By William T. Koustas & Carrie S. Martin –

On May 7, 2009, FDA announced that it is requiring both approved testosterone gel products to include boxed warnings on their labels and to implement a REMS.  The two products are indicated for testosterone replacement therapy in men that either have a deficiency or absence of endogenous testosterone.  The products may be applied to the patient’s skin, including upper arms, shoulders, or abdomen.  The current product labels instruct users to wash their hands after using the products as well as covering the treated areas.  

According to the FDA’s announcement, as of December 1, 2008, FDA was aware of eight cases of children developing serious side effects after inadvertent exposure to these products and has since received additional reports of secondary exposure.  The children exposed range in age from nine months to five years.  Children in these cases experienced “inappropriate enlargement of the genitalia, premature development of pubic hair, advanced bone age, increased libido and aggressive behavior.”  In most cases, the symptoms subsided when the children were no longer exposed to the products, but some children did not completely recover and required invasive diagnostic procedures. One child was hospitalized after a delay in recognizing that exposure to testosterone gel was the likely cause of the symptoms.

In response, FDA has used its powers under sections 505(o)(4) and 505-1 of the Food, Drug, and Cosmetic Act (“FDC Act”) to mandate several labeling changes, including a boxed warning, and a REMS in the form of a medication guide.  FDA letters to the manufacturers of the testosterone gels note that they consider adverse event reports and peer-reviewed biomedical literature of children inadvertently affected by the drugs to be “new safety information” under the Food and Drug Administration Amendments Act (“FDAAA”), thus providing the basis necessary for the Agency to require these changes.  The focus of the labeling changes is a boxed warning that highlights the risks of virilization in children and women exposed to the products, warns that children and women should avoid contact with the areas on men using the products and a warning that patients should adhere to the instructions for use that come with the products.  FDA is also requiring testosterone gel manufacturers to submit a proposed REMS consisting of a medication guide in an attempt to mitigate risk of secondary exposure to women and children.

It is interesting to note, however, that the medication guide is intended to mitigate a risk that is not a risk to the patient using testosterone gels, but a risk to other persons not intended to use the product.  Under section 505-1 of the FDC Act, FDA can require a REMS post-approval if the Agency becomes aware of new safety information and determines that the REMS is necessary to ensure that the benefits of the drug outweigh its risks.  Although this language does not explicitly prohibit a REMS that is designed to protect a third-party, one might argue that the law intended that the benefits of the drug outweigh its risks to the patient.  Setting aside REMS for teratogens where the risk is to the fetus, this is the first product to receive a REMS exclusively for a non-patient related risk.  The proposed class-wide opioid REMS also includes measures to protect non-patients from certain risks, but it includes measures to protect patients as well. 

By Michelle L. Butler –

On May 20, 2009, the President signed the Fraud Enforcement and Recovery Act of 2009 (“FERA”), which is purported to be aimed at improving enforcement of fraud, including fraud related to Federal assistance and relief programs.  Among other things, this legislation included substantial amendments to the Federal False Claims Act (“FCA”), 31 U.S.C. §§  3729-3333.

Section 4 of FERA is titled “Clarifications to the False Claims Act to Reflect the Original Intent of the Law.”  These amendments are described by Congress as being primarily directed at closing loopholes made by recent court decisions that have undermined and limited the scope of the law (see, e.g., Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008) (holding that 31 U.S.C. § 3729(a)(2) of the FCA requires the Federal government to prove that a defendant intended the government itself to pay a claim, resulting in no liability under the FCA unless a subcontractor intended to defraud the Federal government, not just the general contractor to whom the subcontractor submits claims for payment from government funds); United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004) (holding that the “presentment clause” limits recovery for frauds committed by a government contractor when the funds are expended by a government grantee).

The most significant changes made by section 4 of FERA relate to when liability attaches.  To address the “presentment clause” issue presented by Totten and other court decisions, FERA deleted from the FCA the “presentment clause” that required direct presentation of a claim to the government in order for liability to attach.  See 31 U.S.C. § 3729(a)(1)(A).  The Senate Report accompanying this legislation identified FCA liability for Medicaid claims as an example of where defendants have argued that the presentment clause precluded liability.  The Report stated that removal of the presentment clause clarifies that “the FCA reaches all false claims submitted to State administered Medicaid programs.”  S. Rep. No. 111-10, at 11 (2009).  To address the issues presented by the decision in Allison Engine, FERA also amended the FCA to remove language that was interpreted by the Supreme Court to require an intent by a subcontractor that its false statement to be used by the prime contractor to get the government to pay the claim.  Specifically, FERA removed the language requiring a person use a false statement “to get” a false claim “paid or approved by the government” and replaced it with a requirement that the false statement be “material to” a false claim.  FERA also amended the definition of a “claim” and added a definition for “material.”  See 31 U.S.C. § 3729(a)(1)(B).

