The Drug Enforcement Administration’s (“DEA”) final rule allowing individual practitioners to issue multiple Schedule II prescriptions to individual patients to be filled sequentially went into effect on December 19, 2007.  The rule will allow practitioners to prescribe up to a 90-day supply of a Schedule II controlled substance. 

The federal Controlled Substances Act (“CSA”) and the regulations implementing the CSA prohibit the refilling of Schedule II prescriptions.  DEA’s final rule amends the regulations to allow individual practitioners to issue multiple prescriptions authorizing patients to receive “a total of up to a 90-day supply of a Schedule II substance,” provided:

1.         Each separate prescription is issued for a legitimate medical purpose by an individual practitioner acting in the usual course of professional practice;

2.         The practitioner provides written instructions on each prescription indicating the earliest date on which a pharmacy can fill the prescription;

3.         The practitioner concludes that providing multiple prescriptions to the patient “does not create an undue risk of diversion or abuse;”

4.         Issuing multiple prescriptions is permissible under applicable state law; and

5.         The practitioner fully complies with all other requirements under the CSA and regulations as well as state requirements. 

DEA asserts that nothing in the amended regulation should “be construed as mandating or encouraging” practitioners to issue multiple prescriptions or to see their patients only once every 90 days.  Practitioners “must determine on their own, based on sound medical judgment, and in accordance with established medical standards, whether it is appropriate to issue multiple prescriptions and how often to see their patients.”  In addition, practitioners must include instructions on each multiple prescription indicating that it shall not be filled until a certain date, and pharmacists cannot fill it before that date. 

The final rule asserts that the amended regulations do not alter the longstanding principle that neither the CSA nor the regulations contain a “specific limit on the number of days worth of a schedule II controlled substance that a physician may authorize per prescription.” 

By John A. Gilbert & Larry K. Houck

The Drug Enforcement Administration (“DEA”) recently issued an advisory announcing that as of January 1, 2008, manufacturers of methadone HCl 40 mg tablets have voluntarily agreed to limit distribution due to the reported increase of adverse events related to methadone.  This raises new issues for downstream distribution and prescribing of methadone.

The advisory states that manufacturers will instruct wholesale distributors to supply methadone 40 mg tablets only to authorized and DEA-registered opioid addiction detoxification and maintenance facilities and hospitals.  Retail pharmacies and other registrants (including practitioners) will be unable to purchase methadone 40 mg tablets for dispensing or administration.  The advisory states that methadone, a long-lasting opioid and a federally-controlled Schedule II substance, is used for pain management and opioid addiction treatment.  However, DEA’s statement asserts that methadone 40 mg tablets are indicated for detoxification and maintenance treatment of opioid addiction only and not pain management. 

The voluntary restriction follows an FDA public advisory and Substance Abuse and Mental Health Services Administration (“SAMHSA”) Center for Substance Abuse Treatment (“CSAT”) report.  FDA issued an advisory in November 2006 warning about death and serious side effects associated with the use of methadone for pain management.  SAMHSA CSAT convened a multidisciplinary meeting on methadone-associated mortality in 2003, which concluded, in part, the correlation between increased methadone distribution through pharmacies with a rise in methadone-associated mortality. 

By John A. Gilbert & Larry K. Houck

We previously reported that two pharmacy associations were challenging the implementation of a rule promulgated by the Centers for Medicare & Medicaid Services (“CMS”) setting forth how to calculate the Average Manufacturer Price (“AMP”), the new, and importantly lower, benchmark for pharmaceutical reimbursement by Medicaid. 

Finding that the plaintiffs had met the requirements to obtain a preliminary injunction, Judge Lamberth of the United States District Court for the District of Columbia held earlier this week that (1) plaintiffs were likely to succeed on the merits of their claim because the rule did not appear to follow either the “statutory definition of ‘average manufacturer price’ or the statutory definition of ‘multiple source drug,’” (2) the inadequate reimbursement plaintiffs members would receive under the new rule would force the member pharmacies to reduce hours and services or leave the Medicaid program – causing irreparable harm to the pharmacies, (3) this harm outweighs any potential harm to the government, and (4) it is in the public interest for agencies to comply with the law and Medicaid beneficiaries to obtain access to local pharmacies.

Based on these findings, the court enjoined the government from taking any action to implement the rule, although the government may continue to require drug manufacturers to make the calculations used to determine the rebates paid to states under the Medicaid program.  The court also enjoined the government from posting any AMP data online or disclosing the data to any entity except that the U.S. Department of Health and Human Services can distribute the data internally within the department and also to the U.S. Department of Justice for enforcement use.

