By Kurt R. Karst – 

Last week, the U.S. Government Accountability Office (“GAO”) issued a report, titled “Nonprescription Drugs: Considerations Regarding a Behind-the-Counter Drug Class.”  The report updates the Office’s 1995 report on the same topic (see our previous post here).  The updated report was requested by Representatives John Dingell (D-MI) and Bart Stupak (D-MI) in January 2008 after FDA held a public meeting in November 2007 on Behind-the-Counter (“BTC”) availability of certain drugs.  A copy of the 2007 FDA meeting transcript is available here.  FDA has previously considered and declined to create BTC drug status.  Specifically, in April 2004, FDA denied – without substantively discussing BTC status – a citizen petition requesting that the Agency “switch Nicotrol Inhaler (Nicotine Inhalation System) from prescription only to over-the-counter status TO BE SOLD ONLY UNDER A PHARMACIST’S SUPERVISION as a third class of drugs.” 

According to the GAO report, there are two general views on how a BTC drug class would be used in the U.S.  The first view is that BTC drugs would be a permanent drug class – similar to the current prescription and Over-the-Counter drug ("OTC") classes – insofar as there would be no expectation that BTC drugs would eventually switch to the prescription or OTC class.  The second view is that a BTC drug class would function as a transition class for some drugs and a permanent class for other drugs, such that “[a] drug being switched from prescription to nonprescription would spend time in the transition class, during which the suitability of the drug for OTC status could be assessed.”

The 1995 GAO report concluded that “[l]ittle evidence supports the establishment of a pharmacy or pharmacist class of drugs in the United States at this time, as either a fixed or a transition class, and that “[t]he evidence that is available tends to undermine the contention that major benefits are being obtained in the countries that have such a class.”  The bottom line in the 2009 report is less clear, presumably because the focus of the report was to describe arguments supporting and opposing the creation of a BTC drug category, evaluate BTC drug systems in five countries that have evaluated drug classification since 1995 (i.e., the U.S., Australia, Italy, the Netherlands, and the United Kingdom), and note issues important to establishing a BTC drug class in the U.S.  The GAO report concludes that:

Arguments supporting and opposing a BTC drug class in the United States have been based on public health and health care cost considerations, and reflect general disagreement on the likely consequences of establishing such a class.  Proponents of a BTC drug class suggest it would lead to improved public health through increased availability of nonprescription drugs and greater use of pharmacists’ expertise.  Opponents are concerned that a BTC drug class might become the default for drugs switching from prescription to nonprescription status, thus reducing consumers’ access to drugs that would otherwise have become available OTC, and argue that pharmacists might not be able to provide high quality BTC services.  Proponents of a BTC drug class point to potentially reduced costs through a decrease in the number of physician visits and a decline in drug prices that might result from switches of drugs from prescription to nonprescription status.  However, opponents argue that out-of-pocket costs for many consumers could rise if third-party payers elect not to cover BTC drugs. 

The GAO report also goes on to comment that “[a]ll five study countries have increased nonprescription drug availability since 1995; however, the impact of restricted nonprescription drug classes on drug availability is unclear.”  The report also identifies several issues that need to be addressed before a BTC drug class is established in the U.S.  In particular, the GAO report states that:

Pharmacist-, infrastructure-, and cost-related issues would have to be addressed before a BTC drug class could be established in the United States.  The roles and responsibilities of pharmacists in a BTC drug class that would need to be considered include defining pharmacist responsibilities for dispensing BTC drugs, ensuring that pharmacists provide the necessary BTC counseling, and determining whether additional training would be needed for pharmacists and pharmacy staff.  In addition, whether or not there is a sufficient pharmacist workforce to make such a class viable would need to be determined, and pharmacists’ new role would need to be communicated to the public. Ensuring that pharmacies have the data infrastructure necessary to provide pharmacists with patient information and the physical infrastructure to protect consumer privacy would also be important.

Whether the GAO’s report will lead to the introduction of legislation to create a BTC drug class remains to be seen.  Legislators are presumably reviewing the report in detail to gauge the need for and the potential impediments to the creation of a BTC drug class. 

By Ricardo Carvajal –      

The latest Morbidity and Mortality Weekly Report from the Centers for Disease Control and Prevention (CDC) gives credence to a possible link between higher intake of sodium and an increased risk of hypertension.  According to CDC, nearly 70% of U.S. adults should be limiting their intake of sodium to 1,500 mg/day (@ 2/3 teaspoon of salt), considerably lower than the estimated average daily intake of 3,436 mg/day for those age 2 and older. (Current dietary guidelines recommend a limit of 2,300 mg/day, but a lower limit of 1,500 mg/day is recommended for those in certain at-risk groups.)  CDC recommends that health-care providers “inform their patients of the evidence linking greater sodium intake to higher blood pressure.”

In an accompanying editorial note, CDC states that “[p]ublic health actions to reduce sodium intake likely will include 1) reducing the sodium content of processed foods; 2) encouraging consumption of more low-sodium foods, such as fruits and vegetables; and 3) providing more relevant information about sodium in food labeling.”  CDC further states that current percent daily value information in nutrition labeling of packaged foods “is likely to mislead the majority of consumers, for whom the 1,500 mg/day limit is applicable.”  As an example of a public health strategy to reduce sodium intake, CDC cites New York’s efforts to reduce sodium levels in processed and restaurant foods.

In 2005, the Center for Science in the Public Interest filed a citizen petition asking FDA to revoke the GRAS status of salt, require a reduction in the amount of salt in processed foods, and reduce the daily value for sodium to 1,500 mg/day, among other actions.  In response to the petition, FDA held a public hearing in November 2007.  The citizen petition is still pending.

