Last week, in a letter thanking President Joe Biden for his leadership to federally reschedule cannabis, Democratic governors sought to make the case for rescheduling.  Letter to President Joseph R. Biden, Jr., from Governor Jared Polis et al., Dec. 5, 2023.  The governors (of Colorado, Illinois, Louisiana, Maryland, New Jersey and New York) thanked the President for his leadership in directing the Department of Health and Human Services (“HHS”) to reconsider the current scheduling of cannabis and HHS’ August 2023 rescheduling recommendation to the Drug Enforcement Administration (“DEA”).  Quoting a Pew Research poll, the governors expressed their “hope” that DEA reschedules cannabis to schedule III “this year” because 88% of Americans favor legalization for medical or recreational use.

However, anyone reading the letter would take away the impression that rescheduling to schedule III would legalize cannabis for medical and recreational use.  As explained more fully below, that impression would be partially correct, but partially incorrect.

In October 2022 President Biden asked the Secretary of HHS and the Attorney General to “initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.”  Statement from President Biden on Marijuana Reform, White House (Oct. 6, 2022).  HHS and DEA officials confirm that HHS recommended rescheduling cannabis from schedule I to schedule III in August.  Riley Griffin et al., US Health Officials Urge Moving Pot to Lower-Risk Tier, Bloomberg News (Aug. 30, 2023).

The governors, acknowledging that while the Food and Drug Administration (“FDA”) based its recommendation “solely on science and medicine,” asserted that rescheduling “also increases public health and safety, is sound public policy, and is a big win for states,” particularly for the 38 states that authorize cannabis for medical or recreational use, or both.  Authorized cannabis activities in those states, the governors wrote, have delivered $15 billion in tax revenue for education, law enforcement and other historically underfunded programs.

Conceding that they may disagree whether legalization of recreational cannabis or cannabis use is a “net positive,” the governors agreed that the cannabis industry is permanent, that states have implemented “strong regulations,” and supporting the state regulated cannabis marketplace “is essential for the safety of the American people.”

Rescheduling cannabis to schedule III, the governors asserted, would protect the public against more dangerous drug use because legal cannabis products sold in states where they are legal “are significantly safer than myriad alternatives, including opioids.”  They contended that access to cannabis is associated with reduced rates of:

• Opioid use and abuse;
• Opioid-related hospitalizations;
• Opioid-related traffic fatalities;
• Opioid-related drug treatment admissions; and
• Opioid-related overdose deaths.

Citing a DEA publication, the governors asserted that “cannabis use killed no one.”  The governors observed that the U.S. needs “real solutions to our addiction epidemic” and while not expressly stating as much, believe cannabis rescheduling is the safer alternative.  Rightly or wrongly, the governors seem to be saying that with the U.S.’ addiction problem, it is preferable to promote state-regulated cannabis products as an alternative to illegal opioid and non-regulated cannabis use.

The governors expressed confidence that rescheduling cannabis will ensure enhanced regulation and oversight of cannabis use while decreasing the use of unregulated cannabis and hemp products, noting that unregulated, untested hemp products are being sold to kids in convenience stores.  They observed that unregulated cannabis products have been found to contain fentanyl, high levels of heavy metals, contaminants, and even high delta-9 tetrahydrocannabinol (“THC”) concentrations.  The governors contended that regulated cannabis is safer than opioids and the unregulated illicit cannabis market and safer than hemp-derived THC products.

As justification, the governors argued that state-regulated cannabis would require age verification, packaging and labeling standards, testing and warning symbols or statements, and allow for tracking products from seed to sale.  The governors noted that the public safety requires protection of the state-regulated marketplace by ensuring regulated companies are able to operate efficiently.

The governors concluded that it is time to act like “the greatest nation on earth” that the United States is by promoting safe products, taking enforcement action against dangerous products and entities that violate state law and focusing on the real problems the states face as a community “with opioid use at the top of the list.”  The governors further asserted that FDA’s and HHS’ recommendation to reschedule cannabis is a “signal” of their faith in state regulators and the regulations they have promulgated to keep their citizens safe.  We believe it is a reach to conclude that FDA’s and HHS’s rescheduling recommendation is a signal of faith in state regulators and regulations.

The governors appear to have the best interests of their constituents, the public and the authorized cannabis industry in their states at heart.  While they sent their letter to President Biden, we note that the rescheduling analysis based on the “eight factors” is in DEA’s court, not the President’s.

Lastly, the governors wrote as if rescheduling cannabis to schedule III will authorize unfettered adult access for medical and recreational use.  It will not.  While rescheduling cannabis to schedule III would more closely align federal law with that of the 38 states that allow for some form of cannabis for medical use (depending upon the state), it would still conflict with the laws of the 23 states that legalize cannabis for recreational use.  Obtaining cannabis as a schedule III substance would require a prescription “issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.”  21 C.F.R. § 1306.04.  In other words, a prescription written by a DEA-registered, state-licensed practitioner.  In addition, cultivators, manufacturers, distributors and dispensers would have to obtain DEA registrations, create and maintain transaction records, file certain reports and maintain adequate security.  Federally rescheduling cannabis to schedule III would not create the unlimited public access the governors alluded to in their letter.

On December 12, 2023, FDA announced the creation of a new advisory committee specifically for treatments for genetic metabolic diseases, the Genetic Metabolic Diseases Advisory Committee, or “GeMDAC.”  As described by FDA’s press release, genetic metabolic diseases are conditions whereby a genetic mutation, generally one that leads to dysfunction of a key protein or enzyme, disrupts the chemical processes (metabolism) responsible for converting food into energy and eliminating metabolic byproducts and waste from the body.  There are hundreds of known genetic metabolic diseases, most of which are rare and carry significant morbidity.

GeMDAC was established to advise FDA regarding treatments under the purview of CDER’s Division of Rare Diseases and Medical Genetics (DRDMG), within the Office of Rare Diseases, Pediatrics, Urologic and Reproductive Medicine.  Dr. Janet Maynard, Director of this Office, highlighted in the press release that “[g]enetic metabolic diseases include very rare diseases that individually affect a limited number of patients. Drug development for these conditions has unique and complex challenges, therefore few treatments are available to patients.”

GeMDAC’s mandate is to advise the Agency on these complicated issues in this challenging area of medical product development.  The advisory committee’s website notes that membership will be selected not just “from among authorities knowledgeable in the fields of medical genetics, [and] manifestations of inborn errors of metabolism” but also experts in “small population trial design, translational science, pediatrics, epidemiology, or statistics and related specialties” (emphasis added).  Note that FDA is currently soliciting applications to staff this committee.

Here at HP&M, we applaud this announcement and hope that it leads to a greater understanding of the challenges faced by rare disease patients, caregivers, and medical product developers, and, hopefully, to the successful development and approval of treatments for rare and ultra rare disease patients.  However, the challenges faced by these stakeholders are not isolated to products overseen by DRDMG alone.  Given that Dr. Maynard described that a primary focus of the advisory committee is for rare diseases, and its membership will include experts in the science of small trials, FDA’s establishment of GeMDAC creates an opportunity to support all rare disease drug development broadly, that is, not only for genetic metabolic conditions but rare diseases that fall under the purview of any FDA review division.

An Opportunity to Convene this New Advisory Committee for All Rare Disease Therapies

In 2018, HP&M attorneys Frank Sasinowski and James Valentine proposed a Rare Disease Center of Excellence (which we blogged about here).  The proposal outlined how a new Rare Disease Center of Excellence (COE) could leverage the skills of experts experienced in rare diseases to help expedite rare disease drug development across CDER, CBER, and CDRH, as well as other offices across FDA.  Importantly, the proposal also included a call to create a Rare Disease Advisory Committee, which could be called jointly with disease area-specific advisory committees to advise on the review of new products for any rare disease.  Members for this advisory committee would be selected “from among authorities knowledgeable and experienced in rare disease research and development.”

As the Agency fills out GeMDAC’s roster, particularly with those knowledgeable in the fields of small population trial design and other areas related to rare disease medical product development more broadly, it is a significant opportunity for FDA to leverage this expertise beyond products overseen by DRDMG.  The membership of the committee would not need to change beyond what FDA has proposed, nor would its primary mandate of serving DRDMG NDAs and BLAs.  However, there is tremendous potential in such a committee to advance rare disease drug development broadly.  GeMDAC could be used in conjunction with other advisory committees for rare disease products overseen by other divisions as well as CBER and even CDRH, as described in our 2018 proposal.  In addition, the rare disease experts included in GeMDAC’s membership could serve as ad hoc members of other advisory committees.

Volume of Genetic Metabolic Diseases Therapies Suggests Capacity to Serve Whole Agency

DRDMG was formed in 2020 as part of the CDER Office of New Drugs reorganization, so it is a fairly new Division.  However, our research reflects that of the orphan-designated novel drugs approved since 2013 by DRDMG or its predecessor, the Division of Gastroenterology and Inborn Errors Products (DGIEP), only 1 out of 18 went to an advisory committee meeting.  The online records of the Gastrointestinal Drugs Advisory Committee, the advisory committee of choice for DRDMG/DGIEP prior to the establishment of GeMDAC, only list 7 meetings total in these 10 years, likely none of which would have been in DRDMG after the split (e.g., irritable bowel syndrome, primary biliary cholangitis).

Presumably, the Agency foresees greater use of advisory committees in the future for genetic metabolic disease products, but this still leaves significant bandwidth and potential to address rare disease issues more broadly.  Meanwhile, other Divisions have referred a multitude of rare disease drugs to other advisory committees with issues on which the proposed constituency of GeMDAC, with its rare disease expertise, would be well-positioned to provide meaningful advice.

Again, we heartily applaud CDER’s creation of GeMDAC.  It is a significant step forward for rare disease patients whose diseases bring them within the oversight of DRDMG.  In addition, many other rare disease patients could (and we hope WILL) benefit from this committee’s expertise, so long as FDA extends the reach of GeMDAC to benefit all rare disease patients, and not only those with genetic metabolic conditions.

On November 30, FDA’s Center for Veterinary Medicine (CVM) released a draft guidance, “Using Relative Supersaturation to Support ‘Urinary Tract Health’ Claims for Adult Maintenance Cat Food,” to provide recommendations for how pet food companies manufacturers can use relative supersaturation (RSS) methodology to support urinary tract health (UTH) claims for certain adult maintenance cat food.