Department of Defense (“DoD”) authorization bills currently pending in Congress (both H.R. 1585 and S. 1547) contain authority for a new, mandatory TRICARE retail pharmacy rebate program.  TRICARE is the military’s health care program serving active duty service members, retirees, their families, survivors and certain former spouses. 

If the legislation is enacted, then the TRICARE retail pharmacy rebate program would be “treated as an element of the [DoD] for purposes of the procurement of drugs by Federal agencies under [38 U.S.C. § 8126] to the extent necessary to ensure that pharmaceuticals paid for by the [DoD] that are provided by pharmacies under the program to eligible covered beneficiaries under this section are subject to the pricing standards in such section 8126” (H.R. 1585, § 701(a)).  This requirement would apply to prescriptions filled on or after October 1, 2007. The legislation would also require the Secretary of Defense to modify existing regulations to implement the new provision no later than December 31, 2007. 

The legislation described above is viewed as necessary to implement a TRICARE retail pharmacy rebate program in light of the decision last year 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 Department of Veterans Affairs (“VA”) to implement the program. 

Under section 603 of the Veterans Health Care Act of 1992, manufacturers of covered drugs are required to make their covered drugs available for purchase on the Federal Supply Schedule (“FSS”).  Covered drugs (generally, prescription drugs approved under a new drug application) listed on the FSS or purchased under “depot contracting systems” are required to be sold to the DoD, the VA, and other specified federal agencies at a price no greater than a statutorily determined federal ceiling price (“FCP”).  As stated in the October 2004 Dear Manufacturer Letter, in October 2002, the VA determined that the TRICARE retail pharmacy program “was a centralized pharmaceutical commodity management system that met the definition of ‘depot’ contracting system set forth in [the statute].”  According to the VA, covered drug purchases under the TRICARE retail pharmacy program, authorized and paid for by the TRICARE Management Activity’s (“TMA’s”) Pharmacy Benefits Office, qualified for rebates to the FCPs. TMA published procedures and guidelines for the program on its website and began implementation of the program effective October 1, 2004. 

On March 25, 2005, the Coalition for Common Sense in Government Procurement filed a Petition in the U.S. Court of Appeals for the Federal Circuit challenging the refund program.  The VA agreed to stay enforcement of the October 2004 Dear Manufacturer Letter pending judicial review.  In 2006, the Court determined that the 2004 Dear Manufacturer Letter was a substantive rule and concluded that it was required to set the letter aside as procedurally defective because the notice and comment procedures of the Administrative Procedure Act (“APA”) were not followed prior to the issuance of the letter.  Accordingly, the Court remanded the matter to the VA for compliance with the procedures required by the APA.  The Court did not reach the issue of the substantive validity of the TRICARE retail pharmacy rebate program.  To date, neither the DoD nor the VA has initiated rulemaking to implement the TRICARE retail pharmacy rebate program.

ADDITIONAL READING:

• TRICARE Program Information for Pharmaceutical Manufacturers
• December 6, 2007 Conference Report for H.R. 1585

By Michelle L. Butler

On November 2, 2007, FDA published an Advance Notice of Proposed Rulemaking (“ANPR”) to revise nutrition labeling requirements for foods and dietary supplements.  FDA’s ANPR commences perhaps the most sweeping food labeling modification effort since 1993, when FDA issued the nutrition labeling rules mandated by the Nutrition Labeling and Education Act of 1990 (“NLEA”).

Since 1990, new nutrition data and information has emerged that FDA believes warrants revisiting nutrition labeling requirements.  These data include the 2005 Dietary Guidelines for Americans, and the Institute of Medicine’s (“IOM’s”) series of reports on the Dietary Reference Intakes (“DRIs”) for vitamins and other micronutrients, minerals dietary antioxidants and related compounds, and energy and macronutrients published from 1997 to 2004.  In addition, the IOM released a 2003 report, “Guiding Principles for Nutrition Labeling and Fortification,” on recommended use of its DRIs in nutrition labeling.

In the ANPR, FDA requests input from stakeholders as to which nutrients should be listed in Nutrition Facts and Supplement Facts labels, what new reference values should be used to determine percent daily values (“DVs”) and which factors should be considered in calculating DVs, as well as several specific issues regarding calories, fats, cholesterol, carbohydrate, protein, dietary fibers, sugar alcohols, sodium, chloride, vitamins and minerals.  Of these topics, there are two particular areas that are likely to generate the most debate: (1) the method for determining percent DV values; and (2) the proposed dietary fiber definition.  The IOM report recommended using a population-weighted method of calculating the percent DV, rather than the current population-coverage method.  If FDA were to adopt this recommendation, the percent DVs for most nutrients would probably decrease.  The IOM also recommended three new categories of dietary fiber linked to the physicochemical properties of the fiber, which would have a major effect on how dietary fiber content is calculated for the purpose of nutrition labeling.   