By Susan J. Matthees –

FDA announced last week that it had added the first unapproved new animal drug to the Index of Legally Marketed Unapproved New Animal Drugs for Minor Species (i.e., the Index) since the Agency began accepting submissions last February.  The drug, Ovaprim, is indicated “[f]or use as a spawning aid in ornamental finfish broodstock.”  Placement on the Index allows the sponsor, Western Chemical, to sell Ovaprim without having the drug approved by FDA. 

The Index was created as part of the Minor Use Minor Species ("MUMS") Animal Health Act of 2004, which was passed with the intention of making more drugs available for treatment of minor species and uncommon diseases in major animal species.  Minor species are all animals other than the 7 major species (dogs, cats, cattle, horses, swine, chickens, and turkeys).  The Act was intended to increase drug availability by modifying the Federal Food, Drug, and Cosmetic Act in three ways. 

First, the Act allows a company to ask FDA’s Center for Veterinary Medicine to grant “conditional approval” of a drug.  Conditional approval permits a sponsor to sell a drug for up to 5 years before collecting all necessarily efficacy data.  However, the sponsor must demonstrate that the drug is safe.  Second, for drugs that have a very limited potential for marketing, FDA can add a drug to the Index, as it did yesterday for Ovaprim.  Finally, FDA can grant an animal drug a similar designation as human Orphan Drugs.  Sponsors who receive this designation can receive up to 7 years of marketing exclusivity.

FDA granted the first conditional approval in early 2007, but the Agency has not announced any other conditional approvals.  FDA granted the first designation in 2005 for the drug Florfenicol (Aquaflor®), and has been actively granting designation over the past 4 years. 

It is difficult to draw many conclusions from yesterday’s announcement since it was the first time that FDA has accepted a drug for the Index, and it remains to be seen whether the Index will increase the number of drugs available for minor uses and minor species.  However, the Index may soon prove to be very popular among the ornamental finfish of the country.

By Jennifer B. Davis & John R. Fleder –

In a March 17, 2009 opinion in United States ex rel Roop v. Hypoguard USA, Inc., the United States Court of Appeals for the Eighth Circuit held that the Relator’s qui tam allegations concerning Defendant’s alleged failure to submit FDA-required medical device reports (“MDRs”) for defective blood glucose monitors was insufficient to meet the Fed.R.Civ.P. 9(b) requirements for pleading fraud with specificity.  Affirming the lower court’s dismissal of Relator’s pre- and post-judgment motions to file a First Amended Complaint, the Eight Circuit determined that Relator’s proposed First Amended Complaint “failed to cure deficiencies in the initial Complaint” because it “did not plead with particularity the details of any false Medicare reimbursement claim presented to, or paid by, the United States or its agent.  Nor did it allege with particularity how any product defect or failure to submit MDR reports to the FDA was material to . . . the government’s decisions to pay countless unidentified Medicare reimbursement claims submitted by Hypoguard distributors.”

In a March 20, 2009 opinion in United States ex rel Poteet v. Lenke, the United States District Court for the District of Massachusetts held that Relator’s qui tam action against multiple spine surgeons and device distributors alleging receipt of kickbacks from Medtronic, Inc. and Medtronic Sofamor Danek U.S.A. in exchange for off-label promotion of INFUSE Bone Graft/LT-CAGE® was barred by the prior public disclosure of Relator’s allegations in previously filed lawsuits and the media, and by the Relator’s failure to meet the Fed.R.Civ.P. 9(b) requirements for pleading fraud with specificity.  In its application of the Rule 9(b) specificity requirement, the court found that Relator’s Amended Complaint was “devoid of specific allegations linking the distributor defendants to the general allegations of kickbacks and the filing of false claims with the government.”  It further observed that the Relator had failed to specify “which distributors were involved in the scheme, and how they were involved,” or “whether the recipients of the gifts ever purchased Medtronic products or filed a claim for medicare benefits,” “[ ]or . . . that these gifts caused a false filing with Medicare.”  Quoting a leading First Circuit FCA/Rule 9(b) opinion, United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 733 (1st Cir. 2007) (see our post about that case here), the court further found that the Relator’s Amended Complaint “contains ‘no factual or statistical evidence to strengthen the inference of fraud beyond possibility.’”

We have earlier reported on the case of Hopper and Hutto v. Solvay Pharmaceuticals, Inc., where the United States District Court for the Middle District of Florida dismissed a qui tam False Claims Act case involving allegations that the defendants had engaged in an alleged off-label marketing scheme with regard to the drug Marinol.  On March 13, 2009, the defendants filed their appellate brief with the United States Court of Appeals for the Eleventh Circuit.  On March 24, 2009, the Washington Legal Foundation filed an amicus curiae brief in that Court supporting the defendants’ position that the Eleventh Circuit should affirm the lower court’s dismissal.  Hyman, Phelps & McNamara P.C. is one of the counsel of record for the defendants in that case.

By Ricardo Carvajal –      

In June 2008, the Technical Committee on Dietary Lipids of the International Life Sciences Institute sponsored a workshop titled “Towards Dietary Reference Intakes for Omega-3 Fatty Acids.”  A summary of the workshop participants' conclusions is now published in the Journal of Nutrition. The publication contends that the government should reassess data on the health effects of eicosapentaenoic acid (“EPA”) and docosahexaenoic acid (“DHA”) and consider setting a Dietary Reference Intake (“DRI”) for those substances.  (A DRI is a reference value that provides the recommended intake of a nutrient.  DRI’s are set by the Food and Nutrition Board of the National Academy of Sciences.)  The publication, “Towards Establishing Dietary Reference Intakes for Eicosapentaenoic and Docosahexaenoic Acids,” is available here.

