What Annual Compliance Measures Should Members Take at the Beginning of the Year

A moderated discussion between Tom Badstubner and Michael Dodd

By Tom Badstubner, Michael Dodd and Steve Guglielmo

As members close the book on 2019 and look forward to continued success in 2020, GAWDA Consultants Tom Badstubner and Michael Dodd have some advice on annual compliance measures that should be taken during the strategic planning process. GAWDA membership includes access to these consultants at no additional expense. Members should make sure that they’re taking full advantage of that! These consultants are ready and willing to help members be proactive in ensuring they are in compliance so that when federal auditors come around, GAWDA members are in the best position to ensure they leave happy. Tom Badstubner, GAWDA’s FDA and Medical Gases Consultant, and president of AsteRisk, LLC, and Michael Dodd, GAWDA’s DOT, Security and EPA Consultant, and president of MLD Safety Associates, LLC, spoke with Welding & Gases Today about how members can stay up-to-date on annual or multi-annual compliance measures. The following is a transcript of that conversation.

Welding & Gases Today: Because this is the 1Q issue of the magazine, what would you say are some annual compliance actions members should consider taking during their strategic planning process?

Tom Badstubner: There are a few things that make sense to do on an annual schedule. One thing, from an FDA perspective, is called the Annual Records Review. It basically is a review of your records to see if you need to make any changes to your program. For example, you look at some, not all, production and testing records. You look at your complaint records, any recalls, any nonconformances. And then you ask yourself, “Do I need to make any changes in my program for a more reliable program?” This documented review is required by the FDA and it typically takes just a few minutes to complete. We have a sample form that is available upon request. Members can email me ([email protected]) for the sample form and procedure.

WGT: Mike, how about from a DOT perspective? As members are doing their strategic planning, are there annual compliance actions that they should be considering taking during that process?

Mike Dodd: A lot of the DOT stuff has time records, but they are spread through the year based on when the last time the member did it. So, let’s talk about some things that are coming up due and then we can talk about the ongoing items that members need to be looking at during the year. Any of our members who are doing interstate commerce, crossing state lines in business, must do what’s known as a unified carrier registration. That’s where they will go online to the website that has that and then fill out the form. The key there is that they only have to pay for the commercial motor vehicles that cross state lines, not for every vehicle that they have in their company. That’s quite a cost savings. That runs from January to December every year.

The next thing that they need to do is look at their accident register and set up a new one for the upcoming year. And then remind themselves that they only need to keep three years, plus the one they’re currently working on. So, they can throw out the one that now becomes four years old. They might want to look and check a couple of forms. It’s a good time to check. Although I highly recommend that these things that are annualized or every two or three years, that the member puts those dates into some sort of a calendar program like Outlook to remind them. It’s difficult to remember something a year from now. Some of these things are two or three years from now. So, if people make it a point to use an outlook program, they will get reminded in a timely fashion. I’ve got a whole list of things that they can put into an Outlook calendar.

WGT: I assume there’s a difference between things you want to do once per year at the end of the year, versus things that might be annualized but is a continuing process throughout the year. The calendar is a great tool for that, but how can members keep track of those things that have to be done once per year versus those rolling dates?

TB: There is another FDA requirement that has to happen twice per year. It’s called the Review of the Drug Listings. This review is required by 21 CFR part 207. The regulation requires you to look at your FDA drug listing submission and assure that it is still accurate (the right size cylinders, filling locations, label, etc.). This review is required in June and December of each year. Like Mike said, just put the Drug Listing Review on your calendar (December and June each year). I have a link that people can use in order to do their own review. It’s also a good time for people to review their registrations and ensure that the right address is still listed on the FDA’s website.

MD: Honestly, I don’t have a distinction between annualized tasks and rolling tasks. But, other than the Unified Carrier Registration, which happens at the end of December because you have to register for the upcoming year, the other one that happens on an annualized basis is what’s known as the Hazardous Materials Registration. That runs from July 1 through June 30 each year. So, it would be a good idea if the member would take a look at their HazMat registration, their existing form, and see what the expiration date is because you can buy 1, 2 or 3 years worth. And that way, they can just take a quick peek at it and see what the date is and know if anything needs to be done with it now. That’s a great one to look at.

