2024 FDA Enforcement Review: Quality and Transparency Remain Critical Concerns

The U.S. Food and Drug Administration (“FDA”), in partnership with the Department of Justice (“DOJ”), pursued significant and, in some cases, precedent-setting enforcement actions in 2024. The government continued to prioritize opioid-related enforcement, using various legal tools to hold companies and executives accountable for their roles in the opioid epidemic. FDA and DOJ also took action based on longstanding enforcement priorities, including to ensure medical product quality and food safety and to prevent the distribution of unapproved new drugs. Outside of the FDA regulatory context, certain rulings from the U.S. Supreme Court and lower federal courts reflect continued skepticism of executive agency authority in general, which could impact future FDA enforcement.

This year-end review describes notable criminal and civil enforcement actions in 2024 involving alleged violations of the Federal Food, Drug, and Cosmetic Act (“FDCA”), related criminal laws, and the federal False Claims Act (“FCA”) as well as significant judicial rulings with the potential to affect future enforcement of these statutes.

FDA’s focus may shift in 2025 due to changing priorities under the new administration and the heightened potential for challenges to agency authorities. However, protecting the public health by deterring and punishing conduct that compromises the safety and quality of medical products and foods is typically a priority in every administration. Thus, industry should continue to invest in strong regulatory compliance and quality programs that encourage the reporting and thorough investigation of potential problems and facilitate prompt corrective and preventive action to address identified risks.

Continued Emphasis on Opioid Enforcement

DOJ reached two notable settlements with corporations in 2024 to resolve criminal and civil allegations related to allegedly inappropriate opioid marketing and the dispensing of opioids without a legitimate medical purpose.

In December 2024, DOJ announced a groundbreaking $650 million settlement with McKinsey & Company Inc., United States (“McKinsey”) to resolve a lengthy investigation into consulting services the firm provided to Purdue Pharma (“Purdue”).

As part of the resolution, McKinsey entered into a five-year deferred prosecution agreement (“DPA”) in connection with a criminal information alleging that the company (1) knowingly and intentionally conspired with Purdue and others to aid and abet the misdemeanor misbranding of opioids without valid prescriptions and (2) knowingly destroyed and concealed records, through the acts of a senior partner, with the intent to impede, obstruct and influence a federal investigation. The DPA also imposes detailed compliance program requirements, reporting obligations, and an annual compliance certification.

The government alleged that, after a Purdue affiliate pleaded guilty to misbranding OxyContin in 2007, McKinsey worked with Purdue to boost “brand loyalty” for OxyContin and obtain FDA approval for a reformulated version of the drug. When sales of OxyContin declined following the introduction of the reformulated version, McKinsey allegedly advised Purdue on strategies to “turbocharge” sales, including by intensifying marketing efforts to prescribers who were writing OxyContin prescriptions for allegedly unsafe, ineffective, and medically unnecessary uses. According to the government, this conduct caused the drugs to be misbranded. Pursuant to the DPA, McKinsey agreed to pay more than $326 million and to cease work related to the marketing, sale, promotion, or distribution of controlled substances during the five-year term of the DPA.

McKinsey also entered into a civil settlement agreement to resolve potential FCA liability relating to (1) its advice to Purdue to increase their marketing to health care providers who were already prescribing large amounts of opioids, which resulted in the submission for payment of false and fraudulent claims for OxyContin, and (2) alleged misrepresentations by McKinsey to FDA about its conflict of interest policy. With respect to the first theory of FCA liability, “focusing sales calls on High Value Prescribers resulted in reformulated OxyContin prescriptions for uses that were not for a medically accepted indication, were unsafe, ineffective, and medically unnecessary, and that were often diverted for uses that lacked a legitimate medical purpose.” The second theory of liability is based on claims by McKinsey for payment submitted to the government based on allegedly false representations about the company’s conflict of interest policy. Although McKinsey assured the government that consultants would not be assigned to “competitively sensitive projects” for a significant period after working with the FDA, several consultants were consulting for Purdue on regulatory compliance matters while advising the FDA on prescription drug safety. As part of the resolution of these investigations, McKinsey did not admit that the Purdue projects were “competitively sensitive.” Pursuant to the civil settlement, McKinsey has agreed to pay $323 million and comply with a five-year corporate integrity agreement (“CIA”) outlining specific obligations related to the firm’s risk assessment and quality control procedures.

A former McKinsey senior partner pleaded guilty to an obstruction of justice charge brought in connection with the federal investigation into McKinsey and is scheduled to be sentenced in April 2025. Under the plea agreement, DOJ will recommend a $250,000 fine and a six- to 12- month prison sentence.

