By Riëtte van Laack –

District Judge Susan Nelson of the District of Minnesota recently concluded that FDA is best qualified and has been authorized by Congress to decide whether Milk Protein Concentrate (“MPC”) is a “proper, permitted ingredient in yogurt.” 

Earlier this year, on March 30, 2012, plaintiff Martin Taradejna filed a complaint alleging that the marketing of Yoplait Greek yogurt containing MPC violated several Minnesota consumer protection statutes, and failed to comply “with legal and regulatory rules” defining “yogurt.”  Specifically, Plaintiff alleged that the addition of MPC was not permitted under the standard of identity for yogurt.  Pointing to various publicly available statements and a proposed rule by FDA (see our prior post here), defendants General Mills and Yoplait USA argued that according to FDA yogurt may contain MPC.  Defendants filed a motion to dismiss arguing, among other things, that primary jurisdiction barred Taradejna’s claims.

As explained by the court, the primary jurisdiction doctrine “comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body.”  The Court concluded that the question whether MPC may be added to yogurt falls squarely within FDA’s jurisdiction and that the Agency is in the best position to resolve any ambiguities about the standard of identity for yogurt.  The Court further pointed to the multitude of “yogurt lawsuits” involving similar issues and the potential for inconsistent judicial rulings, and reasoned that leaving the decision to FDA would promote consistency and national uniformity in labeling.  Thus, the Court concluded that the reasons for applying the primary jurisdiction doctrine were present in the case, and dismissed the case without prejudice.

Hyman, Phelps & McNamara, P.C. is pleased to announce that Diane B. McColl has been elected to serve as the new President of the International Society of Regulatory Toxicology and Pharmacology (“ISRTP”).  ISRTP’s mission is to provide 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.  Ms. McColl previously served as ISRTP’s Vice President.

Ms. McColl, who is both an attorney and a pharmacist, is also an elected member to the U.S. Pharmacopeial Convention’s Food Ingredients Expert Committee.  The committee received the 2012 USP Award for an Innovative Response to Public Health Challenges (see our previous post here).

By Larry K. Houck –

The Drug Enforcement Administration (“DEA”) published a notice of proposed rulemaking in the December 19th Federal Register (77 Fed. Reg. 75,075 (Dec. 19, 2012)) to place lorcaserin into schedule IV of the federal Controlled Substances Act (“CSA”).  Interested persons must submit electronic comments by January 18, 2012.  Written comments must be postmarked by the same date. 

Lorcaserin is a new chemical entity with central nervous system hallucinogenic properties that FDA approved on June 27, 2012 as an addition to a reduced-calorie diet and exercise for chronic weight management regimens.  Lorcaserin will be marketed under the trade name Belviq® and is approved under NDA No. 022529.

The proposed scheduling is based on a recommendation from the Department of Health and Human Services (“HHS”) and on an eight-factor analysis conducted by DEA.  Lorcaserin has not been marketed in the U.S. or any other country so there is no available information about actual abuse.  However, HHS found evidence that lorcaserin produces subjective effects in humans and animals similar to those produced by zolpidem, a schedule IV substance, and ketamine, a schedule III substance.  HHS concluded that the scope and significance of the lorcaserin’s abuse potential is similar to schedule IV substances and its marketing as a schedule IV substance, rather than as an uncontrolled or schedule V substance, will decrease its potential for abuse.  DEA determined that there is substantial evidence of the potential for abuse of lorcaserin and thereby proposes to control it as a schedule IV substance.

This proposed scheduling action illustrates how HHS and the DEA evaluate the abuse potential of a new compound where there is no actual abuse data.  In these cases, the agencies review the results of clinical studies to use as a barometer of the potential that drug abusers will seek the drug out once it is marketed.  In addition, both agencies compare the drug’s abuse potential to other currently scheduled drugs to determine the best “fit” for which schedule to classify the drug.

DEA’s placement of lorcaserin in schedule IV would subject manufacturers, distributors, dispensers such as pharmacies and physicians, importers, exporters, and anyone in possession of lorcaserin to the applicable provisions of the CSA and its implementing regulations, including administrative, civil and criminal sanctions.  DEA registration, recordkeeping and reporting, labeling and packaging, importation and exportation, security and disposal requirements for handlers of schedule IV substances would apply.

Hyman, Phelps & McNamara, P.C. Director David B. Clissold will be speaking at an upcoming Management Forum conference on myriad topics, including orphan drug exclusivity, FDA regulatory strategies, and advanced therapy products.  The conference, titled “EU and US Regulatory Issues for IP Professionals,” will take place on February 4-5, 2013 in Geneva.  A copy of the conference brochure is available here.

FDA Law Blog readers can receive a 20% discount off the registration price of the two-day conference.  To receive the discount, please contact Sarah Packham at sarah.packham@management-forum.co.uk and mention FDA Law Blog.  For more information and to register, visit the conference website.

By Kurt R. Karst –      

The Pharmaceutical Research and Manufacturers of America (“PhRMA”), the Biotechnology Industry Organization (“BIO”), and the Generic Pharmaceutical Association (“GPhA”) share some common ground.  All three of the trade groups oppose a Safe Drug Disposal Ordinance (see here and here [Item No. 69]) passed by the Alameda County, California Board of Supervisors on July 24, 2012, and that is slated to go into effect in July 2013.  In a recent Complaint filed in the U.S. District Court for the Northern District of California, PhRMA, BIO, and GPhA contend that the first-in-the-nation county ordinance is a per se violation of the Commerce Clause of the U.S. Constitution and violates 42 U.S.C. § 1983, which allows monetary relief to those whose constitutional rights have been violated by an actor acting under “color of any statute, ordinance, regulation, custom, or usage, of any State. . . .”  The trade groups are seeking declaratory and injunctive relief; specifically, a declaration that the ordinance violates the Commerce Clause, and an injunction prohibiting Alameda County and the County’s Department of Environmental Health from implementing the ordinance or seeking enforcement of its requirements. 

The Alameda Safe Drug Disposal Ordinance reportedly traces its roots to a so-called “Extended Producer Responsibility” (“EPR”) policy framework adopted several years ago by CalRecycle (formerly the California Integrated Waste Management Board).  The Safe Drug Disposal Ordinance, like other EPR (or “manufacturer take-back”) ordinances and laws (see here) place the primary responsibility for end-of-life management of products on the manufacturers of the products.  There are several bills that have been introduced in various states to create EPR programs for myriad products, including electronics, batteries, sharps, and mercury thermostats (see here), as well as bills targeting pharmaceuticals in Maine (LD 821), Maryland (HB 648), New York (A04651 and A00211), Pennsylvania (HB 2466), and Washington (SB 5234 and HB 1370).  The general intent of drug take-back legislation is allegedly to prevent unintentional poisonings and the improper disposal of products into the water treatment system.  

