Whistleblower Lawsuit Results in $750 million Settlement for GlaxoSmithKline

Facing criminal and civil charges relating to the manufacturing and distribution of certain adulterated drugs made at its Cidra Manufacturing Plant in Puerto Rico, GlaxoSmithKline (GSK) has pleaded guilty and agreed to pay the United States $600 million in settlement of criminal charges and $150 million for civil violations.

The Cidra Manufacturing Plant had been cited by the FDA for manufacturing violations as early as 2002. GSK had instructed Cheryl Eckard and a team of scientists to fix these manufacturing violations. According to Eckards lawyers, she and her team found additional problems than those already cited by the FDA, including mixed-up products, contaminated water systems, and air-handling systems that misdirected the flow of product powder. She recommended GSK shut down the plant, advice which GSK ignored. Her lawyers indicate that she was fired in 2003 after she had, on numerous occasions, requested GSK to address the problems at the Cidra Manufacturing Plant.

Eckard then instituted a qui tam lawsuit in federal court in the District of Massachusetts under the False Claims Act in 2004. The qui tam, or whistleblower, lawsuit permits private citizens to bring suits on behalf of the United States and share in any recovery. In a press release dated October 26, 2010, the Justice Department discussed the effectiveness of the False Claims Act in cases involving fraud against federal health care programs, indicating total recoveries since January 2009 of $5.4 billion. The whistleblower in this case, Cheryl Eckard, will receive approximately $96 million as her share of the settlement amount.

Among the drugs manufactured at the closed Cidra facility were Kytril, a sterile anti-nausea medicine, and Bactroban, a topical anti-infection ointment. The criminal information alleges that GSK failed to ensure that these products were free of contamination from microorganisms. Additionally, it is alleged that manufacturing deficiencies resulted in Paxil CR, a two-layer tablet which is the controlled-release formulation of the popular anti-depressant drug, Paxil, to split apart. Also, Avandemet, a combination Type II Diabetes drug, allegedly was not always composed of the FDA approved mix of active ingredients, and potentially contained too much or too little of the ingredient with the therapeutic effect. The Cidra facility also allegedly suffered numerous product mix-ups.

Commenting on the settlement, Mark Dragonetti, Special Agent in Charge of the FDA New York Field Office, stated:

FDA expects pharmaceutical companies to abide by these manufacturing standards and correct deficiencies in an expedited manner. FDA and its law enforcement partners will continue to aggressively pursue those companies that place the public health at risk by distributing products that do not comply with all FDA requirements.

U.S. Attorney Carmen Ortiz expressed his views that the industry must comply with all of the rules and regulations or face these severe consequences. “To do less erodes public confidence and compromises patient safety.”

If you have any questions regarding qui tam actions, FDA manufacturer requirements or any other FDA regulations, please contact Fuerst Ittleman, PL at contact@fidjlaw.com.

FDA Releases Guidance for Cellular Therapy Sponsors

The U.S. Food and Drug Administration (FDA) have recently published its guidance document, entitled “Guidance for the Industry: Cellular Therapy for Cardiac Disease.” Found here, this document finalizes and incorporates various comments from last years draft guidance entitled “Guidance for Industry: Somatic Cell Therapy for Cardiac Disease.”  The newly-released guidance is intended for sponsors who are in the process of developing cellular therapies for cardiac disease. 

This Guidance provides various recommendations regarding the design of pre-clinical and clinical studies.  In addition, the document suggests what information the FDA will consider when an Investigational New Drug (IND) application is submitted.  Although the suggestions in this document are non-binding, compliance with these procedures may facilitate the path to FDA approval.

For more information on FDA guidance documents or cellular therapies, please contact us at contact@fidjlaw.com.

Mitchell Fuerst Featured Speaker at Upcoming Stem Cell and Age Management Medicine Conference and Meeting

Fuerst Ittlemans Managing Partner, Mitchell S. Fuerst, Esq., is a featured speaker and participant at a series of upcoming meetings and conferences focused on stem cell medicine and age management medicine.

