FDA's Final Order to Baxter to Recall, Refund, or Replace the Colleague Infusion Pumps

July 13, 2010

CERTIFIED MAIL
RETURN RECEIPT REQUESTED

Robert L. Parkinson, Jr., Chief Executive Officer
Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, IL 60015

and

Peter J. Arduini, Corporate Vice President
and President, Medication Delivery
Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, IL 60015

Re: U.S. v. 7,140 boxes of infusion pump and Baxter Healthcare Corporation, et al. 05-C-5852 (N.D. Ill.)

Dear Messrs. Parkinson and Arduini:

Pursuant to Paragraph 15 of the Consent Decree for Condemnation and Permanent Injunction (“Consent Decree”) entered on June 29, 2006, FDA is issuing this final order to Baxter Healthcare Corporation (“Baxter”) to recall all Colleague infusion pumps currently in use in the United States and to provide refunds or replacement pumps to customers at no cost. FDA has determined that this action is necessary, as Baxter has failed to adequately correct, within a reasonable timeframe, the deficiencies in the Colleague infusion pumps still in use. In addition, Baxter’s latest proposed correction schedule, submitted to FDA on April 8, 2010, states that Baxter does not plan to begin the latest round of corrections to the pumps until May 2012. The proposal also states that Baxter does not anticipate completion of the proposed corrections until 2013. This new timeline is unacceptable.

Therefore, under Paragraph 15 of the Consent Decree, FDA orders Baxter to take the following actions:

• Recall and destroy all Colleague infusion pumps covered by the Consent Decree that are manufactured, distributed, or sold by Baxter or that are under the custody and control of Baxter's agents, distributors, or customers from the US market.
• Provide either a replacement infusion pump (other than the Colleague model) or refund to all owners, and a lease termination to all lessees, of Colleague infusion pumps no later than the date that is twenty four months after the date of this final order (“the transition period”).

To accomplish the recall and to establish the programs to provide a refund or a replacement pump to customers, Baxter shall adhere to the following transition plan:

1. Obtain Certificates of Medical Necessity (“CN”) From All Owners and Lessees of Colleague Infusion Pumps

The scope of the order is intended to include all Colleague infusion pumps within the United States. Therefore for purposes of this document “customer” shall be defined as: the current owner (regardless of whether it purchased directly from Baxter or a third party) or the current lessee who leases the pump(s) directly from Baxter or one of its authorized agents.

Baxter will continue to support its current customers’ use of Colleague pumps by providing of batteries, spare parts, and service during the transition period. In order for a customer to receive this continued support, a customer must submit a CN to Baxter that describes and justifies its immediate and continued medical necessity for its use of the Colleague pump.

1. Baxter shall notify all customers of this requirement and provide copies of the Transition Guides, as described below, no later than two months after the date of this final order.
2. Baxter shall provide its customers with a standard CN form and assure that its customers provide the following information for each of the customer’s healthcare facilities that currently uses, and wishes to continue to use, Colleague pumps:
   1. Complete address, name, and contact information for the signatory at the healthcare facility.
   2. Serial number, model, and owned/leased status for all Colleague pumps used at the facility. If the pump is leased/rented from a company other than Baxter, provide the name and contact information for the leasing/rental company.
   3. The number of Colleague pumps at the facility.
   4. The medical necessity that requires continued use of the Colleague pumps. Please note that an increased patient capacity at a facility does not independently constitute a medical necessity.
   5. The date by which the customer anticipates completing the removal of the Colleague pumps from use.
   6. The names of the manufacturer, make, and model of any other large volume infusion pumps currently used at the facility.
3. The CN shall be signed by one of the following: the Hospital Administrator, CEO, and/or Chief Medical Officer, who shall certify that the facility has an immediate medical need for continued use of, and product support for, the Colleague pumps. Healthcare facilities, rental/leasing agencies, and distributors will have until the date that is four months after the date of this final order to certify and return the CN to Baxter.
4. After the date that is four months after the date of this final order, Baxter shall cease support of its Colleague Pump at any facility that has not submitted a completed CN.
5. Baxter shall continue to provide services, including the servicing of Colleague pumps sent to Baxter for maintenance, that are identified in a completed CN, for the purpose of maintaining and/or restoring the Colleague infusion pumps now in use to currently labeled operating parameters until the date that is twenty four months after the date of this final order, or until the customer is able to transition to an FDA approved or cleared alternative to the Colleague pump, whichever occurs first.