Section 4 of FERA also made changes, among other things, to procedural matters when the government intervenes, including providing that, for statute of limitations purposes, any government pleading (either a complaint or an amendment of the relator’s complaint) relates back to the filing date of the relator’s complaint, to the extent that the government’s claims arise out of the conduct, transactions, or occurrence set forth, or attempted to be set forth, in the prior complaint; civil investigative demands for information relevant to a FCA investigation; and relief for employees, contractors, or agents subject to retaliatory action because of lawful acts done by such employees, contractors, or agents in attempting to stop violations of the FCA.

The amendments to the FCA by FERA take effect on the date of enactment of FERA and apply to conduct on or after such date (May 20, 2009), with certain exceptions.  Specifically, 31 U.S.C § 3729(a)(1)(B) takes effect as if enacted on June 7, 2008 and applies “to all claims under the [FCA] that are pending on or after that date.”  In addition, certain of the procedural changes apply to cases pending on the date of enactment.

By JP Ellison –

In a Memorandum to the heads of Executive Departments and Agencies dated May 20, 2009, with the Subject Line “Preemption” (the “May 20, 2009 Memorandum”), President Obama stated that “executive departments and agencies have sometimes announced that their regulations preempt State law, including State common law, without explicit preemption by the Congress or an otherwise sufficient basis under applicable legal principles.”

The May 20, 2009 Memorandum cross-references Executive Order (“EO”) 13132, which President Clinton issued on August 4, 1999, and the May 20, 2009 Memorandum includes as one of its criteria that an agency or department can only make a preemption statement in regulations when it is consistent with EO 13132 to do so. 

Significantly, the May 20, 2009 Memorandum seems to go beyond EO 13132.  For one thing, unlike EO 13132, the May 20, 2009 Memorandum specifically calls out “state common law” for preemption protection.  EO 13132, which was negotiated with state and local government organizations, did not specifically address common law preemption. 

In addition to compliance with EO 13132, the May 20, 2009 Memorandum also requires that any new regulations must contain preemption provisions in the codified regulations if there are preemptions statements in the preamble.

The May 20, 2009 Memorandum further requires heads of departments and agencies to look back 10 years to determine whether regulations issued in that time frame, “contain statements in regulatory preambles or codified provisions intended by the department or agency to preempt state law.”  Once any such regulations are identified, the departments and agencies are required to “decide whether such statements or provisions are justified under applicable legal provisions governing preemption.”  Other than EO 13132, the May 20, 2009 Memorandum does not identify any guidance for this review.  Finally, the May 20, 2009 instructs heads of departments and agencies to take “appropriate action” if they conclude that existing preemption provisions cannot be justified, “which may include amendment of the relevant regulation.”

It is difficult to predict how may regulations may be affected by the review ordered by the May 20, 2009 Memorandum.  That being said, FDA’s changes being effected (“CBE”) regulation, which was finalized in August 2008 and contains preamble preemption statements, is certainly on the FDA/HHS list of regulations to be reviewed. 

Unlike the FDA regulation at issue in Wyeth v. Levine, the preemptive effect of the CBE regulation was subject to notice and comment rule-making.  While the absence of notice and comment rulemaking seemed to matter to the Supreme Court in Wyeth, the presence of notice and comment rulemaking has not been given much weight by several courts that have considered the preemptive effect of the CBE regulation in connection with private tort suits against drug manufacturers.

It will be interesting to watch how the regulation review process unfolds across departments and agencies and in the courts.  It certainly seems like a significant undertaking.  Moreover, as the Supreme Court recently noted in FCC v. Fox Television Stations, Inc.:

To be sure, the requirement that an agency provide reasoned explanation for its action would ordinarily demand that it display awareness that it is changing position. An agency may not, for example, depart from a prior policy sub silentio or simply disregard rules that are still on the books. See United States v. Nixon, 418 U. S. 683, 696 (1974). And of course the agency must show that there are good reasons for the new policy.

Thus, even when the agencies have completed the process outlined in the May 20, 2009 Memorandum – which could take years – one can imagine court challenges and litigation that could go on even longer.

In the interim, it will also be interesting to see whether the plaintiff’s bar can make use of the President’s statement that there are unspecified federal regulations containing preemption provisions that  lack “sufficient basis under applicable legal principles.”  While the Memorandum states that it “is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person” (emphasis added), it would be surprising if a citation to this Memorandum did not appear in a preemption brief soon. 

By Ricardo Carvajal –  

According to a DOJ press release, a federal judge has handed down a 63-month sentence to a seafood company president convicted of participating in a conspiracy to falsely label a certain type of fish from Vietnam to avoid paying federal tariffs.  The tariffs had been imposed in 2003 after U.S. catfish farmers contended that the Vietnamese fish, known as swai or striped pangasius, were being  imported and sold below market value.  In this case, the importers avoided paying the tariffs by mislabeling the fish as one of several types of more expensive fish, including grouper, flounder, and sole.  The investigation was conducted by agents  from FDA’s Office of Criminal Investigation, the National Oceanic and Atmospheric Administration, and U.S. Immigration and Customs Enforcement.

This case marks just one twist in a long-running battle by domestic catfish farmers to ward off lower priced imports.  In another twist, the 2008 Farm Bill transferred inspectional authority over catfish from FDA to USDA.  Now USDA is considering whether to classify the Vietnamese pangasius as catfish, a seemingly innocuous issue that has significant implications for both sides and has generated some strong opinions.

