final slides for total recall - foley & lardner“a recall will be terminated when fda...

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©2014 Foley & Lardner LLP • Attorney Advertising • Prior results do not guarantee a similar outcome • Models used are not clients but may be representative of clients • 321 N. Clark Street, Suite 2800, Chicago, IL 60654 • 312.832.4500

Tuesday, March 4, 2014

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©2014 Foley & Lardner LLP

Speakers

Michael D. FlanaganPartnerFoley & Lardner LLP

David L. RosenPartnerFoley & Lardner LLP

Nathan A. BeaverPartnerFoley & Lardner LLP

Moderators

Panelists

Brian KalielPartnerMiller Thomson LLP

Robert AndersonPartnerMiller Thomson LLP

Catherine BatePartnerMiller Thomson LLP

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U.S. Recall Background■ Historically in the U.S. all FDA recalls were

voluntary.

− FDA did not have authority to order recall though itcould pursue seizure or injunction.

■ Since Food Safety Modernization Act (FSMA)passage in 2011, FDA now has mandatoryrecall authority.

− However, it remains very limited in its usage.

■ Vast majority of recalls continue to beconducted voluntarily.


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Overview of FSMA Recalls

■ Mandatory Recall Authority

− “[R]easonable probability that food is adulterated…or misbranded… and use or exposure will causeserious adverse health consequences or death tohumans or animals” FDA must provide anopportunity to recall. If the party does not do so“within the time and manner prescribed by FDA,”FDA may order recall.

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Overview of FSMA■ Mandatory Recall Authority

− Before issuing order, FDA must first provide partywith opportunity to cease distribution and conductvoluntary recall.

− If company refuses FDA may order a mandatoryrecall, however FDA must offer party informalhearing within 2 days of order.

− Civil monetary penalties for non-compliance

− Effective upon passage of Act

− FDA Authority to charge fees for recall


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Overview of FSMA■ Mandatory Recall Authority

− To date FDA has initiated only one mandatory recallaction.

2/2013 action against Kasel Associates Industries forpet treats. (Tested positive for Salmonella).

Ultimately Kasel initiated a voluntary recall afterreceiving order from FDA.

Even without mandatory recall FDA has significantleverage.

FDA has stated it believes it will use this authorityinfrequently and data reflects this.

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When is an Action not a Recall?

■ Two types of actions are not recalls.

− Market Withdrawals removal or correction of a distributed product which involves a

minor violation that would not be subject to legal action by theFood and Drug Administration or which involves no violation, e.g.,normal stock rotation practices, routine equipment adjustmentsand repairs, etc.

− Stock Recovery removal or correction of a product that has not been marketed or

that has not left the direct control of the firm, i.e., the product islocated on premises owned by, or under the control of, the firmand no portion of the lot has been released for sale or use.


Voluntary Recalls

■ FDA has voluntary recall guidelines in place.

− 21 CFR Part 7

− Requires companies to have a plan in place thatenables them to answer three basic questions:

What is the affected product?

What is wrong with the product?

Where is the product located?

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Voluntary Recalls

■ Notifying FDA− Companies are “requested” to notify FDA of a recall by

contacting its local District Office immediately. See list at http://www.fda.gov/safety/recalls/industryguidance/ucm129334.htm

− Typically notifying FDA is the smartest option. However,where a company chooses not to, there is the danger thatFDA will learn of the action and disagree with the actiontaken.

− Once notified, FDA will request information on the recall.

− Opportunity to make a good first impression!


FDA Recall Submission■ FDA submission will typically include:

− (1) Identity of the product involved.− (2) Reason for the removal or correction and the date and circumstances

under which the product deficiency or possible deficiency was discovered.− (3) Evaluation of the risk associated with the deficiency or possible

deficiency.− (4) Total amount of such products produced and/or the timespan of the

production.− (5) Total amount of such products estimated to be in distribution

channels.− (6) Distribution information, including the number of direct accounts and,

where necessary, the identity of the direct accounts.− (7) A copy of the firm's recall communication if any has issued, or a

proposed communication if none has issued.− (8) Proposed strategy for conducting the recall.− (9) Name and telephone number of the firm official who should be

contacted concerning the recall.

