Not-So-Good Manufacturing: GMPs and Alleged False Claims

The use of violations of good manufacturing practices as a pretext for False Claims Act prosecutions is not unprecedented, but it is not commonplace, either. Baxter Healthcare has agreed to pay a total of roughly $18.2 million dollars in connection with just such a legal pretext, but the precedent is much more important than the dollar value of this case.

The settlement agreement between Baxter and two government entities, the Department of Justice and the Department of Veterans Affairs, stipulates that Baxter will pay $2.16 million to settle the whistleblower suit, which alleged that the company violated current good manufacturing practices in the production of products such as Ringer’s lactate solution between January 2011 and December 2012. The agreement noted that the relator received roughly $430,000 for his troubles, a sum that may or may not make up for any future employment difficulties.

Baxter also had to hand over $16 million as part of a deferred prosecution agreement, but the Jan. 12 notice by the Department of Justice acknowledged that there were no adverse events reported in association with the purported mold found in a processing facility for the products in question.

To be sure, this is not the first instance in which a company had to face a legal action related to GMPs and relator claims. A previous episode of this sort arrived at the U.S. Court of Appeals for the Fourth Circuit, which ruled in February 2014 that allegations of failure to comply with the regulations did not suffice to support a claim of violation of the False Claims Act. Omnicare may have dodged a bullet in this instance, but there were no allegations that the company attempted to deceive the FDA, an allegation that fed the $500 million settlement between India’s Ranbaxy and the FDA in 2013.

Clearly Baxter has no intent to pursue the case further, and the company enjoys a market cap of nearly $27 billion, so the loss of $18 million might come across as a rounding error in the company’s financials. It is not clear whether this leveraging of GMPs to feed allegations under the False Claims Act is an aberration or the leading edge of a new trend. One consideration is the volume of warning letters the FDA issues in connection with drug and device manufacturing as a source of fodder for these qui tam suits, which the DoJ rarely turns down.

Another thing to consider is that the world of drug sterility and environmental monitoring may have changed after the 2008 episode involving tainted heparin from China. More recently, the pharmaceutical industry has a public relations problem stemming from recent pricing debacles, and the medical device industry has been dinged over the power morcellation and permanent-birth-control device sagas. Those in the life science industries have to recognize that they have little leeway in the court of public opinion, a fact which all too easily translates into no leeway at all in the court of law.

Inspection imbroglio spurs legislation

There is never a shortage of new bills floating around on Capitol Hill, but Sens. Johnny Isakson (R-Ga.) and Michael Bennett (D-Colo.) have introduced legislation that would force the FDA to finally live up to its purported risk-based approach to device inspections, a bill that seems destined to appear in the legislation for the next device user fee agreement.

Recall that the current user fee agreement, MDUFA III, expires at the end of September, hence the need for a new five-year handshake. The fourth iteration calls for just shy of $1 billion over the five-year term, quite a bit more than the $595 million agreed upon in MDUFA III.

The bill by Isakson and Bennett addresses grievances of some standing regarding FDA inspections of device manufacturing sites located in the U.S. Industry has for some time complained that the agency is far more likely to give sites located outside the U.S. a heads-up when an FDA filed investigator is on the way, but device makers have also claimed that FDAers are sometimes late for domestic inspections, and in some instances, don’t show up at all. Other issues include poor communication from the agency regarding the acceptability of corrections made by companies in response to inspectional findings, which if valid would help explain why the FDA’s warning letter close-out program has been an abject failure.

The overarching goal of the bill, however, is to force the agency to focus more on sites that have a sketchy compliance history and less on sites that have a clean quality systems record. Whether the drafting of this bill is a signal that Congress is confident that the user fee agreement can go forward despite the Trump administration’s moratorium on federal hiring is not clear.

Medtronic beats express warranty claim

Attorneys at Medtronic seem to have all the experience where PMA preemption cases are concerned, but Wildman v. Medtronic worked out well for the company, which has not always been the case. The plaintiff in this case, Ray Wildman, had a Medtronic neurstimulator implanted to deal with pain, and the unit’s battery quit after less than two years despite that the company’s website had claimed that those devices had an expected life of nine years.

The suit relied on the warranty implicit in the company’s website for the RestoreUltra neurostimulation unit, which states in part, “the result of extensive design and testing involved in manufacturing rechargeable neurostimulators give Medtronic the confidence that our device is reliable for 9 years.”

That statement is still on Medtronic’s website, so one imagines that the FDA is aware of the statement, and hence has no issue with it. From there, one has to assume that the statement is backed by some evidence, otherwise the agency would have forced Medtronic to pull the statement by now.

In the end, Judge David Ezra of the U.S. District Court for the Western District of Texas dismissed the case with prejudice, in part because Wildman’s suit would impose requirements that are “different from, or in addition to” the FDA-imposed requirements that were part of the PMA for this device. Chalk up one for PMA preemption.

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