A recent Federal Trade Commission (“FTC”) action serves as a reminder that the agency takes seriously cases referred to it by the National Advertising Division of the Council of the Better Business Bureaus (“NAD”).  In a press release issued earlier this week, the FTC announced that a federal court ordered North American Herb and Spice Co. to pay $2.5 million to settle civil charges brought by the agency, after the NAD alerted the FTC to certain claims that had been made by the company.

The FTC complaint alleged that North American Herb and Spice falsely claimed that its products, Oreganol P73, Super Strength Oreganol P73, and Oregacyn, are “scientifically proven to cure colds and flu.”  In addition, advertisements for the products claimed that they would kill germs, including human cold and flu viruses, avian bird flu, hepatitis C, staph aureus, and Helicobacter pylori. 

The NAD had challenged the claims in July 2007, but the company reportedly never responded to the challenge or provided substantiation for its claims.  The NAD then referred the matter to the FTC.  As a result of the FTC lawsuit, the company agreed to a stipulated final judgment and order for permanent injunction that was entered in the federal court in Chicago.  The FTC’s press release declared that the defendants’ claims “were false and unsubstantiated in violation of federal law.”  The company agreed to pay the $2.5 million in settlement, and was enjoined by the court from making any similar claims without “competent and reliable evidence that substantiates the representation.” 

The NAD, which has a small staff of lawyers who review advertising based on their own routine scrutiny or on challenges by competitors, generally relies on voluntary compliance with its decisions.  However, if the advertiser does not comply, the NAD often refers the matter to the FDA or the FTC.  The FTC in particular has given special attention to matters that come from the NAD.  This action serves as a reminder that, although the NAD lacks the statutory authority of the FTC or FDA, its inquiries are not without consequences and should be taken seriously.   

By Susan J. Matthees

Now that FDA has set the Fiscal Year 2009 Prescription Drug User Fee Act (“PDUFA”) user fee rates and is preparing invoices for delivery (payable by October 1, 2008), a quick review of the options available to companies to request user fee waivers and reductions seems in order. 

Under PDUFA, FDA collects three types of user fees for a drug product that is the subject of a “human drug application” (i.e., a new drug approved under FDC Act § 505 and a biological product licensed under PHS Act § 351): (1) a one-time application fee that must be paid in order for FDA to accept an application for filing; (2) an annual establishment fee for “each prescription drug establishment listed in [an] approved human drug application as an establishment that manufactures the prescription drug product named in the application;” and (3) an annual product fee for each drug listed in FDA’s Orange Book (i.e., the active section of the Orange Book and not the Discontinued Drug Product List) that is the subject of an approved human drug application.  There are several exceptions under PDUFA that could preclude the assessment of user fees.

For those companies that are subject to user fees – and in particular annual product and establishment fees – FDC Act § 736(d) provides a few mechanisms to offer relief.  Specifically, a company can request FDA to waive or reduce user fees under: (1) the “public health” mechanism; (2) the “barrier to innovation” mechanism; and (3) the “fees-exceed-the-costs” mechanism.  In addition, a firm that qualifies as a “small business” (i.e., 500 or fewer employees, including employees of affiliates) and that does not have a drug product approved and marketed pursuant to a human drug application may request FDA to waive the application fee for its first human drug application.  Please note, however, that to qualify for consideration of a waiver or reduction of fees, an applicant must submit a written request to FDA no later than 180 days after the fee is due.

Under the public health mechanism (FDC Act § 736(d)(1)(A)), FDA can waive or reduce user fees if the Agency finds that “such waiver or reduction is necessary to protect the public health.”  FDA explained in what is now a sorely out of date July 1993 guidance document that a “public health” waiver/reduction may be appropriate when: (1) the product protects the public health; and (2) the person requesting the waiver shows that a waiver is necessary to continue an activity that protects the public health. 

Under the barrier to innovation mechanism (FDC Act § 736(d)(1)(B)), FDA can waive or reduce user fees if the Agency finds that “the assessment of the fee would present a significant barrier to innovation because of limited resources available to such person or other circumstances.”  FDA’s 1993 guidance document explains that a “barrier to innovation” waiver/reduction may be appropriate when: (1) the product for which the waiver/reduction is being requested is innovative, or the entity requesting the waiver/reduction is otherwise pursuing innovative drug products or technology; and (2) the fee would be a significant barrier to the entity’s ability to develop, manufacture, or market innovative products or technology. 

In addition to these criteria, FDA also considers other factors in determining whether either a “public health” or “barrier to innovation” waiver/reduction should be granted.  These factors include the size and annual gross revenues of a business, whether a human drug application is for a new chemical entity, or has priority review status or fast track status, and, for a barrier to innovation waiver/reduction, special circumstances subject to FDA’s discretion. FDA has interpreted the financial test to mean a company with $10 million in foreign and domestic annual gross revenues and no corporate parent or funding source with annual gross revenues of $100 million or more (in 1993 dollars).

