By Ricardo Carvajal – 

FDA and the Center for Food Safety (CFS) entered into a consent decree that calls for FDA “to submit a final rule regarding ‘Substances Generally Recognized as Safe’ to the Federal Register for publication no later than August 31, 2016.”  As we reported in a prior posting, CFS sued FDA over the agency’s administration of a GRAS notification program consistent with a proposed rule issued in 1997.  The consent decree does not address CFS’s substantive concerns.  Rather, it commits FDA to issue a final rule by the agreed-upon deadline.  CFS reserves the right to “challenge the merits of the final rule, including but not limited to claims relating to whether FDA’s final action complies with the APA and other applicable laws.”  FDA can seek an extension of the agreed-upon deadline for good cause and/or exceptional circumstances.

Notwithstanding the limited relief obtained through the consent decree, CFS trumpeted a victory on its website.  The CFS announcement propagates a number of mischaracterizations of the GRAS exception (e.g., that it was intended only for common food ingredients like sugar and gelatin, and that manufacturers could once “formally petition FDA to approve a food additive as GRAS”).  Further, CFS claims that finalization of the GRAS rule “gives the public the right to challenge FDA on its GRAS system.”  CFS’s posture suggests that FDA’s issuance of a final rule could beget additional litigation – and a corresponding delay in the rule’s implementation. 

By Kurt R. Karst –      

We were wondering how long it might be until a company went running to FDA to request that the Agency reset the date of approval of its NDA, as well as any unexpired marketing exclusivity, as the result of a proprietary name review issue FDA identified in a footnote to an April 30, 2014 denial of two  Citizen Petitions requesting that the Agency reset the 5-year New Chemical Entity (“NCE”) exclusivity periods for drug products because of delays in the controlled substance scheduling process.  It took one company, Spectrum Pharmaceuticals, Inc. (“Spectrum”), less than 6 months to make its appeal to FDA.  In an October 13, 2014 Citizen Petition (Docket No. FDA-2014-P-1615), Spectrum requests that FDA update the Orange Book to state that the company’s FUSILEV (levoleucovorin) for Injection drug product approved under NDA 020140 was approved 129 days after the date currently listed in the publication – on July 14, 2008 rather than March 7, 2008 – and that the period of 7-year orphan drug exclusivity expires 129 days later than currently listed – on July 14, 2015 instead of March 7, 2015.  (Spectrum’s October 13th petition follows a September 30th Citizen Petition [Docket No. FDA-2014-P-1649] from the company requesting that FDA not approve ANDAs for generic FUSILEV that omit certain labeling information – see our updated Generic Drug Labeling Carve-Out Scorecard.)

As we previously reported (here, here, and here), Eisai Inc. (“Eisai”) and UCB, Inc. submitted Citizen Petitions (Docket Nos. FDA-2013-P-1397 and FDA-2013-P-0884) to FDA in 2013 requesting that the Agency conclude that the NCE exclusivity start dates for BELVIQ (lorcaserin HCl) Tablets (NDA No. 022529), FYCOMPA (perampanel) Tablets (NDA No. 202834), and VIMPAT (lacosamide) Tablets (NDA No. 022253) are triggered only when FDA-approved labeling incorporates the final Drug Enforcement Administration Controlled Substances Act scheduling decision to permit commercial marketing of the drug products, and not on the date of NDA approval.  In denying the petitions, FDA addressed the petitioners’ argument that the Agency’s regulation at 21 C.F.R. § 314.108(a) defining “date of approval” supports a later NCE exclusivity start date.  That regulation defines “date of approval” as follows:

Date of approval means 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)]

According to FDA, the approval letters for BELVIQ, FYCOMPA, and VIMPAT do not “expressly require” approval of labeling or other materials, and therefore, the regulation is not applicable to the approval of those drugs.  To make the point about the limited nature of the “expressly required” exception in the regulation, FDA says the following in footnote 92 of the petition denial:

The highlighted language is an exception to the general rule, and FDA has always construed that exception narrowly.  PhRMA, in a comment supporting Petitioners, has argued that this exception can only have been intended to apply to scheduling situations (despite the fact that it has never been applied to such situations).  PhRMA comment at 5-6.  FDA is aware of one situation, which did not involve scheduling, in which this narrow exception has been applied.  In that case, the letter announcing the approval of the NDA contemplated the later submission of a trade name that FDA would have to review and approve prior to marketing, and FDA determined that the approval date was the date when the trade name was approved. The drug involved in that case was Razadyne ER (NDA 021615). . . .

That footnote – and the RAZADYNE ER (galantamine hydrobromide) Extended-release Capsules precedent in particular – is at the heart of Spectrum’s October 13th petition.  (It also plays an important role in the lawsuit Eisai filed against FDA earlier this year after the Agency denied the company’s petition – see our previous post here – and in Eisai’s recent Motion for Summary Judgment in that case.)

FDA initially approved NDA 021615 for RAZADYNE ER on December 22, 2004.  The drug, however, was approved without a proprietary name after FDA rejected name proposals because of concerns about medication errors.  The NDA sponsor ultimately (i.e., 101 days after the  December 22, 2004 approval, or April 1, 2005) found a proprietary name that passed muster at FDA and then asked the Agency to revise the NDA approval date.  FDA acquiesced and issued a letter in June 2006 with the following rationale: 

FDA’s December 22, 2004 action letter stated that, because of medication errors associated with the use of the trade name Reminyl for the approved galantamine hydrobromide immediate release product, J&J would not market the extended release product until a new trade name had been reviewed and approved by FDA. 

We have reviewed your letter and the NDA record, and concluded that the action letter of December 22, 2004, should be considered an approvable letter as described in 21 CFR 314.110.  In light of the concerns about medication errors expressed in that letter, it is reasonable to conclude that Razadyne ER was not approved until April 1, 2005, when the Agency completed its review of the proposed new trade name, found it acceptable, and conveyed this information to J&J.

As a result, FDA also amended the Orange Book to reflect the new NDA approval date, and reset the period of 3-year exclusivity for  RAZADYNE ER to expire on April 1, 2008 instead of December 22, 2007. 

According to Spectrum, the regulatory history of FUSILEV is strikingly similar to that of RAZADYNE ER.  FDA and Spectrum were unable to come to terms on a proprietary name for the proposed Levoleucovorin drug product, which led to the approval letter issued on March 7, 2008 providing

for the use of Levoleucovorin for Injection, 50 mg/10 mL or 10 mg/mL for rescue after high-dose methotrexate therapy in osteosarcoma and to diminish the toxicity and counteract the effects of impaired methotrexate elimination and of inadvertent overdosage of folic acid antagonists.

The letter goes on to state that

A decision on the acceptability of your proposed trade name will be made by the Division of Medication Error Prevention and will be communicated to you at a later date.  Accordingly, you may submit a post-approval labeling supplement with inclusion of the accepted trade name. Until then, you may not use any trade name on the labels and labeling, but may only use the established name.

On July 14, 2008 – 129 days after the original March 7, 2008 approval letter was issued – FDA sent Spectrum a letter approving a supplement providing “for a proprietary name, Fusilev, and revised labeling to include the proprietary name.”  Spectrum subsequently began marketing the drug with the FUSILEV name. 