The McKinsey resolution sets a new precedent in life sciences industry enforcement. We are unaware of a similar case in which the government has alleged that an advisory firm’s advice in connection with the marketing of a medical product constituted the aiding and abetting of a conspiracy to violate the FDCA and also caused the submission of false claims for the product. When announcing the plea agreement, the U.S. Attorney for the District of Massachusetts highlighted the case as a reflection of the office’s commitment “to holding powerful companies accountable for their part in the opioid epidemic, even if they did not make, sell, or dispense the drugs.” In recent remarks related to the announcement of his resignation, the outgoing U.S. Attorney said, “the message I hope to send…is that a company needs to look at McKinsey’s reforms hard, and look at their own house, and make sure they have the procedures in place to avoid this kind of situation.”¹

Time will tell if this McKinsey investigation and settlement reflect a unique reaction to the opioid crisis, or if advisory and consulting firms, and other secondary players in the drug and device industry, are likely to be new targets of government efforts to penalize noncompliance with the FDCA and the FCA.

Separately, in February 2024, an opioid manufacturer agreed to plead guilty to one misdemeanor misbranding count related to the marketing of its drug and to resolve FCA liability related to the same conduct. In connection with this resolution, the firm agreed to pay nearly $2 billion in criminal fines and forfeiture and civil penalties.²

Medical Device Quality and Transparency

This year, DOJ announced two major FDCA-based settlements with medical device manufacturers, one civil and one criminal. As detailed in a prior Alert, these settlements include stringent compliance and reporting requirements for the involved companies.

Philips Respironics Consent Decree

In April 2024, DOJ announced that the U.S. District Court for the Western District of Pennsylvania had entered a consent decree against Philips RS North America LLC, Respironics California LLC, and Philips Holding USA Inc. (collectively, “Philips”) and five Philips executives in connection with recalls of certain breathing assistance devices.

Starting in June 2021, Philips initiated a series of Class I recalls for several of its continuous positive airway pressure (“CPAP”) machines, bi-level positive airway pressure (“BiPAP”) machines and certain mechanical ventilators due to potential health risks associated with the polyester-based polyurethane foam used in these devices to reduce sound and vibration. After determining that Philips’ initial recall efforts were insufficient and that the recalled products posed unreasonable risks of substantial harm, FDA invoked rarely used statutory authorities to compel Philips to provide significantly more information about its recalls and push Philips to fully resolve issues with the recalled devices. These recalls impacted millions of devices globally, significantly affecting the availability of devices that many patients could not live without. In July 2022, Philips announced discussions with DOJ regarding a consent decree that was entered in April 2024.

Under the terms of the consent decree, Philips agreed to cease the manufacture and distribution of non-medically necessary devices from select facilities until specific conditions were met, including the implementation of an FDA-approved recall remediation plan. The consent decree is expected to require a substantial financial investment to improve Philips’s quality program and workforce and follows the company’s prior agreement to pay $1.1 billion to resolve personal injury litigation and a medical monitoring class action related to the recalled devices. The company will be subject to rigorous FDA oversight for an extended period, with the potential for further enforcement related to a DOJ subpoena the company disclosed that it had received in April 2022.

Magellan Criminal Resolution

In May 2024, the U.S. Attorney’s Office for the District of Massachusetts announced a criminal plea agreement with Magellan Diagnostics, Inc. (“Magellan”) to resolve a federal investigation into the company’s alleged mishandling of a device malfunction that affected its LeadCare devices resulting in inaccurate readings of lead testing results.

Magellan entered into a DPA with respect to two felony conspiracy charges and pleaded guilty to an information charging the company with two misdemeanor counts of introducing misbranded devices into interstate commerce. Magellan was ordered to pay $42 million in criminal fines, forfeiture, and victim compensation. The DPA mandates that Magellan implement a corporate compliance program, which includes the annual review and necessary updates of compliance policies and procedures, periodic testing, and remediation based on previous alleged misconduct. Updates must consider relevant industry developments, evolving standards, and the company's risk profile. The company is also required to adhere to specific reporting obligations and will be monitored by an independent compliance monitor for at least two years.

In a related criminal case, three former Magellan executives were indicted on the very same misdemeanor and deferred felony charges brought against the corporation, as well as an additional wire fraud charge. A jury trial for these individual defendants is scheduled to begin in April 2025.

Stem Cell Treatments

Action related to stem cell products and other human cells, tissues, and cellular and tissue-based products (“HCT/Ps”) also continued in 2024.