By Kurt R. Karst –

The Washington Legal Foundation is publishing a Legal Backgrounder authored by Hyman, Phelps & McNamara, P.C., attorneys Robert A. Dormer and Kurt R. Karst.  The article, titled “The Drug User Fee Catch-22,” argues that FDA should be more flexible in receiving and approving ANDAs for drug products whose formulations differ from that of the Reference Listed Drug (“RLD”). 

FDA’s regulations preclude the submission of an ANDA for certain drug product category inactive ingredient changes – so-called “non-exception excipients” – unless the Agency waives such regulations.  Historically, FDA policy limits granting waivers to cases in which an ANDA applicant seeks approval to market a drug product containing a non-exception excipient used in a discontinued, brand name RLD formulation that is not used in the currently-marketed RLD formulation.  As a result, manufacturers unable to obtain a waiver for a non-exception excipient change are effectively forced to submit a 505(b)(2) application.  While under earlier iterations of PDUFA such an application usually would not have qualified as a fee-paying 505(b)(2) application, the changes made to PDUFA under the 2007 FDA Amendments Act (“FDAAA”) require the payment of user fees for all FDC Act § 505(b) applications.  As we state in the article: 

In short, such applicants become the victims of a “Catch-22.”  That is,  FDA’s unnecessarily narrow non-exception excipient policies preclude the submission and approval of an ANDA, which is not subject to PDUFA user fees, and effectively force the submission of a 505(b)(2) application.  Meanwhile, Congress’ decision in passing FDAAA to make all 505(b)(2) applications fee-paying applications means that such applications are subject to user fees, which are quite substantial. . . . 

FDA could avoid a conflict between FDC Act § 505(j)(4)(H) and its exception excipient regulations by interpreting the list of excipients in its regulations as illustrative rather than as exhaustive, or by granting § 314.99(b) waiver requests for non-exception excipients outside of discontinued RLD formulation scenarios, provided there is sufficient information to show that an excipient in a proposed drug product is safe for use.  By doing so, a generic applicant would be able to submit an ANDA, rather that being effectively forced to submit a user fee-paying 505(b)(2) application, and could avoid the Catch-22 Congress created with FDAAA.

We published another WLF Legal Backgrounder in August 2005 discussing the applicability of PDUFA user fees to certain 505(b)(2) applications.  That issue was made moot with the enactment of FDAAA.

By JP Ellison –

Today Attorney General Eric Holder and HHS Secretary Kathleen Sebelius announced the creation of a new interagency effort, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to combat healthcare fraud. Medicare appears to be the primary focus of the initiative, but both Medicare and Medicaid were mentioned in the officials' prepared remarks.

The HEAT initiative builds on existing efforts within each agency.  According to the announcement, HEAT, as its full name suggests, will have both prevention and enforcement aspects.

The announcement also notes that President Obama's budget  for 2010 calls for $311 million to strengthen program integrity activities within the Medicare and Medicaid programs, a 50% increase over 2009 levels.

By David B. Clissold –  

FDA’s meeting guidance “Guidance for Industry: Formal Meetings With Sponsors and Applicants for PDUFA Products” was issued in final form in February 2000.  On May 19, 2009, FDA released Revision 1 to that guidance, now entitled “Guidance for Industry: Formal Meetings Between the FDA and Sponsors or Applicants” (“Revision” or “Guidance”).  The Revision retains the 3 classifications of meetings (Types A, B, and C) and the same scheduling goals (within 30, 60, and 75 days of FDA receipt of a meeting request, respectively).  However, the new Guidance provides some important clarifications and explanations of FDA’s policies and expectations.  For example, as in the 2000 meeting guidance, FDA explained that Type A meetings are designed “to help an otherwise stalled product development program proceed” and FDA provided the same three examples of such meetings (dispute resolution, clinical hold, and special protocol assessment).  Guidance at 2.  However, the Revision clarifies that Type A meetings to discuss a clinical hold are appropriate only after the applicant has submitted a complete response to the hold “but the FDA and the sponsor or applicant agree that the development is stalled and a new path forward should be discussed.”  Id.  In addition, if an applicant is considering submitting a request for a Type A meeting, FDA now advises contacting the review division “to discuss the appropriateness of the request” (Id. at 3) and a Type A meeting request must now include the rationale for the request (Id. at 4).

Meeting requests are generally to be submitted to the sponsor’s application (IND, NDA, or BLA) through the controlled document system.  If there is no application, then meeting requests may be mailed, faxed, or emailed but if faxed or emailed, should only be sent “during official business hours (8:00 a.m. to 4:30 p.m. EST/EDT) Monday through Friday (except Federal government holidays).”  Id. at 4.  For fax and email submissions, FDA urges the submitter to contact the appropriate review division first and arrange for confirmation of receipt of the request since “[p]rocessing and receipt may be delayed for requests where confirmation of receipt has not been pre-arranged.”  Id.  Questions in meeting requests should include “a brief explanation of the context and purpose” of each question.  Id.  The “affiliations” of the individuals attending with the sponsor or applicant should be included in the request.  The applicant or sponsor should now request the format of the meeting (face to face, teleconference, or videoconference).  FDA recognizes that the projected attendees can change and so advises companies to update the list when submitting the information package, and again shortly before the meeting.  Id. at 5.