Spectrum says that there is no reason for FDA to treat FUSILEV and the circumstances surrounding the proprietary name review and approval of the drug any different than in the case of RAZADYNE ER.  But a decision is needed fast, says Spectrum.  The March 7, 2015 date currently listed in the Orange Book for the expiration of a period of orphan drug exclusivity, and that could mean ANDA approval, is approaching quickly. 

By Ricardo Carvajal –

That’s the clever title of a symposium on entomophagy being delivered at the next annual meeting of the Entomological Society of America (ESA), scheduled for the week of November 16 in Portland, Oregon.  As we noted in a prior posting, the market for insect-derived foods is stirring, and with that awakening comes greater interest in understanding the governing regulatory framework.  Hyman, Phelps & McNamara, P.C. will cover that topic at the symposium, which will also feature presentations on consumer perception, market research, bringing products to market, and other issues of interest to producers, consumers, and researchers.  For those planning to attend, no word yet on whether there will be samples on hand, but at least one local eatery aims to please.  Sushi Mazi offers a grasshopper roll that has its devotees. 

By Jay W. Cormier & Alan M. Kirschenbaum –

As we previously reported, in late August, the U.S. District Court for the District of Columbia denied PhRMA’s request that the Court vacate a recent HRSA interpretive rule on the orphan drug exception under the 340B drug discount program, ruling that the interpretive rule was not the subject of PhRMA’s lawsuit. The Court stated that PhRMA “is free to challenge that interpretive rule, but such a challenge is beyond the scope of the instant action.”   It should come as no surprise that PhRMA was not deterred by the procedural hiccup.

Briefly, in July 2013, HRSA issued a regulation providing that the orphan drug exclusion added to the 340B statute by the Affordable Care Act – which exempts orphan drugs from 340B pricing in cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals – applies only to orphan drugs that are used for the rare condition or disease for which that orphan drug was designated.  (For a more detailed description of the 340B program and the orphan drug rule specifically, please see our previous post.)  In October of 2013, PhRMA filed suit alleging that the final rule violated the Administrative Procedures Act (see our previous post here).  In May of this year, the Court agreed with PhRMA, finding that HRSA did not have statutory authority to promulgate the rule.  (See our previous post here.)  In July, HRSA issued what was styled an interpretive rule, which set forth the same use-based limitation contained in the final rule that had been invalidated by the Court.  PhRMA then asked the Court to strike down the interpretive rule, and, as mentioned at the opening of this post, the Court dismissed PhRMA’s motion on the ground that PhRMA needed to file a new suit (see our previous post here).

Last week, PhRMA did file a new lawsuit in the D.C. District Court, challenging HRSA’s use-based interpretation of the orphan drug exclusion as arbitrary, capricious, and not in accordance with law.  PhRMA’s complaint requests declaratory and injunctive relief, arguing that, although styled an interpretive rule, the rule requires PhRMA members to either change their conduct and comply with HRSA’s interpretation or risk substantial penalties, including a requirement to pay refunds to 340B covered entities. 

As if to substantiate PhRMA’s latter point, HRSA has recently sent letters to at least some manufacturers of orphan drugs, warning them that, if they do not offer 340B pricing on orphan drugs when used for non-orphan indications, they will be in violation of the 340B statute and their 340B agreements with HHS.  The letters request the manufacturer to submit to HRSA within 30 days a plan for providing refunds to covered entities that have overpaid for orphan drugs and for providing the 340B price in the future.

We will continue to keep our readers updated as events continue to unfold.

By Kurt R. Karst –      

For several months now we have been monitoring an appeal to the U.S. Court of Appeals for the Federal Circuit concerning a patent – U.S. Patent No. 6,878,703 (“the ‘703 patent”) – listed in the Orange Book for Daiichi Sankyo Inc.’s (“Daiichi”) BENICAR (olmesartan medoxomil) Tablets (NDA 021286).  We were waiting for the case to ripen into a blog post.  That happened earlier this week, just not in the way we expected it to happen.  But before we get there, some background on the BENICAR case.

The ‘703 patent, which Daiichi statutorily disclaimed, is a 180-day exclusivity-bearing patent, and therefore, remains listed in the Orange Book, but with a “Patent Delist Request Flag.”  This flag is described by FDA in an Orange Book data file as follows:

Sponsor has requested patent be delisted.  This patent has remained listed because, under Section 505(j)(5)(D)(i) of the Act, a first applicant may retain eligibility for 180-day exclusivity based on a paragraph IV certification to this patent for a certain period.  Applicants under Section 505(b)(2) are not required to certify to patents where this flag is set to Y.  Format is Y or null.

The first ANDA applicant’s eligibility for 180-day exclusivity for Olmesartan Medoxomil Tablets – here subject to the post-Medicare Modernization Act (“MMA”) version of the statute – is apparently serving as an obstacle to Apotex, Inc. (“Apotex”), which has an ANDA pending  at FDA that is not yet tentatively approved. 

In November 2012, Apotex filed a Complaint for Declaratory Judgment in the U.S. District Court for the Northern District of Illinois in an effort to obtain a court decision triggering the 75-day statutory period under FDC Act § 505(j)(5)(D)(i)(I)(bb) and that would ultimately result in a forfeiture of 180-day exclusivity eligibility.  Daiichi filed a Motion to Dismiss the Apotex Complaint, as did non-party/proposed intervenor-defendant Mylan (here).  Earlier this year, the District Court issued a Memorandum Opinion granting Daiichi’s Motion to Dismiss, saying that “[t]he mere fact that the FDA has failed for some reason to delist Patent ‘703, despite Daiichi’s request, does not create a case or controversy by which Apotex may seek a declaratory judgment regarding a nonexistent patent.” 

Apotex appealed the District Court decision to the Federal Circuit with the following statement of the issue in the case:

Whether the district court legally erred in concluding that a patentee’s disclaimer of a patent that continues to have an exclusionary effect by virtue of the patentee’s listing of that patent in the FDA Orange Book deprives the court of subject matter jurisdiction to decide Apotex’s civil action to obtain patent certainty under 21 U.S.C. § 355(j)(5)(C) and 35 U.S.C. § 271(e)(5), where the requisites of the statutes were satisfied and where, unless Apotex can obtain the declaratory judgment sought in this action, final FDA approval of its [ANDA] will be delayed by at least 180 days.

Daiichi’s brief is on file, as well as a brief from cross-appellant Mylan challenging the District Court’s denial of the company’s motions to intervene and dismiss the Apotex Complaint.  Recently, Apotex filed its Response and Reply Brief. 

The BENICAR case above serves as an interesting counterpoint to a Memorandum Opinion and Order issued earlier this week by the U.S. District Court for the Eastern District of Virginia.  In that case, the court denied a Motion to Dismiss filed by patent owner Ferring B.V. (“Ferring”) seeking dismissal of a Complaint for Declaratory Judgment of Patent Unenforceability filed by ANDA applicant Glenmark Generics Ltd. (“Glenmark”) (Opposition and Reply briefs available here and here).  The drug at issue in that case is DDAVP (desmopressin acetate) Tablets, 0.1 mg and 0.2 mg, which FDA approved under NDA 019955 on September 6, 1995.  (A hat tip to the folks at Sterne, Kessler, Goldstein & Fox PLLC who represent Glenmark and who alerted us to the DDAVP decision.)