The November 2007 announcement is only an ANPR, the very early initial step in the rulemaking process.  The deadline for submission of public comments in response to the ANPR is January 31, 2008, but this deadline is likely to be extended, possibly more than once, and the rulemaking process can be expected to require three years or longer.

Earlier today, FDA issued a Federal Register notice announcing the Fiscal Year 2008 user fee rate for advisory review of Direct-to-Consumer (“DTC”) Television advertisements for prescription drug and biological products. The advisory review fee for FY2008 will be $41,390 for each proposed television advertisement voluntarily submitted to FDA for advisory review.  It was widely anticipated that the FY2008 fee would be set somewhere between $40,000 and $60,000.  The fees will be used to hire approximately 27 new employees to meet the new PDUFA IV performance goals for DTC television ad review.

The new voluntary DTC television ad user fee program was established by the recently-enacted FDA Amendments Act (“FDAAA”).  The December 11, 2007 notice follows an October 25, 2007 Federal Register notice in which FDA requested companies to notify the Agency within 30 calendar days whether they intend to participate in the DTC user fee program during FY 2008 – and if so to identify the number of planned DTC television ads in that period. 

Companies responding to the October notice indicated that they planned to submit 151 DTC television ads to FDA for advisory review in FY2008.  FDA calculated the FY2008 fee rate by dividing the number of planned DTC television ads by $6.25 million – the target revenue level set in the new law for FY2008.  Participating companies must pay the advisory review fee identified in invoices FDA will send to them by a specified date, or be subject to a 50% penalty (i.e., $62,085 for each advisory review).  In addition, participating companies must pay a one-time operating reserve fee.  The operating reserve fee is based on the number of advisory review submissions a participant identifies for their first year in the new user fee program.  Therefore, if a participating company indicated that it plans to submit four DTC television ads to FDA for advisory review in FY2008, the company must pay $41,390 for each advisory review and a one-time $165,560 operating reserve fee. 

The FDAAA provides that the new DTC user fee program will not commence if FDA fails to receive at least $11.25 million within 120 days after enactment of FDAAA (i.e., January 25, 2008).  Such funding consists of a combined total of the advisory review and operating reserve fees.  Provided all participants pay the fees FDA invoices them for by January 25, 2008, the program should launch.

Late last week, a yet-to-be released FDA draft guidance on “Good Reprint Practices” was made public by Rep. Henry Waxman (D-CA). Waxman, on behalf of the Committee on Oversight and Government Reform, issued a letter to FDA strongly urging it to refrain from finalizing and disseminating this “ill-advised” guidance as it would “open the door to abusive marketing practices that will jeopardize safety, undermine public health, and lead to an increase in unapproved uses of powerful drugs.” A copy of Waxman’s letter and the FDA guidance can be found here.

Despite the hoopla over the Waxman letter, the guidance really does not represent any new general policy by FDA – it merely clarifies the types of reprints to be disseminated and how they should be disseminated.  The general principles of the guidance are consistent with FDA’s prior approach, as understood through the framework of FDA’s battles with Washington Legal Foundation (WLF):

the distribution of reprints is not an independent violation of law;

FDA has the authority to use reprints as evidence that a manufacturer has illegally promoted its product; and

FDA will not initiate an enforcement action where the only evidence of an unapproved intended use is the distribution of reprints.

Although the guidance does not represent any new general policy by FDA, its clarifications and the introduction of several new requirements for the dissemination of reprints make it a more restrictive approach.  The guidance clarifies that letters to the editor, abstracts, Phase I study reports, and reference publications that contain little to no discussion of investigations or data do not qualify as scientifically sound reprints.  (There is some debate among practitioners as to whether these types of publications are appropriate to disseminate.)  New and more restrictive requirements on how the reprint must be disseminated include the attachment of a comprehensive bibliography of publications discussing adequate and well-controlled clinical studies for the product’s use as disseminated in the reprint and the attachment of a representative article that calls into question the results published in the reprint.

The Waxman letter does not meaningfully acknowledge that the guidance does not represent a radical new approach by FDA.  Instead, the letter addresses the guidance as a departure from the more stringent requirements on reprint dissemination from the Safe Harbor provision of the FDA Modernization Act (which expired in September 2006).  Waxman fails to recognize, however, that although the Safe Harbor provision remained in effect after the WLF decision, FDA’s policy was not as restrictive after that decision and was largely the same as in the guidance.  Further, Waxman fails to address the fundamental decision of the WLF case – that manufacturers have a constitutional right to disseminate truthful, non-misleading reprints under the First Amendment

Much of Waxman’s letter cites to “abuses” of reprint distribution by the manufacturers of anti-depressants, Vioxx, Celebrex, Neurontin and antiarrhythmic drugs.  His letter to FDA includes a Committee Request for information on the development of the guidance and how FDA expects to enforce the principles outlined.  An FDA response is due by December 21, 2007.