The Alameda Safe Drug Disposal Ordinance requires “producers” of “covered drugs” to operate take-back programs after submitting a plan to the Department of Environmental Health by July 1, 2013.  Such operation includes the creation, administration, promotion, and payment of the program (including the payment of Alamada County’s costs to administer and enforce the ordinance).  A “covered drug” is defined in the ordinance generally to include “all drugs as defined in 21 U.S.C. § 321(g)(l) of the Federal Food, Drug and Cosmetic Act,” “including both brand name and Generic Drugs;” however, there are several exemptions, including exemptions for “nonprescription drugs,” vitamins, supplements, herbal remedies, cosmetics, soap, detergent, “household cleaning products,” biological products for which the producer already provides a take-back program, and certain “[p]et pesticide products.”  Every producer’s take-back program – which may be run by an individual producer or funded by a group of covered producers under a “product stewardship organization” – must accept and dispose of all covered drugs received, no matter who manufactured the drugs, unless excused from that comprehensive obligation by the Department of Environmental Health.  The collection, shipping, and destruction of collected items must comply with all state and federal laws.  A violation of the ordinance may result in a civil penalty up to $1,000 per day.

In their Complaint, PhRMA, BIO, and GPhA allege that the Alameda Safe Drug Disposal Ordinance is a per se violation of the Commerce Clause, and in particular, the dormant Commerce Clause, which is a doctrine is rooted in the fear that parochial governments might adopt regulations that advance their own interests at the nation’s expense, and therefore, must be declared unconstitutional and the Alameda County government enjoined from implementing it. According to the trade groups:

The Ordinance represents a per se violation of the Commerce Clause for three distinct reasons.  First, it directly regulates and burdens interstate commerce and its primary purpose and clear effect is to shift the costs of a local regulatory program directly onto interstate commerce and out-of-county consumers.  Second, the Ordinance discriminates against interstate commerce by targeting interstate commerce and products delivered from outside the County for burdens.  Finally, the Ordinance favors local interests by deliberately shifting costs away from local consumers and taxpayers and onto drug manufacturers and pharmaceutical consumers nationwide.

And even if the ordinance is not a per se infringement of the Commerce Clause it is still unconstitutional, say the trade groups, because “[i]ts burden on interstate commerce is inherently excessive because the County could accomplish all of the purported benefits of a take-back program without any interstate burden,” such as “by developing and conducting the take-back program through government officials paid by the local taxpayers or consumers served by the program.” 

If the Alameda Safe Drug Disposal Ordinance is permissible, then what’s to stop Alameda County (or perhaps other counties from around the nation for that matter) from requiring other interstate producers to implement similar programs?  For example, say the trade groups, Alameda County could “require interstate food producers to collect and dispose of all spoiled food or similar garbage.”  The bottom line, according to PhRMA, BIO and GPhA, is that “[l]ocalities would be authorized to get something for nothing, simply by free-riding on interstate commerce and transferring the financial burdens to out-of-state consumers.  Because such policies offend the dormant Commerce Clause at least as directly as a tariff, the Court should declare the Ordinance unconstitutional and permanently enjoin its implementation.”

A case management statement is due in the case by March 1, 2013, and a case management conference has been set for March 8, 2013 in San Francisco.

By Alexander Varond –

On December 14, FDA released a draft guidance document entitled “Enrichment Strategies for Clinical Trials to Support Approval of Human Drugs and Biological Products” (“Enrichment Guidance”).  The thirty-nine-page document was more than six years in the making and aims to provide “guidance to industry on enrichment strategies that can be used in clinical trials intended to support effectiveness and safety claims.”  It also “defines several types of enrichment strategies, provides examples of various potential clinical trial designs, and discusses potential regulatory considerations when using enrichment strategies in clinical trials.”  The Enrichment Guidance follows a June 21, 2012 article written by Bob Temple entitled “Enrichment Design Studies should Enhance Signals of Effectiveness” and is the product of years of research, papers, and presentations.  It is a welcome step towards providing sponsors with insight into FDA’s thinking regarding enrichment strategies and will serve as an important guide for future clinical design.

Bob Temple, in a recent article, stated that “[w]hile enrichment won’t save a drug that doesn’t work, it will help find one that will.”  Therefore, the draft guidance defines “enrichment” as “the prospective use of any patient characteristic to select a study population in which detection of a drug effect (if one is in fact present) is more likely than it would be in an unselected population.” 

Three types of enrichment strategies are discussed:

• Strategies to decrease heterogeneity (practical enrichment) which “include selecting patients with baseline measurement in a narrow range (decreased inter-patient variability) and excluding patients whose disease or symptoms improve spontaneously or whose measurements are highly variable (decreased intra-patient variability).”

• Prognostic enrichment strategies which include “choosing patients with a greater likelihood of having a disease-related endpoint event (for event-driven studies) [such as a MACE event] or substantial worsening in condition (for continuous measurement endpoints).”

• Predictive enrichment strategies which include “choosing patients more likely to respond to the drug treatment than other patients with the condition being treated.”  This can result in large effect size, a smaller study population, and a more favorable benefit-risk relationship for the subset population.  Selection of patients can be driven by factors including “a specific aspect of pathophysiology, past history of response, or a disease characteristic that is related in some manner to the study drug’s mechanism (e.g., genomic or proteomic factor).” 

FDA notes that enrichment strategies must be careful to avoid issues relating to the generalizability and applicability of study results.  Therefore, sponsors must consider whether potential enrichment strategies could be used in clinical practice and whether the treatment is useful in a population broader than the study population.  The Enrichment Guidance also points out that enrichment studies must abide by established principles of well-controlled studies, control bias, and conserve studywise type I error.  FDA also recommends that sponsors be explicit about enrichment designs in study protocols and reports and that they engage in early discussions with FDA on plans to use enrichment designs.

While FDA states that it is “very interested” in individualization of treatment and the efficiency of enrichment studies, it is also concerned that labeling adequately describe the studied population and do not overstate the benefit for the non-enrichment populations.  Therefore, sponsors must carefully consider whether enrichment marker-negative populations should be studied, realizing that the enrichment strategy can have important implications to the labeling the drug will receive.

With regard to predictive enrichment, the question of whether non-marker patients can benefit is critical.  FDA and sponsors must, therefore, consider the amount of information available on the marker-negative population, both before and after approval, risk-benefit for multiple groups, and whether the treatment is a critical advance for the enriched group such that “it would be generally unreasonable to delay approval for the enriched group, even if few data on the group without the enrichment factor were available and even if some off-label use were anticipated despite appropriate labeling.” 

Importantly, FDA has signaled that many treatments will likely be required to show data on marker-negative population including risks to the marker-negative population, the relative size of the marker-negative population compared to the marker-positive population, and the likelihood of off-label usage in the marker-negative population.  Therefore, FDA could require additional premarketing or postmarketing studies on these marker-negative populations.

FDA puts the Enrichment Guidance into perspective by concluding that, despite a number of concerns and limitations, it “is prepared to approve drugs studied primarily or even solely in enriched populations.”