RSS is a measurement used to estimate the potential for crystal formation and bladder stone (urolith) growth, a common affliction in cats.  In fact, clinical studies estimate that as many as 23% of cats suffer from urolithiasis.  We know what you must be thinking: “With all this crystal formation, why don’t they call them Glitter boxes?”  (Apologies to our readers—word play is FDA Law Blog’s catnip.)

Acknowledging concerns about urolithiasis, pet food manufacturers use a range of formulation strategies to make UTH cat food, which have included limiting the magnesium content or formulating it to produce slightly acidic urine.  However, creating UTH cat food has been quite the cat-and-mouse game: apparently, the historical strategies of limiting the cat food’s magnesium content or formulating it to produce slightly acidic urine are effective in creating a urinary environment that is unfavorable to certain types of urolith growth, yet favorable to others.  Formulating cat food based on RSS methodology is a more recent dietary strategy whose principles apply to all urolith types.

The recommendations in the draft guidance address:

1. The wording of UTH claims based on RSS for use on adult maintenance cat food labeling;
2. The RSS criteria to substantiate those UTH claims; and
3. The study data that CVM recommends to demonstrate the utility and target animal safety of the cat food.

For pet companies that use RSS methodology to substantiate general structure or function claims that an adult maintenance cat food supports UTH, CVM recommends that prior to marketing the product, the company submit the following:

1. Empirical data demonstrating the utility and safety of the product’s mechanism(s) for maintaining UTH (discussed in greater detail below);
2. A complete quantitative ingredient formulation and nutrient composition of the product; and
3. A complete product label, which includes the following FDA recommended claim regarding : “Formulated to promote a healthy mineral content in the urinary tract.”

To demonstrate a UTH cat food’s utility based on RSS methodology, CVM recommends that pet manufacturers submit the results of at least one feeding study demonstrating that cats that consume the food achieve RSS values below the formation products for the two most common types of uroliths found in cats (struvite and CaOx).  CVM explicitly states in the draft guidance that preventing one urolith type while potentially promoting formation of the other is not supportive of a general UTH claim.

To allow for some spread in individual RSS values while still providing an acceptable margin of safety against urolith formation, CVM’s recommended mean RSS and 95% CI limits are:

• Struvite: Mean RSS ≤ 1.8; Upper bound of 95% CI ≤ 2.5
• CaOx: Mean RSS ≤ 6.0; Upper bound of 95% CI ≤ 12

In addition, CVM advises the study to be based on at least four separate RSS measurements on urine collected over at least 24 hours.  To be clear, this minimum measurement requirement is intended to provide evidence that cats consistently produce urine that meets the RSS targets, as demonstrated by at least four consecutive measurements.  Apart from these recommendations, the length of a study and how many RSS measurements are performed are left to the pet food company.

In terms of target animal safety, CVM highlighted potential safety concerns that vary with the method(s) used to formulate the cat food (e.g., the degree to which the cat food acidifies the urine, which could increase the risk of metabolic acidosis, or the nutritional adequacy of the cat food).  CVM recommends that UTH cat food based on RSS methodology meet at least one, and preferably both, of these Association of American Feed Control Officials (AAFCO) methods for substantiation of nutritional adequacy:

1. Formulate the cat food to meet the AAFCO Cat Food Nutrient Profile for Adult Maintenance, and/or
2. Successfully complete and pass an appropriate AAFCO Protocol Feeding Study that demonstrates the cat food to be adequate for maintaining the nutritional status of adult cats.

The draft guidance provides a number of other specific recommendations on study data used to demonstrate target animal safety of the cat food.  Although not all of them are covered in this blog post, do not fur-get:

1. Because CVM recommends conducting both target animal safety and utility studies for a minimum of 40 days, pet food companies may choose to combine safety and utility in one feeding trial to maximize efficiency;
2. Regardless of duration, the study should include:
   • Veterinary physical exams, serum chemistries, hematologies, and urinalyses performed at the beginning and end of the study;
   • Weekly body weight measurements;
   • Daily food consumption measurements;
   • Morbidity and mortality observations;
   • A record of any medical treatment provided and why; and
   • All data generated from individual animals as well as summary statistics for each day of measurement.

You can submit comments on the draft guidance here until February 28, 2024—unless, of course, the cat’s got your tongue.

With comments due on the proposed LDT rule last week, FDA wasted no time updating the Unified Agenda to indicate that a final rule may be published in April (here).  We take this date with a grain of salt given the frequency with which these dates are missed and given the volume of comments filed. (It is not entirely clear how many comments were actually logged in; on December 7, FDA showed 19,655 comments, and the next day 6,732.)  While some comments were boilerplate, others were comprehensive, detailed critiques of the Proposed Rule.  Under the Administrative Procedure Act, FDA is obligated to address major substantive issues when – and not so much if – it publishes a final rule.  Complying with that requirement between now and April will be a daunting task.  But, FDA has expressed urgency in moving forward with this rule so it is not out of the question that it could happen.

With a possible final rule right around the corner, it made us think – will FDA be ready to actually implement the rule?  FDA must believe it will be, but sound public policy is predicated on accurate and reliable data.  FDA recognizes that “data is at the heart” of the agency’s work as a “science-based Agency.”[1]  Yet FDA’s conclusions about the Agency’s ability to regulate the entire laboratory industry are based on fundamentally flawed assumptions about the number of entities and tests that will be subject to FDA regulation.

FDA estimates that approximately 12,000 CLIA-certified laboratories are currently certified to perform high-complexity testing in the United States.  This is based on FDA’s reported 2018 review of the CLIA database.^[2]  It is unclear how FDA derived this number or why it chose to rely on a review conducted five years ago when the database is—according to FDA—updated monthly. In fact, as of November 2023, the CMS’s Standards and Certification’s (S&C’s) Quality, Certification and Oversight Reports (QCOR) CLIA Laboratory Lookup Database shows 17,206 CLIA-certified laboratories.  This is 50% greater than the 2018 numbers relied upon by FDA in its estimates.[3]

FDA further assumes that these laboratories collectively perform roughly 80,000 LDTs.  But, FDA understates the number of laboratories by roughly one-third.  Using FDA’s per-lab number of tests, the number of LDTs would be well over 100,000.

Even using a lower, out-of-date number of laboratories, FDA anticipates receiving an astounding number of premarket review submissions for LDTs, specifically:

• 32,160 510(k) premarket notifications;
• 4,210 PMAs, PDPs, Panel-Track PMA Supplements; and
• 4,020 de novo[4]

FDA derives these estimates by applying the same metrics applicable to currently‑regulated IVDs: 50% undergo premarket review, and of those 40% are submitted through the 510(k) process, 5% are submitted for de novo classification, and 5% are submitted for premarket approval.[5]  This stratification, though, assumes that LDTs will follow the same pattern as IVDs currently regulated by FDA.  However, this prediction is unfounded, because it assumes that there is an existing classification regulation and/or product code for 90% of currently available LDTs.  Further, it assumes that 80% of LDTs requiring premarket review will be able to identify a “predicate” device and be reviewed under the 510(k) process.  Given that many LDTs introduced are for new indications for which IVDs are not currently available, this assumption is unwarranted. In other words, FDA’s extrapolation from existing IVD submission data ignores some key differences between LDTs and distributed IVDs.

FDA further assumes that half of LDTs will not need to undergo premarket review because they are exempt.  That seems very unlikely to be the case, because exemptions apply only to well-established tests.  In seeking to justify regulation of LDTs, FDA emphasizes that many of these tests are novel.[6]  It is inconsistent to say that LDTs must be regulated as medical devices because of the newness of the tests and then reduce the cost of the proposed regulation by declaring that half of all LDTs will be exempt from premarket review.  FDA’s assumption that 50% of the tests will be exempt is particularly baffling because the laboratories are ones licensed to perform high complexity tests.  By their very nature, these tests are less likely to be exempt from FDA review.

Thus, FDA understates the number of laboratories and almost certainly overstates the number of LDTs that will be exempt.Yet, even assuming the accuracy of these estimates, the predicted volume of submissions would be unprecedented.  FDA’s 5-year average across all of CDRH is 73 PMAs, PDPs, Panel-Track PMA Supplements; 3,877 510(k) premarket notifications; and 66 de novo submissions per year.[7]  This means that OHT7, the Division responsible for reviewing in vitro diagnostic tests, will need to be staffed to review substantially more submissions per year than the entire Center, specifically: 57 times the number of PMAs, PDPs, Panel-Track PMA Supplements; 8 times the number of 510(k) premarket notifications; and 60 times the number of de novo submissions.  This would require a massive increase in staffing and training.[8]  FDA would need to commence a hiring spree at the same time that laboratories would be looking to hire personnel with the same sorts of expertise to be able to navigate the FDA process.  The foreseeable outcome will be a shortage of qualified personnel and significant salary increases.  Regulatory affairs professionals with significant expertise in diagnostics are already in short supply.

Furthermore, given FDA’s proposed 5-Stage, 4-year timeline, these submissions will all arrive within a very narrow window, with PMAs being due 3.5 years after publication of the final rule and all 510(k)s and de novo submissions due a mere six months later (i.e., 4 years after publication of the final rule).  This sudden bolus of submissions will strain FDA’s capacities beyond the breaking point, as happened during the COVID-19 pandemic.

FDA also does not take into account the volume of pre-submissions that laboratories will inevitably need to begin filling almost immediately after issuance of the final rule to ensure that the data they will be presenting to FDA in their premarket submissions is what the Agency will expect.  Unless FDA provides timely responses to pre-submissions, laboratories (and current IVD manufacturers) will not be able to submit applications that address FDA’s expectations.  During COVID-19, however, FDA essentially stopped reviewing pre‑submissions severely limiting feedback to non-COVID test developers.  Under FDA’s own calculations, the number of LDT premarket submissions will far exceed the number of COVID Emergency Use Authorizations (EUAs).  Thus, it is unclear how FDA will have resources to field pre-submissions and the anticipated premarket submissions.

During the October 31, 2023 webinar discussing the proposed rule, stakeholders sought clarity from FDA officials on the Agency’s plan to address the resource gap.  FDA cited two solutions to the resource problem: (1) enhancing the existing third-party 510(k) review program; and (2) resolving resource issues during the next user fee renegotiation process (MDUFA VI).[9]  Neither of these proposed approaches can be expected to adequately address the anticipated volume of submissions.

