United States of America v. Dakota Laboratories, LLC et al

Filing 4

CONSENT DECREE OF PERMANENT INJUNCTION. Signed by U. S. District Judge Lawrence L. Piersol on 8/26/13. (DJP)

UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
UNITED STATES OF AMERICA,

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AUG 262013

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Plaintiff,

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v.
DAKOTA LABORATORIES, LLC, a
limited liability company, and CHARLES
L. VOELLINGER, SR., an individual,
Defendants.

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FILED

Civil No.

13~

L(tSb

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CONSENT DECREE OF PERMANENT INJUNCTION
Plaintiff, the United States of America, by its undersigned attorneys, having filed a
Complaint for Permanent Injunction ("Complaint") against Dakota Laboratories, LLC, a limited
liability company, and Charles L. Voellinger, Sr., an individual (hereinafter, collectively,
"Defendants"), and Defendants having appeared and having consented to entry of this Decree
without contest, without admitting or denying the allegations in the Complaint, and before any
testimony has been taken, and the United States of America having consented to this Decree;
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED as follows:
1.

This Court has jurisdiction over the subject matter of this action and has personal

jurisdiction over all parties to '-his action.
2.

The Complaint states a cause of action against Defendants under the Federal Food,

Drug, and Cosmetic Act, 21 U.s.c. §§ 301 et seq. (the "Act").
3.

The Complaint alleges that Defendants violate the Act, 21 U.S.C. § 331 (a), by

introducing and causing to be introduced, and delivering and causing to be delivered for
introduction, into interstate commerce articles of drug, as defined by 21 U.S.c. § 321 (g)(1), that

are adulterated within the meaning of21 U.S.c. § 351 (a)(2)(B), in that they have been
manufactured, processed, packed, labeled, held, and distributed in violation of current good
manufacturing practice ("CGMP"). 21 U.S.C. § 351(a)(2)(B) and 21 C.F.R. Parts 210 and 211.
4.

The Complaint alleges that Defendants violate the Act, 21 U.S.c. § 331 (k), by causing

the adulteration within the meaning of21 U.S.C. § 351 (a)(2)(B) of articles of drug while such
articles are held for sale after shipment of one or more of their components in interstate
commerce.
5.

For purposes of this Decree, "Defendants' Facilities" shall refer to 1022 North Main

Street, Mitchell, South Dakota, and any future locations at which Dakota Laboratories, LLC, or
any successor manufactures, processes, packs, labels, holds, or distributes any article of drug.
6.

Upon entry of this Decree, Defendants represent to the Court that Dakota Laboratories,

LLC, is not directly or indirectly engaged in the manufacture, processing, packing, labeling,
holding, or distribution of any article of drug. Defendants further represent that Dakota
Laboratories, LLC, has eliminated all inventory of drugs and that notice of discontinuance of its
operations has been communicated in writing to its customers and posted on its website.
7.

Upon entry of this Decree, Defendants and each and all of their officers, agents,

employees, attorneys, successors, and assigns, and all persons in active concert or participation
with any of them who receive notice of this Decree, are permanently restrained and enjoined
under 21 U.S.C. § 332(a) from directly or indirectly manufacturing, processing, packing,
labeling, holding, or distributing any article of drug at or from Defendants' Facilities unless and
until:
A. Defendants notify the United States Food and Drug Administration ("FDA") in
writing at least ninety (90) calendar days prior to re-entering the business of manufacturing,

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processing, packing, labeling, holding, or distributing any article of drug at or from Defendants'
Facilities;
B.

