By Kurt R. Karst –

On September 30, 2015, Judge Randolph D. Moss of the U.S. District Court for the District of Columbia issued his highly-anticipated decision in a lawsuit lodged by Eisai Inc. (“Eisai”) last August challenging FDA's April 2014 denial of a Citizen Petition (Docket No. FDA-2013-P-0884) requesting that the Agency conclude that the 5-year New Chemical Entity (“NCE”) exclusivity start dates for Eisai's BELVIQ (lorcaserin HCl) Tablets (NDA 022529; approved on June 27, 2012) and FYCOMPA (perampanel) Tablets (NDA 202834; approved on October 22, 2012) are triggered only when FDA-approved labeling incorporating the final DEA Controlled Substances Act (“CSA”) scheduling permits commercial marketing of the drug products, and not on the date of NDA approval.  In granting FDA's Motion for Summary Judgment and denying Eisai's Motion for Summary Judgment, Judge Moss concluded that despite some good arguments put forth by Eisai, FDA's interpretation of the Agency's own controlling regulation defining the term “date of approval” is not plainly erroneous or inconsistent with that regulation.  “This case . . . turns on the meaning, not the wisdom, of an FDA regulation implementing the Hatch-Waxman Amendments,” writes Judge Moss.  “Under that regulation—the validity of which Eisai does not challenge—the exclusivity period for a new drug begins when the FDA issues its letter approving the drug, even if the drug’s manufacturer must await DEA’s scheduling determination before it can bring the drug to market.  The regulation does provide for an exception under limited circumstances.  But the FDA has interpreted that exception narrowly, and the Court is bound to defer to the agency’s reasonable interpretation of its own regulation.  Because Eisai’s drugs do not qualify for the exception under the FDA’s interpretation of its regulation, the FDA and its co-Defendants are entitled to summary judgment.”

There's a lot of background to Eisai's case against FDA, which we've reported on in previous posts (here, here, and here) and that we won't repeat here.  (Eisai even unsuccessfully challenged DEA in court before challenging FDA – see our previous post here.)  The regulation at issue in the case is in 21 C.F.R. § 314.108(a), which defines the term “date of approval” to mean:

the date on the letter from FDA stating that the new drug application is approved, whether or not final printed labeling or other materials must yet be submitted as long as approval of such labeling or materials is not expressly required. “Date of approval” refers only to a final approval and not to a tentative approval that may become effective at a later date. [(Emphasis added)]

Eisai alleged in its Complaint that FDA violated the FDC Act and the Administrative Procedure Act (“APA”) in multiple respects by using the BELVIQ and FYCOMPA NDA approval dates as the triggering events to start the NCE exclusivity periods, thereby possibly accelerating the timing of future generic competition for BELVIQ and FYCOMPA.  According to Eisai:

[C]onsistent with FDA’s regulation—21 C.F.R. §314.108(a)—the governing statute, and clear congressional intent, market exclusivity for BELVIQ® and FYCOMPA® should have been triggered when labeling incorporating the final CSA schedule permitted legal marketing of the products.  FDA’s letters approving the products as safe and effective reinforce this requirement.  FDA’s letters make clear that the products’ labeling would need further revisions once CSA scheduling was complete. . . .  Thus, after CSA scheduling, a revision to the labeling was expressly required before the product could be legally marketed.  Therefore, the date of the approval letters cannot be considered the triggering date for market exclusivity purposes.

As to Eisai's argument that the company should prevail because the FDA letters approving BELVIQ and FYCOMPA contained language that should have brought the drugs within the exception to 21 C.F.R. § 314.108(a) (highlighted above), thereby delaying the official approval date, it was a close call for the court.  “The question here is whether the NDA approval letters themselves 'expressly required' that approval.”  If so, wrote Judge Moss, “then the drugs should have fallen within the exception in § 314.108(a), even as the FDA construes the regulation, and should have received an official approval date that reflected that later approval. This is a close question on the facts.”  

As the court read FDA's BELVIQ and FYCOMPA approval letters, “both expressly require Eisai to revise the labels, but neither expressly requires that the FDA approve those edits.  It is true that the letters require the sort of label revision that the FDA must presumptively approve under its regulations. But only an express requirement of FDA “approval” triggers the exception in 21 C.F.R. § 314.108(a), at least as the FDA construes that exception, and the letters say nothing about approval” (emphasis in original; citation omitted).  This is a fine, but not insignificant distinction, as noted by Judge Moss. “Because those letters did not facially contain an 'express[] require[ment]' that the FDA approve of additional labeling requirements and because Eisai understood that, in fact, the FDA would not need to approve of any additional labeling requirements before the company could take the drugs to market, the Court concludes that the FDA’s decision to consider the date of approval for both Belviq and Fycompa as the date found on their NDA approval letters was not arbitrary or capricious.” 

Judge Moss then turned to whether or not FDA reasonably construed the exception to its regulation defining “date of approval.”

[I]n run-of-the-mill cases, the date of approval is simply the “date on the letter from the FDA stating that the new drug application is approved.”  There is little room for the agency to interpret this clear rule, and its interpretation is not at issue here.  There is room, however, to interpret the exception to the general rule, which applies when “approval of [final printed] labeling or other materials” is “expressly required.”   The regulation is entirely silent as to who must “expressly require[ ]” labeling approval, where that requirement must appear, or even what constitutes an “express require[ment].”  [(Emphasis in original)]

But after analyzing the text of 21 C.F.R. § 314.108(a), FDA's intent behind the regulation, and the statutory purpose of NCE exclusivity, Judge Moss decided that FDA had a reasonable interpretation of its regulation:

Although the extent to which the current regulatory scheme comports with the incentive structure that the Hatch-Waxman Amendments put in place raises difficult issues, the question presented here is a narrow one: Is the FDA’s interpretation of the exception to its “date of approval” regulation “plainly erroneous or inconsistent with the regulation.”  The answer to that question is relatively straightforward.  The FDA has reasonably construed the exception to mean that the requirement for further FDA approval must appear in the letter itself.  

Before turning to prior FDA practice and some other miscellaneous arguments Eisai raised, Judge Moss addressed a lingering “interpretive question”: “What rational basis might plausibly exist to confer different effective periods of exclusivity on new drugs based on whether a requirement for further FDA approval of labeling or other materials is expressly mentioned in the approval letter itself or simply mandated by statute or regulation.” The answer, said Judge Moss,

is that the approval letters signify completion of the FDA’s process for reviewing and approving a manufacturer’s NDA. . . .  Some requirements that may remain after the FDA sends such a letter are ministerial and do not affect the finality of that approval. In those circumstances—including when the manufacturer will have to finalize a label to reflect DEA scheduling—the FDA does not need to consider further any aspect of the NDA and so it treats its “approval” as final.  In other cases, however, the requirements that remain are substantial and will require further substantive review and approval.  In those cases, the agency expressly requires further action in its approval letter as a signal that the FDA has concluded that its process is not yet completed.  Although not the only method that the FDA might use to differentiate applications that require no further substantive review from those that still demand some significant approval, the approach the FDA has adopted is a reasonable one.  The operative statute makes it necessary for th e FDA uniformly to define the “date of approval,” and the agency drew that line in a reasonable place. The Court, accordingly, concludes that the FDA’s interpretation of 21 C.F.R. § 314.108(a) is not “plainly erroneous or inconsistent with the regulation,” and it thus defers to that interpretation.  [(Emphasis in original; citation omitted)

Finally, Judge Moss addressed a precedent Eisai raised concerning FDA's decision to reset the NDA approval and NCE exclusivity dates of RAZADYNE ER (galantamine hydrobromide) Extended-release Capsules (NDA 021615).  Eisai argued that FDA's decision on RAZADYNE ER is inconsistent with FDA's construction of 21 C.F.R. § 314.108(a) as applied to BELVIQ and FYCOMPA.  (The RAZADYNE ER precedent was also raised by another company in a citizen petition – see here – that FDA later denied – see here.)  But Judge Moss found instead that the RAZADYNE ER precedent helps to define the contours of the exception under § 314.108(a):

The Razadyne letter thus reveals where the FDA draws the line for the § 314.108 exception.  Its interpretation is strict enough that merely mentioning regulatory obligations that, in turn, give rise to a requirement to obtain approval of a label change is insufficient to trigger the exception.  But it is accommodating enough that language expressly referring to an obligation to submit labeling-related materials for “review” qualifies for the exception.  The agency did not need to draw the line in this place—it could have adopted an interpretation of the exception under which both Eisai and the sponsor of Razadyne qualified, and it likely could have adopted an interpretation under which neither qualified.  The conclusion it actually reached, however, reasonably relies on a real—even if modest—textual difference in the letters the FDA issued, and it warrants deference. 

There's more in Judge Moss' decision as to additional arguments Eisai raised in the litigation against FDA.  But it's getting late in the night, so we'll leave it to you to peruse the remainder of the decision (pages 28-31).

We'll know in the coming weeks whether or not Eisai's bid to reset the NCE exclusivity start dates for BELVIQ and FYCOMPA will continue on with an appeal to the U.S. Court of Appeals for the District of Columbia Circuit.  In the meantime, we note that Congress is considering legislation – H.R. 639, the Improving Regulatory Transparency for New Medical Therapies Act – that would, among other things, amend the FDC Act to delay the effective date of approval (and therefore, delay the start of applicable exclusivity and other deadlines keyed to an approval date) of a drug, biological product, or animal drug for which FDA recommends scheduling under the CSA until the Department of Justice issues a final interim scheduling rule for the product. 

By Douglas B. Farquhar –

Industry newsletter The Pink Sheet reports that, at a conference Monday, FDA said that investigators performing FDA inspections will likely be divided into “subspecialties within the various product groups.”  Thanks for reporting that news, but we are not sure we agree with The Pink Sheet prediction that this development “surely will be welcomed by industry, because it could lead to smoother inspections.”

