By Karla L. Palmer –  

FDA announced (here and here) earlier this week the availability of two draft guidances (here and here) for compounders using bulk substances under FDCA Sections 503A and 503B.  FDA also published final guidance for compounders under Section 503A (see our previous post addressing that guidance).  As previously addressed, FDA published the long-awaited proposed bulk substance lists after industry’s submission of two rounds of nominations and comments.  Recall that the Agency required an industry-wide “do-over” of the nomination process after too many substances were submitted (including en bulk submissions of entire pharmaceutical compendia), and with allegedly insufficient clinical information concerning many of the nominations (see our previous posts here and here).

The underlying enabling legislation, the Drug Quality and Security Act, Title I (DQSA) (Pub. L. No. 113-54) requires FDA to publish the list of bulk substances for which there is a “clinical need” that may be used in compounding under 503B.  A similar provision exists in Section 503A, but the statute does not contain an explicit “clinical need” requirement.  The publication of the bulk substances lists (which FDA now terms the “bulks”) is occurring during FDA’s Pharmacy Compounding Advisory Committee (PCAC) (Oct. 26 and 27).  This is the third PCAC meeting this year, at which the PCAC has addressed certain nominated substances (for both the so-called positive and negative lists).  FDA notes in the Section 503B interim guidance that, unlike Section 503A bulks nominations, FDA is not required to consult with the PCAC before publishing its nominations.

One of the conditions necessary for an outsourcing facility to qualify for certain exemptions from the FDCA is that it may not compound drug products using a bulk drug substance unless: (1) it appears on a list established by the Secretary identifying bulk drug substances for which there is a clinical need (see Section 503B(a)(2)(A)(i) or (2) the drug product compounded from such bulk drug substances appears on the drug shortage list in effect under FDCA Section 506E at the time of compounding, distribution, and dispensing (Section 503B(a)(2)(A)(ii)). 

For Section 503A compounders, one of the conditions that must be met to qualify for Section 503A’s exemptions from certain provisions of the FDCA is that it: (1) comply with the standards of an applicable United States Pharmacopeia (USP) or National Formulary (NF) monograph, if a monograph exists, and the USP chapter on pharmacy compounding; (2) if such a monograph does not exist, they are components of approved drugs; or (3) if such a monograph does not exist and the drug substance is not a component of an approved drug, it appears on a list developed by the Secretary. (See Section 503A(b)(1)(A)(i)).

The guidance documents set forth the conditions under which FDA does not intend to take action against an outsourcing facility or licensed pharmacy for compounding a drug product from a bulk drug substance that does not appear on a list of substances that may be used in compounding while FDA develops (or finalizes) the lists.

Set forth below are the details:

Section 503A

Approximately 740 substances were nominated. 

• Approximately 275 substances are already eligible for use in compounding (i.e., components of approved drugs, the subject of a USP/NF monograph), and do not need to appear on the list. 
• At least one (Maalox) is not a bulk substance.
• At least one (sodium hexachloroplatinate (IV) hexahydrate) is a biological product subject to approval pursuant to a BLA.  No biological products subject to BLA approval will be eligible for the 503A bulks list.
• At least two are radiopharmaceuticals (GHRP-2 and GHRP-6), to which Section 503A does not apply, and thus the substances are ineligible. 
• At least four appear on the FDA’s list of drugs withdrawn or removed as unsafe or ineffective (chloroform reagent, cobalt chloride hexahydrate, cobalt gluconate, and phenacetin).
• One substance (an extract of cannabidiol and tetrahydrocannabinol) has no currently accepted medical use and is listed in Schedule I of the CSA; it is not eligible for the bulks list.
• About 390 substances were nominated without sufficient supporting evidence for FDA to evaluate them.
• Remaining nominations contained sufficient supporting information; however, FDA determined some raise safety concerns.

FDA has published on its website (and attached to the guidance) four Section 503A bulks lists:

• 503A List 1 – Bulk Drug Substances Under Evaluation:  Bulk substances that may be eligible for inclusion and were nominated with sufficient information for FDA to evaluate them and do not appear on any other list.
• 503A List 2 – Bulk Drug Substances that Raise Safety Concerns: Nominated with sufficient supporting information; however, because FDA has identified safety concerns, FDA has placed these substances on a list that may not be used in compounding unless and until FDA publishes a final rule authorizing their use under Section 503A.
• Section 503A List 3 – Bulk Drug Substances Nominated Without Adequate Support: May be eligible for inclusion on the list but nominations did not include sufficient supporting information.  These may be renominated with sufficient supporting information.
• Section 503A List 4 – Bulk Drug Substances That May Not Be Used to Compound Drug Products under Section 503A (to be developed):  These bulks were considered for inclusion on the list, but after notice-and-comment rulemaking, FDA determined that they should not be used. 

The guidance describes the FDA’s rulemaking process for the nominated substances, including the balancing of the four factors FDA considers when reviewing substances.

FDA states it does not intend to take enforcement action if: (1) the bulk substance appears on List 1; (2) the substance was “originally manufactured” by an establishment that is registered under Section 510, and is accompanied by a certificate of analysis from the original manufacturer (importantly, note that FDA defines “original manufacturer” as the entity that originally produced the bulk drug substance and not a subsequent packer, repacker, labeler, or distributor); (3) the drug is compounded in compliance with all other sections of Section 503A. 

Section 503B

In response to the requests for nominations, approximately 2,590 unique substances were nominated. 

• Approximately 1,740 are biological products subject to approval pursuant to a BLA.  No biological products subject to BLA approval will be eligible for the 5o3B bulks list.
• At least one (Maalox) is not a bulk substance.  Finished drug products are not eligible for the list. 
• At least four are radiopharmaceuticals (strontium chloride, sodium iodide I-131, GHRP-2 and GHRP-6), to which Section 503B does not apply, and thus the substances are ineligible.  Radiopharmaceutical compounding will be addressed in a separate guidance.
• At least five appear on the FDA’s list of drugs withdrawn or removed as unsafe or ineffective (chloroform reagent, cobalt chloride hexahydrate, cobalt gluconate, and phenacetin, and methapyrilene fumarate).
• One substance (an extract of cannabidiol and tetrahydrocannabinol) has no currently accepted medical use and is listed in Schedule I of the CSA; it is not eligible for the bulks list.
• About 650 substances were nominated without sufficient supporting evidence for FDA to evaluate them.
• Remaining nominations contained sufficient supporting information, and may be eligible for inclusion. 

FDA has published on its website (and attached to the guidance) four Section 503B bulks lists:

• 503B List 1 –Bulk Drug Substances Under Evaluation:  Bulk substances that may be eligible for inclusion and were nominated with sufficient information for FDA to evaluate them and do not appear on any other list.
• 503B List 2 – Bulk Drug Substances that Raise Safety Concerns: Nominated with sufficient supporting information; however, because FDA has identified safety concerns, FDA has placed these substances on a list that may not be used in compounding unless and until FDA publishes a final rule authorizing their use under Section 503B.
• Section 503B List 3 – Bulk Drug Substances Nominated Without Adequate Support: May be eligible for inclusion on the list but nominations did not include sufficient supporting infuriation.  These may be renominated with sufficient supporting information.
• Section 503B List 4 – Bulk Drug Substances That May Not Be Used to Compound Drug Products under Section 503BA (to be developed):  These bulks were considered for including on the list, but after notice-and-comment rulemaking, FDA determined that they should not be used.

As with FDA’s Section 503A bulks guidance, FDA’s guidance set forth the process for developing the lists.  Like Section 503A, it will publish nominations on a rolling basis.  In order to “avoid unnecessary disruption to patient treatment” while FDA considers bulk substances nominated with sufficient support and for which FDA has not identified safety concerns.  

FDA does not intend to take enforcement action for compounding from bulk under Section 503B provided that: (1) The substance appears on List 1; (2) the substance was “originally manufactured” by an establishment that is registered under Section 510, and is accompanied by a certificate of analysis from the original manufacturer; (3) if the bulk substance is the subject of a USP/NF monograph, the substance complies with it; and (4) the drug product is compounded in compliance with all other provisions of Section 503B.

To ensure that the Agency considers any comments on the draft guidance documents before it finalizes them, interested persons must submit comments by December 28, 2015.  Each guidance document contains a one-page chart (Appendix) setting forth a neat summary of FDA’s bulks policies for Sections 503A and 503B, and FDA’s current lists of bulk substances.      

By Kurt R. Karst –

Hatch-Waxman Patent Term Extension (“PTE”) disputes never get old for this blogger.  There’s often some new twist for FDA or the U.S. Patent and Trademark Office (“PTO”) to consider, as shown in a recent PTE denial for a patent concerning the ZILVER PTX Drug Eluting Peripheral Stent (Docket No. FDA-2013-E-0781).  And even when yet another PTE denial based on a product not meeting the first permitted commercial marketing prong of the PTE statute (35 U.S.C. § 156) pops up, as shown in a recent PTE denial for a patent covering ARIDOL (mannitol inhalation powder) (Docket No. FDA-2012-E-0168), this blogger still feels a little giddy before reading the decision.  But what this blogger enjoys most is a good PTE court battle.  That’s what we have in Boehringer Ingelheim Pharma GmbH & Co. KG, et al. v. FDA, et al., Case No. 15-cv-00656-CKK (D.D.C.).  