Injunction against California Stem Cell

As described in a prior Alert, the U.S. Court of Appeals for the Ninth Circuit recently issued a ruling in U.S. v. California Stem Cell Treatment Center, Inc. (“California Stem Cell”) that affirmed FDA’s authority over certain stem cell treatments and other HCT/Ps.³ In California Stem Cell, the government sought to enjoin a clinic from adulterating and misbranding drugs while held for sale by extracting adipose tissue from those patients, isolating the stem cells from the surrounding fat tissue, and injecting the resulting mixture back into the patients from which the original tissue was removed. Defendants claimed they were performing medical procedures, not manufacturing drugs, and thus were exempt from FDA regulation. The district court accepted these arguments, but the Ninth Circuit disagreed and aligned with the U.S. Court of Appeals for the Eleventh Circuit, holding that clinics offering such treatments are not exempt from FDA regulation and that the clinician-created stem cell mixture is subject to regulation as a “drug.” The Ninth Circuit reversed the district court’s judgment and remanded the case for further proceedings. Parties have until March 20, 2025, to petition the Supreme Court for a writ of certiorari.

Prosecution of John Kosolcharoen

In July 2024, John Kosolcharoen pleaded guilty to a felony FDCA charge brought in connection with the alleged sale and distribution of injectable stem cell products manufactured from non-autologous umbilical cord blood that were linked to 19 hospitalizations.

In a criminal information filed in the U.S. District Court for the Central District of California, DOJ charged Kosolcharoen with introducing an unapproved new drug into interstate commerce with the intent to defraud and mislead. Under the plea agreement, Kosolcharoen admitted to making false and misleading advertising statements about the safety and effectiveness of the company’s injectable human umbilical cord blood products. Additionally, Kosolcharoen stated he fraudulently induced the purchase of these products by misleading the public about the cause and severity of adverse events and the results of a prior FDA inspection. Kosolcharoen further admitted to misleading FDA about his company’s activities by directing purchase orders to falsely state that the company’s drug products were being sold “for research purposes only.”

At sentencing, the government alleged these products generated approximately $21.6 million in revenue between 2017 and 2018. On September 30, 2024, Kosolcharoen was sentenced to 36 months in prison.

Unlawful Distribution of Animal Drugs

In July 2024, US Compounding, Inc. (“USC”) pleaded guilty in the U.S. District Court for the Southern District of New York to conspiracy to commit mail fraud and conspiracy to introduce adulterated and misbranded drugs into interstate commerce. The criminal information alleged that USC executives and sales representatives maintained an illegal arrangement with a veterinarian wherein a sales representative would use the veterinarian’s state veterinary license to issue prescriptions for consumers. USC would then ship the drugs intended for animal use directly to the customer, despite knowing that the prescriptions issued in the veterinarian’s name were invalid. The information also alleged that USC conspired with others to use an encrypted electronic messaging application to conceal its unlawful activity. The drugs were allegedly adulterated in that they were unsafe new animal drugs and misbranded both because they were prescription drugs dispensed without valid prescriptions, as well as for other reasons. This scheme allegedly persisted for several years until four USC pharmacists responsible for fulfilling prescription drug orders resigned due to the company’s failure to address the conduct. After pleading guilty to both felony conspiracy charges, USC was ordered to pay more than $14 million in criminal penalties and forfeitures. In a related case, the government indicted a former USC executive on one count of conspiracy to violate the FDCA. If convicted, this individual defendant faces a maximum sentence of five years in prison.

In May 2024, a veterinary drug distributor was ordered to pay more than $23 million in criminal fines and forfeitures after pleading guilty to distributing misbranded prescription veterinary drugs that lacked adequate directions for use. This action is the third settlement in a string of cases brought by the U.S. Attorney’s Office for the Western District of Virginia against veterinary drug distributors, following a similar $52 million settlement in 2020 and an $11 million settlement in 2023.

Ongoing Focus on Food Safety

FDA enforcement continues to focus on food safety, and the Agency took significant civil and criminal action against food manufacturers and distributors in 2024. FDA has also increased its efforts to ensure food safety with a unified Human Foods Program and a restructured Office of Inspections and Investigations. FDA expects this reorganization of its food-related functions and the agency-wide restructuring of its compliance and enforcement offices will facilitate more effective and efficient oversight of human food and other FDA-regulated products.

