Caraco’s GMP Violations No Excuse to Escape Labor Laws, Court Finds

A federal appeals court has ruled that Caraco Pharmaceutical Laboratories’ assumption that its plants wouldn’t be closed for GMP violations was not legal justification for it to skirt layoff-notice labor laws.

Caraco was forced to shutter two Detroit plants in 2009 after the FDA seized drugs and other properties for significant GMP deviations. After hundreds of workers were laid off by Caraco’s owner Sun Pharmaceuticals without notice, they sued Caraco.

The U.S. 6th Circuit Court of Appeals upheld a lower court’s decision that Caraco improperly fired the workers without giving them 60 days’ notice, as required by law.

Caraco — which was issued several warning letters for GMP deficiencies starting in 2006 — had argued that it did not foresee the FDA shutting its plants; therefore, it could not comply with notifications under the Worker Adjustment and Retraining Notification (WARN) Act.

The appeals court disagreed, saying because it was reasonably foreseen that because an FDA “enforcement action was imminent, Caraco was not entitled to the unforeseen business circumstances exemption under the WARN Act.”

“The warning letter also noted that Caraco’s previous responses to earlier Form 483s had been significantly inadequate, and that many current failures of its processes and policies had been previously noted by the FDA and not corrected by Caraco,” the ruling notes.

In court papers, Caraco said that it had no reason to believe the FDA would initiate a mass seizure of its property because it had not done so in the past after issuing previous warning letters.

“A reasonable drug manufacturer should have known that a positive relationship with the FDA was not enough to insulate it from the possibility of regulatory action,” the court said.

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