As we previously reported, in April 2015, Boehringer Ingelheim Pharma GmbH & Co. KG and Boehringer Ingelheim Pharmaceuticals, Inc. (collectively “Boehringer”) filed a Complaint in the U.S. District Court for the District of Columbia alleging that FDA and the PTO unlawfully shorted by about two months a PTE for U.S. Patent No. 6,087,380 (“the ‘380 patent) covering Boehringer’s PRADAXA (dabigatran etexilate) Capsules approved under NDA 022512.  The Complaint was prompted by a December 2014 PTE regulatory review period decision from FDA in which the Agency refused to revise the Agency’s previous determination published in the Federal Register (see our previous post here).   In that May 2012 Notice, FDA commented that:

[Boehringer] claims December 15, 2009, as the date the new drug application (NDA) for PRADAXA (NDA 22-512) was initially submitted.  However, FDA records indicate that NDA 22-512, received December 15, 2009, was incomplete.  FDA refused to file this application and notified the applicant of this fact by letter dated February 12, 2010.  The completed NDA was then submitted on April 19, 2010, which is considered to be the NDA initially submitted date.

Boehringer alleges in its Complaint that FDA violated the Administrative Procedure Act and the Hatch-Waxman Amendments when the Agency unlawfully relied on the NDA “filing” standard instead of an “initially submitted” standard in the Agency’s calculation of PTE for the ‘380 patent. 

Boehringer lays out its case in a Motion for Summary Judgment filed in September.  According to the company:

The agency violated the Hatch-Waxman Act’s plain language that the approval phase begins “on the date the application was initially submitted for the approved product.” 35 U.S.C. § 156(g)(1)(B).  The agency failed to follow its own patent term extension regulation, which makes clear that the approval phase begins when an applicant initially submits an application sufficiently complete to allow review to commence.  And the agency abandoned without reason or explanation the previous position that it had applied to other applicants. [(Emphasis in original)]

Although Boehringer goes through the two-step Chevron analysis in the company’s memorandum, the company says it’s not really necessary, because the inquiry should end at Step One, as the statute is clear:

FDA’s position is fatally inconsistent with the plain text of the Hatch-Waxman Act itself.  The statute does not provide that the approval phase starts when an application is “ready for filing,” “accepted for filing,” “finally submitted,” or “complete.”  The statute mandates that the approval phase commences when an application is “initially submitted.”  35 U.S.C. § 156(g)(1)(B).  “Initial” means “happening or being at the very beginning: FIRST.”  Webster’s II New College Dictionary (1995).  And Congress quite deliberately chose to use the word “submitted” rather than “filed,” making clear that the application need only be submitted by the applicant and need not be cleared for filing by FDA before the review phase starts.  By selecting the words “initially submitted” rather than “ready for filing,” Congress chose to end the testing phase and begin the approval phase based on the action of the sponsor, not the action of the agency.  [(Emphasis in original)]

Moreover, says Boehringer, citing to legislative history (H.R. Rep. No. 98-857, pt. 1 (1984)), Congress directly addressed the issue presented in the dispute during passage of the Hatch-Waxman Amendments:

The term “initially submitted” is used to describe the point in time when the testing phase is considered to be completed and the agency approval phase to have begun.  This term is used instead of the term “file,” because an application is often not considered to be filed, even though agency review has begun, until the agency has determined that no other information is needed and a decision on the application can be made.  For purposes of determining the regulatory review period and its component periods, an application for agency review is considered to be “initially submitted” if the applicant has made a deliberate effort to submit an application containing all information necessary for the agency review to begin.  [(Emphasis added in brief)]

Turning to FDA’s PTE regulations (21 C.F.R. Part 60), Boehringer says that those regulations “make clear that an application need not be ‘ready for filing’ in order to count as ‘initially submitted,’” because those regulation make no reference to “filing.”  “First, the agency has defined the term “marketing application” as an application for human drug products, medical devices, food and color additives, or animal drug products “submitted” under the applicable laws,” and “[s]econd, FDA’s patent term extension regulations define the phrase ‘initially submitted’ as the date upon which a marketing application ‘contains sufficient information to allow FDA to commence review of the application,’” writes Boehringer. 

Boehring also cites a blast from the past as evidence of FDA acting in an arbitrary and capricious manner in this case.  According to Boehringer, there’s a 1985 PTE decision concerning TONOCARD Tablets that does’nt jibe with FDA’s position here concerning PRADAXA:

FDA’s calculation of PRADAXA’s regulatory review period is contrary to the agency’s past precedent with regard to similarly situated applicants.  Previously, FDA has determined that submission of an application starts the approval phase of the regulatory review period even when the agency later determines that the application is not approvable.  See A.R. 5514-16 (Determination of Regulatory Review Period for Purposes of Patent Extension; Tonocard Tablets, 50 Fed. Reg. 19,809, 19,810 (May 9, 1985)).  The facts in that case are strikingly similar to those presented here: The applicant submitted an application on December 19, 1979.  Six months later, FDA declared the initial application to be “nonapprovable.”  The applicant submitted a different application a few years later that was eventually approved.  The agency found that even though the first application had been declared “nonapprovable” and was replaced by a later application, that fact “did not preclude that application’s commencement of the approval phase of the regulatory review period.”  Id.  The agency reasoned that while the December application “was not approvable, it was sufficiently complete to permit agency action to begin.”  Id.  Accordingly, the applicant received day-for-day credit for the intervening months for patent term extension purposes.  Id.

FDA, in the Agency’s Cross-Motion for Summary Judgment (Motion to Dismiss), has a response for each argument proffered by Boehringer.  Citing another court decision on PTEs involving the statute’s “initially submitted” language – Wyeth Holdings Corp. v. Sebelius, 603 F.3d 1291 (Fed. Cir. 2010) (see our previous post here) – FDA paints Boehringer’s case as an attempt by the company to have its cake and eat it too:

Generally, priority review shortens the targeted review time for a drug that may provide a significant improvement over marketed therapies.  Priority review often enables a drug sponsor to market its product sooner than the traditional review process.  But there is a trade-off.  Priority review usually leads to a shorter patent term extension because a shorter approval phase typically reduces the regulatory review period.  Yet here, Boehringer wants it all.  In order to obtain an earlier approval, Boehringer requested and enjoyed the benefits of priority and rolling review (and a shorter approval phase); but in order to obtain a longer patent term extension, Boehringer now seeks a longer approval-phase than the statute provides.  In an earlier lawsuit, similarly challenging FDA’s determination of the date a New Animal Drug Application was “initially submitted” in a case where it had conducted phased review, the Federal Circuit rejected a similar request for an overly generous patent term extension, holding that the statutory term “initial submission” was ambiguous, and that FDA’s interpretation was reasonable.  The same is true here, and this Court should likewise reject Boehringer’s attempt to unduly extend its patent term.  [(Internal citations omitted)]

Because the statute is unclear as to the meaning of “initially submitted,” says FDA citing Wyeth, the Agency’s determination must be considered under Chevron Step Two, where a court determines whther or not an agency interpretation is reasonable.  And FDA says the Agency’s decision is quite reasonable, relying in part on the same House Report relied on by Boehringer:

An “application” for purposes of this provision must be “submitted . . . under”—and thus contain the information required by—the cross-referenced subsection of the FDCA, namely, 21 U.S.C. § 355(b). . . .  An application with inadequate sections that cannot be substantively reviewed is not enough. . . .  In order words, to count as “the application . . . submitted . . . under subsection (b) of section 505 [of the FDCA, codified at 21 U.S.C. § 355(b)],” “the application” must be sufficiently complete and capable of being reviewed. . . .  [A]n “application” is “initially submitted” under 21 U.S.C. § 355(b) when the sponsor has provided FDA with all the elements required by Section 355(b) and the corresponding regulations to make an approval decision.  Indeed, the House Report’s use of the words “all information necessary” rather than “some information necessary” reflects Congress’s intent that the approval phase commence when an application is sufficiently complete to permit FDA’s substantive review of all required components of the application.

FDA continues this line of argument in refuting Boehringer’s interpretation of the PTE statute:

Boehringer wrongly focuses on the words “initially submitted” rather than the phrase “the application . . . for the approved product . . . under . . . [21 U.S.C. § 355(b)]” as the critical statutory language in this case.  The relevant question is what must be “initially submitted.” Determining the date that “the application . . . for the approved product . . . under . . . [21 U.S.C. § 355(b)]” is “initially submitted” requires knowing what constitutes such an “application.”  As explained above, such an “application” must contain the information required by 21 U.S.C. § 355(b) and 21 C.F.R. § 314.50.  Boehringer did not submit clinical data (which is required by FDA regulations) that was sufficiently reviewable until April 19, 2010.  Therefore, Boehringer did not “initially submit[]” a sufficiently complete and reviewable application until April 19, 2010.