In a prior blog posting, we discussed FDA’s proposed rule to prohibit nutrient content claims for EPA and DHA.  That proposed rule is based on FDA’s determination that there is no authoritative statement identifying a reference value for EPA and DHA.  Subsequently, a citizen petition was submitted to FDA that raises several challenges to FDA’s proposed rule.  

By Kurt R. Karst –      

In a scathing 52-page opinion issued earlier today, the United States District Court for the Eastern District of New York takes FDA to task over the Agency’s August 24, 2006 approval of a supplemental NDA (“sNDA”) for Barr Pharmaceuticals, Inc.’s emergency contraceptive PLAN B (levonorgestrel) Tablets, 0.75mg and denial of a citizen petition requesting FDA to switch PLAN B (and all emergency contraceptives like it) from prescription-only to OTC status without age or point-of-sale restrictions.  FDA’s August 24, 2006 approval permitted Over-the-Counter (“OTC”) use of PLAN B in women 18 years and older and maintained prescription status for women 17 years old and younger.  As we previously reported, another attempt to vacate FDA’s PLAN B approval failed when the United States District Court for the District of Columbia ruled in March 2008 that plaintiffs lacked standing to assert the claims in the complaint, and because the plaintiffs also failed to exhaust their administrative remedies.

Today’s decision is filled with intimate details of the FDA PLAN B decision-making process.  Here are the exact words of the court's decision:

Putting aside for the moment the specifics of the many claims brought by plaintiffs and the details of each of the FDA’s decisions, the gravamen of plaintiffs’ claims is that the FDA’s decisions regarding Plan B – on the Citizen Petition and the SNDAs – were arbitrary and capricious because they were not the result of reasoned and good faith agency decision-making.

Plaintiffs are right.  The FDA repeatedly and unreasonably delayed issuing a decision on Plan B for suspect reasons and, on two occasions, only took action on Plan B to facilitate confirmation of Acting FDA Commissioners, whose confirmation hearings had been held up due to these repeated delays.  The first occasion involved the confirmation of then-Acting FDA Commissioner Lester M. Crawford, who froze the review process for seven months in 2005. In order to overcome a hold that had been placed on his nomination by two Senators, the Secretary of Health and Human Services promised that the FDA would act on Plan B by September 2005.  After Dr. Crawford was confirmed by the Senate in July 2005, however, he reneged on the promise and, instead, delayed action another eleven months to pursue, and then abandon, a rulemaking with respect to Plan B. There is also evidence that when the FDA finally decided to approve non-prescription use of Plan B for women 18 and older, it did so to facilitate the confirmation of Commissioner Crawford’s successor, then-Acting FDA Commissioner Andrew C. von Eschenbach, whose confirmation certain Senators had vowed to block because of the continued delays on Plan B.

These political considerations, delays, and implausible justifications for decision-making are not the only evidence of a lack of good faith and reasoned agency decision-making. Indeed, the record is clear that the FDA’s course of conduct regarding Plan B departed in significant ways from the agency’s normal procedures regarding similar applications to switch a drug product from prescription to non-prescription use, referred to as a “switch application” or an “over-the-counter switch.”  For example, FDA upper management, including the Commissioner, wrested control over the decision-making on Plan B from staff that normally would issue the final decision on an over-the-counter switch application; the FDA’s denial of non-prescription access without age restriction went against the recommendation of a committee of experts it had empanelled to advise it on Plan B; and the Commissioner – at the behest of political actors – decided to deny non-prescription access to women 16 and younger before FDA scientific review staff had completed their reviews.

. . . [N]o useful purpose would be served by continuing to deprive 17 year olds access to Plan B without a prescription.  Indeed, the record shows that FDA officials and staff both agreed that 17 years olds can use Plan B safely without a prescription.  The FDA’s justification for this age restriction, that pharmacists would be unable to enforce the prescription requirement if the cutoff were age 17, rather than 18, lacks all credibility.

The court ultimately vacated FDA’s citizen petition denial and remanded the matter back to FDA for the Agency to “reconsider its decisions regarding the Plan B switch to OTC use.”  In addition, the court also ordered FDA to permit Barr, within 30 days, “to make Plan B available to 17 year olds without a prescription, under the same conditions as Plan B is now available to women over the age of 18. 

By Kurt R. Karst –      

We previously reported on a complaint filed by Wyeth Holdings Corporation and its Fort Dodge Animal Health Division (collectively “Wyeth”) in the U.S. District Court for the District of Columbia against FDA and the U.S. Patent and Trademark Office (“PTO”) under the Administrative Procedure Act (“APA”) requesting declaratory and injunctive relief with respect to Wyeth’s request for a Patent Term Extension (“PTE”) for U.S. Patent #4,916,154 (“the ‘154 patent”).  The ‘154 patent covers Wyeth’s new animal drug CYDECTIN (moxidectin) Pour-On.  Earlier today, the District Court granted FDA’s Motion to Dismiss or Alternatively for Summary Judgment and denied Wyeth’s Cross-Motion for Summary Judgment.

By way of background, under the PTE statute at 35 U.S.C. § 156(g)(4), certain patents covering animal drugs are eligible for a PTE if patent life was lost during a period when the product was undergoing regulatory review.  As with other FDA-regulated products, such as human drugs and medical devices, the “regulatory review period” is composed of a “testing phase” and a “review phase.”  For animal drugs approved under FDC Act § 512, the “testing phase” begins on the earlier of the effective date of an Investigational New Animal Drug (“INAD”) exemption or the date a major health or environmental effects test on the drug was initiated, and ends on the date a New Animal Drug Application (“NADA”) is “initially submitted” to FDA under FDC Act § 512(b).  The “review phase” is the period between the initial submission and approval of the NADA.  FDA’s PTE regulations at 21 C.F.R. § 60.22(f) clarify that a marketing application “is initially submitted on the date it contains sufficient information to allow FDA to commence review of the application.”  The CYDECTIN PTE case concerns when the NADA was “initially submitted” to FDA. 