The facilities, methods, and controls used to manufacture, process, pack, label,

hold, and distribute drugs at or from Defendants' Facilities are established, operated, and
administered in conformity with COMPo 21 U.S.c. § 351(a)(2)(B) and 21 C.F.R. Parts 210 and
211;
C. Defendants retain, at Defendants' expense, an independent person or persons (the
"COMP expert"), who is without any personal or financial ties (other than the retention
agreement) to Defendants and their families, and who, by reason of background, training,
education, or experience, is qualified to inspect Defendants' Facilities to determine whether the
methods, facilities, and controls are operated and administered in conformity with COMPo
Defendants shall notify FDA in writing of the identity and qualifications of the COMP expert as
soon as they retain such expert;
D. The COMP expert performs a comprehensive inspection of the facilities, methods,
and controls used to manufacture, process, pack, label, hold, and distribute drugs at or from
Defendants' Facilities to determine whether they are in compliance with COMPo This inspection
shall include, at a minimum, an evaluation as to whether Defendants have established a
comprehensive written quality assurance ("QA") and quality control ("QC") program ("QAlQC
program") that is adequate to ensure continuous compliance with the Act, its implementing
regulations, and this Decree. The expert shall determine whether the QAlQC program, at a
minImum:

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(I) Addresses all facets of compliance monitoring and trend analyses, and internal
audit procedures, and confirms that Defendants' Quality Unit is adequately trained and staffed to
evaluate CGMP compliance and prevent and correct future deviations from CGMP;
(2) Includes written procedures to ensure that Defendants, in a timely manner,
thoroughly investigate (i) product deviations, (ii) reports of complaints about Defendants'
products, and (iii) any unexplained discrepancy or failure of a batch of drug or its components to
meet any of the product's or component's specifications, including the extension of such
investigation to other batches of the same drug product and other drug products that may have
been associated with the specific discrepancy or failure, and to take required and timely
corrective actions for all products that fail to meet their specifications;
(3) Includes written procedures to ensure that Defendants implement and maintain
appropriate controls to prevent microbiological contamination of drug products purporting to be
sterile, including written procedures to ensure that (i) all aseptic and sterilization processes are
validated; (ii) simulation tests (e.g., media fills) are representative of actual filling operations and
include worst-case conditions; (iii) operators practice appropriate aseptic techniques; (iv) HEP A
filtration systems are adequate to maintain the ISO 5 area; and (v) appropriate environmental
monitoring, including trend analysis and investigations, is conducted;
(4) Establishes mechanisms to ensure that written procedures are periodically
evaluated to ensure they reflect current and CGMP-compliant practices, and that these
procedures provide for all facets of CGMP compliance to be reviewed and controlled by an
independent QA unit;
(5) Includes written procedures to ensure that (i) Defendants' QA personnel are
promptly notified in writing of all deviations and/or problems that could affect the safety,

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identity, strength, quality, and purity of any drug; (ii) Defendants' QA personnel participate in or
monitor the implementation and verification of corrective actions to prevent future occurrences
of such deviations and/or problems; and (iii) there are systems to ensure that such written
procedures are continuously followed; and
(6) Includes written procedures that specify the responsibilities and procedures
applicable to QA and QC personnel, and establishes systems to ensure that such procedures are
followed;
E.

The CGMP expert certifies in writing to FDA that:
(1) He or she has inspected the facilities, methods, and controls used to

manufacture, process, pack, label, hold, and distribute drugs at or from Defendants' Facilities;
(2) All CGMP deviations brought to Defendants' attention since 2010 by FDA, the
CGMP expert, or any other source, including but not limited to any experts hired prior to the
entry of this Decree, have been corrected; and
(3) Such facilities, methods, and controls are in compliance with the requirements
ofCGMP. As part of this certification, the CGMP expert shall include a full and complete
detailed report of the results of his or her inspection(s);
F.

