By Larry K. Houck –

Representative Bill Johnson (R-Ohio) introduced a second bill in Congress that seeks to curb abuse of dextromethorphan by teenagers.  Johnson introduced the Preventing Abuse of Cough Treatments of 2014 Act (“PACT Act”) last week.  The PACT Act, H.R. 3969, co-sponsored by Bruce Braley (D-Iowa), is the second bill that Congress is considering that would restrict the sale of dextromethorphan to individuals under 18 years old.  Senator Robert Casey (D-Pennsylvania) introduced a companion bill, S. 644, the Preventing Abuse of Cough Treatment Acts of 2013, (also referred to as the “PACT Act”) in the Senate on March 21, 2013.

Dextromethorphan is an antitussive (i.e., cough suppressant) found in over 120 over-the-counter cough and cold products.  Dextromethorphan is not a federally-controlled substance (though legislation introduced several years ago attempted to schedule unfinished dextromethorphan - see here). The Drug Enforcement Administration (“DEA”) has noted “individuals of all ages” abuse it, but “its abuse by teenagers and young adults is of particular concern.”  Dextromethorphan, DEA Office of Diversion Control, July 2012.

The bills would amend the Federal Food, Drug, and Cosmetic Act and would:

• Prohibit the sale, or offering for sale, of any drug containing dextromethorphan to individuals under 18 years old except pursuant to valid prescriptions or for military personnel;
• Deem retailers who fail to request government-issued identification for an individual under 18 years old to have knowledge that the customer was underage unless they could reasonably presume from the customer’s appearance that they are at least 25 years old;
• Provide an affirmative defense for retailers who check identification and reasonably conclude that the identification is valid and indicates that the customer is at least 18 years old;
• Prohibit possession or receipt of unfinished dextromethorphan by any person not registered, licensed or approved under federal or state law to practice pharmacy, engage in “pharmaceutical production,” or manufacture or distribution of drug ingredients;
• Prohibit the distribution of unfinished dextromethorphan to unregistered or unauthorized persons;
• Create the following penalties for violating the age prohibition:  a warning letter for a first violation; civil penalties of up to $1,000 for a second violation, civil penalties of up to $2,000 for a third violation and civil penalties up to $5,000 for a fourth or subsequent violation; and
• Establish a civil penalty of up to $100,000 for the unfinished dextromethorphan possession, receipt and distribution violations.

So, while there is no requirement that retailers request identification, if they fail to do so and the individual is under 18 years old, the retailer is deemed to have known that the individual is underage unless the individual appears to be at least 25 years old.  Likewise, the bills would provide an affirmative to retailers who examine the identification and reasonably conclude that the ID was valid and indicated the person was over 18 years old.

The bills have been referred to responsible committees in each chamber; the House bill referred to the Committee on Energy and Commerce on January 29, 2014 and the Senate bill referred to the Committee on Health, Education, Labor and Pensions on March 21, 2013.

By Jeffrey N. Wasserstein & Jennifer M. Thomas –

Yesterday, the Department of Health and Human Services (HHS), announced a final rule (published in the Federal Register on February 6, 2014 – here) amending the Department’s Clinical Laboratory Improvement Amendments of 1988 (CLIA) regulations, and the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule, to give patients direct access to laboratory test results.  Until now, CLIA and CLIA-exempt laboratories reported results only to an “authorized person,” defined as a person authorized under state law to either order, or receive, test results.  In most states, that limited reporting of test results to the treating physician or the laboratory that initially requested the test.  However, the HHS final rule will require laboratories to also report those results directly to the patient, or his or her personal representative, upon request.  It will preempt state laws to the contrary.

According to the press release announcing the final rule, HHS Secretary Kathleen Sebelius believes that “[i]nformation like lab results can empower patients to track their health progress, make decisions with their health care professionals, and adhere to important treatment plans.”  Indeed, the final rule states that patients’ right to access test reports “is crucial to provide individuals with vital information to empower them to better manage their health and take action to prevent and control disease.”

But there are limits to patient empowerment.  FDA, an HHS operating division, recently sent a widely-publicized warning letter to 23andMe, Inc., a direct-to-consumer genetic testing laboratory, in which it noted that certain risks associated with laboratory tests “are typically mitigated by . . . management under a physician’s care.”  Further, FDA expressed its concern that the “risk of serious injury or death is known to be high when patients are either non-compliant or not properly dosed; combined with the risk that a direct-to-consumer test result may be used by a patient to self-manage, serious concerns are raised if test results are not adequately understood by patients . . . .”

There is a logical distinction between CLIA-certified laboratories reporting the results of a physician-ordered test directly to the patient, and a direct-to-consumer testing service that reports results with potentially no physician involvement at all.  However, the circumstances FDA cites in the 23andMe, Inc., letter as being most concerning would entail at least some degree of physician involvement.  For example, FDA notes that a patient receiving a false positive for BRCA-related genetic risk of breast or ovarian cancer might “undergo prophylactic surgery, chemoprevention, intensive screening, or other morbidity-inducing actions,” or that a patient receiving his or her assessment of drug responses may “begin to self-manage their treatments through dose changes or even abandon certain therapies depending on the outcome of the assessment.”  In either case, the patient would be required to consult a physician to seek treatment, or would already be under treatment by a physician prescribing the drugs in question.

So the questions raised by these two government actions remain:  when does greater access to health information empower patients, rather than putting them at risk?, or, when is patient empowerment worth the risk?  The answer for now seems to be “when HHS and FDA say so.”

Hyman, Phelps & McNamara, P.C. is participating in the Food and Drug Law Institute's Food Week 2014 being held February 10–13 in Washington, D.C. This program provides an opportunity for food law, regulation and policy stakeholders to gather practical guidance on cutting-edge issues and hear first-hand from government officials and industry experts on the latest legal and regulatory developments. Food Week is a collection of four advanced one-day conferences, as well as FDLI's "Introduction to Food Law and Regulation" course. You can attend one, two, three or all four conferences.  HP&M’s Ricardo Carvajal is speaking on regulation of contaminants and unintended components of food, and moderating a discussion of the economic and business aspects of food safety.  Additional information is available here.

By Kurt R. Karst –      

The Wachowski Brothers’ Matrix Trilogy of movies depict a post-apocalyptic world in which reality is not what it seems.  The reality most people perceive is actually a  simulated reality created by sentient machines – a dream world created by virtue of a “reboot” of humanity.  Those humans have no recollection of “real history” and the break from “true reality.”  The true reality is that the machines have taken over the world and have subdued humanity to harvest its energy.  Only a few humans have broken free from the simulated reality, and they rebel against the machines.  Computer programmer “Neo” is given the option to join the rebellion.  But to do so he must make a choice: take a red pill and know the painful truth of reality, or take the blue pill and be blissfully ignorant of the illusion.  Of course, Neo takes the red pill and the story moves on. 

