By Alan M. Kirschenbaum, Michelle L. Butler & David C. Gibbons –

The February 1st Federal Register contains CMS’s final rule implementing changes to the Medicaid Drug Rebate Program (MDRP). The rule had been released for prepublication review on January 21. This rule, which has an effective date of April 1, 2016, will require pharmaceutical companies to make substantial changes in their MDRP policies, procedures, calculation methodologies, and systems within a very short time frame. To help our readers understand the final rule and how to implement it, HP&M today released a memorandum summarizing the rule, which is available here.

Also, in collaboration with KPMG’s government pricing leaders, HP&M will conduct a free Webinar entitled “A Practical Guide the Medicaid Rebate Final Rule” on Friday, February 19 from 1:00 to 3:00 pm EST. For information about the Webinar and how to register for it, click here.

The final rule goes a long way toward clarifying ambiguities in the Affordable Care Act amendments to the Medicaid Rebate statute and CMS’ 2012 proposed rule, and contains a number of favorable changes from the proposed rule. Among the highlights are the following (page numbers refer to our summary memorandum):

• Wholesaler sales: For the treatment of wholesaler sales in AMP, CMS has retreated from its proposal to require a so-called buildup method, and instead is permitting manufacturers to use the traditional presumed inclusion approach. (P. 3)

• Line Extensions: CMS has withdrawn its complex proposed methodology for determining line extensions of solid oral dosage form single source and innovator multiple source drugs, and is instead soliciting additional comments on this subject. A drug will not be considered a line extension of a drug marketed by another manufacturer unless there is a corporate relationship. (Pp. 20-21)

• Territories: The MDRP will be extended to the U.S. Territories beginning April 7, 2017, and sales to customers located in the Territories will be includable in AMP and best price. (P. 2)

• 5i AMP: Exclusions from AMP for 5i drugs are added to the regulation, specifically identifying government sales, bona fide service fees, and other excluded transactions. (Pp. 11-14)

• Entities conducting business as retail community pharmacies:   CMS has withdrawn its proposal to include in AMP sales to entities that “conduct business as retail community pharmacies,” such as specialty pharmacies, home infusion pharmacies, and home health care providers. (P. 5)

• Best price definition: CMS is narrowing the scope of customer categories included in best price so that it is consistent with the statutory definition. For example, sales to patients are not included in best price. (P. 14)

• 340B sales and best price: All prices to 340B covered entities are excluded from best price, not just “prices charged under the 340B program,” as proposed. (P. 15)

• “Original NDAs”: Although an “original NDA” is defined to mean an NDA as in the proposal, certain drugs approved under an NDA may be eligible for a “narrow exception” to the definition of an innovator drug, with approval from CMS. (Pp. 18-19)

• Federal Upper Limits: FULs for multiple source drugs will be calculated as 175% of the weighted average of the A-rated drugs, as proposed, except that a FUL will not be lower than the National Average Drug Acquisition Cost (NADAC) published by CMS. (P. 26)

• Actual acquisition cost: Beginning April 1, 2017, states must base their fee-for-service Medicaid ingredient cost reimbursement to pharmacies on actual acquisition cost, determined using pharmacy surveys or other reliable data. (P. 25)

By Allyson B. Mullen & Jeff N. Gibbs –

Before the multiple feet of snow that the DC area recently received, CDRH had been creating its own storm of device guidance documents. One of the most recent ones is the final guidance “Submission and Review of Sterility Information in Premarket Notification (510(k)) Submissions for Devices Labeled as Sterile,” which was released on January 21, 2016.  This guidance is the final version of the draft by the same name, which was issued in December 2008.  FDA is holding a webinar to discuss this guidance on February 11th from 2–3:30pm ET. Webinar details can be found on FDA’s website.

This guidance applies to devices that are labeled as sterile through microbial inactivation. It distinguishes established sterilization methods and those that are novel.  That is FDA has established a bifurcated universe of “established” versus “novel.”  It is unlikely, though, that all 510(k)s will neatly fall into this scheme.  This scheme is also different from the original scheme proposed by FDA in the draft guidance with more methods falling under the “established” category than the draft, which proposed a three-tier system of “traditional,” “non-traditional,” and “novel non-traditional.”

Established methods are those for which there is an FDA-recognized standard and are well-accepted, for example dry heat, EO, steam, and radiation. Established methods are also those for which there is no FDA-recognized standard, but there is “published information on development, validation, and routine control available” and/or FDA has previously reviewed and accepted the sterilization method as being acceptable (e.g., through clearance of a 510(k) for a device sterilized with such a method).  These established methods include, for example, hydrogen peroxide, ozone, and flexible bag systems.

On the other hand, novel methods are “newly developed methods for which there exists little or no published information, no history of comprehensive FDA evaluation” and no FDA-recognized consensus standard. Novel methods include, among other things, brand new sterilization methods, changes to parameters of established methods, and combinations of established sterilants which FDA has not previously reviewed or cleared.  It is worth noting that the guidance states that a method is novel if “parameters of an FDA-cleared sterilizer have been altered.”  The guidance does not address how significant the alterations must be in order to be considered novel.  As a result, on its face, it appears that any change to an FDA-cleared sterilizer’s parameters would result in a “novel” sterilization method.

The guidance indicates that FDA intends to inspect device manufacturing facilities that employ novel sterilization methods prior to clearing 510(k)s for such devices.  The draft guidance also indicated that pre-clearance inspections would be required for novel sterilization methods.  The draft guidance also stated that FDA would perform priority post-clearance inspections of device manufacturing facilities utilizing sterilization methods for which there is no FDA-recognized standard, but there is published information on its validation and FDA has previously reviewed and accepted the sterilization method as being acceptable (previously referred to as non-traditional methods, and now encompassed within the definition of “established” methods).  The statement regarding post-clearance inspections has been omitted from the final guidance, and it should be noted that it is unclear what FDA meant by a “priority” inspection in this context.  It is not to say, however, that FDA will not still consider performing such post-clearance inspections. 