Unlike BENICAR, DDAVP is a pre-MMA drug insofar as 180-day exclusivity is concerned.  And in that pre-MMA world, which continues to generate interesting controversies (see our previous post here),  a subsequent ANDA sponsor that certifies to a newly listed patent cannot be approved until the first-filer’s exclusivity is over, or is otherwise lost because of, for example, a final court decision.  That’s because under the pre-MMA statute 180-day exclusivity is patent-by-patent and can result in multiple rounds of exclusivity. 

In the case of DDAVP, the listing of U.S. Patent No. 7,022,340 (“the ‘340 patent”) in the Orange Book for NDA 019955, and the subsequent Paragraph IV certification to that ‘340 patent by an unknown first-filer, has given rise to a new period of 180-day exclusivity eligibility.  That unknown first-filer’s period of exclusivity is blocking subsequent ANDA applicant Glenmark from obtaining final approval of its ANDA 201831 that FDA tentatively approved in Decemner 2013.  So in an attempt to relieve the bottleneck created by the fist-filer’s 180-day exclusivity eligibility, Glenmark initiated litigation. 

As with the ‘703 patent listed in the Orange Book for BENICAR, the ‘340 patent listed in the Orange Book for DDAVP has been statutorily disclaimed an is identified with a “Patent Delist Request Flag.” But unlike the Illinois District Court in the BENICAR case, the Virginia District Court in the DDAVP case ruled in its October 14, 2014 decision that notwithstanding the patent delisting, there remains a case or controversy by which Glenmark may seek a declaratory judgment regarding the disclaimed and now nonexistent patent.  Specifically, wrote the Virginia District Court:

Ferring held an exclusive license to the ‘340 patent that is listed in connection with Sanofi’s NDA for DDAVP Tablets.  The Federal Circuit has consistently held that “the alleged action taken (giving rise to the injury-in-fact) [is] [the] listing [of] particular patents in the Orange Book.”  Teva Pharms., USA, Inc. v. Eisai Co. Ltd., 620 F.3d 1341, 1346-47 (citing Caraco, 527 F.3d at 1292; and Janssen Pharmaceutica, N.V. v. Apotex, Inc., 540 F.3d 1353, 1359-60 (Fed. Cir. 2008).  The same logic applies here.  That is, “‘but-for’ the [] list[ing] [of the ‘340] patent in the Orange Book, FDA approval of [Glenmark’s] drug would not have been independently delayed by the patent.”  Id.  The statutory disclaimer and request to delist the patent from the Orange Book does not obscure the traceability of Glenmark’s injury to Ferring.  In other words, the statutory disclaimer of the ‘340 patent, that Glenmark admits renders the patent legally nonexistent, does not eliminate the patent from obstructing the FDA’s approval of Glenmark’s ANDA.  The ‘340 patent remains the critical factor in the FDA’s approval process. . . .

Finding that it may appropriately exercise jurisdiction over the matter, the Court now finds no persuasive reason to decline to do so.  Exercising jurisdiction in this matter will not merely serve a useful purpose in settling the legal relations at issue and affording relief from the underlying controversy, but is essential to doing so.  There exists a legitimate dispute over the continued listing of the ‘340 patent in the Orange Book that the Court may resolve through “specific relief… of a conclusive character. ”  MedImmune, 549 U.S. at 127 (citations and internal quotation marks omitted).  Such relief is appropriately sought under the Declaratory Judgment Act.

The DDVAP case may be headed on to the Federal Circuit for another look, though a decision in the BENICAR case could resolve this Hatch-Waxman declaratory judgment issue sooner rather than later. 

By Kurt R. Karst –      

In recent comments submitted to FDA, the American Academy of Pediatrics (“AAP”) is taking a stand against the relief requested in a June 2014 Citizen Petition (Docket No. FDA-2014-P-0830) submitted on behalf of Merz North America.  The petition calls into question the long-held belief that FDA’s issuance of a Pediatric Written Request (“PWR”) is a condition precedent to the Agency awarding a period of 6-month pediatric exclusivity pursuant to the Best Pharmaceuticals for Children Act (“BPCA”) (FDC Act § 505A).  According to the AAP, Congress never intended for certain provisions of the BPCA “to be an end-run around the requirement for exclusivity to be granted on the basis of a written request.”

As we previoulsy reported, FDA approved the Merz (formerly Shionogi) drug CUVPOSA (glycopyrrolate) Oral Solution on July 28, 2010 under NDA No. 022571 for a pediatric-only indication: to reduce chronic severe drooling in pediatric patients (aged 3-16) with neurologic conditions associated with problem drooling (e.g., cerebral palsy).  FDA awarded periods of 3-year new clinical investigation exclusivity and 7-year orphan drug exclusivity, but not 6-month pediatric exclusivity.  That’s because the NDA sponsor never obtained a PWR from FDA.  But a PWR should not have been necessary says Merz, because the company’s “predecessor fulfilled the requirements for six-month pediatric exclusivity pursuant to FFDCA § 505A(h) as it existed at the time [FDA] approved Cuvposa in 2010.  The pediatric studies were performed as required under a provision of law and regulations (i.e., for NDA approval), and thus satisfied the requirements for pediatric exclusivity under § 505A(h) without a formal written request from FDA.”

In 2010, FDC Act § 505A(h), which concerns the relationship between the BPCA and the Pediatric Research Equity Act (“PREA”) (FDC Act § 505B) under which FDA can require sponsors to conduct pediatric testing for on-label uses, stated:

Notwithstanding any other provision of law, if any pediatric study is required by a provision of law (including a regulation) other than this section and such study meets the completeness, timeliness, and other requirements of this section, such study shall be deemed to satisfy the requirement for market exclusivity pursuant to this section.

That provision, originally added to the statute in 1997 at FDC Act § 505A(i) with the enactment of the FDA Modernization Act (“FDAMA”), and moved to FDC Act § 505A(i) with the enactment of the 2007 FDA Amendments Act (“FDAAA”), was changed in 2012 with the enactment of the FDA Safety and Innovation Act (“FDASIA”) to state:

Exclusivity under this section shall only be granted for the completion of a study or studies that are the subject of a written request and for which reports are submitted and accepted in accordance with subsection (d)(3).  Written requests under this section may consist of a study or studies required under section 355c of this title [FDC Act § 505B].

Merz says that the difference between the 2007 and 2012 versions of FDC Act § 505A(h) is significant for two reasons: “First, it includes language referencing written requests which was not present in that particular subsection when Cuvposa was approved,” and “[s]econd, it facially narrows the relationship between studies conducted for pediatric exclusivity and for other required purposes.”  Continuing on with the second point, the petition says that the 2010 version of FDC Act § 505A(h) “broadly referenced pediatric studies conducted as required by another provision of law or regulation,” but that the 2012 version of FDC Act § 505A(h) “only references PREA studies by name as being eligible for pediatric exclusivity.” 