On Nov. 27, 2007, FDA published a proposed rule to restrict the use of nutrient content claims for the omega-3-fatty acids, alpha-linolenic acid (ALA), docosahexaenoic acid (DHA), and eicosapentaenoic acid (EPA). The Agency proposes to prohibit notified nutrient content claims for EPA and DHA and certain claims for ALA because these claims do not meet the requirements of the Federal Food, Drug, and Cosmetic Act.

A nutrient content claim expressly or implicitly characterizes the level of a nutrient (e.g., “high in vitamin C,” “low in sodium”). Such a claim generally may not be used in food labeling unless the claim is made in accordance with authorizing FDA regulations or the claim has been notified to FDA. FDA has approved certain nutrient content claims for substances for which reference daily intakes or daily reference values have been established.

In 1997, the Food and Drug Modernization Act of 1997 (FDAMA) amended the Federal Food, Drug, and Cosmetic Act (FDCA) to allow use of a nutrient content claim on foods provided that this claim is based on authoritative statements from certain federal scientific bodies. 21 U.S.C. 343(r)(2)(G). Before such claims may be used, a notification must be submitted to FDA. If FDA does not object to the notification within 120 days, the claims may be used. After the 120 days expired, FDA can overturn the claim only if the Agency issues a regulation or obtains a court order. Id. 343(r)(2)(H).

Between 2004 and 2006, FDA has received three nutrient content notifications for omega-3-fatty acids: a notification for nutrient content claims for ALA, DHA, and EPA submitted collectively by Alaska General Seafoods, Ocean Beauty Seafoods, Inc., and Trans-Ocean Products, Inc. (the “Seafood Processors notification,” permitted since May 16, 2004); a notification for nutrient content claims for ALA and DHA submitted by Martek Biosciences Corp. (the “Martek notification,” effective since May 22, 2005); and a notification concerning nutrient content claims for DHA and EPA submitted by Ocean Nutrition Canada, Ltd (permitted since April 9, 2006 All three notifications were based on “authoritative” statements by the Institute of Medicine (IOM) in its September 5, 2002 Prepublication Report, Dietary Reference Intakes for Energy, Carbohydrate, Fiber, Fat, Fatty Acids, Cholesterol, Protein and Amino Acids (IOM Report). Yet, each notification proposed different claims and criteria for products qualified to carry the claim.

As explained in the proposed rule, FDA has concluded that the IOM Report does not contain authoritative statements identifying a nutrient level, or reference value, for EPA and DHA. Moreover, the nutrient content claims for ALA set forth in the Seafood Processors notification are based on a daily value determined by a population-weighted average adequate intake level whereas the daily values FDA established for other nutrients are based on a population coverage approach. (Note, however, that FDA recently published an Advanced Notice of Proposed Rulemaking requesting public comments on the recommendation by IOM to base daily values on a population-weighted average rather than on a population coverage approach.)

FDA is proposing to take no regulatory action with respect to the nutrient content claims for ALA set forth in the Martek notification. Martek used the population coverage method to establish the reference daily value. Thus, if the proposed rule is finalized without change, the claims for ALA described in the Martek notification will be the only claims allowed to remain on the market. The Martek notification defines "high," "good source" and "more” claims for ALA. based on a daily value for ALA of 1.6 grams.

The proposed rule does not limit the use of structure/function claims concerning omega-3-fatty acids, or the use of the qualified health claim about the relationship between EPA and DHA and the reduced risk for coronary heart disease.  Also, truthful, factual statement about the amount of EPA and DHA present in a food (e.g., "Contains x mg of EPA and DHA omega-3 fatty acids per serving") and comparative percentage claims for omega-3-fatty acids remain lawful.

The comment period closes February 11, 2008.

By Riëtte van Laack

We previously reported that the Supreme Court had agreed to hear the PMA device preemption case Riegel v. Medtronic, Inc. The status of the case was in question earlier this fall because of an untimely motion to substitute the correct party (following the death of the petitioner). The Court exercised its discretion to grant the untimely motion, however. Today, attorneys for the parties, and the Solicitor General’s Office (supporting Medtronic) argued their respective positions before the Court.