First, FDA notes that the Agency is “currently working to enhance our Third-Party Review Program, which was reauthorized under MDUFA V.”[10]  While this goal is admirable, the Third-Party Review Program has been available for decades and has long been regarded as a flop.[11]  In fact, in Fiscal Years 2018 – 2022, fewer  than 100 510(k)s went through the Third-Party Review Program annually.[12]  In FY2020, 2021, and 2022, Third-Party Review 510(k)s accounted for 2.6%, 2.6%, and 2.5% of 510(k) decisions, respectively.[13]  Notably, a search of FDA’s 510(k) database shows that zero IVDs were cleared through the Third-Party Review Program between November 1, 2022 and November 1, 2023.[14]  Thus, while the Third-Party Review Program is not well‑utilized generally, it is not utilized at all by the in vitro diagnostic industry.

Furthermore, even if the Third-Party Review Program could gain traction within the IVD industry, it is, per statute, available only to select Class I and II devices.[15]  Even of those IVDs fitting within the statutory criteria, FDA must specify if an IVD type is eligible for third-party review.  Given the innovative nature of LDTs, it is unreasonable to anticipate that many LDTs would be eligible for the program.  Absent legislative change, therefore, the Third-Party Review Program would not be able to review the overwhelming majority of the PMAs, PDPs, Panel-Track PMA Supplements or de novo submissions.  Thus, it is wholly unrealistic for the Third-Party Review Program to provide any meaningful reduction in Agency workload.

Second, FDA assumes that there will be a sufficient number of accredited third-party review organizations available to conduct the reviews.  During the October 31, 2023 webinar, FDA cryptically noted that there are “certain CLIA‑accredited organizations that may be interested in serving in this third-party review role.”[16]  However, the experience of the New York State Department of Health (NYSDOH) should serve as a cautionary tale.  In 2017, FDA announced the addition of NYSDOH as an accredited third-party review organization in the context of the Agency’s clearance of an NGS-based tumor profiling test, explaining that the Agency’s goal in allowing third party review of such tests was “to reduce the burden on test developers and streamline the regulatory assessment of these types of innovative products.”[17]

This initial fanfare culminated in the unheralded disappearance of NYSDOH from FDA’s list of accredited third parties earlier this year.[18] Despite NYSDOH’s expertise in reviewing diagnostic tests, the program was used sparingly.  Notably, NYSDOH was reported as having fewer than five 510(k) submissions in each fiscal year of MDUFA IV (FY18 – FY22).[19]  It is unclear why FDA expects other CLIA-accredited organizations would succeed in this program where the most prominent and “only state that requires test approval for IVDs offered as LDTs” failed.[20]

In short, without both statutory changes and a specific plan to revamp the Third-Party Review Program so that it can have a meaningful effect on the workload related to LDT pre-market review, the reliance on this program to provide critical resources for this massive regulatory undertaking is, at best, wishful thinking.  Without dramatic changes to the Third-Party Review Program, FDA will need to shoulder on its own the unprecedented burden of receiving thousands of applications for novel, complex diagnostics in a very short period of time.

In reality, FDA’s staffing plan relies almost entirely on hiring a significant number of additional reviewers with user fees authorized by Congress under MDUFA VI.  However, while Congress can authorize the funding mechanism, it cannot ensure the availability of qualified personnel.  (Congress could also decide not to authorize the funding mechanism or take other steps that would hamper hiring.)  Even assuming a 3% reduction in the 510(k) workload from the Third-Party Review Program, under FDA’s projections OHT7 will need to be staffed to review nine times the current capacity of the entire Center.[21]  Calling this task impossible may be an understatement.  Indeed, FDA has publicly noted its challenges with hiring under MDUFA IV, explaining that “competition with well-known tech innovation locations, the creation of new scientific and technical professional fields, and fewer candidates with a hybrid of specialties have resulted in hiring delays for the MDUFA program.”[22]  The “competition” for these candidates will inevitably worsen due to the hiring needs of laboratories that must submit tens of thousands of applications. Regulating LDTs as medical devices will mean that neither FDA nor laboratories will be able to recruit, hire, and train enough qualified personnel to meet their respective obligations.

Given the acknowledged and ongoing recruitment and retention challenges, FDA’s reference to MDUFA VI amounts to nothing more than “kicking the can down the road,” rather than a meaningful plan to ensure adequate resources. Meanwhile, given the compressed enforcement discretion phaseout timeline proposed by FDA, upon issuance of a final rule (which could occur while MDUFA V is still in place) laboratories would need to immediately begin compliance efforts, including by filing pre-submissions.  FDA has proposed no plan for how resources, including those needed to review pre-submissions for LDTs or the numerous other questions laboratories will have, will be handled under MDUFA V.  Even if MDUFA VI were to allow the hiring of a significant number of new personnel, implementation of the Proposed Rule would begin before those employees arrive.

OHT-7’s well documented meltdown during the COVID-19 public health emergency should serve as an object lesson.  The massive onslaught of EUA submissions, in part caused by FDA’s decision to not exercise enforcement discretion for LDT-based COVID-19 tests, led FDA to decline most pre-submissions and to delay review of most submissions for non-COVID-19 IVDs for many months.[23]  This significant disruption to the broader IVD industry was triggered by an increase of approximately 1,200 submissions annually.[24]  These submissions all related to a single disease.  FDA’s own estimates would result in an influx of premarket submissions, in a six-month period, that would be 40 times greater than the number of COVID submissions and related to an extraordinarily diverse set of diseases and conditions.

Nor can FDA simply reallocate staff and resources from other, non-IVD product areas, as it did during COVID-19.  The requirements and data specific to in vitro diagnostics are unlike those for other device types.  Further, even if all CDRH review staff were reallocated to OHT7 to support this effort, it would still be insufficient given the vast volume of submissions that are expected.

The bottom line is this: without far better resource planning, this massive regulatory undertaking is going to be a disaster for all stakeholders, including FDA, industry, health care systems, providers and, most importantly, patients.  Certain points are indisputable.  First, under FDA’s own, extremely conservative projections there will be an exponential increase in submissions for diagnostic tests.  Second, based on years of experience, it would be hopelessly optimistic to expect the Third-Party Review Program to provide any meaningful relief.  Third, even with user fee support, it will be extremely challenging for FDA to recruit, hire, train, and manage the staff needed to cope with an unprecedented onslaught of submissions.  Fourth, the inability to manage this influx will harm the diagnostic industry, including manufacturers of distributed IVD products.

Without proper preparation one of two things will happen: (1) the regulatory review of non-LDT premarket submissions will come to a halt, or (2) there will be significant delays in the implementation of the final rule.  We do not expect that the broader IVD  industry will tolerate the first, particularly in light of the MDUFA VI negotiations that would be on-going leading up to the time at which labs will be required to file premarket submissions.  Thus, it is likely that FDA will have to push out the timelines for review of LDT premarket submissions to align with its available resources.  It would be far better for everyone if FDA acknowledged this reality now, and significantly extended the timelines for implementation.

As we explained in our comments (here), FDA should not finalize the proposed regulation.  If it does, instead of requiring submissions and then hoping to obtain resources and the necessary congressional authorizations, FDA should have a clear plan for obtaining the required resources.  The failure to do so is likely to result in chaos for all diagnostic products.

[1] https://www.fda.gov/news-events/fda-meetings-conferences-and-workshops/modernizing-fdas-data-strategy-06302020-06302020#:~:text=Data%20is%20at%20the%20heart,making%20and%20public%20health%20mission.

[2] U.S. Food & Drug Administration (FDA), II. Preliminary Regulatory Impact Analysis, Reference 34, Laboratory Developed Tests Proposed Rule, Docket No. FDA-2023-N-2177, at 21 (Oct. 4, 2023) [hereinafter PRIA], https://www.regulations.gov/document/FDA-2023-N-2177-0077. (“Laboratories that meet these requirements are the only laboratories that can perform LDTs under CLIA regulations, because LDTs are considered high complexity tests”)

[3] S&C’s Quality, Certification and Oversight Reports (QCOR), Active CLIA Laboratory Search Database, https://qcor.cms.gov/advanced_find_provider.jsp?which=4&backReport=active_CLIA.jsp.

[4] PRIA at 28.

[5] Id. at 75.

[6] 88 Fed. Reg. 68006, 68012 (Oct. 3. 2023) (hereinafter the “Notice of Proposed Rule Making”).  Notice of Proposed Rule Making Reference 1 “Grand View Research, “Laboratory Developed Tests Market Size, Share & Trends Analysis Report By Technology (Immunoassay, Molecular Diagnostics), By Application (Oncology, Nutritional & Metabolic Disease), By Region, and Segment Forecasts, 2023–2030: Report Summary,” available at https://www.grandviewresearch.com/industryanalysis/

laboratory-developed-tests-market-report (last accessed on Nov. 20, 2023) (“The lack of an equivalent IVD on the market is the primary reason labs develop LDTs.”)

[7] PRIA. at 28.

[8] FDA assumes that user fees will cover much of the increased costs. These fees, however, do not cover all costs. FDA does not discuss the consequences of a shortfall in congressional appropriations, which is a foreseeable risk.

[9] FDA anticipates the beginning of the MDUFA VI user fee cycle aligning with Stage 4 – FDA’s end of its enforcement policy for high-risk LDTs.  FDA, Transcript of CDRH Webinar regarding Proposed Rule: Medical Devices; Laboratory Developed Tests, at 9-10 (Oct. 31, 2023), https://www.fda.gov/media/173623/download?attachment.

[10] Id. at 9.

[11] Jeffrey N. Gibbs, Allyson B. Mullen & Melissa Walker, 510(k) Statistical Patterns, MD+DI (Dec. 2, 2014), https://www.mddionline.com/news/510k-statistical-patterns.

[12] FDA, Third Party Review Organization Performance Report (version 1 of FY2022, Q4), at 38, https://www.fda.gov/media/162658/download?attachment

[13] See id.; FDA, Performance Report to Congress: Medical Device User Fee Amendments FY 2022, at 13-18, https://www.fda.gov/media/167825/download?attachment.

[14] FDA, 510(k) Premarket Notification Search Database (last updated Nov. 13, 2023), https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfPMN/pmn.cfm. Searches were done for all IVD panels: immunology, microbiology, clinical chemistry, pathology, toxicology, hematology, and molecular genetics.

[15] 21 U.S.C. § 360(m)(a)(3).

