FDA Law Blog welcomes back to the blogosphere our friend Scott Hensley, formerly of the Wall Street Journal (where he was the founding editor and a regular contributor to the paper’s Health Blog).  Scott will be blogging at the National Public Radio Health Blog and appearing on NPR as well.  The NPR Health Blog covers news about health and medicine, including FDA-related issues, and is written and reported by NPR’s Science Desk.

By Douglas B. Farquhar –

In an August 6, 2009 speech at an event sponsored by the Food and Drug Law Institute, Margaret A. Hamburg, M.D., the new FDA Commissioner, promised to ratchet up enforcement by speeding up issuance of Warning Letters, reducing the amount of time that industry has to respond to notices of violations, and landing on repeat violators quickly and severely.  However, she also offered a reward to cited companies who respond expeditiously and effectively, in FDA’s view.  She promised that companies which fully correct violations cited in a Warning Letter will receive a “close-out notice,” which will be posted on the FDA website, documenting that the companies have achieved a state of compliance (trumpets sound and choirs sing).  (A copy of FDA's press release announcing Dr. Hamburg's speech and enforcement vision is available here.) 

Warning Letters have traditionally been FDA’s most potent weapon against FDA-regulated industry, short of the agency seeking an injunction, initiating criminal prosecutions, or persuading state officials to shut down a company.  Hundreds of Warning Letters, which are publicly available, are issued every year to food processors, drug manufacturers or distributors, investigators in clinical trials, medical device manufacturers, pharmacies, and Institutional Review Boards (IRBs) which monitor clinical trials.  The agency routinely follows up on Warning Letters with inspections to ensure that corrective actions have been taken.  Enforcement officials at FDA have repeatedly said that if violative conditions cited in Warning Letters are not corrected, the agency will proceed to more significant enforcement measures, including those listed above, or, if available, import detentions.

Noting a “steep decline in the FDA’s enforcement activity over the past several years,” Dr. Hamburg said that many enforcement actions have been “hampered by unreasonable delays.”  She focused primarily on the issuance and resolution of Warning Letters.  Although companies routinely have, by agreement with FDA officials, 30 to 60 days to respond to inspectional reports (Form 483s) citing violations of FDA regulations, she said that, from now on, cited companies will “generally have no more than fifteen working days in which to respond,” thus speeding up the issuance of Warning Letters when responses do not satisfy FDA’s concerns.  Her speech re-emphasized past pronouncements that there will not be “multiple warning letters to noncompliant firms before taking enforcement action.”

She also said that FDA will work more closely with “local, state and international officials” who have authority to shut down companies more quickly than FDA, especially when the “public health is at risk.”

Warning Letters are very rarely retracted or withdrawn by FDA, and there is generally no public indication that a firm has corrected the violations covered by a Warning Letter.  Dr. Hamburg pledged to set up a “close-out” process so that, after a re-inspection determines that “a firm has fully corrected the violations,” the firm and the public will be informed that issues raised in a Warning Letter have been resolved.

Dr. Hamburg praised the agency for its rapid and repeated Warning Letters issued to promoters of products who promised to “diagnose, prevent, or treat” the H1N1 virus (commonly referred to as the “swine flu” virus).  She also praised the agency for its action to stop the distribution of anabolic steroids “sold under the guise of dietary supplements.”

By Kurt R. Karst & Michelle L. Butler –      

Winston Laboratories, Inc. (“Winston”) recently sued FDA after the Agency denied a waiver of the Prescription Drug User Fee Act (“PDUFA”) application fee assessed with respect to the company’s human drug application (NDA No. 22-403) for CIVANEX (civamide (zucapsaicin)) Cream, 0.075%.  Specifically, the complaint, filed in the U.S. District Court for the Northern District of Illinois Eastern Division, seeks declaratory and injunctive relief with respect to FDA’s denial of Winston’s application for waiver of the application user fee – which was $1,247,200 in Fiscal Year 2009 – under the small business waiver provisions of the FDC Act, notwithstanding the Small Business Administration’s (“SBA’s”) determination that Winston is a “small business.”  (The correspondence identified below is included as exhibits to Winston’s complaint and is available here.) 

Under the FDC Act, FDA shall grant a waiver or reduction of user fees where “the applicant involved is a small business submitting its first human drug application to [FDA] for review.”  FDC Act § 736(d)(1)(d).  The statute further provides “Rules Relating to Small Businesses” and requires that FDA shall waive “the application fee for the first human drug application that a small business or its affiliate submits to [FDA] for review."  FDC Act § 736(d)(4)(B) (emphasis added).  The statute defines a small business as “an entity that has fewer than 500 employees, including employees of affiliates, and that does not have a drug product that has been approved under a human drug application and introduced or delivered for introduction into interstate commerce.”  FDC Act § 736(d)(4)(A). 

FDC Act § 735(11) defines the term “affiliate” to mean “a business entity that has a relationship with a second business entity if, directly or indirectly – (A) one business entity controls, or has the power to control, the other business entity; or (B) a third party controls, or has power to control, both of the business entities.” 