For the first time in over a decade, the United States Sentencing Commission (the “Commission”) is considering amending the Sentencing Guidelines that are applied to individuals and organizations convicted of criminal violations of the Federal Food, Drug, and Cosmetic Act (“FDCA”). See 72 Fed. Reg. 51884 (Sept. 11, 2007). Interestingly, on July 31, 2007, when the Commission solicited public comments on its tentative proposed priorities for the upcoming amendment cycle (ending May 1, 2008) for the Guidelines, amendments to the Food and Drug Guideline were not among those priorities. See 72 Fed. Reg. 41795. Six weeks later, when the Commission published its notice of final priorities, “the treatment under the guidelines of . . . human growth hormone (HGH), Prescription Drug Marketing Act of 1987 (Pub. L. 100-293) offenses, and other food and drug violations . . .” was among those final priorities.

In the notice, the Commission has specifically identified two discrete aspects of the interplay between the FDCA and the Guidelines, but also broadly signaled that is examining whether the existing Guidelines for FDCA offenses are adequate to promote the goals of the Commission (just punishment, deterrence, incapacitation, and rehabilitation). It seems a safe bet that the Commission did not sua sponte decide that the Guidelines need to be watered down. Rather, it would appear the federal government, and, in particular, the U.S. Food and Drug Administration’s (“FDA”) Office of Criminal Investigations (“OCI”) are pushing for “stronger” guidelines for FDCA offenses. Apparently the FDA’s push for amendments is not new, but those efforts gained some traction this year, based–at least in part–on the increased visibility of HGH in the headlines.

With respect to HGH and the PDMA, it’s relatively clear why, if the Commission is going to look at the existing Food and Drug Guideline, 2N.2.1, those topics would be called out. For HGH, the Guidelines are clear–at present, there is no guideline for HGH. See Guidelines Manual § 2N2.1 Application Note 4 (“The Commission has not promulgated a guideline for violations of 21 U.S.C. § 333(e) (offenses involving human growth hormones).”). For PDMA offenses, the statutory maximum for those offenses in section 333(b) is 10 years, as compared to the 3 year statutory maximum for a felony under 333(a)(2), but 2N2.1 does not explicitly take account of the PDMA’s higher statutory maximum.

Recently, three attorneys from our firm met with five members of the Staff from the Commission to share our impressions of the FDCA Guidelines generally, and have gained valuable insights into the issues. It seems likely that the Commission will take some action with respect to the several FDCA Guidelines issues identified in the Federal Register notice. The window of opportunity to potentially affect the course that the Commission may take is closing quickly.

The Commission must submit Guideline amendments to Congress no later than May 1, 2008. An amendment requires a public Commission meeting, which would have to take place in April at the latest, and could come up for a vote in March. The Commission typically allows at least 60 calendar days for public comment on proposed amendments once those proposed amendments have been published. Therefore, a Commission vote on proposed amendments to the FDCA is likely in January 2008. Of course, we would expect that the Commission’s Staff will submit options to the Commission regarding these issues well in advance of that vote.

While participation in the public comment period, through comments or testimony at a likely public hearing, can influence Commission action on proposed amendments, there is an opportunity to influence the amendment process before the Commission votes to publish proposed amendments. Accordingly, interested persons hoping to influence the proposed amendments that the Commission will consider (likely in January) have very little time to provide the Commission with information that could affect the Commission’s decision.

By John R. Fleder, Douglas B. Farquhar and J.P. Ellison.

Earlier this week, the European Medicines Agency (“EMEA”) announced that EMEA and FDA have adopted a common application form for sponsors seeking orphan drug designation in the European Union (“EU”) and the U.S.  The move to a common application form was anticipated when FDA and EMEA announced earlier this year that the two regulatory authorities agreed to expand regulatory cooperation under a September 2003 Confidentiality Arrangement to include orphan drugs (see 7/18/07 FDA Law Blog post). According to the November 26th EMEA press release:

To be eligible for receiving orphan incentives, sponsors of orphan medicines have had to submit separate applications for orphan designation to the EMEA and to the FDA using different submission formats to satisfy the respective regulatory requirements. These different formats have imposed an additional burden on sponsors. Hence, the parties have agreed to harmonise the application form to simplify part of the orphan medicines designation process.

This common application format will now allow sponsors to apply to both jurisdictions at the same time with one application. A common format will also establish a favourable environment for the EMEA and FDA to share common experiences and gain an understanding of the similarities and differences of the process of obtaining orphan designation in the two regulatory systems.

FDA has not yet formally announced the adoption of a common designation application form; however, earlier this month the Agency issued a Federal Register notice requesting emergency Office of Management and Budget processing of a proposed collection of information to enable FDA to jointly announce with EMEA the adoption of the common EMEA/FDA application form at the EU-wide Administrative Simplification Workshop on November 28, 2007.  FDA also recently updated its website to include the new common application form – Form FDA 3671.

