International Pharmaceutical Supply Chain Imperiled Like Never Before A Webinar Presented by Dechert LLP and Hyman, Phelps & McNamara PC June 22, 2016 Douglas B. Farquhar | Lewis Ho | Mark I. Schwartz | Kareena Teh | Jeremy B. Zucker

© 2016 Dechert LLP

Foreign Manufacturing and Data Integrity Problems The International Pharmaceutical Supply Chain Is Imperiled Like Never Before Douglas B. Farquhar [email protected] Mark I. Schwartz [email protected]

Assisted by McKenzie E. Cato [email protected] June 22, 2016

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FDA’s Enforcement Focus • FDA’s enforcement focus has shifted: • Until recently (details later), most FDA enforcement activity relating to pharmaceutical manufacturing was aimed at U.S. facilities. • Now, enforcement focus is on pharmaceutical manufacturing facilities outside the United States. • Analysis of Warning Letters issued to pharmaceutical manufacturers relating to manufacturing issues (excludes compounding pharmacies and WLs for promotional/approval issues) shows: • 25 Warning Letters were issued in 12 months ending May 31, 2016. • Only 2 of those letters were issued for facilities in the United States. • 16 of the letters alleged violations of data integrity or deficient systems

designed to protect data integrity. • Many of the cited facilities ended up being subject to Import Alerts, which can result in FDA refusals to permit importation of drugs manufactured at those plants and of drugs which use Active Pharmaceutical Ingredients (APIs) from those plants.

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FDA’s Enforcement Focus (cont.) • Of the 25 WLs: • 14 were issued for facilities in India. • 3 were based on inspections of facilities in mainland China. • 2 were based on inspections in Canada. • 2 were issued to facilities in Europe (Italy and Germany). • 2 were issued after inspections in the U.S. (South Carolina, Texas). • 1 each issued to facilities in New Zealand or Taiwan. • Of the 16 WLs which included allegations relating to data

integrity: • 12 were in India. • 2 were in China. • 1 was in Germany. • 1 was in South Carolina.

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Our message to you: • If you have manufacturing facilities

in India or China (or Europe), • If you use contract manufacturers there, or • If you or your contract manufacturers use APIs manufactured there,

BE PREPARED.

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FDA’s International Inspection Focus • FDA officials have said: • Nearly 40 percent of drugs sold in the U.S. are manufactured in foreign countries • About 80 percent of active pharmaceutical ingredients used in drugs manufactured in the U.S. come from foreign countries.

See, e.g., Statement of Howard Sklamberg, Deputy Commissioner for Global Regulatory Operations and Policy, FDA, Counterfeit Drugs: Fighting Illegal Supply Chains; Hearing Before the H. Comm. on Energy and Commerce (Feb. 27, 2014), http://www.fda.gov/NewsEvents/Testimony/ucm387449.htm.

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FDA’s International Inspection Focus • Office of International Programs, within the Office of

Global Regulatory Operations and Policy (GO) • OIP: 154 employees, including staff in Belgium, China, Chile, Costa

Rica, India, Mexico, and the United Kingdom. • Overseas, FDA personnel conducted 3,331 inspections in FY 2015. • GO oversees more than 380 ports of entry and international mail

facilities.

http://www.fda.gov/AboutFDA/CentersOffices/OfficeofGlobalRegulatoryOperationsandPolicy/

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FDA Presence in India and China • China • There are 13 FDA staff members stationed in China. • FDA is working to more than triple the number of American staff stationed in China. Margaret A. Hamburg, China Journal: strengthening relationships to protect public health, FDA Voice (Nov. 21, 2014), http://blogs.fda.gov/fdavoice/index.php/2014/11/china-journalstrengthening-relationships-to-protect-public-health/.

• India • FDA has 9-10 FDA staff members stationed in India. • FDA is working to increase the number of American staff stationed in India to 19. USFDA to increase its India headcount, The Economic Times (Feb. 4, 2015) (quoting Solomon Yimam, Assistant Country Director of FDA’s India office), http://articles.economictimes.indiatimes.com/2015-0204/news/58795939_1_inspections-india-headcount-marketingapplications.

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WLs for Foreign Inspections (2011-15) 45

45%

Number of Warning Letters

40

61%

35

62%

30 82%

25

87%

20

Total CDER cGMP Warning Letters (Worldwide) CDER cGMP Warning Letters that Were the Result of a Foreign Inspection

15 10 5 0 2011

2012

2013

2014

2015

10

WLs for Facilities Inspected in India and China 45

19%

Number of Warning Letters

40

11%

35

29%

30 25

59%

65%

20

Total CDER cGMP Warning Letters (Worldwide) CDER cGMP Warning Letters That Were the Result of an Inspection in India or China

15 10 5 0 2011

2012

2013

2014

2015

11

Extrapolated data for Oct.-Dec. 2015 based on average number of inspections in India and China per month.

Inspections in India and China 200

Number of Inspections

180 160 140 120 100 80 60 40 20 0 2011

2012

2013

2014

2015 *

* Current through September 2015. FDA has not yet released inspection data for the entire year of 2015.