Fuerst will be speaking on the "Practice of Medicine “ Physicians, Stem Cells and the Current Regulatory Environment" at the annual conference of the Age Management Medicine Group (AMMG) in Las Vegas, NV, on November 11, 2010.  The conference, entitled "Clinical Applications for Age Management Medicine," brings together leading healthcare professionals, physicians, researchers and others to provide education and information on the preservation of optimum human function and quality of life making every effort to modulate the process of aging prior to the onset of degenerative aging.

In addition to traditional medicine, alternative medicine therapies, and general health and nutritional régimes, age management medicine focuses on regenerative and stem cell therapies.  The leading professional, non-profit organization devoted to researching, promoting and safeguarding stem cell therapies and its related research, the International Cellular Medicine Society (ICMS), will be holding its annual membership meeting and congress concurrent with the AMMG conference.

The 2nd Annual International Congress on Regenerative and Cell Based Medicine, sponsored by ICMS and Fuerst Ittleman, will bring together medical practitioners from dozens of countries to discuss the latest developments in cell-based medical therapies and will feature presentations on the therapeutic use of platelet rich plasma, adipose tissue, bone marrow, and peripheral blood.  As one of the foremost authorities on the governmental regulation of stem cell therapies and medical professionals who practice in the field, Mitchell Fuerst is featured at the Congress as a faculty member.

In addition to its Congress, ICMS will also be conducting its annual general membership meeting, at which Mr. Fuerst will serve as a panel member discussing "Severe Adverse Events and Cell Based Medicine."  The panel is expected to discuss FDA regulation over stem cell therapies and the various ways in which the FDA could attempt investigation and enforcement actions regarding the practice of that particular form of medicine.

For more information on Fuerst Ittlemans experience in the legal aspects of stem cell therapies, age management medicine, food and drug law in general, and FDA regulatory and enforcement actions, please visit our Food, Drug and Cosmetic Law practice page.

Tea Party May Throw Kink Into GOP Trade Policies

By Ryan Davis

Law360, New York (November 03, 2010) — In the past, a sweeping election win for Republicans reliably translated into wide support for free trade measures. That may not be the case after Tuesday’s election results, lawyers say, because the Tea Party movement that powered the GOP to victory is largely an unknown commodity when it comes to trade and may be hostile to the traditional GOP agenda on the issue.

Congress has gotten relatively little done on the international trade front since President Barack Obama took office, but the Republican gains and divided legislature brought about by the election will likely push trade even further down on the congressional agenda, attorneys say.

While the new leaders in the House, including presumptive House Speaker John Boehner, R-Ohio, and Majority Leader Eric Cantor, R-Va., have a track record of supporting free trade policies, the freshman class of Tea Party-backed Republican representatives could be far less supportive, though their positions on trade are still largely unknown, lawyers say.

The conservative rhetoric in this year’s election was fueled by populist anger about the economy and fear about the threat open trade policies pose to American jobs, lawyers say.

“It’s interesting, you would expect a high number of additional Republicans would translate into additional support for free trade,” said Behnam Dayanim, a partner at Axinn Veltrop & Harkrider LLP. “But we’re not in normal times.”

Nevertheless, few of the newly elected Republican representatives have extensive background in trade or ran on an explicitly trade-based platform, so it is difficult to guess how they will vote, said Russell L. Smith, special counsel at Willkie Farr & Gallagher LLP.

Given the economic climate and the circumstances of the election, Smith said it’s possible the freshman GOP lawmakers will be inclined to support protectionist trade policies to curry favor with constituents.

That could create tension with House leaders who are more supportive of free trade and lead to a “battle for the soul of the Republican Party,” Smith said. Whether the leadership will be able to wrangle the votes to pass legislation in support of free trade “is a big unknown,” he added.

Dayanim said he could envision a scenario in which Tea Party Republicans and liberal members of Congress who support more protectionist policies form an unusual coalition to oppose some pieces of free trade legislation.

Republicans who are skeptical of free trade “will have to do a delicate straddle on this issue because their corporate supporters like those policies just fine,” said Stanley J. Marcuss, a partner with Bryan Cave LLP.

“It’s a peculiar time,” said Mitchell S. Fuerst, managing partner at Fuerst Ittleman PL. “There are rules we thought we knew about Democrats and Republicans, but new rules are getting written.”