With regard to pre-clearance inspections, the guidance does not indicate how FDA will ensure that such an inspection takes place within the Federal Food, Drug, and Cosmetic Act mandated 90 day review time frame for 510(k)s. Nor does the guidance indicate how FDA will handle inspectional findings that result from such pre-clearance inspections, what effect those findings will have on a pending 510(k) or its review timing, or what the inspectional criteria will be.  Historically, FDA has not considered QSR compliance as part of making a substantial equivalence determination, and its ability to use QSR compliance in making an initial classification decision is limited by statute.  FDC Act § 513(f)(5).

Moreover, the guidance creates a new standard for sterilization information required in 510(k)s, and although the guidance is nonbinding, failure to comply will likely result in a finding of not substantially equivalent. For devices sterilized by established methods, the guidance indicates that the sterilization information from the current 510(k) Refuse to Accept policy (a copy of the current requirements for sterile devices is at the end of this post) and the CDRH premarket coversheet (i.e., the sterilization facility) should be submitted in a 510(k) plus the following information:

• A description of the sterilization chamber (e.g., rigid or fixed);
• If the sterilization method is not the subject of an FDA-recognized consensus standard, but the sterilizer or sterilization method has been cleared by FDA:
  • the 510(k) number,
  • the make and model of the sterilizer, and
  • whether the proposed sterilization cycle is identical to a cleared cycle or has been altered (note: if it has been altered then it would be considered a novel method under the guidance);
• If the method has not been previously cleared by FDA, but there is “published information on development, validation, and routine control available” it should be stated;
• The radiation dose, if the device is sterilized by radiation;
• If the sterilization method is not the subject of an FDA-recognized consensus standard, “a comprehensive description of the process and the complete validation protocol;” and
• A description of not only the packaging, but also how it will “maintain the device’s sterility, and a description of the package test methods, but not package test data.”

For novel methods, the above information must be provided along with the following additional information:

• “A comprehensive description of the sterilization process;
• The method used to validate the sterilization cycle (e.g., the half-cycle method);
• The validation protocol; and
• The sterilization validation data. The submission should also identify any applicable published scientific literature.” Note: the requirement to provide the sterilization validation data is in direct contradiction of the current version of the 510(k) RTA, which expressly states that “the sterilization validation report is not required.” We think it would be too cute for FDA to say that asking for the data rather than the report was not a contradiction.

The guidance also provides additional information regarding the information needed to support a “non-pyrogenic” claim and the types of devices for which pyrogenicity data should be provided. These sterilization and pyrogenicity requirements have been modified in the final guidance compared to the draft guidance. 

The draft guidance also set out detailed steps for how the reviewers should route sterilization information during a 510(k) reviewing, including, requesting inspections and involving the Infection Control Devices Branch (ICDB) in its review of novel sterilization methods. This detailed routing information and references to the ICDB’s involvement have all been omitted from the final guidance.  It is possible that the review team will follow the draft process internally, and it was simply omitted from the public-facing final guidance.

Although the guidance is neither binding nor set out in the 510(k) RTA, we expect that FDA will begin enforcing these requirements sooner rather than later, even if not officially. As a result, manufacturers will want to ensure that they are familiar with these new sterilization requirements prior to submitting a 510(k) to FDA.

By John R. Fleder & Mark I. Schwartz –

We all know that under the so-called “Park Doctrine”, corporate executives can be criminally prosecuted under the FDC Act for violations of that Act even absent any showing that the executives acted with any wrongful intent.  A prosecution is possible when violations are committed by an employer even though the executive did not directly participate in the alleged unlawful conduct and did not even know the conduct was occurring.  At least since United States v. Park was decided by the United States Supreme Court in 1975, there has been substantial debate about the level of responsibility at a corporation that should subject an individual to a criminal prosecution.  The government’s position has been understated but basically consistent since this writer was in the government between 1973 and 1992:  Any person, no matter what his/her level of responsibility, is theoretically subject to criminal prosecution under 21 U.S.C. 333(a)(1) because: (1) that person directly committed a prohibited act under 21 U.S.C. 331; (2) the person “caused” a prohibited act  to have occurred or aided and abetted in such an act by his/her employer; or (3) the person was in a position of authority to prevent Section 331 violations from occurring.

On January 14, 2016, the United States Court of Appeals for the Eighth Circuit affirmed the convictions of three individuals convicted of selling misbranded synthetic drugs.  Charges had been brought under the FDC Act, the Controlled Substances Act and its Analogue Act.  The Court affirmed the FDC Act felony convictions of two of the defendants, ruling that the jury instructions given by the District Court were correct in terms of the “knowledge” element required for a conviction under 21 U.S.C. 333(a)(2).  Slip Op. at 12-13.

Two other paragraphs of the Court’s Opinion make this ruling particularly noteworthy.  The Court of Appeals affirmed the FDC Act misdemeanor convictions of Joseph Gellerman, who worked as a store clerk for the business run by one of the other two defendants.  Gellerman was sentenced to three years of probation, a $1000 fine, and 90 days of home electronic monitoring.

Mr. Gellerman did not own the business or run it, although he was the son of the owner.  Nor was he a high level executive.  Instead, he was what the Court referred to as a “store clerk.”  See Slip Op. at 13-14.  The Court ruled that the government could hold Gellerman criminally liable as a store clerk under the FDC Act because he sold misbranded drugs.  “[T]he government only had to prove beyond a reasonable doubt that Gellerman was responsible for, or aided and abetted in the commission of, delivering misbranded drugs after they had been received in interstate commerce.”  The Court further ruled that “[m]isdemeanor liability stems not from ‘corporate hierarchy,’ but from an individual’s role in the sale of misbranded drugs” [citing United States v. Park. 421 U.S. 658 (1975)].  The Court upheld his conviction because government agents had purchased misbranded drugs from him even though “Gellerman had limited responsibilities as a store clerk.”