Defendants report to FDA in writing the actions they have taken to:
(1) Correct the CGMP deviations brought to Defendants' attention by FDA, the

CGMP expert, and any other source, including but not limited to any experts hired prior to the
entry of this Decree; and
(2) Ensure that the methods used in, and the facilities and controls used for,
manufacturing, processing, packing, labeling, holding, and distributing drugs at or from

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Defendants' Facilities are operated and will be continuously administered in conformity with
CGMP;
G. FDA, as it deems necessary to evaluate Defendants' compliance with the terms of
this Decree, inspects Defendants' Facilities to determine whether the requirements of this Decree
have been met, and whether Defendants' Facilities are operating in conformity with CGMP, the
Act, and its implementing regulations; and
H. FDA notifies Defendants in writing that Defendants appear to be in compliance
with the requirements set forth in Paragraphs 7(A)-(F). In no circumstance will FDA's silence
be construed as a substitute for written notification.
8.

If Defendants have re-entered the business of manufacturing, processing, packing,

labeling, holding, or distributing any article of drug at or from Defendants' Facilities in
accordance with Paragraph 7, then, after Defendants have complied with Paragraphs 7(A)-{F)
and FDA has notified them pursuant to Paragraph 7(H), Defendants shall retain an independent
person or persons (the "auditor") who shall meet the criteria described in Paragraph 7(C) to
conduct audit inspections of the drug manufacturing operations at Defendants' Facilities no less
frequently than once every six (6) months for a period of three (3) years and then annually for a
period no less than the following two (2) years. The first audit shall occur not more than six (6)
months after Defendants have received FDA's written notification pursuant to Paragraph 7(H).
If Defendants choose, the auditor may be the same person or persons retained as the CGMP
expert in Paragraph 7(C).
A. At the conclusion of each audit inspection, the auditor shall prepare a detailed
written audit report ("audit report") analyzing whether Defendants are in compliance with
CGMP and identifying any deviations from CGMP ("audit report observations"). As a part of

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every audit report, except the first audit report, the auditor shall assess the adequacy of corrective
actions taken by Defendants to correct all previous audit report observations. The audit reports
shall be delivered contemporaneously to Defendants and FDA by courier service or overnight
delivery service, no later than fifteen (15) calendar days after the date the audit inspection is
completed. In addition, Defendants shall maintain the audit reports in separate files at their
facility and shall promptly make the audit reports available to FDA upon request.
B.

If an audit report contains any observations indicating that Defendants are not in

compliance with COMP, Defendants shall, within thirty (30) calendar days of receipt of the audit
report, correct those observations, unless FDA notifies Defendants that a shorter time period is
necessary. If, after receiving the audit report, Defendants believe that correction of the
deviations will take longer than thirty (30) calendar days, Defendants shall, within ten (10)
calendar days of receipt of the audit report, submit to FDA in writing a proposed schedule for
completing corrections ("correction schedule"). The correction schedule must be reviewed and
approved in writing by FDA. In no circumstance will FDA's silence be construed as a substitute
for written approval. Within thirty (30) calendar days of Defendants' receipt of an audit report,
unless FDA notifies Defendants that a shorter time period is necessary, or within the time period
provided in a correction schedule approved by FDA, the auditor shall review the actions taken by
Defendants to correct the audit report observations. Within fifteen (15) calendar days of
beginning that review, the auditor shall report in writing to FDA whether each of the audit report
observations has been corrected and, if not, which audit report observations remain uncorrected.
9.

Nothing in Paragraph 7 shall preclude Defendants from receiving, holding, or

distributing at or from Defendants' Facilities any finished drug products that are in compliance

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with the Act and all applicable regulations that Defendants purchase from third parties, so long
as:
A.

Defendants notify FDA in writing at least forty-five (45) calendar days prior to the

first time they receive, hold, or distribute at or from Defendants' Facilities such finished drug
products;
B.

