Lessons Learned from the Mistakes of Others Moderated by Nancy Singer, Compliance-Alliance and Arthur Miller, Bruce Bromley Professor of Law Harvard Law School

2 Panelists Susan Alpert, PhD, MD Senior Vice President & Chief Quality and Regulatory Officer Medtronic, Inc. John Bentivoglio, Esq. Partner, King & Spalding Martin Browning President, EduQuest Bob Klepinski, Esq. Partner, Fredrikson & Byron Stephanie Mensh Vice President, Reimbursement Policy, NEOCURE Keisuke (Kaye) Suzuki Former Executive Vice President, Chief Regulatory & Quality Officer and Director Guidant John Taylor III Division VP, Federal Government Affairs, Abbott Laboratories

3 Continuous Ventilator In 2004 Ace introduced the Model A continuous ventilator, a 510(k) product. Device was indicated for adult use to support breathing during surgical procedures. Ace will be filing a 510(k) for version 2 of the ventilator for pediatric use.

4 Breath Assist Device Ace also markets, under an approved PMA, an implantable breath assist device that – fits in the larynx, and – is indicated for chronic unsolvable breathing problems. Ace is planning to conduct clinical trials for pediatric use of the breath assist device and then submit a PMA.

5 General Promotion Reps get info about products in pediatric settings. Generic ads are placed in pediatric journals. Staff goes to pediatric hospitals and clinics. Devices are displayed at pediatric trade shows. Press releases are issued about –Submitting a 510(k) for pediatric use of the ventilator and –Conducting clinical trials and submitting a PMA for pediatric use of the breath assist device.

6 Questions Which of these actions would FDA object to? What action would FDA take? How should Ace respond?

7 Submissions to FDA Ace hires a new VP for regulatory affairs. She wants to submit the appropriate applications. How should she go about determining –The type of applications that Ace needs to submit, and –The type of data that would ensure the fastest approval? Should she set up a meeting with FDA?

8 Contract Research Organization Ace decides to use a CRO to perform the research. How should Ace locate the CRO? How should Ace supervise the CRO’s activities?

9 More Sales Ace needs to increase its sales of the continuous ventilator for adult use. It sponsors an educational program during an all expense paid cruise ship bound for Bermuda. The president of Ace is a Republican who supports family values. –Requires that doctors who take the training bring along their wives and children. –Provides activities for the spouses and children. Ace also gives unrestricted $15,000 grants to prominent anesthesiologists to find new uses for the continuous ventilator.

10 Promotional Program Ace also has a new promotional program. –Hospitals buying five or more ventilators in any quarter receive tuition and travel to a Harvard financial accounting course. Ace hires a new compliance officer. What practices should she implement? What type of training programs should she offer to communicate the new policies?

11 Coverage Ace decides that it needs its own CPT code. Appoints manager to submit an application for the continuous ventilator to the AMA’s CPT panel. Panel determines –The technology is too new and experimental for a regular (“category one”) code, and –assigns it a temporary (“category three”) code.

12 Coverage Insurers won’t pay the doctors or hospitals for using the device when they bill the new code. Even Ace’s best customers don’t use product. What should Ace do?

13 Manufacturing Locations Ace makes products at three locations. The accessories for the ventilator, which consist of tubing, masks, the nasal cannulas, and spare parts, are manufactured in Tijuana, Mexico. The ventilator is assembled in Paducah, Kentucky, Ace’s corporate design center. The breath assist device is manufactured in Orlando, Florida.

14 Tijuana Inspection In January 2004, FDA inspects the Tijuana plant. Discrepancies include: –validation procedures and –the CAPA system. FDA issued a warning letter.

15 Paducah Inspection In March 2004, FDA inspects the Paducah facility. Discrepancies include: –There were no electrostatic discharge suppressors in the manufacturing area to prevent damage to the electronic circuitry during manufacture. –Ace had sent a letter to its customers telling them that the software in the ventilators had to be upgraded to fix the alarm status display and the corrections would be made during the next service call. –Ace had failed to submit a report under Part 806. –Ace failed to follow up on 16 complaints.

16 Paducah Inspection In April 2004, FDA sent Ace a warning letter.

17 Orlando Inspection In Sept. 2004, FDA inspects the Orlando plant. Discrepancies include: –Environmental monitoring for their aseptically manufactured devices was not being conducted according to the company’s procedures. –Ace personnel failed to investigate the cause of, and implement corrective actions, when actionable levels were discovered. –The manufacturing processes for the breath assist devices had not been validated. –There was not an effective CAPA system in place. FDA issued a warning letter.

18 Warning Letter In Jan FDA re-inspects the Orlando facility Discrepancies include –Ace failed to make any of the corrections. –Ace had also not filed any reportable events under the MDR regulation. The Florida District Office works with the Cincinnati District and CDRH Office of Compliance to issue a corporate warning letter. What Ace do?

19 Product Problems FDA received reports from two different hospitals: –Two children died and two different doctors were not able to effectively insert the Ace breath assist device in children during an emergency situation. FDA’s Office of Criminal Investigation is talking to two confidential informants who said –Ace ignored the reports it received from the hospitals on the deaths, and –Ace concealed the fact that finished products in Lot failed the final test so the company could meet its quarterly sales goals.

20 Prosecutions OCI is also looking into Ace’s off-label promotion and kickback scheme. After an extensive investigation, OCI presents the criminal case to DOJ. What would the DOJ do? If DOJ decided to criminally prosecute the firm, –who could be liable, and –what would be the sequence of events? Is there anything that Ace can do to lessen the consequences of its illegal activities?

21 Follow-up Inspection Time passes. Ace has responded to each warning letter. FDA conducts follow-up inspections. No substantive observations relative to the systems cited in the previous FDA 483s and warning letters were found. Only observations were failures to –date a change to a device history record, –adequately validate a rework procedure for one batch of tubing, and –create a training folder for a new employee.

22 Ace’s Actions Ace fired the top management who were associated with: –illegal promotions, kickbacks, attempts to introduce defective devices on to the market and those involved in failing to file the MDR reports. Ace also fired several of the key quality personnel at the Orlando, Tijuana and Paducah facilities.

23 Ace’s Actions Management believes they now have an effective corporate quality management system based on –Their internal audits, –Recent FDA inspections, and –Management reviews. Is this firm in the clear with FDA or not? What are some actions that Ace can take to help rebuild their image?

24 Marketing in Japan Ace decides to enter the Japanese market. It will use a Japanese distributor. What should Ace watch out for, during the selection process? What other actions can Ace take to speed up its entry into the market?