As precedent, the government’s appellate brief cited only to a 1986 case where a low-level employee, a store clerk, was prosecuted under the FDC Act.  The brief also asserted that the language in Park holding what the government calls “responsible parties” to be liable under the FDC Act did not apply in this case because Gellerman personally sold misbranded drugs to customers.  In contrast, Gellerman’s brief argued that he lacked responsibility and authority as a clerk, he believed the products he sold were legal, and he received no prior notice that the drugs he sold were misbranded or otherwise illegal.

This case perhaps answers the question regarding who can be criminally prosecuted for personal involvement in FDC Act violations.  The answer, according to this Court, appears to be anyone!  Although the Supreme Court in Park and an earlier Supreme Court decision had noted that relying on the “good sense of prosecutors” provides some protection to defendants being unfairly targeted, that is hardly a comfort to lower level employees in an FDA-regulated world.

We do not know the reasons why Gellerman was charged and we are not opining about whether this was an appropriate use of prosecutorial discretion.  Rather, the notable (and potentially troubling) aspect of the Eighth Circuit’s Opinion is that the legal principle announced in the case appears to be that there is no legal limit on who can be prosecuted.  That is an extremely powerful tool to place in the hands of government prosecutors.

This decision presents a number of very sticky issues for corporations, outside corporate counsel, and employees of a corporation.  For instance, when the government investigates a corporation for alleged FDC Act violations, government investigators will frequently ask to speak with “lower-level” employees such as the sales force.  Can anyone now assure such an employee that he/she will not be prosecuted absent a grant of immunity?  Should company counsel represent both the corporation and lower-level company employees in a corporate criminal investigation when it is at least possible that the government may decide to prosecute low level employees for their actions?

Moreover, we have read numerous articles about the “Responsible Corporate Officer” Doctrine in the context of FDC Act prosecutions.  It appears that this Court may have misunderstood Park.  The Eighth Circuit said that misdemeanor liability does not stem from “corporate hierarchy” under Park, but instead turns on an individual’s role in the violations charged.  In fact, Mr. Park’s conviction was based on his position at his company and his legal duty to prevent violations (as opposed to participating in them).  In any event, here Gellerman was prosecuted for what he did, rather than any duty imposed on him to prevent others from violating the FDC Act.

As Congress and others debate the propriety of strict liability “no mens rea” prosecutions, the Gellerman prosecution is likely to be used (perhaps improperly) as Exhibit A by people who believe that strict liability prosecutions give the government too much power.

By Melisa M. Moonan –

FDA has granted stakeholders an additional 30 days to comment on its the December 31, 2015 draft guidance “Public Notification of Emerging Postmarket Medical Device Signals ('Emerging Signals').” The new deadline for comments is March 29, 2016.   We previously commented on the significant issues raised by this draft guidance here and in relation to User Facility MDR inspections here.

FDA stated in its announcement of the extension that it was “taking this action due to the unanticipated high-level of interest from external stakeholders and the medical device community[.]”  We are baffled by FDA’s lack of anticipation of stakeholder interest. Considering the risks for manufacturers, users, and patients of  FDA publicly communicating theoretical risk information about emerging signals that have not been fully analyzed or confirmed, this high level of interest was foreseeable.

The extension appears to respond to requests for an additional 30 days to comment by two industry groups, AdvaMed and the 510(k) Coalition.  The grounds are unsurprising to us, and accord with the concerns we noted in our blogpost on the draft guidance.   AdvaMed ’s request stated that the draft guidance “represents a significant departure from the Agency’s current postmarket communication policies” and requires consideration of the potential impact across a broad range of products that have a variety of indications for use and use settings.  The 510(k) Coalition’s request similarly stated  that the draft “represents a significant change,” from current policy and process and presents “complex legal and regulatory issues and public health implications.”    

Given recent Congressional and press interest in FDA’s efficiency in communicating public health issues,  interested stakeholders should submit their comments by the new deadline.  We do anticipate that finalizing the Emerging Signals guidance will be a high-level priority for the agency.

By Kurt R. Karst –

Whether in the context of asserting First Amendment protection for a pharmaceutical manufacturer’s off-label promotion of an otherwise approved drug (see our previous post here), or challenging FDA’s denial of New Chemical Entity (“NCE”) exclusivity for VASCEPA (icosapent ethyl) Capsules (NDA 202057) (see our previous post here), Amarin Pharma, Inc. (“Amarin”) blazed new trails in food and drug law with victory after victory in court against FDA in 2015. Amarin’s litigation track record continues in 2016 with another court victory last Friday when much of the East Coast of the United States was bracing for Winter Storm Jonas (a.k.a. Snowmageddon 2016).  Although this time Amarin’s win was not against FDA, it’s another first-of-its-kind ruling, and it is of interest to the Hatch-Waxman Community. 

On January 22nd, the U.S. District Court for the District of New Jersey issued an unpublished Memorandum Opinion and Order granting Amarin’s Motion to Dismiss (without prejudice) Paragraph IV patent infringement litigation with several companies that had submitted ANDAs to FDA seeking approval to market generic versions of VASCEPA (opposition, response, and reply briefs available here, here, and here). 