Prosecution of Family Dollar Stores and Vulto Creamery

In February 2024, Family Dollar Stores LLC pleaded guilty to a one-count misdemeanor adulteration information brought in connection with a rodent infestation at one of its U.S. distribution facilities. According to the plea agreement, certain employees became aware of a rodent issue at an Arkansas distribution facility and, by January 2021, knew that insanitary conditions in the warehouse were leading to the adulteration of FDA-regulated products. Notwithstanding awareness of the infestation, Family Dollar Stores continued to distribute products from this facility until January 2022, when an FDA inspection allegedly uncovered live rodents, dead and decaying rodents, rodent feces, urine, odors, and signs of gnawing and nesting throughout the premises. Subsequent fumigation of the facility resulted in the reported extermination of 1,270 rodents.

Family Dollar conducted voluntary recalls in 2021 and 2022 of all FDA-regulated products shipped from the facility. FDA also issued the company a warning letter at the end of 2022. From early 2021 until January 2022, the compromised facility had allegedly distributed at least $41 million in FDA-regulated products held under insanitary conditions to over 400 retail locations in five states. After pleading guilty, Family Dollar Stores was ordered to pay $41,675,000 in criminal fines and forfeitures. Additionally, Family Dollar Stores will comply with compliance program and reporting requirements as set forth in the plea agreement.

DOJ also successfully prosecuted Vulto Creamery, LLC, and its founder and owner, Johannes Vulto, in connection with allegations related to the manufacturing of raw milk cheese linked to a 2016-2017 outbreak of listeria. Between 2014 and 2017, environmental swabs taken at the company’s manufacturing facility repeatedly tested positive for the pathogen Listeria monocytogenes (“L. mono”). After FDA linked the company’s raw milk cheese products with a listeriosis outbreak that resulted in eight hospitalizations and two deaths, Vulto Creamery shut down its manufacturing facility and recalled its cheese products in 2017 and entered a negotiated consent decree in 2018. DOJ brought criminal charges, and in March 2024, both defendants pleaded guilty to causing the introduction of adulterated food into interstate commerce. Vulto was sentenced to three years of probation, ordered to pay a $100,000 fine, and required to perform 240 hours of community service. Vulto Creamery, which is no longer in operation, was sentenced to one year of probation.

Consent Decrees against Freshy Foods and Rizo Lopez Foods

In July 2024, the U.S. District Court for the Eastern District of Louisiana entered a consent decree against Freshy Foods, LLC, Team Fresh & Go, LLC, (collectively, “Freshy Foods”) and their owners. The complaint alleged that environmental tests conducted in 2023 detected L. mono in the defendants’ food processing facility, and an FDA inspection observed insanitary conditions at the site. Freshy Foods voluntarily withdrew its registration to process food in August 2023 and, under the consent decree, must notify FDA and comply with certain remedial measures before resuming the manufacture of any FDA-regulated products.

Similarly, in October 2024, the U.S. District Court for the Eastern District of California enjoined Rizo Lopez Foods, Inc. and its owners from manufacturing and distributing adulterated food products following a multistate listeria outbreak linked to multiple hospitalizations and two deaths. Prior to reaching this settlement, Rizo Lopez Foods voluntarily recalled the affected cheese and dairy products and ceased all food preparation and processing operations.

Developments in Administrative and Constitutional Law

Federal courts issued three noteworthy decisions this year opining on legal theories that FDA and DOJ have relied on for decades. Additionally, several high-profile attacks on FDA regulatory authority remain ongoing. These jurisprudential developments demonstrate increased skepticism of agency interpretations of statutory and regulatory authorities that may have future enforcement implications, both in terms of which cases are pursued, and where they are brought.

Administrative Law Challenges to Agency Action

As discussed in a prior Alert and podcast, recent Supreme Court rulings may embolden defendants, or those concerned about regulatory overreach by FDA, to challenge FDA’s statutory interpretations under the Administrative Procedure Act (“APA”). In Loper Bright Enterprises v. Raimondo (“Loper Bright”), the Supreme Court overruled the landmark Chevron decision, which had required that federal courts defer to federal agency interpretations of ambiguous statutory provisions, ruling instead that “[c]ourts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.”⁴ Additionally, a recent podcast examined Corner Post, Inc. v. Board of Governors of the Federal Reserve System (“Corner Post”), in which the Supreme Court opened the door for new industry entrants to challenge longstanding federal rules in by holding that the six-year statute of limitations for APA lawsuits does not begin to run until the plaintiff is injured by the challenged agency action.⁵

Together, Loper Bright and Corner Post may increase the likelihood of APA challenges to agency regulations, which could undermine the government’s ability to take enforcement action based on those provisions. Even in the absence of APA challenges, defendants will undoubtedly cite Loper Bright and Corner Post in motions to dismiss complaints or other charging documents, or in negotiations with prosecutors, in an attempt to raise doubts about the viability of the enforcement theories brought against them. Thus, the government may shy away from relying on enforcement theories believed to be vulnerable. The government may also carefully select the jurisdictions in which it pursues enforcement to avoid creating precedent that could undermine its authorities, although the ability to forum shop is not an option the government has when defending against APA challenges. Should reviewing courts decide that FDA lacks sufficiently clear authority to pursue particular aspects of its enforcement agenda, FDA may need to appeal to Congress to clarify its statutory authority in such areas.