Another thing that would be a good thing to look at, and on an annual basis is fine, though most people put this on their calendar a few months before it becomes due but it never hurts to look more than once, but some people have requalification identification numbers. We call them RIN numbers. That enables them to requalify certain types of cylinders. Those are typically issued for five years at a time. But, because they are five years at a time, it’s easy to lose track of them. I think that the first part of the year would be a great time to go back and look at any existing RIN numbers. Take a look at that and see when the due date is. Why that is so important is because if they’re requalifying high pressure cylinders or acetylene cylinders, they have to get a third party outside agency to come in and they need to schedule that about six months in advance.

WGT: Does there have to be some sort of triggering event to have a regulatory agency show up or do they come by periodically to ensure that you’re actually keeping up with these annualized registrations? Or is it more that when they do show up, if you don’t have it, then you’re in trouble? Do they do any preemptive checkup visits?

MD: From a DOT standpoint, an onsite visit or audit can be triggered by several things. A fatality, a multiple injury accident, or if they don’t keep their roadside inspection scores in a good favor at the DOT, that could also visit a trigger. And then the other one that is in there is that they do put all of the names into a random program that randomly selects a certain percentage of people to look at without a qualifying event. So, bad accidents and keeping your roadside selections can do it, but sometimes you just get picked by random chance.

TB: There are probably three triggers for an FDA investigation. The FDA’s rules say that they need to inspect every drug manufacturer every two years. However, they don’t inspect gas manufacturers every two years because, historically, we are lower risks than traditional pharma. The FDA uses a risk assessment to schedule inspections based on the type of business you operate (ASU, cylinder filling, homecare, etc.). Another inspection trigger would be if there has been a major compliance or public health issue in your company. This is very rare. And then the third inspection trigger is if you add a significant operation to your business. Let’s say you begin to make helium medical grade. That new activity could trigger an audit by the FDA.

The state agencies often need to do an inspection before they’re allowed to issue a license. So just the fact of submitting a license application can trigger a state inspection.

WGT: What is the severity of the penalty if the DOT shows up because you’ve had a fatality and oh, by the way, you don’t have your Hazardous Materials Registration up to date? Or the FDA shows up and you haven’t renewed the registration you’re supposed to have. What happens then?

TB: The FDA does not have the same type of authority to levy fines as the DOT. But the FDA does have a few levels of “compliance actions” they can take. The first is called a FDA Form 482, “Notice of Inspection.” If all you receive is a FDA Form 482, it simply means that they visited and found no problems.

The next level of compliance action is called a FDA Form 483, “Inspectional Observations.” Receiving FDA Form 483 means that, in the opinion of the inspector, there are some compliance problems. That’s really not terrible news, but the issues should be promptly addressed. There are typically no fines associated with receiving a FDA Form 483. You should respond within 15 working days in order to get off the FDA’s radar. Your response may explain how conditions have improved or it could explain why no action is needed.

The next level of compliance actions, which is very serious, is called a Warning Letter. The FDA publishes Warning Letters on the Internet each week. The Warning Letter notifies you, and everyone else, that the FDA considers you to be out of compliance. You must respond to Warning Letters within 15 working days.

There are other, very severe, compliance actions which are available to the FDA if they consider conditions to be dangerous or a public health risk exists. These actions (seizure, debarment, prosecution) are very rare… especially in the medical gas industry.

In the gas industry, the last seizure that I’m aware of happened in 2000. That year, a company in New York had their assets seized. The FDA stated, “Despite repeated written notices from FDA, the firm continued to disregard CGMP requirements for the transfilling of medical oxygen. Continuing deficiencies included the following: failure to perform identity-testing; failure to perform adequate pre-fill operations; and failure to establish and follow adequate written procedures.”

These would have been easy compliance problems to correct, if timely and effective actions been taken. Eventually the FDA seized the bulk tank, cylinders and medical gas equipment. This is an extreme action by the FDA, but it will not happen if a company is reasonably diligent about compliance.

