SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 28, 1997
COPLEY PHARMACEUTICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
0-20126 04-2514637
(Commission File Number) (IRS Employer Identification No.)
25 John Road
Canton, Massachusetts 02021
(Address of principal executive offices) (Zip Code)
(617) 821-6111
(Registrant's telephone number, including area code)
<PAGE 2>
ITEM 5. OTHER EVENTS
The Board of Copley Pharmaceutical, Inc. (NASDAQ:CPLY) announced today
that it has voted to enter into a plea agreement covering all issues
investigated by the Massachusetts U.S. Attorney during a nearly three-
year-long review. The plea agreement covers criminal violations arising
out of changes that Copley made prior to July, 1994 in the manufacturing
processes of four drugs regulated by the Food and Drug Administration.
A federal judge in Boston will be asked to accept the plea.
"We sincerely regret that any regulatory violations occurred. The
safety and efficacy of the products cited by the U.S. Attorney are not
at issue. All these products met all their final release specifications
and consumers can continue to use our products with confidence," said
Kenneth N. Larsen, Copley's Chairman of the Board.
The Company also announced that it has entered into an agreement with
the FDA providing for an independent audit of 20 of Copley's approved
Abbreviated New Drug Applications (ANDAs). Copley is cooperating fully
with the FDA. The FDA has agreed that during this audit it will
continue to review Copley's pending ANDAs, accept new ANDAs from the
Company, and, where appropriate, approve Copley ANDAs.
In the plea agreement with the U.S. Attorney, Copley agreed that batch
records for two drugs: Brompheril tablets, an over-the-counter cough and
cold product, and potassium chloride tablets, which are used for
electrolytic, caloric, and water balance--were incorrect. The Company
also agreed that it failed to note, in reports filed annually with the
FDA, production changes in Brompheril and potassium chloride as well as
in two other drugs: hydrocortisone acetate/pramoxine topical aerosol, a
treatment for hemorrhoids, and procainamide HCl 500 mg. tablets, an
anti-arrhythmia agent.
Mr. Larsen added, "It is important to note that the violations to which
Copley has agreed to plead guilty are not comparable to actions in
earlier cases that received significant fines. In addition to there
being no health issues, the drugs Copley sold were exactly what they
were represented to be. There were no unauthorized ingredients, no
reworking of failed batches, and no finished product quality issues."
This is the first corporate fine in a food and drug case imposed under
new, stricter federal sentencing guidelines that call for higher
penalties than prevailed in the past. Commenting on the $10.65 million
fine recommended by the U.S. Attorney, Larsen said, "We do not expect
the fine to affect operations or our ability to produce quality
products. We are very disappointed, however, by the size of the fine.
The principal point on which we and the U.S. Attorney agree is the
desirability of resolving this investigation."
Copley has established a toll-free number, 1.800.218.5749, for
healthcare professionals and consumers who may have questions about the
agreement.
"We have full confidence in our people, our products, and our
manufacturing ability. The agreement with the U.S. Attorney allows us
to devote our attention to our core business and our customers," Larsen
concluded.
The Company is revising its reserve for product-recall and litigation
expenses. The impact of this adjustment will be an after-tax charge to
earnings of $2 million or $0.10 per share, and will be taken in the
current quarter. The fine will be paid in three installments over a
period of two years.
We are glad that this lengthy investigation has ended. We sincerely regret the
reporting and batch-record violations for which we are responsible. We also
apologize for any inconvenience that this matter has meant to our customers.
As we have maintained throughout, the charges brought by the U.S. Attorney's
office involve no harm or injury to any patients. All of these issues covered
in the plea agreement ended by July, 1994, prior to the start of the U.S.
Attorney's investigation. Copley intends to cooperate fully with the FDA in
the independent audit and to restore as quickly as possible the excellent
relationship we have always enjoyed with that agency.
We feel the size of the fine leveled by the U.S. Attorney does not reflect the
nature of Copley's violations. The fine's size is a reflection of new,
stricter federal sentencing guidelines applicable to corporate conduct
occurring after November 1, 1991.