By Ricardo Carvajal –

FDA announced that it executed a Food Safety Systems Recognition Arrangement ("RA") with its counterpart in New Zealand, the Ministry for Primary Indsutries ("PMI").  The RA is the culmination of an assessment that began in 2010 and included both paper and on-site reviews.  Based on that assessment, the two regulatory authorities “decided that their respective food safety regulatory systems provide for a comparable degree of food safety assurance” – the first such decision for FDA.  A principal consequence of that decision is stated in the RA as follows: 

This systems recognition decision allows for a more efficient and effective use of resources. This includes reductions in the type and frequency of further reviews of each other’s regulatory systems, the type and frequency of border checks when foods are offered for entry into their respective countries, and the level and type of verification activities expected by the Participant’s importers and exporters of food and feed products from either country.

It’s not yet clear how this language will be given effect, but the advantages for manufacturers, exporters, and importers in both countries could be significant – particularly in the absence of a viable third party certification alternative.  In a recent GAO report (see our prior post here), FDA defended its preference for RA’s over the more narrowly tailored comparability assessments recommended by GAO.  Now FDA can claim to have an RA under its belt.

By Kurt R. Karst –      

Excitement over the U.S. Supreme Court’s recent decision to hear Federal Trade Commission v. Watson Pharmaceuticals, Inc. (Docket No. 12-416), a drug patent settlement agreement (a.k.a. “reverse payment” or “pay-for-delay agreement”) case involving ANDROGEL (testosterone gel) (see our previous post here), and anticipation that the Court might still decide to grant certiorari in Merck & Co., Inc. v. Louisiana Wholesale Drug Company, Inc. (Docket Nos. 12-245) and Upsher-Smith Laboratories, Inc. v. Louisiana Wholesale Drug Company, Inc. (Docket No. 12-265) concerning K-DUR (potassium chloride), seems to have largely crowded out the news of another decision on the topic of drug patent settlement agreements from the U.S. District Court for the District of New Jersey.  The New Jersey District Court resides in the Third Circuit.  In July 2012, the U.S. Court of Appeals for the Third Circuit rejected in In re K-Dur Antitrust Litig., 686 F.3d 197 (3d Cir. 2012), the so-called “scope of the patent test” when considering whether drug patent settlement agreements involving cash payments and early entry dates violate the antitrust laws, and instead applied a “quick look rule of reason” analysis.  Under that analysis, “the finder of fact must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit.”

As we previously reported, the New Jersey case was brought against GlaxoSmithKline (“GSK”) and Teva Pharmaceutical Industries Ltd. and Teva Pharmaceuticals USA, Inc. (jointly, “Teva”) by direct purchasers of certain anti-epileptic drug products containing the active ingredient lamotrigine and marketed by GSK as LAMICTAL.  The direct purchaser plaintiffs allege that GSK and Teva violated Sections 1 and 2 of the Sherman Act when they entered into an agreement providing, among other thing, that GSK would not market an authorized generic version of Lamictal Tablets and Lamictal Chewables, and that such agreement was well beyond the exclusionary scope of a now-expired patent listed in the Orange Book for GSK’s lamotrigine drug products and constitutes a naked market allocation agreement.  GSK and Teva each filed a Motion to Dismiss the case (see here and here) arguing that there was no reverse payment, but only a negotiated early entry date for marketing the generic LAMICTAL drug products.  The Federal Trade Commission (“FTC”), whose motion to file an amicus brief in the case was granted, took the position that a branded drug company’s commitment, as part of a drug patent settlement agreement, not to launch an authorized generic to compete with a generic version of the product approved under an ANDA – a “no-AG” agreement – constitutes a “payment” under the Third Circuit’s K-Dur decision.

In an unpublished decision handed down just one day before the U.S. Supreme Court decided to hear the ANDROGEL drug patent settlement agreement case, Senior District Judge William H. Walls granted GSK’s and Teva’s Motions to Dismiss the case on the basis that a drug patent settlement agreement based on negotiated entry dates is not subject to antitrust scrutiny.  Judge Walls’ decision turned on the interpretation of what constitutes a “payment” under the Third Circuit’s K-Dur decision.  “The Court finds that the term ‘reverse payment’ is not sufficiently broad to encompass any benefit that may fall to Teva in a negotiated settlement.  The Third Circuit’s K-Dur opinion is directed towards settlements when a generic manufacturer is paid off with money, which is not the case here,” wrote Judge Walls.  His opinion went on to discuss four separates bases supporting his decision, including that “a careful reading of K-Dur shows that the Third Circuit contemplates a cash payment when it uses the term ‘reverse payment,’” the lack of any case in which a drug patent settlement agreement without a cash payment was subject to antitrust scrutiny, and that the lamotrigine agreement actually created generic competition sooner than otherwise would have occurred had Teva not challenged GSK’s patent.

The lamotrigine case is the second case in which the FTC has expressed concern that a “no-AG” agreement constitutes a “payment” under the Third Circuit’s K-Dur decision.  In August, the FTC sought leave to file an amicus brief in private antitrust litigation pending in the U.S. District Court for the District of New Jersey before Judge Joel A. Pisano concerning Wyeth Pharmaceuticals Inc.’s anti-depressant drug EFFEXOR XR (venlafaxine HCl) Extended-release Tablets.  Judge Pisano denied the FTC’s motion for leave to file its  amicus brief.  The case has been stayed pending the conclusion of the proceedings in the U.S. Supreme Court in In re K-Dur Antitrust Litig. 

By Carmelina G. Allis –

Earlier this month, the IRS published final regulations and interim guidance on the excise tax imposed on the sale of certain medical devices intended for human use pursuant to the Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act (see our previous post here, and additional guidance from the IRS here).  But while the regulations have been finalized, it appears that there is growing support to delay and/or repeal the tax, which goes into effect on January 1, 2013.

Device industry advocates claim that the tax will stifle innovation and adversely affect middle-class jobs.  They are pushing Congress to clear legislation that would abolish the tax before the end of the year.  An outright repeal of the tax before the end of the year appears difficult, but there is talk about the possibility that the Democrat-led Senate will agree to delay the tax (see here).

In the U.S. House, Rep. Erick Paulsen already sponsored a repeal measure (H.R. 436).  Rep. Paulsen’s bill passed the House in June, but was stalled by the Senate.  However, it appears that he is obtaining bipartisan support in his efforts against the medical device tax.

This week, 18 Senate Democrats sent a letter to Senate Majority Leader Harry Reid asking to delay the tax.  An overall poor economy and lack of guidance for compliance with the tax provisions were cited in the letter as reasons for delaying enactment of the tax.  The Democrats also cited the importance of the medical device industry to U.S. exports, high-tech manufacturing jobs, and small businesses – three areas that would be adversely affected by the tax.