The most extensive changes to the Revision explain the reasons that FDA may reschedule or cancel a meeting.  A decision to reschedule or cancel a meeting is at the discretion of the review division.  A rescheduled meeting should be arranged “as soon as possible after the original date” and no new meeting request should be submitted.  Id. at 6.  On the other hand, a cancelled meeting needs a new meeting request that is subject to the same time frames as a new request.  Rescheduling may occur if the sponsor or applicant experiences a minor delay in submitting the meeting package, the review team determines that the meeting package is inadequate but that the additional information can be submitted, the information submitted is too “voluminous,” essential attendees are unavailable due to an emergency, the sponsor or applicant submits additional questions or data after the meeting package is submitted, or because FDA attendees not originally anticipated or requested by the sponsor but deemed to be “critical” are not available.  Id. at 6-7.  FDA warns that it may cancel a meeting if the meeting package is late or “grossly inadequate.”  Id. at 6.  In addition, a sponsor or applicant may determine that FDA’s “premeeting responses to its questions are sufficient” and request that a meeting be cancelled.  Id. at 7.  In our experience, this is far and away the most common reason that meetings are cancelled.  FDA’s preliminary responses have proven to be an important communication that at the very least helps to focus the meeting, resulting in a more efficient use of both parties’ time and resources. Although it took some time for all of the review divisions to adopt the practice of sending premeeting responses to a sponsor’s questions, the practice is now practically universal and FDA is to be commended for this effort.  However, the Revision states only that FDA “may” communicate premeeting responses to the sponsor (Id. at 9), and contains a somewhat disturbing qualification to this practice.  If a sponsor requests that a meeting be cancelled because FDA’s premeeting responses are thought to be clear,

[t]he division will consider whether it agrees that the meeting should be cancelled.  Some meetings, particularly milestone meetings, can be valuable because of the broad discussion they generate and the opportunity for the division to ask about relevant matters (e.g., dose-finding, breadth of subject exposure, particular safety concerns), even if the premeeting communications seem sufficient to answer the sponsor’s or applicant’s questions.  If the division agrees that the meeting can be cancelled, the division will document the reason for cancellation and the premeeting communication will represent the final responses and the official record.

Id. at 7. One way to read this qualification is that while the sponsor’s questions must be “precise” and asked far in advance of any meeting, FDA can apparently reserve its blockbuster questions for the meeting itself.  If FDA doesn’t ask the questions before the meeting, the sponsor may not have the appropriate time or personnel available to respond to FDA during the meeting, thus generating another meeting request that is subject to another delay.  We understand that “broad discussion” during a meeting may generate additional questions for both parties, but if FDA has questions about “relevant matters,” it is not clear why such questions can not be asked in advance of the meeting.  Ideally, such questions would be communicated ad hoc throughout the development cycle (e.g., when “particular safety concerns” are first observed).  But even if FDA asked their questions in the context of FDA’s premeeting responses to the sponsor’s questions, that would be far better than if FDA held them until the meeting itself.  Our observation is that such issues usually are raised by FDA no later than the premeeting responses.  Moving away from such a practice would be disastrous for sponsors.

In assembling the meeting package, FDA advises sponsors to consult FDA and ICH guidances, and to consider them in planning and developing the meeting package:

If a product development plan deviates from current guidances, or from current practices, the deviation should be recognized and explained.  Known difficult design and evidence issues should be raised for discussion (e.g., use of a surrogate endpoint, reliance on a single study use of a noninferiority design, adaptive designs).

Id. at 8.  FDA discourages presentations by sponsors or applicants noting that they “generally are not needed because the information necessary for review and discussion should be part of the meeting package.”  Id. at 9.  If a sponsor or applicant nevertheless wants to make a presentation, it should be discussed ahead of time with FDA “to determine if a presentation is warranted."  Id.

The Revision draws on FDA’s experience in conducting meetings over the last several years.  FDA’s expectations are more clearly described and the consequences for not meeting those expectations are highlighted.  FDA’s minutes of a meeting are the “official record” of decisions following what may have been a series of conversations and negotiations with the agency.  Thus, companies need to be familiar with the policies and procedures that lead to the creation of those minutes.

By JP Ellison – 

On May 18, 2009 the U.S. Department of Justice and sixteen states announced that they had intervened in whistleblower (qui tam) lawsuits pending in federal district court in Massachusetts against  drug manufacturer Wyeth, alleging false claims act violations under federal and state law.  A Wyeth spokesperson insists that the company has done nothing wrong and will vigorously defend against the allegations. 