While the investigation of individuals continues, we have confidence in the
integrity and honesty of Copley's current and former management. We are a
company whose primary concern is the welfare of patients and the integrity of
our products. We will continue to play a significant role in healthcare cost-
containment by producing quality generic pharmaceuticals, we thank our
customers and employees for their ongoing support.
Copley, a Canton, Massachusetts-based company founded in 1972, currently
employs approximately 450 people in Research and Development, Quality
Assurance, Quality Control, Engineering, Production, Regulatory Affairs,
Sales and Marketing and International Registration. Copley is a leading
manufacturer and marketer of a broad range of multi-source prescription
and over-the-counter pharmaceuticals. The firm markets its products to
distributors, retail chains, wholesalers, hospitals, government
agencies, and managed care companies.
Forward-looking statements (statements that are not historical fact) are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that all
forward-looking statements involve risks and uncertainties, including
those risks and uncertainties detailed in the Company's filings with the
Securities and Exchange Commission, copies of which are available from
the Company.
ITEM 7. EXHIBITS
10.1 Plea Agreement dated May 27, 1997.
10.2 Criminal Information.
10.3 Agreement between the Company and the Food and Drug
Administration.
<PAGE 3>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
May 30, 1997
COPLEY PHARMACEUTICAL, INC.
/s/ Ken E. Starkweather
______________________________
Ken E. Starkweather
Vice President - Finance
Principal Financial Officer
EXHIBIT 10.1
May 27, 1997
Richard M. Cooper, Esquire
Williams and Connolly
725 12th Street, N. W.
Washington, D. C. 20005-5901
Re: Copley Pharmaceutical, Inc.
Dear Mr. Cooper:
This letter sets forth the agreement entered into by and among the United
States of America, acting through its Department of Justice and the United
States Attorney for the District of Massachusetts (collectively referred to
as "the United States") and your client, Copley Pharmaceutical, Inc.
("Copley"), as follows:
A. PLEA
On or before May 29, 1997, or on such date as the Court may determine,
Copley shall waive indictment and plead guilty to the attached one count
Information, charging a violation of Title 18, United States Code, Section
371, a conspiracy to defraud the United States and one of its agencies, the
Food and Drug Administration ("FDA") through, among other things, its: (1)
manufacture of drugs subject to abbreviated new drug approval by the FDA,
including prescription drugs, using manufacturing processes different from
those approved by the FDA; (2) falsification of manufacturing batch records
for FDA-approved drugs; and (3) submission of false annual reports to the
FDA. Copley admits that it is in fact guilty of this offense and will so
advise the Court.
B. PENALTIES
For the count set forth in the attached information, Copley faces a
maximum penalty of $500,000 or, as an alternative fine, the greater of twice
the gross pecuniary gain or twice the gross pecuniary loss resulting from the
offense, pursuant to Title 18, United States Code, Section 3571 (c).
C. SENTENCE RECOMMENDATION
The United States and Copley agree that, pursuant to Chapter Eight of the
United States Sentencing Commission Guidelines Manual, the following sentence
is the appropriate disposition of the case:
1. a fine in the amount of ten million, six hundred fifty
thousand dollars ($10,650,000) to be paid in three
installments of three million, five hundred fifty thousand
dollars ($3,550,000) each (plus payment of all applicable
interest, on the second and third installments, as set
forth in 18 U. S. C. Section 3612 (f)), the first installment
of which is due within one week of the date on which the
sentence is imposed by the Court, the second installment
($3,550,000 plus interest ) of which is due one year after
the date on which the sentence is imposed by the Court, and
the third installment ($3,550,000 plus interest) of which
is due two years after the date on which the sentence is
imposed by the Court; and
2. a mandatory special assessment of $400 pursuant to 18 U.S.C.
Section 3013 (a)(2)(B), which shall be paid at the time of
disposition.
The United States and Copley agree that the payments described above
constitute an appropriate monetary penalty taking into account the United
States Sentencing Guidelines and the nature and extent of the violations.