Notably, the announcement was made by FDA’s GDUFA (Generic Drug User Fee Act) staff director for the Office of Regulatory Affairs at FDA.  She has been a very busy woman: the number of Warning Letters issued to drug manufacturers has mushroomed in recent years, and most of those letters have been issued to foreign generic drug manufacturers, or to the facilities that manufacture Active Pharmaceutical Ingredients (many of which are used in generic drug manufacturing).  Indeed, we reviewed Warning Letters issued by FDA between July 1, 2013, and May 26, 2015, and of the 35 Warning Letters issued during that period to mainstream human drug manufacturers for cGMP violations (excluding compounding pharmacies), 30 were for facilities outside the United States and 22 were for data integrity/data integrity protection issues.  We haven’t performed a detailed analysis of Warning Letters posted in the last four months, but a quick review shows that the trend continues.

Reasons that there have been so many Warning Letters in this area include the increased number of foreign inspections, and the increasing specialization of the investigators performing these inspections.  One of the investigators who identified many of the deficiencies leading to the Warning Letters is Peter Baker, who is stationed in India, but has also performed inspections in China.  To his credit, Mr. Baker has proven to be especially gifted at tracking down laboratory testing (usually performed on High Performance Liquid Chromatography equipment, or moisture analysis equipment) that has not been properly analyzed, documented, or reported by laboratory personnel.  Another trend is that microbiological and sterile technique experts are being sent to inspect aseptic processing areas, enforcing very strict – some would say unreasonably strict – standards in sterile manufacturing technique, or environmental or personnel monitoring.

Such specialized investigators may be more adept and knowledgeable at identifying issues, making for undoubtedly “smoother inspections” instead of flailing around.  But just because an inspection may be smoother, it does not mean that there will be happier consequences for the affected facilities.

What’s a pharmaceutical manufacturer to do?  Ensure that all electronic testing equipment is Part 11 compliant, and perform regular audits of electronic data to make sure that testing is not being hidden, that data are not being destroyed, and that laboratory and manufacturing personnel are strictly following Good Documentation Practices.  Also, watch Warning Letters for trends in cited deficiencies, and do everything possible to ensure that when specialized investigators show up to perform an inspection, you are confident that you know what they will find.

As the experience of many companies has demonstrated, the expenditures required to identify and correct problems in advance of an FDA inspection are only a fraction of what is required if the specialized investigators identify the problem for you, and FDA imposes serious sanctions, such as import alerts. 

By Jamie K. Wolszon & Jeffrey N. Gibbs –

As kids around the country return to school, FDA also appears to be returning from a break—in this case a break from public enforcement-type activities related to laboratory-developed tests (LDTs)—with the issuance of a letter to Pathway Genomics.  FDA has a litany of concerns, including that the test appears to be marketed without requisite FDA approval, clearance, listing or adequate clinical validation and the test may hurt the public health.  Meanwhile, Congress is back in action—or what passes for action these days—and there is yet another proposed legislative alternative to the FDA Framework—this time from laboratory accrediting body the College of American Pathologists (CAP).  And while we are on the topic of LDTs, we also think it is worth noting that a significant number of comments submitted to the Framework draft guidance docket still have yet to be made available, and some critics have voiced suspicions that comments favorable to the proposal are more likely to be posted in a timely fashion, and unfavorable comments to remain unpublished.

FDA Letter to Pathway Genomics

As we have previously reported (here, here, and here), in October 2014, FDA issued its controversial two draft guidances that outlined its proposal to actively regulate LDTs.  Since that time, we are unaware of any public action by FDA against an LDT—until now.

On September 21, 2015, FDA sent a letter to Pathway Genomics stating that the CancerIntercept Detect, a non-invasive blood test intended for use as a screening tool for the early detection of up to 10 different cancer types in high-risk populations, appears to be an unapproved device that does not have a PMA, 510(k) or requisite listing.  Although it is not a Warning Letter, FDA posted the letter on its website, indicating that it believes it is important to communicate.  FDA stated that the Company was marketing the test under a “direct-to consumer type model.”  FDA continued: “Under this model, you ship blood collection tubes, a medical device, for use with CancerIntercept Detect.”  The use of the collection system provides the articulated jurisdictional hook for the agency.

The letter also states that the test lacks adequate clinical support for the claims it is making.  “We have also examined published literature and have not found any published evidence that this test or any similar test has been clinically validated as a screening tool for early detection of cancer in high-risk individuals. We have reviewed the information presented on your website in the white paper, entitled ‘Liquid Biopsy for the Detection and Monitoring of Cancer: Analysis of 96 Hotspot Mutations via Plasma Derived Circulating Tumor DNA,’ dated September 2015. It is unclear how the literature that you cited, addressing the presence of circulating tumor DNA (ctDNA) in already-diagnosed patients, is adequate to support the expansive claims of screening for early cancer detection using ctDNA in undiagnosed patients for up to 10 different cancers with the CancerIntercept Detect,” the letter states. 

FDA calls on the Company to discuss with the Agency “your offer of the CancerIntercept Detect and the associated blood specimen collection device, and any validation strategies you have undertaken beyond those reported in the publications cited in your white paper, including your determination of the test’s clinical sensitivity and specificity and the corresponding positive and negative predictive values for its claimed intended use.”  The letter requests a proposed timeline from the Company within 15 days. 

The letter states that the Agency “is committed to working with you as we strive to protect the public health without unnecessarily imposing regulatory burdens on the marketing of products of potential clinical importance.”  We do not recall seeing similar language in similar letters by FDA.  The inclusion of this language suggests that the Agency is sensitive to the current climate as the draft guidances are pending.

Pathway Genomics released a response on September 24, 2015, stating that it would respond to the FDA letter.  The Company did not take a conciliatory tack, contesting the assertion that it was offering a DTC model.   “We assure that there is physician involvement in the ordering, review and follow-up of CancerIntercept testing.  We believe that CancerIntercept Detect is a laboratory-developed test and, as a CLIA and CAP certified clinical laboratory, we are offering it as such.  While Pathway Genomics is involved in educating and marketing the tests to physicians and consumers, we do not believe this is a direct-to-consumer model.”  The Company also took issue with the statement that there was not adequate clinical support: “We believe we have performed appropriate validation of the test as a laboratory-developed test, and we are in the process of performing additional studies.”

This is not the first time that Pathway Genomics has been the subject of FDA scrutiny:  In May 2010, FDA sent a letter to Pathway Genomics objecting to its home-use saliva collection kit to analyze for predisposition for over 70 genetic conditions.

CAP Adds to Legislative Proposals that Would Serve as Substitute for Framework

The FDA letter comes on the heels of CAP unveiling what is now the third publicly proposed legislative alternative to FDA’s Framework.  As we previously reported, the Association of Molecular Pathology (AMP) announced in a press release that it has met with the Senate Health, Education, Labor and Pensions Committee to propose a legislative solution to modernize the Clinical Laboratory Improvement Amendments (CLIA), including premarket review by the Centers for Medicare & Medicaid (CMS) or its designated third parties, as a substitute to the FDA Framework.  We also previously reported that a group of labs and in vitro diagnostic kit companies called the Diagnostic Test Working Group have tried to craft their own legislative solution. 

The CAP proposal would amend the Federal Food, Drug, and Cosmetic Act to subject high-risk LDTs to existing FDA pre-market and post-market requirements.  The proposal also would modify CLIA to subject low and moderate-risk tests to CMS regulation; under the proposal, CMS or a third party would review moderate-risk tests.  Low-risk tests would not undergo premarket review.  In several respects, the CAP legislative proposal is similar to the AMP proposal.  For instance, both similarly define high-risk, moderate-risk and low-risk tests.  Both exempt low-risk tests from premarket review, would give CMS or third-party reviewers sole authority to review moderate-risk tests, and FDA would only get involved for high-risk tests (all high-risk tests under the CAP proposal and a subset of high-risk tests under the AMP proposal).  Both would exempt tests for rare disorders from premarket review.  However, the CAP proposal, unlike the AMP proposal, incorporates certain elements of the FDA Framework (with modifications), such as exceptions from premarket review for tests for unmet needs and “traditional LDTs,” and a separate requirement for notification to the Secretary (presumably through CMS but it is unclear) of tests.

The flurry of legislative proposals is enough to make even the most dedicated LDT-watchers lose track.  In an effort to provide some clarity about the competing proposals, we provide a chart comparing some of the key provisions of the AMP and CAP proposals, as described in publicly available documents.  We do not include the DTWG proposal in this chart as it has been reported that members of the group are working with the House Energy & Commerce Committee on a revised version; we fear that the DTWG proposal will change as soon as this blog is posted.  Of course, if any legislation is enacted, it is likely to look different from what is proposed.

Large Number of Comments to Framework Still have Yet to be Posted

We previously reported that, according to regulations.gov, FDA has received 236 comments on the draft “Framework” guidance; however, it has only posted 170 of those comments.  As of this writing, that number has not changed.  But some critics are suspicious that FDA is more likely to post a comment if the comment is favorable to the proposal than if the comment is negative.  One member of the laboratory community, which submitted comments that criticized the proposal well within the deadline for comments, said that FDA did not initially post their comments.  When they called to inquire, they were informed that it had been flagged for an inappropriate reason, and the comments were subsequently posted.  By contrast, according to the individual, one company submitted comments that were favorable to the proposal after the docket deadline, and those got posted within a few weeks.  Several weeks after that company submitted their comments late, additional comments were posted that had been submitted on time but were against the proposal.  Whatever the objective validity of their concerns, it speaks to a perception that FDA is not acting fairly.