We were reminded of the Matrix Trilogy when we sat down and read the Generic Pharmaceutical Association’s (“GPhA’s”) Overview and Assessment of FDA’s November 2013 proposed rule.  There, FDA proposes to allow generic drug manufacturers to independently update product labeling (with respect to product safety) through the changes being effected (“CBE-0”) supplement process that is currently only available to brand-name drug manufacturers whose products are approved under an NDA. 

FDA’s proposal has generated quite a bit of attention, and it will continue to do so.  It’s not only GPhA’s top priority in 2014 (see here), but several lawmakers recently chimed in expressing “grave concerns” with the proposal (see our previous post here), saying that it “conflict[s] directly with the statute, thwart[s] the law’s purposes and objectives, and impose[s] significant costs on the drug industry and healthcare consumers.”  In other words, FDA’s proposal is a departure from the “true reality” industry has known for decades; a reboot of the generic drug industry in a world created by, what some proponents of the FDA proposal might say is the apocalyptic decision made by the U.S. Supreme Court in PLIVA, Inc. v. Mensing, 131 S. Ct. 2567 (2011).  Indeed, FDA says as much in the preamble to the proposed rule: 

At the time of FDA’s adoption of the generic drug regulations in 1992, FDA believed it was important that product labeling for the RLD and any generic drugs be the same to assure physicians and patients that generic drugs were, indeed, equivalent to their RLD.  However, as the generic drug industry has matured and captured an increasing share of the market, tension has grown between the requirement that a generic drug have the same labeling as its RLD, which facilitates substitution of a generic drug for the prescribed product, and the need for an ANDA holder to be able to independently update its labeling as part of its independent responsibility to ensure that the labeling is accurate and up-to-date.  In the current marketplace, in which approximately 80 percent of drugs dispensed are generic . . . FDA believes it is time to provide ANDA holders with the means to update product labeling to reflect data obtained through postmarketing surveillance, even though this will result in temporary labeling differences among products. . . . 

The Mensing decision alters the incentives for generic drug manufacturers to comply with current requirements to conduct robust postmarketing surveillance, evaluation, and reporting, and to ensure that the labeling for their drugs is accurate and up-to-date.

But as GPhA, which has clearly chosen the “red pill,” says in its comments, FDA’s proposal is unjustified and unwarranted, and would wreak havoc on the generic drug industry:

It is difficult to overstate the implications of the Proposed Rule on the generic pharmaceutical industry.  The Proposed Rule creates the regulatory framework whereby multiple, different labeling, including different warnings, can simultaneously exist in the marketplace for the “same” drug.  The confusion that will be created among health care professionals will undermine FDA’s longstanding, unwavering emphasis on consistency in drug labeling.  The confusion that will ensue has obvious implications for public health, which FDA has not addressed in its Proposed Rule.  FDA also did not conduct a robust cost/benefit analysis, and attempts to minimalize the potential that the Proposed Rule, if adopted, very likely will result in defensive labeling.  FDA also failed to recognize that adoption of the Proposed Rule may result in under-adoption of safe and effective generic drugs that improve lives and reduce healthcare costs, fewer generic drugs coming to market, manufacturers withdrawing from certain markets, drug shortages, and increased expense of drugs − all antithetical to the basic purposes of the [1984 Hatch-waxman Amedments]. 

But there is some hope.  While GPhA says unquivocally that the organization “cannot support a proposed rule that undermines public health merely to facilitate litigation against generic drug companies by the plaintiffs’ bar,” GPhA does recognize the importance of maintaining up-to-date safety labeling – just not in the chaotic world that could result from FDA’s proposal.  Instead, GPhA says that the organization “supports a modification of the process that would explicitly allow generic firms to actively assist FDA in its determination that a change to labeling based on new safety information is warranted and in an efficient and prompt review of proposed changes by FDA. . . . The GPhA fully supports an expedited communication process through which FDA can notify both generic and brand-name drug companies, as well as healthcare practitioners of potential new safety information.”  In other words, GPhA says, let’s stick with and improve upon the operating system that’s been in place now for almost 30 years.  There’s no need (or justification) for a “reboot.”

Update:

• Our reference to the Matrix Trilogy of movies appears to have been prescient.  On February 5th, Matrix Global Advisors, a Washington, DC-based economic consulting firm led by Alex Brill, released an economic assessment concluding that FDA's generic drug labeling proposal, if implemented, would result in an estimated $4 billion in additional U.S. health care costs annually.

By Kurt R. Karst –      

In a new paper published by The Petrie-Flom Center for Health Law Policy, BioTechnology, and BioEthics at Harvard Law School, and presented at a February 3, 2014 Health Law Workshop, Kevin Outterson, a Professor of Law at Boston University and member of the U.S. Centers for Disease Control and Prevention’s Antimicrobial Resistance Working Group, says that the current environment in which “antibiotics are mismanaged in a haphazard fashion” has to change, and that “antbiotic delinkage” might be the answer.  In doing so, Prof. Outterson says that recent initiatives to incentivize the development of new antibiotics, such as the Generating Antibiotics Incentives Now Act (“GAIN Act”) and the Limited Population Antibacterial Drug (“LPAD”) pathway, as reflected in the Antibiotic Development to Advance Patient Treatment Act of 2013 (see our previous post here) are inadequate to address the growing problem of antibiotic resistance.  The GAIN Act “fails to focus the incentive exclusively on the highest quality antibiotics and antifungals.  If the GAIN Act triggers a large number of new antibiotic introductions, it might unfortunately lead to greater evolutionary pressures and therefore resistance,” writes Prof. Outterson.

In his 28-page paper titled “New Business Models for Sustainable Antibiotics,” which comes from an October 2013 roundtable meeting on the subject of “Aligning Incentives for Antibiotic Development and Use with Public Health Needs,” Prof. Outterson says that antibiotics are different from other types of products, and therefore, must be viewed and addressed differently.  After describing two overarching paradigms – the “dominant paradigm” under which there is effectively an “arms race between drugs and bugs,” and the “ecological paradigm” under which antibiotic effectiveness is treated “as a precious common pool resource, akin to fisheries or any other exhaustible resource” – Prof. Outterson goes on to explain that because antibiotics are “rivalry” instead of “non-rivalry,” models incorporating the concept of “antibiotic delinkage” need to be further explored and discussed:

Unlike physical goods or land, knowledge can be shared without diminishing the original source.  This characteristic (known as “nonrivalry”) is a key means by which unrestricted knowledge benefits society.  But it is weakened in the case of antibiotics due to resistance.  Each dose potentially diminishes the effectiveness of the next, effectively destroying the usefulness of both the knowledge and the resulting product (rivalry).  The fundamental reworking of patent law theory to account for this fact and to design alternative means to meet the same end are underway, most prominently in the concept of antibiotic delinkage.