The cases concern Wyeth’s acid-reflux drug Protonix (pantoprazole sodium).  According to the allegations made by the government, Wyeth “bundled” IV and oral versions of its drug Protonix, and sold both versions to hospitals at a substantial discount, but only if both versions of the drug were placed on the hospital formularies and certain market share requirements were met.  According to the government, Wyeth’s motivation for bundling the drugs was to get hospitals to use the IV version on its inpatients, so that they would continue with the oral version of the drug as outpatients.  The government alleges that the outpatient market was much more lucrative than the inpatient market.

Under Medicaid law, and the Medicaid rebate agreement, a brand name drug manufacturer is required to report its “best price” to the federal government.  The federal government then uses that pricing information to calculate a rebate that drug manufacturers must pay to each state Medicaid program.  The government alleges that Wyeth failed to properly calculate best price, and as a result underpaid Medicaid rebates to the states.  The government’s theory is that in reporting its best price, Wyeth improperly excluded as “nominal” the discounted sales price for the oral version of the drug, knowing that the discounted sales price was contingent on bundled sales, and therefore not properly excluded.

The government’s intervention in these lawsuits indicates that it  believes it can prove that Wyeth acted with the requisite intent to prove false claims act violations.

According to the allegations, Wyeth engaged in this conduct between 2000 and 2006.  Congress, in the Deficit Reduction Act of 2005, and the Centers for Medicare and Medicaid Services (“CMS”) in implementing regulations that were finalized in 2007, modified or clarified various aspects of best price reporting, including but not limited to bundling.  

It is unclear whether the 2000-2006 timeframe for the allegations is a function of the statute of limitations for these causes of action, changes in the laws and regulations, or some combination of both.

In any event, according to press reports, the expectation is that Wyeth will resolve these cases before Pfizer takes over Wyeth later this year.

By JP Ellison –

We previously reported on the President’s FOIA Memorandum and the Attorney General’s FOIA Guidelines encouraging discretionary disclosure.  Today, the D.C. Circuit handed the Administration a FOIA win that shows the importance of such discretionary disclosures, given FOIA’s exemptions. 

In CREW v. Office of Administration, the court ruled that the Office of Administration (“OA”) within the White House, was not subject to FOIA because “it performs only operational and administrative tasks in support of the President and his staff and therefore, under our precedent, lacks substantial independent authority,” and thus is exempt from FOIA.

According to the plaintiff, historically OA had complied with FOIA requests until some point in the prior Administration.  The court found it legally irrelevant what OA had done in the past, stating “past views have no bearing on the legal issue whether a unit is, in fact, an agency subject to FOIA.”

Perhaps more interesting than the decision concerning OA itself is the listing of entities that have been found to be FOIA exempt historically, including the Council of Economic Advisors, the National Security Council, and President Reagan’s Task Force on Regulatory Relief.  All of those entities were found to be FOIA exempt because they did not have a substantive role separate from advising the President.

Given the FOIA precedent, it would seem that the Administration could argue that the newly created White House Office of Health Reform is FOIA exempt.  In addition to health reform, the Administration has tapped “czars” for energy and urban affairs, which similarly could be FOIA exempt. 

It will be interesting to follow the position of the Administration with respect to FOIA’s application to these entities.  It will be similarly interesting to see whether the Administration elects to make discretionary disclosures from these and similar entities regardless of its legal position.

By Kurt R. Karst –      

On May 18th, the U.S. Senate confirmed (by voice vote) President Obama’s pick to head FDA – Dr. Margaret Hamburg.  Among other things, Dr. Hamburg has worked extensively on bioterrorism issues.  For six years in the 1990s, Dr. Hamburg served as the New York City Commissioner of Health.  Beginning in 1997, she served as Assistant Secretary for Planning and Evaluation at the United States Department of Health and Human Services.  Immediately prior to her new position as FDA Commissioner, Dr. Hamburg was a senior scientist at the Nuclear Threat Initiative, a Washington-based foundation that focused on nuclear, biological and chemical weapons.  Dr. Hamburg, who is the 21st FDA Commissioner and only the second woman to hold the position (see the wall of FDA Commissioners here), has a full plate of issues to deal with.

 By Alan M. Kirschenbaum – 

The Senate Finance Committee released a white paper today outlining policy options that the Committee is considering to offset the cost of upcoming health care reform legislation.  The proposed options include lifestyle taxes (e.g., alcohol excise taxes), reductions in subsidies and incentives related to health care (e.g., repealing the itemized deduction for medical expenses), and, of course, direct savings within Medicare and Medicaid.  Among the latter are three proposed changes to the Medicaid Drug Rebate Program:

• Increasing the base Medicaid rebate for innovator drugs from 15.1 to as much as 23.1 percent of AMP, with best price provisions remaining unchanged.

• Increasing the basic Medicaid rebate for non-innovator multiple source drugs from 11 to 13 percent of AMP.

• Requiring Medicaid rebates to be paid on drugs dispensed to enrollees in Medicaid managed care organizations.  These drugs are currently exempt from the Medicaid rebate requirement.