The fees-exceed-the-costs mechanism (FDC Act § 736(d)(1)(C)) involves a complicated calculation used by FDA to determine whether the total fees paid by an applicant since the enactment of PDUFA in 1992 exceed the Agency’s total costs in reviewing all submissions to the Agency by the applicant since that time.  FDA’s fees-exceed-the-costs guidance document and accompanying standard costs chart provide additional information on this mechanism.  While this mechanism is not often used (because many applicants are continually submitting applications to FDA and the Agency’s costs usually exceed the fees paid), it has been successfully used by companies with a small number of FDA submissions approved several years ago that are still subject to annual user fees.  Thus, for such companies, FDA’s costs remain static while the total amount of fees paid by the company continues to grow, eventually leading to an overage. 

The FDA Amendments Act (“FDAAA”) introduced a new user fee exemption applicable to orphan drugs.  As we previously reported, sponsors of orphan drugs have been exempt from paying the application user fee since the enactment of PDUFA II in 1997, but have not been exempt from paying annual product and establishment fees.  With the enactment of PDUFA IV under FDAAA, however, the law was amended to add new FDC Act § 736(k) to exempt orphan drugs from annual product and establishment fees.  Specifically, an approved drug designated as an orphan drug is exempt from product and establishment fees if: (1) “[t]he drug meets the public health requirements contained in [FDC Act § 736(d)(1)(A)] as such requirements are applied to requests for waivers for product and establishment fees;” and (2) “[t]he drug is owned or licensed and is marketed by a company that had less than $50,000,000 in gross worldwide revenue during the previous year,” and provided a certification to this effect is submitted to FDA. 

By Kurt R. Karst

Massachusetts has now joined California and Nevada in imposing marketing compliance obligations on drug and device companies marketing products in the state.  On Sunday, August 10th, Massachusetts Governor Deval Patrick signed into law Senate Bill 2863, which requires the Massachusetts Department of Public Health (DPH or Department) to establish a pharmaceutical and medical device marketing code of conduct, and imposes compliance and reporting requirements on pharmaceutical and medical device companies that employ a person to sell or market prescription drugs or medical devices in Massachusetts.  The law will become effective on January 1, 2009.  It does not apply to wholesale drug distributors or retail pharmacies.

The law requires the DPH to establish a marketing code of conduct that is no less restrictive than the most recent versions of the Codes on Interactions with Healthcare Professionals issued by the Pharmaceutical Research and Manufacturers of America (the PhRMA Code) and the Advanced Medical Technology Association (the AdvaMed Code).  As we reported in June, the PhRMA Code was recently revised to add more stringent restrictions on meals, gifts, and other drug marketing activities.

Under the statute, the DPH marketing code must contain specific prohibitions, some of which are more restrictive than the revised PhRMA Code.  For instance, the DPH marketing code may not allow a pharmaceutical or device manufacturing company to provide meals that are part of a recreational event, offered without an informational presentation, consumed outside of the office, or for a practitioner’s spouse or other guest.  The PhRMA Code, in contrast, permits a drug company to provide meals outside the professional’s office if they are not provided by field representatives or their immediate managers.  The DPH code must also prohibit the sponsorship of independent medical education programs that do not meet the Accreditation Council for Continuing Medical Education (ACCME) Standards for Commercial Support, whereas the PhRMA Code permits support for non-ACCME accredited third-party programs.  The DPH code must, like the PhRMA Code, prohibit the provision of entertainment or recreation.  In addition, the Code must prohibit all payments to healthcare practitioners, except as compensation for bona fide services.  This latter provision is drafted broadly enough to prohibit rebates and other price reductions offered after a purchase.  Hopefully, the DPH will clarify that price reductions are not affected by the code.

The law also spells out certain activities that must be permitted under the marketing code.  The code must allow companies to distribute peer reviewed scientific information; purchase advertising in peer reviewed scientific journals; provide pharmaceuticals exclusively for use by the practitioner’s patients; compensate a practitioner for consulting services in connection wth genuine research or a clinical trial; and pay reasonable expenses in connection with medical device training if those expenses are part of the purchase contract.

The law does not impose a deadline for the development of the marketing code, but once it is established, the DPH must update it at least every two years.

Under the new law, drug and device companies that employ a person to sell or market a prescription drug or medical device in Massachusetts must adopt and comply with the DPH’s most recent marketing code of conduct; adopt a training program for compliance with the code; conduct annual audits to monitor compliance with the code; and adopt policies and procedures for investigating noncompliance with the code.  In addition, these companies must take corrective action in response to noncompliance with the code, and report any noncompliance to state authorities.

The law also requires covered drug and device companies to provide two annual reports to the Department.  The first report will include a description of the company’s training program, a description of the investigation policies, information on the compliance officer, and a certification that the company has conducted its annual audit and is in compliance with the DPH marketing code.  The annual deadline for this report is not specified.