[16] FDA, Transcript of CDRH Webinar regarding Proposed Rule: Medical Devices; Laboratory Developed Tests, at 9-10 (Oct. 31, 2023), https://www.fda.gov/media/173623/download?attachment.

[17] FDA, News Release, FDA unveils a streamlined path for the authorization of tumor profiling tests alongside its latest product action (Nov. 15, 2017), https://www.fda.gov/news-events/press-announcements/fda-unveils-streamlined-path-authorization-tumor-profiling-tests-alongside-its-latest-product-action.

[18] Compare FDA, Current List of FDA-Recognized 510(k) Third Party Review Organizations (updated July 31, 2023), https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfthirdparty/accredit.cfm  [https://web.archive.org/web/20230803134353/https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfthirdparty/accredit.cfm], with FDA, Current List of FDA-Recognized 510(k) Third Party Review Organizations (updated Nov. 13, 2023), https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfthirdparty/accredit.cfm?party_key=7.

[19] FDA, Third Party Review Organization Performance Report (version 1 of FY2022, Q4), at 38, https://www.fda.gov/media/162658/download?attachment.

[20] PRIA at 22.

[21] Total number of submissions from PRIA estimates less 3% of 510(k)s divided by the annual number of submissions, given that all of these submissions are slated to be filed within six months of each other under the proposed rule.

[22] FDA, Financial Report to Congress: Medical Device User Fee Amendments of 2017 FY 2022, at 27, https://www.fda.gov/media/165116/download?attachment.

[23] https://www.fda.gov/news-events/fda-voices/year-pandemic-how-fdas-center-devices-and-radiological-health-prioritizing-its-workload-and-looking

[24] “[W]e continue to receive more than 100 IVD pre-EUA and EUA submissions per month.” See Jeff Shuren & William Maisel, Looking Ahead to 2022 as FDA’s Center for Devices and Radiological Health Manages a Sustained Increase in Workload, FDA Voices (Dec. 21, 2021), https://www.fda.gov/news-events/fda-voices/looking-ahead-2022-fdas-center-devices-and-radiological-health-manages-sustained-increase-workload.

The annual Enforcement, Litigation, and Compliance Conference put on by the Food and Drug Law Institute (“FDLI”) took place in Washington this week. There were too many interesting panels and discussions to mention them all, but presentations about DOJ’s and FDA’s coordination deserve some special mention.

In his conference keynote address, Arun Rao—the Deputy Assistant Attorney General for DOJ’s Consumer Protection Branch—provided an overview of DOJ’s year in FDA enforcement. This speech is an annual victory lap for CPB’s enforcement achievements, and this year included much discussion about the Branch’s Voluntary Self Disclosure (VSD) policy. We’ve blogged on VSDs previously here and here, as the application of the VSD for FDA-regulated industry has been vexing. DOJ has provided few bright lines about when conversations and disclosures to FDA may also satisfy its own VSD requirements. Meeting those requirements might, as Rao said, make the difference between facing an indictment and receiving a declination.

At FDLI, Rao clarified that CPB’s policy dictates that “to receive credit for a disclosure, the disclosure must be made directly to the branch.” He also noted that the VSD “does not supplant existing obligations to report to appropriate regulatory agencies, nor is it intended to alter those existing practices and channels of communication.” This amounts to the clearest confirmation we’ve seen that companies in the FDA-regulated space face parallel reporting obligations when they deal with Federal oversight of FDCA violations and hope to short-circuit a potential criminal prosecution.

A panel on Day 1 discussed FDA’s efforts to ramp up domestic and foreign inspections following the COVID-19 slow down. A regulatory consultant on the panel made a recommendation to FDA that it lean more heavily on Remote Interactive Evaluations (“RIEs”) to help alleviate its backlog—of which HPM recently learned the Agency had only conducted 10 in the last 30 months for purposes of drug manufacturing compliance. Given that FDORA recently expanded FDA’s RIE authority to include device facilities, we may see more activity from FDA on this in the near future.

The last panel of Day 1 provided a bookend to the keynote’s clarifications about parallel disclosure. Panelists from CPB, FDA, and the Federal Trade Commission (FTC) all amplified the enduring government policy that they expect companies in the food and drug space have robust and legitimate compliance programs. And not to be left out of the conversation, FTC’s Associate Director on the panel noted twice that the Commission intends to be a player in this game as well and has robust plans to team with DOJ and use its enforcement authority over advertising for health products. The Associate Director highlighted FTC’s recent notice of penalty offenses sent to nearly 700 companies—many of whom may consider FDA to be their primary regulatory body—as a key example of FTC’s renewed activity in this space. She also hinted that such notices may become more common following the 2021 AMG v. FTC Supreme Court decision stripping FTC of its ability to obtain restitution or disgorgement under Section 13(b) of the Federal Trade Commission Act.

On Day 2 of the conference, HPM’s Anne Walsh moderated a fascinating conversation about due diligence investigations relating to FDA-regulated industries. Ms. Walsh is a nationally recognized expert in such matters, and the discussion combined the nuances of complex regulations, the prevailing ethos of both biotech and medtech, and securities law. Also on Day 2, HPM’s John Claud was part of a discussion of some of 2023’s more prominent enforcement resolutions, offering perspective from his vantage point as a former federal prosecutor.

The conference closed with an energized luncheon lecture that featured some amplified opinions that FDA and DOJ need to step up their criminal enforcement of bad actors in the industry, potentially by delegating the criminal enforcement authority currently centralized with OCI to FDA’s field offices. As that may develop, the 2024 edition of this conference will be worth coming back for.

On Monday, Hyman, Phelps & McNamara, P.C. filed comments on behalf of the Coalition to Preserve LDT Access and Innovation in response to FDA’s proposed rule to regulate laboratory developed tests (LDTs) as devices.  Weighing in at nearly 60 pages, the comments detail extensive flaws in the proposed regulation.  We’ve previously written about this proposed rule (see here, here, and here) which would transform the diagnostic market in the United States.

As a threshold matter, FDA lacks the power to regulate tests developed and used in a laboratory.  The Federal Food, Drug, and Cosmetic Act simply did not confer that power upon FDA.  Congress has, on multiple occasions, considered legislation that would have given FDA that authority, but it never did so.  FDA cannot now unilaterally assume power that Congress chose not to confer in the first instance.

FDA tries to justify the proposed rule by claiming that LDTs present significant risks, and that the solution is to regulate them all as medical devices.  The support FDA offers for its proposition – which comes from a mixture of sources, including a few published scientific articles, newspaper stories, FDA’s experience with LDTs with COVID, anecdotes, older case studies, and class action lawsuits – is singularly unconvincing.  For example, one of the primary articles cited by FDA to show poor laboratory performance of LDTs has been the subject of a reanalysis by the College of American Pathologists that found “excellent laboratory performance” of molecular oncology proficiency testing for cancer-associated genetic variants.  Similarly, a newspaper article cited by FDA, which asserted risks from Non-Invasive Prenatal Testing, was rebutted by multiple peer-reviewed studies and is at odds with the conclusion reached by medical professionals, such as the American College of Medical Genetics.  Although the sources cited by FDA differ, there is a common denominator: FDA never acknowledges the existence of contrary evidence.

The proposed rule similarly ignores the benefits of LDTs.  Tests such as genetic testing of prospective parents, prenatal screening, cancer prognosis, and testing for rare diseases play a critical role in the health care system.  Reading the proposed rule, one would never know why LDTs even exist, since there is no reference to their benefits.  Similarly, there is no recognition of the harm that would occur if many of these tests were to vanish because laboratories cannot sustain the significant economic burdens resulting from the new regulatory requirements.

FDA’s assessment of the costs of regulating LDTs as devices is similarly problematic.  The agency’s Preliminary Regulatory Impact Assessment (PRIA) repeatedly either understates the costs of certain tasks or ignores them altogether.  For example, in FDA’s “primary” case, laboratories would be expected to spend eight hours a year on management reviews.  That projection is ludicrously low, and one can only wonder how FDA could expect a compliant company to spend so little time on this function.  The PRIA also omits entire other categories of costs, such compliance with 21 C.F.R. Part 11, the need to hire new laboratory personnel, and engage outside experts such as Contract Research Organizations, biostatisticians, lawyers, and software engineers.

Although the proposed rule cites FDA’s reports of allegedly flawed Emergency Use Authorizations for COVID-19 tests submitted by labs – a complaint that ignores the extraordinary and non-representative circumstances presented by COVID – FDA apparently has developed its own post-COVID brain fog concerning the Agency’s inability to handle the deluge of EUAs during the course of the pandemic.  And yet, under the proposed rule, FDA is expecting a far greater surge, for a longer period of time, of far more complicated submissions.  Based on the COVID experience, this is a recipe for gridlock and chaos. FDA seems unconcerned by this prospect.

In sum, we think the proposed rule is a mistake.  But don’t take our word for it in this summary; read the other 6,731 comments submitted to FDA’s docket.   Speaking of which, given the statements FDA has made to date, we fully expect FDA to issue a final rule; while we cannot predict when, one press report predicted it could happen as soon as May 2024. Although the Administrative Procedure Act requires a federal agency to review and carefully consider all comments, it is inconceivable that FDA could read, let alone reflect on, this volume of comments within that timeframe.  Nevertheless, whenever the final rule is issued, there is very likely to be litigation.  For the reasons laid out in our comments, as well as the many others that objected to FDA’s proposal, the comments filed with FDA will provide plaintiffs with numerous bases for judicial challenge.

Separate decisions by federal district courts in Texas and Puerto Rico in the past two months provide cautionary tales for every pharmacy and wholesale distributor dispensing or distributing controlled substances.  On October 10th, based on ability to pay, the U.S. District Court for the Western District of Texas imposed a $275,000 civil penalty on Zarzamora Healthcare LLC, in San Antonio, and its pharmacist-owner.  Federal Court Orders San Antonio-Area Pharmacy and Pharmacist to Pay $275,000 Civil Penalty in Case Alleging Unlawful Opioid Distribution, Oct. 11, 2023 (DOJ Press Release).  Several weeks later, also based on ability to pay, the U.S. District Court for the District of Puerto Rico entered a consent decree requiring Drogueria Betances LLC (“Betances”) to pay $12,000,000.  Federal Court Orders Puerto Rico Pharmaceutical Distributor to Pay $12 Million in Connection with Alleged Failure to Report Suspicious Orders of Pharmaceutical Drugs and Other Controlled Substance Violations, Nov. 6, 2023 (DOJ Press Release).