FDA first approved CYDECTIN on January 28, 1998 under NADA #141-099.  The NADA was submitted under FDA’s Phased Data Review Policy and Administrative NADA process.  An Administrative NADA “is a new animal drug application that is submitted after all of the technical sections that fulfill the requirements for the approval of the new animal drug . . . have been reviewed by [the Center for Veterinary Medicine (‘CVM’)] and CVM has issued a technical section complete letter for each of those technical sections.”  The human drug and medical device counterparts to the Administrative NADA are the statutory “Fast Track” process and the Modular Premarket Approval Application process, respectively.  Both of these processes permit a type of rolling submission and review of marketing application sections.  (FDA and the PTO have previously addressed both processes with respect to PTE issues.)

In March 1998, Wyeth timely submitted an application to the PTO requesting a PTE with respect to the ‘154 patent.  In that application, Wyeth calculated a PTE based on the date the company submitted the first technical section to its INAD (i.e., August 8, 1995).  Using this date, Wyeth calculated a new expiration date of the ‘154 patent of January 28, 2012. (The original expiration date of the ‘154 patent was April 10, 2007.) 

In September 2006, FDA issued a Federal Register notice stating the Agency’s determination that the date NADA #141-099 was initially submitted to FDA was on January 13, 1998, when the final NADA component was submitted to the Agency.  In the notice, the Agency also stated that “[i]t is FDA’s position that the approval phase begins when the marketing application is complete.”  In November 2006, Wyeth submitted a request for reconsideration and revision of the regulatory review period.  Wyeth argued that August 8, 1995 is the controlling date for PTE purposes.  On May 7, 2008, FDA denied Wyeth’s request, stating that “it is FDA’s position that the approval phase for purposes of [PTE] begins when the marketing application is complete, including all technical sections and the CVM complete letters.”  Wyeth promptly sued FDA alleging that using the August 8, 1995 date for purposes of calculating the PTE regulatory review period is consistent with Congress’ intent in passing the PTE provisions at 35 U.S.C. § 156 and with FDA’s PTE regulations at 21 C.F.R. 60.22(f), and that a mere 16-day approval period “is unreasonable.”

The District Court reviewed the case under the familiar framework of Chevron U.S.A. Inc. v. Natural ResourcesDefense Council, Inc., 467 U.S. 837 (1984).  Finding that both FDA and Wyeth had advanced  plausible readings of the PTE statute – “FDA contends that there was no ‘application’ until Wyeth submitted its Administrative NADA; and Wyeth contends that the application was ‘initially submitted’ upon its submission of the first technical section” –  the court determined under Chevron Step 1 that the statute is ambiguous, thereby necessitating review under Chevron Step 2. 

Under a Chevron Step 2 analysis, the court ruled that:

Wyeth has not met its burden here because the court finds the FDA’s arguments to be more persuasive than those made by Wyeth.  Indeed, the FDA’s construction runs true to the text and defines “initially submitted” in a manner “that is reasonable in light of the legislature’s revealed design.” . . . .  Accordingly, the court cannot say that the FDA’s interpretation is based on an impermissible construction of the statute, nor can the court find that the FDA’s interpretation violates the APA.

It is unclear whether Wyeth will appeal the decision.  We will update you as we learn more information.
 

By Riëtte van Laack & J.P. Ellison –

The Seventh Circuit’s March 12, 2009 decision in United States v. Farinella starkly shows what can happen when, as the court concluded, a prosecutor relies on bad facts for the government and combines that with no controlling law, an ineffective government expert witness, and questionable courtroom conduct. [link to decision].  In Farinella, this unfortunate combination resulted in an order directing a judgment of acquittal and a five-page broadside attack on the entire prosecution case.

Briefly, the case involved a criminal prosecution arising from a defendant changing the “best when purchased by” date on salad dressing by about 18 months before selling the salad dressing to discount stores.  A jury convicted the defendant of wire fraud and introducing a misbranded food into interstate commerce with intent to defraud or mislead.  The district court judge had earlier sentenced the defendant to five year probation, a fine, and forfeit of more than $400,000 for his “gain” from his sales of the relabeled product.  The defendant appealed and the government cross-appealed.  In a sharply worded opinion by Judge Posner, the Seventh Circuit reversed and directed an acquittal on all counts. 

From reading the opinion, it seems that the appellate court was particularly disturbed by the lack of a record evidence to support the government’s theory of the case and by the lead prosecutor’s conduct.  The opinion correctly observes that  “best when purchased by” labeling is not required and neither the Food, Drug, and Cosmetic Act (“FDC Act”) nor FDA regulations address such labeling.  Thus, the charge of misbranding could only stand if re-labeling of the product was false or misleading as a matter of law.

The Court concluded that a shelf stable product such as the salad dressing was edible for years after it has been manufactured.  Without any evidence, the prosecutor implied that the product was deteriorated and tasted “foul [and] rancid” after the “best when purchased by” date.  Moreover, the prosecution presented no evidence that consumers were misled by the change of the “best when purchased by” date or that there was a uniform food industry understanding of the meaning of “best when purchased by” date.  Nevertheless, without any citation to a law or regulation or some written document, FDA’s expert witness offered testimony implying that a change of the “best by date” required FDA approval.  As the Court of Appeals pointed out “to prove a person guilty of having made a fraudulent representation, a jury must be given evidence about the meaning . . . of the representation claimed to be fraudulent.”  The appellate court found no such admissible evidence. 