By Kurt R. Karst –

FDA recently released the Agency’s Seventh Annual Report to Congress, required by FDC Act § 505(q)(3), on FDA’s experience during Fiscal Year 2014 (“FY 2014”) with citizen petitions subject to FDC Act § 505(q).  Other than some updated numbers fo FY 2014, the report largely repeats both FDA’s concerns about petitioning expressed in previous reports (see our previous posts here, here, here, here, here, and here) and the trends the Agency has been seeing in petitioning.  In particular, FDA notes: 

• FDA continues to receive serial 505(q) petitions, frequently from the same petitioner, about the same specific drug or class of drugs, sometimes requiring several separate responses about different issues regarding the same product.  Responding to such serial petitions requires the use of substantial FDA resources, on a repeated basis, over a protracted period of time.
• The enactment of FDASIA has increased the strain on Agency resources by significantly shortening the time frame for responding to 505(q) petitions by 30 days.  The shortened timeframe affords FDA even less time to evaluate the issues raised in the petitions and to provide a response that articulates the scientific and legal reasoning supporting the Agency’s decision.  As a result, FDA has needed to direct resources away from other important initiatives to attempt to comply with the new shorter deadline.
• 505(q) contains a provision that permits FDA to summarily deny a petition at any point if FDA finds that it was submitted with the primary purpose of delaying the approval of an ANDA, 505(b)(2) application, or 351 (k) application and the petition does not “on its face” raise valid scientific or regulatory issues (FD&C Act, section 505( q)(l )(E)).  As FDA previously noted in its Report to Congress, “Encouraging Early Submission of Citizen Petitions and Petitions for Stay of Agency Action” dated February 2009, we believe that the statutory language requires that both preconditions be present, and we believe this statutory standard would be extremely difficult to meet.  To date, FDA has never applied this provision to summarily deny a petition, despite the fact that, in FDA’s estimation, many 505(q) petitions do not in fact raise persuasive scientific or regulatory issues when those issues have been reviewed by FDA (as previously noted, approximately two-thirds of these petitions are denied in full).  Accordingly, it is FDA’s view that this provision has neither curbed the filing of petitions submitted with the primary purpose of delay nor has it permitted FDA to dispose of such petitions without expending substantial amounts of resources.
• The Agency continues to be concerned that section 505(q) is not discouraging the submission of petitions that are intended primarily to delay the approval of competing drug products and do not raise valid scientific issues.  The statute requires FDA to prioritize these petitions above other matters, such as safety petitions, that do raise important public health concerns.  As a result, FDA remains concerned about the resources required to respond to 505(q) petitions within the 150 day deadline at the expense of completing the other work of the Agency.

To provide some context for the statements above from FDA, FDC Act § 505(q) was added to the law by the 2007 FDA Amendments Act (“FDAAA”) and is intended to prevent the citizen petition process from being used to delay approval of pending ANDAs and 505(b)(2) applications.  The law was amended by Section 301 of Pub. L. No. 110-316 (2008), and again by Section 1135 of the 2012 FDA Safety and Innovation Act (“FDASIA”).  Among other things, FDASIA changed the original 180-day response deadline to 150 days, and made the law applicable to citizen petitions concerning biosimilar applications submitted to FDA pursuant to PHS Act § 351(k). In June 2011, FDA issued final guidance on FDC Act § 505(q).  That guidance was revised in November 2014 to account for changes made to the law by FDASIA.  In January 2012, FDA issued proposed regulations to amend the Agency’s citizen petition regulations to implement changes made to the law by Section 505(q).

Under FDC Act § 505(q), FDA shall not delay approval of a pending ANDA, 505(b)(2) application, or 351(k) biosimilar application as a result of a citizen petition submitted to the Agency pursuant to 21 C.F.R. § 10.30 (citizen petition) or § 10.35 (petition for stay of action), unless FDA “determines, upon reviewing the petition, that a delay is necessary to protect the public health.” FDA is required to “take final agency action on a petition not later than 150 days after the date on which the petition is submitted.”  FDA may not extend the 150-day period “for any reason,” including consent of the petitioner.  Although the statute provides that FDA may summarily deny a petition submitted with the primary purpose of delaying ANDA, 505(b)(2) application, or 351(k) biosimilar approval, the Agency has never done so, as noted above by FDA.

Perhaps the most noteworthy aspect of the Seventh Annual Report to Congress is the numbers.  FDC Act § 505(q)(3) requires that each annual report to Congress specify: “(A) the number of applications that were approved during the preceding 12-month period; (B) the number of such applications whose effective dates were delayed by petitions referred to in paragraph (1) during such period; (C) the number of days by which such applications were so delayed; and (D) the number of such petitions that were submitted during such period.”  FDA says in its Seventh Annual Report to Congress that:

During the FY 2014 reporting period, the Agency approved 39 505(b)(2) applications, 409 ANDAs, and 0 biosimilar biological product applications.  No approvals for ANDAs or biosimilar biological product applications were delayed because of a 505( q) petition in this reporting period.  One 505(b)(2) application approval was delayed in this reporting period because of a 505(q) petition.

The 505(b)(2) approval delayed in FY 2014 was delayed by 5 days because “FDA was concerned that if it approved the 505(b)(2) application before resolving the issues raised in the petition and later concluded that one or more of the arguments against approval were meritorious, then the presence on the market of a drug product that did not meet the requirements for approval could negatively affect public health.”  Although FDA does not identify by drug name or application number the particular approval delayed, we suspect that the application at issue was NDA 205776 for RASUVO (methotrexate injection), and that the petition delaying approval was Docket No. FDA-2014-P-0318 (see our previous post ).

As to the number of 505(q) citizen petitions submitted in FY 2014, the Report to Congress says that 28 of the 102 citizen petitions (or 27%) handled by the Center for Drug Evaluation and Research (excluding ANDA suitability petitions and petitions that raise only OTC monograph issues) were 505(q) petitions.  That’s a hefty increase over FY 2013 when FDA received only 15 505(q) petitions.  “During FY 2008 through FY 2014, FDA received a total of 160 petitions subject to section 505(q).  Over this 7-year period, FDA responded to all but nine of the 505(q) petitions within the statutory time frame that was applicable during that period” (i.e., 180 days or 150 days).  The report includes helpful tables showing the percentage of 505(q) petitions received during Fiscal Years 2008-2014, and the outcomes for the 149 petitions that have been resolved under FDC Act § 505(q) as of September 30, 2014.    

By Kurt R. Karst – 

The legal world is chock-full of tests, doctrines, and processes named after a particular case or court decision.  It’s kind of a legal short-hand; a lexicon of legal eponyms.  There’s the “Winter Standard” for preliminary injunctions in federal courts; the “Lemon Test” for cases involving the establishment clause of the First Amendment; the “Central Hudson Test” for analyzing commercial speech regulations; the “Walker Process” for antitrust claims; the “Park Doctrine” for prosecutions against corporate officials under the FDC Act . . . . and on and on . . . .  Today, we offer up a potential addition to the legal lexicon of eponyms: the “Depomed Threat.”  Recent precedent suggests that it might be an effective tool for some companies with orphan drug designations.

The case namesake of the “Depomed Threat” is Depomed, Inc. v. HHS, — F. Supp. 2d –, 2014 WL 4457225 (D.D.C. Sept. 5. 2014).  In that decision, the U.S. District Court for the District of Columbia granted Depomed Inc.’s (“Depomed’s”) Motion for Summary Judgment and ordered FDA to recognize orphan drug exclusivity for GRALISE (gabapentin) Tablets “without requiring any proof of clinical superiority or imposing any additional conditions on Depomed.”  You see, FDA designated GRALISE as an orphan drug for the treatment of Post-Herpetic Neuralgia (“PHN”) based on a plausible hypothesis that GRALISE may be clinically superior to NEURONTIN (gabapentin) for the management of PHN, but FDA refused to grant Depomed a period of orphan drug exclusivity after approving the GRALISE NDA because Depomed had not  demonstrated clinical superiority over NEURONTIN by showing greater efficacy, greater safety, or a major contribution to patient care.  Depomed challenged FDA in court arguing, among other things, that the orphan drug designation was sufficient and that a demonstration of clinical superiority was not necessary to obtain orphan drug exclusivity (see our previous posts here and here). 

When the Depomed decision came out in September 2014, we commented that the decision, which finds that “the plain language of the exclusivity provisions of the Orphan Drug Act requires the FDA to recognize exclusivity for any drug that the FDA has designated and granting marketing approval” (emphasis added), would have far-reaching implications for FDA’s orphan drug program (and perhaps beyond).  Among other things, we thought the decision might mean a rewrite of some of FDA’s orphan drug regulations.

FDA initially appealed the District Court decision to the U.S. Court of Appeals for the District of Columbia Circuit, and then quickly dropped the appeal (see our previous post here).   But FDA didn’t stop there.  To our surprise, FDA issued a notice, styled as a “clarification of policy,” doubling-down on the Agency’s clinical superiority orphan drug regulations (see our previous post here).  In the policiy clarification, FDA states:

In consideration of any uncertainty created by the court’s decision in Depomed, the Agency is issuing this statement.  It is the Agency’s position that, given the limited terms of the court’s decision to GRALISE, FDA intends to continue to apply its existing regulations in part 316 to orphan-drug exclusivity matters.  FDA interprets section 527 of the FD&C Act and its regulations (both the older regulations that still apply to original requests for designation made on or before August 12, 2013, as well as the current regulations) to require the sponsor of a designated drug that is the “same” as a previously approved drug to demonstrate that its drug is “clinically superior” to that drug upon approval in order for the subsequently approved drug to be eligible for orphan-drug exclusivity.

In other words, FDA seemingly blows off the district court decision as a one-off case that applies only to the facts of Depomed.  We speculated at the time that this might be “FDA’s way of drawing out another lawsuit from an affected sponsor so that the Agency can have another crack to relitigate the issue in court.”  After all, we were aware of several orphan drug designations based on a plausible hypothesis of clinical superiority.  Now that we are a year separated from the Depomed decision, however, we have a different take on things. 

What changed our perspective?  One of those several orphan drug designations mentioned above:  Eagle Pharmaceuticals, Inc.’s (“Eagle’s”) RYANODEX (dantrolene sodium) for Injectable Suspension. 

According to FDA’s Orphan Drug Designations and Approvals Database, FDA designated the drug as an orphan drug on August 16, 2013 for the “[t]reatment of malignant hyperthermia syndrome.”  FDA approved RYANODEX (NDA 205579) on July 22, 2014 for “the treatment of malignant hyperthermia in conjunction with appropriate supportive measures and for the prevention of malignant hyperthermia in patients at high risk.”  But FDA did not update the Orange Book to show a grant of orphan drug exclusivity for RYANODEX until the publication of the February 2015 Cumulative Supplement. 