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Recall Classification

■ Based on submission FDA will classify recall.− Class I is a situation in which there is a reasonable

probability that the use of, or exposure to, a violativeproduct will cause serious adverse health consequences ordeath. -- (Allergen recalls, E.Coli, Salmonella)

− Class II is a situation in which use of, or exposure to, aviolative product may cause temporary or medicallyreversible adverse health consequences or where theprobability of serious adverse health consequences isremote. -- (Foreign objects/low level pesticides).

− Class III is a situation in which use of, or exposure to, aviolative product is not likely to cause adverse healthconsequences. -- (Labeling violations -- not allergen).


Depth of Recall

■ Wholesale, retail or consumer level?

− Depends on degree of hazard, classification leveland exposure of product/extent of distribution.

− A recall strategy and proposal should includedepth of recall. May be area of negotiation withFDA.

− Press release and public statement oftennecessary.

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Effectiveness Checks and Status Reports

■ Effectiveness checks verify that consignees havereceived notification about the recall and takenappropriate action.

− May be follow up by phone, email or fax.

− Documentation is necessary.

− Percentage of effectiveness checks may vary but FDAoften wants 100%. May also be negotiated.


Effectiveness Checks and Status Reports

■ Periodic status reports will need to be submitted todistrict office.− Generally every 2-4 weeks.

− Should contain status including the following: Number of consignees notified of the recall, and date and method of

notification.

Number of consignees responding to the recall communication andquantity of products on hand at the time it was received.

Number of consignees that did not respond (if needed, the identity ofnonresponding consignees may be requested by the Food and DrugAdministration).

Number of products returned or corrected by each consigneecontacted and the quantity of products accounted for.

Number and results of effectiveness checks that were made.

Estimated time frames for completion of the recall.

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Termination of Recall

■ Status reports will continue until termination of recall.

■ “A recall will be terminated when FDA determines that allreasonable efforts have been made to remove or correct theproduct in accordance with the recall strategy, and when it isreasonable to assume that the product subject to the recallhas been removed and proper disposition or correction hasbeen made commensurate with the degree of hazard of therecalled product.” 21 CFR 7.55.− May receive written response or more informally (e-mail).

− Company may also request termination of recall in writing to FDA.


Is The Recall Reportable?

■ Under FDA Amendments Act of 2007, FDA was required toestablish the “Reportable Food Registry.”

■ The RFR applies to all FDA-regulated categories of food andfeed, except dietary supplements and infant formula.

■ Facilities that manufacture, process, pack, or hold food forhuman or animal consumption in the United States arerequired to report when there is a reasonable probability thatthe use of, or exposure to, an article of food will cause seriousadverse health consequences or death to humans or animals.

■ Responsible party must submit report.

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Reportable Food Registry

■ Reportable Food Registry− Not all recalls are reportable, but reports are required to be submitted

within 24 hours after determining that an article of food is areportable food.

− http://www.fda.gov/Food/ComplianceEnforcement/RFR/default.htm

− Most common reported events: Undeclared Allergens

Salmonella

Listeria monocytogens

− Not required to report if Adulteration originated with responsible party; and

Detected prior to any transfer to another party (intra-company shipment okay); and

Corrected or destroyed product.


Current Trends in U.S. Recalls

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Why Getting It Right Matters

Cantaloupe -- Jensen Farms 2011Deadliest foodborne illness outbreak in over 25 years Listeriacontamination resulted in over 30 deaths and hundreds ofillnesses.Dollar volume of sales drops by 55.7% within four weeks

Nuts -- Sunland 201242 people infected with Salmonella in 20 states240 products recalledFirst company to have registration suspendedFacility & industry still trying to recover

Peanuts – Peanut Corp of America 2008Salmonella contaminated peanuts affectingmore than 200 companies and more than2000 different products. Industry lossesestimated at $1B+. PCA declaredbankruptcy and criminal charges files.