2. Prepare and Distribute Transition Guide

Baxter shall prepare, for FDA’s prior review and written approval, a guidance document to help customers choose the most appropriate FDA approved or cleared alternative products to replace the Colleague infusion pumps. This Transition Guide shall not be a marketing tool, nor is it intended to be all-inclusive or identify all factors to be considered. Rather, it is a guide to assist customers through the transition and installation of a new infusion pump system. In addition, the Transition Guide shall accurately and completely identify the current known risks associated with the continued use of the Colleague infusion pumps, including all open recalls and deficiencies known to Baxter when the Transition Guide is distributed.

Within the Transition Guide, Baxter shall present the following information in a manner that can be easily understood by customers:

1. Suitable FDA approved or cleared alternatives to the Colleague infusion pumps, and their respective manufacturers.
2. Ways to minimize disruption and reduce risk to patients during the transition period.
3. The need to appropriately train staff prior to using alternative infusion pumps.
4. The need to verify and validate the alternative pumps prior to use within the healthcare facility.
5. A list of consultants who can assist facilities with the verification and validation of the alternative infusion pumps prior to use.

The Transition Guide shall also contain detailed information on the refund and replacement programs. Owners and lessees of Colleague pumps that certify and return the CN to Baxter within the required timeframe shall be offered one of the following three options when they return their pumps to Baxter:

A. Refund

The Colleague infusion pump refund program shall afford funds to current owners of Colleague pumps to purchase any replacement pump they deem appropriate for their particular needs in return for their Colleague infusion pumps. Baxter shall provide a refund to the owner of the pump that is the lesser of: (a) the Depreciated Value (as defined below) or (b) the owner’s documented purchase price. In order to qualify for the cash refund, Colleague pump owners who did not purchase their pumps directly from Baxter or its agents must provide verifiable proof of purchase that shows the purchase price for the devices for which they request a cash refund.

For purposes of this document, the Depreciated Value shall be calculated based on a 10-year, straight-line monthly depreciation of 90% of the price that the customer paid for the pump. The depreciation scale will begin on the date that the customer purchased its pump from Baxter, and end on June 29, 2006 (the date of the Consent Decree). Thus, if a customer purchased a pump from Baxter in June 2005, the customer is entitled to 90% of that price, minus 12 months of depreciation (the time between the purchase of the pump and June 29, 2006), as shown in the equation below. In no case shall the Depreciated Value be less than $1,500 for a single channel Colleague pump or $3,000 for a triple channel Colleague pump.

[Depreciated Value] = [Purchase Price] * (0.9 - ( ([Date Consent Decree] - [Date Purchases]) in Months / 120 Months) )

Where:

[Purchase Price] = The price when the pump was last sold by Baxter.

([Date Consent Decree] - [Date Purchased]) = The positive value difference between the two dates expressed in months.

Example:

[Purchase Price] = $5,000

[Date Consent Decree] = June 29, 2006

[Date Purchased] = June 1, 2005

[Depreciated Value] = $5,000 * (0.9 - ( ([June 2006] - [June 2005] Months) / 120 Months) )

[Depreciated Value] = $5,000 * (0.9 - (12 Months / 120 Months) )

[Depreciated Value] = $5,000 * (0.9 - 0.1)

[Depreciated Value] = $5,000 * 0.8

[Depreciated Value] = $4,000

The cash may be used by the owner for any purpose, including the purchase of any FDA approved or cleared alternative infusion pump manufactured by Baxter or a competitor. Baxter shall issue all refunds within 10 days after receipt of the returned pumps.

B. Termination of Leases

Baxter shall permit pump lessees to terminate their leases without penalty. Baxter shall also refund all lessees for the unused portion of any Colleague infusion pump lease within 10 days of receipt of the Colleague pump by Baxter.

C. Replacement

Baxter shall establish a program that allows current Colleague pump owners that purchased their pumps directly from Baxter to obtain an FDA cleared or approved infusion pump, including delivery, installation, and training for such pump at no cost to the customer, to replace the recalled Colleague pump, provided that at no time shall Baxter be required to offer or provide customers with a replacement pump manufactured, sold, or distributed by a competitor. The replacement pump may be greater in value than the cash refund to which the customer would otherwise be entitled under the refund program. If a customer will receive a replacement pump, the customer should not return its Colleague pump to Baxter until the customer has received and installed the replacement pump.