After FDA grants a small business or its affiliate a waiver, the company or its affiliates must pay “application fees for all subsequent human drug applications submitted to [FDA] for review in the same manner as an entity that does not qualify as a small business,” and “all supplement fees for all supplements to human drug applications submitted to [FDA] for review in the same manner as an entity that does not qualify as a small business.”  FDC Act § 736(d)(4)(B)(i)-(ii).

In May 2008, in advance of the CIVANEX NDA submission, Winston requested that FDA waive the application user fee in accordance with FDC Act § 736(d)(1)(D), asserting that the company met the statutory requirements for FDA to grant the waiver.  After receiving the request, FDA requested the SBA to determine whether Winston and its affiliates met the “small business” definition.  The SBA, which does not consider those firms that are no longer in business in determining affiliates, made a formal size determination in August 2008 that Winston and its affiliates had fewer than 500 employees. 

In December 2008, FDA denied Winston’s waiver request, stating that although Winston and its affiliates have fewer than 500 employees, the company failed to meet the requirement that the marketing application must be the first human drug application that a company “or its affiliate” submits to FDA.  FDA noted that “for purposes of determining whether to grant a small business waiver, FDA considers all affiliates, even those that are no longer in existence” (emphasis added), and that according to the Agency’s records, the CIVANEX NDA is not the first human drug application submitted by Winston or its affiliates.  Specifically, according to FDA, two now defunct companies with ties to Winston through its CEO, Joel E. Bernstein, M.D. – GenDerm Corporation (“GenDerm”) and Northbrook Testing Co., Inc. (“Northbrook”) – were considered to be affiliates of Winston that previously submitted human drug applications to FDA.  In the course of making this determination FDA conducted its own analysis of whether Dr. Bernstein was affiliated with GenDerm and Northbrook. 

Dissatisfied with FDA’s decision, Winston promptly requested that FDA reconsider the waiver denial, arguing that Winston is not an affiliate of either GenDerm or Northbrook.  In February 2009, FDA affirmed its finding that Winston is a “small business,” but also confirmed its prior decision to deny the small business waiver on the basis that, given the affiliate status of GenDerm and Northbrook, Winston did not satisfy the requirement that the NDA be the first human drug application submitted by a small business or its affiliate.  In reaching this decision, FDA stated that “[t]here is no requirement in the definition of affiliate that all relevant parties be in existence at the same time.”

In April 2009, Winston appealed the decision, explaining that FDA’s interpretation of the term “affiliate” to include companies that are no longer in business is unacceptable and inconsistent with the definition of affiliation.  In June 2009, FDA issued a final decision denying Winston’s appeal and affirming its previous determination that Winston does not qualify for a small business waiver.  In that decision, FDA affirmed that Northbrook is a Winston affiliate, but found that there is insufficient evidence to conclude that GenDerm and Winston are affiliates for PDUFA user fee purposes.  In explaining its interpretation of the scope of the term “affiliate” FDA commented that:

In contrast to the [SBA’s] process for making a size determination, which require consideration of a company’s status at the time the determination is made, PDUFA contemplates that FDA examine past events in order to determine whether an NDA is the first human drug application submitted by a company or its affiliates.  Therefore, it is reasonable, indeed, arguably necessary, to consider whether companies that may no longer exist should be considered affiliates of that company and whether they have submitted applications. Given the clear purpose of this provision and the fact that the statute's plain language includes no temporal limitation to prevent the consideration of now defunct companies, it is reasonable to consider companies that are no longer in business to be affiliates of an applicant for a small business waiver.

Moreover, policy considerations support a broader interpretation of the term affiliate. Under the interpretation promoted by Winston, a company could obtain a fee waiver for its “first human drug application,” dissolve the company, establish a new company that is essentially a duplicate of the first, and obtain a fee waiver for its next NDA (which would technically be the “first” NDA of that incarnation of the company).  This cycle could be repeatedly indefinitely.  PDUFA’s emphasis that a waiver is only available for the first human drug application submitted by “a small business or its affiliate,” and not for subsequent applications, 21 U.S.C. § 379h(d)(4)(B) (emphasis added), instead of all applications submitted by a “small business,” id. § 379h(d)(1)(D), certainly suggests that Congress intended to prevent such abuse.  To adopt an interpretation that would permit companies to easily circumvent the limitation on the small business waiver put in place by Congress is not sound public policy. [(italics in original)]

Winston’s complaint requests that the court enter a judgment declaring that FDA’s refusal to grant a small business waiver of user fees violates the Administrative Procedure Act (i.e., that FDA’s interpretation of the user fee statute is arbitrary, capricious, and an abuse of discretion, contrary to law, and in excess of the Agency’s statutory authority).  Winston also requests that the court enter an injunction requiring FDA to immediately grant Winston the small business user fee waiver. 