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Data Integrity Issues 45

43%

Number of Warning Letters

40

50%

35

26% Total CDER cGMP Warning Letters (Worldwide)

30 25

50%

78%

2014

2015

CDER cGMP Warning Letters (Worldwide) Citing Data Integrity Issues

20 15 10 5 0 2011

2012

2013

13

Warning Letters to India and China Facilities Which Cite Data Integrity Issues 45 Total CDER cGMP Warning Letters (Worldwide)

Number of Warning Letters

40 35 30

CDER cGMP Warning Letters (Worldwide) Citing Data Integrity Issues

25 20 15

CDER cGMP Warning Letters Citing Data Integrity Issues That Were the Result of an Inspection in India or China

10 5 0 2011

2012

2013

2014

2015

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What Violations Supported Warning Letters? • Recent speech by Paula Katz, Director of Manufacturing

Quality Guidance and Policy Staff in CDER Office of Compliance, to Parenteral Drug Association (March 16, 2016): • Four pages of examples from recent Warning Letters of gross violations

of CGMP, including: • • • • • • • •

Failed analytic results that were hidden Altered time/date settings Analyses re-integrated to achieve passing results Routine retesting of analytic data and deleting original results Disabling system audit trails “Off-book” CGMP analyses Completed batch records days after operations ended Fabricated impurity data http://www.fda.gov/downloads/AboutFDA/CentersOffices/OfficeofMedicalProductsand Tobacco/CDER/UCM504306.pdf

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Trends in FDA Inspection Findings (from review of 483s, Warning Letters) • Data integrity issues and issues with data integrity

protections, including • Electronic records systems are not Part 11 compliant. • Review of QA and QC data shows duplicate testing, “trial” testing,

and “unofficial” testing. • Paper test reports and laboratory notebooks are not controlled documents.

• Additional issues for aseptic processing facilities • Defective smoke studies in aseptic processing areas • Improper investigation of Environmental Monitoring results and Personnel Monitoring results • Complaint handling, FDA reporting, investigations

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Recent Example of Data Integrity Issues at a Foreign Facility • Foreign facilities may just be an inspection away from

disrupting the supply chain of countless U.S. manufacturers. • On March 2, 2015, FDA investigators walked into Zhejiang Hisun Pharmaceutical Co., Ltd., in China and immediately discovered a number of serious cGMP deficiencies, including data integrity problems.

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Recent Example of Data Integrity Issues at a Foreign Facility • At one point, the investigators walked into a lab and

noticed an employee pulled a memory stick from a computer and put it in his pocket. • The investigators asked to see what he had taken, and the employee turned around and ran away. • The investigators never found out what the employee took from the computer, but they did find evidence that: • The firm routinely retested samples without justification (testing

products into compliance) • Deleted analytical data • Disabled an audit trail • Engaged in systematic data manipulation

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Adverse Regulatory Consequences • Warning Letters • Publicity • Import Detentions • PAI block of application review • Withdrawal of Drug Approvals • Regulatory Requirements • Product Recalls • Application Integrity Policy • Seizures • Consent Decrees • Injunctions • Debarment/Exclusion • Criminal Prosecution

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Adverse Regulatory Consequences • • • • • • • • • • • • •

Warning Letters Publicity Import Detentions PAI block of application review Withdrawal of Drug Approvals Regulatory Requirements Forced Recalls Application Integrity Policy Seizures Consent Decrees Injunctions Debarment/Exclusion Criminal Prosecution

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Warning Letters

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Pre-Approval Inspections

http://www.lachmanconsultants.com/2016/06/complete-response-letters-due-tofailed-pais-more-to-come/

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Pre-Approval Inspections (cont.) • Anecdotal information from other members of the Food

and Drug Bar similarly suggests growing problems with securing approvals after failed PAIs.

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Import Alerts – Statute • 21 U.S.C. § 381: Imports and Exports • (a) The Secretary of the Treasury [meaning Customs] shall deliver to the

Secretary of Health and Human Services [meaning FDA] . . . samples of . . . drugs, devices. . . and cosmetics which are being imported or offered for import into the United States, giving notice thereof to the owner or consignee, who may appear before the Secretary of Health and Human Services and have the right to introduce testimony. The Secretary of Health and Human Services shall furnish to the Secretary of the Treasury a list of establishments registered pursuant to subsection (i) of section 360 or section 387e(h) of this title and shall request that if any drugs, devices, or tobacco products manufactured, prepared, propagated, compounded, or processed in an establishment not so registered are imported or offered for import into the United States, samples of such drugs, devices, or tobacco products be delivered to the Secretary of Health and Human Services, with notice of such delivery to the owner or consignee, who may appear before the Secretary of Health and Human Services and have the right to introduce testimony.

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Import Alerts – Statute • 21 U.S.C. § 381: Imports and Exports (cont.) • (a) . . . If it appears from the examination of such samples or otherwise

that (1) such article has been manufactured, processed, or packed under insanitary conditions or, in the case of a device, the methods used in, or the facilities or controls used for, the manufacture, packing, storage, or installation of the device do not conform to the requirements of section 360j(f) of this title, or (2) such article is forbidden or restricted in sale in the country in which it was produced or from which it was exported, or (3) such article is adulterated, misbranded, or in violation of section 355 of this title, or prohibited from introduction or delivery for introduction into interstate commerce under section 331(ll) of this title, or (4) the recordkeeping requirements under section 2223 of this title (other than the requirements under subsection (f) of such section) have not been complied with regarding such article, then such article shall be refused admission, except as provided in subsection (b) of this section.