• Applying the baseline AMP of the original product to line extensions for purposes of calculating the so-called “additional rebate” for innovator drugs.  The additional rebate penalizes price increases exceeding the rate of inflation, compared against a baseline AMP for the first full quarter after launch.  Currently, new dosages or formulations are considered new products with new baseline AMPs separate from those of the original product.  This permits companies to escape the low initial pricing of the original product and reset the baseline AMP when calculating the additional rebate.  The Committee proposes that, “when a new, extended release version of an existing drug is introduced,” the additional discount would be calculated using the baseline AMP of the original drug or the new drug, whichever would result in a larger amount.  It is unclear whether the new proposal would apply to changes other than new extended-release formulations (for example, other formulation changes).

These Medicaid Rebate proposals first appeared in the Obama Administration’s FY 2010 budget outline, which we reported on previously.  The Finance Committee is also considering options to improve payment accuracy for items and services of durable medical equipment (DME), and a variety of payment reforms for other Medicare and Medicaid services.

By Kurt R. Karst & Frank J. Sasinowski –      

Earlier this week, we posted on a recent district court decision affirming the validity of a Patent Term Extension (“PTE”) for a patent covering an enantiomer of a previously approved racemate.  The court’s decision relied heavily on previous FDA and U.S. Patent and Trademark Office (“PTO”) PTE decisions concerning patents covering an enantiomer of a previously approved racemate.  In each case, FDA determined that the approval of the enantiomer NDA represented the first permitted commercial marketing or use of the product.  That is, FDA determined for PTE qualification purposes that a particular enantiomer drug product approval represented the first approval of that active ingredient.  We noted in the post, however, that:

Notwithstanding previous enantiomer patent PTE decisions, . . . FDA has for decades treated single enantiomers of approved racemates as previously approved drugs not eligible for five-year new chemical entity exclusivity (but eligible for three-year new clinical investigation exclusivity).  For example, FDA stated in the preamble to its 1989 proposed regulations implementing the Hatch-Waxman Amendments that “FDA will consider whether a drug contains a previously approved active moiety on a case-by-case basis.  FDA notes that a single enantiomer of a previously approved racemate contains a previously approved active moiety and is therefore not considered a new chemical entity.” 

Another part of FDA – the Office of Orphan Products Development (“OOPD”) – has weighed in (albeit informally) on the issue of the “newness” of an enantiomer in a previously approved racemate.  And that Office’s policy appears to be consistent with FDA’s enantiomer non-patent market exclusivity policy. 

FDA’s March 2008 approval of Spectrum Pharmaceuticals, Inc.’s (“Spectrum’s”) FUSILEV (levoleucovorin) and decision to grant a period of seven-year orphan drug exclusivity appears to offer some indication of a counterpoint to the Agency’s first permitted commercial marketing or use determinations for PTE purposes.  FUSILEV is comprised of the pharmacologically active enantiomer of leucovorin, which FDA initially approved as a new molecular entity in June 1952 under NDA No. 8-107. 

According to FDA’s Orphan Drug Designation and Approval List, the Agency designated and approved Spectrum’s levoleucovorin as an orphan drug on August 1, 1991 and March 7, 2008, respectively, for “use in conjunction with high-dose methotrexate in the treatment of osteosarcoma.”  (The actual approval was for “rescue after high-dose methotrexate therapy in osteosarcoma and to diminish the toxicity and counteract the effects of impaired methotrexate elimination and of inadvertent overdosage of folic acid antagonists.”)  These decisions were made notwithstanding FDA’s earlier designation and approval of leucovorin as an orphan drug for “rescue use after high dose methotrexate therapy in the treatment of osteosarcoma.”

Under the Orphan Drug Act (“ODA”) and FDA’s implementing regulations at 21 C.F.R. Part 316, marketing an orphan drug in the United States is a two-step process.  First, a company must obtain orphan drug designation from FDA.  In the case where a drug sponsor requests orphan drug designation for a drug that is otherwise the same drug as an approved orphan drug, and is intended for the same orphan indication as the approved orphan drug, FDA’s regulations state that the drug sponsor must include in its request for orphan drug designation “a plausible hypothesis that its drug may be clinically superior to the first drug.”  Second, a company must obtain FDA’s approval of a marketing application to market the product for the orphan condition.
  
Once FDA approves a marketing application for a designated drug, the Agency may not approve another company’s version of the “same drug” for the same disease or condition for seven years, unless the subsequent drug is different from the approved orphan drug,  or because the sponsor of the first approved product either cannot assure the availability of sufficient quantities of the drug or consents to the approval of other applications.  A drug is different from an approved orphan drug if it is either demonstrated to be chemically or structurally distinct from an approved orphan drug, or “clinically superior” to the approved orphan drug. 

The degree of chemical or structural similarity that allows FDA to determine whether two drugs are “the same” depends on whether the drugs are small molecules or macromolecules.  In the case of small molecules, “the same” means the identical chemical structure.  FDA’s orphan drug regulations define a “clinically superior” drug as “a drug . . . shown to provide a significant therapeutic advantage over and above that provided by an approved orphan drug (that is otherwise the same drug)” in one of three ways:
 
(1) greater effectiveness as assessed by effect on a clinically meaningful endpoint in adequate and well controlled trials;
(2) greater safety in a substantial portion of the target populations; or
(3) demonstration that the drug makes a major contribution to patient care.