By Kurt R. Karst –      

Earlier this week FDA issued several Federal Register notices setting the Fiscal Year (“FY”) 2010 user fee rates for human drugs under the Prescription Drug User Fee Act (“PDUFA”), for medical devices under the Medical Device User Fee and Modernization Act (“MDUFMA”), and for animal drugs (here and here) under the Animal Drug User Fee Act (“ADUFA”) and Animal Generic Drug User Fee Act (“AGDUFA”). 

The FY10 PDUFA application user fee rates have been set at $1,405,500 for an application requiring “clinical data,” and one-half of a full application fee ($702,750) for an application not requiring “clinical data” and a supplement requiring “clinical data.”  (The term “clinical data” for PDUFA user fee purposes is explained in an FDA guidance document available here.)  Annual establishment and product fees have been set at $457,200 and $79,720, respectively.  The FY10 fees go into effect on October 1, 2009. 

While the FY10 increases in the establishment and product user fee rates are generally consistent with the jump between FY08 and FY09 rates, the increase in the application user fee rate is more significant – increasing 12.7% in FY10 over FY09, compared to a 5.9% increase in FY09 over FY08.  The table below shows the percent increase since the previous FY, and should be used with the table from our previous post, which tracks PDUFA user fees since the inception of PDUFA.

The FY10 MDUFMA user fee rates have also increased over FY09.  For example the standard Premarket Application fee, which was $200,725 in FY09, is now $217,787 – an 8.5% increase.  The standard 510(k) user fee is $4,007 for FY10, which is also an 8.5% increase over the $3,693 FY09 fee.

For FY10, the animal drug user fee rates under ADUFA are $290,400 for an animal drug application, $145,200 for a supplemental animal drug application for which safety or effectiveness data are required, $6,185 for an annual product fee, $73,850 for an annual establishment fee, and $57,100 for an annual sponsor fee.  This compares to FY09 when the fees were $246,300, $123,150, $4,925, $59,450, and $52,700, respectively. 

The FY10 fees under AGDUFA are $75,000 per application for an abbreviated generic new animal drug application for which safety or effectiveness data are required, a $3,255 annual product fee, and an annual sponsor fee (that is lower than FY09) of $54,050 for each generic new animal drug sponsor paying 100% of the sponsor fee, $40,537 for each generic new animal drug sponsor paying 75% of the sponsor fee, and $27,025 for a generic new animal drug sponsor paying 50% of the sponsor fee.  This compares to FY09 when the fees were $41,400, $3,005, $56,350, $42,265, and $28,175, respectively. 

By Alan M. Kirschenbaum –

As we reported on August 2, the House Energy and Commerce Committee last Friday reported out its healthcare reform bill, the America’s Affordable Health Choices Act (H.R. 3200).  In order to help finance healthcare reform, the bill contains numerous provisions that would increase the current discounts that prescription drug manufacturers provide under federal programs and add several new pricing/discount provisions.  One such provision, which was added by amendment at the Committee mark-up, was the repeal of the “non-interference” provision under Medicare Part D.  This prohibition, which was a cornerstone of the Part D prescription drug benefit legislation initially enacted in 2003, would be replaced by a provision explicitly permitting the Secretary of Health and Services to negotiate with pharmaceutical manufacturers to obtain price concessions on Part D drugs.

Numerous other drug discount and pricing provisions contained in the Committee draft were reported out intact.  These include the following:

• Rebates for Part D beneficiaries in the coverage gap (§1182):   The bill would eliminate the Part D coverage gap (the so-called “donut hole”) over a nine-year period beginning in 2011.  However, while the coverage gap exists, drug manufacturers would be required, as a condition of drug coverage under Part D, to enter into an agreement modeled after the Medicaid Rebate Agreement, in which the manufacturer agrees to pay rebates to prescription drug plan (PDP) sponsors on units dispensed to Part D beneficiaries in the coverage gap.  The rebate would be equal to 50% of the negotiated price of the drug.  This provision implements an agreement negotiated between the industry and the Obama Administration.

• Rebates for Dual Eligibles (§1181(b)):  In addition, again as a condition of having their drugs covered under Part D, manufacturers would be required to enter into a separate agreement providing for payment to Medicare of rebates on Part D drugs dispensed to full-benefit dual eligibles.  The rebate would be the difference between the Medicaid Rebate and the average amount of discounts, rebates, and other price concessions offered by the manufacturer on each drug dispensed to full-benefit dual eligibles under Part D.

• Changes to the Medicaid Rebate Program (§§ 1741-1743):  Beginning in 2010, the minimum per-unit Medicaid Rebate for innovator drugs would be increased from 15.1% to 22.1%.  Rebates would now be payable on units dispensed to enrollees in Medicaid managed care organizations.  There would be several changes to the definition of average manufacturer price (AMP):  the current regulatory exclusion of bona fide services fees and returns would be codified in the statute, and AMP would additionally exclude (1) price concessions (if not passed through to retail pharmacies) and direct sales to PBMs, managed care organizations, HMOs, insurers, long term care providers, and mail order pharmacies not open to the public; (2) price concessions and direct sales to hospitals, clinics, and physicians, except for inhalation, infusion, or injectable drugs, or except as determined by CMS; and (3) rebates required under the Part D agreements described above.  The AMP calculation for extended release formulations of oral dosage drugs would have to take into account price increases of the original formulation.  With regard to Federal Upper Limits, CMS would be required to continue to use the method established by regulation in 2006 (previously codified at 42 C.F.R. 447.332) until January 2011, when the methodology would be revised to 130% of weighted AMPs of the multiple source drugs.

