By Kurt R. Karst –      

Last week, Representative Michael McCaul (R-TX), along with Reps. G.K. Butterfield (D-NC), Sue Myrick (R-NC), and Chris Van Hollen (D-MD), introduced H.R. 3059, the Creating Hope Act of 2011.  The bill is a companion bill to S. 606, which was introduced in the Senate earlier this year by Senator Robert Casey (D-PA), along with co-sponsors Sens. Scott Brown (R-MA), Sherrod Brown (D-OH), Al Franken (D-MN), and Johnny Isakson (R-GA).  Both the House and Senate versions of the Creating Hope Act of 2011, which are almost identical, are substantially similar to the 2010 version of the bill, S. 3697, which was introduced by now-retired Sen. Sam Brownback (R-KS).  The Creating Hope Act would amend FDC Act § 524 to change the transferable Priority Review Voucher (“PRV”) program created by the 2007 FDA Amendments Act (the so-called “treat and trade” program), and would amend the PRV program to extend it to applications for a “rare pediatric disease.”  Under the PRV program, sponsors of certain new drugs and biologics for “tropical diseases” that have received priority review may receive a PRV entitling the holder to a 6-month priority FDA review of another application that would otherwise be reviewed under FDA’s standard 10-month review clock. 

We previously reported on the Creating Hope Act of 2010 here, and we refer you to that post for a summary of the bill.  The 2011 version of the bill, which we reported on here, makes some revisions to the 2010 version.  The most significant change appears to be the conditions under which FDA may refuse to issue a PRV upon the approval of a rare pediatric disease product application – the so-called “good faith intent to market determination.”  Under both the 2010 and 2011 bills, FDA may consider several factors in determining whether to refuse to issue a PRV, including “the history of such sponsor of producing rare pediatric disease products for which such sponsor received a [PRV], orphan drugs for which the sponsor received exclusivity under [FDC Act § 527], or pediatric drugs for which the sponsor received an additional 6 months of exclusivity under [FDC act § 505A].”  Added to the 2011 version of the bill is the requirement that FDA issue guidance before making a good faith intent to market determination. 

Rep. McCaul, who co-chairs the House Childhood Cancer Caucus with Rep. Van Hollen, introduced H.R. 3059 on the day of the 2nd annual Childhood Cancer Summit.  (The caucus website includes links to several stories on the Creating Hope Act and an endorsement video from actor Dennis Quaid.)  In a Dear Colleague Letter signed by Rep. McCaul and the bill co-sponsors, they urge support for the bill, stating that it “would expand and strengthen the cost-neutral FDA [PRV] program, giving pharmaceutical companies an incentive to develop treatments for rare diseases that are often less profitable than treatments for more common medical conditions.”  In addition, the letter notes that the possibility of a shortened review time offered by a PRV “is estimated to be worth hundreds of millions of dollars.”

The true value of a PRV is debatable.  BIO Ventures for Global Health has estimated that, based on certain assumptions, a PRV could be worth a few hundred million dollars.  The group cautions, however, that “[o]ne factor that may reduce the market value of priority review vouchers is risk tolerance.  For example, companies may not be willing to invest as much in obtaining a priority review voucher if there are any doubts as to whether or not their product will be approved.”

To date, FDA has issued only a single PRV – with the approval of Novartis’ COARTEM (artemether; lumefantrine) for the treatment of acute, uncomplicated malaria infections in adults and children weighing at least five kilograms (see our previous post here).  Novartis traded in the PRV (instead of selling it) to obtain priority review for a supplemental Biologics License Application for ILARIS (canakinumab) for the treatment of gouty arthritis attacks in certain patients, but an expedited review did not pan out for the company (see our previous post here).  Thus, to date, the PRV market is untested.  Adding further uncertainty to PRV value is the high PRV redemption user fee FDA has set.  FDA recently set the Fiscal Year 2012 PRV redemption fee at $5,280,000 – and that amount is in addition to the Fiscal Year 2012 full application fee of $1,841,500. 

By Cassandra A. Soltis –

There is yet another lawsuit to add to the growing list of class actions against companies marketing foods bearing “natural” claims.  On September 21, 2011, a class action complaint was filed in California against Bear Naked, Inc. (“Bear Naked” or “the Company”), alleging that several of the Company’s products labeled as “100% Pure & Natural” contained synthetic ingredients.  Complaint at 1, Thurston v. Bear Naked, Inc., No. 11-cv-04678-LB (N.D. Cal. Sept. 21, 2011).  The Complaint seeks damages and injunctive and declaratory relief for alleged common law fraud and unjust enrichment, as well as for violations of several California laws regarding unfair, unlawful, deceptive, misleading, and fraudulent practices.  Id. at 12-19.

