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Originally Published IVD Technology July/August 2005
INDUSTRY NEWS
DPC resolves government issues
Richard Park
Diagnostic Products Corp. (DPC; Los Angeles) and its wholly owned Chinese subsidiary, DPC (Tianjin) Co. Ltd. (DePu), reached agreements with the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) to settle issues related to compliance with the Foreign Corrupt Practices Act (FCPA). According to the settlement, DPC agreed to make total payments of approximately $4.8 million, the same figure that the company previously announced and accrued.
This amount includes a DOJ recommended fine of $2 million and payments to the SEC consisting of disgorgement of $2.04 million plus approximately $750,000 in prejudgment interest. DePu has also agreed with DOJ to enter a guilty plea for violating the FCPA. This plea is subject to the approval of the federal court that will be assigned this matter. In addition, as part of the settlements, DPC and DePu have agreed to maintain enhanced compliance programs that will be confirmed by an independent monitor.
“The company has taken remedial action with respect to its subsidiary’s activities in China, including implementing new and updated compliance programs,” said Michael Ziering, the CEO and chairman of the board at DPC. “Beginning with our voluntary disclosure of the facts underlying these actions to the SEC and DOJ and throughout the governmental investigations and settlement process, the company has been fully cooperative with the DOJ and SEC. We have also made it very clear that improper activities will not be tolerated by the company. We are relieved that this chapter in the company’s history is drawing to a close and that we can look forward to putting these matters to rest.”
This issue first emerged in 2003 when DPC announced that it contacted SEC and DOJ to disclose voluntarily that its Chinese subsidiary made payments in China that violated foreign and U.S. laws, including the FCPA. An independent committee of DPC’s board of directors oversaw the investigation of these matters, the results of which were promptly disclosed to SEC and DOJ. While the improper payments and guilty plea are limited to DePu and its activities in China, DPC’s remedial efforts include expanded companywide FCPA and ethics policies and procedures.
“We’ve made a number of changes,” says James L. Brill, vice president of finance at DPC. “First of all, we changed the management at our Chinese subsidiary. In addition, all of our processes have been tightened up to try to ensure that we comply with the FCPA. As a part of our settlement with the SEC and DOJ, we’ll have an independent monitor who will review our FCPA compliance program.”
In another matter, DPC has developed and implemented a corrective action plan in response to FDA’s decision to issue an application integrity policy (AIP) to the company. According to company officials, the agency has accepted DPC’s corrective action plan and will send a team from its district office to inspect its implementation.
“FDA’s inspection is going to entail looking at the implementation of our corrective action plan,” says Brill. “Assuming that the inspectors don’t find any issues, we would assume that fairly quickly the agency would release us from the AIP.”
In February 2004, based on inspectional findings related to DPC’s Chagas diagnostic test application, FDA decided that the company was subject to an 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 determined that the company had resolved these issues. DPC had been seeking FDA regulatory approval for its Chagas test as part of its strategy to ease entry into the Brazilian market.
According to FDA’s regulatory procedures manual, while an AIP is typically invoked for wrongful acts such as fraud, untrue statements of material fact, bribery, and illegal gratuities, it may also be applied to companies that have submitted data that are otherwise unreliable.
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