■ How much does a recall cost companies?

■ General product liability insurance enough?

■ Strict liability implications

■ Premium vs. Deductible

■ Standard vs. Optional coverage

■ Likelihood of having an ‘Insured event’

■ Recoverable event or Catastrophic?

Recall Insurance?

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■ Destruction Costs

■ Recall Communication (PR, Customer Service)

■ Transportation and Warehousing

■ Additional Staffing/Consulting Cost

■ Inspection and Testing

■ Replacement Product

■ Refunds to Customers

■ Business Interruption

■ Rehabilitation Expense / Lost Good Will

What’s the true cost of a recall?


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Preparing for A Recall

■ Someone has just walked into your office and said:

I need to talk to you

We’ve got a little problem

■ Are you prepared? (You should be!)

− insights from seminars

− you know the drill

− there are procedures in place

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Survival Tips

■ Stay calm

Take a deep breath and relax.

You will get through it!

■ Be methodical

− think clearly and logically

− fully investigate the matter before

drawing conclusions or embarking on a plan

− carefully manage the situation

staff

publicity - press

FDA


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Survival Don’ts

■ Don’t take risks or shortcuts

■ Don’t act impulsively

− Take control of the situation

■ Don’t avoid people

− Ask for help in these difficult times

■ Don’t lose your spirit

− Keep a positive attitude

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Do You Have a problem?

■ Has an investigation been initiated?− Status

− Is the investigation comprehensive

■ Isolate the problem− Determine the root cause

■ Determine the scope of the problem− How many products/units could have been affected?

− How many lots?

− When were they manufactured and on what shift?

− Where are the potentially problem lots?


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Once You’ve Identified a Problem

■ Does this problem warrant a recall?− Unsure?

− Further investigation necessary?

■ When do you have enough information to act?

■ What actions are you going to take?

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Develop a Plan

■ Decide what you are going to do− Build a consensus

− Take the responsible course of action consumer safety of paramount importance

− Recall/Correction/Market withdrawal/Stock recovery

− Decide no recall is warranted

− Prepare appropriate communications

■ Negotiate with FDA− Over what

− Basis for negotiation


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Develop a Plan

■ Who is in charge of implementing the plan?− In house

− Out source

■ Who is in charge of following up to ensurethat the plan is moving ahead?

■ Conduct a mock recall –work out the detailsin advance

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Corrective and Preventative Action

■ Can actions be taken to correct theimmediate problem?

■ Can the product be reconditioned?

■ Must it be destroyed?− All lots, some lots

■ What changes are being implemented toprevent recurrences


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Dealing With FDA

■ Do you notify FDA regarding your plans– Depends on circumstances

You are not required to notify FDA before initiatinga recall action– But - you’ve got to work with FDA daily

– Can you survive another FDA inspection?

– Are you trying to limit scope and that may the subject of adispute

issues identified during an inspection

subject of warning letter

history of violative products and recalls

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Possible Areas for Negotiation with FDA

■ Action being taken by the firm− recall

− market withdrawal

− correction

− stock recovery

■ Recall classification

■ Recall strategy− depth

− need for public warnings

− extent of effectiveness checks


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Possible Areas for Negotiation with FDA

■ Products/Lots subject to recall

■ Communications/Press releases

■ When to terminate the recall

■ Disposition of the product

■ Corrective actions

■ Follow up inspections

■ Warning letters or other FDA enforcement action− injunction

− seizure

− consent decree

− civil penalties

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War Stories

■ Always seem to happen on a Friday evening orholiday weekend!