According to the Complaint, several Bear Naked products contain ingredients, such as lecithin, which are “recognized to be . . . synthetic additive[s] by federal regulation.”  Id. at 8.  The federal regulation referred to is a United States Department of Agriculture (“USDA”) National Organic Program (“NOP”) regulation that lists those nonagricultural substances – both nonsynthetic and synthetic – that are “allowed as ingredients in or on processed products labeled as ‘organic’ or ‘made with organic’” ingredients.  7 C.F.R. § 205.605.  The Complaint asserts, among other things, that the Bear Naked products’ labels are false and misleading because the claim “100% Pure & Natural” suggests to “a reasonably prudent consumer” that the product does not contain synthetic ingredients.  Complaint at 1.

Determining whether an ingredient is “natural” is generally a very complex question.  The Food and Drug Administration’s (“FDA’s”) informal definition of “natural” is “that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.”  58 Fed. Reg. 2302, 2407 (Jan. 6, 1993).  While this definition might seem straightforward, in practice, it has proven to be open to interpretation and influenced by other factors.  For example, FDA has reportedly stated that high fructose corn syrup may be “natural” or not, depending on how the syrup is manufactured. 

In light of this lawsuit, and absent a formal FDA definition of “natural,” it would be prudent for food companies considering a “natural” claim to determine what, if anything, the USDA has said about the ingredients.

By Kurt R. Karst –      

A recent decision from the U.S. District Court for the Eastern District of North Carolina in patent infringement litigation concerning Sandoz, Inc.’s (“Sandoz’s”) pending ANDA for a generic version of XYZAL (levocetirizine dihydrochloride) is one of the rare instances in which a court has vacated a 30-month litigation stay triggered by a timely filed patent infringement lawsuit pursuant to FDC Act § 505(j)(5)(B)(iii).

Under the FDC Act, a timely filed patent infringement lawsuit in response to a Paragraph IV certification means that “the [ANDA] approval shall be made effective upon the expiration of the [30-month stay] . . . or such shorter or longer period as the court may order because either party to the action failed to reasonably cooperate in expediting the action . . . .”  FDC Act § 505(j)(5)(B)(iii).  As we previously reported, in May 2008, Sandoz submitted an ANDA to FDA containing a Paragraph IV certification to U.S. Patent No. 5,698,558 (“the ‘558 patent”), which is listed in the Orange Book for XYZAL as a method-of-use patent with a U-812 patent use code (“RELIEF OF SYMPTOMS ASSOCIATED WITH SEASONAL AND PERENNIAL ALLERGIC RHINITIS”) and that is subject to a period of pediatric exclusivity that expires on March 24, 2013.  In February 2010, Sandoz reportedly revised its Paragraph IV certification to the ‘558 patent to a “section viii” statement and requested ANDA approval for chronic idiopathic urticaria and labeling that carves out seasonal and perennial allergic rhinitis.  (FDA ruled in response to a citizen petition – Docket No. FDA-2010-P-0545 – that such a labeling carve-out is permissible.)

Despite the change from a Paragraph IV certification to a “section viii” statement, Magistrate Judge William A. Webb issued a Memorandum and Recommendation/Order on December 3, 2010 extending the 30-month patent litigation stay on the basis that Sandoz had failed to cooperate reasonably in expediting the patent litigation.  Sandoz appealed Judge Webb’s Order and asserted lack of subject matter jurisdiction, that a stay is no longer applicable because the company’s ANDA no longer contains a Paragraph IV certification to the ‘558 patent, and that the facts upon which Magistrate Judge Webb based his decision simply do not warrant an extension of the 30-month stay.

Judge Malcolm J. Howard agreed with Sandoz on this issue.  According to Judge Howard:

The stay authorized by 21 U.S.C. § 355(j)(2)(B)(iii) applies only where an ANDA contains a paragraph IV certification.  In light of Sandoz’s withdrawal of its paragraph IV certification, plaintiffs were not entitled to an extension of the the [sic] thirty-month stay.  In the event Sandoz is subsequently required to amend its section viii statement to a paragraph IV certification, plaintiffs may be entitled to an additional stay or injunctive relief delaying FDA approval.  Absent such a determination, however, no basis exists for extending the stay of FDA approval. [(Emphasis added)]

Despite vacating the 30-month litigation stay extension, Judge Howard denied a separate Motion to Dismiss for Lack of Subject Matter Jurisdiction filed by Sandoz.  In that motion, Sandoz argued that the patent infringement case should be dismissed because the change from a Paragraph IV certification to a “section viii” statement divested the court of subject matter jurisdiction. 

By Michelle L. Butler –

On September 27th, FDA published a guidance document regarding user fee waivers, reductions, and refunds for drug and biological products.  See 76 Fed. Reg. 59705 (Sept. 27, 2011); FDA, Guidance for Industry: User Fee Waivers, Reductions, and Refunds for Drug and Biological Products (Sept. 2011).  This is a final version of the document FDA published in draft in March 2011, which we described in detail here.  

