One of the last steps of the FDA's new drug approval process is an inspection of the facility where the drug will be manufactured to verify compliance with the Food, Drug and Cosmetic Act, and with the FDA's current good manufacturing practice regulations, which outline minimum standards for manufacturing drugs to ensure the quality, safety and effectiveness of drug products.
At the conclusion of the inspection, the FDA often issues a Form 483 to the manufacturing facility, detailing observations by the FDA's inspectors that may indicate potential regulatory compliance violations at the facility.[1] Critically, the Form 483 is not a final agency determination that the facility is in violation of the FD&C Act or any federal regulations,[2] and many potential violations observed on Form 483s are resolved through corrective action by the facility, without further escalation to a warning letter or FDA enforcement action.
Given the frequency with which Form 483s are resolved without further escalation, whether to disclose the receipt of a Form 483 is far from obvious. When a company believes the inspection observations on a Form 483 will be quickly resolved and have no impact on the FDA's drug approval process, there would seem to be little reason to disclose this event.
Predictably, however, if the resolution of FDA inspection observations on a Form 483 takes longer than expected and results in delays in the FDA's drug approval process, shareholder plaintiffs are quick to claim that the failure to disclose the Form 483 was a violation of the federal securities laws. These claims have become much more prevalent since the FDA started making certain Form 483s publicly available on its website about 15 years ago.[3]
In these securities class actions, shareholder plaintiffs have essentially argued that Form 483s are per se material and must always be disclosed promptly. To that end, shareholder plaintiffs frequently claim that any statements concerning the likelihood of FDA approval after receipt of a Form 483, such as management's assurances that the FDA process is progressing well, are misleading if the company does not also disclose the receipt of a Form 483.
Early decisions in cases alleging failures to disclose Form 483s suggested that companies might need to disclose Form 483s in a broad range of circumstances, but that trend has shifted. The Checkpoint case forcefully applies a more modern, flexible standard that requires disclosure only if a pharmaceutical company knows or reasonably believes that a Form 483 will delay the FDA's approval process.
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