Any ideological schism between Republicans of different stripes will only become visible when trade legislation comes up for a vote, but many lawyers say they don’t expect trade to be a significant part of the agenda in the new Congress.

“Unfortunately, I don’t think trade will be a priority issue,” said Ashley W. Craig, a partner at Venable LLP. “The Republicans in the House have said they will focus on financial issues and repealing health care reform, so trade may get caught in the crossfire and fall victim to a further lack of consideration.”

Thompson Hine LLP partner David Christy said he doesn’t see any way for the newly elected Congress to score political points by pushing potentially unpopular free trade measures that may just get vetoed by the president anyway.

“Given the state of the economy, it won’t be a golden age for free trade,” he said.

One litmus test for how the new Congress will handle trade issues will be how it addresses the three pending free trade agreements with South Korea, Colombia and Panama. The U.S. signed the deals years ago, but they still require approval by both houses of Congress.

There has been little action so far during the Obama administration about getting the agreements approved by Congress, although the U.S. and Korea are seeking to finalize details of the plan in advance of next week’s G20 meeting in Seoul.

Jennifer Choe Groves, a partner at Hughes Hubbard & Reed LLP, said the free trade agreements “might provide an opportunity for cooperation between the White House and Congress.”

She said that even with the unknown quantity of the Tea Party’s stance on trade and the fact that Obama has voiced support for getting the deals approved, she’s optimistic the House, if not the Senate, could vote to implement the trade deals.

“Passage of the free trade agreements would be good for the country,” she said. “I don’t think the Republicans would vote against them just to spite Obama.”

Craig was less certain that the House GOP leaders would have the appetite for a vote on trade deals that conservative new members could portray as aiding foreign countries at the expense of American jobs.

“The big question is whether they want to tackle something that could blow up in their face,” he said.

Still, Craig said, Republican leaders inclined to seek a less risky approach to supporting free trade and set themselves apart on trade issues could issue statements putting pressure on the administration to begin negotiating new free trade agreements with other trading partners.

As it has for the past several years, China will be the focus of most trade-related policy and discussion, and legislators on both sides of the aisle could ramp up anti-China rhetoric, Dayanim said, and even seek to strip away some favorable trade provisions the country now enjoys.

“I suspect China is going to be an even bigger bogeyman for many members of Congress than it has been in the past,” he said.

Smith said that although the new Republican leaders have pledged to tackle the very difficult task of fixing the economy first, if they become frustrated in that effort, they may find it politically expedient to capitalize on public suspicion of China and by imposing punitive trade measures.

Mario Mancuso, a partner at Fried Frank Harris Shriver & Jacobson LLP, said that ultimately U.S. policy toward China may not change much under the new Congress, but in terms of public comments about Chinese policies, “there will be more fireworks.”

While Democrats retained control of the Senate, they now have a slimmer margin that could open the door for passage of free trade measures, lawyers say. Free trade proponents are also encouraged by the election of Republican Rob Portman, a former U.S. trade representative in the George W. Bush administration, to a Senate seat in Ohio.

Some parts of Obama’s trade agenda could be significantly hampered by the Republican victory, Mancuso said.

For one, the administration has placed a high priority on reform of the country’s Cold War-era export control system, a plan that requires congressional approval for some measures, but not others.

While export control reform is not typically viewed as a partisan issue, the aspects that need a vote by the legislative branch may run up against the same skepticism about free trade that could hinder other policies, he said.

Members of Congress who oppose the plan could also slow down parts of the process that don’t need a vote by requiring members of the administration to testify more frequently and answer more questions about the project, he said.

The election may also have brought the Obama administration’s efforts to open trade with Cuba, such as relaxing regulations on family travel and some exports, to a screeching halt, Mancuso said.

That’s because Ileana Ros-Lehtinen, a Cuban-American Florida Republican who strongly supports the embargo, is expected to become new chairwoman of the House Foreign Affairs Committee, which handles most Cuba-related legislation.

“To the extent that there was a mini-trend toward easing up on the embargo, that mini-trend stopped last night,” Mancuso said.