■ Dietary supplement allegedly adulterated withtoxic inactive component

■ Microbial contamination (lysteriamonocytogenes) of certain lots of importedsmoked fish

■ Beer allegedly adulterated with foreign objectsand microbial growth

■ Cookies and other foods with undeclaredallergens (nuts, milk)

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AGENDA

A. Overview of Governing Legislation in Canada

B. Best Practices & Prevention Protocols

C. Disaster Plan Guide & Checklist

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A. Governing Legislation–Canada & Ontario

1. Canadian Food Inspection Agency Act

2. Food and Drugs Act (Canada)

3. Safe Food for Canadians Act

4. Health Protection and Promotion Act (Ontario)

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Food and Drugs Act (Canada)

4.(1) No person shall sell an article of food that

a) has in or on it any poisonous or harmful substance;

b) is unfit for human consumption;

c) consists in whole or in part of any filthy, putrid,disgusting, rotten, decomposed or diseased animal orvegetable substance;

d) is adulterated; or

e) was manufactured, prepared, preserved, packaged orstored under unsanitary conditions.

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Canadian Food Inspection Agency Act

19.(1) Where the Minister believes on reasonablegrounds that a product regulated under an Act orprovision that the Agency enforces or administersby virtue of section 11 poses a risk to public,animal or plant health, the Minister may, by noticeserved on any person selling, marketing ordistributing the product, order that the product berecalled or sent to a place designated by theMinister.

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Safe Food for Canadians Act

5. It is prohibited for a person to sell a food commodity that is the subjectof a recall order referred to in subsection 19(1) of the Canadian FoodInspection Agency Act.

47.(1) The Minister may disclose to a person or government, without theconsent of the person to whom the information relates, any personalinformation or confidential business information if the Ministerconsiders that the disclosure is necessary

a) to identify or respond to a risk of injury to human healthassociated with a food commodity; or

b) for a recall that is or may be ordered under subsection 19(1) ofthe Canadian Food Inspection Agency Act, including formonitoring the conduct of the recall or its effectiveness.

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Health Protection and Promotion Act (Ont)

7. The Minister may publish guidelines for theprovision of mandatory health programs andservices and every board of health shall complywith the published guidelines.

Therefore, Ontario Public Health Standards(OPHS) are published by the Minister whichincludes 26 program and topic specific protocols.

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B. Best Practices & Prevention Protocols

1. Food Safety Protocol, 2013 (Ontario)

2. Ontario Food-borne Illness Outbreak ResponseProtocol (ON-FIORP)

3. Canada’s Food-Borne Illness Outbreak ResponseProtocol (Canada’s-FIORP)

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Food Safety Protocol, 2013

• The purpose of this protocol is to assist in the prevention andreduction of food-borne illness by providing direction to [municipal]boards of health on the delivery of local, comprehensive food safetyprograms, which include, among others:

– Surveillance and Inspection of food premises

– Timely response to:

• Reports of food-borne illnesses or outbreaks

• Unsafe food-handling practices, food recalls, adulteration andconsumer complaints; and

• Food-related issues arising from floods, fires, power outages orother situations that may affect food safety.

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Ontario Food-borne Illness OutbreakResponse Protocol (ON-FIORP), 2013

• A Guide to Multi-jurisdictional Response: Thetechnical and operational protocol that guideshow federal, provincial and municipal publichealth and food safety authorities manage food-borne hazards and illness outbreaks in Ontario. Itfollows the same structure as Canada’s-FIORP.

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Ontario Food-borne Illness OutbreakResponse Protocol (ON-FIORP), 2013 (Cont’d)

• The purpose of the ON-FIORP is to set out the key guidingprinciples and operating procedures for the identificationof, and response to, food-borne hazards and illnessoutbreaks in Ontario, involving the Parties, in order to:

– enhance collaboration and coordination among Parties;

– establish clear lines of communication and informationsharing among Parties; and

– improve the efficiency and effectiveness of response,protecting the health of Ontarians.

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C. Disaster Plan Guide & Checklist

1. Area Operations Framework for Food Safety

Investigation and Response (CFIA)

2. Food Investigation and Response Manual (CFIA)

3. Investigation & Recall Process (Flowchart)

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Area Operations Framework for Food SafetyInvestigation and Response (CFIA)

The purpose is to describe the Agency's overall approach to food safetyinvestigations and response. It describes the governance and the rolesand responsibilities of CFIA Branches:

• Operational Branch which includes Area Executive Director (ED) &Office of Food Safety & Recall (OFSR)

• Policy and Program Branch (for program advice & guidance, correctiveaction)

• Science Branch (for scientific leadership, advice and laboratoryservices)

• Public Affairs (for strategic risk communication advice, disseminateinfo)

• Legal Services (for legal advice to CFIA officials)

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Food Investigation & Response Manual

Two types of recalls:

Voluntary

• Initiated by person/firm selling, marketing,manufacturing or distributing product.

