FDA Charges Florida Pharma Supplier with Re-Selling Suspect Drug Ingredients | March 2023

March 2023 | Volume 14, Issue 8

Find the complete article from the Insurance Journal.

According to the article, the U.S. Food and Drug Administration is asking a federal court to bar a Florida drug company from making or shipping any more adulterated pharmaceutical ingredients and products that do not meet quality control standards.

In a lawsuit filed in the U.S. District Court in south Florida, the FDA charged that LGM Pharma LLC, based in Boca Raton, had unlawfully distributed drug ingredients that contained impurities, had failed to perform quality control measures, had re-labeled compounds without verifying their content, and had re-shipped medications after they were flagged by customers as substandard.

Some of the violations were the same as those found by FDA inspectors in a 2018 inspection of the LGM facility, the FDA said.

LGM officials said in a statement that the company “vigorously disagrees” with the FDA’s charges. Despite that assertion, the company said it has already reached a resolution with the agency, finalizing issues that had originated under a previous owner and leadership of the company’s supply chain division.

LGM’s manufacturing division, based in Colorado, was not named in the legal action. The supply division provides tailored active pharmaceutical ingredients and drug development for drug makers, and contracts with multiple suppliers overseas, according to the lawsuit and news reports.

An LGM spokesman declined to say if the company is self-insured or if it holds liability coverage from an insurance carrier.

The FDA complaint cites several drugs or drug ingredients and multiple violations by the company in recent years. The agency inspected LGM’s Kentucky facility in March and April 2022 and found that the company had failed to follow good manufacturing practices, which violates the federal Food, Drug and Cosmetic Act and puts the public at risk, the lawsuit reads.

The alleged violations include:

• LGM failed to investigate complaints from customers that cromolyn sodium, used to treat asthma, contained impurities. After the complaints, the company did not quarantine the product but instead shipped much of it to other customers.
• Similarly, the firm did not take appropriate action when it learned of impurities and potency issues with estriol, an estrogen hormone. The ingredient came from a Chinese supplier and was distributed to six customers in the United States.
• LGM received multiple complaints that a powder used to treat underactive thyroid conditions was inconsistent in potency. “Rather than quarantining the product pending an investigation into the cause for the OOS (out-of-specification) testing results, defendants accepted returns of the rejected product from customers, stripped any indication the drug had been previously distributed and shipped it to other customers,” the complaint notes.
• After the company received shipments from China of the antiviral drug cidofovir, which was apparently mislabeled as a blood-clotting agent, LGM workers re-labeled it as cidofovir without verifying or testing the contents. The drug was then distributed to several U.S. customers, the FDA said.
• LGM also failed to qualify its suppliers in keeping with standard procedures and received hundreds of ingredients from companies whose manufacturing standards had not been properly verified.
• The firm’s supply division also did not have an adequate quality-control unit. Quality reviews were led by financial personnel, not a dedicated control team, the complaint noted.

The FDA is asking the court to prevent LGM and its directors from delivering any more suspect drug compounds and to authorize the FDA to further inspect the company’s operations and records, with expenses borne by LGM.

The company did not answer questions from Insurance Journal about which brand-name or generic drugs the suspect ingredients ended up in.

“We are now leading the industry by example by applying quality by design (QbD) principles throughout this division,” LGM said in its statement. “This includes featuring an extensive global network of API manufacturers that are FDA-registered and frequently audited to ensure quality and reliability.”

The allegations come seven months after the CEO of another Florida drug manufacturer pleaded guilty to distributing tainted drugs and conspiring to defraud the FDA. Contaminated stool softeners distributed by Davie-based PharmaTech sickened dozens and killed three infants, according to news reports and prosecutors. CEO Raidel Figueroa struck a plea agreement after he was indicted and is now serving a sentence of three years in prison.

Instances of adulterated, tainted drugs or drugs that did not meet quality standards also bring to mind the New England Compounding Center, in which health insurers and workers’ compensation carriers may have paid for contaminated injection treatments that were linked to the deaths of 76 patients.

The official FDA news release:

“Federal Court Enters Consent Decree Against Florida-based Drug Importer and Distributor”

On January 30, 2023, the U.S. District Court for the Southern District of Florida entered a consent decree of permanent injunction against LGM Pharma LLC, an importer and distributor of active pharmaceutical ingredients (API), used by the company’s customers to manufacture and/or compound finished drug products, and two of the company’s executives, Chief Executive Officer and part owner, Prasad Raje, and Shailesh Vengurlekar, the company’s Senior Vice President of Quality and Regulatory Affairs. 

The consent decree sets a strict timetable and requirements for the firm to ensure it obtains compliance with current good manufacturing practice (CGMP) requirements under the Federal Food, Drug, and Cosmetics Act (FD&C Act). Among other things, the consent decree requires ongoing compliance auditing and reporting to the U.S. Food and Drug Administration and provides that the FDA may take appropriate action, including ordering the company to cease receiving, labeling, holding and/or distributing any or all drug substances, in the event the defendants further violate the FD&C Act, its implementing regulations or the consent decree.