Second, by July 1 every year, a covered drug or device company must also report the “value, nature, purpose and particular recipient” of any payment, fee, or economic benefit of at least $50 it provided to a physician, hospital, nursing home, pharmacist, or other specified healthcare practitioner.  The Department will then make such information available on its website.  Notably, unlike the reporting laws of other states, there are no exceptions to this reporting obligation for bona fide service fees, investigator payments, or any other payments.

The law, which will be enforced by the Attorney General, provides for a fine of up to $5,000 for each transaction, occurrence, or event that violates this law.

By Bryon F. Powell & Alan M. Kirschenbaum

The latest FDLI Update article by Hyman, Phelps & McNamara, P.C.’ s Gwendolyn M. McKee and John R. Fleder discusses the potential consequences to company executives and companies of submitting false information to a government agency, even when the submission is not made under oath.  The article discusses the recent indictment of a former high ranking officer of Bristol-Myers Squibb for information allegedly omitted in a certification to the Federal Trade Commission (“FTC”).  The article also discusses the FTC’s enforcement efforts involving marketing agreements between brand name and generic pharmaceutical manufacturers.

On September 8, FDA will hold a public meeting to receive data and other information on the effects of nanoscale materials on quality, safety, and effectiveness of FDA-regulated products.  FDA will consider the information that it receives in its development of guidance that addresses: (1) the data required to demonstrate safety and effectiveness of a product that contains nanoscale materials; and (2) the circumstances under which the use of nanoscale materials might change the regulatory status of a product.  There will be breakout sessions that will address different product categories, including medical devices, prescription drugs, food and color additives, dietary supplements, and cosmetics.

The issues to be addressed in the breakout sessions include: (1) characteristics of materials to be identified and evaluated; (2) availability of tools to assess characteristics of nanoscale materials that could affect safety, effectiveness, and quality; (3) whether the manufacturing processes for nanoscale materials have unique features that merit evaluation; (4) whether there are aspects of formulation, processing, or storage that affect quality, safety, or effectiveness of products that contain nanoscale materials; (5) experience with, avoidance of, and concerns about products containing nanoscale materials; and (6) whether FDA should consider additional questions regarding characterization and manufacture of products containing nanoscale materials.

FDA also is requesting data that: (1) identify Over-the-Counter (“OTC”) drug products that contain nanoscale versions of ingredients in an OTC drug monograph; (2) identify nanoscale versions of food and color additives; (3) address the safety and effectiveness of both new FDA-regulated products and those that are reformulated to contain, or increase the content of, nanoscale materials; (4) address the effects of nanoscale versions of materials on bioavailability; and (5) address the effects of nanoscale materials on the manufacturing process for FDA-regulated products.

The importance of submitting comments to FDA as the Agency works to implement the recommendations in the 2007 Nanotechnology Task Force Report and sets a course for the future regulation of nanotechnology can hardly be overstated.  Comments can be submitted to Docket No. FDA-2008-N-0416. 

By Ricardo Carvajal

ADDITIONAL READING:

• April 17, 2008 FDA Law Blog post

• August 1, 2007 FDA Law Blog Post

In the coming days, President Bush is expected to sign into law H.R. 6432 – the Animal Drug User Fee Amendments of 2008.  The new law reauthorizes and amends the Animal Drug User Fee Act (“ADUFA”) through Fiscal Year (“FY”) 2013, creates a new law for generic animal drug user fees (the Animal Generic Drug User Fee Act of 2008), and makes a couple of technical changes to the FDA Amendments Act (“FDAAA”), which was enacted in September 2007. 

ADUFA was first enacted in 2003 (Pub. L. No. 108-130).  Like its human drug counterpart, the Prescription Drug User Fee Act (“PDUFA”), ADUFA authorizes FDA to collect user fees to enhance the performance of the drug review process and ensure that new drugs are safe and effective. Under both laws, FDA has agreed to certain performance goals to review and act on applications. While human drug products under PDUFA are subject to three types of fees (application, establishment, and product fees), animal drug products approved under ADUFA are subject to four types of fees – application, product, establishment, and sponsor fees.  FDA’s ADUFA website provides additional information on the law.

The House Report accompanying H.R. 6432 details the changes made to ADUFA I by ADUFA II.  Among other things, the new law requires animal drug sponsors to submit annual reports to FDA on certain products containing antimicrobial active ingredients, and requires FDA to make summaries of the reports publicly available.  The information is intended to support FDA’s continuing efforts to address antimicrobial resistance.