Import Alert 66-40: Detention Without Physical Examination of Drugs From Firms Which FDA Says Have Not Met Drug GMPs Country

Number of Facilities

Country

Number of Facilities

Country

Number of Facilities

Australia

1

Hungary

1

Spain

2

Belgium

1

India

42

Taiwan

2

Canada

7

Italy

1

Thailand

2

China

52

Jamaica

1

Tunisia

1

Denmark

4

Japan

2

Turkey

1

France

3

South Korea

2

Un. Arab Em.

1

Germany

2

Mexico

3

U.K.

2

Greece

1

New Zealand

1

Venezuela

2

Guadeloupe

1

Singapore

1

Vietnam

1

Hong Kong

5

South Africa

1

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Import Detentions and Destruction – FDASIA • From www.FDALawBlog.net summary of provisions of Food and

Drug Administration Safety and Innovation Act (FDASIA) (2012): • FDASIA grants FDA the authority to destroy, without the opportunity for

export, any drug that is refused admission into the U.S. (i.e., counterfeit or adulterated imported drug products) that has not been brought into compliance and that is valued at less than or equal to $2,500 (the amount of which may be amended by regulation issued by the Department of Treasury). See id. § 801(a), as amended by FDASIA § 708(a). FDA must issue regulations by July 9, 2014 that address the appropriate due process available to the owner, including the introduction of testimony. See FDC Act § 801, as amended by FDASIA § 708(b). In addition to FDA’s current authority to detain a device or tobacco product found during an inspection that FDA believes is adulterated or misbranded, FDASIA permits FDA to detain for a reasonable period drug products that the Agency believes are adulterated or misbranded based on an inspection. See id. § 304(g), as amended by FDASIA § 709. FDA must promulgate regulations by July 9, 2014 to implement administrative detention authority of drugs. http://www.hpm.com/pdf/blog/FDASIA-HP&MSummary&Analysis.pdf

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Can You Avoid a Bad Inspection? • Conduct Internal audits • Focus on electronic data recording systems • Are data backed up routinely at a remote location? • Are passwords shared? • Are there directories on local drives that contain test results, and, if so,

are those test results properly documented? • Compare entries on cGMP records with attendance records. • Encourage unannounced QA visits to ensure that workers are

making contemporaneous entries. • Review manufacturing flow to ensure that reviewers can be present and verify manufacturing steps or tests contemporaneously.

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Avoiding Bad Inspections (cont.) • Mock Inspections: • Can find deviations that, if corrected prior to FDA inspection, can mitigate adverse consequences. • Can ensure that plant doesn’t bungle arrival of inspectors or handling of inspectors. • Ensure inspection SOP is adequate. • Diversify supplier network. • Do not rely on inspection results from foreign regulators or

customers – FDA won’t.

China Drug Inspection 101 A primer on CFDA-initiated drug inspections

June 22, 2016 Lewis Ho - [email protected]

© 2016 Dechert LLP

Regulatory Framework  Relevant government agencies • CFDA (China Food and Drug Administration) • CFDI (Center for Food and Drug Inspection of the CFDA)

 Legislations, rules and regulations • PRC Drug Administration Law (and regulations) • Provisions for Drug Registration • GMP guidelines • Foreign Drug Manufacturing Enterprises Inspection Administrative Measures (Measures) (Draft published on August 20, 2012) – not yet in force

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Why do you need to know?  When will the CFDI knock on your door? • You export your pharmaceutical products to China • You are in the process of registering your drug with the CFDA for sale in the Chinese market (pre-approval inspections) • As observers on inspections conducted by other regulators (i.e. FDA, EDQM, MHRA, ANSM, etc.) as part of the international collaboration initiative • Unannounced inspections – CFDI acting upon safety or quality warnings as announced by other regulators and agencies

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History of CFDI Overseas Inspections  Overseas Inspection Program • Started in April 2011 on an experimental basis • Scale and scope of inspections ramped up since 2014 • Since 2011, the CFDA has appointed over 100 inspectors drawn from its more experienced pool of inspectors to conduct overseas inspections

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Statistics of CFDI Overseas Inspections  Number of overseas inspections completed 2011-2015 40 35 34

30 28

25 20 18

15 10 5

12 8

0 2011

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2012

2013

2014

2015

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Statistics of CFDI Overseas Inspections  Geographical distribution of overseas inspections 2011-2015 (no. of manufacturing facilities) 60 59 50 40 30 20 10

12

12

12 5

0 Europe

North America

South America

India

Rest of Asia (excl. India and China)

• Facilities inspected spread out in 20 countries

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Observations from the CFDI  Conclusions from the CFDI since the commencement of its overseas inspection program:

“In the first three years, we found such problems...overseas enterprises didn’t value China’s pharmaceutical laws and regulations…[had not manufactured drugs according to the requirements of China]…had different treatment on products exporting to China [versus] to other countries…”

-

see CFDI’s Annual Report on Drug Inspection (2015) http://www.cfdi.org.cn/ccdweb/main?fid=open&fun=show_pic_view&nid=1&page_no=42

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2015 Overseas Inspections  Summary • Total of 343 deficiencies identified (8 severe*, 58 major) • Deficiencies identified mostly relate to deviations in (%): ̶ QC and QA (15.2%) ̶ Documentation management (6.7%) ̶ Quantification and verification (5.5%) ̶ Premises and facilities (5.5%) ̶ Production management (5.2%) *Severe deficiencies are defined as those deviations which will lead to product safety issues and/or contain elements of fraudulent documentation/data – Guidelines on On-Site Inspections (2014)