D. AGREEMENT IS CONDITIONAL
The United States and Copley shall submit this plea agreement to the
Court pursuant to Federal Rule of Criminal Procedure 11 (e) (1) (C). In the
event that the Court rejects this plea agreement for any reason, Copley shall
be afforded the opportunity to withdraw its guilty plea pursuant to Federal
Rule of Criminal Procedure 11 (e) (4), and either party may elect to declare
this agreement null and void, except that, under any circumstances, the
waiver of Copley's rights as to defenses under any statute of limitations or
the Speedy Trial Act, as set forth in paragraph 8 below, shall remain in full
force and effect. Further, if Copley shall withdraw its guilty plea at any
time, the United States may elect to declare this agreement null and void,
except that under any circumstances the waiver of Copley's right as to
defenses under any statute of limitations or the Speedy Trial Act, as set
forth in paragraph 8 below, shall remain in full force and effect. If
Copley's guilty plea is rejected and /or withdrawn, Copley shall have the
benefit of Federal Rule of Criminal Procedure 11 (e) (6).
E. CRIMINAL LIABILITY
The United States and Copley agree the $ 10,650,000 payment described
above is the appropriate monetary disposition of all criminal liability of
Copley to the United States with respect to all conduct by Copley:
1. that occurred between May, 1988 and July, 1994 which
relates to the alteration of product formulation or
manufacturing processes for the four FDA-approved drugs
which are the subject of the attached Information, without
FDA notification or approval; and the submission to the FDA
of any annual report which falsely represented that there
were no changes made to approved procedures for manufacturing
those same drugs; or
2. that was otherwise under investigation by the grand jury
convened by the United States Attorney for the District of
Massachusetts; or
3. that was known to the Office of the United States Attorney
for the District of Massachusetts as of the date of this
agreement; or
4. as to which the FDA had notified Copley in writing, prior
to the date of this agreement, of a possible or apparent
violation of a regulation or statute; or
5. was the subject of a recommendation to or within the
Center for Drug Evaluation and research or the New
England District Office of the FDA or the Office of General
Counsel of FDA for a criminal referral to the United States
Department of Justice as of the date of this agreement; or
6. was otherwise known to the FDA as of the date of this
agreement.
In particular, the grand jury investigation has concerned principally:
(1) allegations that Copley, in the manufacturing of a number of prescription
and over-the-counter drugs, including Albuterol Solution for Inhalation,
Brompheril Sustained Action Tablets, Hydrocortisone Pramoxine, Potassium
Chloride Extended Release Tablets, and Procainamide Sustained Release Tablets,
did not follow the method of production for those drugs as approved by the
FDA, and did engage in certain conduct to hide those manufacturing deviations,
including the filing of false annual reports and the preparation of false
batch records; and (2) whether there was fraud, including false statements,
withholding of material information, or theft from anyone else, of trade
secret information, in the abbreviated new drug applications submitted by
Copley to the FDA for each of those drugs.
The United States and Copley further agree that the $10,650,000 fine, and
any applicable interest referred to in paragraph C above, constitutes full
satisfaction by Copley of all sums that Copley might be required to pay
pursuant to a sentence or other order of the Court in any criminal proceeding
- -- whether for fine, interest, forfeiture, restitution, disgorgement, or
reimbursement for the costs of the investigation by the United States for the
offenses charged in the attached Information.
This payment is not intended to, and does not satisfy or affect, the
criminal liability of any employee, agent or representative of Copley or any
other individual.
F. CIVIL LIABILITY
1. Subject only to the conditions specified in this paragraph,
and to the acceptance by the United States District Court for the District of
Massachusetts of Copley's guilty plea and the sentence set forth in paragraphs
A and C above, the United States hereby releases Copley from any civil or
administrative monetary claims that the United States has or may have under
the False Claims Act, 31 U.S.C. Section 3801, et seq., or common law, for the
conduct described in paragraphs A and E-1, E-2, and E-3 above. This civil
release specifically does not include subparagraphs E-4, E-5 and E-6.
2. Notwithstanding any other provision in this Agreement, the
United States specifically does not release Copley, its parents, affiliates,
divisions, subsidiaries, successors, assigns and its current directors and
officers from: (a) any potential criminal, civil or administrative claims
arising under Title 26, United States Code (Internal Revenue Code); (b) any
obligations created by this Agreement; (c) any claims for defective or
deficient services or products; or (d) any administrative suspension or
debarment remedy or action by a federal agency which may arise from the
subject matter of this Agreement.
