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GlaxoSmithKline and FDA in late April signed a consent decree to correct manufacturing deficiencies FDA alleged existed at a Glaxo affiliate plant in Cidra, Puerto Rico: (www.fda.gov/bbs/topics/news/2005/NEW01176.html and www.gsk.com/media/pressreleases.htm).

FDA alleged that Glaxo subsidiaries responsible for the Cidra plant had failed to comply with currrent GMP in the manufacture of certain drug products, causing them to be adulterated (United States vs. GlaxoSmithKline, No. 5:05-CV-141-FL[1] [E.D.N.C. Apr. 27, 2005]). FDA identified the drugs as Paxil CR tablets and Avandamet tablets. Paxil is approved to treat depression and panic disorder, while Avandamet is approved for use in the treatment of Type II diabetes.

The Glaxo consent decree is important because it appears to signal a sea change in FDA enforcement philosophy, at least in GMP-related cases.

The Problem
FDA seized supplies of the two Glaxo drugs in March 2005, in effect halting any further distribution until the dispute was resolved. FDA said investigators determined the Paxil tablets could split apart. As FDA described it, "This deficiency could cause patients to receive a portion of the tablets that lacks any active ingredient or, alternatively, a portion that contains an active ingredient and does not have the intended controlled-release effect." As for the Avandamet tablets, FDA indicated that some tablets "did not have an accurate dose of rosiglitazone, an active ingredient in this product."

FDA did not require Glaxo to recall the drug distributed prior to the seizure. Instead, FDA urged "patients who use these drugs to continue taking their medication and to talk with their healthcare provider about possible alternative products until the manufacturing issues have been resolved."

It can be assumed that Glaxo denied all of the FDA allegations from day one. In the consent decree, as is normally the case, Glaxo and the other subsidiaries and individuals named neither admitted nor denied the allegations.

The Glaxo case is significant for two reasons. First, it is not common for FDA enforcement proceedings involving alleged violations of GMPs to progress to the point of a complaint against the manufacturer and a consent decree resolving those issues. Second, the remedy chosen by FDA in the Glaxo case represents a substantial departure from the relief sought in earlier cases involving major pharmaceutical firms.

Many GMP violations take place without any effect on the safety and efficacy of the product involved; these are mostly technical violations. The theory behind the GMP regulations is that quality must be built into the product and that adherence to a set of standards for production is essential to produce repeatedly a conforming product.

Although that may be true, failing to follow GMPs does not necessarily mean that the resultant product is always substandard in some way. As a result, disputes over GMP compliance are usually resolved with the manufacturer agreeing to make the requisite changes and the FDA inspector checking on his or her next scheduled visit to see that the promised changes have been made. Production usually is not interrupted in such a case.

Alleged deficiencies take on a greater sense of urgency if it is alleged that the deficiencies cause a product to fail to perform as intended, particularly where the product is being used to diagnose, treat or prevent a serious condition. There is also more concern if FDA believes the manufacturer is not taking GMP compliance seriously. Such concern could arise if the manufacturer is slow to make the needed changes, or if the same problem is observed in a number of inspections over a period of time, despite attempts to correct it.

If FDA's level of concern reaches a certain point, it may feel compelled to take legal action to get management's attention. In any of the above situations, FDA is likely to pursue a formal legal action if the matter cannot be resolved administratively.

The Remedy
Many of the provisions of the consent decree appear similar to those in earlier legal actions involving consent decrees to correct GMP violations; however, FDA, in the Glaxo case, apparently made no attempt to recover profits (i.e., disgorgement) made on non-conforming products. Invoking the equitable remedy of disgorgement to prevent the company from profiting from sales of non-conforming product was a central feature of earlier GMP legal actions.

With regard to the stock on hand that was seized, Glaxo will post a penal bond of $650 million contingent upon either successfully reconditioning the drugs or destroying them and paying costs to the government. This is a significant sum of money, but there is every indication that the bond will be cancelled by the time you have read this article.