Constitutional Challenges to Qui Tam Enforcement of the FCA

The FCA is a significant area for DOJ enforcement against life sciences companies. FCA cases often involve allegations that claims presented to the government for payment related to medical products or procedures were false as a result of violations of underlying FDA regulatory requirements. These lawsuits are typically initiated by a relator, or whistleblower, under the qui tam provisions of the FCA, which are intended to facilitate the exposure of fraud schemes that might otherwise remain hidden. Historically, many of the biggest settlements and judgments against FDA-regulated entities have arisen from qui tam actions—which may prompt joint civil FCA and criminal FDCA investigations with exposure for both corporations and individual executives, as exemplified in a $3 billion settlement with GlaxoSmithKline in 2012 and a $1.4 billion settlement with Reckitt Benckiser Group in 2019. Although several courts of appeals have upheld the constitutionality of the FCA’s qui tam provisions, a recent district court decision may jeopardize the viability of lawsuits brought by whistleblowers.

In September 2024, a judge in the U.S. District Court for the Middle District of Florida ruled that qui tam enforcement of the FCA violates the Appointments Clause of Article II of the U.S. Constitution. As explained in a recent Alert, in U.S. ex rel. Zafirov v. Florida Medical Associates, LLC (“Zafirov”), a relator filed suit against her former employers, on behalf of the government, accusing them of committing Medicare fraud in violation of the FCA.⁶ When the government decided not to intervene in the action, the relator proceeded on her own. Defendants moved for a judgment on the pleadings, arguing the qui tam provisions were unconstitutional. After determining that the relator in a Medicare fraud case qualifies as an improperly appointed “Officer” of the executive branch, the court agreed that qui tam enforcement of FCA is unconstitutional and dismissed the underlying FCA case with prejudice. With this decision, the district court rejected contrary rulings from other circuits, as well as vocal objections from the government and several amici.

In October 2024, both the relator and the DOJ appealed the district court’s judgment to the Eleventh Circuit. This appeal opens the door for potential future review of the constitutionality of the FCA’s qui tam provisions by the Supreme Court, where at least three justices have already suggested that these provisions may be unconstitutional.⁷ A wholesale overruling of the qui tam process could force a significant change in the government’s approach to identifying targets for investigation and prosecution.

In the three months since the Zafirov decision, other defendants have raised similar constitutional challenges. For example, in October 2024, defendants in U.S. ex rel. Gil v. CVS Health Corp. filed an amended answer in the U.S. District Court for the Northern District of California, arguing that the relator’s claims are unconstitutional based on the principles of separation of powers and Article II. The DOJ is intervening specifically to defend the constitutionality of the FCA’s whistleblower provisions. Defendants are likely to continue challenging the legality of these provisions until the issue is resolved by a Supreme Court ruling.

Looking Forward

It is impossible to predict with any certainty the impact of the new administration on enforcement against FDA regulated companies and the extent to which the government may retrench or pursue new avenues for enforcement in the aftermath of recent administrative law decisions. However, product safety concerns have historically driven much FDA-related enforcement, regardless of an administration’s political leanings. Companies that fail to appropriately address product risks with the potential to cause significant patient harm are likely to remain high-priority enforcement targets.

Executives at life sciences companies should maintain an appropriate “tone at the top,” emphasizing their personal commitment and the company’s commitment to compliance, quality, and transparency. Companies will be well served by ensuring their quality and compliance programs are robust, appropriately resourced and that employees receive comprehensive training for their functions that evolves as part of continuous improvement efforts. Maintaining a culture of compliance and a mature quality system is the best way to detect and mitigate medical product and food safety problems that could pose consumer and patient harm and lead to investigations of corporations and individuals.

One impact of recent administrative law decisions may lead the government to focus more on cases arising out of clear cut statutory authorities and well developed factual records involving strong allegations of fraud or conscious decisions to refrain from taking action to address known safety risks. Where possible, FDA and DOJ may also strategically select friendly jurisdictions when filing enforcement actions.

Ropes & Gray will continue to monitor enforcement actions and trends related to FDA-regulated products in 2025. If you have any questions, please contact any member of our Life Sciences Regulatory and Compliance practice or your usual Ropes & Gray advisor.