• Expansion of 340B Program (§§ 2501-2502):  The list of covered entities eligible for discounts under section 340B of the Public Health Service Act would be expanded to include certain children’s hospitals, critical access hospitals, Medicare-dependant small rural hospitals, sole community hospitals, and rural referral centers, and inpatient drugs as well as outpatient drugs purchased by these hospitals would be eligible for the 340B discount.  In addition, maternal and child health clinics, mental health services providers, and substance abuse treatment centers receiving federal funds would be added to the list of covered entities.

It is too soon to predict whether these provisions will survive in the final health care reform bill – if there is one.  H.R. 3200 will reach the House floor for a vote following the August recess.  In the Senate, a healthcare reform bill has cleared the HELP Committee, but the Finance Committee has yet to complete legislation.  If and when the Senate passes a bill, differences from the House version will have to be reconciled.  We’ll be posting updates on this legislation as it progresses.

By Kurt R. Karst –      

Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia ruled in a 27-page opinion issued last Friday that the 180-day exclusivity forfeiture patent information withdrawal provision at FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC) is not ambiguous and that FDA’s interpretation of the statute is reasonable.  As we previously reported (here and here), Teva Pharmaceuticals USA, Inc. (“Teva”) filed a Complaint and a Motion for Preliminary Injunctive Relief against FDA concerning 180-day exclusivity forfeiture for generic versions of Merck & Co., Inc.’s (“Merck’s”) blockbuster angiotensin II receptor antagonist drugs COZAAR (losartan potassium) Tablets and HYZAAR (hydrochlorothiazide; losartan potassium) Tablets.  Although FDA has made no determination with respect to generic COZAAR and HYZAAR 180-day exclusivity, Teva believes that FDA’s interpretation of the statute will result in a forfeiture of 180-day exclusivity for both products. 

Teva’s lawsuit challenged FDA’s interpretation of the “failure to market” 180-day exclusivity forfeiture provisions at FDC Act § 505(j)(5)(D)(i)(I), which were added to the FDC Act in December 2003 by the Medicare Modernization Act (“MMA”), and in particular FDA’s interpretation of the patent information withdrawal provision at FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC).  That provisions states that one of the dates for calculating a forfeiture is the date that is 75 days after which “[t]he patent information submitted under [FDC Act § 505(b) or (c)] is withdrawn by the holder of the application approved under [FDC Act § 505(b)].”

According to Teva, FDA’s interpretation of FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC), as stated and applied in two previous 180-day exclusivity forfeiture decisions concerning generic PRECOSE (acarbose) and generic COSOPT (dorzolamide hydrochloride; timolol maleate), is unlawful.  Specifically, Teva argues that the mechanism added to the FDC Act by the MMA – i.e., FDC Act § 505(j)(5)(C)(ii)(I) – permitting a cause of action that allows a generic applicant to seek a court order compelling the brand manufacturer to delist a challenged patent must be read together with FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC):

Read together, as statutory provisions must be, it thus is clear that these twin Amendments – the delisting mechanism, on one hand, and the delisting trigger, on the other – were not remotely intended to open the proverbial floodgates to manipulative, exclusivity-divesting patent delistings by brand manufacturers, and thus sub silentio to abrogate the longstanding prohibition against such delistings that Ranbaxy recognized.

(In Ranbaxy Labs. Ltd. v. Leavitt, the U.S. Court of Appeals for the District of Columbia Circuit held in 2006 in a pre-MMA case that FDA may not condition the delisting of a patent on the existence of patent litigation and deprive an ANDA applicant eligible for 180-day exclusivity of such exclusivity.)

FDA filed a Motion to Dismiss the case on several grounds – that Teva is not challenging final agency action, Teva’s claims are not ripe, Teva has not suffered sufficient injury for Article III standing, and Teva has failed to exhaust administrative remedies.  Judge Collyer denied FDA’s Motion to Dismiss.  With respect to final agency action, the court held that:

FDA’s interpretation of the MMA in the context of the Acrabose [sic] and Cosopt Decisions constitutes a rule of decision made through adjudication, and the FDA’s interpretation of the MMA constitutes “final agency action” that is subject to review under APA §§ 702 and 704.  Thus, Teva has stated a claim under the APA seeking to set aside the FDA’s statutory interpretation as arbitrary and capricious under § 706(2).