Under traditional “linkage,” sales volumes and price determine the return on investment for a drug.  Due to resistance, maximizing sales volumes of antibiotics is not in the interest of global public health.  Delinkage removes the link between the funding of antibiotic R&D and sales volumes.  Under delinkage, companies will be paid for antibiotic R&D and innovation on some other basis. . . .  Delinkage seeks to solve three problems simultaneously: (1) inadequate market incentives for companies to invest in antibiotic R&D; (2) inadequate market incentive to protect these valuable resources from overuse and premature resistance; and (3) inadequate market incentives to ensure global access to life-saving antibiotics.

So, what are the various “antibiotic delinkage” models?  There are many – and nine of which are discussed in the paper, not including some hybrd models: (1) Payer Licenses; (2) Rewarding Antibiotic Development and Responsible Stewardship (RADARS); (3) GlaxoSmithKline’s model under which “drugs are provided at marginal cost to payers (and perhaps lower to consumers at the point of care) with all company profits deriving from a very significant government-funded income stream”; (4) Patent Buy-out Prize Funds; (5) Strategic Antibiotic Reserve (SAR); (6) Antibiotic Health Impact Fund (aHIF); (7) Antibiotic Innovation Funding Mechanism (AIFM); (8) a Drug Discovery Platform for Sourcing Novel Classes of Antibiotics as Public Goods (Public Goods); and (9) “Delinkage Plus” under which “providers and payers are given additional incentives and held responsible for conservation while the drug companies focus on bringing drugs to market under one of the delinkage models discussed above.”  Each model is summarized in tables around the end of the paper.

Because, according to Prof. Outterson, “[d]elinkage requires a clean break from revenues based on sales volumes,” traditional incentives for drug product development are not delinkage.  These include so-called “push incentives” such as tax credits and grants, and so-called “pull incentives” such as patent and non-patent exclusivities, priority review vouchers, and fast-tracking/streamlining clinical trials (see our previous post here).  Nevertheless, “[e]ach of these ideas could be modified to include delinkage,” writes Prof. Outterson.  For example, the LPAD pathway could be modified into an “LPAD Plus” pathway that includes “antibiotic conservation commitments by the company, distribution at marginal cost, and a very significant registration prize paid by the government.”  Of course, changes to the current linkage system in which new antibiotics are developed would be a significant change in direction for the drug industry.  But that shift in thinking and approach is what Prof. Outterson says needs to be further explored and pursued. 

By Kurt R. Karst –   

The U.S. Patent and Trademark Office (“PTO”) has finally issued a final decision in the long-running dispute over eligibility for a Patent Term Extension (“PTE”) for U.S. Patent No. 5,674,860 (“the ‘860 patent”) covering AstraZeneca LP’s SYMBICORT (budesonide and formoterol fumarate dihydrate) Inhalation Aerosol (Docket No. FDA-2007-E-0440), which FDA approved under NDA No. 021929 on July 21, 2006 at “04:36:00 PM,” according to the FDA approval letter. The PTO’s verdict: a denial of PTE.

By way of background, under the PTE statute at 35 U.S.C. § 156, the term of a patent claiming a drug is extended from the original expiration date of the patent if: (1) the term of the patent has not expired; (2) the patent has not been previously extended; (3) the PTE application is submitted to the PTO by the owner of record within 60 days of NDA approval; (4) the product, use, or method of manufacturing claimed has been subject to a “regulatory review period” before it is commercially marketed; and (5) the NDA is the first permitted commercial use of the drug product.

As we reported way back in July 2008 (see here), there were two impediments to obtaining a PTE for the ‘860 patent: (1) timely submission of the PTE application to the PTO after approval of the SYMBICORT marketing application (the PTE application was submitted on day 61) (35 U.S.C. § 156(d)(1)); and (2) FDA’s previous approval of NDAs for drug products containing either budesonide or formoterol fumarate dihydrate (35 U.S.C. § 156(a)(5)(A)).  As such, the PTO issued a decision on June 13, 2008 denying a PTE, but allowing AstraZeneca the opportunity to submit a request for reconsideration. 

AstraZeneca took up the PTO on its offer and submitted a request for reconsideration on December 16, 2008.  [Coincidentally, December 16, 2008 is the same day the PTO denied a PTE for a patent covering AstraZeneca’s PRILOSEC OTC (omeprazole magnesium) Delayed-Release Tablets . . . . on the same two grounds that the PTO cited for denying a PTE for the ‘860 patent on SYMBICORT (see our previous post here).  AstraZeneca also submitted a request for reconsideration with respect to that decision, which has not yet been ruled on.]  AstraZeneca argues in its reconsideration request, among other things, that SYMBICORT is a combination of two active ingredients that have an “unexpected synergistic effect such that the resultant pharmacologic effects are greater than the sum of their constituents,” and thus FDA’s approval of SYMBICORT is the first permitted commercial use of the drug product.  As we previously reported, the PTO has regularly rejected “synergistic combination” arguments.  And in 2012, the U.S. District Court for the Eastern District of Virginia rejected the argument in Avanir Pharm. v. Kappas, Case No. 12-00069 (E.D. Va. March 21, 2012) (see our previous post here).

On June 24, 2011, AstraZeneca filed an additional response to the June 13, 2008 PTO decision.  AstraZeneca’s response came after the the U.S. District Court for the Eastern District of Virginia ruled in The Medicines Company v. Kappos, 731 F. Supp. 2d 470 (E.D. Va. 2010), that the 60-day period for timely submitting a PTE application should be calculated under a next business day construction of the statute such that an NDA approval decision after 4:30 PM starts the 60-day clock on the next business day.  This decision was codified in section 37 of the Leahy-Smith America Invents Act, titled “Calculation of 60-Day Period for Application of Patent Term Extension” (see our previous post here), which added the following to 35 U.S.C. § 156(d):

For purposes of determining the date on which a product receives permission under the second sentence of this paragraph, if such permission is transmitted after 4:30 P.M., Eastern Time, on a business day, or is transmitted on a day that is not a business day, the product shall be deemed to receive such permission on the next business day.  For purposes of the preceding sentence, the term "business day" means any Monday, Tuesday, Wednesday, Thursday, or Friday, excluding any legal holiday under section 6103 of title 5.