Why the delay?  We think FDA might have had to do some thinking to come up with a way to justify a demonstration of clinical superiority to avoid a Depomed-like lawsuit.

We’ll spare you the long story of the quest to designate RYANODEX as an orphan drug.  Here’s the short story . . . .  It starts back in October 2003 with an orphan drug designation request.  FDA subsequently took the position that the predecessor-in-interest to Eagle, Lyotropic Therapeutics, had to provide a plausible hypothesis as to why RYANODEX was clinically superior to the non-orphan designated DANTRIUM IV (dantrolene sodium for injection) (NDA 018624), which is also approved for malignant hyperthermia treatment.  After a lot of back-and-forth over the years – even FDA’s Office of Chief Counsel had to step in at one point (see here) – FDA ultimately granted orphan drug designation on August 16, 2013 based on a plausible hypothesis of greater safety vis-à-vis DANTRIUM IV.  Specifically, Eagle hypothesized that RYANODEX was safer than previously approved dantrolene sodium formulations because it requires a substantially smaller diluent volume and has a substantially lower amount of mannitol. 

Once FDA approved RYANODEX (NDA 205579) on July 22, 2014, the Agency had to decide whether or not to grant the orphan drug exclusivity.  But according to a January 15, 2015 memorandum (the memo says 2014, but that’s clearly a typo) from FDA’s Office of Orphan Products Development (“OOPD”), that was going to be a problem: “The review division informed OOPD that there was no data to demonstrate clinical superiority in the NDA submitted by Eagle.”  Uh-oh!

OOPD informed Eagle of the determination from the Division of Anesthesia, Analgesia, and Addiction Products (“DAAAP”), and Eagle responded.  While Eagle “made a case for clinical superiority based on length of time needed to reconstitute and administer Ryanodex compared to the previously approved dantrolene product (1 minute versus 50 minutes), decreased quantity of mannitol in the Ryanodex product, and decreased volume of fluid administered with the Ryanodex product,” Eagle also issued the “Depomed Threat.”  According to OOPD:

It should be noted that Eagle maintained that a demonstration of clinical superiority was not necessary due to the Depomed court decision that stated that a company that had orphan drug designation for a drug or biologic for treatment of a rare disease automatically received orphan exclusivity upon marketing approval per the Orphan Drug Act.

It’s what happened next, after the Depomed Threat was issued, that we find particularly interesting.  (And we imagine the correspondence from Eagle to FDA/OOPD concerning Depomed may have been more strongly worded than what is conveyed in OOPD’s memorandum.)  DAAAP largely dismissed Eagle’s clinical superiority arguments, but OOPD, after consulting with DAAAP, found that there was a major contribution to patient care (the so-called “MC-to-PC” clinical superiority basis) supporting a grant of 7-year orphan drug exclusivity.  Here’s how the OOPD memorandum describes the discussions and conclusion (it’s worth quoting at length from the memorandum):

DAAAP was consulted concerning the sponsors claims of clinical superiority.  With respect to the claim of superiority due to decreased mannitol content and fluid content, it was noted by the review division that mannitol and fluids were part of the supportive care used to maintain the patient and cool down the patient and was thus not acceptable as making Ryanodex superior over the previously approved dantrolene product.  The review division acknowledged that malignant hyperthermia is a medical emergency and as such, a decrease in time to treat should result in improved patient outcome.  However, it was noted that treatment involves a discontinuation of administration of the triggering anesthetic, fluid, mannitol, and dantrolene.  The sponsor provided data from retrospective analysis of cases in which there was delay in administration of dantrolene.  This data showed that there was an increased complication rate with every 15 minute delay in delivery of dantrolene.  However, there was no control over time of diagnosis or timing of the other procedures involved in the treatment of this condition.  The review division concluded that a demonstration of superior efficacy would require controlled prospective studies.  The review division and OOPD met and discussed the concept of a major contribution to patient care which is one aspect of clinical superiority defined under 21 CFR 316.3(b)(3)(iii) (“[i]n unusual cases, where neither greater safety nor greater effectiveness has been shown, a demonstration that the drug otherwise makes a major contribution to patient care.”).  This basis for finding a subsequent drug clinically superior is intended to constitute a narrow category, and its proposed use is not intended to open the flood gates to FDA approval for every drug for which a minor convenience over and above that attributed to an already approved orphan drug can be demonstrated.  The example provided in the orphan regulations for major contribution to patient care was a sponsor developing an oral dosage form where the previously approved drug was available only in a parenteral formulation.

The review division said that in view of the emergency nature of malignant hyperthermia, more rapid treatment should result in improved patient outcome but again, treatment involves multiple interventions including discontinuation of offending agent, administering fluids for support, cooling the patient, administering mannitol for organ support, providing continued anesthesia for surgery, and administering dantrolene.  It was also noted that while the full dose of Ryanodex can be administered in 1 minute and the previously approved dantrolene requires up to 1 hour to reconstitute and administer, the anesthesiologist would not wait until the previously approved dantrolene is totally reconstituted before initiating therapy.  The dantrolene is administered over the 1 hour period as each vial is reconstituted.  It is, therefore, not fully apparent how this delay in administration of the full dose of dantrolene would impact the care of the patient.  The review division did not believe that the requirement to reconstitute up to 10 vials of dantrolene compared to one vial of Ryanodex subjected the patient to increased risk of contamination or dosing error.  However, the review division did note that the ability of the anesthesiologist to reconstitute and administer Ryanodex within one minute allowed the anesthesiologist to concentrate on continued supportive care and treatment of the patient with malignant hyperthermia compared to treatment with the previously approved dantrolene product that required up to one hour to reconstitute and administer, which would not allow the anesthesiologist to fully concentrate on the other aspects of treatment and support of the patient.  This would have an impact on the patient’s care.  The review division believed that this would support a decision that Ryanodex provided a major contribution to patient care. [(Emphasis added)]

That’s a pretty creative and unique basis on which to find clinical superiority.  We’ll add RYANODEX to our growing list of MC-to-PC precedents (see our previous posts here, here, and here).

By James C. Shehan –

Aficionados of pro wrestling can regale you with the exploits of tag teams  like The Bruiser and the Crusher, The Wild Samoans and The Fabulous Freebirds.   The moniker FDA-IRS-FTC is far less colorful and mellifluous than those of WWE stars, but proved more than sufficient recently to take down a Rhode Island man accused of distributing unapproved cancer drugs.  And therein lies an unpleasant lesson for those facing government enforcement actions.

On September 15th, James Feijo pleaded guilty  in federal court in Providence, Rhode Island to selling products not approved by FDA as cancer mitigation and treatment options and to failing to pay ~$220,000 in employment taxes.  But government interest in Mr. Feijo began years earlier and in another agency – the Federal Trade Commission.

In September 2008, the FTC announced enforcement actions against 11 sellers of bogus cancer cures.  One of these 11 companies was Daniel Chapter One, a company owned by Mr. Feijo and his wife Patricia.  Daniel Chapter One was said to market herbal formulations and shark cartilage for the prevention, treatment and cure of cancer, and to mitigate the side effects of radiation and chemotherapy.  The FTC announcement noted that Daniel Chapter One also had received an FDA warning letter.

While six of the eleven companies had agreed to settle, Daniel Chapter One was not among them and so the FTC proceeded with a case before one of its administrative law judges. After an administrative trial, the ALJ in August 2009 upheld the FTC charges of deceptive claims and ordered the company and Mr. Feijo to stop making cancer claims for its products unless it could show that the claims were true, non-misleading and based on reliable scientific evidence.  In December 2009, the FTC Commissioners unanimously upheld the ALJ. 

Mr. Feijo and Daniel Chapter One then asked the U.S. Court of Appeals for the DC Circuit in March 2010 to review the FTC ruling that they were making deceptive claims.  In December 2010, the DC Circuit  ruled in favor of the FTC.  Meanwhile, the FTC asked the Department of Justice to impose civil penalties on Daniel Chapter One and Mr. Feijo for violating the FTC order and in August 2011 the DOJ did so.    A DOJ summary judgment motion for liability was granted in September 2012, leading to a final order of injunctive relief, equitable monetary relief in the amount of $1,345,832.43 and a civil penalty award of $3,528,000.  In the course of that case, Mr. and Mrs. Feijo were held in contempt of a court order for, among other things, continuing during 2011 to make claim that their products treat or cure cancer.   

The Feijos’s continued defiance of the FTC appears to have triggered the government to involve other federal agencies.  In April 2014, following an investigation by the Rhode Island FDA Task Force and the IRS’s Criminal Investigation unit, a grand jury indictment issued charging Daniel Chapter One and Mr. and Mrs. Feijo with 18 counts of tax evasion and six of introducing an unapproved new drug into interstate commerce.  This was followed by the afore-mentioned plea agreement, under which Mr. Feijo will plead guilty to one count of willful failure to collect, account for or pay a tax, punishable by up to five years imprisonment, and one count of introduction of an unapproved new drug into interstate commerce., punishable by up to one year imprisonment.   Sentencing is set for January 12, 2016. 

Enforcement activity by any one federal agency is a daunting prospect.  But when a tag team of several agencies becomes involved, almost any defendant will be pinned to the mat.

By Kurt R. Karst – 

One day in the future, reporting on biosimilar patent dance challenges lodged pursuant to the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) will be considered passé.  Such challenges will be as commonplace as Hatch-Waxman Paragraph IV challenges.  Indeed, earlier this week, FDA released a report that the Agency has held nearly 90 meetings with more than 50 companies interested in biosimilars, and last week, CDER Director Janet Woodcock testified before a Senate Committee that as of July 31, 2015, 57 proposed biosimilar products were in FDA’s Biosimilar Product Development Program.  But we’re not yet even close to that future date.  Today, each BPCIA patent dance lawsuit holds the potential to alter the future course of the law.  And because of that potential, we try to keep a close eye on the biosimilars scene. 