By Etan Yeshua –

Manufacturers of foods, drugs and cosmetics might possibly be able to label their products as “Carcinogen-Free” with federal approval.  In November, Rep. Theodore Deutch (D-FL) and Rep. Sue Myrick (R-NC) introduced the "Carcinogen-Free Label Act of 2012" (H.R. 6601), which would require FDA, the Department of Agriculture (“USDA”), the Environmental Protection Agency (“EPA”), and the Consumer Product Safety Commission (“CPSC”) to develop a “Carcinogen-Free” label that manufacturers may affix to products that do not contain any known or probable carcinogens.  Any product that is regulated by FDA, USDA, EPA, or CPSC (and that is intended for individual or residential use) would be eligible to bear the label upon approval of an application submitted by the manufacturer for the specific product, and each agency or department would be required to post on its website the names of all products for which the label has been approved.  Rep. Deutch described the program as “100 percent voluntary” and maintained that the bill’s confidentiality provisions “would protect manufacturers’ hard-earned intellectual property.” 

Under the program outlined in the bill, a manufacturer wishing to affix the label to a product would submit an application (including a sample of the product and a list of all substances “contained within” it) to one of the four participating regulatory bodies.  Approval of an application would require that the product not contain any carcinogens and that the applicant demonstrate a plan to comply with manufacturing, storage, and transportation guidance which the regulatory bodies would be required to publish as part of the program.  The application would include a fee, calculated by each regulatory body, such that the estimated revenue for all “Carcinogen-Free” label application fees would be equal to the estimated cost of running the program.  The bill also calls for random testing of products for which applications have been submitted and random audits of the facilities in which they are manufactured.  The maximum penalty for unauthorized use of the label would be $100,000.

All information submitted with the application would “be treated as trade secrets or confidential information.”  The agency or department would be prohibited from making the information public without the applicant’s consent and from using the information for any purpose other than review of the application.

The bill defines “carcinogen” by adopting two lists of substances compiled by other Federal programs, but broadens the scope of the definition beyond simply the substances contained within the product.  An approvable product must not contain any substance listed in the National Toxicology Program Report on Carcinogens (“NTP Report”) as known, or reasonably anticipated, to be a human carcinogen, or in EPA’s Integrated Risk Information System (“IRIS”) as carcinogenic or likely to be carcinogenic to humans.  In addition, the product may not contain a non-carcinogenic substance that “displays carcinogenicity” when it interacts with other substances in the product or with substance exposed to the product by its intended use.  Thus, for example, hair straighteners (see our previous post here) that do not contain formaldehyde but that do contain methylene glycol would likely be ineligible for the label: although methylene glycol is not listed as a human carcinogen, when heated to straighten hair the chemical releases formaldehyde, which is listed in the NTP Report.

The bill does not address state-mandated carcinogen labeling, such as California’s Proposition 65, thus raising the possibility of putting both manufacturers and consumers in an unfortunate position.  Proposition 65 requires manufacturers to include a warning on products sold in California that contain any chemical that is considered by the State to be toxic.  Therefore, if a product sold in California contains a substance that is included in California’s list but not in the NTP or EPA lists, consumers may soon be faced with a label that reads “Carcinogen-Free: This product does not contain known or likely carcinogens that increase your risk of cancer,” as well as “WARNING: This product contains chemicals known to the State of California to cause cancer….”

H.R. 6601 has been referred to the House Agriculture Subcommittee on Nutrition and Horticulture.  With only days remaining in the 112th Congress, however, it seems unlikely that the bill will gain any traction.

As we promised in an earlier post, we provide here a deeper analysis of the Second Circuit’s holding in United States v. Caronia and the context in which it should be viewed by industry.

Since the 2004 Warner-Lambert settlement, the federal government has investigated hundreds of companies for promotion of approved products for unapproved uses, commonly known as “off-label promotion.”  Many of the publicly known investigations have been fueled by whistleblowers who file qui tam suits under the federal False Claims Act ("FCA") in hopes of gaining a share of the government’s recovery.  These civil suits rely on an underlying violation of the Federal Food, Drug, and Cosmetic Act ("FDCA") to support the theory that certain claims for reimbursement from federal programs were false.  The government also has litigated a number of criminal prosecutions of companies and individuals for their alleged off-label promotion.  In light of the Second Circuit’s statement about the Agency’s wrongful criminalization of this type of conduct, we address below whether Caronia is likely to curtail future enforcement efforts by the government.

I.     Legal Framework

Much to the surprise of many companies, the term “off-label promotion” is not found anywhere in the FDCA.  FDA’s authority to regulate off-label promotion draws from the FDCA prohibitions against introducing an “unapproved new drug” or a “misbranded” drug into interstate commerce.  21 U.S.C. §§ 331(a), (d).  If a company promotes a drug for a use that is not embodied in the FDA-approved labeling, then it can be deemed a “new drug” because it is not generally recognized as safe and effective “for use under the conditions prescribed, recommended, or suggested in the labeling thereof.”   21 U.S.C. § 321(p).  This definition of “new drug” requires that the new intended use be evident in the “labeling” of the product.  The definition of “labeling” is quite broad.  It includes “all labels and other written, printed, or graphic matter . . . accompanying such article,” 21 U.S.C. § 321(m), and could include brochures, leaflets, letters, and arguably websites.  Under this “unapproved new drug” theory, the off-label claims must be contained in the labeling, i.e., the company’s written promotional materials. 

Drug and device marketing, however, is often conducted through oral communications between a company’s sales and marketing team and healthcare providers.  Therefore, the government may not have evidence sufficient to support an unapproved new drug charge.  Instead, the government proceeds under a convoluted misbranding charge, called the “backdoor new drug” charge, to support its civil and criminal cases.  Under this theory, a drug is misbranded for failing to bear adequate directions for its intended uses.  21 U.S.C. § 352(f)(1).  FDA relies on an exemption contained in the regulations precluding prescription drugs from ever meeting this requirement, 21 C.F.R. § 201.5, and then uses the oral promotional statements of the company’s sales representatives as evidence of the company’s intended use.  21 C.F.R. § 201.128. 

The use of speech to support a “backdoor new drug” charge has withstood earlier First Amendment challenges.  For example, in Whitaker v. Thompson, 353 F.3d 947 (D.C. Cir. 2004), the plaintiff argued that he had a First Amendment right to label his product with a disease claim, even though FDA had not reviewed and approved the claim.  The D.C. Circuit determined that the “use of speech to infer intent, which in turn renders an otherwise permissible act unlawful, is constitutionally valid.”  Id. at 953.  In fact, it ruled the First Amendment allows “the evidentiary use of speech to establish the elements of a crime or to prove motive or intent.”  Id. 

The government justifies its crackdown on off-label promotion on the ground that it is protecting the integrity of FDA’s drug approval process.  The notion is that a manufacturer might seek approval of a new product for only a narrow (and easily approvable) claim, and once the drug is approved, the sky would be the limit for the company to make other claims that would lead to larger sales.  This perception, however, ignores other reasons why a manufacturer would not illegally off-label promote, such as litigation commenced under states’ product liability laws for ineffective products and the resulting reputational harm from such lawsuits.