According to FDA’s ANDA Paragraph IV Certifications List, the first ANDA submitted to FDA containing a Paragraph IV certification to a patent listed in the Orange Book for VASCEPA occurred on January 15, 2013. Subsequent Paragraph IV ANDAs followed.  Each ANDA, however, was submitted to FDA earlier than the not-yet-here four-year anniversary of the approval of NDA 202057 for VASCEPA (i.e., July 26, 2016).  Why is that important?  After all, the electronic Orange Book does not even identify an unexpired period of non-patent exclusivity associated with VASCEPA; and the period of “New Product” 3-year exclusivity that previously appeared in the Orange Book expired on July 26, 2015.  So what’s the hang-up?

As folks may recall (and as noted above), on May 28, 2015, the U.S. District Court for the District of Columbia issued an Opinion vacating FDA’s February 21, 2014 Exclusivity Determination that VASCEPA is not eligible for 5-year NCE exclusivity and remanded the matter to FDA for proceedings consistent with the court’s Opinion. ANDA sponsor (and suspected first applicant) Watson Laboratories Inc. (“Watson”), which was not a party to the proceedings before the district court issued its May 2015 decision, sought to intervene and appealed the district court ruling.  In October, 2015, the district court deferred resolution of Watson’s Motion to Intervene pending further action from the U.S. Court of Appeals for the District of Columbia Circuit. In December 2015, the DC Circuit dismissed Watson’s appeal for lack of jurisdiction. 

Meanwhile, FDA, in light of the district court’s May 28, 2015 decision, issued letters to ANDA applicants notifying them that review of their ANDAs was suspended, and that the status of their applications was (and still is) “submitted, but not yet received.” “If, after further review, FDA determines that Vascepa qualifies for NCE exclusivity, the exclusivity will bar an applicant from submitting an ANDA which references Vascepa until July 26, 2017 or an ANDA containing a [Paragraph IV certification] until July 26, 2016,” wrote FDA. FDA has not yet issued an exclusivity determination based on the district court’s May 2015 ruling; however, to avoid complicating matters even further, we suspect FDA will issue a ruling in the coming months, and almost certainly before July 26, 2016, which is the so-called NCE-1 date if 5-year exclusivity is granted. If FDA denies NCE exclusivity a second time, then we suspect Amarin will challenge that decision as unlawful.

Moving back to last week’s dismissal of ANDA Paragraph IV litigation, the New Jersey District Court relied on previous case law concerning so-called “premature” Paragraph IV certification notice. In those cases (see our previous post here), and in SB Pharmco P.R., Inc. v. Mutual Pharm. Co, Inc., 552 F. Supp. 2d 500 (E.D. Pa. 2008), in particular, the court found that notice sent prior to FDA’s acceptance (i.e., receipt, or filing) of an original ANDA is considered premature and ineffective.  Citing and quoting SB Pharmco P.R., the New Jersey District Court reasoned as follows:

The current procedural posture of the Consolidated [Patent Infringement] Actions demonstrates the “important distinction between physically-received ANDAs . . . and officially-received ANDAs.” SB Pharmco P.R., 552 F.Supp.2d at 506.  Therefore, “the FDA’s role in accepting an ANDA for review, so that it is received and not merely delivered, acts as a safeguard” against premature litigation. Id. at 508 (emphasis in original).  Therefore, this Court must grant [Amarin’s] Motion to Dismiss because [this Court] lacks the authority to adjudicate the Consolidated Actions for want of an ANDA having been deemed as “received” by the FDA. Id. at 511. . . .

The court granted Amarin’s Motion to Dismiss despite arguments from ANDA sponsors that FDA’s suspension action was premature and improper because the Agency has not made a final exclusivity determination with respect to VASCEPA. Moreover, wrote several ANDA applicants:

It would lead to unnecessary litigation and a waste of judicial resources if the Court were to dismiss the case now, while the action is stayed, and before the FDA has an opportunity to rule on Vascepa’s NCE status. Accordingly, the Court should deny Plaintiffs’ Motion, or at minimum, stay the action and defer its decision until after a final determination on Vascepa’s NCE status . . . .

So where do we go from here? Absent an appeal by the ANDA sponsors, everyone is waiting for FDA to act.  A grant or denial of NCE exclusivity will almost certainly spawn more litigation . . . not only over the merits of FDA’s exclusivity decision, but what the exclusivity decision means for companies that previously submitted ANDAs (and in light of the New Jersey District Court’s January 22nd dismissal). 

By Riëtte van Laack & John R. Fleder –

In hockey parlance, a player gets a “hat trick” when the player scores three goals in one game. In the FDA enforcement world, a “hat trick” – and perhaps a “Gordie Howe hat trick” – would be the use of FDA’s three traditional enforcement mechanisms in one matter: a criminal prosecution, an injunction action and a civil seizure.  In a case announced late last week, we saw the government come very close to scoring a hat trick with regard to cheese products that were connected to a Listeria outbreak in 2014.

FDA and the Department of Justice (DOJ) have an arsenal of methods for dealing with alleged violations of the Federal Food, Drug, and Cosmetic Act (FDC Act). The government typically uses one of those remedies against a company. Although, in the past, it has on numerous occasions used multiple enforcement methods against the same company, as far as we can recall, it has never used three remedies against the same company in the same matter. While the East Coast was getting ready for a historical snowstorm, DOJ did just that. On January 22, 2016, it filed a civil Complaint and proposed Consent Decree for Permanent Injunction. It also filed a separate criminal Information, which includes as part of the remedy sought “forfeiture” (which is akin to a civil seizure action) of adulterated food products. Seeking a forfeiture of allegedly violative products regulated by FDA in a criminal case is highly unusual but not unprecedented.

The government announced a guilty plea involving the company, Roos Foods, Inc. (Roos) to the Information and the other actions taken by the government.