Turning to the TONOCARD Tablets PTE precedent cited by Boehringer as evidence of arbitrary and capricious action by FDA, the Agency comes armed with its own precedents beginning in 1994, and says that the Agency’s “position in this case is not new.  On the contrary, the agency has consistently maintained, for over two decades, that the approval phase begins when FDA receives an application that is sufficiently complete to be reviewed.”  The TONOCARD Tablets precedent is “readily distinguishable,” says FDA.  “In the Tonocard Tablet case, the non-approvable decision is not analogous to FDA’s refuse-to-file decision for Pradaxa: the Tonocard application was ‘complete enough’ for FDA to commence review and determine that it was not approvable, while for Pradaxa, the deficient module in the application meant that it was not yet at that stage.”  (Citation omitted)

Responses to the Cross-Motions for Summary Judgment are due by November 24, 2015, and replies are due by December 16, 2015.

By James R. Phelps –

Last Thursday, at the 16th Pharmaceutical Compliance Congress and Best Practices Forum, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division, Benjamin Mizer, reviewed enforcement policies that the Department of Justice will follow.  Appropriate to the forum, he focused on the industries regulated by FDA.  The emphasis he gave to the requirements for settling civil and criminal cases brought against organizations gives sharp focus to the problem of doing business when governed by a law that operates with a malum prohibitum standard of liability, a law that permits findings of criminal guilt without proof of intent or guilty knowledge.

If an organization wishes to settle a criminal or civil case, in order to receive credit for cooperation and therefore a reduced penalty, the DOJ will require that organization “…to identify all individuals involved in the wrongdoing, regardless of the individual’s position or seniority in the company.  This includes providing all relevant facts about the individual’s misconduct.”   Mr. Mizer was clear to say that failure to provide this information means no partial credit will be given; in other words, that would be a failure to cooperate that would be brought to the attention of the court. 

Mr. Mizer said investigations would, for criminal and civil cases, from the outset focus on individuals.

Individuals in FDA-regulated business who stand in what is considered to be a “responsible relation” to a violative activity can be held liable in the absence of intent or actual knowledge of that activity.  In practice, operating under this standard, the DOJ and FDA have charged presidents of companies when the violation occurred at the other end of the country, and plant managers whose plant did the physical production of a product that had a design flaw – unknown to him – caused by faulty engineering designs in another part of the country.  In short, what is a responsible relation depends pretty much on what a prosecutor decides and just about anyone, from top to bottom in the executive suites, who had an association with an activity deemed violative, is at risk.

In the past, DOJ and FDA personnel have said they would only pursue a criminal case when some real wrongdoing was involved.  Of course, the DOJ and FDA personnel leave it to themselves to decide what is the ‘wrongdoing’ that merits prosecution, and they know that, at a trial, the judge will give the jury instruction that criminal intent or knowledge is not necessary for conviction.  So as a practical matter, there is a very slim protection against the effect of the malum prohibitum standard.

The effect of the DOJ policy is, then, that in civil and criminal litigation, to be “cooperative” and avoid being labeled “uncooperative,” an organization must identify an array of potential defendants for the prosecutors to select.  When there is deliberate criminality or palpable negligence, corporations and most organizations are responsible to separate themselves from such people, so identifying the perpetrators could be reasonable.  However, the experience in the FDA-regulated industry is that most of the problems arise when people simply cannot anticipate adverse things that occur because of unforseen issues of design, manufacture, or use of their products; subjecting personnel to risk of criminal prosecution in these circumstances is unfair.

The Supreme Court read the malum prohibitum standard into the Federal Food, Drug, and Cosmetic Act in the 1940s.  The DOJ and FDA have enjoyed the power it gave them, and have successfully defeated any effort by legislation or litigation to ameliorate that standard.  The DOJ policy provides – promotes – a process to give the malum prohibitum standard fuller implication in all cases where there is conflict with the regulated parties.  Personnel in the regulated industry, those who are doing their best to provide health-related products, have reason to be uncomfortable.

Join the Federal Bar Association (FBA) and its Federal Litigation Section on Tuesday, October 27 in Washington, DC for the Annual FBA Federal Litigation Conference! Expert panelists and judges will be discussing hot topics including but not limited to cyber security, electronic evidence, and tips for federal practice. Hyman, Phelps & McNamara’s Karla Palmer will be moderating a panel that will provide insight from in-house counsel.  Other panels will cover the Supreme Court of the United States and insights from federal judges. In addition to a plethora of CLE credit opportunities, the luncheon and receptions provide excellent networking opportunities to meet professionals from across the nation. To register to attend, complete the affiliate registration form and receive $150 off the nonmember rate.

By Kurt R. Karst – 

Last week we posted on one of two bills recently introduced in Congress that continues a trend to push for (or reward) new product development by offering an incentive different from the standard grants of patent and non-patent marketing exclusivities (S. 2055, the Medical Countermeasure Innovation Act of 2015).  We promised we would address the second bill in a post in the coming days.  This post concerns H.R. 3539, the Reinvigorating Antibiotic and Diagnostic Innovation Act of 2015, which was introduced by Representative Charles Boustany (R-LA) in September.  While most recent legislative proposals focus on offering some variation of the current Priority Review Voucher programs (see here and here), H.R. 3539 takes a different tack: tax credits.

Offering tax credits as an incentive to develop products by offsetting clinical trial expenses is not new.  But to our knowledge you have to go back to the early 1980s to find the last time Congress amended the tax code to provide tax credits to FDA-regulated industries.  Specifically, under the Orphan Drug Act of 1983, a tax credit for certain clinical testing expenses for an orphan drug incurred in that taxable year is permitted under the Internal Revenue Code and under the Internal Revenue Service’s implementing regulation at 26 C.F.R. § 1.28.  The tax credit permits a firm paying United States taxes to credit against its federal income tax 50% of “qualified clinical testing expenses” relating to orphan drug development.  To qualify for the credit, the clinical testing must, under 26 U.S.C. § 45C: (1) be conducted under an IND; (2) relate to a drug and indication that has received an orphan drug designation from FDA; (3) occur after FDA designation as an orphan drug and before FDA approval; and (4) be conducted by or on behalf of the taxpayer to whom the orphan drug designation applies.

Expenses eligible for the orphan drug tax credit include both in-house testing expenses, such as wages and non-depreciable supplies, and contract research expenses (i.e., amounts paid to persons other than employees to conduct the research).  Under 26 U.S.C. § 39(a), companies can carryback unused tax credits “to each of the 1 taxable years preceding the unused credit year,” and can carryforward unused tax credits “to each of the 20 taxable years following the unused credit year.”  Although the law sets a baseline that “[n]o tax credit shall be allowed . . . with respect to any clinical testing conducted outside the United States,” there’s an exception when “testing is conducted outside the United States because there is an insufficient testing population in the United States . . . .”  (A regulation – at 26 C.F.R. § 1.28-1(d)(3)(ii)(B) – defines “insufficient testing population” to mean “[t]he testing population in the United States is insufficient if there are not within the United States the number of available and appropriate human subjects needed to produce reliable data from the clinical investigation.”)

This past June, the Biotechnology Industry Organization (“BIO”) and the National Organization for Rare Disorders (“NORD”) released a report touting the success of the orphan drug tax credit program.  We covered that report in a post here.

Why all this background on the orphan drug tax credit?  Because the Reinvigorating Antibiotic and Diagnostic Innovation Act of 2015 borrows heavily from, and is modeled after, the orphan drug tax credit program. . . . but with a significant twist.

H.R. 3539 would amend the Internal Revenue Code to add Sections 45S (“Clinical testing expenses for qualified infectious disease products”) and 45T (“Clinical testing expenses for rapid infectious diseases diagnostic tests”) to provide a tax credit for certain “qualified clinical testing expenses” related to both a “qualified infectious disease product” and a “qualified rapid infectious diseases diagnostic test.”  The bill links the tax credit to the Generating Antibiotic Incentives Now Act, which is codified at FDC Act § 505E and provides for a 5-year exclusivity extension for drugs designated as a qualified infectious disease product. 

H.R. 3539 defines a “qualified infectious disease product” to mean any human drug or biological product that (1) “is intended to treat a serious or life-threatening infection, including those caused by— (i) an antibacterial or antifungal resistant pathogen (including novel or emerging infectious pathogens), or (ii) qualifying pathogens listed by the Secretary of Health and Human Services under [FDC Act § 505E(f)];” and (2) “is intended to treat an infection for which there is an unmet medical need as defined by the Secretary of Health and Human Services.”  The bill also defines a “qualified rapid infectious diseases diagnostic test” to mean “an in-vitro diagnostic (IVD) device that provides results in less than four hours and that is used to identify or detect the presence, concentration, or characteristics of a serious or life-threatening infection, including those caused by (1) an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens or (2) qualifying pathogens listed by the Secretary of Health and Human Services under [FDC Act § 505E(f)].”