The Orphan Drug Act of 1983, as amended (“ODA”), amended the FDC Act to provide drug manufacturers with incentives to develop and market products for rare (i.e., orphan) diseases and conditions — most notably, a 7-year period of market exclusivity.  To be eligible for this exclusivity, the approved drug must have been designated as an orphan drug by FDA.  The ODA provides two routes for obtaining designation of a drug for an orphan disease or condition.  A request can be made either on the basis that a product is intended to treat a disease or condition that has a prevalence of 200,000 or less affected persons in the U.S, or if a disease or condition affects over 200,000 individuals, then if a sponsor can show that there is no reasonable expectation that the costs of developing and making available the drug will be recovered from sales in the U.S.  Most orphan drug designations are based on a U.S. prevalence under 200,000 persons. 

The EU orphan drug system, established in December 1999 under European Commission Regulation No. 141/2000 (later amended under European Commission Regulation No. 847/2000), is largely based on the ODA; however, there are differences between the two systems.  In particular, a rare disease is defined as one affecting fewer than 5 in 10,000 people in the EU.  This means that a disease or condition could be considered orphan in the EU, but not in the U.S.  The common orphan drug designation application form contains sections for requirements unique to each regulatory authority.

Although the creation of the common application form might decrease the burden on sponsors seeking orphan drug designation, it is not intended to signal a greater likelihood of dual FDA/EMEA designation.  According to the EMEA announcement, the “EMEA and the FDA will still conduct independent reviews of such submissions to assure the data submitted meet the legal and scientific requirements of their respective jurisdictions.”

ADDITIONAL INFORMATION:

• FDA Office of Orphan Products Development website
• EMEA orphan drugs website

On November 20, 2007, the Drug Enforcement Administration (“DEA”) issued a proposed rule to remove the thresholds for distributing, importing, and exporting pseudoephedrine and phenylpropanolamine (“PPA”).  In September 2007, DEA indicated in testimony before the Senate Finance Committee that the Agency was in the process of finalizing the proposal. 

Both pseudoephedrine and PPA are “List I chemicals” under DEA’s regulations.  A List 1 chemical is a chemical “that, in addition to legitimate uses, is used in manufacturing a controlled substance in violation of the [Controlled Substances Act] and is important to the manufacture of a controlled substance.”  Although pseudoephedrine and PPA have therapeutic uses in both Over-The-Counter (“OTC”) and prescription drug products, pseudoephedrine is a primary precursor used in the synthesis of methamphetamine (a Schedule II controlled substance) and methcathinone (a Schedule I controlled substance), and PPA is the primary precursor used in the synthesis of amphetamine (a Schedule II controlled substance).  The Combat Methamphetamine Epidemic Act of 2005 banned over-the-counter sales of cold medicines containing pseudoephedrine and limited the sale of such drug products to “behind the counter” status.  In November 2000, FDA issued a public health advisory concerning PPA and requested that all drug companies discontinue marketing products containing PPA due to risk of hemorrhagic stroke.  Also, in December 2005, FDA published a proposal to categorize all OTC nasal decongestants and weight control drug products containing PPA as “non-monograph” (i.e., not generally recognized as being safe for human use).

Under DEA’s current regulations, single transactions or multiple transactions of pseudoephedrine and PPA in a calendar month to a single customer that equal or exceed established thresholds are regulated transactions that trigger reporting and recordkeeping requirements.  The current pseudoephedrine threshold is 1 kilogram, and the threshold for PPA is 2.5 kilograms.  Elimination of the pseudoephedrine and PPA thresholds will make any registrant manufacturing, distributing, importing, or exporting pseudoephedrine or PPA in any quantity as bulk chemicals or in OTC subject to reporting and recordkeeping requirements.  Importers and distributors of prescription drug products containing these chemicals will also be subject to the recordkeeping and reporting requirements, however, exporters of prescription drug products will not be subject to quota requirements.  DEA-registered importers will have to obtain import quotas from DEA.

DEA explains in the preamble to the proposed rule that removal of the thresholds is necessary to implement the requirement in the Combat Methamphetamine Epidemic Act of 2005 that the Agency set import and production quotas and to address diversion concerns.  DEA has found evidence of diversion of pseudoephedrine and PPA, as well as ephedrine (a related List 1 chemical) in all drug product formulations, including liquid, non-liquid, and gel capsules.  DEA removed the threshold for ephedrine in October 1994 (59 Fed. Reg. 51,365 (Oct. 11, 1994)).

Comments on DEA’s proposed rule are due by January 22, 2008.

By John A. Gilbert & Larry K. Houck

In the preemption world, “fraud on the FDA” cases are fairly common.  As one court recently used the term, fraud on the FDA means a drug or a medical device company is liable to someone who was injured by their product if that product was approved by FDA based on false information the company submitted and the company has admitted to the Agency that it engaged in fraud.  But drug (and device) companies often do not gather all the data they submit to FDA.  Instead, they frequently have help from Contract Research Organizations (“CROs”), which perform a variety of functions, including overseeing clinical trials.  So what happens when a CRO does something questionable during a clinical trial?