Unlike PDUFA, which does not cover human generic drug products approved under Abbreviated NDAs (“ANDAs”), H.R. 6432 establishes a generic animal drug user fee system under the Animal Generic Drug User Fee Act of 2008 (“AGDUFA”).  Under AGDUFA, generic animal drug applicants are subject to three types of fees – application, product, and sponsor fees.  The enactment of AGDUFA will fulfill the Bush Administration’s FY2009 budget proposal to create such a law.  It is possible that the creation of a user fee system for generic animal drugs might lead to the creation of such a system for generic human drugs.  Indeed, the Bush Administration’s FY2008 and FY2009 budget proposals recommended the creation of generic human drug user fees.  While it is unlikely that a generic human drug user fee system will be proposed in Congress this year, it could happen once the 111th Congress convenes in January 2009.

In addition to handling animal drug user fees, H.R. 6432 makes a few technical corrections to FDAAA.  FDAAA added FDC Act § 505(q) concerning certain types of citizen petitions that could delay generic competition.  H.R. 6432 clarifies that “[c]onsideration of the petition shall be separate and apart from review and approval of any application.”  FDA has been criticized for its implementation of FDC Act § 505(q), and, in particular for not decoupling ANDA approval from responding to an applicable petition that could delay generic competition.  Despite this criticism, FDA has in at least one post-FDAAA instance decoupled ANDA approval and petition response.  Specifically, FDA approved ANDAs for generic CAMPTOSAR (irinotecan HCl) Injection in February 2008, notwithstanding a January 29, 2008 petition requesting that FDA stay further ANDA approvals.  FDA formally responded to the petition late last month.  H.R. 6432 also makes minor clarifying amendments to the clinical trial registry and results data bank provisions of Public Health Service Act § 402(j) added by FDAAA § 801.

An earlier version of the so-called “FDAAA fix” language that was circulated on Capitol Hill would have made more significant changes to FDAAA, including adding a provision creating Hatch-Waxman benefits for “old” antibiotics – i.e., antibiotic active ingredients (and derivatives of such ingredients) included in an application submitted to FDA for review or approved prior to the enactment of the 1997 FDA Modernization Act on November 21, 1997.  The proposal circulated on Capitol Hill mirrored § 1111 of the Staff Agreement version of FDAAA.  Section 1111 was stripped from FDAAA hours before the House of Representatives voted on the bill, reportedly due to costs concerns.  The same provisions in a proposed FDAAA fix addition to H.R. 6432 were removed, but for reasons that are unclear.

By Kurt R. Karst    

Off-label use cases have certainly become the rage.  Last week, the federal government’s Government Accountability Office released a report that outlined the government’s enforcement efforts in this area.  The report casts doubt on FDA’s ability to monitor off-label drug promotion. 

In addition, a number of individuals have filed federal False Claims Act “qui tam” lawsuits, seeking monetary rewards for lawsuits they have initiated against drug manufacturers which have allegedly engaged in unlawful off label promotional practices.  However, most of these lawsuits have been rejected by federal courts. 

On August 1, 2008, Magistrate Judge Thomas G. Wilson of the U.S. District Court for the Middle District of Florida (Tampa Division) joined the list of federal judges who have rejected off-label use qui tam cases.  In United States ex rel Hopper and Hutto v. Solvay Pharmaceuticals, Inc., Magistrate Judge Wilson issued a 27-page Report and Recommendation in which he recommended that the District Court dismiss this action under Fed. R. Civ. P. 12(b)(6).  Magistrate Judge Wilson found that although the qui tam relators’ amended complaint had gone into detail about allegations of a purported fraudulent scheme involving off label sales, the relators had utterly failed to comply with the requirements set forth in Fed. R. Civ. P (9)(b) to include specific allegations of actual false claims that were submitted to the government.  The relators acknowledged that they had no evidence of any false claims being submitted.  The Magistrate Judge rejected the argument that the court could infer that false claims were submitted because of the purported off label marketing scheme that was identified in the amended complaint.

The court’s ruling relied on three published decisions from the United States Court of Appeals for the Eleventh Circuit, which had collectively rejected qui tam cases where the relators had not submitted evidence that false claims had actually been submitted to the government.  However, the court did not need to rely on any of the four other court ruling which have dismissed off label use qui tam actions.   See e.g., United States ex rel. Rost v. Pfizer, Inc., 446 F.Supp. 6 (D. Mass 2006), a ruling later affirmed by the U.S. Court of Appeals for the First Circuit.  (Additional information on this case is available from Pharmalot.)

These qui tam off-label use cases, culminating in Hopper and Hutto establish a very demanding threshold for qui tam relators to meet in order to move forward with this type of case.  For instance, it seems very unlikely that current or former sales people can meet the 9(b) requirements even if, as in Hopper and Hutto, the sales people were allegedly involving in the off-label marketing practices of a company.

By John R. Fleder

UPDATE:

• On September 8, 2008, Judge Merryday issued an order adopting the Magistrate’s report and recommendation, and dismissing the case.

Representative John Dingell (D-MI) has revised several of the drug-related sections of the Discussion Draft of the FDA Globalization Act (“FDAGA”).  We first reported on the Discussion Draft, which has received significant attention from industry and stakeholder groups alike, in April 2008. 