BPCIA-related lawsuits come in many flavors, several of which we have not yet even tasted.  (Consider, for example, the palate-expanding experience that awaits us when the duo of Amgen and Allergan face off against Roche and Genentech over a biosimilar version of Avastin (bevacizumab) – see here – or when FDA is eventually challenged over the Agency’s implementation of the law.)  Initially, there were the declaratory judgment cases filed by biosimilar applicants (see our previous post here).  Then there were the challenges alleging that biosimilar applicants violated the BPCIA for failure to participate (or to cooperate) in the patent dance process and for providing inadequate or ineffective notice of commercial marketing (see our previous post here).  More recently, there has been a post-patent dance challenge involving a biosimilar version of Amgen’s NEULASTA (pegfilgrastim) – see here – and that also involves an allegation of ineffective notice.  For the most part, courts are still working on sorting out the second wave of BPCIA lawsuits involving participation in the patent dance process (PHS Act § 351(l)(2)-(l)(7)) and the timing of 180-day commercial notice (PHS Act § 351(l)(8)).  Both issues are in dispute in a recent Complaint filed by Amgen against Hospira concerning a biosimilar version of EPOGEN (epoetin alfa) (BLA 103234). 

Amgen’s Complaint (Case No. 1:15-cv-00839-RGA) – the first BPCIA-related Complaint filed in the U.S. District Court for the District of Delaware – alleges that Hospira violated PHS Act §§ 351(l)(8)(A), (l)(2)(A), and (l)(4) after Hospira engaged Amgen upon FDA notification that the Agency accepted Hospira’s BLA for a biosimilar version of EPOGEN.  (The Complaint also alleges infringement of three patents, one of which was included in Amgen’s disclosure under PHS Act § 351(l(3)(A).)  These issues, insofar as they concern the mandatory or voluntary nature of the patent dance process and the timing of notice, were tackled by the U.S. Court of Appeals for the Federal Circuit in a July 21, 2015 decision, but the decision has been appealed. 

According to Amgen, “Hospira has chosen to ignore certain statutory requirements of the BPCIA that Congress put in place to protect innovators such as Amgen.  Rather than follow the requirements of the BPCIA, Hospira has selectively decided to comply with certain provisions while refusing to comply with others.”  First, Amgen alleges that “[a]lthough Hospira provided a copy of the Hospira BLA to Amgen, it did not provide Amgen with the other information describing the processes used to manufacture the Hospira Epoetin Biosimilar Product as required by § 262(l)(2)(A),” and that Hospira has repeatedly refused to provide information specifically identified by Amgen.  None of the correspondence identified in Amgen’s Complaint is attached to the Complaint, so we’re unclear what that information is exactly.  Is it information included in a Drug Master File (i.e., a submission of information to FDA to permit the Agency to review such information in support of a third party’s submission without revealing the information to the third party), or in some other submission to FDA?  “By unlawfully withholding the information required by 42 U.S.C. § 262, Hospira has thereby frustrated the statutory purpose and deprived Amgen of the opportunity to seek redress for potential infringement.  Amgen may therefore seek to assert additional patents following eventual receipt of Hospira’s manufacturing information to be produced in discovery in this action under the Federal Rules,” says Amgen in its Complaint. 

Notwithstanding the alleged absence of certain information from Hospira, Amgen engaged Hospira in the patent exchange process of the patent dance.  But Amgen says that Hospira has failed to cooperate.  After accepting Amgen’s patent list provided pursuant to PHS Act § 351(l)(3)(A), “Hospira refused to engage in any of the negotiations required by [PHS Act § 351(l)(4)(A)]” in violation of the statute, according to Amgen. 

Turning to notice of commercial marketing, Amgen says that the 180-day notice Hospira provided on April 8, 2015 is invalid.  The Federal Circuit recently ruled in a severely split decison that valid notice can only be provided on or after FDA licensure of a biosimilar BLA.  “Despite its obligation under § 262(l)(8)(A), Hospira provided Amgen with a purported (8)(A) notice on April 8, 2015, before Amgen had provided its initial disclosure of patents under (3)(A) and before Hospira received FDA approval for its Hospira Epoetin Biosimilar Product” (emphasis in original), says Amgen.  “In serving a purported ‘notice of commercial marketing’ before its biosimilar product is licensed, Hospira intends to deprive Amgen of the statutory time period for considering the need for and, if appropriate, seeking adjudication of, a potential preliminary injunction motion. Therefore, Hospira intends to continue violating this provision of the BPCIA absent an order of the Court compelling Hospira to comply.”

In addition to patent-specific relief, Amgen has a laundry list of BPCIA-specific relief the company wants from the court.  The relief includes: (1) orders “enjoining Hospira from commercially marketing the Hospira Epoetin Biosimilar Product until Amgen is restored to the position it would have been in had Hospira met its obligations under the BPCIA,”  “enjoining Hospira from continuing to seek FDA review of its [biosimilar] application and/or compelling Hospira to suspend FDA review of its [biosimilar] application until Hospira has obtained permission from Amgen to use the EPOGEN® (epoetin alfa) license or Hospira has restored to Amgen the benefits afforded to Reference Product Sponsors in the BPCIA,” and “requiring Hospira to provide Amgen ‘such other information that describes the process or processes used to manufacture the biological product that is the subject of’ the Hospira BLA; (2) declarations that Hospira’s April 9, 2015 notice of commercial marketing  is ineffective, and that Hospira has violated the BPCIA by failing to provide to Amgen by the statutory deadline certain manufacturing informatin; and (3) an injunction requiring notice of commercial marketing from Hospira to Amgen on or after FDA licensure of Hospira’s EPOGEN biosimilar application and prohibiting Hospira from launching its biosimilar until 180 days after notice is provided. 

By Karla L. Palmer – 

Last week, several congressional representatives announced the introduction of H.R. 3537, the “Synthetic Drug Control Act of 2015.”  If enacted, the Synthetic Drug Control Act would strengthen existing federal law (specifically, the Controlled Substances Analogue Enforcement Act) (“Analogue Act”), which provides that any compound that is chemically or pharmacologically similar to a controlled substance in Schedule I or II under the Controlled Substances Act (“CSA”) must be treated as if it is controlled in that same schedule.   

The significant limitation found in the Analogue Act, which the legislators hope to address with passage of the proposed legislation, is that the Analogue Act currently addresses substances that are substantially structurally and pharmacologically similar to a controlled substance as long as they are intended for human consumption.  (21 U.S.C. § 816 (a “controlled substance analogue shall, to the extent intended for human consumption, be treated, for purposes of any Federal law as a controlled substance in Schedule I.”))  Schedule I substances have a high potential for abuse, have no currently accepted medical use in treatment in the U.S. and there is a lack of accepted safety for their use under medical supervision.  21 U.S.C. § 812(b)(1).  The use of newly derived analogues, which crop up on a very regular basis and include “flakka” and “molly,” are often sold legally in colorful, readily identifiable, and branded packaging. These drugs are distributed by convenience stores, head shops, or online, and, importantly, they typically bear the legal fig leaf ‘not for human consumption’ to avoid regulation by the federal Food and Drug Administration.

The legislation intends to facilitate the prosecution of synthetic drug manufacturers and distributors and make Analogue Act law a more useful tool for law enforcement.  It adds to the end of 21 U.S.C. § 813, which currently states “A controlled substance analogue shall, to the extent intended for human consumption, be treated, for the purposes of any Federal law as a controlled substance in schedule I” the following language: “for purposes of prohibitions, restrictions, and other requirements with respect to manufacture, importation, distribution, and sale.” The bill also removes all references of the term “substantially” from the definition of a controlled substance analogue (21 U.S.C. § 802(32)(A), so that substances may be more readily classified as an analogue without having to show that they have a substantial similarity to their alleged counterpart.  Finally, it adds a detailed and long list of known synthetic drugs identified by the DEA into schedule I, thus bypassing the need for DEA to temporarily place substances in Schedule I on an emergency basis and await scheduling by DEA.  Note that at least one court has noted that the Analogue Act as applied is unconstitutionally vague.  See United States v. Forbes, 806 F. Supp. 232, 234 (D. Colo. 1992).     

To ensure that the legislation targets manufacturers and distributors rather than end users, the Synthetic Drug Control Act narrows the Analogue Act to provide that it should apply to the sale, manufacture, import, and distribution of drugs – not simple possession.  A concern likely remains here, however, because the legislation does not address another loophole in the Analogue Act – the fact that synthetic compounds often are not sold as drugs or “for human consumption,” but are instead sold as non-food products (i.e., bath salts) not intended for human consumption and thus elude a clear FDA regulatory status.  Whether the supplier of the product or substance is a manufacturer, distributor, or end user, the fact that the Analogue Act applies to products for human consumption (and the burden is on law enforcement to demonstrate that the suspect product is intended for human consumption) will likely still be an availing loophole throughout the distribution chain.  One other way to close this loophole is to remove the requirement “intended for human consumption” from Section 813.      

Congressman Jim Himes (CT) made the following statement concerning the importance of this legislation:

Synthetic drugs are being marketed in convenience stores and other markets as a safe, legal alternative to controlled substances . . . . This is far from the truth. Without any serious regulation or enforcement, the manufacturers of these drugs are exploiting a legal loophole to put untested, potentially dangerous drugs on the street, where the people buying them have no idea what sort of effect they’re going to have. The side effects can include aggression, disorientation and hallucination, which can lead to harm for the user and others. We need them off the street.

By Anne K. Walsh & John R. Fleder –

The government has long repeated the mantra that it will hold individuals personally liable for the activities of their corporate employer.  In the FDA-regulated arena, the government has been bolstered by the U.S. Supreme Court precedents set in United States v. Dotterweich, 320 U.S. 277 (1943), and United States v. Park, 421 U.S. 658 (1975), and corporate officials have been well-trained to understand the potential exposure they face from their positions under the Park Doctrine.  In the 1960s to the mid-1980s, FDA requested the Department of Justice to prosecute numerous individuals, which it did mostly in cases involving egregious conduct, such as persistent violations in the face of notice from FDA, or serious injury to the consumers.  Between the mid-1980s and the early 2000s, the government’s focus on individuals languished, except for cases involving allegations of clear fraud, for many reasons described here, but no more.  In the last year alone, several high-level government officials have repeated the clear message that responsible corporate officers are in the crosshairs of DOJ and FDA in both misdemeanor and felony situations.