Armed with the decision in the The Medicines Company and the change to the statute, AstraZeneca argued that its PTE application for the ‘860 patent was timely, because FDA approved NDA No. 021929 at 4:36:00 PM on Friday, July 21, 2006, thereby making Monday, July 24, 2006 day 1 of the 60-day period (the PTE application was submitted to the PTO on September 19, 2006).

The PTO, in its January 2014 decision, while agreeing that AstraZeneca’s PTE application for the ‘860 patent was indeed timely in light of the decision in the The Medicines Company and the change Congress made to the PTE statute, nevertheless denied AstraZeneca’s reconsideration request on the basis that the approval of SYMBICORT does not constitute the first permitted commercial marketing of either budesonide or formoterol fumarate dihydrate.  In doing so, the PTO once again rejected the “synergistic combination” theory – both as a matter of statutory interpretation and when considering precedent, including In re Alcon, 13 USPQ2d 1115 (Comm’s Pat. & Trademarks 1989), Glaxo Operations UK Ltd. v. Quigg, 894 F.2d 392 (Fed. Cir. 1990), Arnold P’ship v. Dudas, 262 F.3d 1338 (Fed. Cir. 2004), and Avanir Pharm.:

When Congress provided a definition of “product” for purposes of determining which kinds of products, when subject to a regulatory review period and claimed in a patent, would give rise to patent term extension, the definition indicated that a new drug had either an active ingredient as a single entity or multiple active ingredients which are in combination with one another.  See § 156(f)(2)(A).  The language of section 156(f) recites that the term “product,” means “a drug product,” which in turm, means “the active ingredient of a new drug … as a single entity or in combination with another active ingredient.”  Applying the statutory language here, a drug product, SYMBICORT®, means the active ingredient (budesonide) of a “new drug” in combination with another active ingredient (formoterol fumarate).  There is no escaping the plain language that the statute contemplates an active ingredient as a single entity in a new drug or an active ingredient in combination with another active ingredient in a new drug.  To conclude that a single active ingredient can be a combination of two or more active ingredients would render superfluous the statutory language “or in combination with another active ingredient.[”]

Whether the PTO’s decision will now truly put to rest the “synergistic combination” PTE theory remains to be seen. 

By Kurt R. Karst –     

FDA’s implementation of the Generic Drug User Fee Amendments of 2012 (“GDUFA”) and adherence to the triad of key aims laid out in the accompanying Performance Goals and Procedures – Safety, Access, and Transparency – have been a bit of a roller coaster ride for the generic drug industry, the Office of Generic Drugs (“OGD”), and even us. 

It wasn’t too long ago that we were griping on this blog (see here) about a Manual of Policies and Procedures (“MAPP”) – MAPP 5200.3 – titled “Responding to Industry Inquiries with respect to Abbreviated New Drug Applications in the Office of Generic Drugs” that FDA published in September 2013 as part of the preparatory efforts in the lead-up to full GDUFA implementation beginning on October 1, 2014.  Although the stated intent of the MAPP is to “clarif[y] the general principles for handling inquiries with respect to [ANDAs] from the authorized representative for an applicant with an ANDA submission (the authorized inquirer) by Regulatory Project Management (RPM) staff in [OGD]” we were concerned it represented what we called the “UFAization” of OGD (i.e., the process by which an FDA component, after the enactment of a User Fee Act, becomes focused on so-called process enhancements to meet goals and commitments at the expense – both literally and figuratively – of those who are subject to such user fees.) 

We were a little more upbeat about news shared by FDA at the Generic Pharmaceutical Association’s (“GPhA’s”) 2013 Fall Technical Conference about GDUFA implementation, including year 1 accomplishments and the announcement that a  committee – the GDUFA Steering Committee – had been put together to oversee GDUFA implementation (see our previous post here).  We were even more encouraged when the news came out that the Department of Health and Human Services approved the reorganization of OGD into a “Super Office” and that a new reporting structure would be created, including the creation of a new Office of Generic Drug Policy to handle, among other things, Hatch-Waxman disputes (see our previous post here). 

On the downside, we have heard some complaints about FDA’s enhanced ANDA refuse-to-receive standards reflected in recent guidance and less-than-helpful responses to Controlled Correspondence, though we have not focused on either topic in a blog post.  And then there’s the issue of how OGD will handle the recent explosion in ANDA submissions, as reported by Bob Pollock at the Lachman Blog (see here).  

But what we’re here today to announce is what can only be described as a massive and unprecedented undertaking on the part of OGD to address what seems to be an outpouring of concern about the perceived effects of MAPP 5200.3.  In other words, OGD has heard industry’s concerns and wants to do something about it – at least to the extent the Office can do so. 

In a recent memorandum to the Commissioned Corps (“CC”) Officers serving in OGD, OGD’s Acting Director, Kathleen Uhl, M.D., says that OGD’s “recent process changes, while critical to improving review efficiency, have made it harder for industry to assess the status of their submissions, and to plan the market launch of generic medicines that are important to industry and consumers alike.”  As such, writes Dr. Uhl, CC Officers “will be placed in mission critical status until completion of a one-time, special initiative related to GDUFA implementation.”  And what is this “special initiative”?  “Beginning February 1,” writes Dr. Uhl, “OGD’s CC officers will conduct a complete inventory of all the original ANDAs in our queue, and provide each applicant with an update regarding the status of its ANDAs.”  

That’s right, ANDA sponsors will be receiving, on a rolling basis, information on all of their respective original ANDAs (and amendments to them) – but not supplements – pending at the Agency.  This covers ANDAs submitted to FDA pre-GDUFA and pending on October 1, 2012 (i.e., the backlog), and that are subject to the GDUFA goal of 90% action by the end of FY 2017.  It also includes ANDAs submitted to FDA in the full year 1 (Fiscal Year 2013) and partial year 2 (Fiscal Year 2014) GDUFA cohorts.  These two GDUFA cohort years have been referred to as the “GDUFA donut hole” because, other than first Paragraph IV submissions, there are no FDA performance goals associated with review and action on them.  Performance goals take effect on October 1, 2014 (Fiscal Year 2015), when OGD has agreed to review and act on 60% of original ANDA submissions within 15 months from the date of submission, among other goals.  Note, however, that action on an ANDA within 15 months does not necessarily mean approval of that application.  More likely, OGD will be issuing Complete Response Letters reflecting full division-level review of deficiencies from all relevant review disciplines, including inspections.  Certainly, that seems to be the trend – see here and here.  This also means that once OGD issues a Complete Response Letter, and a sponsor responds, there may be another call from industry to gain some transparency into ANDA status. 