Updated sections of the FDAGA were recently posted on the U.S. House of Representatives’ Energy and Commerce Committee’s website.  The updated draft does not significantly alter any sections of the original Discussion Draft, but it does include several new provisions of interest – many of which appear to be aimed at ensuring the purity of drugs.  Several of the new additions are blank placeholders left for further updating. 

First, the updated draft calls for inspections of drug, active ingredient, device, and device part manufacturing establishments every two years.  However, FDA can permit inspections once every four years if such a timeline would be appropriate when considering the class of the products, associated risks of the products, shipping volume, the history of the facility, and any other factors the Agency finds relevant.  The draft discussion also adds a section calling for reports to Congress on “the risk-based process for conducting surveillance of 8 current good manufacturing practices” under FDC Act § 510(h)(4). 

The revisions also include several sections on risk management.  If these revisions are enacted, the FDC Act would be amended to hold that a drug is adulterated if it is manufactured in a plant that fails to have a risk management plan.  The risk management plan must “provide for an assessment, prior to contracting with a person to supply raw materials or ingredients . . . of the suitability and competence of such person to carry out such activity,” explain the quality control process, “provide for the monitoring and review through periodic on-site audits of the facility,” “provide for the monitoring of incoming materials,” and explain quality control measures to ensure that the drugs manufactured are pure.  FDA would have authority to inspect this risk management plan during facility inspections.   

In addition, the updated draft adds a requirement for the documentation of the supply chain for all steps in the chain of drug manufacturing.  Each establishment registered with FDA must also be able to provide the Agency with an electronic statement that documents the chain of supply for the drug. 

Several other provisions are aimed at giving FDA greater authority.  For example, the revised Draft Discussion contains sections that would give FDA greater recall authority.  Perhaps to alert FDA to the need for a recall, a provision was added that requires that a person, other than a consumer, who “has reason to believe that a drug intended for human use would cause serious, adverse health consequences or death, shall” notify FDA as soon as practical of the danger.  The bill, if enacted, would require penalties for those who manufacture counterfeit drugs and provides for greater civil penalties for those who violate the FDC Act (although the actual dollar amounts of the penalties were mostly left blank). 

Finally, the end of the updated draft contains two very interesting additions.  First is a blank section titled “FDA Bonuses.”  Text below this heading indicates that the language will be added later.  Rep. Dingell has been a vocal critic of FDA bonuses and has launched an investigation into the Agency’s compensation practices.  Second is a section stating that FDA has “extraterritorial Federal jurisdiction over any violation of this Act relating to any food, drug, device, or cosmetic intended for import into the United States.”  It remains to be seen what, if anything, will be added to or deleted from these sections.    

Although the latest revisions to the FDAGA Draft Discussion are not extensive, they do indicate that the bill continues to receive the attention of Rep. Dingell and others in Congress.  We will continue to monitor this legislation and report on any further updates. 

By Susan J. Matthees

On July 1, 2008, ConsumerLab.com, LLC published a product review titled “Red Yeast Rice Supplements.”  Hyman, Phelps & McNamara, P.C. sent an 8-page letter to ConsumerLab on July 17 to inform the company that, as confirmed in FDA warning letters, the product review created potential safety issues for consumers as well as regulatory issues for the dietary supplement industry. 

The ConsumerLab product review of red yeast rice supplements makes incorrect statements about the law and FDA enforcement policy, and creates general confusion about the marketing of red yeast rice products.  Most important, the review encourages consumers to purchase dietary supplements with high levels of lovastatin, the active ingredient in the prescription drug Mevacor™, that FDA has determined to be unsafe.  In addition, FDA has repeatedly warned industry that the marketing of products with levels of lovastatin represented as “high” or “moderate” in the ConsumerLab review is illegal. 

Although ConsumerLab has updated its product review, ConsumerLab has not corrected the safety and regulatory issues addressed in FDA’s warning letters and this firm’s July 17 letter.  In a telephone call with counsel to ConsumerLab on July 30, this firm was informed that ConsumerLab did not intend to make further changes to the red yeast rice product review.  For this reason, we are posting a memorandum based on the firm’s letter to ConsumerLab as a warning to industry and consumers that the ConsumerLab review is in conflict with FDA’s view of the law.

By A. Wes Siegner

Yesterday, Pharmalot reported that U.S. Senator Herb Kohl (D-WI) and several co-sponsors introduced the “Independent Drug Education and Outreach Act of 2008.”   A similar version of the bill has reportedly been introduced in the U.S. House of Representatives.  According to a press release from the U.S. Senate Special Committee on Aging, the bill is intended “to provide doctors with unbiased information on prescription drugs,” and “will provide an important alternative to the way doctors currently get their information about drugs.”