According to the complaint filed by the U.S. Department of Justice on behalf of the FDA, LGM Pharma LLC introduced into interstate commerce adulterated drugs that were manufactured, processed, packed, or held in conditions that do not comply with CGMP requirements under the FD&C Act.

“Protecting patients means we must hold all parts of our drug supply chain to the highest standards of quality allowed by law, including importers and distributors of both finished drug products and active pharmaceutical ingredients,” said Jill P. Furman, J.D., acting director of the Office of Compliance in the FDA’s Center for Drug Evaluation and Research. “LGM Pharma LLC’s failure to adhere to CGMP requirements put patients at risk. This consent decree requires the firm to implement and adhere to rigorous quality standards, under close FDA supervision. We will continue to do everything in our power to ensure compliance and address violations of federal law to protect the American public and the safety of the drug products they rely on.” 

The agency inspected the company’s Florida and Kentucky facilities in 2022. During these inspections, the FDA identified significant departures from CGMP requirements, including the company’s failure to perform adequate investigations of quality-related customer complaints involving out-of-specification (OOS) API that it distributed, failure to adequately qualify foreign manufacturers of API imported and distributed by the company and failures to establish adequate procedures for the distribution of drugs after an API supplier has been disqualified by the company. A previous inspection of LGM Pharma LLC’s Kentucky facility also revealed significant non-compliance with CGMP requirements, including the company’s improper re-labeling of API, lack of sufficient qualification procedures for the company’s foreign API suppliers and failure to perform adequate investigations of quality-related customer complaints involving OOS API distributed by the company.

This action will require the company to undertake detailed quality-related compliance actions to ensure that the company’s processes for importing and distributing drugs conform to CGMP requirements and federal law.

The case was filed by the U.S. Department of Justice’s Consumer Protection Branch, on behalf of the FDA.

The FDA, an agency within the U.S. Department of Health and Human Services, protects the public health by assuring the safety, effectiveness, and security of human and veterinary drugs, vaccines, and other biological products for human use, and medical devices. The agency is also responsible for the safety and security of our nation’s food supply, cosmetics, dietary supplements, and products that give off electronic radiation, and for regulating tobacco products.

Discussion Questions

1. According to the article, an LGM spokesman declined to say if the company is self-insured or if it holds liability coverage from an insurance carrier. What is the difference between a company being self-insured as opposed to having liability coverage from an insurance carrier? Is insurance designed to cover the type(s) of “loss” addressed in the article? Explain your response.
   Generally, to be “self-insured” means to be individually and financially responsible for certain liabilities. If an insurance company is willing to underwrite the risk, the insured can obtain an insurance policy to cover certain liabilities. In your author’s opinion, the concept of insurance for drug impurities and non-compliance with FDA standards does seem somewhat unusual; it is important to recall, however, that insurance is a contract, and that so long as the insured and the insurer are willing to enter into a legal contract (based on an offer, an acceptance of the offer, and mutual consideration), the agreement is enforceable. Assuming that an insurer is willing to underwrite the risk, the essential consideration for the potential insured is whether it would be more beneficial (from a risk management and financial standpoint) to self-insure or to pay premiums for an insurance policy.
    
2. Explain the Federal Food, Drug, and Cosmetic Act.
   The Federal Food, Drug, and Cosmetic Act of 1938 establishes quality standards for food, drugs, medical devices, and cosmetics manufactured and sold in the United States. The law provides for federal oversight and enforcement of these standards. The Federal Food, Drug, and Cosmetic Act of 1938 replaced the Pure Food and Drug Act of 1906, which was the first law to provide for federal regulation of the food and pharmaceutical industries.
    
3. In the context of the FDA statement referenced above, explain what a “consent decree of permanent injunction” is.
   A consent decree (also known as a consent order) is a decree made by a judge with the consent of all parties. It is not strictly a judgment, but rather a settlement agreement approved by the court. The agreement is submitted to the court in writing after the parties have reached a settlement, and once approved by the judge, the agreement is binding and enforceable on both parties.
   
   A consent decree is often used in government regulation in areas such as antitrust, securities, and environmental law. When the government sues a person or company and the defendant agrees to stop its illegal conduct, the government may agree not to pursue the case, and the court approves and issues a consent decree.
   
   A permanent injunction is a court order to forever cease and desist from committing a particular act. In the context of the subject case, and as indicated in the FDA’s news release included above, the consent decree sets a strict timetable and requirements for the firm to ensure it obtains compliance with current good manufacturing practice requirements under the Federal Food, Drug, and Cosmetics Act. Among other things, the consent decree requires ongoing compliance auditing and reporting to the U.S. Food and Drug Administration and provides that the FDA may take appropriate action, including ordering the company to cease receiving, labeling, holding, and/or distributing any or all drug substances, in the event the defendants further violate the Federal Food, Drug, and Cosmetics Act, its implementing regulations, or the consent decree.