The latest missive is the strongest statement by DOJ.  In a seven-page memorandum, announced during a highly publicized speech at NYU School of Law, Deputy Attorney General Sally Quillian Yates explicitly revises the “Principles of Federal Prosecution of Business Organizations,” set forth in the U.S.A.M. 9-28.700 et seq. and the civil litigation provisions in USAM 4-4.000 et seq.  It is unclear how these changes will be formally documented in the U.S. Attorney’s Manual, but Ms. Yates makes clear that the guidance will apply immediately, even “to those matters pending as of the date of this memo.”

The memo is not long, and should be required reading for anyone who defends companies and individuals in civil and criminal enforcement actions taken by the government.  The new policy does not reference and is thus not limited to FDA-regulated entities, but applies broadly to “any investigation of corporate misconduct.”  And unlike earlier memoranda addressed at criminal prosecutions, like the 2008 Filip memo, Ms. Yates makes clear that there will be changes to the way the government considers civil corporate matters.  Taking that to the extreme, even a simple negotiation with the government on an FDA regulatory matter could result in potentially implicating individuals before the company can achieve resolution.

And that’s the point of the Yates memo.  The government appears to mean business that it will pursue individuals, and it will incentivize (or penalize, depending how one stands on the issue) companies to turn over facts to help the government with the witch hunt.

Below are each of the six principles and some questions for consideration:

• Companies will not receive any credit for cooperating with the government unless that cooperation includes producing facts relating to the individuals involved in the alleged misconduct.  How many facts are enough?  How many individuals are enough?  How much investigation must a company do before turning over its facts?  What impact will there be on the attorney-client privilege governing that investigation?
• The government is required to focus on potential individual culpability from the inception of an investigation.  Will all involved individuals need to retain separate counsel?  How will that affect the company’s own internal investigation?  And when will the government notify individuals or the company that a particular person is not a focus?
• Civil and criminal government attorneys should be in routine communication about potential conduct that might give rise to culpability.  How will material governed by grand jury secrecy rules be shared?  Will a company have to jointly communicate with both the civil and criminal sides of DOJ?
• The government will not release an individual from liability as part of a corporate resolution.  This appears to document what we have seen as existing practices by government lawyers, so this is not to change the policy.
• Companies cannot resolve a matter until there is a plan to resolve investigations of any individuals.  This could seriously delay corporate resolutions, but of course, that is the stick the government is holding to urge companies to assist with the individual case.
• Government lawyers handling civil cases cannot use an individual’s inability to pay as a factor in deciding whether to bring a case against an individual.  Ms. Yates recognizes that these cases “may not provide as robust a monetary return on the Department’s investment,” but focuses on the long-term deterrent effect of these cases.

As noted earlier, this new policy applies immediately, even to pending matters.  We will just have to see if those in the unfortunate circumstance of being involved in a negotiation that is close to resolution would serve as the guinea pigs for fleshing out how this guidance will be applied.

By Kurt R. Karst –

Finding new ways to incentivize and reward drug development for particular therapeutic needs is all the rage these days.  Over the past few years we’ve seen several new incentives incorporated (and proposed for incorporation) into the FDC Act.  These new incentives are quite different from the standard grants of patent and non-patent marketing exclusivities, including incentives that merely stack exclusivity periods upon one another, such as 6-month pediatric exclusivity (FDC Act § 505A) or 5-year Generating Antibiotic Incentives Now Act exclusivity (FDC Act § 505E) or other proposals under consideration (see our previous posts here and here).  Take, for example, the Rare Pediatric Disease Priority Review Voucher (“Pediatric PRV”) program (FDC Act § 529) and the Tropical Disease PRV (“TD PRV”) program (FDC Act § 524), added to the law in 2012 by the FDA Safety and Innovation Act and in 2007 by the FDA Amendments Act, respectively.  Both PRV programs, which provide for a transferable voucher allowing for a standard 10-month application review to become a 6-month priority review, have been tremendously successful, with several new drug and biologic approvals and PRV sale tags going through the roof (see our previous post here).  There’s also the concept of so-called “wildcard exclusivity” proposed in one version of the 21st Century Cures Act.  A provision in the bill would allow a sponsor to convey a portion of its exclusivity to apply with respect to one or more other drugs (see our previous post here).  Such conveyance could include the sale of exclusivity from one company to another company and would also apply to Orange Book-listed patents.

The latest incentive proposal from Congress comes from Senator Robert Casey (D-PA) in the form of S. 2041, the Promoting Life-Saving New Therapies for Neonates Act of 2015.  If enacted, the bill would amend the FDC Act to add Section 530 to create a transferable “Neonatal Drug Exclusivity Voucher.”  The voucher is kind of a combination of the recent PRV programs and efforts to create “wildcard exclusivity.”  And it’s an idea the President’s Council of Advisors on Science and Technology (“PCAST”) proposed in a September 2014 report as part of a broader initiative announced by The White House to address the growing challenges posed by antibiotic resistance.  In the report, PCAST recommended consideration of a tradable exclusivity voucher to reward successful antibiotic development.  As we noted in a post when the PCAST report was published, “there seems to be a growing chorus of support for wildcard exclusivity that may mean it will gain traction among legislators and find its way into the FDC Act.”  Clearly, momemtum is building for transferable wildcard exclusivity. 

S. 2041 would allow the sponsor of a 505(b)(1) NDA for a new chemical entity or the sponsor of a BLA for a new biological entity intended for the prevention or treatment of a disease or condition of a preterm or full-term neonate (as specificed on a Priority List of Critical Needs for Neonates created under the bill), and that “relies on clinical data derived from studies examining a neonatal population and dosages of the drug intended for that population,” to obtain a “Neonatal Drug Exclusivity Voucher” upon approval of its application.  A “Neonatal Drug Exclusivity Voucher” is defined in the bill to mean:

a voucher issued by [FDA] to the sponsor of a neonatal drug application that entitles the holder of such voucher to one year of transferable extension of all existing patents and marketing exclusivities, including any extensions, for a single human drug with respect to an application submitted under section 505(b)(1) or for a single human biologic product with respect to an application submitted under section 351(a) of the Public Health Service Act, including the 6-month period described in section 505A, the 4- and 5-year periods described in subsections (c)(3)(E)(ii) and (j)(5)(F)(ii) of section 505, the 3-year periods described in clauses (iii) and (iv) of subsection (c)(3)(E) and clauses (iii) and (iv) of subsection (j)(5)(F) of section 505, the 7-year period described in section 527, the 5-year period described in section 505E, and the 12-year period described in section 351(k)(7).  [(Emphasis added)]

The bill includes some provisos on voucher transferability and use.  For example, a voucher “may not be transferred to, or used for, a drug with respect to which all patents and cxclusivities have expired as of the date of the transfer.”  In addition, each person to whom a voucher is transferred must notify FDA of the change in ownership not later than 30 calendar days after the transfer.  A sponsor intending to use a voucher would be required to notify FDA not later than 15 months prior to loss of patent and exclusivities on the drug to which the voucher would apply, and FDA would then be required to notify the sponsor of its eligibility to redeem a voucher for the intended drug within 30 days of notice of intent to use.  Also, FDA would be able to revoke a voucher if the neonatal drug product for which the voucher was awarded is not marketed in the United States within 365-days from the date of the approval of the neonatal drug.  And, in a change from the current PRVs programs, FDA would be prohibited from assessing a fee  for the exercise of a Neonatal Drug Exclusivity Voucher.

S. 2041 also includes certain limitations on voucher eligibility and use.  For example, a Neonatal Drug Exclusivity Voucher would only be available to a sponsor that submits a marketing application after the enactment of S. 2041.  In addition, the bill provides that FDA “shall limit grants of exclusivity under [proposed FDC Act § 530] to drugs that are not required to complete neonatal studies under section 505B,” the Pediatric Research Equity Act.  And in case anyone thinks about “voucher stacking” (i.e., combining a PRV with a Neonatal Drug Exclusivity Voucher), think again.  S. 2041 says that “ [a] sponsor may not use a neonatal exclusivity voucher on a product for which the sponsor also intends to use a voucher obtained or purchased pursuant to section 524 or section 529.”

As one person (likely Pablo Picasso) once said: “Good artists copy, great artists steal.”  That’s a nice way to characterize the Promoting Life-Saving New Therapies for Neonates Act of 2015.  Senator Casey has taken a pinch of the PRV and a pinch of the concepts underlying “wildcard exclusivity,” mixed them together, and came up with something new. 

S. 2041 has been referred to the Senate Committee on Health, Education, Labor, and Pensions.  Perhaps we’ll see the bill resurface soon as part of the Senate’s counterpart to the House-passed 21st Century Cures bill.  We’re already seeing an uptick in FDA-related legislation introduced in the Senate, perhaps paving the way for the introduction of a larger FDA-related bill (or the release of a draft bill) in the coming weeks.  In addition to the Promoting Life-Saving New Therapies for Neonates Act of 2015, we’ve also seen the recent introduction of the Advancing Targeted Therapies for Rare Diseases Act of 2015 (S. 2030), a bill addressing  national health security (S. 2055), and legislation addressing drug affordability (S. 2023).

The latest issue of the Food and Drug Law Institute’s “Update” magazine features an analysis of the recent case of Amarin Pharma, Inc. v. FDA, No. 15-3588 (S.D.N.Y. May 7, 2015), written by Hyman, Phelps & McNamara, P.C. attorneys David C. Gibbons and Jeffrey N. Wasserstein.  The article, titled "Amarin Case Tests Limits of FDA Regulation of Off-Label Promotion," analyzes the regulatory background leading up to the case and where the Amarin case fits within recent First Amendment jurisprudence.

By David C. Gibbons & Anne K. Walsh – 

In the wake of what industry is touting as Amarin’s First Amendment victory (read our Amarin posts here and here), Pacira Pharmaceuticals, Inc. (“Pacira” or the “Company”) filed a suit raising similar claims in the same district court as the Amarin matter.  On September 8, 2015, Pacira filed a Complaint in the U.S. District Court for the Southern District of New York seeking to prevent FDA from bringing an enforcement action against the Company for what it claims is truthful and nonmisleading speech concerning its sole product, Exparel.  (Pacira subsequently filed a Motion for Preliminary Injunction in the case.)  A key issue is whether FDA can limit the scope of a generally approved product to only those specific uses in which the drug has been studied and approved.