The upshot of the differences in the statutory text, says Merz, is that for CUVPOSA to have been eligible for pediatric exclusivity under FDC Act § 505A(h) as it existed in 2010, two requirements must have been met: (1) the pediatric studies performed must have been “required by a provision of law (including a regulation);” and (2) the studies must have met the pediatric exclusivity requirements, including completeness and timeliness.  And both of these elements were met, argues the company:

Cuvposa met the first hurdle for receiving pediatric exclusivity under § 505A(h) because the sponsor was required to complete pediatric studies for NDA approval under both the FFDCA and the regulations. . . . Cuvposa also cleared the second hurdle for pediatric exclusivity under § 505A(h) — that the studies meet the “completeness, timeliness, and other requirements” for exclusivity.  The completeness requirement was certainly met because, if not, then the NDA would not have been approved.  The timeliness factor is not relevant here, because the studies were completed as required for NDA approval.  As far as any of the “other requirements” — a written request, internal review of the request, and internal review of the completed studies — none of these were required for Cuvposa to be eligible for exclusivity under § 505A(h).

In its comments to FDA, the AAP says there is no reason to believe that Congress ever intended to award pediatric exclusivity under the circumstances in which a company was seeking approval for pediatric-only use of a drug: 

To argue that Congress intended to allow for the awarding of pediatric exclusivity under §505A(i)/§505A(h) for studies submitted in accordance with a pediatric-only new drug application under §505(b)(1), requires one to also argue that Congress also intended pediatric exclusivity to be an incentive for the development of new pediatric-only therapies.  There is no factual basis to make this claim and no record to indicate this is what Congress intended.  While improving incentives for the development of first-in-pediatrics therapies is a worthy goal, the goals of the Pediatric Rule, BPCA, and PREA is and always has been to ensure that drugs developed for adults are studied in children and to provide incentives for completing additional FDA-requested studies in children.

Indeed, says the AAP, if that was the case, then Congress would not have pursued legislation to expand the existing Tropical Disease Priority Review Voucher program set forth at FDC Act § 524 (as added by FDAAA) to create the Rare Pediatric Disease Priority Review Voucher under FDC Act § 529 (as added by FDASIA) (see our previous post here).  Morover, says the AAP, removing the PWR element as a condition to obtaining pediatric exclusivity could be dangerous:

The written request is and always has been an essential element of the pediatric exclusivity program.  Six months of exclusivity is a powerful incentive for manufacturers but it does not come without a cost to society.  Tying this incentive to the fulfillment of a written request allows the FDA to ensure that the data generated by trials involving children are maximized, that product sponsors are meeting the objectives and timeframes agreed to in the written request, and that data and labeling generated by such trials are available to the public.  It would be a dangerous precedent to allow the awarding of exclusivity without a written request.  The written request is in essence a contract between the FDA and the sponsor to conduct specific pediatric studies in return for a generous incentive. Allowing the awarding of exclusivity without a written request would not appropriately serve the interests of child health.

By Alan M. Kirschenbaum & David C. Gibbons –

On October 3, 2014, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) published a Proposed Rule to amend the safe harbor regulations under the Federal health care program antikickback statute (“AKS”) (42 U.S.C. § 1320a-7b(b)),  and to establish exceptions to the Civil Monetary Penalty (“CMP”) statute  (42 U.S.C. § 1320a-7a).   The Proposed Rule would change existing safe harbors and add new ones, and would add new exceptions to the beneficiary inducement CMP.  We describe these changes below, with particular focus on those of most interest to drug and device manufacturers.

Proposed Changes to the AKS Safe Harbors

Cost-sharing waivers by pharmacies:  The OIG would add a safe harbor implementing, and essentially tracking, a statutory exception that was added to the AKS by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) (see 42 U.S.C. § 1320a-7b(b)(3)(G)).  The safe harbor would protect the waiver or reduction by a pharmacy of Medicare Part D cost sharing if: (1) the waiver or reduction is not advertised or part of a solicitation; (2) the pharmacy does not routinely waive the cost-sharing; and (3) the pharmacy either makes a good faith determination of the patient’s financial need or fails to collect the cost-sharing after a reasonable effort to do so.  Conditions (2) and (3) need not be met if the individual is eligible for a Part D subsidy.  Note that this safe harbor protects only the waiver of co-insurance by a pharmacy.  It would not, by its terms, protect the subsidization of a patient’s co-insurance by a third party, such as a drug manufacturer, and there is no indication in the proposed rule or preamble that the OIG would interpret the safe harbor broadly enough to protect such third party subsidies.

Medicare Coverage Gap Discount Program:  To implement another existing exemption in the AKS — one that was added in 2010 by section 3301 of the Patient Protection and Affordable Care Act (“ACA”) – the OIG would add a safe harbor protecting brand drug discounts provided by drug manufacturers to Part D enrollees in the coverage gap under the Medicare Coverage Gap Discount Program.  (We previously described this Program during its early stages of implementation.)

Local transportation:  The OIG would establish a new safe harbor protecting free or discounted local transportation made available to patients by an “Eligible Entity” under certain conditions.   The preamble makes clear, however, that Eligible Entities do not include entities that supply health care items, such as pharmaceutical companies and durable medical equipment (DME) suppliers.  This limitation reflects OIG’s concern that drug manufacturers and DME suppliers “would use transportation arrangements to generate business for themselves by steering transported patients to those [providers] who order their products.”  Laboratories are also excluded from the definition of “Eligible Entity”.

Other safe harbors:  In addition, the OIG proposes to:

• Establish a new safe harbor protecting waivers of cost-sharing or deductible amounts owed to ambulance services owned and operated by a state or political subdivision of a state.
• Implement an existing statutory exemption protecting remuneration between a federally qualified health center and a Medicare Advantage organization (see 42 U.S.C. 1320a-7b(b)(3)(H)).

Changes to the Beneficiary Inducement CMP Statute

The beneficiary inducement CMP (42 U.S.C. § 1320a-7a(a)(5)) prohibits an individual or entity from offering or transferring remuneration to a Medicare or Medicaid beneficiary that such individual or entity knows or should know is likely to influence such beneficiary to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, under Medicare or Medicaid.  The Proposed Rule would add several exceptions to the beneficiary inducement CMP:

Access to care/low risk of harm:  In the preamble (but not in the Proposed Rule itself), the OIG proposes to establish an exception to the beneficiary inducement CMP for remuneration that promotes access to care and poses a low risk of harm to patients and Federal health care programs.  OIG proposes to define the term “promotes access to care” to mean that the remuneration improves a particular beneficiary's ability to obtain medically necessary health care items and services. However, the OIG solicits comments on whether this phrase should be interpreted more broadly to include encouraging, supporting, or helping patients to access care, or making access to care more convenient for patients.  OIG also seeks comments on whether “access to care” should encompass not only clinical care but also nonclinical care that is reasonably related to a patient’s medical care, such as social services.