A lot of the rules for the orphan drug tax credit program would also apply to the proposed qualified infectious disease tax credit.  For example, foreign clinical testing expenses are excluded from the credit unless there is an insufficient testing population in the United States.  There is also the possibility to carryback and carryforward unused tax credits as with the orphan drug tax credit. 

What makes the proposed qualified infectious disease tax credit unique, however, is the ability to transfer by sale allowable credit.  Specifically, H.R. 3539 provides that “[a]ny taxpayer holding a credit under this section may transfer for valuable consideration unused but otherwise allowable credit for use by” either a “qualified pharmaceutical research taxpayer” or a “qualified diagnostics research taxpayer.”   A “qualified pharmaceutical research taxpayer” is defined in the bill to mean “any domestic corporation the primary mission of which is pharmaceutical research or development.”  A “qualified diagnostics research taxpayer” is defined to mean:

any domestic corporation that derives— 

(A) any gross income from research or development on diagnostic tests used to identify or detect the presence, concentration or characteristics of a serious or life-threatening infectious disease or pathogen; or

(B) any gross income from research or development on qualified infectious disease products within the meaning given to such term in section 505E(g) of the Federal, Food, Drug, and Cosmetic Act; or

(C) more than 50 percent of its gross income from activities related to health care.

A taxpayer that transfers any amount of qualified infectious disease tax credit is required to file notice of such transfer with the Treasury Secretary in accordance with procedures and forms that would be prescribed by the Secretary.

We’re likely to see more initiatives to incentivize product development as Congress ramps up efforts to pass legislation, such as the 21st Century Cures Act, to revamp product development and approval processes.  Indeed, earlier this week, one United States Senator announced his “Medical Innovation Agenda” to streamline FDA approval processes.  The announcement was accompanied by the introduction of two new pieces of legislation: the FDA Regulatory Efficiency Act (S. 2187) and the Rare Device Innovation Act (S. 2188).

By Larry K. Houck –

Ruth Carter, Chief of the Drug Enforcement Administration’s (“DEA”) Office of Liaison and Policy Section, was among the presenters who addressed the 31st Annual Conference of the National Association of State Controlled Substance Authorities (“NASCSA”) this week in Scottsdale, Arizona.  Ms. Carter provided an update on DEA activities and initiatives following the recent leadership changes at the agency and the Office of Diversion Control.  Ms. Carter stated that the agency is considering issuing further clarification of suspicious order requirements, possibly a regulation specifying the format for suspicious order reporting and how registrants must maintain those reports with other required controlled substance records.

In the wake of almost ten years of significant DEA civil and administrative enforcement action related to suspicious orders, it remains to be seen the extent to which such rulemaking will clarify the standard for such reporting or only focus on a reporting format.  Issuance of additional clarification of what DEA requires and expects for suspicious order reporting is overdue and would be most welcome by registrants.

In addition, Ms. Carter stated that DEA may issue a final rule on electronic prescriptions (the agency issued an interim final rule on March 31, 2010) and a proposed rule on transporting controlled substances by ambulance, vessels and ships and athletic team physicians.  Ms. Carter did not provide a timeframe for these actions.  Ms. Carter also noted that DEA will hold two Drug Take-Back events in 2016: one in April and the second in October.  Ms. Carter observed that DEA has established goals to conduct cyclic inspections of nonpractitioners every three to five years.  She also stated that the agency has begun conducting scheduled inspections of retail and hospital pharmacies.  Previously, DEA’s inspections of practitioners (doctors, pharmacies, etc.) was primarily limited to investigations into alleged violations.

By Kurt R. Karst –

Last month we posted on a bill introduced in the U.S. Senate – S. 2041, the Promoting Life-Saving New Therapies for Neonates Act of 2015 – that would amend the FDC Act to add Section 530 to create a transferable “Neonatal Drug Exclusivity Voucher.”  The bill, we noted, continues a recent trend to push for (or reward) new product development by offering an incentive different from the standard grants of patent and non-patent marketing exclusivities (including incentives that merely stack new exclusivity periods upon one another).  A few days after the introduction of S. 2041, two other bills were introduced in Congress that offer alternative rewards for targeted product development.  In today’s post we’ll cover the fist proposal: S. 2055, the Medical Countermeasure Innovation Act of 2015, introduced by Senator Richard Burr (R-NC).  The second bill will be covered in a post in the coming days. 

In addition to making certain changes to the Strategic National Stockpile, clarifying the contracting authority of the Biomedical Advanced Research and Development Authority, and prompting FDA to prioritize finalization of draft guidance on the so-called “Animal Drug Rule,” the Medical Countermeasure Innovation Act of 2015 would, in Section 7, amend the FDC Act to add Section 565A, titled “Priority review to encourage treatments for agents that present national security threats.”

That’s right, another Priority Review Voucher (“PRV”) program is under consideration by Congress!  If enacted, the new PRV program would be added to the Rare Pediatric Disease PRV (“Pediatric PRV”) program (FDC Act § 529) created in 2012 by the FDA Safety and Innovation Act, and to the Tropical Disease PRV (“TD PRV”) program (FDC Act § 524), cretaed in 2007 by the FDA Amendments Act. 

We’ll call the new PRV proposed in S. 2055 the “CBRN Countermeasure PRV,” where the “CBRN” is shorthand for “Chemical, Biological, Radiological and Nuclear.”  The CBRN Countermeasure PRV program is modeled after the current TD PRV and Rare Pediatric Disease PRV programs, but is targeted at the development and approval of products that are the subject of a “material threat medical countermeasure application.”   Such an application is an application for a drug or biological product, no active ingredient of which has been previously approved, that qualifies for 6-month priority review, and that is intended to “prevent, or treat harm from a biological, chemical, radiological, or nuclear agent identified as a material threat under [PHS Act §  319F-2(c)(2)(A)(ii)], or “to mitigate, prevent, or treat harm from a condition that may result in adverse health consequences or death and may be caused by administering a drug, or biological product against such agent.”

Like other PRVs, the CBRN Countermeasure PRV would be transferable, requires notice to FDA before use (in this case only 90 days), and is subject to a special application user fee.  Of course, the ability to transfer (by sale) a PRV is what has made PRVs quite sought after.  So far, FDA has issued 7 PRVs under the TD PRV and Rare Pediatric Disease PRV programs (see here).  One PRV recently sold for an astounding $350 million.

Despite the growing popularity of PRVs, there are PRV detractors (or at least those who have expressed some concern with PRVs).  In a recent interview with folks from The RPM Report, FDA Office of New Drugs Director John Jenkins shared his thoughts about the PRV programs administered by FDA.  When asked whether he thinks PRVs are a good way to incentivize drug development, Dr. Jenkins commented:

The PRV programs require FDA to provide a service (i.e., priority review) that would not otherwise be warranted on the merits for the application for which the voucher is redeemed.  This approach is not consistent with FDA’s usual approach to determine priorities for its public health work based on the merits of the application under review.  In effect, these programs allow sponsors to “purchase” a priority review at the expense of other important public health work in FDA’s portfolio.

Dr. Jenkins also noted during the interview that “[t]he PRV vouchers issued to date have been awarded to drugs that were already being studied in the U.S. or approved in other countries prior to the passage of the PRV legislation.”  This is an observation echoed by Aaron Kesselheim, a Professor of Medicine at Harvard, in a recent article published in The Journal of the American Medical Association.  According to Dr. Kesselheim, there is “little reliable evidence” that the TD PRV program has spurred novel drug development.  “Several more promising approaches exist to promote discovery of new treatments for neglected tropical diseases or other overlooked disease classes,” says Dr. Kesselheim.  “In particular, greater funding of basic science research would help identify novel targets for therapy.”

We imagine that there is also some concern among drug and biological product manufacturers that new PRV programs will dilute the value of a PRV.  It’s a simple issue of supply and demand.  The more PRVs issued and on the market, the less they are likely to sell for. 

Given the criticism of and concerns about PRVs on the one hand, and Congress’s apparent need to create incentives on the other hand, we’ve given some thought to other non-exclusivity incentives Congress might consider as it looks for alternative ways to incentivize drug and biological product development.  Borrowing from this blogger’s vast board game experience (e.g., Risk, Monopoly, and Life), Congress might consider a transferable “Anti-PRV.”  An “Anti-PRV” would allow the holder of such a PRV, awarded for some particular product development achievement, the ability to cancel out another company’s redeemed Pediatric or TD PRV (or a CBRN Countermeasure PRV if it exists).  Or how about the “Standstill Voucher”?  That voucher would provide the holder with the ability to freeze FDA’s review of a competitor’s NDA or BLA review for 6 months.  Or maybe the “Switch-Out PRV,” which would allow the holder of such PRV the ability to take another sponsor’s PRV and leave a competitor with a standard 10-month review.  We could go on and on, but we’ll stop with these three proposals (all said with tongue-in-cheek of course).