With respect to FDA’s challenges based on a failure to exhaust administrative remedies, lack of ripeness, and lack of standing, the court ruled that:

Teva has exhausted its remedies by participating unsuccessfully in the Acrabose [sic] litigation and pursuit of administrative remedies would be futile.  In these circumstances, the law does not require further administrative exhaustion. . . .

The issue raised by Teva – whether the FDA’s interpretation of subsection (bb)(CC) of the MMA is arbitrary and capricious under the APA – is purely a legal question fit for judicial review.  It is a challenge to the FDA’s interpretation of the statute on its face and not as applied to a particular set of facts.  There is no need for further factual development as there is no material fact missing from the record that could alter the FDA’s interpretation of the MMA. . . . .

The FDA’s interpretation imminently will cause Teva to lose its right to exclusive marketing, and Teva already has altered its operations due to this imminent loss. . . .  Teva has demonstrated standing.

On the substantive issue challenged by Teva – FDA’s interpretation of FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC) – the court ruled in FDA’s favor.  The court, analyzing the arguments under the familiar Chevron standard, concluded that, “[a]t Chevron step one this Court must give effect to the clear intent of Congress as reflected in the statute because subsection (bb)(CC) is not ambiguous on its face.”  The court went on to state that “Teva is correct that the statute does not address when an Innovator may withdraw a patent, but what is important is that the statute does not limit the Innovator’s right to withdraw patent information.  The Court cannot take on the role of the legislature by creating such limitations when they were omitted by Congress.”

As to Teva’s argument that the delisting mechanism at FDC Act § 505(j)(5)(C)(ii)(I) and the delisting trigger at FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC) are linked and must be read together, the court stated that:

[t]he problem with this interpretation is that the MMA contains no language linking the forfeiture provision and the counterclaim provision as Teva would prefer.  The provisions simply do not refer to one another.

Moreover, even if subsection (bb)(CC) were construed in the context of the whole statute to be ambiguous, the Court would be required to defer to the FDA’s interpretation under Chevron step two.  It is not arbitrary or capricious for the FDA to interpret (bb)(CC) as broadly applying whenever an Innovator withdraws patent information because the statute provides no limitations on withdrawal of patent information and subsection (bb)(CC) makes no reference to the counterclaim provision.  The FDA’s interpretation of the statute is reasonable.

The court also dismissed the utility of the Ranbaxy decision in interpreting the 180-day exclusivity forfeiture provisions added by the MMA, noting that “Ranbaxy was decided under the Hatch-Waxman Amendments as they existed prior to the enactment of the MMA,” and concluding that “FDA’s interpretation of the MMA is a reasonable interpretation of the balance Congress struck between these competing goals.”

It is unclear whether Teva will appeal the decision to the U.S. Court of Appeals for the District of Columbia Circuit.  We will update you as we learn additional information.

By Kurt R. Karst –      

Last Friday, the House Energy and Commerce Committee favorably reported its version of “America’s Affordable Health Choices Act” (H.R. 3200) by a 31-28 vote after adopting several amendments.  A copy of the bill and amendments are available here.  Importantly, the committee agreed to amendments sponsored by Representatives Anna Eshoo (D-CA) (by a 47-11 vote) and Bobby Rush (D-IL) (by voice vote) that would create a Follow-On Biologics (“FOB”) approval pathway and that would prohibit so-called “pay-for-delay” or “reverse payment” settlements between generic and brand-name drug companies, respectively. 

The Eshoo Amendment would amend the Public Health Service Act to create a pathway for the approval of biosimilars (i.e., FOBs), including provisions to resolve patent disputes.  The amendment incorporates many of the principles in Rep. Eshoo’s “Pathway for Biosimilars Act” (H.R. 1548) introduced earlier this year, as well as those in FOB legislation passed in mid-July by the U.S. Senate Health, Education, Labor, and Pensions Committee (see our previous post here). 

One important difference between H.R. 1548 and the Eshoo Amendment is that whereas H.R. 1548 would provide for up to 14.5 years of exclusivity for a new biological product, the Eshoo Amendment to H.R. 3200 would provide for up to 12.5 years of exclusivity, composed of an initial 12-year exclusivity period that may be extended by 6 months of pediatric exclusivity.  In addition, the 12-year exclusivity period would not be available with respect to the approval of “a supplement for the biological product that is the reference product” or “a subsequent application filed by the same sponsor or manufacturer of the biological product that is the reference product” for certain changes or modifications.  Another difference is that the Eshoo Amendment does not require FDA to issue guidance before reviewing or acting on a FOB application.  H.R. 1548 included requirements on FDA guidance before FOB submissions and approvals could be made.

Biotechnology Industry Organization (“BIO”) President and CEO Jim Greenwood said in a press release that the amendment “strikes the appropriate balance among ensuring patient safety, expanding competition, reducing costs and providing necessary and fair incentives that will provide for continued biomedical innovation.”  PhRMA's press release is avaiable here, and GPhA's press release is available here. 