FDA’s decision to designate Spectrum’s levoleucovorin as an orphan drug occurred prior to the promulgation of FDA’s orphan drug regulations in December 1992, and therefore, does not provide any insight into enantiomer/racemate “sameness” orphan drug issues.  (We understand that FDA is in the process of drafting revised orphan drug regulations.)  FDA’s 2008 approval decision and grant of orphan drug exclusivity, however, could have, under certain circumstances, involved an FDA “sameness” analysis if FDA considered an enantiomer in a previously approved racemate to be the “same drug” for orphan drug purposes.  And, indeed, it is our understanding, based on informal interactions with FDA, that the Agency’s current interpretation of the ODA and its implementing regulations is that an enantiomer in a previously approved racemate that is intended for the same orphan disease or condition as the previously approved racemate is the “same drug” and that clinical superiority must be shown to obtain orphan drug exclusivity (and a plausible hypothesis of clinical superiority provided to obtain orphan drug designation).  In other words, FDA (or at least OOPD), for orphan drug purposes, apparently considers a particular enantiomer contained in a previously approved racemate the “same drug” as a previously approved drug, which triggers the need for a clinical superiority showing. 

If FDA does, in fact, consider an enantiomer contained in a previously approved racemate as the “same drug” as a previously approved drug for orphan drug purposes, then such treatment is consistent with the Agency’s treatment of an enantiomer in a previously approved racemate as a “previously approved active moiety [that is] not considered a new chemical entity” eligible for five-year exclusivity under the Hatch-Waxman Amendments.  This policy is, in turn, consistent with FDA’s Policy Statement for the Development of New Stereoisomeric Drugs, which states that most stereoisomers should “be treated as separate drugs and developed accordingly,” and that “[w]here both enantiomers are fortuitously found to carry desirable but different properties, development of a mixture of the two, not necessarily the racemate, as a fixed combination might be reasonable.”  That makes FDA’s first permitted commercial marketing or use determinations for PTE purposes an outlier.  FDA has never, to our knowledge, explained the apparent discrepancy.

By William T. Koustas, Dara Katcher Levy, and John R. Fleder –

On April 28, 2009, Smoking Everywhere, Inc. (“SE”) sued FDA to “stop FDA from improperly exceeding its delegated authority by attempting to regulate electronic cigarettes” to the extent that FDA declared such products to be a new drug and/or new drug device combination.  (A copy of the complaint is available here.)  SE further alleges that FDA exceeded its statutory authority by adding SE’s products to an FDA Import Alert list, thus allegedly preventing their admittance into the United States.  In addition to the complaint, SE filed a temporary restraining order and preliminary injunction Motion.  According to SE, an electronic cigarette essentially permits the user to inhale vaporized nicotine without smoke, tar or “cancerous by-products” normally produced with a cigarette.  They do not claim it as a smoking cessation aid, but rather as an alternative to smoking cigarettes.  FDA added electronic cigarettes to Import Alert 66-41 in early 2009.

SE argues that FDA exceeded its authority in a March 2009 Notice of Action to SE which stated that electronic cigarettes are combination drug/device products that require FDA approval.  SE submits that Congress has clearly indicated that FDA does not have the authority to regulate the non-therapeutic use of nicotine or its delivery systems.  FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000).  SE further contends that FDA lacks the authority to regulate electronic cigarettes because nicotine is not a drug.

On May 11, 2009, FDA filed a brief in opposition to SE’s Motion.  FDA contends that electronic cigarettes are indeed both a drug and a device, and that Brown & Williamson does not exempt them from FDA’s jurisdiction.  FDA argues that it has scientifically determined that nicotine has a psychoactive effect on the brain in such a way as to cause addiction as well as other physical issues.  Additionally, FDA argues that some of SE’s promotional materials demonstrate that electronic cigarettes are intended to “prevent, treat, or mitigate the withdrawal symptoms of nicotine addiction,” specifically because SE claimed their product was a “healthier way” to consume nicotine.

FDA also disputes SE’s claim that Brown & Williamson precludes FDA regulation of nicotine products in general, asserting that the Court based its determination that FDA lacks authority to regulate tobacco products because other laws set out a different statutory scheme for regulation of those products (i.e., Federal Cigarette Labeling and Advertising Act and the Comprehensive Smokeless Tobacco Health Education Act).  However, FDA notes, electronic cigarettes are not traditional tobacco products as defined under those other laws, thus making Brown & Williamson inapplicable to electronic cigarettes.

SE also argues that the inclusion of electronic cigarettes on Import Alert 66-41 is tantamount to a substantive rule, which required FDA to first use notice and comment rulemaking.  In support, SE cites Bellarno Int’l Ltd. v. FDA, 678 F. Supp. 410 (E.D.N.Y. 1998) and Benten v. Kessler, 799 F. Supp. 281 (E.D.N.Y. 1992).  Bellarno held that FDA violated the Administrative Procedure Act by issuing an Import Alert that left no enforcement discretion, thus making it a “substantive rule of general applicability…rather than a discretionary general statement of policy.”  Benten also determined that an Import Alert issued by FDA was a substantive rule requiring notice and comment rulemaking because it was essentially a binding pronouncement that left no room for enforcement discretion.