Exparel is approved for “single-dose infiltration into the surgical site to produce postsurgical analgesia.”  Exparel (bupivacaine liposome injectable suspension) Label, NDA 022496, 2 (Dec. 2014).  The indication does not limit the surgical site for which Exparel can be used, even though the clinical studies used to gain approval were conducted in two specific types of surgeries:  bunionectomy and hermorrhoidectomy.  According to the Complaint, “Pacira initially felt free to provide truthful and non-misleading information to health care providers about Exparel’s use in surgical sites other than bunionectomy and hemorrhoidectomy.”  Complaint at 45, Pacira Pharms., Inc. v. FDA, No. 15-7055 (S.D.N.Y. Sept. 8, 2015). 

Three years after approval, in September 2014, FDA’s Office of Prescription Drug Promotion (“OPDP”) issued a Warning Letter to Pacira alleging that Exparel was misbranded.  FDA, Warning Letter to Pacira Pharmaceuticals, Inc. (Sept. 22, 2014).  Specifically, FDA took issue with Exparel’s distribution of materials describing the use of Exparel in laparoscopic cholecystectomy and open colectomy surgeries.  Id. at 4.  FDA stated that the promotional materials “suggest[ed] an extensive promotional campaign by Pacira to promote the use of Exparel in surgical procedures other than those for which the drug has been shown to be safe and effective.”  Id. at 3.  According to the Complaint, Pacira did not agree with FDA, but was “compelled to comply with FDA’s demands” because Pacira feared enforcement action.  Compl. at 50.   

The Instant Lawsuit

In its lawsuit, the Company seeks to resume promoting Exparel as it did before the Warning Letter issued.  Compl. at 71-72.  Like Amarin, Pacira identifies in its Complaint specific types of information that it desires to disseminate to healthcare providers, such as the use of Exparel in surgical sites other than bunionectomy and hemorrhoidectomy; the different methods by which Exparel can be administered in these other surgical sites; published studies and reports regarding Exparel’s administration into different surgical sites; and experiences that other physicians have had administering Exparel into other surgical sites to produce postsurgical analgesia.  Compl. at 52-53.

Pacira first argues that under Caronia and Amarin, the First Amendment protects the dissemination of information concerning uses of Exparel in patients undergoing a specific type of surgery other than bunionectomy or hemorrhoidectomy, “even if it constituted an off-label use.”  Id. at 59.  Citing the Amarin decision, Pacira argues that FDA has no constitutional basis to prohibit the dissemination of information concerning specific uses of Exparel, even if not FDA-approved, because it is protected commercial speech.  Id. at 56.  

In the alternative, Pacira argues that the information was not even off-label because the Company held a reasonable and good faith belief that the “broad pain indication” allows the Company to disseminate information on uses consistent with such an indication.  Id. at 57.  Under this argument, Pacira disputes FDA’s conclusions that the dissemination of information about the use of the product to produce postsurgical analgesia in other types of surgeries is outside the scope of the approved indication.  Id. at 57-58.  

Pacira also raises familiar challenges under the Administrative Procedure Act (that FDA’s restrictions are arbitrary and capricious) and the Fifth Amendment (due process).  Pacira asserts that FDA changed its position on Exparel, noting that FDA reviewers originally sought to limit the approval to bunionectomy or hemorrhoidectomy surgeries, but that the final Exparel’s approved label did not contain that limitation.  Id. at 63.  Pacira also focuses on FDA’s requirements for pediatric studies under the Pediatric Research Equity Act (“PREA”), arguing that “FDA could only have reached a conclusion that pediatric studies were required for Exparel if it understood the product’s approved indication to encompass all surgical sites generally, and not just those sites associated with bunionectomies and hemorrhoidectomies.”  Id.   

Predictions

While this case appears to present the same issues as in Amarin, there are unique aspects of this case that, if resolved in Pacira’s favor, could further erode FDA’s authority in this field.  But there also are potential weaknesses that highlight the limitations of Amarin.  

For example, unlike Amarin, Pacira could be at risk of a challenge from FDA given the current posture of the matter.  Based on the company’s decision to discontinue the targeted promotional activities, FDA closed out the Warning Letter in July 24, 2015.  Given that FDA’s close-out letter suggests there is no imminent threat of prosecution against Pacira, the court may find there is no justiciable controversy at issue.  Whether the action is mooted, or whether the company lacks standing, or both, is an issue that was not at play in Amarin. 

Also, Pacira’s argument that its promotional claims are in fact within the approved general indication for postsurgical analgesia raises an issue beyond the scope of Amarin and with broader implication on medical device companies.  Medical device companies frequently face this “general versus specific use” issue because it is not uncommon for a medical device to receive clearance for a general use.  Healthcare practitioners, of course, will use the medical device on specific sites, so the question arises whether medical device representatives can talk to these practitioners about the specific uses directly.  The risk is that FDA may view the specific use as a new intended use requiring a new 510(k) clearance or even premarket approval.  Given the specific claims that Pacira wants to make, medical device companies should be keenly following this litigation to see whether FDA gives any insight on how it views marketing for specific uses.  

Also, the scientific strength of the claims is not as strong as that involved in Amarin.  Pacira does not have completed pivotal phase 3 data on the specific indications for which it would like to promote, and instead seeks to extrapolate data that is not directly involving its drug product.  See Compl. at 44.   

If nothing else, Pacira’s lawsuit tells us that Caronia and Amarin have indeed given courage to other potential First Amendment challengers.  The key will be to see who has the heart to file in a circuit other than the Second Circuit where good precedent exists.  Even a loss could be a win for industry if it creates a circuit split that could result in the issue being decided by the U.S. Supreme Court. 

By Kurt R. Karst –

In a September 10, 2015 Response to a September 2, 2011 Citizen Petition (Docket No. FDA-2011-P-0657) submitted by the National Organization for Rare Disorders (“NORD”), FDA refuses to add a statement to guidance documents concerning orphan drugs that the Agency’s official policy is to afford “special flexibility” to the regulatory review of marketing applications for products for rare diseases.  Despite FDA’s refusal, however – and in what might be characterized as the regulatory equivalent of a “nudge nudge wink wink” – the Agency assures NORD that FDA “remains sensitive to NORD’s concerns and will continue to encourage and support the development and availability of treatments for rare diseases” and outlines the numerous ways in which the Agency addresses the unique concerns related to rare diseases. 

NORD’s petition was triggered by a provision included in the Fiscal Year 2010 FDA Appropriations Act (Pub. L. No 111-80).  As we previously reported, Section 740 of the law required FDA to, among other things, develop “internal review standards” no later than 180 days following issuance of a report by the Agency’s internal expert committee on the review of articles for the diagnosis or treatment of rare diseases.  FDA issued the Report to Congress on June 27, 2011, making the Agency’s “internal review standards” guidance due for issuance no later than December 27, 2011 (see our previous post here).  NORD’s petition requests that FDA’s guidance explicitly include three items: 

• Acknowledgement that the conduct of clinical trials for most orphan drugs is qualitatively and quantitatively different from the conduct of trials for drugs that treat common conditions.
• Acknowledgement that FDA review of marketing applications for most orphan drugs is accordingly qualitatively and quantitatively different from FDA review of applications for articles that treat common conditions.
• In recognition of the above, and notwithstanding the unchanged requirements that articles for rare diseases must demonstrate both efficacy and safety, we request a statement that it will now be FDA official policy to afford special flexibility to the regulatory review of submissions for all orphan drugs.

According to NORD, “[t]his petition does not request any itemization of past actions – rather, through the language of forthcoming guidance, we request the establishment of a policy to direct future actions.”  In addition, NORD requests that FDA “incorporate mandatory training in this new policy and other matters related to orphan drug development for all full-time FDA review professionals”  by making the course administered by CDER’s Associate Director for Rare Diseases, titled “Meeting the Challenges of Rare Disease Drug Review,” a requirement for all CDER and CBER reviewers.

Citing the Agency’s January 2013 final guidance on Humanitarian Use Device Designations (see our previous post here) and FDA’s August 2015 draft guidance on “Rare Diseases: Common Issues in Drug Development” (see our previous post here) – which “acknowledges that certain aspects of drug development that are feasible for common diseases may not be feasible for rare diseases” – FDA says in the petition response that the guidances meet the publication provisions of Section 740 of the Fiscal Year 2010 FDA Appropriations Act, and that with their issuance, FDA grants the guidance publication request in NORD’s petition.  (FDA also notes that other related guidances are in the near-term pipeline.)  But that’s the extent to which FDA explicitly grants any of the requests in NORD’s petition. 

Moving on to NORD’s request for “explicit acknowledgements” in guidance that both clinical trials and FDA application reviews for orphan drugs are “qualitatively and quantitatively different” from clinical trials or application reviews for products treating prevalent diseases or conditions, and NORD’s request for a statement in guidance on the “special flexibility” FDA applies to the review of applications for orphan drugs, FDA takes an interesting tack.  FDA denies both requests, saying that “the language you suggest may inadvertently limit FDA’s decision-making flexibility or mislead others regarding the standards required for orphan drugs;” however, the Agency then goes on to note the various ways in which the Agency has accorded flexibility to orphan drug reviews, including citing a landmark report authored by Hyman, Phelps & McNamara, P.C.’s Frank J. Sasinowski on his findings of flexibility in FDA’s review of potential treatments for patients with rare diseases (see our previous posts here and here).  According to FDA:

Although the Agency will not make explicit the suggested acknowledgements in future guidances, FDA has assessed, and will continue to assess, orphan drug development programs on an individual basis, taking into account disease manifestations, the expected results of the intervention, the population under study, and other factors. . . .

