1. FDA Enforcement: Post-Market Lee Tumminello Partner May 19, 2016 1

2. Agenda ► Overview of Government Enforcement ► FDCA Basics ► Enforcement Tools ► Administrative/civil/criminal enforcement options ► How does Government assess criminal v. civil liability? ► Cases & Trends ► Kickback cases ► Off-label ► Individual Liability 2

3. FDCA Basics ► Most common violation of FDCA: the introduction or delivery for introduction into interstate commerce any drug or device that is adulterated or misbranded (21U.S.C. 331) ► Marketing a product that doesn’t conform with cGMP ► Marketing a product not approved by FDA (e.g, no PMA) ► Marketing a product for a specific use not approved by FDA (e.g., off-label) ► Strict Liability – no specific intent required to prove violation ► Responsible Corporate Officer – aka “Park Doctrine” 3

4. Who are the agency players? ► Department of Justice ► Office of Consumer Protection Litigation ► 93 U.S. Attorney’s offices throughout U.S. & territories ► FDA ► Office of Criminal Investigations (OCI) ► HHS-OIG ► FBI 4

5. Sources of case referrals ► Whistleblowers ► Current or former Employees ► Competitors ► Inspections/Audits ► Recalls/Product Problems/Publicity ► Data Mining ► Sunshine Act ► CMS/DOJ & FBI & data analytics 5

6. Administrative Enforcement Options ► Form 483 ► Compliance Correspondence ► Untitled Letters ► Warning Letters ► Import Detentions/Import Refusals ► Recalls ► Product Approval Suspension or Withdrawal ► Civil Monetary Penalties ► Debarment 6

7. FDA Enforcement Statistics – Fiscal Year 2015 7

8. Civil Enforcement Options – The False Claims Act ► Knowingly or recklessly submitting, or causing to be submitted, a false claim for payment to the U.S. ► Lower intent requirement and burden of proof than criminal actions ► Large potential recoveries/bounties ► Treble damages ► $5,500 to $11,000 per false claim ► Attorney costs ► Common Actions leading to FCA cases ► Kickbacks ► Off-label promotion 8

9. False Claims Act – Whistleblowers ► Whistleblower (“qui tam”) suits: actions brought by private citizens on behalf of the government ► Potential bounties for whistleblowers ► If government intervenes – 15 to 25% of the recovery to relator ► If government does not intervene – 25 to 30% of the recovery ► Recoveries ► J&J (2013): $167.7 million ► GSK (2012): $96 million 9

10. Other Civil Enforcement Options (FDA) ► Seizures (21 U.S.C. 334) ► Action against adulterated/misbranded products, not against an individual/company ► From specific lots to entire warehouse ► Injunctions (21 U.S.C. 332) ► Proactive remedy when likelihood that violations will continue or reoccur ► Subject to final review & approval by DOJ ► FDA is represented by Department of Justice in both actions ► Government has burden of proving statutory violation 10

11. Criminal Enforcement Options ► Anti-Kickback Statute -- prohibits: ► Knowing and willful solicitation, receipt, offer or payment of any remuneration, in cash or in kind to ► Induce, or in return for : ► Purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering of any goods, facility, service or item payable in whole or in part under a Federal healthcare program (e.g., Medicare, Medicaid, etc.) ► Title 18 (US Criminal Code) (dozens to choose from) ► Mail/wire fraud, 18 USC 1341 & 1343 ► Health care fraud, 18 USC 1347 ► False Claims, 18 USC 286 and 287 11

12. Kickback “Red Flags” ► Consulting agreements ► Royalties ► Honoraria ► Charitable contributions ► Discounts/rebates ► Speakers fees ► Travel and entertainment ► Fees for services (e.g., switching programs) 12

13. Principles of Federal Prosecution of Business Organizations (USAM 9-28.00) ► Factors to be considered in assessing criminal v. civil: ► Seriousness/severity of harm ► Pervasiveness in business ► Prior bad acts/track record ► Pre-existing compliance program ► Remedial steps taken ► Timely/voluntary disclosure ► Impact to non-offending employees/third parties/investors ► Adequacy of prosecuting individuals ► Adequacy of civil and/or administrative remedies 13

14. Examples & Trends – Off-Label or “Misbranding” ► NuVasive Inc. – $13.5 Million – D.MD (June 2015) ► Misbranding: promoted use of CoRoent system for spine surgical uses that were not approved, namely: ► Severe scoliosis ► Severe spondylolisthesis ► Kickbacks: speaker fees for physicians, honoraria, attendance at events sponsored by a group created and funded by NuVasive ► Genzyme – $32.5 Million – M.D. FL. (Sept. 3 2015) ► Film approved for use in abdominal or pelvic surgeries ► Promoted for unapproved use in laparoscopic surgery ► Promoted for unapproved use in gynecologic cancer surgeries ► Criminal fines ($32.5 million) and civil FCA settlement ($22.28 million) 14

15. Individual Criminal Liability ► Government pursuit of individuals — including corporate executives, managers, employees, contractors and other related parties — for violations of the FDCA and other laws ► Potential for individual liability can occur when: ► Egregious conduct ► False statements made to the government ► Responsible Corporate Officer (aka Park Doctrine) ► Violations of Anti-Kickback Statute 15

16. Individual Liability Examples (Pre-Yates Memo) ► OtisMed -- $80 Million – D. N.J. (Dec. 2014) ► $34.4 Million in fines, $5.16 Million criminal forfeiture, $40 Million to resolve alleged FCA liability ► Alleged the company marketed a knee replacement surgery cutting guide device without FDA approval (FDA said this product required a PMA) ► CEO and company pled guilty ► New England Compounding Center (2014) ► Meningitis outbreak in compounded injectables ► Principals charged with murder, racketeering and FDCA violations 16

17. Yates Memo- Background “[N]othing discourages corporate criminal activity like the prospect of people going to prison.” ► Deputy Attorney General Sally Yates announcing new Department of Justice Guidance regarding individual accountability for corporate misconduct on September 10, 2015, aka “The Yates Memo” 17

18. Key Takeaways on Yates Memo “Effective today, if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company. And we’re not going to let corporations plead ignorance. If they don’t know who is responsible, they will need to find out. If they want any cooperation credit, they will need to investigate and identify the responsible parties, and then provide all non-privileged evidence implicating those individuals.” ► DAG Yates, September 10, 2015 ► Government focus on individuals from the beginning ► “Cooperation” = prompt & complete disclosure of all relevant facts/individuals ► Internal investigations will be more costly & complicated 18

19. Post -Yates ► Warner Chilcott (D.Mass) (Oct. 2015) ► Former CEO of Warner Chilcott and three former district managers indicted for executing a scheme of physician kickbacks to boost prescriptions of Warner Chilcott drugs ► Corporate resolution: ► WC subsidiary pled guilty to one count of health care fraud ► $23 million in criminal fines and $102 million False Claims Act settlement ► USPlabs (N.D. Tex.) (Nov. 2015) ► Company, president and several executives charged in 11-count indictment in connection with the illegal sale of workout and weight loss supplements ► False labeling regarding the source and nature of ingredients, alleged liver damage 19

20. Off-Label: Latest Development ► Amarin – (S.D.NY) (August 2015) ► Court held that Amarin could engage in truthful, non-misleading, off-label promotion of Vascepa ► Based upon good science ► Court reviewed and deemed information w/disclosures was truthful and not misleading ► FDA did not appeal and parties reached settlement in March 2016 ► Important note : Only truthful and non-misleading speech is protected 20

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22. Thank you! Lee. M. Tumminello +1 317 569-4865 Lee. Tumminello@FaegreBD.com 22