The civil Complaint, criminal Information, and previous announcements by FDA suggest that Roos had a history of non-compliance issues. Allegedly, Roos manufactured and distributed several varieties of ready-to-eat cheese, including ricotta, queso fresco and fresh cheese curd and sold and distributed its products to wholesale customers in Maryland, New Jersey, Virginia and Washington D.C. In 2014, investigations by FDA (together with CDC and state authorities) linked Roos cheese products, contaminated with Listeria monocytogenes (L.m.), to a multi-state outbreak of listeriosis. Allegedly, a subsequent inspection of the facility revealed numerous deficiencies in good manufacturing practice and the presence of Listeria monocytogenes in various environmental samples.

Roos issued a recall and, in March 2014, FDA suspended the facility’s registration. Facility suspension is a relatively new enforcement power which gives FDA the authority to suspend the registration of a facility when FDA determines that a food manufactured, processed, packed, received, or held by a facility has “a reasonable probability of causing serious adverse health consequences or death to humans,” and “the facility created, caused, or was otherwise responsible for such reasonable probability.” Because a food facility registration is required for the legal manufacture of food for consumption in the United States, the suspension of the facility registration effectively put the company out of business for the duration of the suspension.

It is not clear what, if anything, happened since March 2014. According to the civil Complaint, the government believes that the permanent injunction is required because without it, Roos will continue to violate the law. Although, the facility suspension should prevent any further violations by the facility, the proposed Permanent Injunction is broader as it includes the owners.

According to both the Complaint and the Information, the 2014 inspection was not the first time that FDA identified violations of GMP and sanitation requirements involving Roos. According to those documents, FDA inspections in 2010 and 2013 revealed similar violations. Both times, “FDA investigators issued a Report of Investigational Observations . . . and discussed . . . the observations with” Roos management. According to the civil Complaint, Roos did not respond in writing to the Form 483s FDA issued in 2010 and 2013. Yet, as far as we know, FDA did not take any further action until 2014.

One wonders why the agency did not take earlier enforcement action as a result of 2010 and 2013 violative inspections. In fact, the Complaint alleges that FDA’s observations in the 2010 and 2013 inspections were, in some instances, the same as or similar to the observations made by FDA in its February-March 2014 inspection.

As mentioned above, as far as we can recall, the government has never before filed criminal and civil charges against a company and also sought the forfeiture of violative products against a company.

It is also noteworthy that the civil Complaint alleges that Roos Foods and the individual owners violated the FDC Act by, among other things, introducing or delivering for introduction into interstate commerce articles of food that were adulterated in that the food was prepared, packed or held under insanitary conditions whereby it may have become contaminated with filth or rendered injurious to health.  The criminal Information, however, is directed only at the company. Does this mean that the government worked out a deal where no individuals would be criminally prosecuted? Or, does it mean that the government is still investigating to determine if it should file criminal charges, presumably against the individual defendants in the civil case? We cannot determine the answer to these questions because the Plea Agreement between the company and the government is not yet public.

By Ricardo Carvajal – 

It’s getting hard to turn around without bumping into a Food Safety Modernization Act (FSMA) consultant.  Perhaps it was inevitable, given the compliance dates that suddenly don’t seem so far away, the law’s many moving parts, and the mantra that FSMA is the most sweeping reform of the nation’s food safety laws in the last 70 years.  The temptation to turn the reins over to someone claiming to have all the answers is understandable, but here are some reasons to question that strategy.

• No one has all the answers.  Yes, four of the major regulations have already published, but they are accompanied by hundreds of pages of preambles that need to be digested, and there are guidance documents under development at FDA that will help flesh out the regulations.

• The law is here to stay.  As a long term strategy, query whether it might be more beneficial to start investing in developing your internal expertise up front.

• No one is likely to understand your facility, products, and processes as well as you.  Someone who doesn’t appreciate that could try to saddle you with answers that are appropriate in a different context, but aren’t in yours.

• Self-proclaimed experts are under significant pressure to give substantive answers, and will find it uncomfortable to answer a question with the phrase “I don’t know.”  This can lead to answers that, upon further investigation, turn out to be wrong.  Wrong answers can lead to wasted resources, or worse.

• There is no training or certification system for FSMA consultants.  This means that there is little to stop an individual or entity from claiming expertise that they might or might not have – but would be happy to acquire at your expense. 

This is not to say that seeking external help to ensure readiness with the law or even ongoing compliance with its requirements is a bad idea.  Indeed, the regulation on preventive controls for human food recognizes that a “qualified individual” or a “preventive controls qualified individual” can be a third party, and there might be perfectly good reasons to outsource those or other functions.  Just beware how loosely you hold the reins, or you could find yourself meandering the long – and potentially expensive – way home.

By Alan M. Kirschenbaum –

Just ahead of a predicted snow storm in the Baltimore-Washington area, CMS yesterday issued a blizzard of 658 pages constituting its final regulation implementing changes to the Medicaid Drug Rebate Program. Although this is a final rule, CMS will be accepting comments on certain provisions relating to the alternative rebate for line extension drugs.

Hyman, Phelps & McNamara, P.C. will be preparing a memo summarizing the rule in the near future. We’ll also be conducting a webinar on the rule in collaboration with KPMG’s government pricing group.  The date and other details will be announced on this blog over the next few days.

By Ricardo Carvajal - 

On January 4, FDA denied the Weston A. Price Foundation’s citizen petition seeking revocation of the health claim for soy protein and coronary heart disease (CHD).  As reported in a prior blog posting, the Foundation filed the citizen petition in 2008, and sued the agency in 2014 to compel a response. 

By way of background, FDA authorized the challenged health claim in October 1999, having concluded that it met the standard of significant scientific agreement.  In December 2007, FDA initiated a reevaluation of the challenged claim in response to the emergence of new scientific evidence.  In reevaluating a health claim, FDA engages in as exhaustive a review as it does in the claim’s approval, by poring over the “totality of publicly available scientific evidence.”  Thus, the claim was already under scrutiny when the Foundation filed its petition seeking revocation of the claim.