Defendants do not manufacture, process, pack or label such finished drug products

and act only as a distributor of such products; and
C. The third parties who manufacture and supply the finished drug products to
Defendants are not owned, controlled by, or otherwise affiliated in any way with Defendants or
any of Defendants' officers, directors, agents, representatives, employees, or attorneys.
10. Upon entry of this Decree, Defendants and each and all of their officers, agents,
employees, attorneys, successors, and assigns, and all persons in active concert or participation
with any of them who receive notice of this Decree, are permanently restrained and enjoined
under 21 U.S.c. § 332(a) from directly or indirectly:
A. Introducing or delivering for introduction into interstate commerce any drug that is
adulterated within the meaning of21 U.S.c. § 3S1(a)(2)(B);
B. Causing any drug to be adulterated within the meaning of21 U.S.C. § 35 I (a)(2)(B)
while such drug is held for sale after shipment of one or more components in interstate
commerce; and
C.

Failing to implement and continuously maintain the requirements of this Decree.

11. If, at any time after entry ofthis Decree, FDA determines, based on the results of an
inspection, the analysis of a sample, a report or data prepared or submitted by Defendants, the
CGMP expert or the auditor, or any other information, that Defendants have failed to comply

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with any provision ofthis Decree, have violated the Act or its implementing regulations, or that
additional corrective actions are necessary to achieve compliance with this Decree, the Act, or its
implementing regulations, FDA may, as and when it deems necessary, notify Defendants in
writing of the noncompliance and order Defendants to take appropriate corrective action,
including but not limited to ordering Defendants to immediately take one or more of the
following actions:
A. Cease all manufacturing, processing, packing, labeling, holding, or distributing any
or all articles of drug at or from Defendants' Facilities;
B.

Recall, at Defendants' own expense, any article of drug that was manufactured,

processed, packed, labeled, held, or distributed at or from Defendants' Facilities and that is
adulterated or otherwise in violation of this Decree, the Act, or its implementing regulations;
C.

Revise, modify, expand, or continue to submit any reports or plans prepared

pursuant to this Decree;
D. Submit additional reports or information, including analytical results, to FDA if
requested; and
E.

Take any other corrective actions at Defendants' Facilities or relating to any article

of drug manufactured, processed, packed, labeled, held, or distributed at or from Defendants'
Facilities, as FDA, in its discretion, deems necessary to bring Defendants into compliance with
this Decree, the Act, or its implementing regulations.
12. The following process and procedures shall apply when FDA issues an order under
paragraph 11:

A. Unless a different time frame is specified by FDA in its order, within ten (10)
business days after receiving such order, Defendants shall notify FDA in writing either that: (i)

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Defendants are undertaking or have undertaken corrective action, in which event Defendants
shall also describe the specific action taken or proposed to be taken and the proposed schedule
for completing the action; or (ii) Defendants do not agree with FDA's order. If Defendants
notify FDA that they do not agree with FDA's order, Defendants shall explain in writing the
basis for their disagreement; in so doing, Defendants may also propose specific alternative
actions and timeframes for achieving FDA's objectives.
B.

If Defendants notify FDA that they do not agree with FDA's order, FDA will

review Defendants' notification, and thereafter, in writing, affirm, modify, or withdraw its order,
as FDA deems appropriate. If FDA affirms or modifies its order, it will explain the basis for its
decision in writing. The written notice of affirmation or modification shall constitute final
agency action.
C.

If FDA affirms or modifies its order, Defendants shall, upon receipt of FDA's

order, immediately implement the order (as modified, if applicable), and may, if they so choose,
bring the matter before this Court on an expedited basis. While seeking Court review,
Defendants shall continue to diligently implement and comply with FDA's order, unless and
until the Court stays, reverses, or modifies FDA's order. Judicial review of FDA's order shall be
made pursuant to paragraph 21.
D.