Although ANDA sponsors will not be able to request prioritization of the ANDAs on their respective lists, FDA’s action goes a long way to give greater transparency to application status, and could help as companies plan for the future.  As Dr. Uhl notes, “[t]he inventory and update goes above and beyond our negotiated GDUFA commitments.  It represents an extra effort to improve transparency, and help stakeholders cope with some of the uncertainty and disruption created by GDUFA implementation.”

Thank you OGD for listening to your stakeholders and providing a greater level of transparency; and thank you CC Officers for dedicating your time to this special initiative!

By JP Ellison –

In a speech on January 29th at the CBI Pharmaceutical Compliance Congress that DOJ posted on its own website, U.S. Department of Justice Assistant Attorney General Stuart Delery set forth his views of the three ways that the government’s enforcement interests align with industry’s interests.  While the speech didn’t break any new ground, it serves as a reminder that pharmaceutical enforcement cases remain a DOJ priority and suggests that recent enforcement trends will continue.

AAG Delery Claimed that DOJ and industry shared the following:

1.  “[A] common interest in promoting ethical corporate culture instead of maintaining a compliance program in name only;”
2. “Transparency about the conduct [the government] investigate[s];” and
3. “[A] common interest in ensuring that corporate compliance is not only the right thing to do but also a winning business strategy.”

Promoting ethical corporate culture

AAG Delery stated that a “common thread” in recent cases was “that numerous individuals . . . saw signs that misconduct was taking place and did not act.”  In response to this observation, AAG Delery stated that DOJ has “put a renewed emphasis on identifying non-monetary measures that will help us to prevent the recurrent of misconduct.”  As examples of such measures, Delery pointed to the Ranbaxy civil consent decree, which required the company to create an Office of Data Reliability, and the Abbott Laboratories resolution (see our prior post here) which he described as “a resolution designed to ensure high-level accountability for the company’s compliance efforts.   Delery’s comments regarding DOJ’s goal of giving “companies the incentives—and tools—to craft better compliance practices in the future” suggests that companies may want to consider similar measures in their own compliance programs.

Transparency

As to the second shared goal, Delery cited to the common interest of the government and industry in being “clear about what misconduct gave rise to a civil or criminal resolution” so that both sides can “distinguish[] conduct that is lawful and even beneficial from conduct that is illegal and harmful.” Delery “emphasize[d] the importance of [the government] explaining the conduct that has given rise to the settlements we negotiate.”  He explained that   “transparency benefits the industry by clarifying the factual basis for the actions we take . . .  and by prompting other companies to avoid the same risks to patient health and safety.”

Making compliance make business sense

AAG Delery “recognize[d] that most pharmaceutical companies are trying to play by the rules.”  Delery explained that DOJ wants “to ensure that companies that are committed to doing things right have the opportunity to compete on a level playing field.”  Delery encouraged self-disclosure and stated that companies would receive credit for such actions.  Lastly he stressed that DOJ would “continue to insist on resolutions that eliminate any economic incentive to engage in and attempt to conceal unlawful conduct.”

The government’s pursuit of pharmaceutical manufacturers has yielded significant recoveries in recent years (see here).  Throughout 2014, we expect the principles set forth in AAG Delery’s speech to be reinforced through investigations, prosecutions, and resolutions that reflect the points made in this speech, and we will keep the readers of this blog updated on those developments as they occur.

By John R. Fleder –

On October 2, 2013, HP&M posted the following on this blog:

On September 26, 2013, the United States Attorney for the District of Colorado announced that he had filed a six count criminal Information against Eric and Ryan Jensen.  The government alleges that the defendants violated the FDC Act by introducing adulterated cantaloupes into interstate commerce.  The government also alleges that the cantaloupes bore Listeria monocytogenes and 33 people died.  It is quite curious (we are being charitable here) that the government’s press release alleges that 147 people were hospitalized as a result of sales of the cantaloupes, but those allegations appear nowhere in the criminal Information!

The prosecution is a misdemeanor case, and does not allege any criminal “intent” on the part of the defendants.  There is no public indication that the defendants are prepared to plead guilty and/or cooperate with the government against others.  This fact pattern strongly suggests that this case is an old style Park criminal prosecution where the government files criminal charges under the FDC Act against company officials, without allegations that the defendants intended to violate the law and without a plea bargain that a misdemeanor prosecution is a settlement of more serious felony charges.  Our speculation is that a thorough government investigation here failed to turn up evidence that the defendants violated the FDC Act “with the intent to defraud or mislead,” which would be necessary to commence felony charges under the FDC Act.  In fact, the government used a grand jury to investigate this case, even though it can file a criminal Information involving misdemeanor charges without using a grand jury.

The second interesting twist in this case is that arrest warrants were issued for the defendants.  Arresting defendants charged only with misdemeanors was certainly not the norm with regard to old style Park prosecutions.  Typically, the defendants were simply notified of the charges and came to court voluntarily to enter their guilty or not guilty pleas.

Recent events have demonstrated that this case is indeed what this writer calls an old fashioned Park criminal prosecution.  The government filed criminal charges under the FDC Act against company officials, without allegations that the defendants intended to violate the law and without a plea bargain that demonstrated that a misdemeanor prosecution was a settlement of more serious felony charges.

On January 28, 2014, the United States District Court for the District of Colorado sentenced the two defendants to five years probation, based on their guilty pleas to the six count criminal Information.  They were also placed in home detention for six months, required to complete 100 hours of community service, and ordered to pay a total of $150,000 in restitution.  The court did not impose any fine “because Defendants have no ability to pay a fine.”

On January 17, 2014, the government filed a somewhat remarkable “Sentencing Statement.”  It argued that the relevant offense level for this case was 9.  When a criminal case fits into the offense level of 9, a court must require some jail time unless it orders substitute measures such as home detention, under Sentencing Guideline 5B1.1.  The government stated that it agreed with the United States Probation Office that the recommended sentence should be probation.  The government explained that “any offense that results in 33-40 deaths [which deaths resulted from the sales of the adulterated canteloupes by defendants’ company] is a serious offense.”  Nevertheless, “the seriousness of the offense is tempered in this case by the lack of a willful, intentional or knowing state of mind.  These defendants were at worst negligent or reckless in their acts or omissions.”

The government then discussed what it described were mitigating circumstances, namely what the defendants did after they discovered that their company’s fruit was tainted.  The government stated that the defendants: sought to voluntarily recall the fruit; through their counsel offered cooperation and assistance in the government’s investigation; and addressed the victims and their families “in an attempt to provide the victims a sense of comfort and closure,” waiving what the government called “constitutional protections in favor of addressing sensitive victim issues.”