3. Nothing in this Agreement is intended to affect: (a) any
third-party liability of Copley to the United States in a civil action brought
against the United States for a personal injury due to a Copley product (i)
that is deficient or effective or (ii) as to which Copley breached any
express or implied warranty; or (b) liability of Copley for failure to
deliver items due under any contract with any agency or department of the
federal government.
4. The parties agree that all costs (as defined by the Federal
Acquisition Regulation 31.205-47) incurred by or on behalf of Copley and/or
its officers, directors, shareholders, successors, in connection with (a)
the matters covered by this Agreement; (b) the government investigation of
the matters covered by this Agreement; (c) Copley's investigation, defense
of the matters and corrective actions; (d) the negotiation of this
Agreement; and (e) the payments made to the United States pursuant to this
Agreement shall be unallowable costs for government contract accounting
purposes. These amounts shall be separately estimated and accounted for by
Copley and Copley will not charge such costs directly or indirectly to any
contracts with the United States.
G. WAIVER OF DEFENSES
In the event that Copley's guilty plea is not accepted by the Court for
whatever reason, or is later withdrawn for whatever reason, Copley hereby
waives any defense to any charges which it might otherwise have as of the date
of this agreement under any statute of limitations or the Speedy Trial Act,
except any such defense that Copley may already have for conduct occurring
before April 1, 1992.
H. COOPERATION
Copley shall cooperate completely and truthfully in any trial or other
proceeding arising out of the federal grand jury investigation of Copley and
some of its employees, officers, former employees and former officers. Copley
shall, to the extent that it is able, make its officers and employees
available for interviews by law enforcement agents, upon request and
reasonable notice, and shall furnish to law enforcement agents, upon request,
all non-privileged documents and records in its possession, custody or control
relating to the conduct that is within the scope of any grand jury
investigation, trial or other criminal proceeding arising out of the conduct
which is the subject of this plea agreement.
Copley shall also take reasonable measures to insure that its officers
and employees testify truthfully and completely before any grand jury, and at
any trial or other hearing, at which they are requested to do so by any
government entity.
The United States Attorney believes that the disposition of the criminal
investigation of Copley reflected in the attached Information and the
provisions of this Agreement constitute an appropriate resolution of Copley's
criminal liability for its past conduct within the scope of the investigation
of Copley's conduct by the United States Attorney's Office and any other
conduct by Copley otherwise known to the United States Attorney's Office. If
Copley complies with all the terms of this agreement, the United States
Attorney will, upon request by Copley, advise federal, state or local
governmental agency of that belief and of the nature and extent of any
cooperation provided by Copley.
I. BREACH OF AGREEMENT
If the United States determines that Copley has materially failed to
comply with any provision of this agreement, the United States shall be
released from its commitments under both such agreements and shall so notify
Copley in writing. Copley recognizes that no such material breach by Copley of
any obligation under this agreement shall give rise to grounds for withdrawal
of its guilty plea.
J. LIMITS ON FURTHER PROSECUTIONS
Other than the charges in the attached Information, the United States
shall not prosecute Copley for any of the conduct described in paragraph E
above.
The United States expressly reserves the right to prosecute any
individual with respect to the conduct encompassed by this agreement,
including, but not limited to, employees, present and former employees,
agents, and representatives of Copley.
K. WHO IS BOUND BY AGREEMENT
This plea agreement is binding upon the United States Department of
Justice, including all United States Attorney's Offices, except that this
agreement does not bind the Tax Division of the United States Department of
Justice.
It is expressly understood that this plea agreement will have no effect
on state or local prosecuting authorities, except as provided in paragraphs E
and F. This plea agreement does not bind the Internal Revenue Service of the
United States Department of Treasury.
L. COMPLETE AGREEMENT
This agreement and the attachments referred to herein are the complete
and only agreement between the parties. No promises, agreements or conditions
have been entered into other than those set forth or referred to in this
letter. This agreement supersedes prior understandings, if any, of the
parties, whether written or oral. This agreement cannot be modified other than
in a written memorandum signed by the parties on the record in court.
