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FDA Warning Letters Increase 155% from 2010 Levels

FDA Warning Letter

FDA Warning Letters Increase 155% from 2010 Levels

If you have any role within an FDA-regulated company, it is likely you are aware that the FDA has been much more focused on enforcement activities since 2008.  Alternatively, if you are involved at all with supply chain, manufacturing, quality assurance, quality control, regulatory affairs or other FDA compliance activities, you are likely intimately familiar with the FDA’s aggressive posture with respect to regulatory compliance enforcement.   For people that spend their days working inside companies trying to build compliance systems and remediate compliance deficiencies, it common knowledge that FDA is looking harder, looking deeper, and issuing more FDA 483s more than ever before.

However, even though I spend my days doing this sort of work I was shocked at a number that was just communicated to me in a public setting relative to FDA enforcement.

On Thursday, January 26, 2012, I attended the New York State Bar Association’s Annual Meeting in New York City, and as part of that, attended the Food, Drug and Cosmetic Law Section meeting.    As part of the regular Food and Drug Administration Update portion of the meeting, the Section was privileged to secure Elizabeth H. Dickinson, Esq., Acting Chief Counsel of the Food and Drug Administration, as the keynote speaker.   As part of Ms. Dickinson’s talk, she briefly reviewed the FDA’s recent enforcement history.

This was where the shock came.

Ms. Dickinson outlined the number of Warning Letters issued in 2009, 2010, and 2011. The numbers related by Ms. Dickinson during her talk are provided in the table below (I have added the % increase column).

 

Year Number of
Warning Letters Issued		 % Increase over Prior Year

2009

474

—

2010

673

42%

2011

1720

155%

 

As can be seen from the numbers, FDA issued 1,720 Warning Letters in 2011 – a full 155% increase over 2010 levels.    This is also a full 262% increase over 2009 levels – an extraordinary increase by any measure.

Now, I must caveat that I have no idea whether these numbers are the final numbers that will be issued formally by the FDA for 2011 Warning Letter levels.   I further have not had the ability to directly verify these numbers with anyone else within the FDA.   However, I think a statement by the Chief Counsel in a Bar Association meeting is a public-enough forum to feel comfortable sharing this information with a broader audience.

The continuing lesson for FDA-regulated companies is that the FDA is fully-engaged, and highly-focused, on enforcement activities.    For those companies that don’t want to spend any more money on improving their quality and compliance systems because of “business” considerations, keep the following in mind:  an FDA inspection is in your future – it is a matter of when, not if, FDA will walk through your doors.   The costs of remediating compliance after the fact (and salvaging your company’s reputation, product brand equity, and loss in shareholder value) far exceeds the incremental spend on additional personnel, systems remediation and consultants in an ongoing manner.

So be careful out there – and for expert assistance with achieving best-in-class quality and compliance systems, contact Compliance Architects® at 888-REG-XPRT (888-734-9778) or Jack Garvey, Principal, at john.garvey@compliancearchitects.com.

Two Billion, One Hundred Twenty Million Dollars – The Real Cost of Non-Compliance

I’m struggling to find an answer to the following question:   If you were the owner of a company, how much would you spend, year over year, to prevent a potential loss in market value to your company of two billion, one hundred twenty million dollars?     Would you spend a half-a-million dollars?   Five million?    Ten million?   How about twenty million?    Remember, we’re talking Two Billion, One Hundred Twenty Million dollars in lost shareholder value– owner value – real dollars.

Given the enormous sum of money, I think most rational executives would spend some serious money to prevent this sort of loss – or, more importantly, even the potential to incur this sort of loss.   And, if I were an owner – a shareholder – in this company, I think I would demand that the executives running the company keep a close watch on the risk and spend generously to mitigate this magnitude of potential loss.

I am of course referring to financial impacts resulting from FDA enforcement, and the example I’m using to illustrate these impacts is the recently announced Genzyme Consent Decree.    From March 23 to March 25, immediately after the announcement that the FDA was going to take further enforcement action against the company, Genzyme stock fell from 59.10 to 51.13, with 266 million shares outstanding.    So, in two days, the company lost two billion, one hundred twenty million dollars* in shareholder value.    However, although Genzyme is the subject of this example, they are really just the latest face on the FDA’s Most Wanted Poster – this scenario has played out a number of times before, and likely, will occur with other companies in the future.

Now, to be fair, I don’t know the specifics of the run-up to the Genzyme Consent Decree.   But, having done this sort of work a long time in and for several different companies, I certainly have an idea of what happened.     And, I believe that in general, these things are preventable – at least in large part preventable.     I don’t think it’s possible to avoid any FDA enforcement action – every company gets an FDA 483 now and then, and some even get the occasional Warning Letter.

But a Consent Decree?

Now, even if you place all the blame for these situations on the FDA as the most unpredictable, inconsistent, unfair Federal Agency in existence (which it isn’t – I’m using this extreme for illustration only), I still come to the same conclusion:     when a company can lose Billions – with a B – in shareholder value due to a significant FDA enforcement action, doesn’t it seem to make sense to perhaps overspend a bit to make sure that doesn’t occur?    Should companies continue to play “compliance  Russian Roulette?”    Am I off here?    And, I’m not even including the direct required payment to the Government of $175 million, or, the tens of millions that will be paid to consultants to fix the problems.   Also, apparently, according to Morningstar, sales of two of Genzyme’s products dropped 6% due to supply issues from 2009 levels.  On billion-dollar products, that’s real money.