Presumably, because he was so distressed by the government’s case, Judge Posner’s decision does not provide much guidance about what may constitute criminal misbranding of a food.  In this regard, it is worth noting that under section 201 (n) of the FDC Act, it states that “in determining whether the labeling . . . is misleading there shall be taken into account . . . the extent to which the labeling . . . fails to reveal facts material in light of such representations.” 

According to FDA, “food can be safe forever from a foodborne-illness standpoint – but if shelf-stable food has been on the shelf for an extended period of time, you might not want to eat it because the quality may not be good . . . . FDA does not require an expiration date for shelf-stable foods, since the storage time for these foods is a quality issue, not a food safety concern.”  

Judge Posner noted that there was no evidence that the re-labeling posed a threat to human safety.  However, many food fraud adulteration and misbranding convictions have involved no threat to human safety.   The decision also makes much of the fact that an FDA employee called at as an expert witness “was not just improper and inadmissible but incoherent.”  The Court’s opinion excoriated the prosecutor by name.  Its displeasure with the prosecutor’s tactics may well have dictated the outcome of the case.

By Ricardo Carvajal –      

The Augusta Chronicle reports that the Georgia legislature will soon be sending new food safety legislation to Gov. Sonny Perdue for his signature.  Senate Bill 80 (S.B. 80), which was unanimously approved by both houses, directs the Commissioner of Agriculture to issue regulations that would require food processing plants to establish and maintain written food safety plans, and to test for the presence of poisonous or deleterious substances. The types of plants, foods, and substances subject to testing, as well as the frequency of that testing, would be determined by regulation. Testing would not necessarily have to be conducted by a third party, but it would have to be conducted in accord with standards and procedures established by the Commissioner. 

If testing indicates the presence of a substance that would render a food adulterated, the test result would have to be reported to the Department of Agriculture within 24 hours.  The applicable adulteration standard under Georgia law is the same as that in FDC Act section 402(a)(1) (i.e., a food is adulterated if it bears or contains any poisonous or deleterious substance which may render it injurious to health; but, in case the substance is not an added substance, such food shall not be considered adulterated under this paragraph if the quantity of such substance in such food does not ordinarily render it injurious to health).  Failure to report the test result would be a prohibited act.  Records of all testing performed would have to be maintained for two years and made available for inspection.

The prospect that S.B. 80 will become law could complicate efforts to develop federal food safety legislation, particularly if other states follow Georgia’s lead and amend their own food safety laws.  Federal legislators will have to grapple with the thorny question of whether to preempt state laws that impose different or more stringent requirements than those being contemplated at the federal level.  In the absence of federal preemption, the food industry would be left to face a patchwork of differing requirements across the country – a most unhappy prospect.

By Alan M. Kirschenbaum –

Yesterday, we reported on the Department of Defense’s final regulation implementing section 703 of the National Defense Authorization Act for Fiscal Year 2008 (NDAA-2008).  The regulation establishes a framework for manufacturers to pay refunds to the government on NDA drugs dispensed to TriCare beneficiaries under the TriCare Retail Pharmacy ("TRRx") Program.  The TriCare Management Authority ("TMA") has issued additional information on the refund program in the form of a Dear Manufacturer Letter and an FAQ guidance.  Among other things, the new guidance states that the deadline for payment of refunds on TRRx utilization from January 28, 2008 (the effective date of NDAA-2008) through December 31, 2008 is May 26, 2009, unless a waiver or compromise is granted.

TMA has also posted on its website a draft of the standard refund pricing agreement between the manufacturer and TMA that is provided for under the final rule.  Under the agreement, a manufacturer agrees to provide refunds to TMA each quarter on covered drugs within 70 days after receiving retail utilization data.  The manufacturer must choose, for all of its covered drugs and for the duration of the agreement, (1) the method of calculating the refund (i.e., either non-FAMP minus FCP, or direct commercial price to the pharmacy minus FCP), and (2) whether to calculate the refund using units as reported in the utilization reports, or as converted to the package size of the 11-digit NDC number (rounding down extra units).  It appears that the all-or-nothing nature of the selections would preclude the flexibility to use the contract pharmacy price method for certain drugs and pharmacies (i.e., those covered by contracts) while using the non-FAMP method for non-contracted drugs and/or pharmacies.

For its part, TMA agrees to consider the manufacturer’s covered drugs for tier 2 status at the next scheduled P&T Committee review of the applicable drug class, and to ensure that the manufacturer’s tier 2 drugs are available without preauthorization.  The agreement also provides for a dispute resolution procedure and dispute codes, and permits a manufacturer to withhold payment of disputed units pending resolution of the dispute.  The FAQ states that the final version of the agreement will be mailed to manufacturers next week.  Utilization data for 1Q 2009 will be available on April 15.

By Michelle L. Butler & Alan M. Kirschenbaum –

On March 17, 2009, the Department of Defense (“DoD”) issued a final rule implementing section 703 of the National Defense Authorization Act for Fiscal Year 2008 (“NDAA-08”).  Section 703 of the NDAA-08 provides that, for any prescriptions filled on or after the date of enactment (January 28, 2008), the TriCare retail pharmacy network shall be treated as an element of the DOD such that drugs dispensed by the TriCare retail pharmacy program ("TRRx") to eligible covered beneficiaries are subject to 38 U.S.C. § 8126, which imposes Federal Ceiling Price ("FCP") limitations on drugs approved under NDAs.  Because DOD is a reimburser rather than a purchaser under TRRx, the regulation lays a framework for a system of manufacturer rebates, or “refunds”, to refund to DOD the difference between the cost of the drug to the government and the FCP. 

