Medical Device Link.

Originally Published IVD Technology November/December 2004

INDUSTRY NEWS

Diagnostic Products Corp. (DPC; Los Angeles) received a subpoena from the U.S. Attorney General’s Office to produce to a federal grand jury documents relating to trading in the company’s securities and the exercise of options by employees, officers, and directors in early 2004.

DPC has also been communicating and cooperating with the Securities and Exchange Commission (SEC) regarding these matters. In addition, an independent committee of the company’s board of directors initiated and conducted its own investigation of the trading issues. The committee recently presented its findings and conclusions to the SEC. DPC officials declined to comment on the committee’s findings.

The subpoena from the U.S. Attorney’s Office also seeks all documents related to FDA’s review of DPC’s application for a diagnostic test to detect Chagas, a virus that exists primarily in Central and South America, as well as any other audits or reviews conducted by the agency since 2000 relating to the company’s products. The company sought FDA regulatory approval for its Chagas test as part of a strategy to ease entry into the Brazilian market.

Last February, based on inspectional findings related to DPC’s Chagas diagnostic test application, FDA decided that the company was subject to the agency’s application integrity policy (AIP). Because of the AIP, FDA suspended its review of all pending diagnostic test applications submitted by DPC. The agency also deferred the scientific review of any future submissions until it determines that the company has resolved these issues. DPC stated that it is cooperating with FDA to address and resolve issues raised by the agency’s decision that the AIP should be applied to DPC.

“We have initiated a process to identify and correct the causes of these issues,” said Michael Ziering, chief executive officer at DPC. “Our understanding is that a reasonable time for the resolution of these types of issues is approximately 12 months.”

The investigations by the U.S. Attorney’s Office and the SEC may have originated as a result of heavy trading of DPC stock early this year. On February 19–25, several members of the company’s board of directors and senior management sold approximately $3.6 million worth of stock. These trades were made before DPC publicly disclosed the AIP matter in early March. While company and government officials have declined to comment, there has been some speculation that these events may have prompted the U.S. Attorney’s Office to issue the subpoena to DPC.

“I think if you look at the timing of events, you could question whether or not there was any issue there,” says James L. Brill, vice president of finance at DPC. “So then if you are a governmental agency and you have to look at all that stuff, you’d say that we have some questions, so we want you to answer these questions.”

DPC has come under government scrutiny before. Last year, DPC contacted the Department of Justice and the SEC to disclose voluntarily that its Chinese subsidiary made payments in China that may have violated foreign and U.S. laws.

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