Now, I know that quality and compliance activities aren’t sexy, and enforcement costs are often dismissed as a “cost of doing business.”   Executives hate spending money on this sort of “non-value added” stuff.    But if this sort of impact doesn’t matter to a company’s financial picture, why should anything?   And it’s not like this should be a surprise – just look at what happened to Schering-Plough’s valuation when it was hit with a Consent Decree eight or so years ago – $40 billion wiped away over the course of two years (contact me if you want my calculations).    Companies are inspected regularly by the FDA, get 483s and Warning Letters, and Consent Decrees, so these impacts clearly are possible, if not probable risks.    If these types of things don’t matter, why would we care about anything that drives shareholder value up or down in the short term?

What am I missing here?    Is this all really much ado about nothing?  Are companies managing these risks appropriately?   Why do these sorts of action continue to occur?    I’d welcome your thoughts.

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For information on how to develop high-performing quality and compliance systems for pharmaceutical, medical device and other FDA-regulated companies, please contact Compliance Architects® at info@compliancearchitects.com or at 888-734-9778.

* Note that at the time of this posting (4/27/10), the value of Genzyme has recovered from a low of 51.13/share to 53.01/share, making the loss in value only $1.6 billion.

FDA 483 & Warning Letter Response & Planning — DOs and DON’Ts

If you are reading this now, you are probably in the middle of an enforcement crisis.   Responding to an FDA-483, Warning Letter, or in some cases, a product seizure or injunction can be one of the most important, and most challenging, activities in your company’s history.  Failing to ensure a proper response and failing to satisfy the FDA can be fatal to your business.

FDA’s enforcement arm is back in business!  Commissioner of Food and Drugs Margaret A. Hamburg, M.D. has announced the following at an August 6, 2009 FDLI Conference in Washington DC:

  • “The FDA must be vigilant, the FDA must be strategic, the FDA must be quick, and the FDA must be visible.”
  • “We must get the word out that the FDA is on the job.”
  • “[I]n some cases, serious violations have gone unaddressed for far too long” and that enforcement action “can be too long and arduous when the public’s health is in jeopardy.”

Read the full text of the Commissioner’s speech here:  FDA Commissioner Margaret A. Hamburg, M.D. Enforcement Speech

Watch the video of the Commissioner’s speech here:

FDA Commissioner Margaret A. Hamburg, M.D. Speech Video

These statements, together with the new FDA 483/Warning Letter policy (below) add up to a new era in FDA enforcement, and one that will require the most experienced and capable team to ensure your don’t risk your business by being unprepared.

In our lengthy industry experience, your company must understand that there are absolute Dos and Don’ts in responding to the FDA:

DO:

  • Unless you are an expert in FDA 483 responses, get an expert in FDA response preparation to assist you, right away, with the response to the enforcement action!
  • Respond within 14 calendar days (10 business days) regardless of whether you are completely ready to respond or not.
    • NOTE:  As of 9/15/2009, FDA has enacted a new policy that FDA will issue automatic Warning Letters to companies that fail to respond to FDA 483s within 15 days!   This is a significant policy change, and one that is indicative of the increased enforcement posture of the FDA.
  • Strike a conciliatory and contrite tone in your communications, but, be sensitive to admissions of noncompliance
  • Offer a complete, thorough and compelling remediation plan that addresses the discrete observation, but also identifies and remediates the root cause of the deficiency.
  • At a minimum, notify FDA counsel of the situation, and preferably, ensure all communications with the FDA are reviewed by counsel.
  • Establish TRUST with the FDA.  If the FDA believes they can trust you, they will be more open to your approaches, plans, and efforts.  On the contrary, if they feel they CANNOT trust you, you may very well be targeted for further enforcement action, and your life will get VERY difficult.

Here are some thoughts from the FDA on the topic:  Responding to an FDA 483

DON’T:

  • Complain about how the FDA is picking on you.  They aren’t.   FDA is charged with protecting the public health and safety.   They have no concern whether your business makes money or not.   They aren’t bad people — in fact, they are doing a very valuable job.  Simply don’t mistake their mission or think you can persuade them that you’re being singled out or targeted unfairly.  It won’t work, and it will only serve to decrease cooperation.
  • Be late with your response.   It does not matter how busy you are — you must get the response in timely.  Although there is no regulatory limit (but see note on response timing above!) on when your responses have to be in, the Agency will perceive your lack of concern from the timeliness of your responses.
  • Challenge the FDA’s interpretation of the law or regulation unless you’ve obtained expert counsel.   In most cases it is not advisable to challenge the FDA’s interpretation of law or regulation, but certainly not without expert advice.
  • Assume that you are out of the woods because you haven’t heard back from the FDA on your response.  You should be undergoing a comprehensive compliance assessment to ensure that when they do walk back in your door — and they will — that you will present a world-class quality and compliance operation that will fully meet their expectations.

These Dos and Don’ts have been tried and tested in multiple enforcement scenarios within multiple companies.    If any of this is unfamiliar to you, CALL AN EXPERT!   Dealing with the FDA can be done predictably and cost-effectively, IF you have the right experts on your team.  Don’t make the mistake of trying to do it yourself.

For additional information, find out more at www.compliancearchitects.com

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