FDA has made clear that it does not intend to go after all promotional statements.  For example, it recognizes that truthful and non-misleading speech about an approved use of an approved drug does not by itself establish a new intended use of the drug.  See Declaration of Rachel E. Sherman, submitted in support of Defendant’s Memorandum in Support of Motion to Dismiss, in Par v. United States, No. 1:11-cv-1820, ¶ 14 (D.D.C. Jan. 11, 2012).  “While manufacturer speech is always a relevant factor in determining intended use, in the absence of other evidence that an unapproved use is intended, a drug manufacturer that engages in truthful and non-misleading speech about an approved use is not placing itself in violation of the FDCA.”  Defendant’s Memorandum in Par, at 27.

FDA also recognizes the value of manufacturers providing off-label information in certain contexts.  It has drafted guidance documents describing parameters under which a manufacturer can disseminate reprints of peer-reviewed scientific literature, sponsor educational programs, and respond to unsolicited requests for off-label information.  FDA states that if a manufacturer meets the factors contained in the guidance, the Agency will not use the activity as evidence that the company created a new intended use for the product.

II.     United States v. Caronia

On November 30, 2009, a jury found Alfred Caronia guilty of misdemeanor conspiracy to introduce misbranded drugs into interstate commerce.  His conviction was based on off-label statements he made while employed as a pharmaceutical sales representative for Orphan Medical, Inc. (“Orphan”).  Specifically, Caronia verbally promoted the drug Xyrem, a central nervous system depressant approved only for the treatment of certain categories of narcolepsy patients, to treat a variety of other conditions including insomnia, fibromyalgia, and Parkinson’s.  He also promoted Xyrem for use in an unapproved patient population – individuals under the age of 16.

The government began its investigation of Orphan in 2005, when former Orphan saleswoman Shelley Lauterbach filed a qui tam suit against the company.  During the course of the investigation, Caronia was recorded on two occasions discussing off-label uses of Xyrem.  On both occasions, Caronia was recorded speaking alongside Dr. Peter Gleason, a doctor that Caronia had engaged to participate in “speaker programs” intended to educate other physicians about Xyrem.  Caronia and Dr. Gleason discussed off-label uses for Xyrem with Dr. Jeffrey Charo, an undercover informant for the government.  In 2006, the government filed charges against Orphan, Dr. Gleason, Caronia, as well as David Tucker (a former Orphan sales manager) for conspiring to promote Xyrem for off-label uses, and thereby introduce a misbranded drug into interstate commerce.

In March 2007, David Tucker pleaded guilty to a single felony misbranding charge.  In July 2007, Orphan pleaded guilty to felony charges, and its parent company, Jazz Pharmaceuticals, Inc., agreed to pay $20 million and enter into a Corporate Integrity Agreement to resolve both criminal and civil charges.  In August 2008, Dr. Gleason also pleaded guilty to criminal misbranding charges. 

Caronia, however, did not plead guilty and filed a motion to dismiss his case based inter alia on First Amendment grounds.  The District Court denied his motion, but noted that the allegations against Caronia included First Amendment-protected speech.  Nevertheless, the District Court concluded that the government’s interpretation of the FDCA was constitutional under the commercial speech doctrine because it did not limit speech more than was necessary to achieve the government’ objectives.  On appeal of Caronia’s criminal conviction, the Second Circuit disagreed.

The Second Circuit first clarified that the government did, in fact, prosecute Caronia for “mere off-label promotion.”  Slip op. at 26.  The court’s opinion details the government’s statements to that effect, as well as the jury instructions that reflected a focus on the off-label promotion rather than promotion as evidence of the intended use of Xyrem.  The court next concluded that strict scrutiny should apply to the government’s interpretation of the FDCA misbranding provisions to prohibit and criminalize off-label promotion.  According to the court, the government’s position was speaker-based:  many individuals (physicians, researchers, etc.) were permitted to access off-label information and make off-label statements, while others (pharmaceutical companies and sales representatives) were not.   It also was content-based because it restricted off-label promotion while permitting favored on-label promotion.  The court determined that Caronia’s prosecution failed to pass strict scrutiny.

The court went further.  Even assuming that off-label promotion triggered only intermediate scrutiny under the Central Hudson test, the Second Circuit found that Caronia’s prosecution would not pass this lower threshold.   First, the off-label speech in question concerned lawful activity and was not false or misleading.  Second, while the government’s interests in drug safety and the public health were substantial, its construction of the FDCA to prohibit off-label promotion did not directly advance those interests.  Third, because physicians can prescribe and patients can receive drugs off-label, even if pharmaceutical manufacturers could not promote drugs for such uses, prohibition of truthful promotion did not directly further the government’s goals: “the government’s prohibition of off-label promotion by pharmaceutical manufacturers ‘provides only ineffective or remote support for the government’s purpose.’”  Id. at 47.

Finally, the court determined that the government’s interpretation of the FDCA – a “complete and criminal ban on off-label promotion by pharmaceutical manufacturers” – was not narrowly drawn to protect its interests.  The court construed “the misbranding provisions of the FDCA as not prohibiting and criminalizing the truthful off-label promotion of FDA-approved prescription drugs.”  The court cited several less-restrictive methods the government could have used to protect its interests instead, such as developing a warning or disclaimer system, and concluded “that the government cannot prosecute pharmaceutical manufacturers and their representatives under the FDCA for speech promoting the lawful, off-label use of an FDA-approved drug.”  Id. at 51.

III.     Potential Next Steps in Caronia

Under the Federal Rules of Appellate Procedure, the government has a few options for handling the Second Circuit’s decision.  Of course the government could do nothing, and let the Caronia decision stand as law in the Second Circuit. 

The government also could petition the Second Circuit for a rehearing, or a rehearing en banc, or both.  See Fed. R. App. P. 35 – 35.1, 40.  Rehearing is generally disfavored, and will not be ordered unless “en banc consideration is necessary to secure or maintain uniformity of the court’s decisions; or . . . the proceeding involves a question of exceptional importance.”  Id. at Rule 35.  Should the government proceed with a rehearing, it must file its petition within 14 days after the entry of judgment, which occurred on December 3, 2012.  Therefore, the deadline for this petition is December 17, 2013. 

Alternatively, the government may petition for writ of certiorari to the United States Supreme Court.  A writ of certiorari is not a matter of right, but of judicial discretion, and the Court may consider granting certiorari if a “Circuit Court decision conflicts with that of another Circuit Court on the same ‘important matter.’”  S. Ct. Rule 10.  The petition must be filed with the Supreme Court clerk within 90 days of entry of the judgment.  S. Ct. Rule 13.  Therefore, if no petition for rehearing or rehearing en banc is filed, the government must file a writ of certiorari by March 4, 2013.  If the government petitions for a rehearing and/or en banc, then the time to file a writ of certiorari is 90 days from the date of the denial of the rehearing.  Even if the Supreme Court grants review, it may dispose of the case by summary affirmance or reversal, or by simply vacating the judgment below and remanding for further proceedings.