The Rush Amendment would amend the FDC Act to add section 505(w) – “Protecting Consumer Access to Generic Drugs” – to, among other things, make it unlawful for any person from being a party to any agreement resolving or settling a patent infringement claim in which an ANDA applicant receives anything of value, and the ANDA applicant agrees not to research, develop, manufacture, market or sell the generic drug that is the subject of a patent infringement claim.  The Rush Amendment is similar legislation sponsored by Rep. Rush earlier this year – the “Protecting Consumer Access to Generic Drugs Act of 2009” (H.R. 1706).  One notable difference is that while H.R. 1706 would amend the FDC Act to add new 180-day exclusivity forfeiture provisions with respect to settlement agreements, the Rush Amendment to H.R. 3200 does not include such provisions. 

The FTC has urged the passage of legislation prohibiting “reverse payment” settlement agreements and recently stated that such agreements are “presumptively illegal” (see our recent post here).  FTC Chairman Jon Liebowitz commended the House Energy and Commerce Committee for adopting the Rush Amendment. 

By Carrie S. Martin –

Last Wednesday, the Senate Special Committee on Aging held a hearing to discuss the conflicts of interest presented by the funding of continuing medical education (“CME”) by pharmaceutical and medical device companies.  Lewis Morris, Chief Counsel to the Office of Inspector General (“OIG”) of the Department of Health and Human Services (“HHS”), testified that industry funding of CME  has increased by more than 300 percent in the last decade and that the pharmaceutical industry spent over a billion dollars on CME-related events in 2007, nearly half of all CME costs.  He said that this funding, however, is not entirely philanthropy:  according to one study, every dollar spent on physician events, like CME, results in over three dollars in increased revenue. 

In order to prevent industry from “co-opting” CME as a marketing tool, Mr. Morris recommended creating an independent CME grant organization, through which funding from industry would be pooled and then distributed by an independent board of experts.  Most panelists on the Aging Committee endorsed the recommendation.  Mr. Morris also recommended that pharmaceutical and medical device companies:

• Separate grant making functions from sales and marketing;

• Establish objective criteria for making educational grants to CME providers; and
• Eliminate any control over the speakers or content of the educational activity.

He acknowledged that the Pharmaceutical Research and Manufacturers of America (“PhRMA”) has already incorporated the first two recommendations into its PhRMA Code and that the Advanced Medical Technology Associates ("AdvaMed") has incorporated some restrictions on CME into its Code of Ethics as well.

The Chairman of the Committee on Aging, Herb Kohl (D-WI), is also a cosponsor of the Physician Payments Sunshine Act (S. 301), which requires industry to report payments and gifts to doctors.  Similar provisions are included in the House tri-committee health reform bill, which also requires disclosure of payments to medical schools and sponsors of continuing medical education programs.  It is conceivable, therefore, that Mr. Morris’s recommended CME “firewall” could make its way into health reform legislation as well. 

Yesterday, President Obama announced that he intends to nominate Anne Northrup as a Commissioner of the Consumer Product Safety Commission.  Anne Northrup was a Congresswoman from Kentucky from 1997-2006.  As we previously reported, earlier this month, Inez Moore Tenenbaum was sworn in as the ninth CPSC Chairman.

By Ricardo Carvajal –

The U.S. House of Representatives has passed the Food Safety Enhancement Act of 2009, which would substantially strengthen FDA’s regulatory authority over foods.  The bill would grant FDA mandatory recall authority, expanded access to records, stronger seizure and administrative detention authorities, and authority to quarantine foods.  In addition, the bill would prohibit delaying, limiting, or refusing inspection, authorize the issuance of subpoenas, provide whistleblower protection, and provide for enhanced criminal and civil penalties for certain prohibited acts with respect to foods.  The bill would also authorize FDA to establish science-based performance standards for classes of food, safety standards for fresh produce, a tracing system for domestic and imported food, a requirement for third party certification of imports, and safety and security guidelines for food imports.  Finally, the bill would require FDA to adopt a risk-based food facility inspection schedule.

In addition to complying with requirements imposed by FDA pursuant to the authorities summarized above, producers would be obliged to register their facilities annually and pay fees, conduct a hazard analysis and implement risk-based preventive controls, and develop and implement a written food safety plan.  Importers would be required to use only accredited testing laboratories and would be required to register and pay fees annually.

The text of the bill (H.R. 2749) is available here.  The Senate is not expected to take up similar legislation until it has addressed health care reform. 

By William T. Koustas –      

Today, the FTC announced that it is delaying enforcement of the controversial Red Flags Rule (“the Rule”) until November 1, 2009.  The FTC press release states that it is extending the August 1, 2009 deadline, previously discussed in this blog, by three months to allow small businesses and low risk entities more time to develop and implement Identity Theft Prevention Programs.  In order to clear up the uncertainties many small businesses and low risk entities have with the Rule, FTC will also create additional compliance guidance and a special link for small and low risk entities on the FTC’s Red Flags Rule website.  It appears that the FTC was encouraged to extend the enforcement deadline by a request from the House Appropriations Committee to “defer enforcement in conjunction with additional efforts to minimize the burdens of the Rule on health care providers and small businesses with a low risk of identity theft problems.”  The American Bar Association and American Medical Association have also vigorously opposed the application of the Rule to lawyers and doctors and have requested a delay of its enforcement as well. 

