CONSENT DECREES: ORIGIN AND IMPACT ON THE PHARMACEUTICAL INDUSTRY

Abstract

The Food and Drug Administration (FDA) is a science-based, law-enforcement agency, which seeks enforcement through laws, regulations, and policy guidance documents. There are two forms of enforcement powers the FDA may utilize: administrative and judicial. Examples of administrative actions are inspections, inspectional observations, warning letters, recalls, and product approval delays. There are three judicial actions the FDA may enforce, which are: civil seizures, civil injunctions, and criminal prosecutions (Levine 2000a). The objective of this project is to focus on the origin of civil injunctions (consent decrees) in the pharmaceutical industry, and evaluate the impact this type of enforcement action has had on the industry. It also attempts to compare, at a high level, the benefits of early establishment of appropriate quality systems that are actively supported by upper management versus the costs and risks involving a consent decree. In the early 1970's, the FDA had placed more emphasis on administrative sanctions and development of compliance guidances. During the 1990's, however, the FDA began to rely more on judicial actions for enforcement of compliance (Levine 2001a). The number of warning letters, seizures and prosecutions rose immensely and industry was placed on notice (Shroff 2003). Since the 1990's, there have been at least 20 companies that have entered into a consent decree of permanent injunction for noncompliance with current Good Manufacturing Practice (cGMP) regulations. An injunction is a civil action taken against an individual or firm, seeking to stop continued production or distribution of a violative product (FDA 2002a). The injunction process is initiated when the FDA (the plaintiff), through the Department of Justice (DoJ), recommends an action to be implemented by a federal court. A federal court forbids a company to perform a certain illegal act, usually the marketing of a product that is violative (RAPS 2001). The defendant may consent to a decree of permanent injunction, better known as a consent decree. Placement under consent decree has a strong financial impact on a company. The company is prohibited from manufacturing products (unless the products are considered medically necessary), product pipelines may be disrupted, and personnel resources usually dedicated to manufacturing product will be required to interact with FDA reviewers, third party reviewers, and other consultants who will develop and execute cGMP plans. In addition to these actions which have well-defined monetary consequences that can be tabulated, the intense efforts required of staff to both change current practices (culture change) and to produce allowed products has a generally unassessed financial impact on the organization. Therefore, by not having a welldeveloped quality systems department, the company could incur the additional costs of a consent decree. The documented costs of a consent decree are typically in the range of hundreds of millions of dollars; therefore, the cost is not trivial. The additional costs due to loss of reputation and difficulty in hiring effective personnel at all levels must also be considered. The three most common violations that lead to injunctions are: cGMP violations, marketing a product without FDA approval, and deviations with labeling and promotional materials (Levine 2001b). The focus of this project is on pharmaceutical companies that are under a consent decree for cGMP violations.