Glaxo stated it expects to meet all the requirements of the bond within 90 days following entry of the consent decree. In that event, the bond will not have the impact the disgorgement penalty had in the other GMP cases. Glaxo will make the necessary corrections to its processes and then have its compliance certified by a third party. Glaxo indicated it must prepare and submit a report on any deficiencies found by the third-party reviewer, setting out the planned corrections and a timetable for completion. Glaxo also stated there is a potential for future penalties up to a maximum of $10 million a year if the company fails to meet the terms of the agreement.

What's Different Here?
There have been three other consent decrees with pharmaceutical manufacturers that involved major alleged GMP deficiencies. The first concerned Abbott Laboratories in November 1999. The second involved Wyeth-Ayerst Laboratories in October 2000. The last case prior to Glaxo involved Schering-Plough Corp. and a decree that was signed and filed in May 2002.

The fact patterns in these cases were reasonably similar, and many of the remedial provisions were similar to those in the Glaxo consent decree. Major GMP violations were alleged. FDA indicated that the company responses were not rapid enough, and there was mention about possible effect on the product produced. Mechanisms were put in place to review corrections, and third-party certification was required. Penalties were provided for failure to comply with the provisions of the respective consent decrees.

The Abbott, Wyeth and Schering-Plough actions differed from the Glaxo case in one very important respect. In each of the earlier cases, FDA assessed a substantial monetary penalty against the company. In the Abbott action, the manufacturer agreed to pay $100 million to the U.S. Treasury pursuant to the "equitable remedy of disgorgement." FDA indicated at the time that the amount "sets a precedent as the largest amount of money ever paid by an FDA-regulated company for a civil violation of the Federal Food, Drug and Cosmetic Act." In the Wyeth action, Wyeth agreed to pay $30 million to disgorge profits from product that did not comply with GMPs.

The record set in the Abbott case only lasted three years, because in 2002, in the third case, Schering-Plough agreed to pay the U.S. Treasury $500 million. As FDA explained, "The government sought this money to disgorge profits made by the firms on drug products that were produced over the last three years prior to entry of the decree in violation of GMP regulations."

In the Glaxo case, however, FDA did not seek to impose the equitable remedy of disgorgement, and this appears to signal a major shift in enforcement philosophy. Applying the above-quoted language to the Glaxo case, it would seem that the government would have sought disgorgement in order to prevent Glaxo from profiting on product not manufactured in compliance with GMPs. It is unclear why the FDA did not seek to recover those profits.

One explanation is that the earlier cases were more serious than the Glaxo situation. In Schering-Plough, for example, FDA alleged it had conducted 13 inspections at four New Jersey and Puerto Rico facilities over a four-year period, and found significant violations of the GMPs relating to facilities, manufacturing, quality assurance, equipment, laboratories, and packaging and labeling. In Abbott, FDA claimed that the company failed to comply over a six-year period, as disclosed in an extensive series of inspections at two facilities and at least two warning letters. In Wyeth, FDA investigators found, among others, issues relating to quality control at two of the firm's plants.

So is the Glaxo case different because the violations were not as pervasive or long standing? Arvin Shroff, Ph.D., does not think so. Shroff, presently a consultant to the regulated industry specializing in regulatory and compliance matters, spent 26 years at FDA with increasing levels of responsibility. At the time of his retirement, he served as the deputy director of the Office of Enforcement and was directly involved in many of the higher-profile FDA enforcement and compliance actions.

He believes that the Glaxo matter is a significant departure from past enforcement policy, and is consistent with other changes in compliance policy he has observed recently. "It appears there is a cultural shift at the FDA both in the enforcement and the drug-approval arena," Shroff says. "In the enforcement area, it is clear that FDA's new thinking is that 'less is more.' The new policies and procedures put in place - under the disguise of thoroughly vetting all enforcement actions - have significantly contributed to a sizable reduction in traditional enforcement actions such as warning letters, seizures, injunctions and prosecutions. Voluntary recalls, on the other hand, have seen a slight uptick.

