BioPharma and Life-Sciences Firms Face ‘A Difficult Time,’ Attorneys Say

July 8, 2010

NEWARK, N.J., July 8 /PRNewswire/ — Keeping track of the federal government’s shifting regulatory and enforcement priorities is nothing new for BioPharma and Life-Sciences firms. But as agencies launch more investigations, ramp up fines and even seek to put more senior executives behind bars, the stakes involved are higher than ever, cautioned two LeClairRyan attorneys during a June 22 Webinar on the latest trends in regulatory compliance and risk-management.

“In this newly aggressive regulatory environment, decision-makers need to pay careful attention to what their firms are doing. Smart, thorough and fully informed compliance strategies are a must,” said Carlos F. Ortiz, a former federal prosecutor who now handles Foreign Corrupt Practices Act (FCPA), health care fraud and other white collar crime cases from LeClairRyan’s Newark, N.J., and New York City offices. The Webinar, “New Initiatives at the Federal Level: Legal Concerns for BioPharma & Life Sciences Companies,” is available in streaming audio or as a free download at www.leclairryan.com.

During the hour-long presentation, Ortiz and Patrick J. Hurd, a veteran healthcare attorney based in the firm’s Norfolk, Va., and Washington offices, outlined the implications of a spate of recent enforcement actions by the Food & Drug Administration, the Securities & Exchange Commission and the U.S. Justice Department. “U.S. Attorneys’ offices around the country, including those in New Jersey and New York, are now modeling task forces on those in Boston and Philadelphia, where we have already seen a number of aggressive regulatory actions,” Hurd said. “States are looking at enforcement actions, not only to deal with what they see as fraud and abuse, but also to address budget problems.”

The Webinar did contain some good news for these sectors. Hurd, for example, offered tips on how firms can win tax credits and cash grants made available through the Patient Protection and Affordable Care Act. The attorney also outlined the FDA’s latest efforts to streamline product-approval and communication with regulated companies, and its push for innovation in efforts to predict drug response based on individual genetic makeup–the field known as pharmacogenomics, or personalized medicine. “The FDA has created a new office within the Office of In Vitro Diagnostics that is staffed by a focused group of scientists whose backgrounds are in pharmacogenomics,” Hurd related. “This should be a major steppingstone in bringing new products to market, with new diagnostic and biomarker guidelines scheduled for release later this year.”

Precisely because personalized medicine and related new genetics-based diagnostics technology are so new, however, startups in the field must contend with a high degree of regulatory uncertainty. The FDA has started sending warning letters to firms that mail genetic tests to consumers, Hurd noted, and is battling with these companies over whether such products actually fall under the agency’s mandate. “There are several problem areas that have yet to be addressed by the FDA and other entities,” he said. “These include intellectual property concerns: Who owns that genetic material and under what justification? How do you protect that ownership interest?”

Likewise, many people harbor deep reservations about the potential for privacy violations that could lead to, say, an insurance carrier dropping someone because of a particular genetic predisposition. “Another big question for BioPharma firms, physicians and others is whether personalized medicine can be paid for at all,” Hurd noted. “Will reimbursements from the likes of insurance carriers or Medicare be available, or is this all too speculative, costly and experimental to warrant coverage, at least in the near term?”

Meanwhile, a big-picture view of recent enforcement actions by the FDA and DOJ sharply illustrates just how aggressive regulators have become in recent years. These headline-grabbing crackdowns include the FDA’s $175 million fine against Genzyme for quality-control violations at its Allston, Mass., plant, and the massive recall of over-the-counter children’s medicines produced by McNeil Consumer Healthcare. “This is an area that needs to be watched closely moving forward,” Hurd said. “Instances in which allegedly tainted drugs are delivered to children tend to attract scrutiny from Congress. There is a chance lawmakers will attempt to respond by drafting new legislation.”

No case highlights the intent to crackdown on so-called off-label promotions — the illegal marketing of unapproved uses of prescription drugs — more than the whopping $2.5 billion fraud settlement and criminal fine against Pfizer, announced in September 2009. During the Webinar, Ortiz and Hurd offered tips on how firms can better train sales reps, expert speakers and others on the risks of making off-label claims.

Finally, Ortiz gave a detailed overview of federal efforts to ferret out bribery by U.S. companies, including BioPharma and Life-Sciences firms, doing business overseas. Under the Foreign Corrupt Practices Act and the Travel Act, regulators have been aggressively targeting the overseas dealings of American companies. Increasingly, they are seeking to put senior executives in jail and force them to pay fines that, by law, cannot be reimbursed by the company. “There are more than 150 companies under investigation by the DOJ and SEC for FCPA violations,” Ortiz said. “The FBI has a new squad focused solely on FCPA, and is training more agents on these issues. Sixteen individual senior executives were prosecuted in 2008. Last year, that number rose to 42.”

Compliance with FCPA can be challenging, Ortiz added. “There are no bright lines for certain applications of the statute,” he explained. Companies can reduce risk by thoroughly educating their employees and third-party intermediaries about all aspects of the FCPA, such as its willful blindness provisions, detailed record-keeping imperatives and stipulations regarding the use of third parties, all of which the attorney described in detail during the Webinar. “Clearly, reducing risk in the area of FCPA is critical,” Ortiz said. “Great care is required.”

About LeClairRyan

Founded in 1988, LeClairRyan provides business counsel and client representation in corporate law and high-stakes litigation. With offices in California, Connecticut, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Virginia and Washington, D.C., the firm’s nearly 300 attorneys represent a wide variety of clients throughout the nation. For more information about LeClairRyan, visit www.leclairryan.com.

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    Carlos Ortiz


    Patrick Hurd


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