The government also made a somewhat remarkable claim that it has already seen a significant difference in how food safety is viewed as a result of this prosecution.  It asserted (without citation) that “A recognition that shoddy compliance with food safety standards and statutes potentially exposes those in the distribution chain to criminal liability has been taken seriously by the food industry in light of this prosecution.”  That statement should be beneficial to the food industry in a variety of contexts.

It is interesting that the government did not explicitly ask for home detention or community service for the defendants even though the Court later imposed those requirements.

So what do we take away from this case:

1. This is perhaps the first recent case where the government has actually gone on record stating that it believed that defendants prosecuted under 21 U.S.C. 333(a) lacked any criminal intent.  In most or all other recent cases the government has stood silent on whether a defendant prosecuted under this statute had any criminal intent;
2. Even conduct that leads to a substantial number of deaths will not necessarily warrant jail time;
3. Defendants can take remedial steps after the “crimes” have been committed which will substantially reduce the sanctions that the government will seek and that a court will impose;
4. For better or worse, the Park Doctrine is indeed alive, at least to the extent that it was applied in this case; and
5. Based on comments made by the government in its Sentencing Statement, it appears that the prosecutors concluded that when deaths occur, the government believes it is obliged to seek criminal sanctions regardless of whether the people prosecuted have any wrongful intent.

By Delia A. Deschaine –

Various members of industry recently joined together in filing a citizen petition with FDA.  Citizen Petition, Docket No. FDA-2013-P-1711 (hereinafter “Citizen Petition”). The Citizen Petition responds to a statement made by CDER Director, Janet Woodcock, M.D. in October 2013 that FDA intends to issue a scientific and medical evaluation and recommendation that DEA reschedule all hydrocodone combination products from their current placement in Schedule III to Schedule II.  The petitioners argue that reclassifying all combination hydrocodone products is inappropriate for myriad of public policy reasons.  Thus they request that FDA instead recommend DEA reclassify only hydrocodone combination products that contain hydrocodone bitartrate in a strength of 5 mg or higher.  Citizen Petition at 2.  While the petition is brief, it touches on several critical points that FDA and DEA will likely consider in determining whether to move forward with the rescheduling.

To name a few points, the petitioners assert that reclassifying all hydrocodone products will have “numerous unintended consequences, including depriving vulnerable patient populations of access to critically-needed pain medications.”  Id. at 2.  The petitioners estimate that nearly 100 million Americans suffer from chronic pain and, thus, require opioid treatment for long periods of time.  Id. at 3.  These patients will also be negatively impacted by the reclassification of all strengths of hydrocodone products,  as the drug will become more costly to acquire, and, therefore, less available.  See id.  Further, the petitioners state that the “upscheduling of hydrocodone combination products would require patients to see their doctor for office visits with greater frequency simply to refill a prescription,” and “[a]s FDA could imagine, such a policy change would impose heavy burdens  . . . on patients, caregivers and the health care system . . . .”  Id.   (Unlike substances in Schedule III of the Controlled Substances Act, prescribers are not permitted to write refill prescriptions for controlled substances listed in Schedule II.) 

The Citizen Petition is not the first response to the proposal to reclassify hydrocodone combination products, and likely not the last.  FDA and DEA have battled for years over the appropriate placement of hydrocodone combination products.  See prior post, here. The issue most recently attracted public attention in April 2012, when Congress declined to legislatively reclassify hydrocodone combination products.  See prior post, here.  Instead, Congress ordered FDA to convene a working group to discuss the risks and benefits of reclassification, which it did in January 2013.  Although FDA signaled its intent to issue a recommendation that DEA move forward with the reclassification by the end of the year (a departure from the position it took a few years ago, as petitioners noted), no public statement has been made that FDA did so.  We note, however, that FDA is not required to publish its recommendation in the Federal Register and historically has not done so.  For that reason, the four-page Citizen Petition may flush out whether FDA has or intends to issue its recommendation soon. (Pursuant to 21 U.S.C. § 355(q), FDA must respond to a citizen petition within 150 days if the petition may delay the approval of a pending 505(b)(2) or Abbreviated New Drug Application.) 

Nevertheless, as the petitioners recognize, a DEA reclassification would likely have broad-sweeping implications for all members in the pharmaceutical chain of distribution.  See prior post, here.  These costs include compliance with the physical security requirements imposed on registrants for Schedule II controlled substances (i.e., that they be physically stored in secure cabinets or vaults (depending on the amount).  See 21 C.F.R. §§ 1301.71(a), 1301.72.  Currently, many pharmacies store hydrocodone combination products in safes or spread out shelves with other prescription drugs, and wholesalers store those products in cages (as opposed to vaults for Schedule II substances), as permitted by DEA.  Id. § 1301.72.  If hydrocodone products are reclassified in Schedule II, many pharmacies and wholesalers will need to alter their storage and security controls due to the widespread use and thus supply of these medications.  See id. § 1301.71(c) (requiring registrants to “expand[] or extend[]” their physical security controls “when [they] become inadequate as a result of a controlled substance being transferred to a different schedule”).  This may include vault construction or alteration which is difficult and costly, given DEA’s precise regulatory specifications.  Id. § 1301.72. 

Because Schedule II prescriptions may not be refilled, the reclassification of hydrocodone would also likely impose additional costs on practitioners who routinely prescribe combination hydrocodone to patients requiring long-term opioid treatment.  Those costs may include administrative expenditures (e.g., supplies and support staff) necessary to handle an increased frequency of in-office visits by their patients.  Payers, such as Medicare, Medicaid, and private insurance, bear some of the burden of subsidizing these costs.  See Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to Part B for CY 2014, 78 Fed. Reg. 43,282 (July 19, 2013) (discussing how administrative expenditures factor into the Medicare physician fee-for-service rates).

On balance, the petitioners argue, reclassifying only certain higher strength products serves to “protect[] vulnerable patient populations which rely on such medication without sacrificing the ability of DEA to target enforcement of drug products likely to be abused (i.e., products in 5 mg strength and above).”  Citizen Petition at 3-4.