In its opposition brief, FDA distinguishes Import Alert 66-41 from the Import Alert at issue in Bellarno, asserting that the language used in Import Alert 66-41 permits districts to use their discretion when determining whether a product subject to the alert should be detained.  FDA cites the language in the Bellarno import alert, “automatically” and “shall,” as creating a detention requirement, while the phrase “districts may detain . . .” from Import Alert 66-41 as allowing for district discretion.

This parsing of words by FDA, as a practical matter, does not reflect the way that FDA personnel treats Import Alerts.  In reality, FDA districts do not look at Import Alerts as mere “advice” that may or may not be followed based on district discretion.  The concept of district discretion contradicts FDA’s stated reasons for the creation of the Import Alert system.  In chapter 9-13 of its Regulatory Procedures Manual, FDA states that prior to the implementation of the Import Alert system, “coverage of imported products was often conducted on a district-by-district basis, resulting in less effective consumer protection.”  In practice FDA relies upon the Import Alert system to identify problem commodities and/or shippers and/or importers and provide something more than mere “guidance” – something that results in more uniform enforcement actions against the specified products/shippers/importers mentioned in the alert.

By Wes Siegner & Ricardo Carvajal –      

FDA has issued a warning letter to General Mills in which the agency alleges “serious violations” of the FDC Act in the label and labeling of Cheerios cereal.  Specifically, FDA contends that the following label claims make Cheerios an unapproved new drug under FDC Act § 505(a) because they indicate that the cereal is intended to prevent, mitigate, and treat hypercholesterolemia:

• "you can Lower Your Cholesterol 4% in 6 weeks" 
• "Did you know that in just 6 weeks Cheerios can reduce bad cholesterol by an average of 4 percent? Cheerios is … clinically proven to lower cholesterol. A clinical study showed that eating two 1 1/2 cup servings daily of Cheerios cereal reduced bad cholesterol when eaten as part of a diet low in saturated fat and cholesterol."

Based on its view that a website constitutes labeling if the website address appears on a product label, FDA further asserts that Cheerios is misbranded under FDC Act § 403(r)(1)(B) because the website includes unauthorized health claims.  According to FDA, the claims featured on the website differ from relevant authorized claims “in significant ways,” such that they do not “enable the public to understand the significance of the claim in the context of the total daily diet,” among other flaws.  The labeling claims at issue are:

• Heart-healthy diets rich in whole grain foods, can reduce the risk of heart disease.
• Including whole grain as part of a healthy diet may … [h]elp reduce the risk of certain types of cancers. Regular consumption of whole grains as part of, a low-fat diet reduces the risk for some cancers, especially cancers of the stomach and colon.

Of late, FDA has devoted few resources to the policing of label and labeling claims made for conventional foods, and it is clear that, as a result, some companies have taken advantage of the lack of enforcment.  However, FDA's choice of target in this case is questionable, as the claims to which FDA has objected appear consistent with information that FDA has included in the health claim regulation concerning the relationship of cholesterol levels to coronary heart disease risk, and FDA's regulation specifically states that information from the section of the regulation that contains this information may be included in the health claim.  Therefore, General Mills could argue that the claims that FDA identifies as violative are the types of claims FDA has authorized under the applicable health claim regulation.

Nonetheless, the issuance of this warning letter against a high profile target suggests that FDA is trying to get a message across to the food industry and should prompt food companies to undertake a review of their existing marketing materials to ensure that they are not similarly vulnerable.  Any such review should include advertising, given the National Advertising Division’s traditional deference to FDA’s interpretation of its requirements.

By Ricardo Carvajal –      

On May 11, FDA announced the condemnation and forfeiture of $1.3 million worth of dietary supplements marketed to body builders because the supplements contain “one or more unapproved food additives and/or new dietary ingredients for which there is inadequate information to assure that they do not present a significant or unreasonable risk of illness or injury.”  The former would constitute a violation of FDC Act § 402(a)(2)(C)(i) and the latter a violation of section 402(f)(1)(B).  Laboratory tests revealed that the products contained one or more of the steroids 1,4,6-androstatriene-3,17-dione (or “ATD” or 1,4,6-etioallocholan-dione) and 3,6,17-androstenetrione (or “6-OXO”), which are promoted as testosterone boosters.  FDA does not contend that the products present a hazard; the agency contends only that it “has no scientific information concerning the safety of the condemned products or their ingredients.”  FDA recommends that consumers discuss their use of the supplements and any related adverse events with health care professionals.

With the exception of a flurry of warning letters issued to marketers of androstenedione supplements in 2004, FDA has made little use of its authority under FDC Act § 402(f)(1)(B).  We’ll soon know whether this latest action is part of a similarly targeted effort, or is the first sign of a broader intent to get tough on new dietary ingredients that the agency considers unsafe within the meaning of the FDC Act.