By James R. Phelps & Wes Siegner –

“Bad reactions to dietary supplements are sending thousands of Americans to the ER every year, a new study shows.”  That’s the attention-getting lead in a CBS News story dated October 15.  It was based on a study report appearing in the New England Journal of Medicine.  The NEJM study reported results of surveillance data about ‘dietary supplement-related’ adverse events, collected from 63 emergency departments in the United States between 2004 and 2013.  The study casts a wide net to include, among adverse events, unsupervised ingestions by children and incidents where seniors were in the emergency room because of difficulty swallowing their supplements. 

The Council for Responsible Nutrition (CRN) and the Natural Products Association (NPA) responded to criticize the study, challenging the method of data selection and the methodology used.

The authors of the NEJM article are CDC and FDA personnel, and the critics express wonder about why the authors used data from emergency room visits and not the adverse reaction reports for dietary supplements that were given to FDA since 2008; it would seem that these adverse reaction reports are exactly on point.  The critics also note that data concerning products that are not dietary supplements were included among the reports of ‘related’ adverse dietary supplement events, confounding the application of the study’s data to dietary supplements.  The response of CRN and NPA goes on to address and mostly contradict or find a lack of significance for each of the report’s assertions. And the authors of the NEJM article themselves identify weaknesses in the sample size and the statistical information the data can provide. 

There is another question about the study that deserves attention.  The report says “[c]ases were defined as emergency department visits for problems that the treating clinician explicitly attributed to the use of dietary supplements.”  This could and perhaps should be taken to mean that the clinicians actually said the ingested supplement caused the problem.  Elsewhere in the report, however, the authors talk only of ‘supplement-related’ events, and some of the charts identify the events as ‘associated with’ supplements.  There is good reason for this terminology to raise questions.

Years ago, FDA wanted to take a regulatory action with sulfites for use on foods, and claimed that the administrative record demonstrated that sulfites on foods caused – were ‘associated with’ – deaths.  Examination of the record, however, showed that not to be the case.  For example, in one instance ‘associated with’ meant that a fellow had eaten at a Mexican restaurant, ingested sulfite-treated food, and died in a motorcycle crash on his way home.  In that instance and others in that record, the agency incorrectly treated ‘associated with’ to mean ‘caused.’  So it would be good for there to be a clarification, based on the accepted tenets of toxicology, of the meaning of the words ‘related’ and ‘associated with’ in this study – was there an allegation or actual evidence of causation by a dietary supplement of the adverse events or did the personnel who collected and worked with the emergency room documents make that assumption?

The FDA and others, including the NEJM, have long wished for the agency to have the power to deal with dietary supplements as they do with pharmaceuticals, to have the preclearance authority and the other statutory supervisory powers.  Over the years, FDA personnel have consistently remarked upon the dangers they see are created by their lack of such complete authority.  This theme is given extensive and generous treatment in the NEJM study.  The publicity given to the study report, and the statements given by the authors to the press, are unabashed promotions for FDA to be given the controls that the law currently does not give the agency.  In the scheme of things, the dietary supplement industry, absent some heroic effort, cannot expect to be given much attention as it makes its responses.

No matter what the final judgment is for the NEJM study, whether it is sound or truly useful as a basis for social policy, the study has done what was intended, as demonstrated by the call-to-action headline of the CBS story; that is, governmental bodies and the public will be influenced to extend regulatory powers over dietary supplements.  Whether that will be sufficient to achieve the regulators’ goal remains to be seen.

By Kurt R. Karst –

Predicting the future is a tricky business.  Predictions don’t often pan out, even when most or all of the indicators prognosticators use say something will (or will not) happen.  We have a pretty decent track record of guessing how a case might come out or whether FDA will be challenged over a particular decision.  Last week we batted .500 on two previous predictions.

In July, after the U.S. Court of Appeals for the Federal Circuit issued a severely fractured panel opinion in Amgen v. Sandoz concerning various statutory issues under the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), we thought the likelihood that the Federal Circuit would grant petitions for rehearing and/or petitions for rehearing en banc (from both Amgen and Sandoz) was pretty high.  After all, we had to chart out the differing Circuit Judge opinions on a couple of the issues at bar (see our previous post here).  Moreover, the implications of the Court’s decision, if not altered, are manifold and may very well set the stage for implementation of the BPCIA’s so-called “patent dance” procedures for quite some time.  Last Friday, however, the Federal Circuit surprised us when the Court issued an Order denying the Amgen and Sandoz petitions for rehearing and rehearing en banc. 

We doubt the Federal Circuit’s Order will be the last word in the case.  So, we’re going to double down now and predict that the U.S. Supreme Court will be asked by Amgen and/or Sandoz to take up an appeal of the Federal Circuit’s decision.  There’s simply too much at stake here for the budding biosimilar industry (and for the future of the BPCIA)  for a party not to take this dispute to the next level.  We’ll know in the coming months if our prediction is correct.  Of course, if neither Sandoz nor Amgen go further (or the issues are otherwise deemed moot in the case), both of the primary issues in the case – whether or not the “patent dance” is mandatory, and when a biosimilar applicant can provide notice of commercial marketing – may still reach the U.S. Supreme Court though a future dispute (perhaps here or here).

We hit the nail on the head with our second prediction when Otsuka Pharmaceutical Development & Commercialization, Inc. and Otsuka Pharmaceuticals Co., Ltd. (collectively “Otsuka”) filed a Complaint in the U.S. District Court for the District of Columbia last week challenging FDA’s October 5, 2015 denial of a Citizen Petition (Docket No. FDA-2015-P-2482) and approval of Alkermes plc’s (“Alkermes”) 505(b)(2) NDA 207533 for ARISTADA (aripiprazole lauroxil) Extended-elease Injectable Suspension in light of unexpired 3-year new clinical investigation applicable to Otsuka’s ABILIFY MAINTENA (aripiprazole) for Extended-release Injectable Suspension, for Intramuscular Injection 300 mg/vial and 400 mg/vial, approved under NDA 202971.  ARISTADA is a prodrug of N-hydroxymethyl aripiprazole (and which N-hydroxymethyl aripiprazole is a prodrug of aripiprazole) that FDA approved for the treatment of schizophrenia (the same use for which ABILIFY is approved).

You can refer back to our previous post for the details on FDA’s (rather lengthy and complex) decision that Otsuka is challenging.  In the end, the dispute concerns the scope of 3-year exclusivity.  Otsuka alleges in its Complaint that FDA violated the FDC Act’s 3-year exclusivity provisions (FDC Act § 505(c)(3)E)(iii) and (iv)), the Agency’s regulation governing 3-year exclusivity (21 C.F.R. § 314.108), and the Administrative Procedure Act (“APA”) in approving ARISTADA.  According to Otsuka:

The FDA decisions challenged in this case undermine a fundamental aspect of the [FDCA]. . . .  Here, FDA disregarded the text and purpose of the exclusivity provisions and, in their place, created a wholly unauthorized new scheme to deny Otsuka exclusivity rights it earned and to approve a so-called new drug that undeniably is not a medical advance; provides no new or additional therapeutic benefit; and, as its own manufacturer has boasted repeatedly, operates in the body exactly as does Otsuka’s drug.  Rather than incentivize innovation and new drug development to benefit public health, FDA’s action punishes the innovator and unlawfully rewards a follow-on copycat company that proposes to bring to market a drug that provides no new or additional public health benefit.  FDA’s decision inverts the intent of the FDCA by denying Otsuka the protection to which it is legally entitled and rewarding what is, at best, an imitative competitor’s facially clever, but substantively meaningless, chemical trick.  Neither law nor sound policy supports this outcome.  FDA’s decision should not stand.

Otsuka asks the D.C. District Court to declare, after expedited proceedings (in a Motion to Expedite), that FDA’s denial of Otsuka’s exclusivity rights and ARISTADA approval violated the APA insofar as such alleged violations are arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law.  Otsuka also asks the court to vacate FDA’s ARISTADA approval and “any FDA decisions or actions underlying or supporting or predicated upon that approval,” and that the court declare that Otsuka’s 3-year exclusivity precludes the Agency from granting approval of the ARISTADA NDA until such exclusivity expires in 2017.  As one would expect, Alkermes promptly filed a Motion to Intervene in the case.

By Jeffrey K. Shapiro –

A determination of “intended use” is fundamental to FDA’s regulation of drugs and medical devices.  It is a primary basis for determining if an article is regulated by FDA at all, and if so, what regulatory requirements apply.

The intended use of an article for FDA regulatory purposes is not based upon the manufacturer’s subjective intent.  Rather, the determinant is “objective intent” based upon product labeling and advertising claims, i.e., the message about the recommended use of a drug or device that is communicated to the public.  E.g., Action on Smoking and Health v. Harris, 655 F.2d 236, 239 (D.C. Cir. 1980).

This regulatory framework is embodied in the parallel drug and device regulatory definitions of intended use (21 C.F.R. §§ 201.128 (drugs), 801.4 (devices)).  The definition provides:

The intent is determined by [a manufacturer’s] expressions or may be shown by the circumstances surrounding the distribution of the article.  This objective intent may, for example, be shown by labeling claims, advertising matter, or oral or written statements by [a manufacturer] or [its] representatives.