If enacted, the bill would amend the Public Health Service Act to add § 904 – Prescription Drug Education and Outreach – to establish a program to award grants or contracts:

• For the development and production of educational materials concerning the evidence available on the relative safety, relative effectiveness, and relative cost of prescription drugs, non-prescription drugs, and non-drug interventions for treating selected conditions, for distribution to healthcare providers who prescribe such drugs and their patients; and

• For the development and implementation of a program to appropriately train and deploy health professionals to educate physicians and other drug prescribers concerning the relative safety, relative effectiveness, and relative cost of prescription drugs, non-prescription drugs, and non-drug interventions for treating selected conditions.

By Kurt R. Karst

On August 1, 2008, FDA will publish a Federal Register notice announcing the Fiscal Year (“FY”) 2009 user fee rates established under the Prescription Drug User Fee Act (“PDUFA”).  A similar notice will also be issued with the FY 2009 user fee rates established under the Medical Device User Fee Amendments.

The FY2009 PDUFA application user fee rates have been set at $1,247,200 for an application requiring clinical data, and one-half of a full application fee ($623,600) for an application not requiring clinical data and a supplement requiring clinical data.  (An FDA guidance document defines the term “clinical data” for PDUFA user fee purposes.)  Annual establishment and product fees have been set at $425,600 and $71,520, respectively.  The FY2009 fees, which go into effect on October 1, 2008, are only a modest increase from those set for FY2008.  The table below tracks PDUFA user fees since the inception of PDUFA. 

By Kurt R. Karst    

As we previously reported, Section 912 of the FDA Amendments Act (“FDAAA”) added a new prohibition to the Federal Food, Drug, and Cosmetic Act (“FDCA”).  The new prohibition, found at FDCA § 301(ll) (21 U.S.C. § 331(ll)), prohibits the introduction into commerce of any food that contains an approved drug or a licensed biologic.  It also prohibits the introduction of a food containing a drug or biologic for which substantial clinical investigations were initiated and made public.  There are four narrow exceptions to this prohibition, including a first-to-market exception.  As we previously noted, the § 301(ll) prohibition may have far reaching consequences for the development of new functional food and dietary ingredients.  The full impact will remain unknown until FDA determines how to resolve the  numerous interpretative issues presented by the provision in the absence of legislative history.

On July 29, 2008, FDA published a Federal Register notice inviting public comment on the possible interpretations of the prohibition and their potential effects on industry and consumers. Comments may be submitted to FDA until October 27, 2008.

The notice does not discuss the various interpretations FDA may consider or has considered.  Instead, the notice invites comments to a series of open-ended questions about the interpretation of various ambiguous terms and the possible impact of the § 301(ll) prohibition.  Among other things, FDA asks for comment on ambiguities in the prohibition and exceptions including the meaning of the following terms:

1. “drug”: how should FDA determine the identity of a drug?  For purposes of section 301(ll) should FDA consider the chemical structure of a substance?

2.  “substantial clinical investigations”: are clinical investigations limited to studies in humans or do they include studies in animals?  Should clinical studies in humans bar the use of that substance in animal feed?  When are clinical investigations in humans and/or animals substantial?

3. “marketed in food”: substances that were “marketed in food” before they were approved as a drug are excepted from the prohibition.  FDA questions whether “marketed in food” means something different than “marketed as food,” the term used in the exclusionary clause for dietary supplements, 21 U.S.C. 321(ff), and interpreted in the Pharmanex litigation.  FDA also asks for input as to the significance of “marketing in food” outside the United States.

4. “an independent biological or therapeutic effect”: substances that are used “to enhance the safety of the food supply” and do not have an “independent biological or therapeutic effect” are also excepted from the prohibition.  FDA asks for input on the meaning of “a biological [and] a therapeutic effect” and when such an effect is “independent.”

FDA also requests comment on the range of products subject to the prohibition and the likely consequences to products in those categories.  In particular, FDA requests information on how the prohibition would affect marketing of infant formula, dietary supplements, animal feed, and food contact substances.

Perhaps most importantly, the § 301(ll) prohibition does not exempt substances that were permitted before the enactment of FDAAA.  Its impact may therefore extend beyond new functional food and dietary ingredients and bar products that are currently legally marketed.  FDA asks for examples of foods that may be affected and the consequences of prohibiting these products for the consumers that use (and rely on) these products. 

Clearly, FDA is grappling with interpreting FDCA § 301(ll) prohibition.  Given FDA’s discretion in interpreting the prohibition, and its potential widespread and serious impact, industry would be well advised to seize this opportunity to influence FDA’s thinking and provide the Agency with information that will facilitate a reasonable construction of the law.