If this letter accurately reflects the agreement entered into between the
United States and your client, Copley Pharmaceutical, Inc., and if the Board
of Directors of Copley Pharmaceutical, Inc., has authorized you to enter into
this agreement and to enter a plea of guilty to the count of the attached
Information, please sign below and return the original of this letter to
Assistant United States Attorney Diane Cabo Freniere.
Very truly yours,
/s/ Donald K. Stern /s/ Frank W. Hunger
- ------------------- -------------------
DONALD K. STERN FRANK W. HUNGER
United States Attorney Assistant Attorney General
District of Massachusetts Civil Division
Department of Justice
By:
/s/ Eugene M. Thirolf
---------------------
EUGENE M. THIROLF
Director, Office of Consumer
Litigation
CONSENTED TO AND AGREED BY
AUTHORIZATION OF THE BOARD
OF DIRECTORS OF COPLEY
PHARMACEUTICAL, INC.
/s/ Richard M. Cooper, Esquire
- ------------------------------
RICHARD M. COOPER, ESQUIRE
COUNSEL FOR COPLEY
PHARMACEUTICAL, INC.
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
) Criminal No.
UNITED STATES OF AMERICA )
) Violation:
v. )
) 18 U.S.C. (371
COPLEY PHARMACEUTICAL, INC. ) Conspiracy to Defraud the
) United States
INFORMATION
The United States Attorney Charges that:
PRELIMINARY ALLEGATIONS
At all times material hereto, unless otherwise alleged:
THE DEFENDANT
1. The defendant COPLEY PHARMACEUTICAL, INC. ("Copley"), a Delaware
corporation with its principal place of business in Canton, Massachusetts and
with manufacturing facilities in South Boston, Massachusetts, was engaged in
the business of the development, manufacture, promotion, sale and interstate
distribution of, among other things, prescription drugs. Copley manufactured
prescription and over-the-counter drugs at facilities located in Canton,
Massachusetts and South Boston, Massachusetts.
2. Brompheril Sustained Release Tablets ("Brompheril") were over-the-
counter drugs manufactured by Copley in South Boston, Massachusetts.
Brompheril, a sustained time-release tablet, was sold for use as a nasal
decongestant.
3. Hydrocortisone Acetate 1% and pramoxine 1% Topical Aerosol Foam
("Hydrocortisone Pramoxine") was a prescription drug manufactured by Copley in
South Boston, Massachusetts. Hydrocortisone Pramoxine, a rectal foam, was
sold to relive rectal inflammation.
4. Potassium Chloride Extended Release Tablets USP, 8 mEq ("Potassium
Chloride") were prescription drugs manufactured by Copley in South Boston,
Massachusetts. Potassium Chloride, a sustained time-release tablet, was sold
for treatment of potassium deficiency and was commonly used by individuals
taking diuretics, including persons with hear ailments.
5. Procainamide Sustained Release Tablets, 500 mg. ("Procainamide")
were prescription drugs manufactured by Copley in South Boston, Massachusetts.
Procainamide, a sustained time-release tablet, was an anti-arrhythmic drug
which was used to treat irregular heart beats.
THE FOOD AND DRUG ADMINISTRATION ("FDA")
6. Pursuant to the terms of the Food, Drug, and Cosmetic Act ("the
FD&C Act"), approval from the Food and Drug Administration for the drug
formula and method of manufacture had to be obtained by Copley before it
shipped in interstate commerce and distributed for human use, Brompheril,
Hydrocortisone Pramoxine, Potassium Chloride or Procainamide. Copley was not
the first manufacturer of any of these drugs and obtained approval to
manufacture and distribute each drug pursuant to an abbreviated New Drug
Application ("ANDA"), or, in the case of Brompheril, what is known as a "paper
NDA." The FD&C Act requires a manufacturer of a drug which obtained prior FDA
approval of that drug to submit an annual report regarding its production and
distribution of the drug.
a. In or about January 1985, Copley submitted an ANDA for
Brompheril (ANDA #89-116). In or about January, 1987, the FDA approved
Copley's Brompheril application as a paper NDA.