This approach allows drug and device manufacturers to influence the regulatory requirements applicable to their products based upon their own public statements.  But FDA has also claimed the authority to regulate based upon the actual uses of an article even if such uses are not claimed in labeling or advertising.  The agency gave itself this authority in another part of the same regulation as quoted above.  This sentence states:

But if a manufacturer knows, or has knowledge of facts that would give him notice, that a [drug or device] introduced into interstate commerce . . . is to be used for conditions, purposes, or uses other than the ones for which he offers it, he is required to provide adequate labeling for such a drug/device which accords with such other uses to which the article is to be put.

This “knowledge” provision for many years has hung like the Sword of Damocles over the heads of manufacturers who have any knowledge of off‑label uses of their products.  The possibility was always present that FDA could deem such knowledge to create a new intended use.  If so, a manufacturer could find itself in trouble for failing to provide adequate directions for this imputed intended use.  FDA also could deem the intended use an unapproved use outside the scope of the existing clearance or approval, opening the manufacturer up to criminal and civil liability for past sales and the burden of developing a new marketing application to bring the imputed use on‑label.

One effect of the “knowledge” sentence has been to inhibit manufacturers from presenting on‑label information to physicians whose prescribing or use of a drug or device is known to be off‑label.  Such interaction has been perceived to heighten the risk that FDA would deem the off‑label use to be the manufacturer’s intended use.

It is true that the “knowledge” sentence has been rarely enforced.  But it has remained on the books and available for FDA’s use.  In May 2010, for example, FDA cited it in a warning letter to DexCom, Inc.  FDA warned Dexcom that the firm “has knowledge . . . that your device . . . is being used for conditions, purposes, and uses other than ones for which it is offered.”  Therefore:  “Under 21 CFR 801.4 you are required to provide labeling for such a device which accords with such other uses.”  FDA stated that the off‑label uses “require action from you in accordance with this regulation.”

So it was welcome news last month that FDA published a proposed rule, 80 Fed. Reg. 57756 (Sept. 25, 2015), proposing to delete the “knowledge” sentence from the intended use regulations.  The preamble to the proposal states that FDA “would not regard a firm as intending an unapproved new use for an approved or cleared medical product based solely on the firm’s knowledge that such product was being prescribed or used by doctors for such use.”  Id. at 57,757.  (FDA cites for this proposition a brief it filed in a court case in January 2010 – five months before the Dexcom warning letter.)

The qualifier “solely” in the preamble statement just quoted could be read to imply that FDA will continue to consider such conduct if it occurs as part of a larger scheme of off‑label promotion.  It is difficult, however, to imagine how lawful conduct could be cited to enhance the unlawful nature of a particular promotional scheme.  Either FDA has evidence of off label promotion or it does not, and a manufacturer’s lawful dissemination of information should not (and likely would not) be permitted to enter into the equation in an enforcement action.

It is also remarkable that FDA provides almost no explanation for the proposed revision to the intended use regulations, considering that it is a fairly significant alteration to regulations that have been on the books for decades.  FDA says only that the revision to the intended use regulations is a “clarifying change,” 80 Fed. Reg. 57761, that will “conform them to how the Agency currently applies these regulations.”  Id. at 57756.

The agency’s unspoken motivation may be to reinforce the position it has taken in recent First Amendment litigation.  As noted above, the “knowledge” sentence has deterred manufacturers from presenting on‑label information in off-label settings.  That chilling effect was part of Par Pharmaceutical’s First Amendment challenge to FDA’s application of the intended use regulation.  We wrote about this aspect of the Par case here and here. 

FDA’s tactical response in the Par lawsuit was to assert that it would never bring an enforcement action solely based upon the presentation of on‑label information in an off‑label setting, so that Par had no legitimate fear of legal jeopardy.  Specifically, the government asserted that “nothing in § 201.128 suggests that disseminating information about a drug’s approved use in settings where the drug is prescribed off- label is sufficient, without more, to establish that the off label use is an intended one. And the government does not construe the regulation to establish any such rule.” The “knowledge” sentence, however, inconveniently undercuts this position, since it appears to provide FDA with legal authority that would support just such an enforcement action.  Although the Par case settled, FDA may be attempting to ward off future challenges by conforming its intended use regulations to its litigation position.

Bottom line: it will now be undisputedly lawful to disseminate on‑label information (e.g., cleared or approved labeling) and/or otherwise promote an on‑label use to physicians, regardless of whether they may prescribe or use the product off‑label.  The mere fact that a manufacturer’s representatives call on physicians knowing that such physicians will use the product off-label will no longer be sufficient, if it ever was, as a basis for FDA to conclude that the off-label use is intended by the manufacturer.  In the Par case, FDA took the position that that such activity would not be deemed to create a new intended use.  The proposed rule will make certain that the intended use regulations no longer support any other position.

By Jennifer M. Thomas & Michelle L. Butler –

The U.S. District Court for the District of Columbia ruled decidedly in favor of PhRMA and against the government earlier this week in PhRMA v. HHS, No. 14-1685 (Oct. 14, 2015), potentially concluding a protracted fight between the Health Resources and Services Administration (“HRSA”) and PhRMA over the meaning of the so-called “orphan drug exclusion,” a provision of the Affordable Care Act (“ACA”) that excludes orphan drugs from the definition of a covered outpatient drug for certain categories of 340B Covered Entities under the 340B drug discount program (42 U.S.C. § 256b).  

We have followed this dispute as it proceeded before the District Court – not once, but twice (see our previous blog posts here, here, and here) – so we will not belabor the background here.  In brief, the Public Health Service Act (“PHSA”) was amended in 2010 pursuant to the ACA to (1) add additional categories of health care facilities to the categories of 340B Covered Entities eligible to purchase drugs at discounted prices pursuant to the 340B program, and (2) exclude “drug[s] designated . . . for a rare disease or condition” from the 340B program with respect to those new categories (with the exception of free-standing children’s hospitals) (the “orphan drug exclusion”). 

At issue in the present iteration of this case before the District Court was an “interpretive rule” under which HRSA stated that it would apply the exclusionary phrase “drug designated . . . for a rare disease or condition” narrowly, such that the exclusion would only apply to orphan drugs when used for their orphan indication, and not for any other use.  (See our previous blog post about the interpretive rule here.)  Pharmaceutical manufacturers that failed to make orphan drugs available to eligible 340B Covered Entities for non-orphan uses would be deemed in violation of the PHSA and could be subject to statutory penalties, refunds of overcharges, or termination of their Pharmaceutical Pricing Agreements.  PhRMA brought suit challenging HRSA’s interpretation, arguing that the orphan drug exclusion must apply to orphan drugs regardless of the particular use.  On cross motions for summary judgment, the District Court ruled that:

1. HRSA’s “interpretive rule” was final agency action subject to judicial review under the Administrative Procedure Act;
2. the Agency’s statutory interpretation did not deserve deference beyond its ability to persuade; and 
3. the Agency’s interpretation of the orphan drug exclusion conflicted with the plain language of the statute.

The Court focused a great deal of attention on the question of finality, and its extensive discussion of the Circuit case law on pre-enforcement review of agency interpretations would merit reading the opinion in full even apart from the underlying substance of the case.  The most salient facts (among the “constellation of factors”) weighing in favor of finality in this case were the significant practical and legal ramifications stemming from HRSA’s interpretive rule, even prior to any actual enforcement action by the Agency.  Slip. Op. at 21-27.

The Court also took the relatively unusual step of stating that the Agency’s interpretation deserved no deference, because HRSA lacks authority to issue regulations carrying the force of law in this context (see our discussion of the Court’s prior ruling on that point).  This statement, while consistent with the Court’s previous opinion, is nevertheless surprising because the Court arguably did not need to reach the issue of deference in light of its finding that the statutory language clearly and unambiguously forecloses the HRSA interpretation.

Specifically, the Court found that, while HRSA’s interpretation appears “plausible at first glance” when confined to the orphan drug exclusion provision alone, it “runs counter to the way Congress has used the phrase ‘a drug designated . . . for a rare disease or condition’” elsewhere throughout the U.S. Code.  Slip. Op. at 30.   The Court noted repeated instances in which Congress had used that phrase, or something similar, and then had gone on to specify that it only intended to include (or exclude, as the case may be) the particular orphan-designated indications of an orphan drug, rather than the orphan drug in general.  See Slip. Op. at 30-33 (citing 42 U.S.C. § 1395l(t)(6)(A)(i); 21 U.S.C. § 379h(a)(1)(F); 26 U.S.C. § 45C(b)(2)(B)).  According to the Court, if the phrase “a drug designated . . . for a rare disease or condition” had the narrow meaning ascribed to it by the HRSA interpretive rule, all these specifying phrases elsewhere in the Code would be rendered superfluous, contrary to basic principles of statutory construction.