Retroactive liability for refunds:  Since the enactment of NDAA-08, DOD has taken the position that, although manufacturers may choose to delay the payment of refunds on drugs dispensed under TRRx since January 28, 2008, those refunds eventually must be paid.  The rule and its preamble lay to rest any hope that DOD would change its views on this issue.  Rejecting industry’s argument that the manufacturers’ obligation to pay refunds was contingent on publication of a final rule, the rule and preamble state unambiguously that prescriptions on or after January 28, 2008 are entitled to FCP pricing under 38 U.S.C. § 8126.  See 32 C.F.R. § 199.21(q)(1); 74 Fed. Reg. 11,279, 11,283-84.  The preamble makes clear that DoD does not view this start date as a retroactive application of a new rule; rather, “the legal landscape” changed prospectively as of the enactment of the statute and manufacturers were obligated to sell at statutory prices as of that date.  The rule does not provide procedures for retroactive repayment of refunds, nor specify a date when they are due.  Presumably, instructions will be forthcoming before the rule’s effective date of May 26, 2009.

“Voluntary” agreements:  Going forward, the regulation provides for voluntary written agreements by manufacturers to honor the FCPs for covered drugs provided through the TriCare retail pharmacy network.  See id. § 199.21(q)(2).  Only by entering into such an agreement will a manufacturer’s covered drugs be eligible for inclusion on the Uniform Formulary (though an agreement is not a guarantee of such inclusion) and be available without preauthorization.  See id. § 199.21(q)(2)(i).  Notably, a failure to enter into an agreement does not relieve a manufacturer of the obligation to pay refunds.  Therefore, there is nothing to gain by declining to enter into an agreement.

The preamble clarifies that, if there is currently in effect a Uniform Formulary Voluntary Agreement for Retail Refunds (“UF-VARR”) for a drug at a price above the FCP, “that agreement fails to achieve the statutory requirement [and] DoD anticipates canceling it.”  74 Fed. Reg. at 11,287.  The preamble also clarifies that if a drug was previously placed on Tier 3, and a manufacturer signs an agreement to honor FCPs, the drug will then be eligible for reclassification to Tier 2 at the next review by the P&T Committee of the drug class involved.  Id.  The regulation provides that the requirement for a written agreement can be waived by the Director of the TriCare Management Activity (“TMA”) if it is necessary to ensure that at least one drug in a drug class is included on the Uniform Formulary.  See 32 C.F.R. § 199.21(q)(2)(iv).  Such a waiver does not waive the statutory requirement that prescriptions be subject to FCPs; it only waives the exclusion from the Uniform Formulary of drugs not covered by a written agreement.  See id.

Refund Procedures:  The regulation does not set forth procedures to implement the refunds, but requires DOD to establish such procedures.  See id. § 199.21(q)(3)(i).  The regulation provides that the refund procedures must, “to the extent practicable, incorporate common industry practices for implementing pricing agreements between manufacturers and large pharmacy benefit plans sponsors.”  32 C.F.R. § 199.21(q)(3)(ii).  DOD explains in the preamble that it believes the UF-VARR process has been successful and plans to use it as a basis for the refund procedures.  74 Fed. Reg. at 11,289.  The regulation mandates that manufacturers have at least 70 days from the date of their receipt of utilization data to pay the refund.  See id.  Manufacturers will have two options for calculating the amount of the refund:  (1) the difference between the current annual FCP and the non-Federal average manufacturer price (“non-FAMP”) from which it was derived, or (2) the difference between the FCP and “direct commercial contract sales price[] specifically attributable to the reported TriCare paid pharmaceuticals[] determined for each applicable NDC listing” and the FCP.  Id.  DoD will defer to and not change any VA determinations of FCPs or non-FAMPs, including deferring to VA determinations with regard to penny pricing.  74 Fed. Reg. at 11,289. 

Waiver and Compromise:  The regulation states that the refunds due are treated as erroneous payments under 32 C.F.R. § 199.11 pertaining to “overpayments recovery.”  See 32 C.F.R. § 199.21(q)(3)(iii).  Although DOD rejected many of the manufactures’ arguments why payment of retroactive refunds would be unfair or unworkable, “DoD agrees that there may be merit to some concerns that in particular circumstances concerning stale utilization data, prior incentive pricing agreements between DoD and drug manufacturers, and other situations, there may be a reasonable basis to waive or compromises a refund for prescriptions filled between January 28, 2008 and the effective date of the final rule.”  74 Fed. Reg. at 11,285.  Accordingly, a manufacturer is permitted to request such a waiver or compromise of a refund amount due.  See id. § 199.21(q)(3)(iii)(A).  While the provision for waiver or compromise is available at any time, DoD states that it “intends that it especially be available to address and resolve in a reasonable way issues arising from the period between the date of enactment of the statute and the effective date of the regulation.”  74 Fed. Reg. at 11,285.  DOD provides an illustration of a compromise whereby a manufacturer is required to pay refunds only retroactive to a specified date between January 28, 2008 and the effective date of the regulation, but there is little guidance on the kinds of grounds that would justify a waiver or compromise.
 
While any request for waiver or compromise is pending, a manufacturer’s written agreement to honor FCPs will be deemed to exclude the matter that is the subject of the request.  See 32 C.F.R. § 199.21(q)(3)(iii)(B).  This is so that the agreement will be considered sufficient for purposes of satisfying the precondition for Uniform Formulary placement and for purposes of remedies for noncompliance.  In addition, in the case of disputes by the manufacturer regarding the accuracy of utilization data, a refund obligation will be deferred pending good faith efforts to resolve the dispute.  See id. § 199.21(q)(3)(iv).

Penalties:  In the event that a manufacturer fails to make or honor an agreement, the regulation authorizes the Director of the TMA to “take any other action authorized by law.”  32 C.F.R. § 199.21(q)(4).  As pointed out by a commenter, a manufacturer’s failure to comply with section 703 of the NDAA-08 arguably also constitutes a violation of the FCP requirement of 38 U.S.C. § 8126, thereby subjecting a manufacturer to loss of federal payment under Medicaid and a ban on selling drugs to the government.  DoD states that, while it agrees with this position, the law is not settled and the question is outside the regulatory authority of the DoD.  See 74 Fed. Reg. at 11,289. 