b. In or about March, 1986, Copley submitted its ANDA for
Hydrocortisone Pramoxine (ANDA #89-490). In or about May, 1988, in response
to an FDA deficiency letter dated April 28, 1988, Copley agreed, as an
amendment to the ANDA, to ultrasonically clean, during the manufacturing
process, the syringe applicator sold with and used to administer
Hydrocortisone Pramoxine Rectal Foam. In or about May, 1988, the FDA approved
Copley's Hydrocortisone Pramoxine application.
c. In or about June, 1985, Copley submitted its ANDA for
Potassium Chloride (ANDA #70-618). In or about September, 1987, the FDA
approved Copley's Potassium Chloride application.
d. In or about September 1984, Copley submitted its ANDA for
Procainamide (ANDA #88-974). In or about July, 1985, the FDA approved
Copley's Procainamide application.
7. Pursuant to the FD&C Act and once the FDA had approved the ANDA,
Copley was required, in connection with its manufacture and distribution of
Brompheril, Hydrocortisone Pramoxine, Potassium Chloride and Procainamide, to
seek prior approval from the FDA for any proposed changes in the approved
product formulation and manufacturing processes for these drugs, where such
changes affect the safety or efficacy of the drug. Where changes in either
formulation or manufacturing process would not affect the safety or efficacy
of the drug, Copley could make such changes without prior FDA approval, so
long as Copley notified the FDA in writing in the annual report for the drug
of the fact and nature of the change in formulation or process.
8. Between at least March, 1991 and January, 1994, Copley altered
the FDA-approved product formulation and manufacturing procedures for
Brompheril. Copley neither sought prior approval for these changes, nor
reported those changes to the FDA in any annual reports filed in that period
for Brompheril.
9. Between at least May, 1988 and July, 1994, Copley altered the FDA-
approved manufacturing procedure for Hydrocortisone Pramoxine and did not
report that change to the FDA for its scientific evaluation. Copley neither
sought prior approval from the FDA for this change, nor reported this change
to the FDA in any annual reports filed with the FDA in that period for
Hydrocortisone Pramoxine.
10. Between at least August, 1989 and July, 1994, Copley altered the
FDA-approved manufacturing procedures for Potassium Chloride and did not
report those changes to the FDA for its scientific evaluation. Copley neither
sought prior approval from the FDA for these changes, nor reported these
changes to the FDA in any annual reports filed with the FDA in that period.
11. Between at least August, 1989 and February, 1994, Copley altered
the FDA-approved manufacturing procedures for Procainamide and did not report
those changes to the FDA for its scientific evaluation. Copley neither sought
prior approval from the FDA for these changes, nor reported these changes to
the FDA in any annual reports filed with the FDA in that period.
COUNT ONE: 18 U.S.C. SECTION 371 (CONSPIRACY TO DEFRAUD)
12. The allegations set forth in paragraphs 1 through 11 are herein
incorporated in full.
13. From in or about May, 1988 through in or about July 1994, in
South Boston and Canton, Massachusetts, elsewhere in the District of
Massachusetts, and elsewhere across the United States, the defendant,
COPLEY PHARMACEUTICAL, INC.,
together with others known and unknown to the United States Attorney, did
knowingly and willfully combine, conspire and agree to defraud the United
States and its agency, the Food and Drug Administration ("FDA"), by its:
(1) manufacture of FDA-approved drugs, including prescription and over-the-
counter drugs, using methods different from those approved by the FDA;(2)
falsification of manufacturing batch records for FDA-approved drugs; (3)
submission of false annual reports to the FDA for approved drugs; and (4)
failure to seek prior FDA approval for certain manufacturing changes.
OBJECTIVE OF THE CONSPIRACY
14. The objective of the conspiracy was to obtain millions of dollars
from the consuming public without the inevitable interruption of production,
and thereby revenue, which would have resulted from the disclosure to the FDA
of such manufacturing changes.