OIG proposes to interpret the phrase “low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs” as meaning that the remuneration: (1) is unlikely to interfere with, or skew, clinical decision-making; (2) is unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (3) does not raise patient-safety or quality-of-care concerns.  The preamble identifies items used to record and report health data, such as scales or blood pressure cuffs, as items that would qualify for this exception, as long as they are not conditioned on a patient obtaining other items or services from a particular provider or supplier.  On the other hand, the OIG expresses concern about gifts offered in connection with  marketing activities, and also about rewards offered by providers or suppliers to patients for compliance with a treatment regimen.  The OIG solicits comments on whether the latter type of incentive should be protected, and, if so, what safeguards should be required. 

Free or discounted items where financial need exists:  To implement a statutory provision added by the ACA (see 42 U.S.C. § 1320a-7a(i)(6)(H)), the OIG proposes to exempt from the definition of “remuneration” under the beneficiary inducement statute “the offer or transfer of items or services for free or at less than fair market value after a determination that the recipient is in financial need and meets certain other criteria.”  These “items or services” cannot include cash or instruments convertible to cash.  The Proposed Rule sets out four requirements that must be met to protect such remuneration:  (1) the items or services may not be offered as part of any advertisement or solicitation; (2) they may not be tied to the provision of other items or services reimbursed in whole or in part by Medicare or Medicaid; (3) there must be a reasonable connection between the items or services and the medical care of the individual; and (4) there is a good faith determination of financial need.  The “reasonable connection” requirement would have a financial component, so that an item with a value that is disproportionate to the benefit — for example, a smart phone loaded with an app for management of blood sugar levels – would not be considered to have a “reasonable connection” to medical care.  Financial need would not be defined, but the preamble explains that a good faith determination requires use of a reasonable set of income guidelines, uniformly applied.  Financial hardship need be limited to indigence.

The preamble provides examples of items or services that may qualify as reasonably connected to medical care under this proposed exception. These include:

• protective helmets and safety gear to hemophiliac children
• pagers to alert patients with chronic medical conditions to take their drugs
• free blood pressure checks to hypertensive patients
• free nutritional supplements to malnourished patients with end-stage renal disease
• provision of air conditioners to asthmatic patients

Nothing in the proposed rule or preamble suggests that items or services provided by a drug or device manufacturer would be ineligible for this exclusion, as long as the four conditions of the rule were met.  Note, however, that free or discounted items conditioned on the use of a particular manufacturer’s drug or device would probably be considered to violate requirement (2), above (no tie to other reimbursable items).

Coupons or rewards from a retailer:  To implement another exception to the beneficiary inducement CMP added by the ACA, the OIG would exclude from the definition of “remuneration” a coupon, rebate, or reward offered by a retailer, if it is offered on equal terms available to the general public regardless of health insurance status, and if it is not tied to the provision of other items or services reimbursed under Medicare or Medicaid.  The preamble indicates that a coupon offered by a retailer that could only be used only to reduce cost-sharing on the purchase of a federally reimbursable drug or device would not meet the “no-tying” limitation, but a coupon that could be redeemed on anything purchased in the store, including cost-sharing on federally reimbursed items, would be permissible.

Other CMP provisions:  In addition, the Proposed Rule would:

• Implement a statutory exception to the definition of “remuneration” in the beneficiary inducement CMP for a waiver by a Part D Plan sponsor of the copayment owed by enrollees for the first fill of covered generic drug.
• Implement another statutory exception to the definition of “remuneration” for reductions in copayment amounts for covered hospital outpatient department services.
• Implement a statutory prohibition on gainsharing arrangements (see 42 U.S.C. § 1320a-7a(b)), but the OIG solicits comments on whether certain types of “reduction[s] or limitation[s] of services” should be exempted to permit initiatives to improve the quality and efficiency of care.

Comment Deadline

Comments on the Proposed Rule are due by December 2, 2014.  Drug and device manufacturers should consider commenting on the provisions identified above that could protect manufacturer programs that enhance treatment or access to care without adversely affecting Federal programs – particularly the proposed beneficiary inducement CMP exception for items and services that promote access and have a low risk of harm and the financial-need-based exception.

By Kurt R. Karst –      

Last Friday morning (October 10th) something interesting popped up out of the blue on FDA’s “What’s New Related to Drugs” webpage: the final version of FDA’s “Guidance for Industry – New Chemical Entity Exclusivity Determinations for Certain Fixed-Combination Drug Products.”  But both the timing and content of the final guidance might mean FDA is in store for some controversy in the not too distant future. 

FDA published a draft version of the guidance in February 2014 (see our previous post here) saying that the Agency would reinterpret the NCE exclusivity provisions of the FDC Act to award NCE exclusivity for a newly approved Fixed-Dose Combination Drug (“FDC”) containing an NCE and a previously approved drug.  The draft guidance states, however, that if the Agency’s new interpretation is adopted, it will apply only prospectively: “If the new interpretation is adopted, FDA intends to apply the new interpretation prospectively.  Therefore, this guidance does not apply to fixed-combination drug products that were approved prior to adopting the new interpretation.”  About a dozen comments were submitted to FDA.  Most of the comments applauded FDA’s proposal and urged the Agency to finalize the guidance promptly. 

FDA proposed the reinterpretation after having received three Citizen Petitions in 2013 requesting that FDA interpret the law to award NCE exclusivity for approved FDCs containing an NCE and a previously-approved drug – specifically STRIBILD (elvitegravir, cobicistat, emtricitabine, tenofovir disoproxil fumarate) Tablets (Docket No. FDA-2013-P-0058); PREPOPIK (sodium picosulfate, magnesium oxide and citric acid) for Oral Solution (Docket No. FDA-2013-P-0119); and NATAZIA (estradiol valerate and estradiol valerate/dienogest) Tablets (Docket No. FDA-2013-P-0471).  However, on the same day FDA posted the draft guidance on the Agency’s website, FDA issued a Consolidated Response denying the three petitions and saying that although FDA would reinterpret the law, that reinterpretation would not apply to previously-approved FDCs.  That move prompted two of the petitioners to each submit a Petition for Reconsideration (with respect to STRIBILD and PREPOPIK) (see our previous posts here and here). Along the way, another company entered the fray (or what we dubbed the “NCE for FDC Club”).  Specifically, Pfizer Inc. submitted a Citizen Petition petition (Docket No. FDA-2014-P-0737) to FDA saying that FDA erred in not granting NCE exclusivity with respect to Wyeth Pharmaceuticals, Inc.’s DUAVEE (conjugated estrogens/bazedoxifene) Tablets (see our previous post here).

Months passed without any word from FDA as to finalization of the guidance.  Some folks were beginning to wonder (and worry) whether or not the Agency would issue a final version of the guidance before the end of 2014.  After all, some NDAs for FDCs that would qualify for NCE exclusivity under FDA’s reinterpretation were scheduled to be acted on before the end of the year, including Eisai Inc.’s AKYNZEO (netupitant/palonosetron) Capsules and Gilead’s HARVONI (ledipasvir and sofosbuvir).  FDA approved both FDCs on October 10, 2014: AKYNZEO under NDA No. 205718 (see here), and HARVONI under NDA No. 205834 (see here).  (Yes, that’s the same day that the final guidance appeared on FDA’s website).

The final version of the guidance that appeared on FDA’s website on the morning of October 10th made only a few changes from the draft guidance.  With respect to applicability, FDA stated:

FDA intends to apply the new interpretation from the date of this guidance’s publication.  Therefore, the new interpretation will not apply to fixed-combination drug products that were approved prior to the publication of this guidance document.

