Pharmaceutical manufacturer Mallinckrodt agrees to pay $35 million in landmark violation case
Mallinckrodt LLC, a pharmaceutical manufacturer and one of the largest manufacturers of generic oxycodone, agreed to pay $35 million to settle allegations that it violated certain provisions of the Controlled Substances Act (CSA) that are subject to civil penalties, Attorney General Jeff Sessions of the Justice Department and Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA) has announced.
This is the first settlement of its magnitude with a manufacturer of pharmaceuticals resolving nationwide claims that the company did not meet its obligations to detect and notify DEA of suspicious orders of controlled substances such as oxycodone, the abuse of which is part of the current opioid epidemic. These suspicious order monitoring requirements exist to prevent excessive sales of controlled substances, like oxycodone in Florida. The settlement also addressed violations in the company’s manufacturing batch records at its plant in Hobart, New York.
Both sets of alleged violations impact accountability for controlled substances, and the compliance terms going forward are designed to help protect against diversion of these substances at critical links in the controlled substance supply chain.
“In the midst of one of the worst drug abuse crises in American history, the Department of Justice has the responsibility to ensure that our drug laws are being enforced and to protect the American people,” said Attorney General Sessions.
“Part of that mission is holding drug manufacturers accountable for their actions. Mallinckrodt’s actions and omissions formed a link in the chain of supply that resulted in millions of oxycodone pills being sold on the street.
Thanks to the hard work of our attorneys and law enforcement, Mallinckrodt has agreed to do everything they can to help us identify suspicious orders in the future. And as a result of today's settlement, we are sending a clear message to drug companies: this Department of Justice will hold you accountable for your legal obligations and we will enforce our laws. I believe that will prevent drug abuse, prevent new addictions from starting, and ultimately save lives.”
“Manufacturers and distributors have a crucial responsibility to ensure that controlled substances do not get into the wrong hands,” said DEA Acting Administrator Chuck Rosenberg. “When they violate their legal obligations, we will hold them accountable.”
The government alleged that Mallinckrodt failed to design and implement an effective system to detect and report “suspicious orders” for controlled substances – orders that are unusual in their frequency, size, or other patterns.
From 2008 until 2011, the US alleged, Mallinckrodt supplied distributors, and the distributors then supplied various US pharmacies and pain clinics, an increasingly excessive quantity of oxycodone pills, without notifying DEA of these suspicious orders.
Through its investigation, the government learned that manufacturers of pharmaceuticals offer discounts, known as “chargebacks,” based on sales to certain downstream customers. Distributors provide information on the downstream customer purchases to obtain the discount.
The ground-breaking nature of the settlement involves requiring a manufacturer to utilize chargeback and similar data to monitor and report to DEA suspicious sales of its oxycodone at the next level in the supply chain, typically sales from distributors to independent and small chain pharmacy and pain clinic customers.
The government also alleged that Mallinckrodt violated record keeping requirements at its manufacturing facility in upstate New York. Among other things, these violations created discrepancies between the actual number of tablets manufactured in a batch and the number of tablets Mallinckrodt reported on its records. Accurate reconciliation of records at the manufacturing stage is a critical first step in ensuring that controlled substances are accounted for properly through the supply chain.
In addition to the significant monetary penalty, this settlement includes a ground-breaking parallel agreement with the DEA, as a result of which the company will analyze data it collects on orders from customers down the supply chain to identify suspicious sales. The resolution advances the DEA’s position that controlled substance manufacturers need to go beyond “know your customer” to use otherwise available company data to “know your customer’s customer” to protect these potentially dangerous pharmaceuticals from getting into the wrong hands.
DEA’s Memorandum of Agreement with Mallinckrodt also sets forth specific procedures it will undertake to ensure the accuracy of batch records and protect loss of raw product in the manufacturing process.
By entering into these agreements, elements of which Mallinckrodt is already implementing, the company is becoming part of the solution to this public health epidemic.
This lengthy investigation was led by DEA’s Detroit Field Division on the suspicious order issues and the New York Field Division on the manufacturing record keeping issues.