But in addition to imposing civil penalties for alleged failure to comply with their obligations under the federal Controlled Substances Act and DEA regulations, the courts mandated how those registrants must handle controlled substances going forward.  Pharmacies and distributors should be aware of the noncompliant activity alleged in these cases and tailor their own compliance programs to include at least some of the requirements imposed by the courts.

This post examines the Zarzamora pharmacy and prescribing red flags decision.  Our post on the Betances distributor decision and suspicious orders will appear in the near future.

Part One:  Zarzamora and Prescribing Red Flags

The government alleged that Zarzamora Healthcare, dba Rite-Away Pharmacy and Medical Supply #2 and its pharmacist-owner (collectively “the Defendants”) repeatedly dispensed opioids and other controlled substances in violation of the CSA “by filling prescriptions while ignoring “red flags,” – that is, obvious indications that the prescriptions were not for any legitimate medical use.”  Zarzamora Press Release.  The government alleged that the Defendants specifically failed to exercise their corresponding responsibility to ensure that the controlled substance prescriptions they filled were issued for a legitimate medical purpose by practitioners acting in the usual course of their professional practice, and by filling the prescriptions outside the usual course of their professional pharmacy practice.  Consent Agreement and Final Judgment 2-3.  The government asserted additional allegations that are outside our scope.

Pharmacists’ Corresponding Responsibility

A controlled substance prescription, to be valid, must be issued for “a legitimate medical purpose by an individual practitioner acting in the usual course of [their] professional practice.”  21 C.F.R. § 1306.04(a).  The prescribing practitioner is responsible for proper prescribing and dispensing but a corresponding responsibility rests the pharmacist filling the prescription.”  21 C.F.R. § 1306.04(a).  A prescription not issued in the usual course of professional treatment or in legitimate, authorized research is not a prescription within the meaning of the CSA and the pharmacist knowingly filling it, along with the prescriber issuing it, is subject to penalties.  21 U.S.C. § 829; 21 C.F.R. § 1306.04(a).

DEA has interpreted pharmacists’ corresponding responsibility as prohibiting the filling of a prescription where the pharmacist or pharmacy “knows or has reason to know” that the prescription is invalid.  Holiday CVS, L.L.C. d/b/a CVS/Pharmacy, Nos. 219 and 5195; Decision and Order, 77 Fed. Reg. 62,316, 62,342 (Oct. 12, 2012).  “[W]hen the circumstances surrounding the presentation of a prescription would give rise to suspicion in a ‘reasonable professional,’ there is a duty to question the prescription.”  Holiday CVS, 77 Fed. Reg. at 62,341.

DEA precedent has evolved to define corresponding responsibility as requiring a pharmacy to resolve red flags before filling a prescription: “[A] pharmacist or pharmacy may not dispense a prescription in the face of a red flag (i.e., a circumstance that does or should raise a reasonable suspicion as to the validity of a prescription) unless he or it takes steps to resolve the red flag and ensure that the prescription is valid.”  Holiday CVS, 77 Fed. Reg. at 62,341.  A red flag does not prohibit a pharmacist from filling a prescription but is a potential concern with the prescription that the pharmacist must address and resolve.  If the pharmacist can resolve it, they must make a record of the resolution.

Prescribing Red Flags

The government alleged that from at least 2017 to April 2021 Defendants knowingly filled controlled substance prescriptions “that raised obvious ’red flags’ of potential abuse or diversion.”  Complaint ¶ 55.  The government further alleged that “Defendants deliberately ignored or were willfully blind to circumstances indicating that controlled substance prescriptions were not issued for a legitimate medical purpose or were issued outside the usual course of professional practice.”  Id.  By doing so they “violated the pharmacist’s corresponding responsibility under 21 C.F.R. § 1306.04(a), and Defendants acted outside the usual course of professional pharmacy practice in violation of 21 C.F.R. § 1306.06.”  Id.

The Zarzamora decision identifies the following as prescribing red flags at issue in the case:

1.  Unusual Amounts and Dosages

Dispensing high doses of opioids in quantities far exceeding the daily morphine milligram equivalent (“MME”) dose recommended by the Centers for Disease Control and Prevention (“CDC”).  Complaint ¶ 57.  (The CDC has advised clinicians to carefully assess increasing total opioid dosage to greater than 50 MMEs per day).

2.  Lack of Individual Drug Therapy

Pattern prescribing can occur when physicians prescribe the same drugs, in the same quantities, in the same strengths to their patients, or a patient receives the same controlled substances repeatedly with no adjustment or change in therapy.  Complaint ¶ 58.  Individuals at the same household receiving the same or substantially similar controlled substance prescriptions likewise indicates lack of individual treatment.”  Complaint ¶ 59.

3.  Routinely Abused Controlled Substances

Dispensing controlled substances when a prescriber exhibits a pattern of routinely prescribing controlled substances known to be abused such as opioids, benzodiazepines, muscle relaxers, psychostimulants, and/or codeine-containing cough syrups, or any combination of these drugs.  Complaint ¶ 60.

4.  Prescriptions Containing No Diagnosis or Intended Use

Controlled substance prescriptions issued with a non-specific diagnosis or no diagnosis.  Complaint ¶ 61.

5.  Unusual Geographic Distances

Individuals travelling long distances to the pharmacy from their home, the prescriber or both, including passing other pharmacies.  Complaint ¶ 62.

6.  Controlled Substances Received from Multiple Providers

Individuals presenting controlled substance prescriptions from multiple prescribers may indicate “doctor shopping.”  Providers should be aware of the other drugs prescribed to their patients.  Complaint ¶ 63.

7.  Immediate Release Opioids

A prescription for immediate release (“IR”) opioids on a set schedule or for a certain length of time.  An extended release (“ER”) opioid in legitimate pain management generally accompanies an IR opioid, with patients taking the ER opioid on a set schedule and the IR opioid as needed.  Complaint ¶ 64.

Future Dispensing

The court mandated specific requirements for the pharmacy’s future dispensing , requiring reviews and monitoring of those activities for seven years.  The Consent Agreement permanently restrained and enjoined the Defendants from administering, dispensing, or distributing:

1. Any controlled substance earlier than two days prior to completion of the intended duration of the previous fill;
2. Concurrent opioid and gabapentin medications unless approved by the same prescriber and the pharmacy has a documented treatment plan on file describing the basis for concurrent use;
3. Concurrent opioid and benzodiazepine medications unless approved by the same prescriber and the pharmacy has a documented treatment plan on file describing the basis for concurrent use. In addition, the pharmacy must counsel the patient regarding the FDA Boxed Warning on concomitant use and provide a written copy;
4. One or more opioids for a patient that together exceed 90 MMEs per day, except for patients who have current treatment plans on file indicating the medications are necessary for end-of-life palliative purposes;
5. More than one prescribed IR opioid for a patient except for patients who have current treatment plans on file indicating the medications are necessary for end-of-life palliative purposes;
6. More than one prescribed ER opioid to a patient except for patients who have current treatment plans on file indicating the medications are necessary for end-of-life palliative purposes;
7. Oxycodone single-entity opioids in excess of 15 mgs.;
8. Any schedule II drug to a patient paying in cash, cash equivalents, or otherwise out-of-pocket, except where the pharmacy has documented that the customer is not covered by any insurance plan or other third-party payor for prescription services;
9. IR opioids for more than 90 days unless the pharmacy first obtains a written treatment plan from the prescribing physician;
10. Methadone in combination with other opioids unless the pharmacy first obtains a written treatment plan from the prescribing physician;
11. Opioids to any person unless the pharmacy first obtains a written treatment plan from the prescribing physician;
12. Controlled substances from multiple prescribers unless the pharmacy first obtains written documentation from each prescriber acknowledging treatment with the controlled substances by other prescribers;
13. Controlled substances totaling greater than 60 MMEs per day unless the pharmacist-in-charge (“PIC”) first provides counseling on the risk of overdose and has offered naloxone. (For patient counseling, the pharmacy must maintain a handwritten logbook containing patient’s name, date of birth, address, telephone number, date of counseling, and signed acknowledgment of counseling by the patient, the PIC, and an additional pharmacy employee as witness);
14. The following combinations, unless the pharmacy has contacted the prescribing practitioner and received verbal confirmation of issuing the prescriptions’ and the diagnoses supporting the treatment plan or a written, signed explanation of the purpose of the prescriptions:
    • Opioids and gabapentin, pregabalin, or topiramate;
    • A musculoskeletal agent and an opiate; or
    • An opiate and one or more opiate potentiators.

Consent Agreement and Final Judgment ¶ 10.a.-n.

Periodic Reviews

In addition, the Defendants must conduct periodic comprehensive reviews of controlled substance dispensing and compliance with the CSA and its regulations for seven years that include electronic prescription data and patient profiles, hardcopy prescriptions, treatment plans and correspondence with prescribers, and internal notes regarding resolution of red flags, and responses to questions or clarifications posed to any prescriber, as necessary.  Within one month of each comprehensive review, the pharmacy must prepare a written report identifying prescriptions filled that were not issued for a legitimate medical purpose or filled outside the usual course of the professional practice of pharmacy, and prescriptions in violation of the permanent injunction terms.  Consent Agreement and Final Judgment ¶ 14.a.-b.

The order also enjoins the pharmacist-owner from serving as a PIC at any other pharmacy for seven years.  Consent Agreement and Final Judgment ¶ 17.

****

Pharmacists and pharmacy management should pay heed to these prescribing red flags, resolve them when they appear and document their resolution.  Part Two will focus on the Betances decision and suspicious controlled substance orders.

The Inflation Reduction Act (IRA) significantly changed the Part D benefit. As part of this change, the Coverage Gap Discount Program (CGDP), a program that has existed since 2011, will sunset on December 31, 2024, and be replaced by the Medicare Part D Manufacturer Discount Program (the “Discount Program”). On November 17th, CMS issued its final guidance on the Discount Program in which it responded to public comments and provided updated guidance for the Discount Program for 2025 and 2026.

The Discount Program is similar to the CGDP with respect to several requirements and operational processes, and CMS will implement it in a similar manner. Below, we provide a high-level summary of the Final Guidance, focusing on the legal and regulatory updates from the May 2023 draft guidance. We do not address the technical and administrative details of the Discount Program here.