There is no circuit split that would make likely the Supreme Court’s granting of the writ.  The government may claim that the D.C. Circuit’s opinion in Whitaker v. Thompson creates a split of opinions.  Whitaker, however, was not a criminal prosecution like Caronia, and the Second Circuit went to great pains to highlight that Caronia did not involve a situation in which the government used speech as evidence of establishing intended use. 

Although oral argument was heard on December 6, 2012, in the Ninth Circuit in another high-profile off-label case, United States v. Harkonen, the former CEO of InterMune was convicted of wire fraud, not the FDCA misbranding charge at issue in Caronia (see our previous posts here and here).  While Harkonen’s defense team consistently has attempted to raise the First Amendment issue throughout trial and on appeal, the Ninth Circuit is likely to remain silent on the issue due to the allegations by the government of the false or misleading nature of Harkonen’s statements. 

The decision to seek rehearing en banc and/or seek Supreme Court review is made by the Solicitor General of the United States, not FDA.  If FDA seeks further review of the decision, we expect that the Solicitor General will surely require FDA to demonstrate why it cannot live with this ruling.

IV.     Potential Impacts on Enforcement Activity

Assuming the Caronia decision stands, can industry expect any changes in FDA’s enforcement focus?   The federal government frequently touts the multi-million dollars it has recovered in settlements for off-label promotion cases.  It would be premature to believe that the government would give up easily on these high-profile and lucrative recoveries, and we certainly do not expect the case to have any effect on relators, who will continue to bring off-label promotion allegations to the attention of the government.  But the Second Circuit’s holding represents an unmistakable setback for the government from continuing business as usual.

Even though the FDCA allows for strict liability prosecution, criminal charges have generally been brought against manufacturers and their agents only in cases involving intentionally false or misleading statements.  These selective prosecutions may have been due to prescient prosecutors who recognized the potential First Amendment implications of these cases, or simply an effort to enhance the jury appeal of a case.  With Caronia, industry can expect to see even closer review of criminal charges to ensure there is strong evidence that a company lied about the safety or efficacy of a drug or device, or made mistakes and/or incomplete statements about the product at issue.  It is unlikely that we will see prosecutors bringing criminal charges against companies, and companies willing to pay money, in cases in which there is strong scientific support for an unapproved use of a product, absent clear evidence that there also were false or misleading statements.  

Indeed one of the key factors the government considers in deciding to pursue a criminal off-label case is whether the company had previously sought, and FDA had explicitly denied, the use that the company is allegedly promoting.  In such cases, the government generally views the company’s conduct as a direct attack on FDA’s drug approval process, and has been more inclined to prosecute the company criminally.  But in light of Caronia, and other FDA guidance, there is a strong argument that the company should be allowed to provide truthful and non-misleading information that may have developed since FDA’s original review of the unapproved use without fear of criminal prosecution. 

We wonder if we will see FDA shift its focus to the “unapproved new drug” charge to support off-label promotion cases against pharmaceutical manufacturers.  Note that there is no analogous “new device” definition contained in the FDCA. This shift would require evidence of labeling containing the drug’s new intended use.  Companies should continue to scrutinize promotional materials to be sure they do not contain false or misleading claims.

Companies also should be wary that FDA may use knowledge of a drug’s intended use as independent evidence to support a misbranding charge.  21 C.F.R. §§ 201.128, 801.4.  Under its regulations, FDA requires manufacturers to provide adequate labeling for a product that the company knows is being used off-label, even if there is no active promotion by the manufacturer.  This requirement has been rarely enforced, but we are aware of a recent Warning Letter in which it was cited to require changes to a product’s labeling.  After Caronia, FDA may look to creative ways, such as this, to curtail off-label promotion without using the manufacturer’s speech.

It is important to note that the holding from Caronia is only the law of the Second Circuit, which covers Connecticut, New York, and Vermont.  Given the broad reach of the Commerce Clause, it is difficult to imagine that any FDA-regulated industry can claim that it is not subject to jurisdiction outside the Second Circuit.  Indeed the U.S. Attorney’s Office in Boston is the most active prosecutor of off-label promotion cases, but only a handful of the companies it has prosecuted have been headquartered in its district.  

The Caronia decision also may have some bearing on the federal False Claims Act, and its state counterparts.  In this context, there arguably has always been a requirement that the government demonstrate that the claim involves falsity – thus the name “false claim” – used to obtain fraudulent reimbursement from a federal healthcare program.  Caronia makes clear that if promotional statements about a product are true and scientifically supported, FDA cannot prohibit this truthful, non-misleading speech.  Therefore it follows that neither can a sister agency of FDA use that same speech to recover hundreds of millions of dollars.  Thus we expect companies to challenge the government and relators on their burden to prove that the claim is actually false.  This may affect future False Claims Act settlements, which have been some of the government’s most sizable.

Although Caronia has made some waves, the tide has far from turned.  Industry remains exposed to substantial risk if it exercises its First Amendment right to free speech by promoting off-label.  Now seems like a ripe opportunity for FDA to provide further clarification to industry on how it will proceed in its enforcement actions after Caronia.

By Ricardo Carvajal –

We previously reported on a lawsuit that seeks to compel OMB and FDA to accelerate the implementation of FSMA.  Now the government has filed a motion to dismiss the case and for summary judgment.  The motion provides a full accounting of FDA’s efforts to implement FSMA, and is worth reading for that reason alone.  However, students of administrative law will also find it worth their time.

The motion sets the stage by noting the difficulty of the challenge of implementing FSMA due to the enormity and diversity of the food supply:

The regulations FDA has been directed to promulgate are novel and complex, and that complexity is increased by the need to build a cohesive system of regulatory controls integrating different regions and countries, as well as different food types. The enormity and scope of the task given to FDA cannot be overstated: FDA regulates over $450 billion worth of domestic and imported food and hundreds of thousand registered food facilities; FDA’s responsibility in the food area generally covers almost all domestic and imported food (except meat, poultry, and frozen, dried, and liquid eggs, tolerances for pesticide residues in foods, and requirements for public (tap) drinking water); the diversity of FDA regulated food (including, for example, perishable and non-perishable, seasonal, processed and raw agricultural commodities) necessitates a regulatory system that addresses a large variety of concerns; and the complexity of the food industry and the technologies used in food production and packaging are increasing…. Through FSMA, Congress directed FDA, for the first time, to develop comprehensive, science-based preventive controls across the entirety of the food supply.

The motion then details the organizational structure created by FDA for FSMA implementation, but notes that the “aggressive timelines” in FSMA were essentially “unachievable” even with “several hundred” FDA employees working on the task.  FDA therefore split the required rulemakings into two “waves,” with priority given to the four rules that FDA believed “are foundational for other rules and offer the most public health benefits.”  The motion serves as a scorecard of sorts for the various rules:

First Wave
• Preventive Controls for Human Food – under review at OMB
• Produce Safety Standards – under review at OMB
• Foreign Supplier Verification Program – under review at OMB
• Preventive Controls for Animal Food – under review at OMB

Second Wave
• Intentional Adulteration – Advance Notice of Proposed Rulemaking under review at FDA
• Sanitary Transport – draft codified and preamble language under review at FDA
• Third Party Accreditation – under review at OMB

The motion alludes to the interdependence of some of these rules, which suggests that some of them could issue concurrently.