"The change in the enforcement numbers could be due to the change in inspection philosophy and inspectional strategy. FDA now allows firms to correct deficiencies while the inspection is in progress and also allows annotation of inspectional observations. Further, FDA has made it clear that inspectional observations are not agency decisions. They are merely observations of an investigator and do not constitute an agency decision. Agency decisions are now made after a formal investigator report is reviewed and appropriately vetted by senior officials."

Shroff said FDA "has stepped back and re-evaluated its overall consent decree strategies of the past and concluded that a change in course is essential at this time. Glaxo's consent decree is a step in that direction."

The Future
An observer could conclude that Glaxo resolved its dispute over GMPs with FDA very favorably. It did not have to disgorge profits. It did not have to retrieve tablets already in the distribution chain, and FDA even told patients that they could continue to take their mediations, in consultation with their healthcare providers.

Glaxo gained the right to recondition the goods seized in March, if it can. The company can continue to manufacture products, and release them after the third-party consultant signs off and FDA agrees. Glaxo said it expected to begin re-supplying the United States and other markets by mid-year. The investment community was heartened by the news. One analyst remarked in The New York Times that "[i]t sounds like Glaxo ate a bit of humble pie, and is moving on."

There was relief that no fine or penalty was imposed, after some experts had predicted a disgorgement penalty of $1 billion. The perception is that Glaxo got off relatively easy. What does that mean for the future? How should company executives view the need to comply strictly with GMP regulations? After all, Glaxo in effect only had to correct what it had not done, and it was not penalized beyond that. Should executives consider whether to wait to comply until they are caught by FDA, and then just do the minimum possible? It is not hard to imagine that such a thought will enter the heads of executives pressured to cut costs and compete in a tough market in tough times. Executives with low opinions of their competitors will likely assume that those companies will "low ball" it, cutting costs and perhaps gaining an edge that will be hard for them to match.

It would be a mistake to view the Glaxo consent decree as a "license to steal." In the first place, failure to comply with GMPs is an illegal act, and it will put every product produced at risk, without the need for the FDA to show that the product is defective. That will give FDA enormous leverage in any discussions regarding problems. Second, the FDA is a politicized agency, no matter what it says to the contrary. In another situation, where failure to comply with GMPs causes widespread injuries, FDA might well forsake its newfound reasonableness, and begin wielding the sledgehammer again. Also, GMPs work, and help a company produce what it intends to produce in a consistent fashion. Any short-term advantage from non-compliance could be completely overshadowed by the need to go into the marketplace and recall everything distributed. It seems highly unlikely that a company would scrap compliance with the GMPs in a generalized way. Most companies are too responsible to even consider that.

What is possible is that executives may think twice before spending more money on GMPs in the future. One example that comes to mind is change control. Companies often make moves to change a product or process. It might be done to reduce costs, to meet competition or to try to build an advantage that helps differentiate the product from competitive offerings. GMP requirements, and design control elements for devices, help assure that the change is validated, and that it will serve the intended purpose. That is vital, because many product mishaps in the past have been blamed on the lack of any control of the change process. The validation studies and other requirements take time and money, though, and often appear to defeat the purpose of trying to rapidly respond to the market. In such a case, there may be a strong urge to ignore the requirements because there does not seem to be much of a penalty for non-compliance, even when the result is of serious concern.

It is shortsighted to forsake the rules simply because it seems that one can. If enough people do that, the pendulum will swing back, and the draconian disgorgement penalties will return. The high road is the better choice; it is the right thing to do, and it will preserve the status quo.

The biggest advantage of a rethinking of the enforcement strategy such as occurred in the Glaxo matter is that the executive can take some comfort that if his or her company does stumble badly in the future, it should be able to get out of the trouble it gets into without devastating effect. Companies should do all they can to preserve such a possibility, because it has real value, as the Glaxo result and its reception in the market demonstrated.  


Michael F. Cole is of counsel at Bergeson & Campbell, P.C., a Washington, D.C., law firm concentrating on industrial, agricultural and antimicrobial chemical product approval, regulation and defense; medical product approval and regulation; and associated business issues. He can be reached at 202-557-3800. Arvin Shroff can be reached at 301-916-0733.