Legal and Regulatory Concerns in the Sourcing of FDA-Regulated Products, Components & Services Part 2 – The Contract and Related Legal Strategies Michael A. Swit, Esq. Law Offices of Michael A. Swit 539 Samuel Ct., Suite 229 Encinitas, California ♦ (fax) FDA Counsel.com

Center for Professional Advancement In-House Seminar Vendor & Supplier Qualification Siemens Concord, California January 29, 2004 FDA Counsel.com

3 Keys to Preventing & Mitigating Problems with FDA-Regulated Suppliers Contract Clauses Audits Surveillance between audits Teamwork at the Buyer FDA Counsel.com

4 THE CONTRACT – Defining Your Regulatory Duties Establishes rights and obligations of both parties Written document that reflects oral agreement The basis for any remedial action FDA Counsel.com

5 Drafting The Contract Should be written in language you understand Should set forth all the conditions of the contract that are important RECOGNIZE -- FDA regulations control/impact many contracting issues FDA Counsel.com

6 Contract Issues For Medical Devices And Components Drafting a 510(k) contract List of parties Who sets product specifications Product release Compliance with QSR Compliance with Federal Food, Drug, and Cosmetic Act Responsibility for vendor audits FDA Counsel.com

7 Medical Device Contract Issues … Drafting a 510(k) contract … Right to audit without notice or with short notice Notification of change in components or manufacturing process Penalties and/or remedies for nonperformance Notification of FDA inspection, including providing FDA 483 and responses FDA Counsel.com

8 Medical Device Contract Issues … Drafting a 510(k) contract … Termination notification -- usually two years Price Price adjustments based on cost, volume, new regulatory requirements Authority to order recall and cost allocation of recall FDA Counsel.com

9 Medical Device Contract Issues … Drafting a 510(k) contract … Arbitration clause Notification provision Intellectual property handling Confidentiality FDA Counsel.com

10 Medical Device Contract Issues … Drafting the PMA Agreement Who is responsible for clinical study data Who is responsible for submitting IDE to FDA or determination that submission of IDE to FDA is not necessary Who will submit PMA Who will respond to agency questions on PMA Publication of data – how handled FDA Counsel.com

11 Preventing & Mitigating Problems... A Look at Specific Contract Clauses Buyer’s right to audit vendor (and vendor’s key suppliers) without notice at any reasonable time during operations vendor to cooperate fully with audit access to records and personnel to be spelled out FDA Counsel.com

12 Preventing & Mitigating Problems … Specific Contract Clauses … advance notice of changes in vendor’s processing -- KEY -- so buyer can assess what regulatory action it must take to keep its approval/submission current FDA Counsel.com

13 Preventing & Mitigating Problems... Specific Contract Clauses... Vendor to cooperate, at no additional expense, with Buyer’s needs to take action to continue to comply with FDA requirements (e.g., vendor to provide data to support filing of supplements to make changes to approved applications) FDA Counsel.com

14 Preventing & Mitigating Problems … Specific Contract Clauses... Vendor’s relations with FDA... Provide copies of 483’s, EIRs prompt notice to buyer of initiation of FDA inspections prompt transmission/notice to buyer of any FDA regulatory correspondence or other regulatory action FDA Counsel.com

15 Preventing & Mitigating Problems... Specific Contract Clauses... Timely notice of other problems encountered by vendor in its manufacturing process Example: problems in making similar products for others – duty to notify you timely notice of any adverse reactions or complaints reported to vendor FDA Counsel.com

16 Preventing & Mitigating Problems … Specific Contract Clauses... Contractually articulated duty to comply with FDA laws/regulations general specific -- examples providing certificates of analysis testing to be done FDA Counsel.com

17 Preventing & Mitigating Problems... Contract Clauses... Recalls -- duty to of vendor to cooperate with recalls initiated by buyer (if applicable) representations, warranties, etc. about state of past and present compliance with FDA legal/regulatory reqs. ♦♦ “continuing Food & Drug Guarantee” – insulates downstream buyer – but is very limited – just bars criminal prosecution FDA Counsel.com