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2015 Overseas Inspections  Major themes derived from deficiencies identified • Products not manufactured in accordance to registered process • Changes to registered particulars not reported in timely manner: ̶ Formula ̶ Quality standard ̶ Manufacturing process ̶ Key ingredients/excipients ̶ Posology / age indication

• Non-compliance with GMP • Willful delay/refusal by manufacturing entities upon inspections

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Consequences  Import bans publicized on CFDA website (in Chinese only)  Return of drug registration application  Renewal application denied

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Practical considerations  Practical differences between FDA and CFDI inspections FDA

CFDI

Teams of 1-2 inspectors (inspection lasts ~5 days)

Teams of 3 inspectors (resulting in shorter inspection time)

English speaking inspectors

Chinese speaking inspectors, limited English proficiency*

May schedule daily meetings with inspectors, allowing manufacturers to correct minor deficiencies identified during inspection.

No meetings during inspection. All opinions issued on written report.

Reporting style: formal / technical in nature in English

Reporting style: more laymen approach in delivery and in Chinese only

*Younger inspectors tend to have better English capabilities but are less experienced. As such, CFDI inspectors dispatched for overseas inspections are generally older and may not be as proficient in English – it is advisable to retain an interpreter well-versed in drug compliance matters during CFDI inspections to avoid miscommunications and costly delays

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Anti-Bribery Compliance The International Pharmaceutical Supply Chain Is Imperiled Like Never Before June 22, 2016 Jeremy Zucker - [email protected] Kareena The - [email protected]

© 2016 Dechert LLP

Agenda  Anti-Corruption Enforcement Trends  Increased Enforcement in China and India  Recent Enforcement Actions in Pharmaceutical Space  Key Risk Areas in Pharmaceutical Supply Chain  Compliance Best Practices

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Anti-Corruption Enforcement Trends

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Foreign Corrupt Practices Act (FCPA) Overview  Anti-Bribery Prohibition • Giving, offering or promising to give anything of value (money, other) • Directly or indirectly to improperly induce the recipient to take (or to refrain from taking) action that would bestow a commercial benefit or advantage • To a “foreign official”  Scope • “Domestic concerns” and “issuers”, includes officers, directors, employees, or agents • Non-US parties who are not domestic concerns or issuers if act in support of violation is subject to US jurisdiction  Record-keeping provisions • “Issuers” ̶ US and non-US companies whose securities are traded on US exchanges ̶ Includes wholly/majority owned subsidiaries

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Anti-Corruption Trends: United States  Since 2009: • the U.S. Department of Justice (“DOJ”) has brought more than a hundred cases against corporations and individuals, resulting in $4 billion in penalties. • the U.S. Securities and Exchange Commission (“SEC”) has brought actions against 85 companies and approximately 35 individuals, resulting in fines, disgorgement and prejudgment interest of about $2.5 billion.

 Significant and growing resource commitment  Cross-border cooperation among enforcement authorities  Increasing focus on individuals: Yates Memorandum  Industry Sweep • In February 2016, SEC FCPA Unit Head, Kara Brockmeyer, warned that the agency is “going back to the pharma industry after a break for a period of years.”

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Penalties in FCPA Cases Since 1977  For 2016, there are 84 pending corporate FCPA investigations (disclosed in SEC filings) and the following countries score the most mentions as being involved in these investigations:

Source: Mintz Group, fcpamap.com

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

China (28)



Brazil (18)



Russia (8)



India (6)

Source: FCPA Blog

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Corruption Perception Index (2015)

China: Rank 83/168 (Score 37/100) India: Rank 76/168 (Score 38/100) Source: Transparency International

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Increased Enforcement in China and India

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Anti-Corruption Trends: China  President Xi launched anti-graft crackdown in December 2012.  Enforcement by way of two-step approach: • Central Commission for Discipline Inspection (CCDI) investigates StateOwned Enterprises (SOEs) and government departments; • Local Administrations of Industry and Commerce (AIC) and Public Security Bureaus (PSB) investigate corporates and individuals.  AICs enforce commercial bribery provisions of Anti-Unfair Competition Law (AUCL); must meet annual enforcement penalty targets.  Recent increase in enforcement and specific focus on (inter alia) the life science industry stems from an Interpretation issued by the Supreme People’s Court and the Supreme People’s Procuratorate in December 2012. • Enforcement focus shift to bribe payers and set out enforcement attention on bribes that directly affect the safety and livelihood of the Chinese people

 Highly regulated industries (e.g., life sciences) most affected by the increased enforcement.

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Anti-Corruption Trends: India  Several bills continue to be actively debated in Indian Parliament • Prevention of Corruption Act amendments being debated that would allow for prosecution of private companies based on acts of their employees or agents • Debate continues over amendments to Lokpal and Lokayutkas Act (2013), with lawmakers divided over how to select members of the Lokpal, a body empowered to commence corruption inquiries against certain public officers

 Prime Minister Modi has emphasized publicly the importance of rooting out corruption in India

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Recent Enforcement Actions in Pharmaceutical Space

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Novartis AG (March 2016)  Novartis reached a $25 million settlement with the SEC • $21.5 million in disgorgement of profits • $1.5 million in prejudgment interest • $2 million civil penalty

 SEC alleged that from 2009 to 2013 two China-based Novartis subsidiaries directly and indirectly via third parties bribed doctors and other healthcare professionals (“HCPs”) to prescribe its drugs.  Novartis subs allegedly gave money and gifts to doctors and other health care professionals in China, which led to several million dollars in sales to China state health institutions. |