Based on that statement, we knew that denials of the STRIBILD and PREPOPIK Petitions for Reconsideration, as well as a denial of the DUAVEE Citizen Petition, would be coming soon.  Indeed, just a few hours later, those petition denials (here and here) appeared on Regulations.gov.  FDA’s denial of the STRIBILD and PREPOPIK Petitions for Reconsideration notes that “[s]imultaneously with this response, the Agency will issue the Exclusivity Guidance in final form and apply its new interpretation of the relevant statutory and regulatory provisions to fixed-combinations approved from this day forward.” 

FDA’s statements “from this day forward” in the petition denial and “from the date of this guidance’s publication” in the final guidance document caught our attention.  Presumably FDA intends to grant NCE exclusivity for FDCs approved beginning on October 10th (like AKYNZEO and HARVONI).  But does the appearance of the final guidance on FDA’s website constitute publication?  Or is such a guidance document “published” only once a Federal Register notice announcing the guidance is issued?  The answer to that question could generate some controversy.  And even if that’s a non-issue, we may still see some controversy over FDA’s decision not to apply the Agency’s reinterpretation to previously approved FDCs.  We’ll be keeping an eye on the court dockets.

Hyman, Phelps & McNamara, P.C., jointly with Barton & Blank LLC, will present a webinar on Tuesday, October 21, 2014 from Noon – 1:30 PM (Eastern Standard Time), titled “Medical Device Promotion on Social Media: Regulatory Considerations and Best Practices.” 

Social Media is increasingly being adopted as a tool for promoting medical devices (see our recent post here).  However, use of these various platforms (e.g., Facebook, Twitter, Pinterest, etc.) has become an area of particular interest by regulators as evidenced by recent FDA Guidance and Warning Letters.  Come hear the latest regulatory thinking and best practice recommendations for implementing medical device promotion on social media platforms.

In this webinar, Jeffrey K. Shapiro from HP&M and Tony Blank from Barton & Blank will guide you through the current legal and regulatory framework for social media promotion of medical devices as well as highlight best practice recommendations for implementation within your organization.

Webinar attendees will:

• Receive important updates on current FDA requirements and expectations for medical device promotion in general, and on social media specifically;
• Understand the expectations and limitations of FDA’s Social Media Guidance;
• Learn from recent FDA enforcement activities in the area of medical device promotion; and
• Hear best practice recommendations for implementing social media practices within your organization.

You can register for the webinar here.  Please contact Lisa Harrington at lharrington@hpm.com with any registration questions. 

By Andrew J. Hull* & William T. Koustas –  

FDA has published its second draft guidance in a much-awaited series of industry guidance documents related to the implementation of the Drug Supply Chain Security Act ("DSCSA"), enacted on November 27, 2013.  (We posted on the first draft guidance issued in June 2014 here.)  The draft guidance, entitled “The Effect of Section 585 of the FD&C Act on Drug Product Tracing and Wholesale Drug Distributor and Third-Party Logistics Provider Licensing Standards and Requirements: Questions and Answers” (hereinafter "Draft Guidance"), addresses the effect of DSCSA preemption provisions on state track and trace (i.e., pedigree) laws as well as on state wholesaler distributor and third-party logistics provider ("3PL") license requirements.

The Draft Guidance confirms the following: State pedigree laws are preempted, and DSCSA track and trace provisions prevail as of January 1, 2015.  State licensing requirements continue as is, provided they meet the minimum standards required by federal law.  The Draft Guidance does not address directly those states that do not currently license 3PLs at all. 

Regarding the new federal track and trace requirements in the DSCSA, the Draft Guidance clarifies that all state requirements for tracing drugs that are “inconsistent with, more stringent than, or in addition to any requirements” contained in the federal law are preempted.  Draft Guidance at 3.  Essentially, state pedigree laws, to the extent they exist, must conform exactly to federal law, including any waiver, exception, or exemption under sections 581 and 582 of the FD&C Act.  Since DSCSA preemption provisions became effective upon enactment, the Draft Guidance indicates that the drug pedigree provisions of the Prescription Drug Marketing Act of 1987 ("PDMA") preempted state pedigree laws as of November 2013.  PDMA pedigree requirements (as discussed in prior blog posts here and here) remain in effect until the new DSCSA track and trace provisions take effect on January 1, 2015.

With respect to the licensing of wholesale drug distributors, the Draft Guidance indicates that the DSCSA will preempt state licensing standards and requirements that are “inconsistent with, less stringent than, directly related to, or covered” by those required by federal law.  Id. at 5.  Because the new wholesale drug distributor regulations will not take effect until two years after they are finalized by FDA (notice of these regulations has yet to be made), states will continue to license wholesalers under their current standards as long as their regulations are “not inconsistent with, less stringent than, directly related to, or covered by” the PDMA.  Id.

The DSCSA also preempts state licensing of 3PLs according to the same preemption standard as applied to wholesale drug distributors (i.e., meet minimum requirements).  However, as is clear from the statute, the Draft Guidance notes that, while states license 3PLs, they cannot license 3PLs as wholesale drug distributors.

*Not admitted in D.C.

The International Society of Regulatory Toxicology and Pharmacology (“ISRTP”) will be holding a Workshop on GRAS Determinations from October 13-14, 2014 at the ASEA Conference Center in Washington, DC.  The workshop provides a forum for leading scientific experts to contribute to the ongoing debate prompted by the recent barrage of criticisms of GRAS determinations.  Speakers will examine the merits and possible limitations of the GRAS review process, and lead discussion of various means for enhancing the value of GRAS determinations in assuring the safety of our food supply.  FDA Law Blog readers can register for the workshop here.  A copy of the workshop agenda is available here. 

ISRTP provides an open public forum for policy makers and scientists promoting sound toxicologic and pharmacologic science as a basis for regulation affecting human safety and health, and the environment.  The current ISRTP Council President is Hyman, Phelps & McNamara, P.C.’s Diane B. McColl.  [http://www.hpm.com/vattorney.cfm?RID=27]

By Kurt R. Karst –  

Colchicine is one of those drugs that has a long and storied history at FDA.  It’s an old drug (about 200 years old) that was marketed for decades without FDA approval.  Then, in 2009, FDA approved Mutual Pharmaceutical Company, Inc.’s (and now Takeda Pharmaceuticals U.S.A., Inc.’s (“Takeda”)) 505(b)(2) application (NDA No. 022352) for COLCRYS (colchicine) Tablets, 0.6 mg, to prevent gout, treat gout flares, and treat Familial Mediterranean Fever (“FMF”) and granted periods of 3-year new clinical investigation exclusivity (related to the gout approvals) and a period of 7-year orphan druig exclusivity (related to FMF).  Soon after the NDA approval, there was litigation to stem the flow of unapproved colchicine (see our previous posts and here).  And about a year after NDA approval, FDA ordered companies marketing unapproved single-ingredient oral colchicine to remove their products from the market.  Companies that wanted to market generic or follow-on versions of single-ingredient oral colchicine then began to consider their options: submit an ANDA or a 505(b)(2) application.  And while those decisions were being made, the citizen petition process was initiated, with no less than two petitions: Docket Nos. FDA-2010-P-0614 and FDA-2012-P-1018.  Now the storied history of colchicine is about to get longer . . . .
  