For products treating rare diseases, FDA’s record of flexibility during the approval process is indisputable.  Between 2006 and 2015, FDA approved almost 200 such products in multiple therapeutic areas and indications.  In doing so, the Agency assented to a wide variety of clinical development programs, accepted trial populations as low as less than 20, approved treatments that in some instances relied on only one study, and accepted a diverse array of study designs.  For approved products, such factors such as the disease being treated, the intervention proposed, and the population under study can affect the quantity and quality of evidence available.) [sic] In each case, FDA exercised its scientific judgment to determine what level of information would be sufficient to demonstrate compliance with applicable statutory and regulatory standards.

FDA also declines to change the content of the Agency’s “Meeting the Challenges of Rare Disease Drug Review” training course as NORD requested, saying that “in its current iteration, this annual course sufficiently addresses your concerns regarding the unique challenges of orphan drug development.” 

But FDA’s petition response is not done yet.  FDA takes this opportunity to tick off some of the recent ways in which the Agency “has been proactive in addressing the unique concerns related to rare diseases”: 

• Hiring additional staff to the OND Rare Disease Program
• Forming a Rare Disease Council that meets monthly and discusses cross-cutting issues relating to rare diseases (see here at page 60)
• Developing a comprehensive regulatory science database and evaluation tool that allows the Agency to identify best practices and gaps for rare disease development
• Holding public workshops and Patient-Focused Drug Development (PFDD) meetings that address specific topical areas and particular diseases, where approximately 50% of these meetings have been focused on rare diseases (see our previous post here)
• Holding a PDUFA V- and FDASIA-mandated three-day public meeting entitled “Complex Issues in Developing Drugs and Biological Products for Rare Diseases and Accelerating the Development of Therapies for Pediatric Rare Diseases” on January 6- 8, 2014
• Publishing the draft guidance for industry entitled “Rare Pediatric Disease Priority Review Vouchers” in November 2014 (see our previous post here)
• Publishing the guidance for industry entitled “Expedited Programs for Serious Conditions – Drugs and Biologics” in May 2014 (see our previous post here)
• Establishing and participating in numerous conferences, committees, and work groups related to rare disease issues and topics

So, despite FDA's reticence to explicitly state as official Agency policy that FDA affords special flexibility to the regulatory review of submissions for orphan drugs, it seems pretty clear that the flexibility is implied.  That seems to me the messaging going on in FDA's petition response to NORD.  And it's a message repeated by FDA’s Associate Director for the CDER Rare Diseases Program, Dr. Jonathan Goldsmith, who commented in a recent FDA Voice blog post that it is “important to note that FDA regulations provide flexibility in applying regulatory standards because of the many types and intended uses of drugs. Such flexibility is particularly important for treatments for life-threatening and severely-debilitating illnesses and rare diseases.”

By Riëtte van Laack & Etan J. Yeshua –

As we previously reported, when FDA announced a new compliance date for the menu labeling rule, it also announced that it would issue guidance.

On Friday, September 11, FDA issued the promised draft guidance.  The draft guidance is a mix of clarifications of the rule, and answers to certain questions.  Overall, the draft guidance appears to include little “new” information, though. A few noteworthy statements:

• The rule requires that covered establishments provide FDA, “within a reasonable period of time upon request,” with information substantiating nutrient values.  According to the draft guidance, FDA considers “4-6 week” a reasonable period of time to respond to such a request;
• If there is an inconsistency between declaration of nutrient values under the menu labeling rounding rules and under the TTB’s rounding rules for the voluntary Serving Facts on the label, covered establishments may use the value provided in the voluntary Serving Facts statement for an alcoholic beverage labeled consistent with TTB’s rather than with FDA’s rounding rules.
• The guidance includes a helpful table that lists types of establishments and identifies which establishments would and would not be considered “covered establishments.”  In response to questions, FDA clarifies that in-patient only food service facilities in hospitals and prisons are not covered establishments.  Also, complementary hotel breakfast buffets are not subject to the menu labeling rule.

The draft guidance is labeled as Part II.  FDA previously issued Part I.  However, that guidance is not available because the Agency is “revising this guidance document in order to make changes in light of FDA’s issuance of final rules.”  It is unclear when an updated version of Part I will be available. 

Stakeholders would be well-advised to review the draft guidance and submit remaining questions.  FDA invites comments to the draft guidance but, at this time, has not provided a deadline for comments to be considered in finalizing the guidance.  In the constituent update, FDA indicates that it will consider updates to the guidance as needed.  Likely as a result of critical reviews of the final rule and the threat of amending legislation, the Agency states that it is “committed to working collaboratively with establishments covered by the menu labeling final rule , . . . now and in the future, to answer additional questions” and FDA will “work flexibly and cooperatively with individual companies making a good faith effort to comply.”  FDA also plans to provide “educational and technical assistance for covered establishments and for our state, local, and tribal regulatory partners to support consistent compliance nationwide.” 

UPDATE: After we published this post, FDA announced that the deadline for comments to be considered in finalizing the guidance is November 2, 2015.”

By Kurt R. Karst – 

Last week, Senators Amy Klobuchar (D-MN) and Charles Grassley (R-IA) announced the introduction of S. 2019, the Preserve Access to Affordable Generics Act.  The bill is the latest attempt to pass legislation to address pharmaceutical patent settlement agreements (aka “reverse payment agreements” or “pay-for-delay agreements”).  It’s also the first attempt (that we can recall) that Congress has made to pass the Preserve Access to Affordable Generics Act after the U.S. Supreme Court declined to hold, in FTC v. Actavis, Inc., 133 S. Ct. 2233 (2013), that reverse payment settlement agreements are presumptively unlawful, and that “Courts reviewing such agreements should proceed by applying the ‘rule of reason,’ rather than under a ‘quick look’ approach” (see our previous post here).  Since that June 2013 decision, the Federal Trade Commission (“FTC”) has continued to battle with companies in court over patent settlement agreements, sometimes with success (see here and here).  The Supreme Court’s decision has also opened the door on a lot of antitrust litigation (see here).  Despite this uptick in litigation, however, companies continue to enter into patent settlement agreements.  Last December, the FTC issued its most recent report on the topic (see our previous post here), saying that Fical Year 2013 saw 145 final patent settlement agreements filed with the Commission.  This was is a small increase from Fiscal Year 2012, but the 2013 numbers do not account for any potential fallout from the Supreme Court’s decision in Actavis.  “The FTC has kept the pressure on, but Congress should act to end these twisted litigation settlements,” commented Senator Grassley in a press release announcing the introduction of S. 2019.

Unlike the last version of the Preserve Access to Affordable Generics Act, which reminded us of that old saying about insanity (i.e., that insanity is doing the same thing over and over again and expecting different result) (see our previous post here), the latest iteration of the bill changes thing up . . .  but just a little. 

Like the previous versions of the Preserve Access to Affordable Generics Act, S. 2019 would amend the FTC Act to add a new section – Section 27 – to permit the FTC to “initiate a proceeding to enforce the provisions of [new Sec. 27] against the parties to any agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a drug product” if “an ANDA filer receives anything of value, including an exclusive license” – a new addition to the bill – and if “the ANDA filer agrees to limit or forego research, development, manufacturing, marketing, or sales of the ANDA product for any period of time.”  Such agreements, if challenged, would be presumptively anticompetitive and unlawful unless it can be demonstrated “by clear and convincing evidence” that “the procompetitive benefits of the agreement outweigh the anticompetitive effects of the agreement,” or, in a new exception, if the value received “is compensation solely for other goods or services that the ANDA filer has promised to provide.”  Previous versions of the bill concerned only ANDA applicants, but in the latest version of the bill, the term “ANDA” is defined to include an application under FDC Act § 505(j) and an application under FDC Act 505(b)(2).  (The bill does not address patent settlement agreements in the context of biosimilar applications submitted to FDA pursuant to PHS Act § 351(k).) 

Gone from S. 2019 are certain “competitive factors” found in previous versions of the bill that fact finders were to consider in determining whether or not the settling parties met the presumption burden noted above.  Instead, fact finders are subject to certain limitations, which also appeared in previous versions of the Preserve Access to Affordable Generics Act.  Specifically, the fact finder shall not presume: (1) “that entry would not have occurred until the expiration of the relevant patent or statutory exclusivity”; or (2) “that the agreement’s provision for entry of the ANDA product prior to the expiration of the relevant patent or statutory exclusivity means that the agreement is pro-competitive, although such evidence may be relevant to the fact finder’s determination under this section.”

Also gone from S. 2019 is the section appearing in previous versions of the bill that the FTC may issue regulations implementing and interpreting the new statutory provisions that would be added by the Preserve Access to Affordable Generics Act.  Of course, the FTC may nevertheless issue implementing regulations if S. 2019 becomes law. 

With the exception of a few additional items, the remainder of S. 2019 is identical to previous versions of the Preserve Access to Affordable Generics Act.  For example, “[e]ach person, partnership or corporation that violates or assists in the violation of [new Sec. 27] shall forfeit and pay to the United States a civil penalty of not more than 3 times the gross revenue of the NDA holder from sales of the drug product that is the subject of the patent infringement claim for the period of the violation, starting with the date of the agreement.”  Also, an agreement that violates propsed Sec. 27 would result in a forfeiture of an ANDA applicant’s 180-day exclusivity eligibility.  (This last penalty would not apply to 505(b)(2) applicants because they are not eligible for – or subject to – 180-day generic drug exclusivity.)

One notable change from previous iterations of the bill is a statute of limitations providing that the FTC “shall commence any enforcement proceeding . . . not later than 6 years after the date on which the partiesto the agreement file” the required notice with the FTC.  Previous versions of the bill gave the FTC only 3 years to initiate an enforcement proceeding.  Another notable change is the addition in S. 2019 of an “Effective Date” provision.  That new provision provides that proposed Section 27(a)(1) concerning enforcement proceedings “shall apply to all agreements . . . entered into after June 17, 2013,” while proposed Section 27(f) concerning penalties “shall apply to agreements entered into on or after the date of enactment of [the Preserve Access to Affordable Generics Act].” 

S. 2019 has been referred to the Senate Judiciary Committee.  The bill will either sit and die in committee, or be taken up as a stand-alone bill or as part of a broader package of legislative proposals.