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SciClone Pharmaceuticals (February 2016)  SciClone settled with SEC for a total of $12.8 million • $9.4 million in disgorgement of profits • $900,000 in prejudgment interest • $2.5 million civil penalty

 Declination from DOJ in February 2016  From at least 2007 to 2012, Sciclone allegedly gave money, gifts and other things of value both directly and indirectly through third party agents to Chinese foreign officials, including HCPs who were employed by state-owned hospitals in China, in order to obtain sales of SciClone pharmaceutical products.  The SEC Order took also issue with SciClone’s alleged “lack of due diligence” on third parties retained to provide services (such as arranging transportation, accommodations, and meals for HCPs) for events.  Among other remedial measures, SciClone’s settlement with the SEC states SciClone will ”substantially [reduce] the number of suppliers providing third-party travel and event planning services.”

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Bristol-Meyers Squibb (October 2015)  Bristol-Meyers Squibb (BMS) reached $14 million settlement with the SEC • $11.4 million in disgorgement of profits • prejudgment interest of $0.5 million • civil penalty of $2.75 million

 Declination from DOJ in November 2015  According to the SEC, certain sales representatives at the majorityowned China joint venture of BMS achieved sales by providing cash and other benefits - such as gifts, meals, travel, entertainment, and sponsorships for conferences and meetings - to HCPs in exchange for prescriptions and drug listings  Certain of these HCPs worked at state-owned or state-controlled hospitals or pharmacies, and therefore qualified as foreign officials under the FCPA

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Case Study: Local AIC Investigation in China  A Chinese subsidiary of a multinational pharma company received anonymous whistle-blower complaint reporting compliance issues including travel / entertainment involving health care professionals, hospital sponsorships  Soon thereafter, local AIC commenced investigation, focusing on issues similar to whistle-blower complaint – AIC threatened further escalation of investigations (to criminal level) if subsidiary does not agree to enter into settlement requiring admission of improper conduct  Thorough internal investigation produced evidence of numerous compliance issues involving sales / marketing staff and third party agents  Compliance policies and training of employees updated to match risk profile of subsidiary, third party due diligence conducted and problematic vendors (travel agencies) screened out  Successful negotiations with local AIC limited exposure, settlement reached in the range of RMB500,000 (USD75,000) for fine + disgorgement

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Key Risk Areas in Pharmaceutical Supply Chain

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Key Corruption Risk Points in Pharmaceutical Supply Chain  Registration  Licensing of Companies  Inspection of Establishments  Promotion  Clinical Trials  Selection of essential medicines  Procurement  Distribution

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Key Corruption Risk Points in Pharmaceutical Supply Chain (continued) Product Development Phase

Clinical Trial Application

Registration, Licensing, and Establishment of Research Facility

Interactions with Local Regulators for Business Establishment (MOFCOM, AIC, etc.)

Manufacturing / Promotion Phase

Clinical Trial Management / engagement of CROs

Procurement and Drug Pricing Marketing Approval

Interactions with Drug and Health Regulators (drug application and approval, GMP inspections, etc.) Monitoring of CRO / Research Staff

Handling / Reporting of Data and Adverse Events

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Reimbursement / NRDL

Hospital Listing / Bidding

Interaction with Local Regulators (MoH, MoHRSS, NDRC, etc.)

Post-marketing surveillance Local Sales Force / Distributors

Distribution

Monitoring / Investigation of Local Sales Force and Distribution Partners

Continuing Obligations to Drug and Health Regulators (reporting of adverse events, drug renewal application and inspections, etc.) Interaction with HCPs

Dealing with Customs

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Key Corruption Risk Points in Pharmaceutical Supply Chain (continued)

Bribery/Fraud

Drug Safety & Integrity

Drug Approval & Registration

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Compliance Best Practices

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Compliance Best Practices  “Tone from the top” - demonstrated senior management support for compliance  Clearly written compliance policies and procedures for high-risk areas (e.g. gifts, entertainment, hospitality, sponsored travel, and political contributions) that take into account both overseas (FCPA, UK Bribery Act) and local requirements  Adjust salary / bonus policies to lower compliance risks (i.e. bonus not tied to individual sales performance)  Clear designation of properly qualified personnel with compliance responsibilities, and direct reporting lines to the board of directors  Periodic compliance training for staff (in particular those facing compliance risks)  Systems enabling employees to safely report suspected compliance violations and to receive advice when confronted with compliance issues (in particular overseas)  Periodic internal reviews to evaluate compliance risks and effectiveness of existing compliance program

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Compliance Best Practices: Third Party Risk Management  Understand company’s use of suppliers and third parties and conduct specific risk assessment to identify potential compliance issues  Design and implement third party / supplier pre-retention due diligence including contractual safeguards, mandatory compliance standards (mirroring own policies/programs), audits, and periodic training to minimize compliance risks  Implement periodic / ongoing monitoring of third parties / suppliers to ensure continued compliance (including updated trainings)  Create and enforce catalogue of sanctions for suppliers in case of non-compliance

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Questions and Answers

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Industry Experience and Speaker Biographies

