FDA Counsel.com 1 Ethics in Regulatory Affairs Ethical Challenges and the Generic Drug Scandal – A Brief Retrospective ORANGE COUNTY REGULATORY AFFAIRS (OCRA) DISCUSSION GROUP Monday, August 30, 2004 Michael A. Swit, Esq. FDACounsel.com LAW OFFICES OF MICHAEL A. SWIT 539 Samuel Ct., Suite 229 Encinitas, CA ♦ fax:

FDACounsel.com 2 60 Seconds of History 1984 – Hatch-Waxman Act passes – liberalizing generic drug approval process Generic Industry’s Challenge – being first to approval for brand name drug Upside – set price, size, shape & color; ensure market penetration Downside – if not first, entering a commodity market; price drives & margins disappear

FDACounsel.com 3 Then What Happened? Mylan – thought it kept losing the race; reaction – hired a private eye; went through Charlie Chang’s trash Result – Congressional investigation -- July 1988 Gratuity pleas/convictions Industry – including a Par Senior VP FDA Generic Drug officials

FDACounsel.com 4 But, we’re not finished yet … Maxzide Samples Switch – Par – announced just a few weeks after gratuity conviction – July 1989 Why FDA asked for sample – tip from disgruntled fired employee Immediate Consequences another senior VP resigns in a cloud Voluntary marketing moratorium of all drugs New CEO – and other management team, including: VP/GC, VP/RA, VP/QA, VP/QC, VP/Ops, VP/R&D Additional grand jury proceedings

FDACounsel.com 5 What Allowed This to Occur? Corporate culture – Ethics must come from the top – simply put, here, the wolves were guarding the hen house Training – little or none on liability & consequences of violations Staff composition – lack of diversity and other factors Fear – see staff composition No mechanisms existed to allow employees to question supervisors/managers’ orders without fear

FDACounsel.com 6 Why It Happened? GREED.

FDACounsel.com 7 What We Had to Do to Correct? Complete overhaul of corporation and operations Procedures Training Audits by outside experts Code of conduct Ethics training – access to outside board members Cooperation with federal investigators

FDACounsel.com 8 The Cost? Immense Lost sales -- $102 mm in ’89 vs, $55 mm in ‘90 Fired employees – 900 to 450 Criminal and civil fines -- $2.75 mm Outside auditors & attorneys -- ~$5 mm Interference with business operations – little R&D for three years

FDACounsel.com 9 Could it happen again? Of course – people are fallible Your job – be prepared to be able to address if it happens on your watch. "The price of freedom is eternal vigilance." -- Thomas Jefferson &/or Wendell Phillips "Noncooperation with evil is as much a duty as cooperation with good." -- Gandhi

FDACounsel.com 10 Questions? Write, call, fax or Michael A. Swit, Esq. FDACounsel.com LAW OFFICES OF MICHAEL A. SWIT 539 Samuel Ct., Suite 229 Encinitas, CA ♦ fax:

FDACounsel.com 11 About your instructor… Michael A. Swit has over 20 years of experience addressing critical FDA legal and regulatory issues. His vast and varied experience, which he is now providing as a solo practitioner, includes serving for three and a half years as vice president and general counsel of Pharmaceutical Resources, Inc. (PRI) a prominent generic drug manufacturer through its Par Pharmaceutical subsidiary, and brings an industry and commercial perspective to his representation of FDA- regulated companies. While at PRI from 1990 to late 1993, Mr. Swit spearheaded the company’s defense of multiple grand jury investigations, other federal and state proceedings, and securities litigation stemming from the acts of prior management. Mr. Swit then served from 1994 to 1998 as CEO of Washington Business Information, Inc. (WBII) a premier publisher of FDA regulatory newsletters and other specialty information products for the FDA-regulated community. From May 2001 to May 2003, Mr. Swit was special counsel in the FDA Law Practice Group in the San Diego office of Heller Ehrman White & McAuliffe. Before that, he was twice in private practice with McKenna & Cuneo, from 1988 to 1990 and, most recently, from 1999 to 2001, first in that firm’s D.C. office and most recently, in its San Diego office. He first practiced FDA regulatory law with the D.C. office of Burditt & Radzius from 1984 to Mr. Swit has taught and written on a wide variety of subjects relating to FDA law including, since 1989, co-directing a three-day intensive course on the generic drug approval process and editing a guide to the generic drug approval process, Getting Your Generic Drug Approved. He is a member of the California, Virginia and District of Columbia bars, an avid hockey, basketball and baseball fan (and ex- player), and the father of triplet sons, born Feb. 29, 1996, and is married to Vera Caccioppoli, an accomplished creative writer, artist, and proud owner of Hi-Way Haven, a boutique and creative hub for jewelry, art and writing, in Leucadia, California.