18 Preventing & Mitigating Problems... Contract Clauses... Indemnification duty from vendor to buyer in event of breach of any FDA- related reps or warranties IDE Related – if delegate to a CRO, must specify in contract what duties are delegated Problem – really doesn’t insulate you from liability FDA Counsel.com

19 Preventing & Mitigating Problems... Contract Clauses... If you want it to happen … or not happen Write it into the contract The contract can be a management tool Tension – time/expense vs. value of contract Partial answer – specific terms and conditions aimed at FDA compliance issues in P.O. or otherwise

20 Preventing & Mitigating Problems … Audits -- the key to compliance No notice (ideal world?) Conduct like an FDA inspection Audit team -- should be interdisciplinary in training -- Operations, QA, RA, QC should have an SOP for conducting FDA Counsel.com

21 Preventing & Mitigating Problems... Audits... Re-audit promptly to confirm corrections General Documents to review chronology of interactions with FDA and other regulatory agencies (e.g., EMEA, HPB, if applicable) all regulatory correspondence/filings between vendor and FDA FDA Counsel.com

22 Preventing & Mitigating Problems … Audits... General Documents to review … minutes of meetings/phone calls with FDA company’s FDA’s (get via FOI if vendor doesn’t have) Tip -- don’t rely just on what the company gives you; seek independent sources of related documents (e.g., under FOI) FDA Counsel.com

23 Preventing & Mitigating Problems... “Surveillance” between audits -- keeping an eye on your vendors Why? “Knowlege is Good” (Faber College motto; Animal House, 1978) -- to be in the best position to anticipate problems To be able to initiate dialogue with vendor as soon as possible after being alerted to a regulatory issue FDA Counsel.com

24 Preventing & Mitigating Problems … “Surveillance” between audits -- keeping an eye on your vendors … How? Read the trade and general press Keep track of FDA warning letters (subscribe to FDA notification services) FOI requests -- direct to FDA or via a third- party service FDA Counsel.com

25 Preventing & Mitigating Problems... Teamwork at the Buyer My old General Counsel’s nightmare -- “here’s the supply contract, we need to sign it today, can you look it over for any legal issues...?” My reply: “Did you run it by RA, QA, QC?” FDA Counsel.com

26 Specific Problems…A few unique ones…. Back-up Manufacturing Plant When needed: whenever manufacturing is contracted out for IND or approved Example: Lilly – 7/18/02 public announcement on 2 nd Quarter results and plant problems not being cured until 2003 What clause says: lets non-mfg. party seek a backup contractor under appropriate circumstances (e.g., Lilly had GMP problems holding up NDA approvals) FDA Counsel.com

27 Specific Problems…A few unique ones…. Who Owns the Data When needed: whenever studies of any sort are farmed out Example: Client has major study done at University; contract is ambiguous on who controls the data, although clear client can use in FDA product approval filing What clause says: makes clear who owns both raw data and results and the right to authorize publications and references FDA Counsel.com

28 Specific Problems…A few unique ones…. Copies of Data Generated by Contract Labs When needed: whenever testing is contracted out for IND or approved products Example: Oread What clause says: obligates the contract lab to maintain raw data, reports, etcs. and provide a copy in event of insolvency; also could require creation of an extra archival copy of data. FDA Counsel.com

29 Questions? Call, , fax or write: Michael A. Swit, Esq. Law Offices of Michael A. Swit 539 Samuel Ct., Suite 229 Encinitas, California ♦ (fax) FDA Counsel.com

30 About the speaker... Michael A. Swit has extensive experience in all aspects of FDA regulation with a particular emphasis on drugs and medical device regulation. In addition to his regulatory law experience, Mr. Swit also served for three and a half years as vice president and general counsel of Pharmaceutical Resources, Inc. (PRI) a prominent generic drug company and, thus, 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 publishing company. Before starting FDACounsel.com, he was with Heller Ehrman from May 2001 to May 2003, and also 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, serving on the Editorial Board of the Food & Drug Law Journal, and editing a guide to the generic drug approval process, Getting Your Generic Drug Approved, published by WBII. Mr. Swit holds an A.B., magna cum laude, with high honors in history, in 1979, from Bowdoin College, and earned his law degree from Emory University in He is a member of the California, Virginia and District of Columbia bars. FDA Counsel.com