FDA denied the Foundation’s petition because it “fails to reflect the totality of scientific evidence that was publicly available at the time of the petition… and is insufficient to support the conclusion that the SSA standard has not been met.”  FDA reviewed the studies cited in the petition and winnowed out those of no relevance, which left only six studies “of moderate quality” that “did not show a benefit for intake of soy protein and risk reduction of CHD.”  However, the petition failed to address the significant number of intervention studies that do show a reduced risk of CHD – a critical deficiency given the obligation in FDA’s citizen petition regulation to include “all relevant information and views on which the petitioner relies, as well as representative information known to the petitioner which is unfavorable to the petitioner's position.”

Although FDA’s response should bring the related litigation to a close, it doesn’t mean that the health claim is entirely in the clear.  FDA intends to complete its review, after which FDA will decide “whether there may be grounds to initiate the rulemaking process for amending or revoking the health claim.”

By Riëtte van Laack –

On January 15, 2016, the National Organic Program of USDA's Agricultural Marketing Service (NOP) announced the availability of guidance on substances that may be used in the post-harvest handling of organic products and in facility pest management.

Under the Organic Food Production Act (OFPA), the NOP of the USDA is authorized to establish the National List of Allowed and Prohibited Substances (National List). The National List identifies the synthetic substances that may be used and the nonsynthetic (natural) substances that may not be used in organic crop and livestock production. It also identifies a limited number of non-organic substances (natural as well as synthetic) that may be used in or on processed organic products. The National List is spread over several regulations identifying the allowed and prohibited substances for crop production (7 C.F.R. §§ 205.601; 205.602); livestock production (7 C.F.R. § 205.603; 205.604); and in (or on) processed food products (7 C.F.R. §§ 205.605, 205.606). However, no regulation addresses use in post-harvest handling, i.e., “the act of handling raw agricultural commodities without further processing” (e.g., washing, cleaning, sorting, packing, cooling, storing of raw agricultural products).

Post-harvest handling of raw agricultural products can take place either on a farm or in a handling facility. It was unclear whether substances allowed in handling (listed in section 205.605) could be used in post-harvest handling on the farm, and if nonsynthetics allowed in crop products could be used in post-harvest handling taking place in a handling facility. NOP developed the guidance to resolve this confusion.

Under the NOP guidance, substances that may be used post-harvest on raw agricultural commodities include substances allowed for use in handling in § 205.605 of the National List, without specific use restrictions that would prevent such post-harvest use, and nonsynthetic substances allowed for use in crop production (without restriction in § 205.602 that would prevent such use). Synthetic substances listed in § 205.601 may only be used if they are specifically annotated to permit post-harvest use.

The organic regulations specify what substances may be used in facility pest management. If management practices fail, a nonsynthetic or synthetic substance “consistent with the National List” may be applied. NOP interprets this to mean that “nonsynthetic substances and synthetic substances” identified in the National List as permitted substances “may be used for facility pest management in accordance with any restrictions” and prohibitions. If a substance is listed as permitted in livestock production but prohibited for use in crop production, the use is not consistent with the National List. If all else fails, substances that are not on the National List may be used “provided that there is no contact with organic products or ingredients” and meet certain other requirements.

Appendices to the guidance include a number of examples illustrating the application of the scheme described in the guidance. In addition, NOP published its responses to comments.

By Kurt R. Karst –

Last week, the Federal Trade Commission (“FTC”) announced the issuance of the Bureau of Competition’s annual summary of agreements filed with the Commission during the last fiscal year (Fiscal Year 2014) – Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.  The FTC’s FY 2014 Staff Report is the first full fiscal year report issued since the U.S. Supreme Court’s June 17, 2013 decision in FTC v. Actavis, Inc., 133 S. Ct. 2233 (2013), which addressed the standards that courts should apply in drug patent settlement cases (also known as “pay-for-delay” or “reverse payment” cases) (see our previous post on the Actavis decision).  Actavis has rippled through the legal system, with lower courts continuing to grapple with the broad contours of that decision, according to a recent article, titled “Where We Stand On Pharmaceutical Patent Settlements,” by Wilson Sonsini Goodrich & Rosati PC attorneys Seth C. Silber, Jeff Bank, Brendan Coffman and Kellie Kemp.

When the FTC issued its FY 2013 Staff Report in December 2014, the Commission noted that “[b]ecause [the Actavis] decision came nearly three quarters of the way through FY 2013, there are not yet enough post-Actavis settlements to draw meaningful conclusions from the [FY 2013] data” (see our previous post here). But with a complete fiscal year of post-Actavis data under its belt, the Commission is making some observations.

According to the FTC Staff Report, FY 2014 saw 160 final patent settlement agreements filed with the Commission – a record number since the data were first collected for FY 2004 – but only 21 of the agreements (involving 20 different brand-name drug products) “potentially involve pay for delay because they contain both explicit compensation from a brand manufacturer to a generic manufacturer and a restriction on the generic manufacturer’s ability to market its product in competition with the branded product.” That’s a drop from the 29 agreements reported in FY 2013, and a “significant decrease” from the record 40 agreements reported in FY 2012.  In addition, 53 of the 160 agreements reportedly involved ANDA sponsors eligible for 180-day exclusivity, of which 11 are identified by the FTC as “potential pay-for-delay settlements.”  The number of potential pay-for-delay settlements is the lowest since FY 2007 when there were also 11 such agreements. 

The downward trends in potential pay-for-delay settlements and settlements involving ANDA first-filers become quite apparent when we at the FDA Law Blog add percentages to the numbers supplied by the FTC and (as we have done in the past) illustrate the numbers in a table.

In a blog post, the FTC is hesitant to say that the numbers show a “lasting trend,” but the Commission does make three observations: (1) more settlements than ever were completed without reverse payments (and almost half in FY 2014 involved cash payments to a generic drug manufacturer of $5 million or less); (2) more settlements than ever were completed without reverse payments; and (3) the use of so called “No-AG” (no authorized generic) commitments appears to be declining.

