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    Features

    Risk Management: Carpe Diem!

    Seize control of your operations today and minimize the risk of litigation tomorrow.

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    Thomas Delaney06.01.06
    Carpe Diem, "seize the day," was the mantra chanted by prep school students in the 1989 hit movie Dead Poets Society. English professor John Keating (played by Robin Williams) relied on this Latin phrase to teach his students about life's hardest lessons. While poetry and romanticism may not be the focus of daily operations in the dietary supplement industry, the philosophy behind carpe diem is worthwhile. By seizing control of daily operations today, supplement manufacturers, as well as formulators, retailers and even raw material suppliers, can effectively minimize the risk of litigation, while maximizing the legal defenses available to them tomorrow, in the event that they are sued.


    A Target Industry



    The dietary supplement industry, especially in recent years, has become a target for litigation. The industry addresses a variety of health issues, and in so doing, offers a viable and often more affordable alternative to conventional healthcare. In today's health conscious market, there is increased emphasis on wellness and prevention, even among persons with no known health impairments. As a result, the industry continues to grow both in terms of members and profits. However, the emerging success of this industry has been plagued by negative publicity, which is often associated with litigation: the battle over ephe­drine, adulteration claims made by athletes who have tested positive for banned substances, and the increasing number of ingredients added to the list of those excluded under most liability insurance policies. Even television broadcasts have profiled the disputes over the safety of certain well-established ingredients like vitamin E. This public emphasis is simply a reminder of the skepticism among some healthcare professionals, who remain highly critical of dietary supplements being treated as food, rather than drugs, under the Dietary Supplement Health and Education Act of 1994 (DSHEA).

    Industry success and the concomitant negative publicity, foster the perception that the industry is "unregulated" under DSHEA. Any business that has a hand in the development, production, marketing or distribution of a dietary supplement is a potential target for a product liability or consumer protection claim, based on an allegedly dangerous or adulterated product, or misinterpreted marketing or advertising strategies. Notably, opportunistic attorneys are not limited to representing injured persons in the private sector, but may also represent government regulators from the FDA or FTC.


    Daily Operations



    Daily operations have a significant impact on your product and commercial liability risk exposure. From maintaining proper records and securing indemnity agreements to managing qualified personnel and minding labeling and advertising requirements, how your business operates every day can mean the difference between avoiding litigation altogether and unnecessarily exposing your business (and maybe your own as­sets) to costly litigation. The affirmative steps you take now can minimize your litigation risk and maximize your legal defenses.


    Record Preparation and Maintenance



    Your success in risk reduction and management may rise and fall on the quality of your documents and record-keeping procedures. The daily operations you record and how you record them will be your first line of defense against most, if not all, claims. Your records (or the absence of them) will be the subject of the first request for information from your company whether by an FDA auditor or private attorney. And, remember the old adage: if it is not documented, it did not happen. You must establish a strong first line of defense by preparing and maintaining appropriate records on issues that matter most to the integrity of your business.

    First, written standard operating procedures (SOPs) are essential. They must be comprehensive, but also simple and understandable to those who implement them daily. And, they must cover all operations. For example, standard procedures for your physical plant should address proper storage of equipment and raw materials, adequate pest control, as well as waste and rubbish disposal. Your procedures for sanitation should be written to include a schedule for regular cleaning, and identify the responsible person(s) charged with the timely and consistent accomplishment of enumerated tasks. Written SOPs covering these issues demonstrate your firm understanding and appreciation of the broad considerations that factor into the quality control of your dietary supplement business.

    Records on specific quality control procedures-from receipt of raw materials to testing, stability data and storage-are also critical. Standard procedures for raw materials should include identification of the material, including its form, (e.g., a plant versus an extract) and a complete certificate of analysis, as well as a protocol for testing the material to confirm and track the identity of each lot.

    Your written protocol must also es­tablish the parameters of responsibility for the Quality Control Unit. The Unit should be autonomous from all other departments and should have final approval of all products before distribution. Document change control for production and laboratories (whether in house or outside labs) must be specifically addressed, along with procedures for test methodology for out-of-specification results. Proper record-keeping on these issues should not only simplify FDA review, but also may quash any adulteration claim before it gets off the ground.

    Production records are no different. Written procedures for how and when to prepare batch production and control records for each lot must be routine. These records should include not only all of the necessary information on each ingredient, but also a complete and accurate picture of the production cycle, processing and equipment information, and records of deviations and investigations. The standard operating procedure should also identify when and how the procedures are reviewed and by whom in the Quality Control Unit.

