The payout is to resolve criminal and civil liability relating to sterile drug products
Baxter Healthcare Corporation has agreed to pay US$18.158m to resolve its criminal and civil liability arising from Baxter’s failure to follow current Good Manufacturing Practices (cGMP) when manufacturing sterile drug products in North Carolina, the US Department of Justice announced this week
The resolution includes a deferred prosecution agreement and penalties and forfeiture totalling $16m and a civil settlement under the False Claims Act (FCA) with the federal government totaling approximately $2.158m.
Baxter is a Delaware corporation and subsidiary of Baxter International Inc., headquartered in Deerfield, Illinois, with many manufacturing facilities throughout the US and the world, including one in Marion, North Carolina (North Cove).
In a criminal information filed this week in the Western District of North Carolina, the government charged that, between July 2011 and November 2012, Baxter introduced into interstate commerce drugs that were adulterated under the Federal Food, Drug, and Cosmetic Act (FDCA) because Baxter did not follow cGMP when making those products.
At North Cove, Baxter manufactured large-volume sterile intravenous (IV) solutions in a cleanroom that had high-efficiency particulate absorption (HEPA) filters installed in the ceiling.
Air was pushed into the cleanroom through the HEPA filters. As alleged in the information, during the relevant time period, a Baxter employee reported the presence of mould on the HEPA filters to plant management. However, Baxter continued to manufacture IV solutions in that cleanroom for months while the filters the employee had identified as mouldy remained in place.
Subsequent testing of the filters following an unannounced US Food and Drug Administration (FDA) inspection revealed several mould species on the filters.
There was no evidence of impact on the IV solutions from the mould found on the filters.
In a deferred prosecution agreement to resolve the charge, Baxter admitted that it distributed products in interstate commerce that were adulterated in violation of the FDCA.
Under the terms of the deferred prosecution agreement, Baxter will pay a total of $16m in monetary penalties and forfeiture and will implement enhanced compliance provisions, including periodic certifications to the government concerning its implementation of those provisions.
The deferred prosecution agreement will not be final until accepted by the US District Court.
“Following current Good Manufacturing Practices is essential to ensure the safety and efficacy of our drugs,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
“Today’s settlement shows that the government will continue to hold companies accountable for failing to fulfil this critically important responsibility.”
“Despite notification by an employee of potential contamination concerns, Baxter was poorly focused on instituting sufficient safety standards for their products,” said US Attorney Jill Westmoreland Rose for the Western District of North Carolina (WDNC).
“Today’s resolution reflects WDNC’s commitment to hold accountable drug companies that violate manufacturing standards and wrongly profit from those violations,” she added.
“FDA’s manufacturing standards are designed to ensure the quality, safety, and efficacy of drugs distributed to American consumers, and FDA expects pharmaceutical companies to correct deficiencies in an expedited manner,” said Special Agent in Charge Justin Green of FDA’s Office of Criminal Investigations, Miami Field Office.
“We will remain vigilant in our efforts to protect the US public health from potentially dangerous products.”
In addition, Baxter will pay approximately $2.158m to resolve allegations that the company violated the FCA by submitting false claims to the Department of Veterans Affairs based upon Baxter’s failure to follow cGMPs.
The civil settlement resolves a lawsuit filed by Christopher Wall, an employee of Baxter, under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the US for false claims and share in a portion of the government’s recovery.
The civil lawsuit was filed in the Western District of North Carolina and is captioned United States ex rel. Christopher Wall v. Baxter International, Inc. et al., No. 13cv42 (W.D.N.C.). Wall will receive $431,535.99 from the proceeds of the civil settlement.
This settlement illustrates the government’s emphasis on combating healthcare fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.
The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.
One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $31.4bn through False Claims Act cases, with nearly $19.6bn of that amount recovered in cases involving fraud against federal healthcare programs.