Given the apparent trending of patent settlement agreements, one must ask whether legislation that would “prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market” is still necessary. After a hiatus, the Preserve Access to Affordable Generics Act reappeared last September in the form of S. 2019 (see our previous post here).  There doesn’t appear to be much steam behind the bill, which has languished in the Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights since it was introduced.  It’s difficult to see how legislators can use the report to support the need for what is essentially a ban on patent settlement agreements involving compensation.  In fact, the silence from Capitol Hill since the FTC Staff Report was published on January 13th is deafening . . . . and is perhaps telling as to the fate that will ultimately befall such legislation.

By Jay W. Cormier & David B. Clissold – 

As we reported 18 months ago here, in July of 2014 the District Court for the District of Columbia granted summary judgment for what is now R.J. Reynolds Tobacco Holdings, Inc. in a lawsuit that alleged that the FDA Tobacco Product Scientific Advisory Committee (“TPSAC”) was tainted by the inclusion of three members who had financial conflicts of interest.  In addition to finding that the appointments were improper, the District Court found that the committee’s 2011 Menthol Report was “at a minimum, suspect, and, at worst, untrustworthy.”  FDA was instructed to appoint an entirely new TPSAC.  

Not surprisingly, FDA appealed on several grounds, the most relevant of which was that the plaintiffs lacked standing.

Last Friday, the DC Circuit agreed with FDA and overruled the District Court’s summary judgment. The Circuit Court concluded that “all three [alleged plaintiff injuries] are too remote and uncertain” for the plaintiffs to have standing to bring the case.  

The impact of vacating the District Court ruling is significant. As the Circuit Court stated in its last sentence of the ruling, “[w]e therefore vacate the judgment of the district court for lack of jurisdiction and dissolve its injunction barring the use of the menthol report and ordering the reconstitution of the Committee.”

Although the direction from the Circuit Court is clear, given the significance of this ruling, we expect that this is not the end of this fight.

By Allyson B. Mullen –

On January 4, CDRH issued its first draft device guidance of the year. The Draft Guidance “Unique Device Identification: Convenience Kits” explains FDA’s position as to what constitutes a convenience kit for purposes of the UDI Rule.  The guidance is quick to point out that the convenience kit definition used in the draft guidance relates to the UDI requirements only, and does not change any other FDA statements regarding what constitutes a convenience kit (e.g., “Convenience Kits Interim Regulatory Guidance” May 20, 1997).  The question of what is a convenience kit is ripe for its own updated guidance. 

The draft guidance defines a convenience kit for purposes of the UDI rule as being “two or more different medical devices packaged together for the convenience of the user where they are intended to remain packaged together and not replaced, substituted, repackaged, sterilized, or otherwise processed or modified before the devices are used by an end user.” This definition is important because if a kit meets the definition of a convenience kit then only the kit label is required to include a UDI and the individual devices within the kit are exempt from the requirement to bear a UDI.  21 C.F.R. § 801.30(a)(11).  If a kit does not meet the definition then each individual device in the kit will be required to comply with the applicable UDI requirements. 

The guidance further elaborates on what it means by the devices being “packaged together.” FDA indicates that devices are packaged together if the devices are “packed (i.e., wrapped or sealed) in a single container that is not intended to be unwrapped or unsealed before it is used by an end user.”

The heart of the draft guidance consists of several examples to illustrate kits that do and do not meet the definition of a convenience kit for purpose of the UDI rule:

• First aid kit – Convenience Kit. The first aid kit meets the definition because the bandages, scissors, etc., are sealed in a single package and are not unpackaged until they are used by the end user.  
• Non-sterile orthopedic device tray or set – Not a Convenience Kit. A non-sterile tray consisting of numerous instruments and implants of various sizes that requires sterilization before use and the unused components from which can be used in another subsequent tray would not meet the definition. This kit does not meet the definition because the components do not remain packaged together prior to use by the end user as they must be unpackaged for sterilization prior to use. In addition, the unused implants and/or reusable instruments can be reprocessed/resterilized and used in a subsequent tray. Thus, these potentially unused components, which may be used later, will not remain packaged with the other components prior to use.
• ACL disposable procedure kit – Convenience Kit. A sterile procedure kit consisting of various instruments, guide wires, graft passers, etc. would meet the definition because the components all remain packaged together up until the point in time when the surgeon opens the tray for use on the patient.
• Reusable medical devices packaged together – Not a Convenience Kit. This example describes non-sterile, reusable surgical instruments packaged together. The draft guidance explains that these co-packaged instruments do not meet the definition of a convenience kit because they would have to be separated prior to use in order to be sterilized. FDA’s rationale appears linked to the device’s need for sterilization rather than the fact that the instruments are reusable, as described in the example title. This ambiguity leads us to wonder whether a kit consisting of reusable devices that did not require sterilization would meet the definition. For example, the first aid kit example contains some devices that are reusable (e.g., scissors, thermometer), and the fact that the devices are reusable does not seem to alter FDA’s analysis in that example. Thus, it appears that meeting the definition – at least in this example – turns on the devices requiring sterilization rather than being reusable.