Faced with strong objections from industry, DOD has offered in this rule a veneer of a voluntary agreement rewarded by potential formulary benefits, provisions for waiver or compromise of refunds due, and a comforting statement that “voluntary action consistent with the law is far preferable to reliance on enforcement action.  74 Fed. Reg. at 11,281-82.  On the other hand, DOD has taken a hard line on the payment of retroactive refunds, and “expressly does not waive the right to pursue any action authorized by law,” which would include the penalties identified above.  The rule as a whole is an attempt by DOD to offer a carrot while carrying a big stick.

The American Intellectual Property Law Association (“AIPLA”) has appointed Hyman, Phelps & McNamara, P.C. attorney Kurt R. Karst as Chair of the organization’s Hatch-Waxman Subcommittee of the Special Committee on the FDA.  “I am honored to have been nominated for this position, and look forward to raising AIPLA’s voice on myriad Hatch-Waxman issues” said Karst.  AIPLA’s Special Committee on the FDA is currently monitoring several issues, including Paragraph IV litigation and follow-on biologics.  Earlier this year, AIPLA sent a letter to FDA raising intellectual property issues about implementation of § 4 of the QI Program Supplemental Funding Act of 2008, which concerns old antibiotics.  Please contact Special Committee on the FDA Chair Myra H. McCormack (mmccorm1@corus.jnj.com), Vice-Chair Freddie K. Park (freddiep99@yahoo.com), or Kurt R. Karst (kkarst@hpm.com) if you are interested in becoming a member of the Special Committee on the FDA and the Hatch-Waxman Subcommittee.

By Riëtte van Laack & Ricardo Carvajal –      

In a reversal of a U.S. Court of Federal Claims decision, the U.S. Court of Appeals for the Federal Circuit held in Rose Acre Farms, Inc. v. United States that an egg producer did not suffer a taking that requires compensation under the Fifth Amendment as the result of losses incurred under U.S. Department of Agriculture (“USDA”) regulations restricting interstate sale and transportation of poultry and eggs contaminated with Salmonella enteritidis (“SE”) .  (The Fifth Amendment to the U.S. Constitution prohibits the taking of private property for public use without just compensation.) 

Rose Acre Farms, Inc. dates back to 1992 when egg producer Rose Acre filed an action against the USDA claiming that the Department’s regulations that restrict eggs sales and layer chickens that test positive for SE effect a compensable “Taking”  under the Fifth Amendment to the United States Constitution. 

By way of background, the USDA, in its effort to stem the increase in SE outbreaks associated with consumption of table eggs (i.e., raw eggs sold in their shells), issued regulations that restrict the interstate sale of eggs and poultry from SE contaminated layer houses.  Under the regulations, if an outbreak of SE disease in humans is traced to a certain house and the USDA determines that SE is present in the environment, then the eggs of this house may not be sold as table eggs; rather, they have to be diverted to breaker facilities where they are pasteurized.  Breaker eggs (i.e., egg products that have been pasteurized) fetch a lower price. 

In the early 90s, three of Rose Acre’s farms were linked to SE outbreaks.  As a result, for 25 months, Rose Acre was required to sell part of its eggs as breaker eggs instead of as table eggs.   A trial court ruled that Rose Acre was entitled to compensation under the Fifth Amendment Takings Clause, and concluded that Rose Acre was entitled to $9 million.

The Federal Circuit, in reversing the U.S. Court of Federal Claims decision, applied the three-prong test in Penn Central Co. v. New York City, 438 U.S. 104 (1978) to conclude that, on balance, a taking did not occur.  First, the court concluded that Rose Acre’s economic impact was not severe (a 10% loss of the value of eggs diverted to the breaker egg market).  Second, the court concluded that although promulgation of the USDA’s regulation interfered with Rose Acre’s reasonable investment-backed expectations, this factor was not dispositive of the outcome.  Third, the court concluded that the character of the government’s actions “strongly favored” the government because the USDA’s regulation is a public health and safety measure.  In sum, the court concluded that “the law of regulatory takings does not generally compensate property owners when a regulation’s economic impact is slight and temporary but the potential for physical harm to the public is significant.”

By Kurt R. Karst –      

Late yesterday, Rep. Anna Eshoo (D-CA), along with Reps. Jay Inslee (D-WA), and Joe Barton (R- TX), announced the introduction of the Pathway for Biosimilars Act (H.R. 1548).  (A copy of the bill should be available soon).  The introduction of the Pathway for Biosimilars Act follows Rep. Henry Waxman’s (D-CA) introduction of the Promoting Innovation and Access to Life-Saving Medicine Act last week.  We reported on the introduction of the Waxman bill here. 

The new Pathway for Biosimilars Act is reportedly very similar to a bill with the same name introduced by Reps. Eshoo and Barton in the 110th Congress (H.R. 5629).  Our post on the introduction of that bill is available here.  Rep. Inslee has apparently decided not to introduce separate legislation, as he did with the introduction of the Patient Protection and Innovative Biologic Medicines Act in the 110th Congress (H.R. 1956).

According to one press release about H.R. 1548, “[t]he legislation’s formula would offer all new biological drugs a base period of 12 years of data protection with the right to obtain an additional two years once a further indication for use of the product is approved by the FDA.”  We also understand that a period of 6-month pediatric exclusivity would be available.  Additional reactions to the Eshoo/Barton/Inslee bill are available here (BIO), and here (GPhA).

UPDATE:

• A copy of H.R. 1548 – the Pathway for Biosimilars Act – is available here.