    Of course, written SOPs are only as meaningful as the records verifying that the procedures were implemented. The goal for re­cord-keeping can be summed up by one word: "traceability." You must be able to trace your company's steps from daily maintenance of both the physical plant and the manufacturing equipment through product production and even distribution, so that you can verify in writing that SOPs were followed during the production of a given product. Traceability and verified compliance procedures are important to potential post-distribution issues, and should secure the best first line of defense for your business. Your ability to trace and verify the steps your business takes daily is critical to its viability. It is better for you to take a proactive interest in your standard operating procedures then to have someone else take such an interest, particularly when that someone is motivated by financial gain literally at your expense.


    Contracts and Indemnity Agreements



    Like record-keeping, it is also critical for you to document and record your specific role and responsibilities in writing when dealing with others in the industry. It is the safest and most cost effective way to protect against liability for miscues of others. You can no longer afford to operate on purchase orders, invoices and certificates of analyses alone. Whether you are working with a product formulator, a raw material supplier, an outside laboratory, or a contract manufacturer, a written contract with clear indemnity obligations is your best opportunity to avoid having to take responsibility for an event in which you had no involvement and over which you had no control. Otherwise, you may be found legally responsible for something that you actually did not do.


    Personnel Management



    You may also minimize your risk exposure with proper training, management and supervision of company personnel. All employees should be trained and educated on SOPs, record-keeping, proper maintenance and use of equipment, and the parameters of their job-specific responsibilities. You should also provide opportunities for retraining on a regular basis to cover evolving procedures, new equipment, and/or modified responsibilities. Of course, the benefits of any training program are limited if the training is not confirmed in writing. Here again, written training procedures and written verification of when and how that training was provided, and by whom, will allow you to use your personnel as an asset against any outside review of your operations.

    The selection of key personnel is also critical. For example, your Quality Control Supervisor must have the qualifications and experience necessary not only to design and supervise an effective QC program, but to manage those persons charged with implementing that program. In addition, the QC supervisor will likely be the company representative who fields questions from FDA or an attorney who seeks to depose a company representative "most knowledgeable" about quality control procedures and issues. Your QC supervisor must be knowledgeable and experienced in the field, as well as presentable and articulate. He or she must also be savvy enough to provide your business the protection it needs under the most stressful of circumstances, including when your business' reputation and/or legal position is at stake.


    Representations



    Every day your company publishes statements, expressed and implied, about its products and, thus, its quality control process, to consumers. These representations are made in various forms, including labels, warnings and instructions, and advertising. The language you select for these representations can provide a creative, motivated lawyer with an opportunity to pursue new claims, or bolster an existing action.

    For example, failure to comply with FDA labeling requirements for something as potentially innocuous as "high" or "good source" claims, health or qualified health claims, or the Supplement Facts may not only subject your business to FDA or FTC attack, but also may be used by a private lawyer to highlight poor quality control in the labeling, manufacturing or quality control process. Even if a minor miscue in labeling or warning is not directly relevant to a pending personal injury or consumer protection claim, a savvy plaintiff will highlight that portion of the label as the single most important factor in his or her decision to use the product as part of their daily routine.

    Your product representations will be scrutinized until they are misinterpreted and even re-worded to fit the purposes and goals of the critic(s). Strict adherence to FDA and industry requirements today (to the extent current guidelines are sufficiently clear), can make the difference between deterring a claim, and trying to explain to a jury what you really intended to say in your advertisement years after it was first published.


    Summary



    The industry emphasis on the creation and implementation of Good Manufacturing Practices (GMPs)-whether promulgated by industry groups or promised (but not yet delivered) by FDA-will guide future attacks on members of the dietary supplement industry. Pending and future federal legislation, including one current proposal to re­quire uniform procedures for reporting adverse events, will fuel, as well as focus those attacks, which could cripple even the most diligent businesses.

    Your daily risk management techniques should be continually evolving. It should be an ongoing process whereby your company regularly reviews its SOPs, record-keeping, quality control protections and personnel training. You must include in that process an effort to identify those areas that require change or improvement either based upon prior performance or modified industry standards. The expense of extra time and money to establish and maintain written SOPs and verification of adherence to those daily procedures, can protect your business' reputation and the integrity it needs to survive and flourish in today's litigious society. And, while it may not necessarily be romantic to mind your daily operations, a swift, successful defense of any legal battle can result in justice that is truly poetic.NW


    About the author: Thomas Delaney is a partner with the law firm Sedgwick Detert, Orange County, CA. Mr. Delaney concentrates his practice in the areas of products and general liability, and has handled cases involving a variety of products, including pharmaceuticals and dietary supplements. Mr. Delaney is also a National Product Liability Counsel for a dietary supplement manufacturer, as well as a manufacturer of high performance racing bicycles. He can be reached at 949-852-8200; E-mail: thomas.delaney@sdma.com.
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