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63

Selected Life Sciences Industry Experience ▸Conducting an internal investigation for a global healthcare company, including assessment of local issues across Europe, Asia, the U.S. and the Middle East, with particular focus on allegations of corruption, bribery and antitrust. ▸Representation of a major global medical devices company on corruption and sanctions-busting allegations arising out of the UN Iraq Oil for Food Program. ▸Representation of a U.S. company and its foreign subsidiaries in an internal investigation arising from potential corruption activities in China, Hong Kong, and Taiwan with regard to the sale of certain medical equipment. ▸Representation of a pharmaceutical manufacturer in multiple internal investigations involving potential corruption violations and potential illegal exports with regard to sales to Mexico, Iran and Brazil. ▸Assisted a Fortune 500 global pharmaceutical company to coordinate and manage its internal investigations in its various operations in continental Europe, the U.S., Russia, the Middle East, Asia and Africa. 64

Douglas B. Farquhar Director, Hyman Phelps & McNamara, P.C., Washington, DC [email protected]

AWARDS/RECOGNITION • ALM Legal Leader, 2014 • DC Super Lawyer, Litigation, 2007 - 2009, 2014 - 2016

+1 202 737 9624 Douglas B. Farquhar has more than 30 years of experience as a prosecutor and defense and regulatory attorney. Since joining the firm in 1997, he has advised pharmaceutical and medical device manufacturers and wholesalers, compounding pharmacies, and individuals on a wide range of enforcement activities, including consent decrees, criminal investigations, debarment issues, arbitration proceedings, civil seizures, FDA inspection issues, and injunctions. Mr. Farquhar has a broad-based understanding of the investigatory process, having negotiated settlements and resolutions for both industry and government. In the last three years, Mr. Farquhar has served as lead trial and appellate counsel for generic drug companies in three different cases related to generic drug exclusivity. In each case, he has won judgments securing his client's approvals of Abbreviated New Drug Applications. In one of the cases, he secured a judgment from the Fourth Circuit Court of Appeals reversing FDA's decision to deny his clients ANDA approval, a decision that had been upheld by the lower court. Mr. Farquhar also advises companies and individuals on adverse findings after FDA and other regulatory agency inspections. He has been active in defending companies during government investigations into drug pricing and drug and medical device fraud and abuse claims. In addition, Mr. Farquhar has represented employees and companies in investigations relating to anti-kickback laws. He has argued cases and conducted trials in federal court defending companies and individuals against both civil and criminal FDA enforcement efforts, and has sued FDA in cases related to generic drug approvals and adverse FDA publicity about his clients. Mr. Farquhar's legal career includes seven years of service as a federal prosecutor. He was an assistant U.S. Attorney in the District of Maryland from 1990 to 1997, and clerked for the Honorable Judge Joseph H. Young, U.S. District Court in Baltimore, Maryland. Mr. Farquhar also reported for local newspapers before enrolling in law school. Mr. Farquhar shares his perspective on enforcement and litigation issues through frequent speaking engagements and publications. He contributes to the firm's FDA Law Blog, and has served repeatedly as cochair of the annual Enforcement Conference for FDLI. In addition, he wrote two chapters for the FDLI publication, How to Work with FDA, focusing on seizures, injunctions, consent decrees, and stolen drug samples.

• Chambers and Partners, Washington D.C., Healthcare, Band 3, 2014 • The International Who's Who of Business Lawyers (Life Sciences), 2014 - 2016

BAR ADMISSIONS/QUALIFICATIONS District of Columbia Maryland U.S. Courts of Appeals for the D.C. Circuit, Federal Circuit, Fourth Circuit, Seventh Circuit Permanent member of the Fourth Circuit Judicial Conference U.S. District Courts for District of Columbia, Maryland Massachusetts pro hac vice, Western District of Virginia pro hac vice, Northern District of West Virginia pro hac vice, Northern and Middle Districts of Georgia pro hac vice, Middle District of Florida pro hac vice, Southern District of Alabama pro hac vice, Eastern District of Texas pro hac vice, Western District of Wisconsin pro hac vice

EDUCATION J.D., Yale Law School B.A., magna cum laude, Journalism, Boston University

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Lewis Ho Partner, Dechert LLP, Hong Kong and Beijing [email protected] +852 3518 4705

Lewis Ho leads the life sciences practice in Asia. He helps life sciences and technology companies and their financial sponsors to capture, manage, risk assess, evaluate and monetize their IP assets. His practice focuses on structuring technology transfer transactions and enforcing IP rights. Mr. Ho has extensive experience advising on both inbound and outbound IP-driven transactions, and has negotiated more than 60 M&A, collaboration, outsourcing, joint venture and licensing deals with various life sciences companies, academic institutes, hospitals and CROs. He also assists Chinese companies acquiring IP assets and manufacturing facilities overseas. Prior to joining Dechert, Mr. Ho served as a resident partner in the Shanghai and Beijing offices of a major international law firm.

AWARDS/RECOGNITION Mr. Ho has been consistently recognized by Chambers Asia and Legal 500 as one of the leading life sciences and IP lawyers in China. Chambers Asia noted him for "approaching issues in a 'down-to-earth' manner" and clients described him as “one of the best lawyers I’ve worked with so far” owing to his sharpness of proactive approach and as producing “a high quality of work.”

BAR ADMISSIONS/QUALIFICATIONS Hong Kong

EDUCATION SIGNIFICANT REPRESENTATIONS

▸ •Several PE and VC funds on their investment in life sciences and technology companies.

The University of Hong Kong, LL.B., 1997 Shanghai Jiao Tong University, Certificate on PRC Law, 2006

▸ •Several leading technology companies, including QUALCOMM, Dover Corporation, Vanderlande and Power Integrations, in global patent infringement and license dispute and settlement.