Mandatory

• Initiated by Minister, under section 19 of the CFIA Act.

• This could be due to the fact that the firm is unwilling orunable to recall the product.

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Recalls are classified according to the relative degree

of health risk presented by the product.

1. Class I: there is a reasonable probability that the use of,or exposure to, a violative product will cause seriousadverse health consequences or death.

2. Class II: the use of, or exposure to, a violative product maycause temporary adverse health consequences or wherethe probability of serious adverse health consequences isremote.

3. Class III: the use of, or exposure to, a violative product isnot likely to cause any adverse health consequences.

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Recall Process Checklist

1. Assemble the Recall Mgmt Team: CEO, Plant & Purchasing Managers, legalcounsel

2. Notify the CFIA / Other Health Agencies

3. Identify all products to be recalled

4. Detain and Segregate all products to be recalled which are in the firm'scontrol

5. Prepare the Press Release (if required)

6. Prepare the Distribution List

7. Prepare and distribute the Notice of Recall

8. Verify the effectiveness of the recall

9. Control the recalled product(s)

10. Decide what to do with the recalled product(s)

11. Fix the cause of the recall if the problem occurred at your facility

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A. Quality Assurance In Advance

• Regulator’s standards are minimum standards

• Do whatever is necessary to ensure food is safe

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B. What Can Management Do to PreventRecalls?

• Food safety research – be ahead of the crowd andindustry standards

• Promote a food safety culture – senior Q.A. staff andoutside consultants

• Management must continually monitor potential Q.A.delivery issues. Examples:

– personnel changes

– labour unrest

– equipment breakdowns

• Keep records of your good work

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C. Have a Recall Plan

• Recalls happen very fast

• There will be havoc

• Your resources will be strained

• You must have a plan

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D. Recall Plan Part 1Management, P.R. and Legal Team

1. Management:

- Have a pre-designated spokesman

- Have a pre-determined management Team

2. Public Relations Firm:

- Consider retaining a P.R. firm

- It takes time for P.R. firms to understand the business and thecorporate philosophy

- Sick people attract media. Media and politicians can be ruthlessand persistent

- P.R. may get in front of the issue

- Be alert to P.R. impact on insurance and class action issues

3. Legal Team:

- Difficult decisions require immediate clear and correct advice

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E. Recall Plan Part 2Record Keeping and Production

• Regulator will demand records

• Records define the scope and size of the recall

• The quicker this is done the quicker the recallwill be done and out of media attention

• Plan should include record accessibility

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F. Recall Plan Part 3The Communication Plan

• Expect a high volume of calls from consumers

• Consider a dedicated website

– questions and answers

– instructions on what to do with recalled product

– toll-free phone number

• Consider engaging a call centre

– Canada needs French and English

– script required

– take information only

• Call back “buckets” for responses

– refunds

– damages for prepared products

– illness and deaths

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G. The Recall Part 4Insurance• Notify your insurers and ensure they approve the steps you

take

• Know your coverage

• Be aware of class action risk

• Consider engaging shadow counsel if litigation arises

H. Recall Plan Part 5Your Suppliers

• Your ability to accept product for processing will be impaired –especially if your license is suspended

• Ensure supply contracts release you from obligations toaccept delivery during recall/suspension period

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I. Recall Part 5Your Customers• Maintaining relationships with customers is vital

• Establish protocols to assist major customers with recall –e.g.: provide them with call centre and website information toprovide to their customers.

J. Recall Plan Part 6Your Employees• Employees will face tremendous strain

• Management must show leadership

K. “This Too Shall Pass”

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Q& A Session

final slides for total recall - foley & lardner“a recall will be terminated when fda...

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