Addressing policy concerns raised by the government and amici, the Court was dismissive.  It recognized the fact that excluding orphan drugs altogether from application of the 340B program could make the program less attractive for the newly covered 340B Covered Entities, but noted that “it is simply ‘not for [this Court] to rewrite the statute.’”  Slip. Op. at 37 (quoting Hall v. United States, 132 S. Ct. 1882, 1893 (2012)).  The Court addressed in a footnote the government’s argument that a broad reading of the orphan drug exclusion could create perverse incentives for pharmaceutical manufacturers to seek orphan drug designations for their best-selling drugs, but dismissed it as an unfounded fear.  Slip. Op. at 37 n. 20.

The government has 60 days to notice an appeal of the District Court’s ruling.  Given the history of this case and the importance of the issue, we would be surprised if the government does not pursue an appeal.

Hyman, Phelps & McNamara, P.C. (“HP&M”) is pleased to announce that Jenifer R. Stach and Dr. Charlene Cho have joined the firm as associates.

Ms. Stach works as a general practice associate and provides counsel on regulatory matters related to foods, over-the-counter drugs, medical devices, cosmetics, and veterinary food and medicine.  Ms. Stach also assists with pharmaceutical compliance, label reviews, corporate compliance matters, and due diligence for mergers and acquisitions.     

Before joining HP&M, Ms. Stach worked at FDA for almost five years.  During her time at FDA, Ms. Stach worked in the Office of Operations as a liaison to CDRH and CFSAN, CDER as a Regulatory Health Project Manager in the Office of Regulatory Policy, and CFSAN in the Office of Regulations, Policy, and Social Sciences as a Regulatory Counsel.  Ms. Stach graduated cum laude from The Catholic University of America Columbus School of Law, and earned a Bachelor of Business Administration in marketing from the University of Notre Dame. 

Dr. Cho advises clients about regulatory strategies, compliance matters, and the FDA approval process.  With a doctorate in Neurobiology, Pharmacology & Physiology and over five years of experience working at FDA on regulatory policies and procedures, she is well positioned to provide technical advice and counseling on regulatory matters related to biologics, devices, and drugs.

Prior to joining HP&M, Dr. Cho worked as Regulatory Counsel at FDA’s CBER.  While there, she worked on a variety of policy and classification issues relating to human cells, tissues, or cellular or tissue-based products (HCT/Ps).  She also went on detail to the CDRH, where she worked on jurisdictional matters for medical devices and combination products.   Dr. Cho graduated from the Vanderbilt University Law School, and earned her Ph.D. at the University of Chicago.  She has a Bachelor of Arts from Smith College.

By Jenifer R. Stach* – 

There have been a number of recent battles between Attorneys General (AG)in various states and dietary supplement manufacturers.  These battles have generally been triggered by AG letters which have alleged that manufacturers have marketed supplements that contain drug-like ingredients in violation of deceptive trade practice state laws.  The letters have resulted in some settlements (see press releases from the New York State Office of the Attorney General, Oregon Department of Justice, and Vermont Office of the Attorney General).  We will see if the recent decision by the 5^th Circuit may discourage state Attorneys General from sending similar warning letters to dietary supplement manufacturers.  We will also see if this ruling provides a legal path for dietary supplement manufacturers to pursue legal claims against a state, state agency, or state official upon receiving a warning letter. 

NiGen is a Utah-based manufacturer and distributor of the dietary supplements, Isodrene and The HCG Solution.  In December 2011, NiGen brought suit against the Texas Attorney General (AG) Ken Paxton after the AG sent warning letters to NiGen, and retailers CVS, Walgreens, and Wal-Mart.  The Texas AG determined that use of the term “hCG” was “false, misleading, or deceptive” in violation of the Texas Deceptive Trade Practices Act because, “the claim is trying to mimic claims that FDA considers off-label for the prescription drug.”  (As stated in the 5th Circuit opinion, discussed below, “hCG is an acronym for human chorionic gonadotropin hormone, a protein found in pregnant women that is an ingredient in prescription drugs sold under the brand names Novarel, Ovidrel, and Pregnyl.”)  Retailers removed the products from the shelves allegedly resulting in millions of dollars in lost revenue for NiGen.

NiGen filed suit under 42 U.S.C. § 1983 alleging violations of its rights under the First Amendment, Fourteenth Amendment Due Process and Equal Protection Clauses, the Commerce Clause, the Supremacy Clause, and state law claims of tortious interference with business relations.  According to the 5th Circuit opinion, “NiGen sought 1) a declaration that its labeling did not violate federal law and that it was entitled to use “HCG” on its labels; 2) preliminary and permanent injunctive relief; 3) money damages; and 4) costs and attorneys' fees.”  After motions by the AG for dismissal and an unexplained two-year delay, the District Court for the Northern District of Texas dismissed the case based on state sovereign immunity.   

NiGen timely appealed and in the case of NiGen Biotech, L.L.C. v. Paxton, No. 14-10923, 2015 WL 5749618 (5th Cir. Sept. 30, 2015), the court reversed in part in favor of NiGen.  The 5th Circuit ruled that NiGen’s claims are not barred from federal jurisdiction on the basis of Ex Parte Young, that federal jurisdiction exists over most of the claims pled, and that NiGen has standing to sue.  In its opinion, the 5th Circuit addressed State Sovereign Immunity, Federal Question Jurisdiction, and Standing.  

State Sovereign Immunity

State sovereign immunity is based on the premise that Federal Courts do not have jurisdiction over suits against a state, state agency, and officials acting in their official capacity, unless the state has waived its immunity or Congress has abrogated it.  According to the 5th Circuit opinion, “[u]nder the doctrine articulated in Ex parte Young, 209 U.S. 123 (1908), a state official attempting to enforce an unconstitutional law ‘is stripped of his official clothing and becomes a private person subject to suit.’”  Under Ex parte Young, a plaintiff must seek relief from a state actor acting in his official capacity, for alleged ongoing violations of federal law (and not merely that the state actor has violated federal law in the past), and that the relief sought must be injunctive in nature and prospective in effect.  The court concluded that NiGen’s allegations of the AG's continuous refusal to justify the warning letters were sufficient to meet the Ex parte Young standard.  The AG’s action was allegedly an ongoing violation of federal law, which could be remedied with injunctive relief which would allow NiGen to sell their products.   

Federal Question Jurisdiction

The AG contended that NiGen’s claims were anticipatory defenses to threatened enforcement action, and were therefore barred from Federal Jurisdiction.  The 5^th Circuit disagreed with the AG and stated that a plaintiff who seeks both declaratory and injunctive relief based on the unconstitutionality of a state statute may raise this as a claim, even if the claim might also be used as a defense to state enforcement action. 

Standing

The AG challenged NiGen’s standing by contending that, “To have standing to sue, the plaintiff must demonstrate injury in fact that is fairly traceable to the defendant's conduct and that would be redressed by a favorable judicial decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 2136 (1992).”  In Lujan, standing was denied in part because the only entities that could redress the plaintiff’s alleged injury were nonparties that would be bound to the judgment.  The AG points to the claim by NiGen that the warning letters to the retailers cost NiGen millions of dollars in lost revenue.  In response, the 5th Circuit pointed out that the warning letters were directed at NiGen itself, and concluded that a favorable court decision would allow NiGen to sell its products in Texas, whether directly or through its retailers, and could again conduct business as usual.  

In conclusion, the 5th Circuit affirmed the District Court’s dismissal of NiGen’s claims for money damages, state law violations, retrospective relief, and declaratory relief against a threatened enforcement action, reversed the dismissal of NiGen’s constitutional law claims, and remanded the case for further proceeding.  We will keep you posted as to how the District Court rules in light of the 5th Circuit analysis if NiGen decides to pursue its Constitutional claims against the Texas AG.

*Admitted only in Maryland. Work supervised by the Firm while D.C. Bar application is pending.

By Larry K. Houck –

The Centers for Disease Control and Prevention (“CDC”), the nation’s premier agency focusing on public health and safety through disease prevention and control, and a component within the U.S. Department of Health and Human Services, is developing guidelines “to provide recommendations for the prescribing of opioid pain medication for patients 18 and older in primary care settings” that focus on treating chronic pain outside end-of-life care.  Draft CDC Guideline for Prescribing Opioids for Chronic Pain.  The CDC observes on its website that existing opioid guidelines vary and that primary care providers do not receive sufficient opioid prescribing training.  Id.  The CDC further notes that its guidelines will address determining initiation or continuing opioid therapy; opioid selection, dosage, duration, follow-up and continuation; and assessing associated risk and harm.  Id.

The CDC provided limited public access to the draft guidelines during a webinar on September 16th but is providing no further access or participation in their development.  The independent online chronic pain and pain management news source Pain News Network, reported that CDC anticipates finalizing the guidelines next month, and submitting them to the Department of Health and Human Services for publication in January 2016.  Pat Anson, CDC: Opioids Not ‘Preferred’ Treatment for Chronic Pain, Pain New Network, (Sept. 16, 2015).  It is unclear what form the publication of the guidelines will take.