By Cassandra A. Soltis –

In Pom Wonderful LLC v. Ocean Spray Cranberries, Inc., 2009 WL 2151355 (C.D. Cal. 2009), the U.S. District Court for the Central District of California determined that Pom Wonderful LLC’s (Pom’s) false advertising claim against Ocean Spray Cranberries, Inc. (Ocean Spray) under the Lanham Act was not precluded or barred by the Federal Food, Drug, and Cosmetic Act (FDC Act).  The court also found that Pom’s false advertising and unfair competition claims under California law were not preempted by the FDC Act. 

Pom alleged that Ocean Spray “made false and misleading representations regarding the primary ingredients” in Ocean Spray’s pomegranate and cranberry juice blend beverage, which “is almost entirely comprised of apple and grape juice.”  Pom, 2009 WL 2151355, at *1.  Indeed, the court noted that, based on the product’s label, “cranberry juice ranks third and pomegranate juice ranks fifth” among the five juices in the product.  Id.  Pom also alleged that Ocean Spray marketed the product as being high in antioxidants when, in fact, this is untrue.  Id.  Pom argued that “[a]s a result of [Ocean Spray’s] misrepresentations,” Ocean Spray’s “costs to produce the Beverage are lower and [it] can charge less for its product than competitors such as” Pom.  Id.  Further, “consumers are ‘tricked’ into thinking they are getting a product that is similar to [Pom’s] (whose product is primarily pomegranate juice) for a lower price.”  Id. 

Ocean Spray’s motion to dismiss Pom’s complaint was denied.  The court explained that although the “Lanham Act and the [FDC Act] have overlapping jurisdiction in areas such as marketing and product labeling,” the “purposes of the two statutes are different,” with the Lanham Act “’intended to protect commercial interests’ from unfair competition,” and the FDC Act, “to protect the public from unsafe or mislabeled products.”  Id. at *2 (citations omitted).  Further, “the Lanham Act may be enforced by private litigants,” but only FDA or the Department of Justice can enforce the FDC Act.  Id.  Because of the differences in these two laws, Lanham Act claims are generally “barred where private litigants ask the district court to ‘determine preemptively how [the FDA] will interpret and enforce its own regulations.’”  Id. (citations omitted).  “Put differently, the key issue in the line of cases dealing with [the FDC Act] or FDA regulation preclusion of Lanham Act claims is whether the false advertising involves a fact that can be ‘easily verified,’ without requiring the truth of the fact to be determined by the FDA.”  Id. (citations omitted).

The district court opined that “determining the primary ingredients of the Beverage and whether [Ocean Spray’s] representations are misleading is not contingent on a decision of fact by the FDA or the enforcement of its regulations.”  Id. at *3.  Indeed, the FDC Act provision stating that a food will be misbranded if its labeling is false or misleading does not define what constitutes “false or misleading.”  Id.  Although there are several requirements for the labels of beverages containing multiple juices, Pom’s complaint “does not reference or attempt to enforce these requirements.” Id. at *4.  “Accordingly, [Pom] has stated a permissible claim under the Lanham Act for false advertising.”  Id. 

The court also found that Pom’s state law claims under the Sherman Act were neither expressly preempted nor barred by field preemption.  Although the FDC Act expressly preempts state requirements for food labeling that are not identical to certain sections of the FDC Act, the Act does not preempt false or misleading labeling or unfair competition claims.  Id. at *5-6.  The court also stated “that Congress did not intend federal law to exclusively occupy the fields of food labeling and advertising.”  Id. at *7.  Finally, the court found that application of the primary jurisdiction doctrine was not warranted in this case and that Pom met the heightened pleading requirements of Rule 9(b).  Id. at *7-8.

By Kurt R. Karst –      

On July 28, 2009, FDA will publish a final rule amending the Agency’s regulations requiring that NDA holders submit in annual reports certain information to the Agency concerning authorized generics.  The regulations, which were first proposed in September 2008 – both as a proposed rule and as a direct final rule (that was later withdrawn after FDA received significant adverse comment) – implement Section 920 of the FDA Amendments Act (“FDAAA”).  FDAAA § 920 amended the FDC Act to create new § 505(t) – “Database for Authorized Generic Drugs” – that requires FDA to compile and publish a complete list of all authorized generic drugs identified in annual reports submitted to the Agency since January 1, 1999.