▸ •Numerous pharmaceutical companies, including The Medicines Company, Servier and Ablynx in their in/out licensing deals in China.

▸ •Numerous pharmaceutical companies, including GSK, Sanofi, Roche, Merck & Co., Bayer, Lundbeck, IPSEN, Takeda and LEO Pharma, in relation to product launches in China and Hong Kong, including clinical trials, data exclusivity, patent linkage, regulatory and patent infringement actions against generics, adverse reaction litigation and product recalls.

MEMBERSHIPS Honorary Legal Advisor, Hong Kong Association of the Pharmaceutical Industry (HKAPI) Vice Chairman of the IP Working Group (Shanghai Chapter, 2009-2011), European Union Chamber of Commerce in China

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Kareena Teh Partner, Dechert LLP, Hong Kong [email protected] +852 3518 4755

Kareena Teh advises multinational, PRC and Hong Kong clients on governance, regulatory and compliance matters, as well as general corporate and commercial litigation matters. Ms. Teh’s experience in these areas includes assisting clients in cross-border fraud, corruption, money laundering, market misconduct and securities fraud investigations. She also represents clients in civil actions involving directors’ and officers’ liability issues, insolvency, asset-tracing and insurance claims and recovery actions, and applications for emergency relief in aid of the actions. Ms. Teh was the first female solicitor in Hong Kong to be granted higher rights of audience, a designation permitting select, highly-qualified litigators to represent clients in civil matters in all levels of Hong Kong’s judicial system.

SIGNIFICANT REPRESENTATIONS ▸ A multinational pharmaceutical company in government and internal investigations of its Chinese subsidiary focusing on ▸ ▸ ▸ ▸ ▸ ▸

business operations and marketing activities with healthcare professionals and hospitals in China involving hospitality, sponsorships, donations and advertising, and in labor claims arising therefrom. A multinational life science company on aspects of Hong Kong’s anti-corruption and competition laws and their application to specific sales practices adopted in relation to various medical institutions (both Government and privately owned) in Hong Kong. A multi-national life science company on its sponsorship programmes and their compliance with Chinese anti-corruption laws. A publicity traded U.S. life science corporation, whose main operations are in China, in respect of internal investigations into possible securities fraud and corruption issues, evaluating the companies’ internal controls and compliance programmes. A former executive of a multinational banking and financial services company in investigations by inter alia the U.S. Securities and Exchange Commission and the U.S. Department of Justice into the company’s hiring practices. A leading international mining group in relation to investigations in Hong Kong, China and Mongolia relating to allegations of corruption, fraud and insider dealing, evaluating internal controls and compliance policies, and responding to inquiries from regulators in British Columbia and U.S. A global technology leader and supplier to rail, mining and energy industries on cross-border enforcement actions against counter-parties in various jurisdictions, including Hong Kong and the PRC. We successfully obtained orders setting aside fraudulent transactions, damages, an order and warrant for committal, and indemnity costs.

AWARDS/RECOGNITION Ms. Teh was recognized by the 2015 edition of The Legal 500 Asia Pacific for her dispute resolution practice, in addition to her regulatory counseling work, in Hong Kong. She also received accolades for her anti-corruption and regulatory compliance work on behalf of clients in cross-border fraud, corruption and money laundering investigations. She was included in the 2015 edition of Global Investigations Review’s “Women in Investigations” profile that highlights 100 remarkable women from around the world for their accomplishments in this area of law.

BAR ADMISSIONS/QUALIFICATIONS Hong Kong New Zealand England and Wales (non-practicing) EDUCATION University of Canterbury, New Zealand, LL.B., 1989, with Honors Institute of Professional Legal Studies, 1989

MEMBERSHIPS Hong Kong Law Society – Anti-Money Laundering Committee and Solicitor Advocates Interest Group Hong Kong Institute of Directors Hong Kong Institute of Certified Public Accountants Restructuring and Insolvency Faculty International Women’s Insolvency and Restructuring Confederation in Hong Kong American Chamber of Commerce in Hong Kong

LANGUAGES Bahasa Malaysia, Chinese, English

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Mark Schwartz

AWARDS/RECOGNITION

Of Counsel, Hyman Phelps & McNamara, P.C., Washington, DC

• Director’s Distinguished Service Award as a member of the team that reviewed the applications for the vaccines Trumenba and Bexsero.