The process and procedures set forth in paragraphs 12 (A}-(C) shall not apply

to any order issued pursuant to paragraph II if such order states that, in FDA's judgment, the
order raises a significant public health concern. In such case, Defendants shall, upon receipt of
such order, immediately and fully comply with the terms of the order. Should Defendants seek
to challenge any such order, they may petition this Court for relief while they implement FDA's

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order. Judicial review of FDA's decision under this paragraph shall be made pursuant to
paragraph 21.
] 3. Representatives of FDA shall be pennitted, without prior notice and as and when FDA
deems necessary, to make inspections of Defendants' Facilities and, without prior notice, take
any other measures necessary to monitor and ensure continuing compliance with the tenns ofthis
Decree. During such inspections, FDA representatives shall be pennitted ready access to
Defendants' Facilities including, but not limited to, all buildings, equipment, in-process and
finished materials and products, containers, packaging, labeling, other promotional materials,
and other documents and things therein; to take photographs and make video recordings; to take
samples of Defendants' in-process and finished materials and products, containers, packaging,
labeling, and other promotional material; and to examine and copy all records relating to the
receipt, manufacture, processing, packing, labeling, holding, and distribution of any and all of
Defendants' drugs, including components, in order to ensure continuing compliance with the
tenns of this Decree. The inspections shall be pennitted upon presentation of a copy of this
Decree and appropriate credentials. The inspection authority granted by this Decree is separate
from, and in addition to, the authority to make inspections under the Act, 21 U.S.C. § 374.
14. Defendants shall pay all costs of FDA's inspections, investigations, supervision,
reviews, examinations, and analyses that FDA deems necessary to evaluate Defendants'
compliance with any part of this Decree at the standard rates prevailing at the time the activities
are accomplished. As of the date of entry of this Decree, these rates are: $87.57 per hour and
fraction thereof per representative for inspection work; $104.96 per hour and fraction thereof per
representative for analytical or review work; $0.565 per mile for travel expenses by automobile,
government rate or the equivalent for travel by air; and the published government per diem rate

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for subsistence expenses where necessary. In the event that the standard rates applicable to FDA
supervision of court-ordered compliance are modified, these rates shall be increased or decreased
without further order of the Court.
15. Defendants shall provide notice of this Decree in the following manner:
A. Within five (5) business days of the entry of this Decree, Defendants shall provide
a copy of the Decree, by personal service or by certified mail (return receipt requested), to each
and all of Defendants' officers, agents, employees, attorneys, successors, assigns, and all persons
in active concert or participation with any of them in the manufacture, processing, packing,
labeling, holding, or distribution of any article of drug at or from Defendants' Facilities. Within
fifteen (15) calendar days of the entry of this Decree, Defendants shall provide to FDA an
affidavit stating the fact and manner oftheir compliance with this paragraph, identifying the
names, addresses, and positions of all persons who received a copy of this Decree pursuant to
this paragraph; and
B.

If, after entry of this Decree, any of the Defendants becomes associated with any

additional officers, agents, employees, attorneys, successors, assigns, or persons in active concert
or participation with any of them, in the manufacture, processing, packing, labeling, holding, or
distribution of any article of drug at or from Defendants' Facilities, Defendants shall
immediately provide a copy of this Decree, by personal service or by certified mail (return
recei pt requested), to each such additional person. Within ten (10) calendar days of each time
that any Defendant becomes associated with any additional person(s), Defendants shall provide
to FDA an affidavit stating the fact and manner of their compliance with this paragraph,
identifying the names, addresses, and positions of the additional person(s) who received a copy
of this Decree pursuant to this paragraph.