US. Attorneys’ Offices for the Eastern District of Michigan and the Northern District of New York, along with DEA Office of Chief Counsel and Diversion Control Division, led the civil settlement negotiations. The Criminal Division’s Narcotic and Dangerous Drug Section (NDDS) also coordinated and assisted in negotiating the settlement.
A guide to labelling compliance for medical devices
Small medical device manufacturers often find themselves scrambling to achieve the necessary compliance and validation, risking costly mistakes.
Validating systems and processes including labelling, to ensure they are compliant with stringent regulatory standards is tough and can be expensive. Indeed, compliance with the EU’s Medical Device Regulation (MDR) will cost more than 5% of annual sales, according to 48% of 101 companies polled by the German company Climedo Health, in July and August 2020 about their MDR-readiness.
But if companies bungle the software validation process or put incorrect and uncompliant data on the labels themselves, the penalties are likely to be more severe than just making corrections. Health and safety may be put at risk and fines imposed for failing to comply. When it comes to compliance, they may become overwhelmed with regulations in other geographic regions that focus on device traceability, each with a unique device identifier (UDI-like) component to it.
On the validation front, companies may not be familiar with the software validation process and the multiple tests and documentation necessary for validation are demanding if companies only have a small IT team that is very busy.
Putting a plan in place
MDR-compliant labelling, however, brings with it certain requirements which differ from what is demanded under the FDA’s Unique Device Identification (UDI) system rules. Under MDR, for example, manufacturers must ensure the label specifically states the device is a medical one using an MD symbol in a box. This is only one of many stipulations that usually require redesigned labels.
Small medical device manufacturers who rely on time-consuming and error-prone manual or legacy labelling processes to facilitate these label updates run the risk of mislabelling which can lead to non-compliance. They may have limited staff and no structured processes around roles and responsibilities when it comes to label design, changes and approval. As project leads work toward a compliant labelling process, it is therefore important to establish defined roles and access for each stage of the process.
When dealing with a compliance initiative, up to date, correct and compliant labelling is imperative. This involves having all the relevant label design elements in place to comply with the EU MDR or FDA regulations. Many times, label templates are hard coded, meaning IT must be involved in making changes. And with IT staff often being tasked with multiple mission-critical projects in the organisation, labelling projects can be delayed. For many small medical device manufacturers who have limited resources, finding a solution can be a challenge.
Why labelling in the cloud offers a roadmap forward
Validation-ready cloud labelling solutions have now emerged to ease compliance with regulations and time-consuming validation requirements. These solutions, built with the needs of regulated companies in mind, digitise the quality control processes and facilitate compliant labelling with role-based access, approval workflows and electronic signatures. Outside of compliance, carrying out labelling in the cloud drives scalability and productivity for small medical device manufacturers and boosts overall efficiency.
The latest cloud labelling solutions integrate with other cloud solutions, allowing for seamless functionality and minimising the need for local infrastructure resources and cost.
When it comes to validation, as with many labelling systems, those hosted in the cloud have vendor-supplied documentation that streamlines the process and significantly eases the burden when it comes to installation qualification (IQ). The manufacturer itself has a much lighter burden and a streamlined path to a validated system and process.
A more relaxed software release schedule eases the validation burden on life sciences companies because the software is updated once a year rather than multiple times. This gives them a continuously updated and maintained labelling solution without increasing the validation workload on their IT staff.
The manufacturer would of course need to work closely alongside the vendor and review the documentation, but, if needed, the vendor is able to do much of the work for them, providing not only the full validation acceleration pack but also professional services to assist with the validation process.
While some medical device manufacturers choose to tackle validation on their own, the vendor supplied validation acceleration pack or documentation helps to simplify the process. Consultancy and advice around validation is usually available from the vendor, tailored to the business’s specific needs.
Given the immense hassles of compliance for small device manufacturers, cloud-based labelling systems offer the benefits of a full label management system while easing compliance and validation. This is a future-proof technology. With a cloud-based labelling system, medical device manufacturers can be confident that they are running the most up-to-date software, enabling them to address the fast-changing new regulations and cope with whatever comes their way. And especially in the current pandemic, when face-to-face meetings are still problematic, it is a perfect way to keep labelling operations moving forward.