[email protected] +1 202 737 9632

Mr. Schwartz advises clients on drug, biologic and device compliance, as well as on regulatory issues. He joined the firm after spending close to 13 years at the Food and Drug Administration in various capacities. Most recently, Mr. Schwartz was CBER’s Deputy Director in the Office of Compliance and Biologics Quality (2012-2015), an office with approximately 140 staff members. Two of the Office’s four Division Directors reported directly to Mr. Schwartz, namely, the Director of the Division of Case Management (managing the Center’s compliance and enforcement matters) and the Director of the Division of Inspections and Surveillance (managing the Center’s inspection and surveillance process), as did CBER’s Associate Director for Manufacturing Science. In his capacity as the Office’s Deputy Director, he advised the Commissioner, the Center Director, the Director of the Office of Compliance and Biologics Quality, as well as various offices within CBER and CDER on a variety of compliance issues involving biologics, drugs and medical devices. Mr. Schwartz also represented the Agency and the Center in various outside activities, including with other federal agencies and governments. Mr. Schwartz’s day-to-day activities included the review of draft 483s, warning letters, untitled letters and NOIRs, among others, for issuance, and determinations as to whether a regulatory letter, enforcement action or other action would be warranted. Mr. Schwartz also reviewed BPDRs and potential recall situations. He handled complaints and adverse events, and cleared all significant advertising and promotional labeling matters for the office. He participated in dozens of regulatory meetings with industry, and reviewed draft guidance documents and regulations for Office clearance. Prior to his tenure at CBER, Mr. Schwartz was Associate Chief Counsel for Drugs and Biologics (2008-2012), Associate Chief Counsel for Biologics (2005-2008) and Associate Chief Counsel for Foods (2003-2005). As Associate Chief Counsel for Drugs and Biologics he advised the FDA Commissioner, the Chief Counsel, CDER and CBER officials on a variety of constitutional, statutory, and regulatory issues involving drugs, biologics and medical devices. Mr. Schwartz was co-team leader for the Biologics team from 2007-2013, and co-team leader for the Biosimilars team from 2010-2013. He was also on the Biosimilars Implementation Committee from 2010-2013. While Associate Chief Counsel for Drugs and Biologics, Mr. Schwartz’s day-to-day activities included providing advice on the regulation of drugs, biologics and medical devices on matters related to: inspection, compliance and enforcement; the approval process; postmarketing safety and regulatory issues; advertising and promotional labeling; orphan drug exclusivity; accelerated approval; and combination products. Mr. Schwartz’s particular areas of interest during that period included: biosimilar and interchangeable biologics; the regulation of HCT/Ps, cell and gene therapies, vaccines, blood products and blood derivatives; Hatch–Waxman generic drug approvals; partial AUC determinations; First Amendment issues (including off-label promotion, and commercial speech versus fully protected speech); and federal preemption.

• Commissioner’s Award of Excellence for providing excellent legal counsel to high level agency officials on a wide range of complex and significant matters involving biological products. • Outstanding Service Award for outstanding performance in providing legal services to FDA on significant and complex issues, primarily involving biologics and conventional human drugs. • Commissioner’s Special Citation for exceptional performance and leadership in carrying out FDA’s mission to ensure the safety of vaccines and other drug products. • Award of Merit for extraordinary and collaborative efforts in responding to the public health threat posed by potentially unsafe human tissue products in commerce.

BAR ADMISSIONS/QUALIFICATIONS District of Columbia

EDUCATION LL.M., Duke University School of Law LL.B., Ecole de Droit de l’Université de Sherbrooke B.S., McGill University

Before joining FDA, Mr. Schwartz was a commercial litigator in Washington, D.C., and prior to that, in his native Montreal, Canada. He has law degrees from Duke University School of Law and l'Université de Sherbrooke (Canada), as well as a Bachelor of Science degree from McGill University (Canada). Mr. Schwartz has been an Adjunct Professor of Food and Drug Law at both George Mason University School of Law and Howard University School of Law, and he was a member of the Food and Drug Law Journal Editorial Advisory Board from 2008-2011.

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Jeremy Zucker Partner, Dechert LLP, Washington, DC [email protected] +1 202 261 3322

Jeremy B. Zucker, co-chair of the firm’s International Trade and Government Regulation practice, advises clients on international trade regulatory compliance matters, including in relation to the U.S. Foreign Corrupt Practices Act (FCPA), the Export Administration Regulations (EAR), the International Traffic in Arms Regulations (ITAR), economic sanctions programs administered by the Office of Foreign Assets Control (OFAC) and the anti-money laundering provisions of the USA Patriot Act. Mr. Zucker also has extensive experience advising on national security reviews under Exon-Florio by the Committee on Foreign Investment in the United States (CFIUS) and negotiating national security agreements. In addition, Mr. Zucker advises clients regarding U.S. government surveillance authorities under the Foreign Intelligence Surveillance Act (FISA). He has represented clients before the U.S. Departments of Commerce, Defense, Homeland Security, Justice, State and Treasury, as well as at the White House.

AWARDS/RECOGNITION Mr. Zucker has been recognized as a leading lawyer in the area of International Trade by Chambers USA (2016) and by the Legal 500 USA (2012). He was also named one of the Top 10 Rising Stars Under 40 in International Trade by Law360 in 2010.

BAR ADMISSIONS/QUALIFICATIONS New York District of Columbia

EDUCATION SIGNIFICANT REPRESENTATIONS

▸ Conducted an anti-corruption risk assessment and internal investigation for a major global pharmaceutical/life sciences company with respect to operations in China and Russia.

▸ Conducting an export compliance investigation in China for a publicly-traded high technology company. ▸ Representing an Asian sovereign wealth fund in connection with its investment in a U.S. software company.

▸ Conducted an anti-bribery investigation in Brazil on behalf of a publicly-traded medical device company.

Yale University, B.A. Harvard University, John F. Kennedy School of Government, M.P.P. New York University School of Law, J.D., magna cum laude, Order of the Coif

MEMBERSHIPS Member, U.S. Department of State Advisory Committee on International Economic Policy: Sanctions Subcommittee

▸ Provided compliance advice and training to the Asian operations of a major oil and gas company. ▸ Advising various multinationals with respect to sufficiency of compliance policies and procedures and suggested improvements reflecting risk assessments and global best practices.

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For further information, visit our website at dechert.com. Dechert practices as a limited liability partnership or limited liability company other than in Dublin and Hong Kong.