Earlier this week, Takeda filed a Complaint in the U.S. District Court for the District of Columbia challenging FDA’s September 26, 2014 approval (here and here) of a 505(b)(2) application (NDA No. 204820) submitted by Hikma Pharmaceuticals LLC (“Hikma”) and its U.S. partner West-Ward Pharmaceutical Corp. (“West-Ward”) for MITIGARE (colchicine) Capsules, 0.6 mg, for prophylaxis of gout flares.  Although there are several patents listed in the Orange Book for COLCRYS, this is the first opportunity Takeda has had to challenge MITIGARE.  Apparently Hikma was able to avoid identifying COLCRYS as a listed drug in its 505(b)(2) application by virtue of relying on information not containd in (or related to) the COLCRYS NDA approval, and therefore avoid certifying to Orange Book-listed patents for COLCRYS.

Takeda alleges in its October 6, 2014 Complaint that FDA’s approval of MITIGARE violates the FDC Act and the Administrative Procedure Act (“APA”) in several respects:

First, FDA acted arbitrarily and capriciously in approving Hikma’s Section 505(b)(2) application for Mitigare without requiring the label to contain critical safety information that FDA previously stated was necessary for single-ingredient oral colchicine products.  Second, FDA’s approval of Hikma’s application for Mitigare was unlawful, arbitrary and capricious because, as approved, Mitigare is not safe in light of the defects in its label.  And third, FDA’s failure to require Hikma to reference Takeda’s own colchicine drug, Colcrys®, in its application interfered with Takeda’s rights to participate in the administrative process, including the Paragraph IV certification process under the Hatch-Waxman Act and the Citizen Petition process. As a result, FDA’s decision is unlawful, arbitrary, capricious, an abuse of discretion, and otherwise violates the Administrative Procedure Act (the “APA”).

Takeda’s Complaint fills in some of the details of the allegations.  For example, Takeda, citing to one of the FDA petition responses concerning colchicine (i.e., FDA-2010-P-0614), says that “[e]ven though Mitigare is indicated only for prophylaxis, FDA has clearly stated that the labeling for a prophylaxis product must disclose the dosage for treatment of an acute gout flare due to the risk of cumulative toxicity,” but that the MITIGARE labeling omits that low-dose regimen information, as well as “specific dose adjustments to avoid potentially fatal drug-drug interaction.”  Having omitted this information, “Hikma was able to avoid referencing Colcrys® and certifying to the Colcrys® patents,” alleges Takeda.  Takeda also alleges that MITIGARE fails to meet the statutory standard required for FDA approval because the labeling omits certain safety information.  

Takeda is seeking declaratory and injunctive relief.  Specifically, Takeda wants the court to declare that FDA’s approval of MITIGARE violated the APA and the FDC Act, that FDA’s refusal to require the MITIGARE 505(b)(2) application to reference COLCRYS as a listed drug violated the APA and the FDC Act, and that FDA’s actions, findings, and conclusions in approving MITIGARE were arbitrary, capricious, an abuse of discretion, and without factual basis.  In addition, Takeda wants temporary, preliminary and permanent injunctive relief requiring FDA to rescind or stay FDA’s approval of MITIGARE.  A redacted version of Takeda’s  memorandum in support of the company’s Motion for a Temporary Restraining Order and Preliminary Injunction should be available soon, and will be included as an update to this post. 

UPDATES:

• A redacted version of Takeda's brief accompanying its Motion for Temporary Restraining Order and Preliminary Injunction filed in the DC District Court was made available on October 8th.
• A Telephone Conference is set for October 9th at 1:00 PM before Judge Ketanji Brown Jackson (DC District Court).
• On October 3, 2014, Takeda filed a patent infringement lawsuit against West-Ward in the U.S. District Court for the District of Delaware: Takeda Pharmaceuticals U.S.A., Inc. v. West-Ward Pharmaceutical Corporation et al, Case No. 1:14-cv-01268-SLR.  A telephonic hearing on Takeda's Motion for Temporary Restraining Order and Preliminary Injunction in that case was held on October 8th.
• October 9, 2014: "Minute Entry for proceedings held before Judge Ketanji Brown Jackson: Telephone Conference held on 10/9/2014 discussions re: Temporary Restraining Order. Government Brief due by 10/17/2014; Intervenor Brief, if any, shall be filed by 10/17/14; Responses due by 10/20/2014. Preliminary Injunction Hearing set for 10/21/2014 @ 2:30 PM in Courtroom 17 before Judge Ketanji Brown Jackson. Motion to Intervene GRANTED for reasons stated on the record."
   

By Jennifer D. Newberger –

In our previous posts (here and here) regarding FDA’s approach to cybersecurity in medical devices we noted that, while neither FDA nor industry was aware of any actual intentional, malevolent software breaches that led to patient harm, FDA seemed to be enforcing the draft guidance by refusing to accept at least one 510(k) submission that did not contain documentation demonstrating the cybersecurity of the device.  We also noted that FDA does not seem concerned with applying the substantial equivalence review standard, since it will now be requiring software devices to contain substantially more information than the predicate devices.  (Of course, it is not uncommon for FDA to require a new 510(k) to meet a standard to which the predicate was not held.)

FDA has now finalized the guidance, and while some of the language has changed, the intent and ultimate impact on device manufacturers has not.  Regardless of what the predicate device had to show, moving forward, FDA will expect to see substantial documentation of a firm’s cybersecurity considerations, including a hazard analysis, list of all cybersecurity risks considered, list and justification for all cybersecurity controls established, and a “traceability matrix” linking the risks considered to the controls implemented.  The takeaway message is this:  be sure that you can adequately address any and all risks considered, no matter how remote, because they all must be provided to FDA and accounted for in the software design, even if they are not accounted for in the predicate.

Fear not:  while substantial equivalence for software devices fades into distant memory, at least the guidance states that FDA will not typically need to review software changes made solely to strengthen cybersecurity.  So, go forth and strengthen cybersecurity—but be careful about making any other changes to the software; those may well require review.

By Jamie K. Wolszon –

On September 25, 2014, the U.S. District Court for the Northern District of Illinois Eastern Division dismissed a claim that a drug company co-pay subsidy program (also known as coupon program) violated the Racketeer Influenced and Corrupt Organizations Act (RICO) under theories of alleged mail and wire fraud.  New England Carpenters Health and Welfare Fund v. Abbott Laboratories, No. 12-cv-1662 (N.D. Ill. Sept. 25, 2014) (opinion), at 15.  This Illinois federal district court joins other federal courts in striking serious blows against use of RICO to attack coupon or co-pay programs:  It appears from our research that of seven lawsuits we previously reported were filed alleging RICO violations, no RICO claims currently are pending in any of those cases.

This lawsuit is one of several filed by various union health plans alleging that brand-name drug-makers violated RICO when they provided co-pay subsidy coupons to privately-insured consumers for branded prescription drugs.  See prior posts here and here. 