Finally, FDA defends its decision not to enforce certain provisions of FSMA under Heckler v. Chaney.  FDA argues that the agency’s “fundamental enforcement tools are the same provisions examined in Chaney, and plaintiffs have not identified anything in FSMA that would circumscribe the discretion inherent in those provisions.”  FDA further argues that its implementation timetable is reasonable and that judicial intervention is not warranted. 

By Karla L. Palmer –

On December 5, 2012, Representatives Rosa DeLauro (D-CT) (the ranking member of the House committee responsible for FDA appropriations) and Nita Lowey (D-NY) (also on the House Appropriations Committee and a senior member of the Health and Human Services Subcommittee) introduced a bill to regulate prescription drug compounding in the wake of the fallout resulting from the New England Compounding Center matter.   To date, the compounding incident is allegedly responsible for 500 illnesses aand at least 36 deaths.  The proposed legislation, titled “Supporting Access to Formulated and Effective Compounded Drugs Act” ("SAFE Act") (H.R. 6638), would provide significantly greater federal oversight of compounding pharmacies.  This latest legislation comes on the heels of the proposed VALID legislation (Verifying Authority and Legality in Drug Compounding), which bill was introduced by Congressman Markey on November 1, 2012 and blogged about here that also seeks to increase federal control of pharmaceutical compounding.

The SAFE bill provides as follows: 

• Registration:  The Secretary of Health and Human Services ("HHS"), in consultation with state regulators, health care providers, compounding pharmacies, and other stakeholders, would be required establish a process by which compounding pharmacies would register their facility with FDA through an electronic registration process.  Subject to limited exceptions, every person who owns or operates a compounding pharmacy would be required to submit to a database specific information, including contact information for the pharmacy; the state of licensure; compounding methods used; and any additional information (that may include the quantity of products compounded) for the purpose of determining whether the facility is engaging in manufacturing, yet inappropriately registering as a compounding pharmacy.  Exemptions would apply for compounding pharmacies that employ fewer than 20 full-time equivalents or perform traditional compounding of drug products that are used in a single state.

• Labeling: The proposed legislation seeks to ensure that patients know they are receiving a compounded drug by requiring that compounded drugs are appropriately labeled.  The legislation would require the prescriber to inform an individual patient, including patients in a healthcare setting, that the individual is being prescribed a compounded drug, and to provide the patient information concerning safety, availability and the production of compounded drugs.  The pharmacist must confirm that the patient received such information when he or she receives a compounded drug product. Furthermore, the product labeling must clearly indicate that the drug product is a “non-FDA approved compounded drug product,” and subject to other to-be-determined regulatory labeling requirements.  

• Database:  The legislation would require HHS to establish and maintain a database of information on compounding pharmacies that are licensed in more than one state to assist and inform oversight and inspection of compounding pharmacies by the FDA and state regulatory authorities.  The database would include minimum standards for a compounding pharmacy license in each state and other information.  The database would be accessible by both state and federal authorities and would permit the sharing of information. 

• Production standards:  The Secretary would also be required to set forth minimum production standards for compounded drug products, and to determine the particular products that would be required to meet the established minimum standards.  The enhanced standards may include, but are not limited to, the intended route of administration for the drug product and whether the product is sterile or non-sterile.  The Secretary may vary the minimum standards depending on type or intended use of the drug product.

• Training:  The Secretary of HHS would also be required to conduct a series of training sessions for state agencies that regulate pharmacies and compounded drugs.  The training would include information on to-be-established minimum product standards, sample inspection protocol and recordkeeping to facilitate inclusion of such information in the database described above. 

The proposed legislation sets forth an 18-month deadline for the issuance of regulations addressing labeling and notification requirements.  It would also establish an advisory committee comprised of patient or consumer representatives, state agencies, compounding pharmacies and health care providers, and “at least one member with expertise on clearly communicating information in such labeling of drugs.”  (Safe Act at 9).  The advisory committee must submit recommendations within 12 months after enactment of the Act.  The proposed legislation similarly calls for establishment of a “database” advisory committee, comprised of representatives of consumers or patients, health care providers, compounding pharmacies, state agencies, and information technology experts, to consult on the development within 12 months of implementation of the proposed compounding pharmacy database.  In addition, the Act would establish a permanent advisory committee on pharmacy compounding to consider issues “related to the safety and availability of compounded drug products.” 

In addition to these various reporting requirements, the Act would require that, not later than six months after enactment, and each six month period (for 25 months thereafter), the Secretary of HHS must submit to Congress a report on the status of the implementation of the requirements of the Act and any amendments.  The Secretary will also be required within 12 months to submit to Congress an additional report that would contain a review and effectiveness evaluation of standards used by organizations that provide accreditation to compounding pharmacies.  Furthermore, not less than 18 months after enactment, the Secretary must submit to Congress a report that contains a review of models that states use to structure their oversight of compounding pharmacies, including how that structure may impact development and enforcement of regulations to ensure safety of compounded drug products. 

And lastly, if the above does not impose enough federal reporting, the Act would require the Government Accountability Office to review the extent to which federal health care programs ensure (1) the extent to which compounded drug products are compounded in facilities that comply with the FDCA, (2) whether reimbursement rates for compounded drugs under such federal programs are appropriate, and (3) whether such programs encourage the use of compounded drugs in lieu of available, lawfully marketed drug products. 

Finally, the proposed legislation would establish significant criminal penalties, including fine or imprisonment, for any person who knowingly and intentionally violates section 301(d) of the Federal Food, Drug, and Cosmetic Act with an intent to defraud or mislead or with conscious or reckless disregards of a risk of death or serious bodily injury.  Lowey commented: “As recent events have made clear, it is critical to ensure compounding pharmacies are operating safely and the products consumers receive will improve – not jeopardize – their health. Federal oversight is critical to identify and correct potential problems and keep consumers safe.”  The proposed legislation likely will not gain much momentum this lame duck session of Congress.

By John A. Gilbert & Delia A. Stubbs –

Last week, Representative Diana DeGette (D-CO) introduced legislation proposing to amend section 903 of the Controlled Substances Act (“CSA”) to create an exception for state marihuana laws.  Section 903, as currently written, expresses Congress’s intent not to preempt state laws that occupy the same field of regulation as the CSA, unless those laws are in “positive conflict” with the federal law.  21 U.S.C. § 903.  A “positive conflict” is described as one that renders the federal and state law unable to “consistently stand together.”  Id.  H.R. 6606 (the “Respect States’ and Citizens’ Rights Act of 2012”), if passed, would insert language stating that no provision of the CSA “shall be construed as preempting” “any state law that pertains to marihuana.”  H.R. 6606 thus seeks to allow states greater flexibility in passing marihuana laws that are less stringent than the federal law.  (H.R. 6606 would also remove federal preemption of any state law relating to marihuana that prohibits an activity expressly permitted by federal law.)