A few key points regarding the convenience kit definition that we can take from the guidance’s definition and the illustrative examples:

• The contents of the convenience kit do not need to be consumed in a single instance. For example, the contents of the first aid kit will be used over time, but it is still a convenience kit, at least for purposes of the UDI rule.
• Whether a kit is a convenience kit for purposes of UDI is based on the manufacturer’s intent. In the first aid kit example, the manufacturer intends for the kit to remain packaged together prior to use in accordance with the convenience kit definition. The guidance acknowledges, however, that it is likely the purchaser could replace devices originally provided in the kit as they are consumed (e.g., bandages). Because the manufacturer is not doing the replacement and the manufacturer intends for the kit to remain packaged together prior to use, the kit meets the convenience kit definition. It would be interesting to see if FDA would still agree with this position if the example were a higher risk kit.Note: FDA’s proposal to focus on the manufacturer’s intent is consistent with the proposal issued last year on amending the intended use regulation (21 C.F.R. § 801.4) to remove the concept of known off-label use requiring additional labeling to address such use. 80 Fed. Reg. 57756 (Sept. 25, 2015).
• If any devices in the kit require sterilization prior to use, the kit cannot be a convenience kit because the devices must be unpackaged prior to use. The guidance only addresses sterilization, but in our view, it is possible that other processing or preparation could cause a kit to not meet the convenience kit definition.

By Melisa M. Moonan –

It has come to our attention that FDA has initiated inspections at several hospitals in various parts of the country to assess compliance with User Facility Medical Device Reporting (MDR) obligations under section 519 of the Federal Food, Drug, and Cosmetic Act (the Act) and 21 C.F.R. Part 803.

User Facilities such as hospitals are no doubt familiar with handling inspections by State licensing agencies and standards organizations, or even by FDA in the clinical research context. However, an FDA inspection related to MDR requirements may not be as familiar.

Although investigators conducting the inspections are referring to their work – which they candidly admit is a new effort for FDA – as “surveys,” these inspections have all the hallmarks and consequences of regular FDA inspections. Hospital-type user facilities have previously been the subject of warning letters for failures to report and a lack of the systems and procedures required by Part 803.

With all the recent inspections, we thought it would be a good time to post a reminder of User Facility MDR requirements and provide some thoughts on compliance.

User Facility Reporting and Record Keeping Requirements

In the 1990 Safe Medical Devices Act, Congress instituted User Facility reporting requirements for serious injuries and deaths under section 519 of the Act, and FDA subsequently promulgated related regulations under 21 C.F.R. Part 803.

Under the statute and regulations, User Facilities have 10 work days to report deaths and serious injuries when they become aware of information that reasonably suggests that a medical device has or may have caused or contributed to the event. Deaths must be reported to FDA and (if known) the manufacturer of the device.  Serious injuries must be reported to the manufacturer, or if the manufacturer is unknown, to FDA. In addition, annual reports attaching or summarizing the reports for the previous year must be submitted by January 1^st.

User Facilities must also establish “MDR event files” and maintain them at least two years after the date of the event, § 803.18(c). The event files must contain information specified by regulation.  User Facilities must also have written procedures that require compliance with the relevant statutory and regulatory provisions.

The statute and regulations also authorize FDA to enter User Facilities at reasonable times to obtain access to, verify, and copy records that are required to be kept pursuant to MDR reporting obligations, and it is violation of the Act to 1) fail to make required reports, 2) fail to keep required records, or 3) refuse to permit an authorized FDA inspection.

As you can see, User Facilities need to have and maintain systems and procedures to ensure timely reporting and complete recordkeeping, and that provide for related FDA access. In this environment, it may be a good time for hospitals to review MDR systems and procedures for compliance, and ensure readiness for an FDA inspection.

Finally, the timing of the recent inspections is fairly coincident with other developments, including FDA’s new draft guidance on Public Notification of Emerging Postmarket Medical Device Signals (“Emerging Signals”) (Dec. 21, 2015) (see our previous post here). The inspections may indicate a concern that FDA needs to be more proactive to help ensure a level of User Facility MDR submission that is commensurate with incidence of reportable events, and which would enhance “Emerging Signals” detection and analysis. 

These developments suggest we can expect to see continued or even escalating agency activity in this area. User Facilities should consider getting ahead of the curve and proactively making sure that they are in compliance and prepared for inspection.

By James E. Valentine –

On January 13, 2015, CDER’s Clinical Outcome Assessments Staff (formerly Study Endpoints and Labeling Development (SEALD)) announced the launch of Stage 1, or the pilot stage, of its Clinical Outcomes Assessment (COA) Compendium. A COA measures patients’ symptoms, overall mental state, or the effects of a disease or condition on how the patients function. There are four types of COA measures:

• Patient-reported outcome (PRO) measures
• Clinician-reported outcome (ClinRO) measures
• Observer-reported outcome (ObsRO) measures
• Performance outcome (PerfO) measures

Based on prior statements from FDA officials, the COA Compendium, which will be available at www.fda.gov/COACompendium, is supposed to provide clinical trial sponsors a database of: (1) qualified tools; (2) ongoing qualification programs; and (3) previously labeled COAs (from new molecular entity labeling approved 2003 and later). This pilot follows through with CDER’s pledge from spring of 2015 (see our previous coverage here) to provide a collated and summarized list of “potentially acceptable endpoints” that could support labeling claims, as well as encourage development of COAs more generally. Consistent with CDER’s intent for this compendium to serve more as a starting point when considering how measures might be utilized in clinical trials, the compendium is not expected to include detail on the endpoints. Therefore, the COAs currently available can serve to inform discussions between research sponsors and FDA, particularly early in drug development.

The COA Compendium also compliments FDA’s efforts to foster patient-focused drug development (see our coverage of these efforts here). CDER intends for the compendium to facilitate the use of measures that capture outcomes that are important to patients (e.g., PROs) – a “high priority for FDA.” In addition, CDER previously indicated its interest in a second stage of the compendium that would directly incorporate input from Patient-Focused Drug Development meetings to identify gaps in available measurements. Specifically, a list of could be generated of concepts highlighted as important by patients, but for which no tool exists.

CDER is seeking input on the utility of the pilot compendium and approaches for future iterations, including any suggested expansions of its scope. Comments can be submitted to FDA’s docket here.