Sunsetting of Coverage Gap Discount Program: The 70% coverage gap discount under the CGDP will continue until December 31, 2024. CMS will send the final manufacturer invoice for discount liabilities accrued by then on April 30, 2028. Final Guidance at 2.

Conditions for Coverage after January 1, 2025: Any manufacturer that wishes to have its applicable drugs covered under Medicare Part D after January 1, 2025 (“participating manufacturers”) must execute a Discount Program agreement with CMS by March 1, 2024. Id. at 35. Applicable drugs are covered Part D drugs approved under a new drug application (NDA) or biologics license application (BLA) that are on a Part D plan formulary or for which benefits are available under a Part D plan, including through an exception or appeal, but do not include drugs selected under the Medicare Drug Price Negotiation Program for a Maximum Fair Price (MFP) applicability year. See id. at 54. The manufacturer’s agreement must cover all its labeler codes that contain an applicable drug or a selected drug. Id. at 33-34. All labeler codes that are covered by Discount Program agreements will be distributed to PDP sponsors and posted on the CMS website. Id. at 21.

The Final Guidance clarifies that, although both applicable drugs and selected drugs must be covered under a Discount Program agreement, selected drugs are excluded from the definition of an applicable drug, so they are not subject to applicable discounts during an MFP applicability year. Id. at 20-21. Non-applicable drugs (e.g., generics) will be coverable under Part D regardless of the manufacturer’s participation in the Discount Program. See id. at 22. CMS expects to provide additional guidance on payments, direct and indirect remuneration (DIR), and calculating subsidies for selected drugs in the coming months. Id. at 10.

Applicable drugs or selected drugs that are not covered by a Discount Program will not be covered by Part D. Although the IRA allows CMS to cover applicable drugs that CMS determines are “essential to the health of [Part D] beneficiaries” even if they are not under a manufacturer’s Discount Program agreement, CMS does not interpret this exception as allowing the agency to proactively create a list of essential medicines that can circumvent the Discount Program. Instead, CMS anticipates using this exception on rare occasions. Id. at 2-3.

Overview of Medicare Part D Design Changes: Beginning in 2025, the Medicare Part D benefit will consist of a 3-phase benefit:

• the deductible, during which the enrollee is responsible for 100% of their gross covered prescription drug costs.
• the coverage phase, during which the enrollee pays a 25% coinsurance, participating manufacturers cover 10% of the negotiated price through the Discount Program (or less if a manufacturer phase-in applies) and Part D plans (PDPs) cover the remainder, typically 65% (but more if a phase-in applies). at 6. This phase extends up to the out-of-pocket (OOP) maximum.
• The catastrophic coverage phase, during which the enrollee pays 0%, participating manufacturers typically provide a 20% discount and PDPs typically cover 60% of the costs for all covered Part D drugs. Medicare pays the remaining 20% reinsurance subsidy for applicable drugs. This reinsurance subsidy increases to 40% for selected drugs and non-applicable drugs, where no manufacturer discounts apply. at 20.

Discount Program Agreements and Requirements: CMS published the Discount Program agreement without the opportunity for public comments. It shares many of the same requirements of the CGDP: manufacturers must provide and maintain updated information on their labeler codes and NDCs; they must provide the applicable discount by making payments within 38 days after receiving the invoice; and they must comply with the program’s legal, regulatory, administrative and technical requirements.

Manufacturers must sign the agreement by March 1, 2024, to participate in the 2025 plan year. The initial term is valid for 12 months and the agreement will automatically renew each January 1 thereafter. For calendar year 2026 and subsequent years, an agreement will become effective on the first day of a calendar quarter that is at least 60 days after a manufacturer has signed the agreement. Id. at 35. An initial term that does not start on January 1 will end on December 31^st of the following year and then follow the yearly renewal cycles thereafter.

At a minimum, the manufacturer’s agreement must cover all its labeler codes that contain an applicable drug or a selected drug, and update CMS within 3 business days of being assigned a new labeler code. Id. at 34-35. Manufacturers must collect, maintain, and have available appropriate labeler code data needed to comply with the Discount Program. These may include data on changes in corporate ownership, or data on any new, transferred, or discontinued labeler codes. Manufacturers must also ensure that all electronic FDA listings and all NDC listings with the electronic database vendors used to process pharmacy claims, including information about discontinued drugs, are up to date for all applicable drug and selected drug NDCs.

CMS can terminate an agreement for any knowing and willful violation of the requirements of the agreement. 42 U.S.C. § 1395w-114c(b)(4)(B)(i). The agency may refuse to enter into a Discount Program agreement with a manufacturer that was terminated from the CGDP for a similar reason. Final Guidance at 34. For-cause terminations by CMS are subject to a hearing and a review by the CMS Administrator. Manufacturers can terminate their participation in the Discount Program at any time for any reason, subject to the requirements related to the effective date of the termination. Id. at 11. The primary manufacturer of a selected drug may also request CMS to terminate its agreement if they are unwilling to participate in the Medicare Drug Price Negotiation. Id. at 36-37.

Use of a Third-Party Administrator: CMS will continue to use an accredited Automated Clearing House (ACH) vendor Third Party Administrator (TPA) for the new Discount Program. Manufacturers will have to enter into a TPA agreement, which CMS has provided on its website, in order to access the Discount Program payment portal. The TPA will use PDE data to invoice participating manufacturers and plan sponsors and to report ACH activity to CMS.

Applicable Discounts: The manufacturer discounts apply regardless of whether the enrollee is entitled to low-income subsidies (LIS) that pays their deductible, has an enhanced benefit plan with a reduced or no deductible, or uses a drug that is not subject to the deductible (e.g., covered insulin product or vaccine). Id. at 23. The value of the applicable discounts applies before the application of any available supplemental benefits that Part D plans offer, and before any coverage or financial assistance under another plan (e.g., state pharmaceutical assistance programs). Id. at 30-31.

After 2024, the PDP sponsors will pay the enrollees’ 5% coinsurance during the catastrophic phase. Once participating manufacturers start making discounts available, those discounts will not count towards the enrollee’s incurred costs. Finally, claims that straddle more than one phase will be apportioned to those respective phases and the discount applicable for those phases will apply.

Phase-Ins:  To ease the transition to 10% and 20% discounts, the IRA has two phase-in programs for certain manufacturers. Each phase-in policy allows eligible manufacturers to build up in a stepwise manner to the 10% and 20% applicable discounts by 2029 and 2031, respectively. Each phase-in program requires the manufacturer to have had a Coverage Gap Discount Program agreement in effect in 2021, and only covers applicable drugs that have been in the market as of August 16, 2022 (i.e., had Part D expenditures on or before August 16, 2022). Id. at 24.

The first phase-in allows “specified manufacturers” to phase-in those discounts that apply to enrollees who receive LIS subsidies (this was not the case for the CGDP). A specified manufacturer is one that:

• Had a CGDP for plan year 2021 (or had its labeler codes listed in another manufacturer’s CGDP)
• Its total Part D expenditures under such 2021 CGDP represented less than 1.0% of the total expenditures for all Part D drugs in 2021.
• Its total expenditures for all specified drugs that are single source drugs or biologics for which payment may be made under Part B in 2021 represented less than 1.0% of the total expenditures for all drugs or biologics under Part B in 2021.
  • A “specified drug” means, for 2021, an applicable drug that is produced, prepared, propagated, compounded, converted, or processed by a specified manufacturer.

The second phase-in allows “specified small manufacturers” to phase-in their discounts. A specified small manufacturer is one that is a specified manufacturer and:

• Had total expenditures under Part D for any one of its specified small manufacturer drugs covered under a CGDP for 2021, and covered under Part D in 2021, equal to or greater than 80% of the total expenditures for all of its specified small manufacturer drugs covered under Part D in 2021.
  • A “specified small manufacturer drug” means, for 2021, an applicable drug that is produced, prepared, propagated, compounded, converted, or processed by a specified small manufacturer.

All manufacturers that sign a Discount Program agreement in time to participate in any year of the phase-in will be considered for the phase-in, and do not need to submit a separate application. Final Guidance at 27. CMS will identify which manufacturers qualify for these phase-ins by analyzing Medicare Part B claims data, Part D PDE data, and ownership information submitted by manufacturers. CMS requires the ownership information in order to apply the IRA’s aggregation rule. See 42 U.S.C. § 1395w-114c(g)(4)(B)(ii)(II)(bb). Under this rule, CMS will consider all entities, including corporations, partnerships, proprietorships, and other entities treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 as one manufacturer. Phase-in Memorandum at 2. CMS will require participating manufacturers to submit and attest to this ownership information in the Health Plan Management System (HPMS). Final Guidance at 27. CMS issued instructions for manufacturers on how to submit this required ownership information. Participating manufacturers that have concerns with CMS’ calculation have the opportunity to ask CMS for a recalculation within 30 days of the eligibility determination. Id. at 29.

CMS also provides manufacturers a “special opportunity” to get a preliminary (i.e., before such manufacturer signs a Discount Program agreement) and non-binding of their phase-in eligibility if they provide CMS all ownership information by December 8, 2023. Id. at 28. CMS will provide this by January 2024 but will not extend the recalculation option to manufacturers that have not signed a Discount Program agreement.

Point-of-Sale (POS) Discounts and Payment Processes: As under the CGDP, PDP sponsors will provide applicable discounts at the POS. CMS confirmed in the Final Guidance that manufacturers must also provide discounts for out-of-network claims or in-network paper claims through direct member reimbursements. Id. at 8. CMS will pay the plans through monthly prospective payments based on the estimated per-member per-month costs submitted in plan bids. CMS recommended plans to incorporate all new risks they anticipate under the Discount Program into their annual bids. Id. at 9.

The plans must report the applicable discounts on the PDE records associated with such discounts to allow CMS to reconcile the prospective payments and issue quarterly invoices to the manufacturers. CMS intends to provide additional guidance on PDE data fields and calculating discounts on more complex claims. See id. at 8, 31. The pharmacy prompt payment requirements from the CGDP will also apply to the Discount Program.

Audits and Compliance Monitoring: Using its discretionary authority under 42 U.S.C. § 1395w-114c(d), CMS will allow participating manufacturers to audit the TPA up to one time per year with at least a 60-day notice. Manufacturers may only review a statistically significant random sample of the TPA data used to determine discounts (which includes claim-level information), and only do so on site, at a location specified by the TPA. CMS may similarly audit participating manufacturers up to once a year to monitor their compliance after a similar 60-day notice of a reasonable basis for the audit. CMS also intends to implement a compliance monitoring program through future regulations or guidance.

