food and Drug Administration (FDA). Prior to joining the firm, Cathy served as associate general counsel for the American Red Cross, responsible for regulatory matters. In this role she provided legal assistance and strategic advice to Red Cross senior management and the Board of Governors' Audit and Risk Management Committee on matters related to the Red Cross Amended Consent Decree.
Edward (Ted) Kang is a partner in Alston & Bird’s Government & Internal Investigations Group. His practice focuses on white collar criminal, regulatory, and compliance matters in the areas of securities fraud, health care fraud, anti-corruption, anti-money laundering, and the Foreign Corrupt Practices Act. Prior to joining Alston & Bird, Ted served for eight years as a federal prosecutor in the Department of Justice’s Criminal Division and at the U.S. Attorney’s Office for the District of Connecticut. In that capacity, he prosecuted some of the Department’s most high-profile fraud and public corruption cases, including criminal charges resulting from the 2010 Deepwater Horizon oil spill, a criminal lobbying investigation into the office of a former U.S. Senator, and bribery investigations involving numerous state legislators and lobbyists.