2,923 Small Biotechnology Companies to Receive $1 Billion in New Therapeutic Discovery Project Credits and Grants

On November 3, the Secretary of the Treasury, the Secretary of Health and Human Services, and the National Institute of Health Director announced recipients of the $1 billion in new therapeutic discovery project credits and grants created by the Affordable Care Act. The 2,923 small companies receiving awards specialize in biotechnology and medical research and are located in 47 states and the District of Columbia.

The purpose of the program is to assist biotech companies in producing new, cost-effect technologies, create jobs, and increase the competitiveness of the United States in the global biotechnology industry, specifically in the filed of life, biological, and medical sciences. The program is meant to target projects showing significant potential to produce new therapies, address unmet medical needs, reduce long-term growth of health care costs, or advance the goal of curing cancer within the next 30 years. The biotechnology industry is growing rapidly and currently employs approximately 1.3 million workers.

The new therapeutic discovery project credit covers up to half of the cost of qualifying biomedical research. The credit is only available to firms with fewer than 250 employees.

For more information on tax and regulatory issues influencing the biotechnology industry, please contact us at contact@fidjlaw.com.

Arizona Aviation Company Indicted for Violating Arms Export Control Act

On October 28, 2010, a federal grand jury indicted Floyd Stilwell, president and CEO of Marsh Aviation Co., an Arizona company for violating the Arms Export Control Act. The indictment charges that Stilwell and his company were part of a conspiracy to ship arms to Venezuela from November 2005 until February 2008.

The indictment alleges that Stilwell and his company shipped military engines to the Venezuelan air force and provided training on how to maintain them in violation of federal law. The engines sold are listed on the United States Munitions List. Under federal law, the export of arms on the US Munitions List is illegal without a federal export license or written authorization issued by the Department of State. Since 2006, the U.S. government has forbidden the export of military hardware to Venezuela because Venezuela does not cooperate with United States anti-terrorism efforts. Additionally, the Office of Foreign Assets Control also issues regulations regarding the import and export of goods to countries which do not comply with U.S. counter-terrorism efforts. These regulations can be found at the OFAC Website.

According to the indictment, Stilwell and Marsh Aviation agreed to upgrade turboprop engines for use on Venezuelan air force reconnaissance planes. The indictment further alleges that Stilwell agreed to disassemble the upgraded engines, disguise them as civilian models when exporting them, and that Marsh Aviation sent employees to Venezuela to reassemble the engines once they had arrived.

U.S. Authorities also allege that Stilwell received $1.8 million in his personal bank account for his role in the arms exporting scheme. If convicted, Stilwell faces up to 15 years in federal prison for the arms violations and conspiracy charges.

For information about Fuerst Ittlemans experience litigating white collar criminal cases, as well as information regarding OFAC and strategies on maintaining compliance with federal customs regulations please contact us at contact@fidjlaw.com.

CBP Loosens the Reigns on Information Sharing for Customs Brokers

CBP recently proposed to amend federal regulations to allow customs brokers greater leeway in sharing confidential client information, with the clients written consent.

Under the proposed amendments to 19 C.F.R. § 111.24, “Permissible Sharing of Client Records by Customs Brokers,” brokers possessing prior, written authorization from their clients would be allowed to share a clients information with:

  • affiliated entities related to the broker in order to offer non-customs business services to its clients;
  • third-party service providers to perform photocopying and scanning of client records (with a signed non-disclosure agreement); and
  • third-party messenger services for transporting and/or delivering client documents on behalf of the broker (if those documents are sealed to prevent viewing, altering or amending).

The proposed regulations acknowledge that many companies affiliated with customs brokers are now offering a wider array of logistics services to its clients. Moreover, customs brokers increasingly face the need to use third-party service providers to meet client and CBP demands. Under existing regulations, brokers are only allowed to share importer information with the importers surety (on a particular entry), certain U.S. Customs and Border Protection offices and officials, and other U.S. government agents, “except on subpoena by a court of competent jurisdiction.”