Enter the Wawrzyneks.

Eileen Wawrzynek had spinal surgery in 1999.  During the surgery her doctors used a device – ADCON-L – that had received conditional FDA approval to help prevent scarring.  The surgery did not go well.  Mrs. Wawrzynek had three subsequent surgeries and the Wawrzyneks sued the doctors and the hospital alleging malpractice.  They lost.  Then they sued the medical device manufacturer, Gliatech, and settled.  Then they sued Statprobe Inc., a CRO, in the U.S. District Court for the Eastern District of Pennsylvania.

Very strict procedures needed to be followed during the ADCON-L clinical trials.  In order to ensure the results were not influenced by whether the investigator knew the device had been used (it is rather difficult to create placebo devices) the results consisted of an MRI scan taken of the area where the surgery occurred.  This MRI was then read by a blinded researcher who rated the resulting scar on a scale of 0 (no scar) to 4 (maximal scarring).  This result was to be recorded in pen on a specific sheet.  To be successful, the manufacturer needed to show that ADCON-L prevented scarring and that there was less than a 5% chance that the results shown were due simply to chance (i.e., a p-value less than 0.05).  The preliminary results looked good.  Then things changed.  As new results were analyzed, the p-value skyrocketed to greater than 0.5, meaning no one could really determine whether ADCON-L did anything useful at all.  In fact, scarring between the two groups was about equal, as was the number of people receiving the highest score of 4.  Because only one person was reading all of the MRIs, it made sense to investigate whether he was consistent in his scoring.

The device manufacturer sent two doctors to supervise the researcher.  The researcher still did not know who had received the device, but these two new doctors did.  The researcher re-read each of the prior MRIs, and instead of recording his results in pen, as he had previously done, he called out the number to one of the new (and unblinded) doctors, who recorded it in pencil.  The researcher then signed the results and the CRO re-entered the numbers into the trial database without noting that they had been re-read or were in pencil.

Through the re-read process, numbers changed.  Fewer ADCON-L patients received 4s, and more non-ADCON-L patients did.  These changes were enough to reduce the p-value from 0.66, nowhere near good enough for approval, to 0.01, well below the required 0.05 level.  Not only was the new data now statistically significant, it was good enough for FDA to conditionally approve the device.

The court indicated that this was a pretty straightforward case of fraud on the FDA for the manufacturer, as the manufacturer had already admitted the fraud.  What makes this case interesting is that this admission was enough for the court to hold the CRO liable as well (at least potentially, as the court’s decision in Wawrzynek v. Statprobe was just an order denying summary judgment in favor of the CRO).  As the court stated:

[T]he Court sees no legal theory or compelling policy reason to allow [the CRO] to use [the manufacturer] and its wrongdoing as a shield. Because the FDA found that fraud and wrongdoing occurred during the ADCON-L approval process, the door to [a fraud on the FDA claim] was opened wide enough to allow both [the manufacturer and the CRO] to pass through.

So, what’s a good CRO to do?  In this case, the year before the re-read occurred the CRO had already recognized it was being asked to do some questionable statistical practices by the manufacturer.  Wawrzynek provides strong incentive for a CRO to protect itself the next time a similar situation arises, either removing itself from the study or simply refusing to go along with similar manufacturer practices.

The Deficit Reduction Act of 2005 changed the basis for the federal government’s calculation of how much it reimburses states for their Medicaid generic prescription drug purchases.  Instead of using the “average wholesale price,” or AWP, which is a benchmark price, the federal reimbursement is now based on the “average manufacturer price,” or AMP (which is based on actual sales data, and which is usually quite a bit lower than AWP).

In July 2007, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule with a comment period (“AMP Rule”) clarifying how manufacturers must calculate AMP.  (Hyman, Phelps & McNamara, P.C.’s summary and analysis of the AMP Rule is available here.)  The regulations became effective on October 1, 2007, but comments may be submitted to CMS until January 2008, after which time CMS will consider revising the regulations. 

Earlier this month, two pharmacy associations — the National Association of Chain Drug Stores (“NACDS”) and the National Community Pharmacists Association (“NCPA”) — filed a complaint for injunctive and declaratory relief in the U.S. District Court for the District of Columbia challenging the AMP Rule.  The NACDS and NCPA allege that:

The AMP Rule unlawfully changes the methodology by which pharmacies are reimbursed for dispensing prescription drugs to Medicaid patients.  The AMP Rule is contrary to the plain language of the Social Security Act, contrary to Congress’ clear intent when it enacted the statute, contrary to [the] prior application of that statute [by CMS], contrary to dozens of other federal agency and State statutes and regulations, contrary to long-standing industry practices, and contrary to common sense.

