Invacare 2014 Annual Report Download - page 16

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and wheelchair sub-assemblies at or from its Taylor Street manufacturing facility. The decree also temporarily limited design
activities related to wheelchairs and power beds that took place at the impacted Elyria, Ohio facilities. The Company is entitled
to continue to produce from the Taylor Street manufacturing facility certain medically necessary wheelchairs provided that
documentation and recordkeeping requirements are followed, as well as ongoing replacement, service and repair of products
already in use, under terms delineated in the consent decree. In addition, the Company was able to fulfill purchase orders and
quotes that were in the Company's order fulfillment system prior to the effective date of the decree. Under the terms of the consent
decree, in order to resume full operations at the impacted facilities, the Company must successfully complete a third-party expert
certification audit and receive written notification from the FDA. The expert certification audit will be followed by an FDA
inspection of the Company's compliance with the FDA's Quality System Regulation (QSR) governing manufacturing of medical
devices. The certification audit is comprised of three distinct reports, which include:
• First, the third-party expert inspected the qualification and validation procedures and documentation for equipment and
processes at the Taylor Street manufacturing facility. The first certification audit was successfully completed during 2013.
The FDA notified the Company on May 13, 2013 that it had accepted the first certification report. Following receipt of
that notification, the Company's Taylor Street facility was permitted to resume supplying parts and components for the
future manufacturing of medical devices at other Company facilities.
• Second, the third-party expert reviewed the Company’s design control systems at the Corporate and Taylor Street facilities.
The second certification audit also was successfully completed during 2013. The FDA notified the Company on July 16,
2013 that it had accepted the second certification report, after which the Company was permitted to resume design
activities at the Corporate and Taylor Street facilities related to power wheelchairs and power beds.
• The third, expert certification audit is an overall review of the Company's compliance with the FDA's QSR at the impacted
Elyria facilities. This audit process is the most comprehensive and challenging of the three expert certification audits,
and it encompasses all areas of the Company's Corporate and Taylor Street quality system. As part of the process, the
Company has determined that it needs to better demonstrate that its quality system is sustainably compliant and that each
subsystem is properly integrated. With the help of a consulting firm the Company engaged in 2014, the Company's internal
subject matter experts are executing on its action plans to improve the functionality and capabilities of certain quality
subsystems, most notably complaint handling and corrective and preventative actions (CAPA). The Company has
identified the root causes of the issues that need to be addressed in order to achieve sustainable compliance and is working
through quality implementation plans that will enable the Company to achieve the appropriate solution. As of the date
of this Annual Report on Form 10-K, the Company is making progress, but the Company still has work to do, including
process improvements for addressing complaint data, before the Company can verify the effectiveness of its solutions
and complete the third-party expert certification audit.
The Company cannot predict the timing or the outcome of the final expert certification audit. According to the consent decree,
once the expert's third certification audit is completed and the certification report is submitted to the FDA, as well as the Company’s
own report related to its compliance status, together with its responses to any observations in the certification report, the FDA will
inspect the Company's Corporate and Taylor Street facilities to determine whether they are in compliance with the FDA's QSR.
If the FDA is satisfied with the Company's compliance, the FDA will provide written notification that the Company is permitted
to resume full operations at the impacted facilities.
After resumption of full operations, the Company must undergo five years of audits by a third-party expert auditor to determine
whether the facilities are in continuous compliance with FDA's QSR and the consent decree. The auditor will inspect the Corporate
and Taylor Street facilities’ activities every six months during the first year following the resumption of full operations and then
every 12 months for the next four years thereafter.
Under the consent decree, the FDA has the authority to inspect the Corporate and Taylor Street facilities at any time. The
FDA also has the authority to order the Company to take a wide variety of actions if the FDA finds that the Company is not in
compliance with the consent decree or FDA regulations, including requiring the Company to shut down all operations relating to
Taylor Street products. The FDA can also order the Company to undertake a partial shutdown or a recall, issue a safety alert,
public health advisory, or press release, or to take any other corrective action the FDA deems necessary with respect to Taylor
Street products.
The FDA also has authority under the consent decree to assess liquidated damages of $15,000 per violation per day for any
violations of the consent decree, FDA regulations or the federal Food, Drug, and Cosmetic Act. The FDA may also assess liquidated
damages for shipments of adulterated or misbranded devices, except as permitted by the consent decree, in the amount of twice
the sale price of any such adulterated or misbranded device. The liquidated damages are capped at $7,000,000 for each calendar
year. The liquidated damages are in addition to any other remedies otherwise available to the FDA, including civil money penalties.