FDC Act § 505(t) defines an “authorized generic” as a drug listed in FDA’s Orange Book that was approved under FDC Act § 505(c) (i.e., a “full” 505(b)(1) NDA or 505(b)(2) application) and that “is marketed, sold, or distributed directly or indirectly to retail class of trade under a different labeling, packaging (other than repackaging as the listed drug in blister packs, unit doses, or similar packaging for use in institutions), product code, labeler code, trade name, or trade mark than the listed drug.”  FDAAA requires that the authorized generic list be updated on a quarterly basis.  FDA first published its authorized generic list in June 2008.  Among other uses, this list is intended to assist the Federal Trade Commission (“FTC”) as that agency moves forward to complete its study of the competitive effects of authorized generics.  As we previously reported, in June 2009, the FTC published an interim report on authorized generic drugs.  The report provides the results of the FTC’s preliminary data analysis on the short-term effects of authorized generics on competition during 180-day exclusivity.

The authorized generics final rule, which goes into effect in six months, amends FDA’s regulations at 21 C.F.R. § 314.3(b) to add the following definition of an “authorized generic drug” that is substantially identical to that in FDC Act § 505(t):

Authorized generic drug means a listed drug, as defined in this section, that has been approved under section 505(c) of the act and is marketed, sold, or distributed directly or indirectly to retail class of trade with labeling, packaging (other than repackaging as the listed drug in blister packs, unit doses, or similar packaging for use in institutions), product code, labeler code, trade name, or trademark that differs from that of the listed drug.

The final rule also amends FDA’s postmarketing reporting requirements to add 21 C.F.R. § 314.81(b)(2)(ii)(b) to require NDA holders to include in their annual reports information detailing: (1) the date each authorized generic entered the market; (2) the date each authorized generic ceased being distributed; and (3) the corresponding brand name drug.  FDA considers each dosage form and/or strength to be a different authorized generic drug that should be separately listed in an annual report.  Moreover, the first annual report submitted after implementation of this regulation must provide information regarding “any authorized generic drug that was marketed during the time period covered by an annual report submitted after January 1, 1999.” 

The final rule makes some changes to the proposed rule, particularly with regard to the electronic submission of authorized generic information.  Specifically, FDA states in the final rule that:

After considering the comments, we have concluded that it is appropriate to make a revision to the proposed rule to permit e-mail submission of the required information in addition to regular mail, including courier delivery.  The final rule revises proposed 314.81(b)(2)(ii)(b) to allow NDA holders to send the required information to the Authorized Generics electronic mailbox at AuthorizedGenerics@fda.hhs.gov with Authorized Generic Submission indicated in the subject line.

We also revised the last line of that section to clarify when separate submission of the authorized generics information is required by this rule.  When information is included in an annual report about an authorized generic drug, the final rule requires that a copy of that portion of the annual report be sent to a central office in the agency that will compile the list of authorized generic drugs and update it quarterly.  At such time as FDA requires electronic submission of annual reports through a system that allows for the extraction of relevant information from annual reports, separate submission of the information will no longer be required.

Based on FDA’s historical review of annual reports, the Agency estimates that approximately 60 NDA sponsors will submit about 400 annual reports containing  authorized generic information required to be reported under new 21 C.F.R. § 314.81(b)(2)(ii)(b).

By Ricardo Carvajal –      

On July 23, FDA held the first of three public workshops to explain the Reportable Food Registry requirements that will take effect on September 8, 2009.  One thing was made clear: the agency has no plans to offer a definition of the standard that triggers the reporting obligation. Rather, it will be left to individual firms to determine, on a case-by-case basis, what constitutes a “reasonable probability that the use of, or exposure to, [the] article of food will cause serious adverse health consequences or death to humans or animals.”  In response to questions, agency officials acknowledged that firms can look to past Class I recall situations to get some indication of how the agency has interpreted and applied what is essentially the same standard in that context. 

The electronic reporting form that firms must use to submit instances of reportable food is a work in progress.  The agency presented the latest version of the form, but will continue to work on the form and present updated versions at the remaining workshops.  In addition, the agency plans to release a step-by-step guide to preparation of the form prior to September 8.  A brief reminder: to ensure that FDA considers comments on its draft guidance on the Reportable Food Registry before the date on which the Registry takes effect, the Agency asks that comments be submitted by July 27, 2009.  For more on the Registry, see our prior post here.

By Carmelina G. Allis –

We previously reported that Synthes, Inc., Norian Corporation, and four of Synthes’s executives had been charged by the United States government for allegedly violating several provisions of Titles 18 and 21 of the United States Code.  The defendants allegedly conducted clinical trials of medical devices without obtaining prior authorization from the Food and Drug Administration.  Now the New York Times and the Philadelphia Business Journal report that two Synthes executives, Michael D. Huggins and John J. Walsh, “pleaded guilty on Monday in federal court in Philadelphia to one misdemeanor count of shipping misbranded Norian XR across state lines.”  Mr. Huggins’s attorney issued a statement, indicating that his client’s guilty plea “‘is grounded in the principle that Mike Huggins was a responsible corporate officer at Synthes’ . . . Mr. Huggins has always made clear that he did not do anything knowingly or intentionally wrong.”  The attorney’s statement was likely made in reference to the Supreme Court’s 1975 decision in United States v. Park concerning responsible corporate officer liability.

Each defendant faces the possibility of one year in prison and a $100,000 fine.