More importantly, H.R. 6606 serves as a crucial reminder to entities that manufacture, distribute or dispense controlled substances  to look beyond federal law in designing their compliance programs.  Because of the congressional intent expressed in Section 903, principles of federalism do not prohibit states from imposing requirements that are separate or more heightened than those imposed by the CSA. U.S. Const. art VI, Cl. 2; Bldg. & Const. Trades Council of Metro. Dist. v. Associated Builders & Contractors of Massachusetts/Rhode Island, Inc., 507 U.S. 218, 113 S. Ct. 1190, 122 L. Ed. 2d 565 (1993) (where Congress has not expressed an intent to occupy the entire field in which federal law exists, state laws that are consistent with the federal law are valid).

Indeed, many states have passed laws that are more stringent than the CSA.  For example, some states schedule drugs not otherwise scheduled by the CSA or place drugs in stricter schedules than the CSA. See DEA, Office of Diversion Control, Drug & Evaluation Section, Tramadol (Feb. 2011) (noting that  several states designate Tramadol as a Schedule IV controlled substance despite being considered only a “drug of abuse” by DEA); N.Y. Pub. Health § 3306, N.Y. COMP. CODES R. & REGS. titl. 10, § 80.67 (scheduling anabolic steroids in Schedule II, although only placed in Schedule IV in the CSA, and restricting prescription quantity to 6 months for certain disorders). Other areas where some states have imposed stricter laws regarding controlled substances include dispensing (e.g., limits on supplies) drug sampling and advertising.   Thus, companies should be sure to review state laws and regulations, in addition to the federal CSA, when designing and implementing their corporate compliance program.

By Kurt R. Karst –   

Things are heating up in litigation in the U.S. District Court for the District of New Jersey initiated by Actelion Pharmaceuticals Ltd. and Actelion Clinical Research, Inc. (collectively “Actelion”) in September 2012, which, according to Actelion, “concerns the fundamental right of a business to choose for itself with whom to deal and to whom to supply its products.”  As we prevously reported, Actelion is seeking declaratory relief that the company is under no duty or obligation to supply prospective ANDA applicants Apotex Corp. (“Apotex”) and Roxane Laboratories, Inc. (“Roxane”) with TRACLEER (bosentan) Tablets for purposes of bioequivalence testing and ANDA submission.  Because of the potential of the drug to cause serious side effects,  TRACLEER is approved with a Risk Evaluation and Mitigation Strategies (“REMS”) program with Elements To Assure Safe Use (“ETASU”) that limit distribution of the drug through certain pharmacies, practitioners, and health care settings.  Apotex and Roxane both sent correspondence to Actelion seeking TRACLEER sample for use in bioequivalence testing and threatening antitrust litigation, but Actelion refused to provide drug sample to the companies “maintaining its right to choose with whom it does business” and citing certain REMS compliance issues. Instead of waiting for that antitrust action to be filed, Actelion took a proactive approach and sued Apotex and Roxane, saying, among other things, that “Apotex and Roxane are seeking to force Actelion to supply them with product, turning well-settled law, not to mention basic free-market principles, on their head,” and that “Apotex’s and Roxane’s demands would also require Actelion to violate its regulatory obligations.” 

In recent court filings, both Apotex and Roxane have brought counterclaims alleging illegal and anticompetitive conduct by Actelion.  Apotex’s Counterclaim Complaint alleges that Actelion has abused its monopoly power in violation of Section 2 of the Sherman Act and the New Jersey Antitrust Act “by denying Apotex the ability to purchase Tracleer samples for bioequivalence testing and to submit an ANDA to FDA for a generic bosentan product.”  Apotex seeks declaratory and injunctive relief and treble damages, including that the court compel Actelion “to sell Apotex sufficient quantities of Tracleer at market prices so that Apotex can perform bioequivalence testing.” 

Interestingly, Apotex procured a version of TRACLEER marketed in Canada and asked FDA for the Agency’s views on using that drug product in bioequivalence testing instead of the U.S.-approved and marketed drug product.  FDA commented in correspondence to Apotex that the company’s bioequivalence studies “should be performed using the approved US product as the reference product,” and that “[i]t is not acceptable to use an approved Canadian drug product . . . .”

Roxane’s Counterclaim Complaint alleges violations of, among other things, Sections 1 and 2 of the Sherman Act and the New Jersey Antitrust Act, and seeks declaratory and injunctive relief and treble damages.  Roxane’s Counterclaim Complaint concerns not only TRACLEER, but another drug as well – Actelion’s ZAVESCA (miglustat) Capsules, which FDA approved on July 31, 2003 under NDA No. 021348 for mild to moderate Type I Gaucher disease in adults for whom enzyme replacement therapy is not a therapeutic option.  ZAVESCA is not subject to an ETASU REMS, but rather, is subject to a “restricted distribution” program adopted and implemented by Actelion.  According to Roxane:

Faced with [a] threat to its monopolies, Actelion engaged in a scheme to prevent Roxane from obtaining the FDA-mandated drug samples necessary to develop Roxane’s generic products, by prohibiting distributors to sell to Roxane and by refusing to sell to Roxane itself.  Through its actions, Actelion has unlawfully prevented Roxane from developing generic versions of these drugs.

Roxane requests that the New Jersey court enter a Judgment and Order declaring that Actelion’s conduct is unlawful and “enjoining and restraining Actelion from limiting distribution of Tracleer and Zavesca samples to Roxane through use of its REMS and/or restricted distribution programs or otherwise,” among other relief.

Another generic drug manufacturer, Actavis Elizabeth LLC (“Actavis”), is seeking to enter the case as a intervenor-defendant/counterplaintiff.  According to Actavis’ Motion to Intervene, “Actelion has refused to provide Actavis with any Tracleer samples on the grounds that the [FDC Act] does not require ‘that Actelion relinquish its right to choose with whom it does business.’”  Actavis’ Proposed Counterclaim Complaint, like the Apotex and Roxane Counterclaim Complaints, alleges violations of the Sherman Act and the New Jersey Antitrust Act and seeks declaratory and injunctive relief and treble damages.

With the increasing profile of this lawsuit and the possibility of a game-changing decision (for either Actelion or generic competitors), one must wonder whether or not the Federal Trade Commission (“FTC”) will eventually seek to chime in on the case.  The FTC has reportedly been investigating REMS and its effects on generic competition.  Is a proposed amicus brief being drafted?  We’ll see.  The FTC has been active as of late, with amicus briefs filed in antitrust lawsuits involving patent settlement agreements and “product hopping.”  As a side note, REMS reform was recently included as a policy recommendation in a report (page 24) from the National Coalition on Health Care on curbing health care costs.