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16. Within five (5) calendar days of having notified FDA in writing prior to re-entering the
business of manufacturing, processing, packing, label ing, holding, or distributing any article of
drug at or from Defendants' Facilities, in accordance with Paragraph 7(A), Defendants shall post
a copy of this Decree on a bulletin board in a common area at Defendants' Facilities and shall
ensure that the Decree remains posted at each location for as long as the Decree remains in
effect.
17. Defendants shall notify FDA in writing, at least fifteen (15) calendar days before any
change in ownership, name, or character of their business that occurs after entry of this Decree,
including relocation, incorporation, reorganization, creation of a subsidiary, dissolutioQ,
bankruptcy, assignment, sale or any other change in the structure or identity of Dakota
Laboratories, LLC (or any of its parents or subsidiaries), or the sale or assignment of any
business assets, such as buildings, equipment, or inventory, that may affect obligations arising
out of this Decree. Defendants shall provide a copy of this Decree to any prospective successor
or assign at least ten (10) calendar days prior to any sale or assignment. Defendants shall furnish
FDA with an affidavit of compliance with this paragraph no later than ten (10) calendar days
prior to such assignment or change in ownership.
18. All notifications, correspondence, and communications to FDA required by the terms of
this Decree shall be prominently marked "Decree Correspondence" and addressed to the
Director, Minneapolis District Office, U.S. Food and Drug Administration, 250 Marquette
Avenue, Suite 600, Minneapolis, Minnesota 55401, and shall reference this civil action by case
name and civil action number.
19. If any Defendant fails to comply with the Act, its implementing regulations, or any
provision of this Decree, then Defendants shall pay to the United States of America liquidated

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damages in the sum of seven thousand five hundred dollars ($7,500) per violation for each day
such violation continues and an additional sum equal to twice the retail value of each shipment of
drugs that violate the Decree, the Act, or its implementing regulations. The remedy in this
paragraph shall be in addition to any other remedies available to the United States under this
Decree or the law.
20. Should the United States bring and prevail in a contempt action to enforce the terms of
this Decree, Defendants shall, in addition to other remedies, reimburse the United States for its
attorneys' fees, expert witness fees, travel expenses incurred by attorneys and witnesses,
investigational and analytical expenses, administrative and court costs, and any other costs or
fees relating to the contempt proceeding.
21. Defendants shall abide by the decisions of FDA, and FDA's decisions shall be final.
All decisions conferred upon FDA in this Decree shall be vested in FDA's discretion and, if
contested, shall be reviewed by this Court under the arbitrary and capricious standard set forth in
5 U .S.C. § 706(2)(A). Review by the Court of any FDA decision rendered pursuant to this
Decree shall be based exclusively on the written record before FDA at the time the decision was
made. No discovery shall be taken by either party.
22. Except as provided in the foregoing provisions of this Decree, the parties shall bear
their own costs and attorneys' fees in this action.

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23. This Court retains jurisdiction over this action and the parties thereto for the purpose of
enforcing and modifying this Decree and for the purpose of granting such additional relief as
may be necessary or appropriate.

jl

SO ORDERED, this 1J;tiay of

(.\
~~ t=

,2013.

BY THE COURT:

ATTEST:
JOSEPH HAAS, CLERK

awrence L. Piersol
nited States District Judge

BY:~mN--J--.::.~~~~~
DEPUTY

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Entry consented to:
For Defendants

For Plaintiffs
BRENDAN JOHNSON

United States Attorney

STUART F. DELERY

Assistant Attorney General

Civil Division

MAAME EWUSI-MENSAH FRIMPONG

Deputy Assistant Anorney General

individual capacity

MICHAEL S. BLUME

Director

By:

Attorneys for Defendants
DOUGLAS B. FARQUHAR
Hyman, Phelps & McNamara, P.C.
700 13 th Street, N. W.
Suite 1200
Washington, D.C. 20005
[phone]
[e-mail]

SHANNON L. PEDERSEN
Trial Attorney
Consumer Protection Branch
U.S. Department of Justice
P.O. Box 386
Washington, D.C. 20044
[phone]
[e-mail]

Of Counsel:
WILLIAM B. SCHULTZ
General Counsel
Food and Drug Division
Office of General Counsel
U.S. Department of Health and Human Services
ELIZABETH H. DICKINSON
Chief Counsel
ANNAMARIE KE..'V[PIC
Deputy Chief Counsel for Litigation
CLAUDIA J. ZUCKERMAN
Senior Counsel
Office of the Chief Counsel
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Food and Drug Administration

10903 New Hampshire Avenue

White Oak 31, Room 4550

Silver Spring, MD 20993-0002

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