Dispute Resolution: CMS will set up a dispute resolution mechanism to help resolve disagreements between CMS, Plan D sponsors, and manufacturers over invoice data received from TPAs. This will be a 3-level process analogous to the one set up for the CGDP (initial dispute; independent review entity; CMS administrator). This dispute resolution system will not cover CMS decisions to terminate a Discount Program agreement or CMS decisions regarding phase-in program eligibility. Manufacturers are not permitted to withhold payment for any disputed invoiced amount, even while a dispute is pending, with the sole exception of a dispute over NDCs that do not correspond with the labeler codes covered under manufacturer’s agreement. Id. at 40. CMS will release requirements and operational guidance in the coming months.

Civil Money Penalties: The statute provides for civil monetary penalties (CMPs) each time a participating manufacturer fails to provide discounts to applicable beneficiaries. 42 U.S.C. § 1395w-114c(e). A participating manufacturer fails to provide this discount each time they fail to make a payment within 38 days of receiving an invoice. Final Guidance at 52-53. The penalty is equal to the amount outstanding plus 25% of such amount. 42 U.S.C. § 1395w-114c(e)(1). Although the statute states that the CMP amount equal to the outstanding amount “will be used to pay the discounts which the manufacturer had failed to provide,” § 1395w-14c(e)(1)(A), CMS states in the Final Guidance that CMS “may” reduce the CMP “by any amount the manufacturer has paid after 38 calendar days.” Id. at 53.

A manufacturer with a delayed payment will first receive a Notice of Non-Compliance and have 5 business days to cure it or challenge it. If the manufacturer can cure the delay show that it was due to reasons beyond the manufacturer’s control, CMS will generally not assess a CMP. Final Guidance at 15. CMS will not consider insufficient compliance controls as reasons enough to avoid the penalties. If CMS determines that CMPs do apply, the agency will send a written notice of this determination. The manufacturer will have 60 days to appeal the CMP before an administrative law judge (ALJ).

The 2023 Food and Drug Law Institute’s (“FDLI”) Enforcement, Litigation and Compliance Conference will boast two speakers from Hyman, Phelps & McNamara, P.C. (“HPM”), as well as other experts from FDA, DOJ, and the private sector.

HPM Director Anne Walsh will moderate a panel discussion on “Due Diligence and Mitigating Securities Violation Risks for Emerging Life Science and Novel Food Companies.” Ms. Walsh is a nationally recognized expert on FDA enforcement matters across all sectors and has held numerous leadership positions with FDLI and with the Women’s White Collar Defense Association. HPM Counsel John Claud joined the firm last year after a long career with DOJ and will speak on a panel to discuss “Top Cases in Enforcement and Compliance: Challenges to FDA and Other Federal Agency Authority.”

The speaker faculty of top FDA regulatory authorities will share critical insights on foreign and domestics inspections, digital health, DOJ’s compliance guidelines, and data privacy, among many other topics. The conference will also include its annual panel discussion with FDA’s Center Compliance Directors. Arun Rao, the Deputy Assistant Attorney General for DOJ’s Consumer Protection Branch, will deliver the keynote address, and Peter Barton Hutt, Senior Counsel at Covington & Burling LLP, will deliver the Tenth Annual Eric M. Blumberg Memorial Lecture.

The Enforcement, Litigation and Compliance Conference will be held in Washington, D.C. next week, on December 6-7, 2023.  It is attended by experienced professionals in the fields of regulatory, legal, public relations, marketing, and management who work in the pharmaceutical, medical device, diagnostic, biologics, and veterinary medicine industries. The conference is also beneficial for consultants in the areas of advertising, public relations, law, and marketing communications.

In October 2021, FDA and MHRA (United Kingdom’s Medicines and Healthcare products Regulatory Agency) jointly developed 10 guiding principles for the development of Good Machine Learning Practice (GMLP) with the goal of promoting “safe, effective, and high-quality medical devices” that are based on Artificial Intelligence/Machine Learning (AI/ML) technologies.  Guiding Principle 10 focused on monitoring the performance of the models and managing re-training risks.  It stated:

Deployed models have the capability to be monitored in “real world” use with a focus on maintained or improved safety and performance.  Additionally, when models are periodically or continually trained after deployment, there are appropriate controls in place to manage risks of overfitting, unintended bias, or degradation of the model (for example, dataset drift) that may impact the safety and performance of the model as it is used by the Human-AI team.

Since that time, FDA issued a draft guidance for predetermined change control plans (PCCPs) for Artificial Intelligence/Machine Learning (AI/ML) software functions.  See our prior blog post on the topic here.  FDA announced that FDA, Health Canada, and MHRA are jointly publishing guiding principles for PCCPs for AI/ML devices to help stakeholders when developing solutions for these countries. Five guiding principles were identified for PCCPs and relate to being focused, risk-based, evidence-based, transparent, and taking into consideration total product lifecycle management.

Focused and Bounded

This guiding principle recommends that the PCCP describe a specific planned change that is consistent with the claimed intended use and intended purpose of the Machine Learning Medical Device (MLMD).  The plan should identify the methods for verifying and validating the change.  If the change does not meet specified performance criteria, it will not be implemented under the PCCP.

Risk-based

This guiding principle ensures risk management principles are used to evaluate the individual and cumulative changes over the life of the device.

Evidence-based

This guiding principle discusses the generation of evidence for the change.  Data should demonstrate the benefits of the change outweigh the risks and any risk identified are appropriately controlled and mitigated to ensure the device remains safety and effective.  The evidence used to measure the device’s performance should be scientifically and clinically justified, consistent with the level of risk for the proposed change.

Transparency

This guiding principle calls for manufacturers to be transparent with users regarding the device performance before and after the implementation of the change.  Considerations include transparency regarding the data used to develop the change, comprehensive testing of the change, characterizing the performance of the device before and after the change, and plans in place for ongoing monitoring of device performance and communication of any unexpected changes in performance.

Total Product Lifecycle (TPLC)

This guiding principle reminds manufacturers that PCCPs and MLMD changes should be integrated into the lifecycle management of the device and be part of their existing quality system processes including but not limited to risk management and post market monitoring.

FDA considers these guiding principles as complimentary to their recent efforts around PCCPs including their proposed draft guidance on PCCPs. However, FDA’s draft guidance included more requirements around data management practices, re-training practices, and update procedures that are not included in these guiding principles.  Perhaps, that is why the Agency believes these guiding principles, although developed specifically for AI/ML devices, could apply to other devices when developing PCCPs.

A recent review of 510(k) summaries for AI/ML devices show very few have taken advantage of including a PCCPs as companies struggle to apply the recommendations in the draft guidance in a practical manner within their already established design change processes.  For those that have referenced a PCCPs, the 510(k) summaries do include a list of the specific modifications however the explanation of the PCCP itself is vague and high level, simply stating that the modifications will be controlled and implemented in a manner that assures the device is safety and effective, the modification will be analyzed against acceptance criteria which will demonstrate substantial equivalence, and labeling will be provided to the end users to inform them of the changes and characterize the performance. The 510(k) summaries also include details on the planned modification protocols, including an impact assessment to address requirements for data management.  It will be interesting to see how these principals are combined with FDA’s draft guidance in practice and whether this will accelerate the use of PCCPs or increase confusion for industry.

Shortly before the Thanksgiving holiday, FDA announced with no fanfare that it would be holding a Molecular and Clinical Genetics Panel meeting this Wednesday November 29.  The notice (here) indicates that FDA plans for the panel to “discuss and make recommendations on the design of multi-cancer detection (MCD) in vitro diagnostic devices (tests) as well as potential study designs and study outcomes of interest that could inform the assessment of the probable benefits and risks of MCD screening tests.”  It is well known in the industry that FDA has been skeptical of multi-cancer (sometimes also referred to as pan-cancer) tests.  Thus, it’s not entirely surprising that FDA would seek input from a panel on this topic.

What is shocking, however, is that the panel meeting was announced on Monday November 13 and FDA only accepted comments until November 15.  Not surprisingly, there were exactly zero comments received prior to November 15.  We cannot recall any other situation where FDA gave stakeholders precisely two days in which to comment.  FDA offers no explanation for either the short advance notice of the meeting or the two-day comment period.  Although comments submitted after November 15 won’t be presented to the panel, FDA says it will still take them “into consideration.”  The docket will remain open through December 29.

The timing of this meeting has certainly raised more than a few eyebrows, particularly given its relationship to the proposed LDT rule (see our prior posts here, here, and here).  Why is the Agency now in such a rush to understand how MCDs should be validated?  Is it that the Agency is preparing from this question from labs that are currently offering/developing MCDs?  Why are the panelists being given such scant background (a mere 6 pages of substantive information in the executive summary)?   While the topic of MCDs is important, it seems like everyone—regulators, labs, patients—deserve a better process to provide thoughtful, informed feedback on important questions regarding MCDs than an extraordinarily hasty meeting.

FDA’s haste is even more surprising given that CDRH has convened only 5 other panel meetings so far in all of 2023.  Further, CDRH announced another panel meeting the same day as the MCD panel notice (November 13) and yet another panel meeting was announced on the day after the MCD panel notice (November 14).  Both of these other panel meetings are scheduled to be held in February 2024, which is months later than the November 29 MCD panel.

The meeting information, including the short agenda and questions, are posted on FDA’s website (here) along with the zoom link.  We hope that interested parties will tune in and file docket comments to make their voices heard both with regard to the process of holding this rushed meeting but also the substance of the topics to be considered.

Although the Consumer Product Safety Act (CPSA) has been around for over 50 years to “protect the public against unreasonable risks of injury associated with consumer products,” it was not until 2008 that the statute was amended to authorize the Consumer Product Safety Commission (“CPSC”) to impose criminal liability against individual directors, officers, or agents of a corporation for violating the CPSA.  See 15 U.S.C.  § 2070.  Now, fifteen years later, on Nov. 17, 2023, the Department of Justice (DOJ) announced the first-ever conviction of two corporate executives in a criminal prosecution for failure to report a consumer product defect under the CPSA.