Furthermore, the associations question CMS’s motivation behind promulgating the AMP Rule:

[CMS] failed to implement the plain meaning of the Social Security Act because they were motivated to cut billions of dollars from payments to retail pharmacies that serve disadvantaged Americans through the Medicaid program.  All of the [CMS] statutory violations result from the [Centers’] efforts to cut Medicaid reimbursement to retail pharmacies below levels permitted by the statute.

The associations request that the court: “(1) declare the AMP Rule illegal; (2) preliminarily and permanently enjoin [CMS] from implementing the AMP Rule; (3) declare illegal the posting on the [CMS] website of AMP data calculated pursuant to the AMP Rule; (4)  preliminarily and permanently enjoin [CMS] from posting on the [Centers’] website AMP data collected pursuant to the AMP Rule; and (5) such other relief as the Court deems appropriate.” 

According to a joint NACDS/NCPA letter addressed to “Senators and Representatives on the Senate Finance Committee and House Energy and Commerce Committee and Co-Sponsors of Medicaid Pharmacy Payment Legislation:”

[T]his lawsuit was necessary at this time given the impending crisis on January 2008, but legislative action this year remains necessary to sufficiently remedy this problem. Only new legislation can eliminate the severe damage to community pharmacies and their patients caused by this new reimbursement method. Action by Congress is the only long-term solution. [(emphasis in original)]

The aforementioned “Medicaid Pharmacy Payment Legislation” is reference to S. 1951, H.R. 3700, and H.R. 3140, which are purported legislative fixes for NACDS/NCPA objections to the AMP Rule.  Clearly, the associations hope that following this two-pronged “belt and suspenders” approach will lead to a favorable resolution of their concerns over pharmacy reimbursement in Medicaid.

We have seen a rash of cases brought by the government and private “whistleblowers” alleging that companies have violated the Federal False Claims Act (“FCA”) by promoting the sales of drugs and devices for “off-label” uses (i.e., uses that have not been approved by FDA).  On November 15, 2007, the U.S. Court of Appeals for the First Circuit issued an opinion in United States v. Pfizer, Inc. that signals the hurdles that whistleblowers have to overcome to be successful in these cases.

Significantly, the court noted that “FCA liability does not attach to violations of federal law or regulations, such as marketing of drugs in violation of the [Federal Food, Drug, and Cosmetic Act], that are independent of any false claim.”  The court concluded that even though the Relator had apparently alleged a fraudulent scheme (“Rost’s complaint amply describes illegal practices”), his complaint had to be dismissed.  He failed to properly allege “that false claims were submitted for government payment in a way that satisfies the requirements of the Federal Rules of Civil Procedure that fraud be alleged with particularity.”  The court’s opinion notes that “[i]n most, if not all, instances, patients taking Genotropin for anti-aging, cosmetic appearance, and athletic performance enhancement, paid for the Genotropin out-of-pocket without reimbursement from any public of private third-party payors.”  However, the court also noted that it was not irrational to infer from the Complaint that at least some false claims were submitted to the government.  Despite affirming the district’s court’s determination that the plaintiff’s complaint did not meet Federal Rule of Civil Procedure 9(b)’s heightened fraud specificity requirements, the First Circuit remanded the case to the district court to consider whether the plaintiff should be permitted to amend his complaint.

As the court noted, Pfizer resolved its issues relating to the promotion of GENOTROPIN (somatropin recombinant) with the federal government in April 2007 by paying $34.7 million. (Copies of the Department of Justice (“DOJ”) press releases are available here and here).  In a series of agreements that had the earmarks of careful lawyering on both sides, one Pfizer subsidiary pled guilty to violation of the federal health care program antikickback law and paid a criminal fine, another Pfizer subsidiary entered into a deferred prosecution agreement relating to off-label promotion and paid a $15 million monetary penalty, and Pfizer, Inc. entered into a non-prosecution agreement.  These agreements came nearly four years after Pfizer voluntarily disclosed these issues to the government and a year and one-half after DOJ declined to intervene in the Relator’s case.

Following the 9th, 10th, and 11th Circuits, the First Circuit also ruled that a voluntary disclosure to FDA, DOJ, and the Department of Health and Human Services Office of Inspector General does not constitute “public disclosure” under the FCA (31  U.S.C. § 3730(e)(4)(A)).  The First Circuit’s decision follows the majority of circuits that have ruled on this issue.  This ruling thus limits the protection from FCA whistleblower suits that companies can get from voluntary disclosures to the government. 

By J.P. Ellison