By Riëtte van Laack & Diane B. McColl

On July 25, 2008, the Department of Defense (“DOD”) issued a proposed rule to implement section 703 of the National Defense Authorization Act for Fiscal Year 2008 (“NDAA-2008”).  Section 703 of NDAA-2008 provides that the TRICARE retail pharmacy program (“TRRx”) is to be treated as an element of the DOD to the extent necessary for prescription drugs provided by TRRx pharmacies and paid for by the DOD to be subject to the Federal Ceiling Price requirements of section 603 of the Veterans Health Care Act of 1992, 38 U.S.C. § 8126.  Under the latter statute, manufacturers of “covered drugs” (generally, prescription drugs approved under a new drug application) must, in order for their outpatient drugs to be federally reimbursed under Medicaid and Medicare Part B, enter into a Master Agreement and Pharmaceutical Pricing Agreement with the Department of Veterans Affairs (“VA”) agreeing to charge no greater than a statutory Federal Ceiling Price for drugs sold on the Federal Supply Schedule to four federal agencies:  DOD, the VA, the Public Health Service, and the Coast Guard.  Congress determined that Section 703 was necessary to establish a TRRx refund program in light of a September 2006 decision by the U.S. Court of Appeals for the Federal Circuit in The Coalition for Common Sense in Government Procurement v. Secretary of Veterans Affairs.  In that case, the Court set aside on procedural grounds an October 2004 “Dear Manufacturer” Letter issued by the VA that sought to establish authority for a TRRx refund program.

Although NDAA-2008 required promulgation of implementing regulations, the substantive provisions of the statute were effective as of the date of enactment of the statute, which was January 28, 2008.  DOD’s view has been that refunds are due on TRRx drugs dispensed as of that date, even in the absence of final regulations.  Written comments on the proposed rule are due by September 23, 2008.

The proposed rule would amend 32 C.F.R. § 199.21 (the TRICARE pharmacy benefit regulation) by adding a new paragraph (q) that would require written agreements to be entered into by manufacturers, and provide for refund procedures and remedies.  The proposed rule would define a “covered drug” for the purpose of this regulation as excluding, among other things, a drug that is not a covered drug under 38 U.S.C. § 8126, a drug that is not provided through a retail network pharmacy, and a drug for which the TRRx Pharmacy Benefits Program is the secondary payor. 

The proposed rule would require manufacturers to enter into written refund agreements, as a condition for inclusion of the manufacturer’s covered drugs on the TRICARE uniform formulary and the availability of covered drugs through the TRRx pharmacies without preauthorization.  A covered drug that is not the subject of a written agreement would require preauthorization in order to be provided through a TRRx pharmacy. 

The proposed rule would require the written agreements described above to include refund procedures to ensure that prescription drugs dispensed by network pharmacies under the TRRx program would be paid for by the DOD at the Federal Ceiling Prices available to the DOD pursuant to 38 U.S.C. § 8126.  The refund procedures would “incorporate common industry practices for implementing pricing agreement between manufacturers and large pharmacy benefit plan sponsors.”  Beyond this, the proposed rule does not prescribe any details of the refund procedures, except that manufacturers must be provided “at least 70 days from the date of the submission of the TRICARE pharmaceutical utilization data needed to calculate the refund before the refund payment is due.” 

Under the proposed rule, the refund due on a covered drug would be the difference between the Federal Ceiling Price and either (a) the most recent annual non-Federal average manufacturer price (“Non-FAMP”) reported to the VA, or (b), at the manufacturer’s option, “direct commercial contract sales prices specifically attributable to the reported TRICARE paid pharmaceuticals, determined for each applicable NDC listing.”

The proposed rule would also provide that refunds due are subject to the overpayments recovery regulation at 32 C.F.R. § 199.11.  The proposed regulation would further permit the Director of the TRICARE Management Activity to take any action authorized by law if a manufacturer of a covered drug fails to make or honor an agreement under the regulation.  Although the proposal does not state this, a failure to provide a section 703 refund to DOD might be viewed by the government as a violation of the manufacturer’s Master Agreement with the VA.  Termination of that Agreement for breach would result in the manufacturer’s covered outpatient drugs being ineligible for federal payment under Medicaid and Medicare Part B, and ineligibility of the manufacturer to sell its drugs to the federal government.

The preamble to the proposed regulation notes that the DOD has proposed to enter into voluntary agreements with manufacturers for prescriptions filled on or after the date of enactment of NDAA-2008, and specifically asks for comments on alternative legally permissible implementation approaches and/or dates. 

By Michelle L. Butler and Alan M. Kirschenbaum

In the second lawsuit in as many months, the Patent and Trademark Office (“PTO”) has been sued over a decision to deny a Patent Term Extension (“PTE”).  As we previously reported, Wyeth sued the PTO and FDA in June 2008 concerning the appropriate PTE regulatory review period determination for a patent covering the company’s new animal drug CYDECTIN (moxidectin) Pour-On.