By Kurt R. Karst –      

FDA has issued its highly anticipated decision concerning whether the QI Program Supplemental Funding Act of 2008 (“QI Act”) imposes a 30-month stay of approval of an ANDA referencing an old antibiotic drug product if that ANDA contains a Paragraph IV certification to a patent that was listed in the Orange Book in accordance with § 4(b)(1) of the QI Act.  FDA received four citizen petitions arguing that a 30-month stay should apply – see our previous posts here, here, here, and here.  FDA denied all four citizen petitions in a 20-page response and determined that:

under the QI Act, no 30-month stay of approval will apply to an ANDA referencing an old antibiotic based on the grounds that the ANDA contains a paragraph IV certification to a later-listed patent and the NDA holder or patent owner has sued the ANDA applicant for patent infringement as a result of notice of the paragraph IV certification.  We note that, under current law, a 30-month stay will apply to an ANDA referencing an old antibiotic if that ANDA contains a paragraph IV certification to a patent submitted to the Agency before the ANDA was submitted, and the NDA holder or patent owner sues the ANDA applicant for patent infringement as a result of notice of the paragraph IV certification.

The four citizen petitions raised three general grounds as to why a 30-month stay should apply: (1) the plain language of the QI Act requires application of the 30-month stay provisions of the original Hatch-Waxman Amendments, rather than the version of the statute amended by the Medicare Modernization Act (“MMA”), which limits 30-month stays such that a generic applicant with a pending ANDA that amends its application to add a Paragraph IV certification to a later-listed patent is not subject to a 30-month stay in connection with that certification; (2) the patents at issue should be treated as having been submitted to FDA with the original NDA, thus providing for 30-month stay availability; and (3) the patents at issue should be treated as having been filed in the original ANDA, instead of in an amendment, thus providing for 30-month stay availability.  FDA’s petition response analyzed and dismissed all three bases.

With respect to the applicability of the original Hatch-Waxman Amendments, FDA determined that Congress “did not require FDA to turn back the clock to 1984,” and that such an “outcome is inconsistent with the purpose of the QI Act.”  FDA further explained that:

Upon consideration of the reference in the QI Act to the original 1984 Act in light of additional statutory text, legislative history, and other regulatory considerations, it is apparent that neither this bare statutory reference, nor other statutory considerations require the Agency to apply the original 1984 Act to the ANDAs referencing petitioners’ old antibiotics.  Congress’s reference to the 1984 Act did not impose a 30-month stay of applicants who had already submitted ANDAs when the QI Act was enacted, nor did it create a class of old antibiotic applications that will be subject to long-term differential treatment . . . .  Rather, the reference to “Drug Price Competition and Patent Term Restoration Act of 1984” was a means to identify, as a general matter, the statutory provisions that would apply for the first time to old antibiotics (i.e., those provisions that comprise the generic drug approval program first enacted in 1984).  The term “Drug Price Competition and Patent Term Restoration Act of 1984” is merely a more formal shorthand than the more common reference to “the Hatch-Waxman Amendments.”

FDA similarly dismissed the remaining two bases raised in the petitions.  First, after explaining that “FDA does not interpret the MMA exclusivity provisions to grant 180-day exclusivity only when an ANDA contains a paragraph IV certification to a listed patent on the date the ANDA is originally submitted to FDA,” FDA stated that:

[b]y rendering all applicants with pending ANDAs that timely submit paragraph IV certifications to a listed patent for an old antibiotic “first applicants,” the QI Act effectively treats the applicants’ amendments containing paragraph IV certifications as having been submitted on the first day on which any ANDA applicant submitted a substantially complete application that contains a paragraph IV certification to a patent for the listed drug.  The QI Act does not, however, recalculate the date on which the ANDAs were submitted to FDA.

Second, with respect to the argument that the patents at issue should be treated as having been submitted to FDA with the original NDA, FDA stated that:

This is a tortured reading of a statutory provision that is more reasonably read to mean that patent information of the type required to be filed under 505(b)(1) and (c)(2) is to be submitted to FDA by the identified date. . . .  There is no need to adopt the strained reading proposed by petitioners to give the reference to sections 505(b)(1) and (c)(2) meaning; they already have a reasonable and well established regulatory meaning.

FDA’s petition response also addresses some general arguments that it would be unfair not to apply a 30-month stay.  FDA commented that “[w]hether petitioners consider the legislative choice made in the QI Act regarding 30-month stays as ‘fair’ to their interests is irrelevant.  FDA is implementing the statute based on its interpretation of the plain language, and on the basis of its experience with the complex generic drug approval program as described over the years in the Hatch-Waxman Amendments.”  FDA then goes on to note:

In [the 1997 FDA Modernization Act], Congress expressly enumerated the statutory benefits that would not apply to old antibiotic drugs (section 12S(d)(2)).  And in the QI Act, Congress appears to have made 3- and 5-year exclusivity available only to certain applications for old antibiotics when the application was submitted to FDA after enactment of the QI Act; any NDA for an old antibiotic submitted before the QI Act appears to be ineligible for the exclusivity protections.  Each legislative action reflects particular public policy judgments regarding the appropriate balance of incentives and protections needed to encourage development of antibiotic drugs and the prompt approval of generic drug products.

FDA’s comments might shed some light on the Agency’s possible position on other issues concerning QI Act implementation raised in a letter submitted to FDA earlier this year by the American Intellectual Property Law Association. 

There has been a lot of speculation as to whether or not one or more of the companies on whose behalf the QI Act citizen petitions were submitted will sue FDA in the wake of the Agency’s decision.  Given the storied history of Hatch-Waxman litigation, it would not be surprising if such a lawsuit is filed shortly.  Your loyal and intepid bloggers will continue to update you about this issue.