CBP hails the proposed regulations as allowing brokers to offer services that are “streamlined with modern and efficient business practices, while protecting the confidentiality of client (importer) information.” We believe that it the proposed rules will allow these tireless trade professionals to do their jobs more effectively, at a lower cost to importers, and with greater benefits to both brokers and their clients.

Comments on this proposed regulation is due by December 27, 2010.

FDA Embarks on New “Swift and Aggressive” Enforcement Approach

The FDA has recently published its Strategic Priorities document on its website. Found here, the draft document outlines the Agencys goals for the years 2011-2015. According to the document, a variety of new programs will be instituted by the FDA in order to “sharpen the effectiveness and timeliness of its regulatory, compliance, and enforcement systems.” Reinforcing its commitment to “swift, aggressive enforcement actions to protect public health,” the goals contained in this document mirror those found in the Agencys recent Enforcement Strategy document.

Found here, the Enforcement Strategy document may be seen as a marked shift to more vigorous enforcement efforts by the FDA. Howard Sklamberg, Director of the Office of Enforcement at the Agency, has confirmed that the FDA is looking to step up its enforcement efforts. Referencing this newly-published document and other newly-published information on the Agencys website, Sklamberg noted that the FDA will no longer be extending warning letters to those deemed “repeat offenders.” Sklamberg suggested that this new “swift and aggressive” strategy will further the overall goals of the Agency, noting that its enforcement measures are designed to deter noncompliance. To this end, the “FDA will use any and all available enforcement tools, as appropriate, based on the facts of the case and the nature and seriousness of the violation.”

For more information on FDA enforcement measures or compliance, please contact us at contact@fidjlaw.com.

FTC maintains momentum in dietary supplement regulation

The FDA and FTC have recently issued another joint warning letter, this time to Telledent, LLC, a dietary supplement manufacturer in Miami, Florida. In the letter, FDA and FTC cite Telledent for unlawful promotion involving treatment for Herpes, Epilepsy, Diabetes, Gonorrhea, Syphilis and Chlamydia. While it is certainly not groundbreaking news when companies get cited by the FDA or FTC for health claims, typically in these situations, the FDA targets enforcement of the FDCA and the FTC targets violations of the FTC Act under separate cover.  What is interesting here is the joint enforcement by FDA and FTC and the cross-organizational targeting implicit in the letter.

Additionally, the FTC appears to be gaining momentum in the regulation of dietary supplements.  Just recently, the FTC appears to have developed a new standard for claims associated with dietary supplements requiring, “competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies, substantiating that the claims are true at the time they are made.”  This is an important departure from the previous FTC benchmark imposed over the last twenty years.  Current litigation, as previously addressed in our blog, is targeting the FTCs authority to institute such a benchmark and the application of this new standard to practice.  

Also, the warning letter states that “Violations of the FTC Actmay require (the company) pay back money to consumers.” The FDA is unable to take such an enforcement approach as it is not within its jurisdiction to do so.  Accordingly, this warning letter represents an important enforcement tool for the government and may provide the FTC with even greater momentum in the regulation of dietary supplements and an important complement to the FDA. 

For information on FTC regulations and substantiation requirements, please contact us at contact@fidjlaw.com.

CBP loses court case on enhanced bonding requirements for shrimp importers.

The U.S. Court of International Trade has ruled this month that Customs and Border Protection (CBP) unfairly targeted U.S. shrimp importers with its enhanced bonding requirement (EBR). The ruling stems from a lawsuit filed by the National Fisheries Institute (NFI) on behalf of 27 shrimp importers. Previously, the Court had determined that CBP had “arbitrarily and capriciously” singled out U.S. shrimp importers and they had been irreparably harmed as a result of application of the EBR.

CBP had originally adopted the EBR in 2004 to prevent tariff evasion. However, the measure was applied at that time only to shrimp, which had no history of tariff evasion. Shrimp importers had their bonds increased from $50,000 to millions of dollars in some cases. Now, following the Courts ruling this month, CBP has 60 days to cancel all of the bonds or appeal the Courts decision. Once the bonds are canceled, shrimp importers will be able to ask the surety companies to release their collateral securing the bonds. As such, an onerous bonding requirement that singled out one class of importers has now been removed.