The hydrocodone rescheduling petition relates to the many initiatives that FDA has recently taken to address concerns regarding the widespread misuse and abuse of opioids.   See, e.g., prior post, here. (discussing FDA’s new labeling for all extended release opioid drugs and biologics).  Despite these efforts, FDA recently came under scrutiny by lawmakers and state attorneys general for its approval of a single-entity hydrocodone drug (making it the first available U.S. hydrocodone drug in Schedule II), without requiring the drug to possess “abuse-deterrent technology.”  See prior post, here.  FDA did so despite finding earlier that year that drug manufacturer, Purdue, had withdrawn Oxycontin for safety or efficacy reasons, in the wake of FDA’s approval of a tamper-resistant formula for that drug.  Id.  FDA reasoned that its policy is to consider whether abuse-deterrent technology is necessary to ensure adequate safety of a drug on a “product-by-product” basis.  Id.  In response, The Pharmacists Planning Service, Inc. (“PPSI”) filed a petition with FDA (Docket No. FDA-2013-P-1606) requesting that FDA add “drug-abuse deterrent technology to all hydrocodone schedule II products.”  The petition listed concerns regarding the abuse of opioids generally, and, specifically, hydrocodone.  Id.  Interestingly, PPSI stated that “[it] has encouraged the FDA reschedule this hydrocodone/apap to schedule II.”  Id. at 2.

For now, we wait with curiosity to see whether, and how, FDA considers the arguments made in these petitions in issuing its scheduling recommendation to DEA.

By Riëtte van Laack –

On December 26, FDA sent Warning Letters (here and here) to Accera, Inc. and NVN Therapeutics.  Accera Inc. markets a product, Axona, as a medical food “for the clinical dietary management of the metabolic processes associated with mild to moderate Alzheimer’s disease,” whereas NVN Therapeutics markets GlucoreinTM PCOS as a medical food for the “dietary management of Polycystic Ovarian Syndrome ("PCOS") by reducing the incidence of metabolic syndrome and insulin resistance.”  FDA alleges that these products are misbranded as medical foods because, according to FDA, there are no distinctive nutritional requirements or unique nutrient needs for individuals with mild to moderate Alzheimer’s disease and for PCOS.

Why is this worth a blog post, you ask?  To our knowledge, these are the first two Warning Letters in which FDA asserts yet another requirement for medical foods.  Under FDA’s “narrow interpretation,” medical foods must not only meet all the requirements of FDA’s regulation, 21 C.F.R. 101.9(j)(8), they also must be intended for “the patient who is seriously ill or who require use of the product as a major component of a disease or condition’s specific dietary management.”  Although the Agency mentioned this requirement in the 2007 guidance and the draft 2013 guidance (see our previous post here), so far, the Agency had not mentioned this limitation in Warning Letters.  More important, the Agency has not provided any authority for adding this requirement.

Biosimilars (or follow-on biologics) are a hot topic these days – and getting hotter – whether one talks about FDA’s draft guidance documents (see here), battles brewing in state legislatures around the country concerning substitution (see here), the flurry of citizen petitions submitted to FDA concerning biosimilar naming (see here), controversy concerning the “patent dance” procedures of the Biologics Price Competition and Innovation Act of 2009 (see here), or the applicability of the BPCIA to older biological products (see here).  

On February 4, 2014, the Federal Trade Commission (“FTC”) will hold a workshop addressing some of these issues: “Follow-On Biologics Workshop: Impact of Recent Legislative and Regulatory Naming Proposals on Competition.”  (The final agenda for the February 4th workshop was announced earlier this week.)  And just two days later, on February 6, 2014, from 12:00-1:00 PM EST, experts from Hyman, Phelps & McNamara, P.C. and Dechert LLP will discuss the implications of and issues with the new biosimilar approval process created by the BPCIA and other major takeaways from the FTC workshop.  Topics to be covered during the February 6th webinar will include: (1) Current status and next steps for the FDA’s implementation of a biosimilar approval process; (2) Major takeaways from the FTC’s February 4 workshop on biologics; and (3) Intellectual property issues in the run-up to the first biosimilar approval. 

Registration for the webinar is free and can be made here.  Webinar speakers include Hyman, Phelps & McNamara, P.C.’s James C. Shehan and Dechert LLP’s Daniel M. Becker, M.D., Mike Cowie, and George G. Gordon.  Please confirm your webinar attendance by February 5, 2014.  Further details, including how to connect to the webinar, will be provided closer to the program.

By Ricardo Carvajal –

The Institute of Medicine (“IOM”) published a summary report of the workshop on caffeine in food and dietary supplements that IOM convened last August at FDA’s request.  As noted in the introduction to the summary, the summary presents statements, recommendations, and opinions of individual participants, and does not reflect the consensus of the IOM, nor is it intended to constitute a comprehensive review of the subject.  Nonetheless, the summary may be of use to those who were unable to attend the workshop and have an interest in the issues that were addressed, including:

• Regulation of caffeine in the U.S.
• Intake and exposure to caffeine
• Safety signals and surveillance
• Exploring safe caffeine exposure levels for vulnerable populations
• Caffeine Effects on the Cardiovascular System 
• Caffeine effects on the central nervous system and behavioral effects associated with caffeine consumption
• Other compounds impacting caffeine effects

In a concurrently issued press release, FDA touted the summary as “extremely informative” and reiterated that the agency is “especially concerned with products that may be attractive and readily available to children and adolescents, without careful consideration of their cumulative impact.”  FDA also noted that it continues to investigate adverse event reports for energy drinks and other caffeinated products, with public safety as the agency’s “top priority,” and that the new online adverse event reporting system for dietary supplements “will make it easier for the FDA to detect dietary supplements that pose risk for a range of reasons, including excessive levels of caffeine.” 

By Jeffrey K. Shapiro –

FDA has issued a new draft guidance on the custom device exemption.  Comments are due by March 17, 2014.  This schedule puts FDA on track to finalize the guidance by July 9, 2014, as required under section 617 of the Food and Drug Administration Safety and Innovation Act (“FDASIA”) (Pub. L. 112-144).  (See our FDASIA summary here at pages 41-42.)

What is the custom device exemption?  It is a long standing provision in Section 520(b) of the Federal Food, Drug, and Cosmetic Act (“FDCA”) that allows device manufacturers to distribute devices designed to accommodate unique  patient conditions without premarket application (“PMA”) approval under Section 515 of the FDCA.  The exemption does not relieve the manufacturer of the usual post market regulatory requirements that apply to medical devices.

Congress revamped the custom device exemption in FDASIA.  Some of the changes were more clarifying than substantive, but a few new concepts were added.  Those who need to consider the applicability of a custom device exemption should review the amended statute and draft guidance and ignore the existing regulation (21 C.F.R. § 812.3(b)), which has not been updated. 

The following is a paraphrase of the custom device requirements in the revised statute.  For a device to qualify, all of these requirements must be met:

• It is created or modified to comply with the order of a physician or dentist.
• In order to comply, the device necessarily deviates from an otherwise applicable premarket approval requirement in Section 515 of the FDCA.
• It is not generally available in finished form through labeling or advertising for commercial distribution in the U.S.
• It is designed to treat a unique pathology or physiological condition that no domestically available device can treat.
• It is intended to meet the needs of a physician or dentist in treating a patient, or will be used by the patient on order of the physician or dentist.
• It is assembled by components or manufactured and finished on a case by case basis to accommodate the unique needs of the physician/dentist or patient.
• It may have common standardized design characteristics, material and chemical composition, and manufacturing processes as commercially distributed devices.