On July 11, 2008, PhotoCure ASA (“PhotoCure”) sued the PTO after the Office denied the company’s PTE application for U.S. Patent No. 6,034,267 (“the ‘267 patent”) covering the human drug product METVIXIA (methyl aminoevulinate hydrochloride).  FDA approved METVIXIA on July 27, 2004 under New Drug Application (“NDA”) #21-415 for the treatment of actinic keratoses of the face and scalp in certain patients and granted PhotoCure a period of 3-year exclusivity for a “new ester or salt of an active ingredient.”  The PTO’s decision to deny a PTE for the ‘267 patent was based on an analysis of the “first permitted commercial marketing” criterion in the PTE statute at 35 U.S.C. § 156(a).  PhotoCure’s lawsuit comes on the heels of several recent PTO decisions denying a PTE based on the “first permitted commercial marketing” criterion. 

Under the PTE statute at 35 U.S.C. § 156(a)(5)(A), the term of a patent claiming a drug shall be extended from the original expiration date of the patent if “the permission for the commercial marketing or use of the product . . . is the first permitted commercial marketing or use of the product under the provision of law under which such regulatory review period occurred.”  In recent PTE memoranda, the PTO has heavily relied on decisions by the U.S. Court of Appeals for the Federal Circuit in Fisons v. Quigg, 8 U.S.P.Q.2d 1491 (D.D.C.1988), aff’d 876 F.2d 99 U.S.P.Q.2d 1869 (Fed.Cir.1989), Pfizer Inc. v. Dr. Reddy’s Labs., 359 F.3d 1361 (Fed. Cir. 2004), and Glaxo Operations UK Ltd. v. Quigg, 894 F.2d 392, 13 USPQ2d 1628 (Fed. Cir. 1990) to support the Office’s interpretation of the term “product” in 35 U.S.C. § 156(a)(5)(A) to mean “active moiety” (i.e., the molecule in a drug product responsible for pharmacological action, excluding any salt, ester, or other non-covalent derivative) rather “active ingredient” (i.e., the active moiety in a drug product, including any salt, ester, or other non-covalent derivative).

With respect to PhotoCure’s PTE request for the ‘267 patent covering METVIXIA, the PTO issued a final decision in May 2008 stating that METVIXIA does not represent the first permitted commercial marketing or use of the product because of FDA’s December 1999 approval of an NDA for Dusa Pharmaceuticals Inc.’s LEVULAN KERASTICK (aminolevulinic acid HCl) Topical Solution, which contains the active moiety aminolevulinic acid (“ALA”).  Thus, according to the PTO, METVIXIA does not represent the first permitted commercial marketing or use of ALA and the ‘267 patent is ineligible for a PTE. 

Dissatisfied with the PTO’s decision, PhotoCure filed a complaint in the U.S. District Court for the Eastern District of Virginia (Alexandria Division) seeking declaratory relief.  Specifically, PhotoCure requests that the court declare that the PTO acted unlawfully in denying PhotoCure’s PTE application, declare that the company’s PTE application satisfies the statutory PTE criteria, and grant further relief as necessary.  PhotoCure alleges that the PTO’s interpretation of the “first permitted commercial marketing” PTE criterion should be rejected because it is “contrary to law and will frustrate the overriding purpose of [the 1984 Hatch-Waxman Amendments], which is to encourage research and innovation, including the development of new active ingredients.” 

Over the past several months, the PTO has denied several PTE applications based on the failure to meet the “first permitted commercial marketing” criterion using analyses similar to those used to deny PhotoCure’s PTE application.  Examples include decisions on patents covering SYMBICORT (budesonide; formoterol fumarate dihydrate) Inhalation Aerosol, PRILOSEC OTC (omeprazole magnesium) Delayed-Release Tablets, and EXELON (rivastigmine) Patch .  Presumably those applicants will be closely following the outcome of the PhotoCure litigation.

By Kurt R. Karst    

In a case brought by POM Wonderful under the Lanham Act and California state statutes governing false advertising and unfair competition, the U.S. District Court for the Central District of California held Purely Juice and its president liable to the tune of nearly $1.5 million.  In its opinion, the court cites substantial analytical evidence gathered by POM Wonderful that a Purely Juice product sold as “100% pomegranate juice” with “no sugar added” in fact contained low levels of pomegranate solids and contained added sweeteners.  Further, Purely Juice had been made aware of the problem with its product, but continued to market it, unlike other competitors with similar problems, who apparently took corrective action. 

Notably, the court also held that Purely Juice knew, or should have known, of problems with adulteration of foreign pomegranate juice concentrate.  In light of that knowledge, the court opinion suggests that Purely Juice should have availed itself of test methods that were readily available for determining the authenticity of pomegranate juice.

Pomegranate juice now joins the list of high value commodities, such as olive oil, linked to economic adulteration and misbranding in the public eye.  In the absence of a robust federal enforcement program, scrupulous manufacturers will continue to have to prosecute their own interests.  As for consumers, the messages are clear and ancient ones: “you get what you pay for” and “buyer beware.”

By Ricardo Carvajal