MANNER AND MEANS OF THE CONSPIRACY
15. It was a part of the manner and means of the conspiracy that
Copley and its employees and other conspirators known and unknown to the
United States Attorney:
a. Prepared batch records for certain drugs, representing
falsely that the company had made a drug using the process approved by the
FDA, when it fact it had not;
b. Made changes in the manufacturing process approved by the FDA
for certain drugs, without notice to the FDA; and
c. Submitted false annual reports to the FDA for certain drugs,
falsely representing that the company and its employees had made no changes in
the manufacturing process, when in fact it had.
OVERT ACTS
16. In furtherance of the conspiracy, the defendant, Copley and its
employees and other conspirators known and unknown to the United States
Attorney, committed among other acts, the following overt acts in the District
of Massachusetts and elsewhere:
BROMPHERIL
a. Beginning on a date not known to the U.S. Attorney, but at
least by March 1, 1991, Copley and its employees began manufacturing
Brompheril using a different process and a different formula from that
approved by the FDA. In order to hide those changes from the FDA, Copley and
its employees prepared false batch records for all batches of Brompheril
manufactured after that date, which records falsely reported that
Copley had followed the approved process and had used the approved formula
during the manufacture of each batch of Brompheril.
b. Between March, 1991 and January, 1994, Copley and its
employees submitted to the FDA three annual reports for Brompheril, falsely
stating in each report that Copley had made no changes in the ANDA-approved
manufacturing process, and had made no changes in the ANDA-approved formula
for Brompheril, when in fact Copley and its employees had made such changes.
HYDROCORTISONE PRAMOXINE
c. Following approval of the ANDA and before manufacturing the
first batch of Hydrocortisone Pramoxine, Copley failed to use ultrasonic
cleaning equipment in preparing the foam applicator for Hydrocortisone
Pramoxine. Thereafter, Copley produced and distributed more than 50 batches
of Hydrocortisone Pramoxine, failing during the manufacturing process to clean
ultrasonically any foam applicators.
d. Between 1989 and 1994, Copley and its employees submitted to
the FDA six annual reports for Hydrocortisone Pramoxine, falsely stating in
each report that Copley had made no changes in the ANDA-approved process for
manufacturing Hydrocortisone Pramoxine, when in fact Copley and its employees
had not been cleaning the rectal foam applicators ultrasonically.
POTASSIUM CHLORIDE
e. Beginning on a date not known to the United States Attorney,
but at least as early as August, 1989, and continuing through in or about
July, 1994, Copley made changes in the manufacturing process approved by the
FDA for the production of Potassium Chloride. it was a part of this
conspiracy that Copley knew that the changes made in the manufacturing process
for Potassium Chloride were changes for which prior FDA approval was required.
f. Between 1989 and 1994, Copley and its employees submitted to
the FDA five annual reports for Potassium Chloride, falsely stating in each
report that Copley had made no changes in the ANDA-approved manufacturing
process for Potassium Chloride, when in fact Copley and its employees had made
changes in the manufacturing process.
PROCAINAMIDE
g. Beginning on a date not known to the United States Attorney,
but at least as early as August, 1989, and continuing through at least
February, 1994, Copley made changes, in the manufacturing process approved by
the FDA for the production of Procainamide. Copley did not seek prior
approval from the FDA for such changes and did not notify the FDA of such
changes in any annual report for Procainamide.
h. Between 1991 and 1994, Copley and its employees submitted to
the FDA four annual reports for Procainamide, falsely stating in each report
that Copley had made no manufacturing changes in the ANDA-approved
manufacturing process, when in fact Copley and its employees had made changes
in the manufacturing process followed for Procainamide.
EXECUTIVE LEVEL APPROVAL
i. In or about March, 1991, Copley Management undertook a review
of the manufacturing process being followed for Brompheril, Hydrocortisone
Pramoxine, and Procainamide, among other drugs. That review concluded that
the company was in fact deviating, for each of these drugs, from the
manufacturing process approved by the FDA. It was a part of this conspiracy
that Copley and its employees after this date continued to manufacture each
of these drugs in a manner not approved by the FDA and did not notify the FDA
of each of the changes.
All in violation of Title 18, United States Code, Section 371.