If a device meets these requirements it may be distributed as a custom device, with three further limitations:

• The condition being treated must be sufficiently rare that a clinical study is impractical.  (This limitations codifies an interpretation that FDA has long applied.)
• Multiple units of the device may qualify for the exemption, but no more than five units per year.
• The manufacturer must annually notify FDA if it is producing custom devices.

FDA’s guidance does a good job of explaining how the agency will enforce these requirements.  We will not reiterate the entire guidance here, since it is largely self explanatory.  The flow chart on page 19 of the draft guidance is especially useful. 

A few points are worth highlighting:

• FDA interprets the five unit per year limitation to exclude extra devices provided in different sizes if the unused devices are returned.  Also, multiple devices for multiple anatomical locations (e.g., bilateral hip replacements) will count as one unit if used in the same reporting year.  [Draft Guidance, lines 229 264.]
• FDA explains that the a device is either patient-centric or physician/dentist centric.  The distinction is between a device that treats a rare patient need and leaves the practice with the patient versus a device that fulfills a special need in the physician/dentist practice that stays with the practice.  [Draft Guidance, lines 279 285.]  It is left unexplained what types of devices might fulfill a physician/dentist special practice need.  It would have been helpful if examples had been provided; all of the examples appear to relate to patient needs.
• FDA reiterates its long standing interpretation precluding “patient specific” or “patient matched” devices from qualifying for the custom device exemption.  These are devices “in which ranges of different specifications have been approved or cleared to treat patient populations that can be studied clinically. . . .  The final manufacturing of these devices can be delayed until the physician provides imaging data or other information . . . to finalize the specifications of the device within . . . cleared or approved ranges. As a result, the device is specifically tailored for the patient.”  [Draft Guidance, lines 329 343.]  Thus, contact lenses or customizable orthopedic implants would typically not qualify for the custom device exemption. 

A final stylistic point: the draft guidance continues FDA’s increasing practice of providing guidance through lengthy question and answer sections.  This practice is somewhat helpful in ensuring that specific questions are answered.  But the use of lengthy questions in headings and subheadings makes it more difficult to find information, not less so.  FDA should revert to using key word topic headings and subheadings; these are a tried and true way of showing the reader where information may be found.

By Anne K. Walsh –

While the mid-Atlantic region was paralyzed under 4 to 8 inches of snow, it was business as usual for the Tenth Circuit Court of Appeals in Colorado.  On January 21, 2014, the court issued an opinion affirming the felony conviction of John Schulte, former CEO of The Spectranetics Corporation, for making a false statement to the government.  

The woes of the company date back to 2008, when a former employee alleged that it was marketing unapproved devices brought into the country illegally.  The company’s Board of Directors ordered an internal investigation, but the investigation did not result in any finding of wrongdoing.  Later that year, the government learned of the same allegations brought to the Board, and quickly executed a search warrant.  It was during this search that Schulte voluntarily agreed to provide an interview to federal law enforcement agents.  The statements he made during that interview five and a half years ago continue to haunt him today.

As readers may recall (see our previous post here), the company entered into a settlement with the government in 2009 in which it agreed to pay a $5 million civil penalty.  The government decided not to criminally prosecute the company, and instead allowed the company to enter into a non-prosecution agreement that required cooperation in the government’s ongoing criminal investigation of certain individuals, including Schulte. 

In 2010, the government indicted Schulte on twelve separate counts, but after a four-week jury trial in 2012, a jury acquitted him of all but one of those counts: making false statements under 18 U.S.C. § 1001.  The court’s sentence was lenient, requiring only one year of probation, a $5000 fine, and 100 hours of community service.  (The court rejected the government’s sentencing request for two years of prison and three years of probation.)  

Schulte appealed this conviction on the grounds that the statements were not false, that the government failed to prove the necessary intent to give false information, and that the statements were not material to the government’s investigation.  The Tenth Circuit addressed these legal issues in turn, the details of which can be reviewed in the opinion.  The court ultimately concluded that there was no fundamental ambiguity about the questions to which Schulte responded, and that there was sufficient evidence provided at trial that the statements Schulte made were false.

The moral of the story is that company employees should be aware of the impact of any communications with the government, whether in the context of a search warrant or a routine site inspection.  In the case against Schulte, the law enforcement agent was in possession of very detailed information, as evidenced by the 48-page affidavit that the agent had prepared to support the search warrant.  In contrast, Schulte agreed to speak off-the-cuff, without having the benefit of reviewing information to refresh his recollection.  The government rejected Schulte’s three attempts to recant or correct those statements after Schulte’s counsel reviewed documents after the interview.  It is possible the government was more aggressive against Schulte because it was “offended” that Schulte had lied, which may have been avoided had Schulte been better prepared in advance of the interview.

Company employees should be advised on the importance of candor, and should be well-prepared before talking with the government about any substantive matters.  With or without counsel present, all company employees speaking to the government on any topic should avoid the temptation to answer all questions posed by the government.  Generally, a company employee has no legal obligation to answer any question unless subpoenaed or ordered by a court.  Thus, before answering any question, the employee should be certain that the answer being provided is correct.  If there is any doubt, the employee has the right to inform the government that she will need to do further checking before answering the question.  Although an employee might want to be “helpful” to FDA, or to her corporate employer, an employee can be (and has been) criminally prosecuted if the information turns out to be untrue, despite good intentions.

Also, with the benefit of hindsight, it is clear that the result of this case would be profoundly different had Schulte not voluntarily spoken with the government.  Recall that the underlying focus of the investigation related to allegations that the company and its employees marketed unapproved devices in violation of the Federal Food, Drug, and Cosmetic Act (FDCA).  Yet, the company settled the matter with a non-prosecution agreement, likely motivated by the government’s acknowledgement that the evidence supporting an FDCA violation was weak.  Schulte was acquitted of eleven of the twelve charges the government brought against him, the majority of which related to counts under the FDCA.  With respect to the other indicted individuals, the government dropped all charges against one, the one who proceeded to trial with Schulte was acquitted of all charges, and the last individual pled guilty to a single count of concealing a felony in exchange for probation.  Thus, the only two criminal charges that resulted from the government’s intense prosecution and trial did not even relate to the FDCA. 

It also bears mention that the jury rejected the government’s theory that Schulte and others were liable under the Responsible Corporate Officer doctrine, a topic which we are following closely (see our previous post here).