What led to this conviction?  It is a long story that started more than a decade ago.  It involved Gree Electric Appliances Inc. of Zhuhai, Hong Kong, Gree Electric Appliances Sales Co. Ltd., and Gree USA Inc. (the “Gree Companies”), an appliance manufacturer and two of its subsidiaries that were involved in the manufacturing, marketing, and sale of dehumidifiers.  According to the government, these companies knew as early as 2012 that their dehumidifiers were defective, in that they could overheat and catch fire.

The government also alleged that the Gree Companies and some of its executive officers knew of their obligation to report this information to the CPSC in a timely manner, but not only did they fail to report (for at least six months), they willfully continued selling products to avoid losing customer contracts, and  used falsified UL certifications to lie to the public about the safety of the dehumidifiers.

DOJ’s enforcement against the Gree Companies and its executives occurred in stages.  First, as is more common under the CPSC, the Gree Companies agreed to pay civil penalties for failing to make the required reporting to the CPSC.  At the time, in 2016, the Gree Companies’ settlement for $15.45 million in civil penalties set a new record for CPSC.

In 2021, DOJ announced that the Gree Companies agreed to plead guilty to one felony count for willfully failing to report consumer product safety information as required by the CPSA.   According to DOJ, the action against the Gree Companies represented the first corporate criminal enforcement action brought under the CPSA.

Then, earlier this year, in April 2023, Gree USA, Inc., the U.S. subsidiary of the Chinese appliance company, was sentenced to pay a $500,000 criminal fine.  The fine, along with provisions to pay restitution to victims, was part of a $91 million resolution with the three related Gree Companies.

Gree USA’s Chief Executive Officer, Charley Loh, and the Chief Administrative Officer, Simon Chu, however, did not agree to the plea deal for the corporate entity, and elected to go to trial.

According to the prosecution, Defendants Chu and Loh:

• deliberately withheld information about the defective and dangerous dehumidifiers from the retail companies that bought the dehumidifiers; from the insurance companies that paid for damage caused by the fires resulting from the dehumidifiers; and from the CPSC.
• continued to sell the dehumidifiers to retailers with false certifications that the products met safety standards, including the UL flammability standard;
• caused a company employee to solicit materials that would falsely portray to an insurance company that the dehumidifiers were safe and not defective; and
• sent an untimely report to the CPSC that falsely stated that the dehumidifiers were not defective or hazardous.

The government charged these individuals with conspiracy (18 U.S.C. § 371), failure to immediately report required Information to the CPSC (15 U.S.C. §§ 2068(a)(4), 2070), and wire fraud (18 U.S.C. § 1343).  After a brief trial, on Friday Nov. 17, 2023, DOJ announced that both defendants had been convicted of conspiracy and failure to immediately report the defects in the dehumidifiers to CPSC. Both defendants were acquitted of the wire fraud charges.  Per DOJ, this is the first-ever criminal prosecution of individuals for failure to report under the CPSA.  The two defendants face a maximum of five years in federal prison on each of the counts; a sentencing hearing is set for March 11, 2024.

Although the facts of these criminal enforcement actions are quite extreme and not limited to a mere failure to delay reporting of a product defects, the criminal actions and conviction of corporate officers serve as a reminder and as a warning to companies and corporate officers that CPSC has the tools to aggressively pursue action against those who fail to take consumer product safety seriously and do not follow the law.  Like FDA’s long-touted authority under the Park Doctrine, time will tell whether this recent prosecution will become a trend or whether they will be reserved for only the extreme scenarios.  Regardless, companies would be well-advised to ensure that they have the processes and policies in place so that they can (and will) timely comply with the reporting requirements related to defective consumer products.  Where it concerns the CPSC mum’s certainly not the word!

For any of our readers seeking recommendations on which drinks pair well with turkey this Thanksgiving, certain fruit-flavored beverages may be off the table.  Earlier this month, FDA issued a proposed rule that would revoke 21 C.F.R. § 180.30, its interim authorization of the use of brominated vegetable oil (BVO) in in fruit-flavored beverages.

BVO is a complex mixture of plant-derived triglycerides that have been reacted to contain atoms of the element bromine bonded to the molecules.  As authorized, BVO is used in small amounts as a stabilizer and emulsifier for flavoring oils in fruit-flavored beverages, primarily to keep the citrus flavoring from separating and floating to the top of the beverage during distribution.

BVO has been used as a flavoring oil stabilizer and emulsifier since the 1920s, and it was generally recognized as safe (GRAS) for this use by FDA.  Fast-forwarding half a century, in 1970, FDA removed BVO from the codified list of GRAS substances due to toxicity concerns at a level of approximately 150 parts per million (ppm) in beverages.  The Flavor and Extract Manufacturers Association responded by submitting a food additive petition to FDA, requesting approval to use BVO in beverages at a maximum use level of 15 ppm.  Based on the data available at the time and the historical use of BVO in food without an immediate threat to health, FDA determined that there would be an adequate margin of safety for BVO in beverages at the use level of 15 ppm on an interim basis while additional, longer-term safety studies were conducted.  FDA subsequently established an interim food additive regulation, codified at 21 C.F.R. § 180.30, which authorizes the use of BVO as a stabilizer for flavoring oils in an amount not to exceed 15 ppm in the finished fruit-flavored beverage.  Since then, FDA has evaluated new information on BVO’s possible health effects as it became available.

As described in the preamble to FDA’s proposed rule, recent toxicology studies in cooperation between FDA and the National Institutes of Health have provided “conclusive scientific evidence” for FDA to remove its authorization for BVO.  FDA asserts that the studies demonstrate that BVO consumption has the potential for adverse health effects in humans, including but not limited to thyroid toxicity.  Once the rule is finalized, companies will have one year from the effective date to reformulate, relabel, and deplete their inventory of BVO-containing products.

Some may wonder what took FDA so long.  Australia, the European Union, Japan, and New Zealand have already banned BVO use in beverages.  Moreover, California recently enacted the California Food Safety Act, prohibiting the manufacturing, selling, delivering, distributing, or holding food that contains BVO, with a $5,000 civil penalty for first violations, as of January 1, 2027.  In addition, New York introduced a similar bill prohibiting certain food additives, including BVO.

Before any reader starts hoarding certain citrus-flavored beverages, rest assured: apparently safe substitutes for BVO are available and have long been used for the same functions as BVO (e.g., ester gum, locust (carob) bean gum, and sucrose acetate isobutyrate).  Over the past decade, beverage manufacturers have already reformulated their products to replace BVO with these alternatives.

Comments on the proposed rule can be submitted here until January 17, 2024.

The word last week was that FDA is re-organizing the Office of Pharmaceutical Quality (OPQ) within the Center for Drug Evaluation and Research (CDER).  It is the latest item on a long list of similar initiatives that have marked 2023.  Those efforts add up to a clear message to industry that FDA is looking beyond CGMP when it evaluates drug makers. The Agency wants to see functional, effective cultures of quality, and expects that C-suites will provide support to quality units.

CDER Director Patrizia Cavazzoni first announced the upcoming changes at OPQ last week in an email to staff, which then went out to trade media. The restructuring divides OPQ into 11 sub-offices that FDA described as creating “a more streamlined, agile, and flexible organization. . . .” Only within the Federal bureaucracy can a (1) complex restructuring of (2) an office of (3) a Center into (4) eleven sub-units be described as “streamlining.” But to be sure, FDA is going beyond just making 10 louder. The Agency has high expectations of industry’s willingness to invest in and proactively address quality matters.

The new parts of OPQ reflect that. Of note, the new structure removes any separation between new and generic drug quality review offices. Under the new OPQ, quality is assessed without much concern of the relevant premarket approval process.

It’s also clear that culture counts. Cavazzoni told staff that the changes at OPQ will strengthen “connections between assessment, inspection, surveillance, research, policy, and administrative operations.” Under this enforcement assessment, quality affects everything. The changes at OPQ will take effect on January 14, 2024.

FDA is putting time and effort into quality systems because when they are lacking, numerous problems can follow, including drug shortages. The changes at OPQ are the latest in FDA’s expanded 2023 quality efforts. For example, in August, CDER and OPQ initiated the Quality Management Maturity Program (QMM) that aspires to “implement quality management practices that go beyond current good manufacturing practice (CGMP) requirements.” Quality agreements between manufacturers and third-party suppliers are on FDA’s radar, and the Agency has shown a willingness to delay approvals in the face of quality concerns. And we are seeing more and more warning letters that cite entire quality units for lacking qualifications and failing to execute their responsibilities.

FDA is putting resources into evaluating quality units across all types of manufacturing and is on the lookout for failures of quality cultures. We’ll almost certainly hear more about this as the Agency cements its organizational changes in 2024. Under this scrutiny, quality units are no places for free-form jazz odysseys.

Hyman, Phelps & McNamara, P.C. (“HP&M”) is proud to announce the firm has been selected to the 2024 edition of Best Law Firms.  Firms included in the 2024 Best Law Firms ranking are recognized for professional excellence with persistently impressive ratings from clients and peers.

To be considered for this milestone achievement, at least one lawyer in the law firm must be recognized in the 2024 edition of Best Lawyers.  HP&M is proud that we have 14 lawyers recognized for their outstanding support of our clients.

In 2024, eight of the 14 are new additions.  Those recognized for their outstanding legal work include:  Paul Hyman, Ricardo Carvajal, Robert Dormer, Douglas Farquhar, Jeffrey Gibbs, Kurt Karst, Josephine Torrente (new 2024), Michelle Butler (new 2024), Sara Koblitz (new 2024), Allyson Mullen (new 2024), Anne Walsh (new 2024), McKenzie Cato (new 2024), Kalie Richardson (new 2024), and James Valentine (new 2024).

“The recognition of the professional excellence of our firm and so many of our lawyers is a great source of pride to all of us at HP&M,” said co-founder Paul Hyman.  “We are especially gratified by the much-deserved recognition of several of our young lawyers, who are continuing the strong traditions of HP&M and leading the firm into the future.”

Receiving a tier 1 designation represents an elite status, integrity and reputation that law firms earn among other leading firms and lawyers. The 2024 edition of Best Law Firms includes rankings in 75 national practice areas and 127 metropolitan-based practice areas.

Best Law Firms rankings are based entirely on annual peer-review and have earned the respect of the profession, the media and the public as the most reliable, unbiased source of legal referrals.  Recognition by Best Law Firms is widely regarded by both clients and legal professionals as a significant honor conferred on a firm by its peers.