DONALD K. STERN
UNITED STATES ATTORNEY
DISTRICT OF MASSACHUSETTS
By: /s/ Michael K. Loucks
-----------------------------
MICHAEL K. LOUCKS
Assistant U.S. Attorney
/s/ Diane Cabo Freniere
------------------------------
DIANE CABO FRENIERE
Assistant U.S. Attorney
EXHIBIT 10.3
AGREEMENT
Copley Pharmaceutical, Inc. (Copley) agrees to do the Following within 90 days
of signing this agreement:
1. Cooperate fully with the Food and Drug Administration (FDA) and other
Federal investigations to determine the perpetrators, participants, causes,
and scope of all wrongful acts related to Copley's drug approval process and
to assess the effects of such acts on safety, effectiveness, and quality of
its products;
2. Identify all individuals now employed by Copley who were responsible for
wrongful acts and remove such persons from any authority on matters under
jurisdiction of the FDA;
3. Conduct a review, acceptable to FDA, of twenty drug applications to be
selected by FDA and identify all instances of wrongful acts associated with
these twenty Copley drug applications submitted to the FDA, including but not
limited to, any discrepancies between manufacturing conditions and controls
identified in approved applications, supplements, or annual reports, and
manufacturing conditions and controls utilized during actual production. The
review shall be done by an outside auditor or team of auditors acceptable to
FDA who are qualified by training and experience to conduct such a review. If
after review of these twenty applications FDA has determined that the
applications accurately reflect the actual and necessary manufacturing and
control procedures and there exists no data integrity problems with any of the
reviewed applications it will deem the review to be completed and require no
further review by Copley of additional applications. All oral reports related
to the review shall be promptly, accurately, and completely reduced to writing
and all written reports related to the review that are provided to Copley
shall be provided to both FDA New England District Office and FDA's Center for
Drug Evaluation and Research, Division of Manufacturing and Product Quality,
for evaluation, within 10 days after receipt by Copley;
4. Develop and implement a comprehensive ethics program to preclude future
instances of wrongful acts related to the drug application process;
5. Correct all current applications by supplement or voluntary withdrawal as
required by the nature of the deficiency;
In addition, Copley agrees that it will not manufacture or distribute any
Albuterol Sulfate for Inhalation product without first obtaining written
approval from FDA's Center for Drug Evaluation and Research, Division of
Manufacturing and Product Quality. If after one year from the date of signing
this agreement Copley has not made such a request to FDA for written approval
to manufacture or distribute Albuterol Sulfate for Inhalation product it will
immediately submit a written request to FDA to withdraw voluntarily, pursuant
to the procedures outlined in 21 CFR 314, 150 (d), all applications for
Albuterol Sulfate for Inhalation. Copley further agrees to take any
additional measures that FDA deems necessary to effectively carry out the
foregoing obligations and to assure that Copley's new drug applications,
including amendments and supplements thereto, are in full compliance with the
law and accurately and completely reflect the products that are the subject of
such applications.
6. Report to FDA's New England District Office every 30 days after signing
the plea agreement each of the steps Copley has taken to implement the
foregoing measures.
Provided that Copley promptly and completely complies with each of the
terms of this agreement, it is not FDA's present intention to impose civil
money penalties against Copley, debar Copley under section 306 (b) of the Act,
or prohibit Copley from submitting new applications, amendments, or
supplements as a result of the fact of Copley's guilty plea to the charge set
forth in a criminal information. However, nothing herein shall preclude FDA
from implementing the Application Integrity Policy, imposing civil money
penalties, debarring Copley under section 306 (b) of the Act, and/or taking
any other available judicial or administrative remedies that FDA deems
necessary should new facts become known to FDA meriting such actions.
Dated this 22nd Day of May, 1997.
CONSENTED TO AND AGREED BY
AUTHORIZATION OF THE BOARD
OF DIRECTORS OF COPLEY PHARMACEUTICAL, INC.
/s/ Richard M. Cooper
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RICHARD M. COOPER
Counsel for Copley Pharmaceutical, Inc.
/s/ Douglas I. Ellsworth
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DOUGLAS I. ELLSWORTH
Director - Division of Manufacturing and Product Quality
Center for Drug Evaluation and Research
Food and Drug Administration