MD: There is a whole list of items that they’re supposed to have kept in an ongoing fashion and in a proper order. We’ve just scratched the surface here, there is a whole list of things that they need to keep in order and up to date. Typically, when the DOT comes in for an audit, they’ll go through things. I can give you a range of the penalties, but I can’t predict what will happen, because these inspectors have quite a bit of latitude and discretion on what the penalty will be. I have seen a few hundred dollars for an infraction up to $10,000 for the same infraction. There is a published schedule that will list what the maximum penalties are for certain infractions. It goes on for pages talking about each individual item that they can write up and what that could potentially cost. Thankfully, very few times do we see the maximum ever applied. The typical penalty will be from a few hundred to a few thousand. And even the few thousand is not all that often. It’s like Tom was saying, while they are there, if you correct the issue while they are there, that goes a long way toward helping you. When they send you back that letter of things that they feel are out of compliance, we tend to immediately tackle that with an action plan. Rectify it, get things fixed and then send them back an action plan. We try to do that as quickly as possible, definitely within 30 days. What that does is it shows a real willingness to cooperate.

The unfortunate thing is that I do get calls from people who have had visits that have not called me to tell me they have had the visit, and then they don’t do anything about it and then they get their penalty letter in the mail and THEN they call me. Unfortunately, after they get the penalty letter, from a DOT standpoint they were there, they told them what to fix, they’ve heard nothing back and now it’s time to issue the letter, so the only way to get your attention is to issue a penalty. Now, all of a sudden, they’ve got the person’s attention. Unfortunately for us, we still have to go fix everything and now we typically can’t get the penalty reduced. Because the time to have gotten that reduced was to show the cooperation and willingness up front. If you wait until you’ve received a penalty letter, well now you’re just cooperating because you got the letter and there’s no good will there.

WGT: Any advice or suggestions you have for members ahead of these typical annual compliance periods? Any best practices or things you’ve noticed can sometimes get overlooked? Any common missteps?

MD: I’ve given you a couple of items to do on an annual basis. I’ve given a couple of things to think about. You think about those RINs. You need to look to see if you’re a party to any special permits. And being a party to a permit, those are issued either two years or four years and when you go to renew those, you must renew more than 60 days in advance of expiration. We definitely do not want to go past the expiration date on those because they can get you for continued use after expiration. That’s one.

The other thing we need to think about is that I’ve got a list of all of the records in my DOT filing system. Things that need to be kept and I’ve also got a driver qualification audit checklist. So on the files that they’ve got, it doesn’t take but a few minutes to just run through the files and make sure that everything is still current and on the driver qualification checklist. It basically lets them audit each individual driver file to see if anything is missing because there are several things in there that expire over time. There are medical cards, driver licenses, annual driver reviews, and now there’s a new thing coming on where they will have to go look at the DOT drug and alcohol clearinghouse, so they’ll have to look at that on an annual basis. When I’m there visiting people, I tell them that there is a very easy way to do this that can keep them out of most of the trouble. If they would just set up a monthly reminder to look at the driver list and look at the vehicle list. And that lets them see those expirations. Because on the drivers list, I have them list what it is that’s going to expire and when. And then they need to make sure that they have their vehicles with what’s known as the annual DOT inspection. If they look those two lists, it tells them what is coming up in the next month or so. That goes a long way toward staying in compliance.

TB: There are a couple of things I recommend that companies double check on an annual basis even though it’s not required. It’s just good practice. Use that same calendar system that Mike recommended. Look at all of your calibrations of your gauges, thermometers and scales. Make sure they’re all up to date. Review the training records of your employees, particularly the Current Good Manufacturing Practice (CGMP) training. CGMP Training is required annually, so make sure that your employees have been trained within the last year. Verify that these simple periodic compliance items are still current and in control.

MD: I want to tack onto Tom’s thoughts there. He mentions training records, that’s an easy one to skip. On the DOT side, we have what’s known as function specific training and we have HazMat training. The HazMat is general awareness, safety and security awareness, and that’s due every three years. If they are required to have a written security plan, they have to do what’s known as in-depth security training, that’s every three years. They have to review that written plan on an annual basis. And if they’re filling cylinders or requalifying cylinders, those employees have to be trained and tested on their job duties every three years. So, training records, that’s a very important thing. Where people tend to get caught is with the brand-new employees. It’s difficult to get a new person caught up with the training in that first few months. I know DOT is really good about that when they come in, they want to look at that employee list and they look at that hire date and they kind of know to zero in on the newbies. 



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