For example, Baxter could choose to offer, at no additional cost to the customer: (a) a single channel Sigma Spectrum infusion pump with a current list price of $4300 as a replacement to a customer who would receive less for a single channel Colleague pump under the refund program; (b) 3 single channel Sigma Spectrum infusion pumps in exchange for a triple channel Colleague pump; (c) 2 single channel Sigma Spectrum infusion pumps and one-third of the value (in cash) of the applicable refund amount as calculated above for a triple channel Colleague pump; or (d) 1 single channel Sigma Spectrum infusion pump and two-thirds of the value (in cash) of the applicable refund amount as calculated above for a triple channel Colleague pump.

Regardless of the option offered to the customer, Baxter shall provide a full refund for the return of all unused Colleague pump spare parts, batteries, and consumables in unbroken packaging that are not past their shelf-lives. Baxter shall not enforce any contract shortfall penalties arising from clinical practice changes necessitated by customers’ transition to an alternative drug infusion platform where Baxter products cannot be used by that platform. Application by Baxter of a lower-discounted pricing tier based on a customer's reduced purchase of Baxter products does not constitute a contract shortfall penalty. In addition, Baxter shall refund all maintenance contract holders for the unused portion of any Colleague infusion pump service contract within 10 days after receipt of the unit by Baxter.

3. Monitor Customers’ Compliance with the Transition Plan

Baxter shall monitor the following activities of its customers and generate a bi-monthly report, due to FDA on the last business day of each month that the report is due, beginning on the date that is two months after the date of this final order, at the address specified in Paragraph 23 of the Consent Decree. The bi-monthly report shall contain the following information:

1. Copies of CN submissions by customers and the status of all customers’ compliance with the CN requirement. After the date that is four months after the date of this final order, Baxter shall cease support of its Colleague infusion pumps at any facility that has not submitted a completed CN.
2. The number of pumps that have been returned to Baxter;
3. The number and dollar amount of refunds issued;
4. The number of pumps that have been replaced with alternate pumps; and
5. Any other information that will show Baxter's compliance with the Consent Decree and this order, including the disposition of returned pumps. Baxter may destroy the returned Colleague pumps by physical destruction or by otherwise rendering the pumps unusable. Notwithstanding the foregoing, Baxter need not destroy any Colleague infusion pump that is the subject of pending or threatened litigation, or a limited number of Colleague infusion pumps to be used exclusively for purposes of research, development, or testing.

Baxter shall ensure that the refund and replacement programs and the transition by healthcare providers from the use of Colleague infusion pumps to lawfully distributed alternative pumps are completed no later than twenty four months after the date of this final order. If these activities are not completed by that date, FDA may seek the maximum amount of liquidated damages allowed under Paragraph 24 of the Consent Decree. Notwithstanding the foregoing, FDA shall not seek remedies where (1) Baxter has offered, with FDA’s concurrence, temporary support beyond that date for healthcare providers that have purchased or contracted for, but have not implemented, an alternative pump, for reasons of medical necessity; or (2) where Baxter has documented an owner’s refusal to return a Colleague infusion pump and Baxter otherwise complies with this order.

If you have any questions regarding the contents of this letter, please contact Lorelei Jarrell, with the Chicago District Office, at 312-596-4216, or Valerie Flournoy with the CDRH Office of Compliance at 301-796-5770.

Sincerely,

Scott J. MacIntire
Chicago District Director

cc:

Phil Batchelor, Corporate Vice President, Quality
Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, IL 60015

Ted A. Leggett, Vice President, Quality
Baxter Healthcare Corporation
25212 W. Illinois Route 120
Round Lake, IL 60073

Richard Kirkendall
Vice President-Quality, Medication Delivery
Baxter Healthcare Corporation
25212 W. Illinois Route 120
Round Lake, IL 60073

Neil Pankau, Director-Consent Decree Office, Global Infusion Systems
Baxter Healthcare Corporation
25212 W. Illinois Route 120
Round Lake, IL 60073