The CDC is not making the guidelines available, but the Pain News Network lists the dozen guidelines provided during the webinar as follows:

1. Non-pharmacological therapy and non-opioid pharmacological therapy are preferred for chronic pain.  Providers should only consider adding opioid therapy if expected benefits for both pain and function are anticipated to outweigh risks.
2. Before starting long term opioid therapy, providers should establish treatment goals with all patients, including realistic goals for pain and function.  Providers should continue opioid therapy only if there is clinically meaningful improvement in pain and function that outweighs risks to patient safety.
3. Before starting and periodically during opioid therapy, providers should discuss with patients risks and realistic benefits of opioid therapy and patient and provider responsibilities for managing therapy.
4. When starting opioid therapy, providers should prescribe short-acting opioids instead of extended-release/long acting opioids.
5. When opioids are started, providers should prescribe the lowest possible effective dosage.  Providers should implement additional precautions when increasing dosage to 50 or greater milligrams per day in morphine equivalents and should avoid increasing dosages to 90 or greater milligrams per day in morphine equivalents.
6. Long-term opioid use often begins with treatment of acute pain.  When opioids are used for acute pain, providers should prescribe the lowest effective dose of short-acting opioids and should prescribe no greater quantity than needed for the expected duration of pain severe enough to require opioids.  Three or fewer days will usually be sufficient for non-traumatic pain not related to major surgery.
7. Providers should evaluate patients within 1 to 4 weeks of starting long-term opioid therapy or of dose escalation to assess benefits and harms of continued opioid therapy.  Providers should evaluate patients receiving long-term opioid therapy every 3 months or more frequently for benefits and harms of continued opioid therapy.  If benefits do not outweigh harms of continued opioid therapy, providers should work with patients to reduce opioid dosage and to discontinue opioids when possible.
8. Before starting and periodically during continuation of opioid therapy, providers should evaluate risk factors for opioid-related harms.  Providers should incorporate into the management plan strategies to mitigate risk, including considering offering naloxone when factors that increase risk for opioid-related harms are present.
9. Providers should review the patient’s history of controlled substance prescriptions using state Prescription Drug Monitoring Program data to determine whether the patient is receiving excessive opioid dosages or dangerous combinations that put him/her at high risk for overdose.  Providers should review Prescription Monitoring Program data when starting opioid therapy and periodically during long-term opioid therapy (ranging from every prescription to every 3 months).
10. Providers should use urine drug testing before starting opioids for chronic pain and consider urine drug testing at least annually for all patients on long-term opioid therapy to assess for prescribed medications as well as other controlled substances and illicit drugs.
11. Providers should avoid prescribing of opioid pain medication and benzodiazepines concurrently whenever possible.
12. Providers should offer or arrange evidence-based treatment (usually opioid agonist treatment in combination with behavioral therapies) for patients with opioid use disorder.  Id.

The guidelines provided during the webinar are reasonable and public health benefits could result from clarifying opioid prescribing.  However, we question CDC’s process for developing the guidelines.  The Pain News Network noted that the Food and Drug Administration (“FDA”), not CDC, normally sets prescription drug guidelines, and that an FDA official responsible for opioid issues was unaware that CDC was drafting the opioid prescribing guidelines.  Id.  Knowledgeable and responsible FDA officials are not providing meaningful input to the guidelines. 

Secondly, the guidelines have ramifications for activities in which many stakeholders hold strong interests-healthcare professionals including prescribers and pharmacists, regulators and especially patients.  How will the American Medical Association and state medical boards react to the final guidelines?  Will the Drug Enforcement Administration take enforcement action against practitioners who it believes issued opioid prescriptions for other than legitimate medical purpose because they did not following the guidelines?  Or, in the alternative, will following the guidelines strengthen a practitioner’s defense that the opioid prescriptions they issued were legitimate?

CDC should not draft the guidelines in isolation until finalized, but instead make them available for public comment prior to their becoming final.  We agree with Edith Rosato, CEO of the Academy of Managed Care Pharmacy, who in a letter to CDC Director Tom Frieden, “strongly urges the CDC to formally release the draft guidelines and provide for a sufficient public comment period to ensure the perspective of all parties, including those of managed care pharmacy, are taken into consideration.”  Letter from Edith A. Rosato, RPh, Academy of Managed Care Pharmacy, to Tom Frieden, CDC, (Sept. 18, 2015).

By Karla L. Palmer –

The U.S. Government Accountability Office (GAO) recently published a Report concerning animal drug compounding, titled “FDA Could Improve Oversight with Better Information and Guidance.”  The Report is a result of a Congressional request for GAO to review issued related to animal drug compounding and FDA’s oversight thereof.  GAO conducted its audit from June 2014 to September 2015.  The Report examines: (1) the benefits and risks of animal drug compounding; (2) the extent animal drug compounding occurs; and (3) FDA’s approach to regulating compounded animal drugs.  The Report comes on the heels of Congress’  reenactment of FDCA Section 503A addressing compounding of human drug products for individually identified patients and the enactment of Section 503B (Title I of the Drug Quality and Security Act, blogged about extensively here, in November 2013).  

The GAO undertook, among other activities, an analysis of relevant federal law, regulations, and animal compounding guidance documents (withdrawn in May of 2015; FDA simultaneously issued draft guidance, with comments now due November 19, 2015; see our previous post here).  GAO also reviewed FDA’s Foods and Veterinary Medicine Program Strategic Plan (2012-16), FDA’s activities concerning animal drug compounding over the past decade, and the Office of Management and Budget’s instructions for drafting appropriate regulatory guidance.  In addition, GAO interviewed FDA officials and reviewed regulatory oversight in four states – Florida, California, Kentucky, and Texas.  GAO selected these states because they vary in their regulation of animal drug compounding, and two of the states (Florida and Kentucky) have been the site of adverse events related to compounded drugs over the past six years.  For the four states, GAO also reviewed relevant state statutes and regulations, because states traditionally have provided oversight of animal drug compounding. 

The Report provides a historical background into animal drug compounding from both approved animal drugs and bulk substances and describes the benefits and risks of the same. (Report at 6-11).  It cites the benefits of compounding to include, among other factors, the lower costs of compounded animal drugs (especially given the high cost of approved drugs and the lack of insurance coverage for most drugs for animals), and the life-saving benefits associated with compounding when no suitable FDA-approved drugs exist.  The Report does differentiate compounding drugs for food-producing versus non-food producing animals, however – the latter of which typically presents less risk to the public health. 

The GAO stated that there is incomplete information concerning the extent to which compounded drugs have caused or may be linked to adverse events given the voluntary nature of reporting from veterinarians, pet owners, and pharmacies, unlike reporting required by manufacturers of approved animal drugs.  (Report at 12-14). The lack of reporting makes it difficult for FDA to determine whether the drug involved in an adverse event was compounded, and the frequency of adverse events.

The GAO also found that FDA does not have guidance concerning compounded animal drugs, and it has not documented consistently the bases for its enforcement and other decisions.  However, FDA in fact did issue guidance animal drug compounding (CPG 608.400) back in 2003, which FDA withdrew in the wake of its publication of its new draft guidance in July 2015 (mentioned above).  GAO noted the prior guidance contained several “limitations” and vague definitions (Report at 14-16). 

FDA explained to GAO that it did not routinely inspect pharmacies that compounded animal drugs because: (1) FDA does not have a comprehensive list of pharmacies that compound animal drugs because they do not need to register with FDA; (2) FDA lacks resources to routinely inspect the thousands of animal drug compounding pharmacies; and, (3) states regulate pharmacy practice and drug compounding.  Notwithstanding these limitations, FDA noted it has sought enforcement action against pharmacies that compound animal drugs on several occasions (including warning letters and voluntary recalls). 

However, FDA has not pursued a legal action to stop a pharmacy from illegally compounding animal drugs since 2010 (referring generally to the Franck’s Lab Inc. matter in the United States District Court for the Middle District of Florida, which decision favorable to the compounder was vacated as moot by agreement when the compounder stopped compounding animal drugs from bulk substances.)  With respect to its enforcement actions generally and FDA’s inconsistent documentation, GAO noted the significant inconsistencies with FDA’s follow-up concerning allegedly violative activities  – ranging from no apparent follow-up to follow-up occurring from 9 months to 6 years after identifying potential violations.  (Report at 20-21).  GAO found FDA was also inconsistent with its handling of adverse event reporting. (Report at 21).  GAO was also unable to determine how FDA handles complaints about illegal compounding because FDA does not track or collect such information. 

GAO provided the following recommendations for FDA:

• Modify the voluntary reporting form FDA uses to obtain information on adverse events to ask whether drugs involved in adverse events were compounded
• Develop policy or guidance for agency staff that specifies circumstances under which FDA will or will not enforce compounding regulations for animals and clearly define key terms.
• Consistently document the bases for FDA’s decisions about how or whether it followed up on warning letters, adverse event reports, and complaints about drug compounding for animals. 

FDA stated in response to GAO’s Report that it generally agreed with the Report’s recommendations, and that it has made substantial progress addressing animal drug compounding.  However, to date, the FDA’s draft guidance is still awaiting industry comments and must be finalized, and there is no effective federal regulatory structure – for better or worse – addressing compounded animal drugs.