Those lawsuits have not been successful to date, and in fact, it appears that only tortious interference with contract claims currently are pending of the cases we have reported in our prior blog cases.  At the time of our last blog post, plaintiffs had already voluntarily dismissed some of those cases, leaving a handful remaining.

In this particular case, New England Carpenters Health and Welfare Fund v. Abbott Laboratories, No. 12-cv-1662 (N.D. Ill. Sept. 25, 2014) (opinion), an employee welfare benefit plan alleged that the co-pay savings program, offered by Defendants Abbott Laboratories and AbbVie, Inc., for their brand-name drugs Humira and AndroGel, constituted substantive RICO violations and a conspiracy to violate RICO.  Id. at 2. 

RICO makes it unlawful to conduct or participate in an enterprise’s affairs through a pattern of racketeering activity.  Since the savings program was carried out using the mail and Internet, plaintiff alleged mail fraud (18 U.S.C. § 1341) and wire fraud (18 U.S.C. § 1343).  Id. at 7.

U.S. District Court for the Northern District of Illinois Eastern District Judge Robert M. Dow, Jr., held that the required element of an “enterprise” was missing from the plaintiff’s RICO allegation in the amended complaint.  Id. at 10.  The court explained that the particular RICO section requires allegation of an enterprise “separate and distinct” from Defendants’ own business.  It is not enough for the Defendants to have a commercial relationship; the contested conduct must be “undertaken on behalf of the enterprise,” not simply on behalf of each of the Defendant’s individual interests.  Id. at 10. 

Plaintiff, according to the court, did not meet that requirement.  Id. at 11.  “[T]here are not indicia of any association among the pharmacies [that accepted the coupons for those two drugs] that comprise the RICO enterprise are in communication with one another or are even aware that other pharmacies are part of the enterprise.”  Id.  By contrast, the court noted, plaintiff’s complaint suggests that pharmacists did not realize that they were erroneously inputting the coupon as secondary insurance, because the cards were designed to look like insurance cards.  Id. at 13.  “This allegation undercuts Plaintiff’s claim that pharmacies were privy to a fraudulent scheme to maximize Defendants’ drug sales.”  Id. 

In addition to the RICO allegation, the Plaintiff also argued that the co-pay subsidies frustrate pharmacies’ contractual obligation to collect co-pays directly from Plaintiff (tortious interference with contract claim).  Id. at 2.  The federal Illinois district court will hold a hearing on October 7, 2014 to consider whether it has the requisite jurisdiction to evaluate the tortious interference with contract claim.  Id. at 2.  The court noted that it appears that the court lacks subject matter jurisdiction to consider this tortious interference with contract claim now that the court dismissed the RICO claim.  Id. at 16.  However, since that time, both the plaintiff and the Defendants have notified the court that they believe the court has jurisdiction over the tortious interference with contract claim.      

The Illinois opinion related to the RICO claim adds to a growing list of federal court blows against efforts to challenge co-pay subsidy programs based on a RICO theory.  On April 29, 2013, U.S. District Court for the District of New Jersey Judge Michael A. Shipp granted without prejudice Merck’s motion to dismiss one of those lawsuits on standing grounds.  Plumbers & Pipefitters Local 572 Health & Welfare Fund v. Merck & Co., No. 12-cv-1379 (D.N.J. Apr. 29, 2013) (opinion).

Plaintiff in that case amended the complaint, and Defendant Merck again moved to dismiss on standing and substantive grounds.  In June 2014, Judge Shipp held that the plaintiff had standing.  However, the court dismissed the RICO claims without prejudice on the grounds that: (1) plaintiff did not plead the alleged misrepresentation with sufficient particularity and (2) plaintiff allege an injury directly tied to the pharmacies’ failure to disclose the subsidies.  The court left intact the tortious interference with contract claims.  The court gave the plaintiff 30 days to amend the complaint in relation to the RICO claims, but the plaintiff did not do so.  In its August 14, 2014 answer to the complaint, Merck only addressed the tortious interference with contract claim because plaintiff had not amended the complaint in relation to RICO within the 30-day timeframe.

In another case related to coupons, in June 2013, the U.S. District Court for the Southern District of New York dismissed two of three theories of RICO violation with prejudice on the grounds that co-pay subsidy program did not cause misrepresentation at the point-of-sale, nor was there routine waiver of co-pays by the defendants.  Am. Fed‘n of State, Cnty. & Mun. Emps. Dist. Council 37 Health & Security Plan et al. v. Bristol-Meyers Squibb Co. et al., No. 12-cv-2238, (S.D.N.Y. June 3, 2013) (opinion).  In addition, the New York federal district court ruled that the savings program did not constitute commercial bribery under the Robinson-Patman Act (commercial bribery prohibition act).  On April 21, 2014, the plaintiff voluntarily dismissed the entire case.

In a case with similar allegations in the U.S. District of Eastern District of Pennsylvania, on August 8, 2014, the court dismissed the plaintiff’s amended complaint for lack of standing.  New England Carpenters Health and Welfare Fund v. GlaxoSmithKline LLC., No. 12-cv-1191 (E.D. Pa. Aug. 8, 2014) (order).

Thus, it appears that a RICO theory, at least at present, does not present a threat to these drug coupon programs.  However, as discussed, tortious interference to contract claims are currently pending and a threat may come from another source:  In September 2014, the Office of Inspector General (OIG) issued a report, a special advisory bulletin, and a podcast on the topic.  We previously reported that the OIG report concluded that despite efforts by the drug manufacturers sponsoring such coupons to carve out federal health care beneficiaries from such programs, some of the coupons were nonetheless used by Medicare Part D beneficiaries, and reimbursed by Medicare.  In the special advisory bulletin, the OIG places the responsibility for currently ensuring that copay coupons do not violate the antikickback statute squarely upon the shoulders of the drug companies that issue copay coupons.  Interestingly, a footnote in the special advisory bulletin states that pharmacies that accept coupons from Medicare beneficiaries may also face sanctions.

What remains unknown is how and when the Centers for Medicare & Medicaid Services (CMS) will take up the OIG’s call to lead the effort to make changes, and whether OIG enforcement actions may occur in this area, either before or after CMS takes action. 

By Jennifer M. Thomas –

We wanted to briefly update our readers on a case we blogged about in February of this year, United States ex rel. Barry Rostholder v. Omnicare, Inc., 745 F.3d 694 (4th Cir. 2014).  To recap, in Omnicare the Fourth Circuit affirmed a lower court’s dismissal of the False Claims Act (“FCA”) for failure to state a claim – rejecting the relator’s theory that Omnicare had violated the FCA when it produced drugs in violation of FDA regulations.  On October 6th, the U.S. Supreme Court denied Rostholder’s petition for certiorari in the case (Case No. 13-1411). 

Omnicare is a leading case among several in which qui tam plaintiffs have tried to shoehorn an alleged FDCA violation – such as an alleged cGMP violation – into a FCA case.  Many hoped that the Supreme Court would hear the Omnicare case to bring certainty to the question of whether that theory is viable.  Given the Supreme Court’s refusal to hear this case, we will need to await further lower court rulings to see if the Court will take the issue up in another case.