According to the Federal Register notice that announced publication of the guidance document, the Agency received no comments in response to its request for comments on the draft guidance document earlier this year, and the only changes to the guidance document were minor editorial changes and a small clarification.  This clarification pertains to the determination of whether an applicant has limited financial resources for purposes of the public health and barrier to innovation waiver grounds.  FDA clarified that $20 million benchmark for determining that an applicant has limited resources for user fee purposes will begin with fees assessed for FY 2011.  Guidance, at 8.  For waivers of fees for fiscal years prior to 2011, “the Agency intends to continue to use as its general market of limited resources the $10 million benchmark cited in the 1993 interim guidance, adjusted for inflation.”  Id. at 8, n.20.

By Kurt R. Karst –      

With each stroke of the pens President Obama used to sign into law the Leahy-Smith America Invents Act, it seemed as though another nail was hammered into the coffin of any attempts to deny The Medicines Company (“MDCO”) a win in the company’s decade-long battle to obtain a Patent Term Extension (“PTE”) for U.S. Patent No. 5,196,404 (“the ‘404 patent”) covering ANGIOMAX (bivalirudin).  Indeed, in what we thought might very well be our final blog post on the issue, we essentially said adieu to the case, but did leave some room open for something crazy to happen in the U.S. Court of Appeals for the Federal Circuit (where APP Pharmaceuticals, LLC (“APP”) has been duking it out with MDCO – see here and here) given all of the twists and turns that have occurred with the ANGIOMAX ‘404 patent PTE over the years.    

The ink from President Obama’s signature on the Leahy-Smith America Invents Act was hardly dry when MDCO, on September 19, 2011, sent a letter to the Federal Circuit notifying the Court of the enactment of Section 37 of the new law and asserting that Section 37 resolves the merits of the ongoing litigation with APP, for which oral argument had been set for October 5, 2011.  As we previously reported, Section 37, titled “Calculation of 60-Day Period for Application of Patent Term Extension,” amended the PTE statute at 35 U.S.C. § 156(d) as follows:

(a) IN GENERAL.—Section 156(d)(1) of title 35, United States Code, is amended by adding at the end the following flush sentence:

“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.”.

(b) APPLICABILITY.—The amendment made by subsection (a) shall apply to any application for extension of a patent term under section 156 of title 35, United States  Code, that is pending on, that is filed after, or as to which a decision regarding the application is subject to judicial review on, the date of the enactment of this Act.

In response to MDCO’s letter, APP, on September 20, 2011, filed a letter of its own, as well as a motion.  In both documents, APP requests the Court to order supplemental briefing on Section 37 and to postpone oral argument.  According to APP:

Even assuming Section 37 of the Act means what MDCO says (a question not yet briefed), Section 35 provides that it does not take effect for one year. Pub. L. 112-29 § 35, 125 Stat. 284, 341 (2011).  Unlike other provisions, Section 37 provides no other effective date. . . .

Moreover, and in any event, the amendment cannot constitutionally be applied here.  Among other reasons, Congress cannot revive a patent that has entered the public domain.

Allowing Congress to resurrect an expired patent would obviate the Constitution's "limited Times" provision and would not promote the progress of science.  U.S. Const. art. I, § 8, cl. 8.  "Congress may not … 'authorize the issuance of patents whose effects are to remove existent knowledge from the public domain, or to restrict free access to materials already available.'''  Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146 (1989) (quotation omitted). . . .

Late last week, the Federal Circuit ordered that oral argument be postponed and that MDCO and APP simultaneously file supplemental briefs addressing the effect of Section 37 of the America Invents Act on the disposition of the case. 

By Kurt R. Karst –      

Generic Pharmaceutical Association (“GPhA”) Board of Directors Chairman Paul Bisaro recently sent a letter to members announcing both the completion of the negotiating phase (see here and here) of what is intended to become the Generic Drug User Fee Act (“GDUFA”) and GPhA’s formal ratification of the performance goals letter and the proposed legislative language needed to authorize GDUFA agreed to between industry and FDA.  Both of those documents have been sent off to the Department of Health and Human Services and to the Office of Management and Budget (“OMB”) for review.  Once approved, the documents will then be sent to Congress for enactment (presumably as part of a larger bill including other user fee statutes, such as the Prescription Drug User Fee Act (“PDUFA”)). 

The GDUFA draft performance goals letter and the proposed legislative language have not yet been publicly released.  They will be posted on FDA’s website once OMB clears them.  Both the GPhA member letter and the negotiation meeting minutes provide some details on the program.  (We’ll stick to those documents now and will plan on providing greater detail on the GDUFA performance goals letter and the proposed legislative language once they are out in the public domain.) 

The intent of GDUFA, like other user fee statutes, is to provide FDA with funding supplemental to the traditional funds Congress appropriates to FDA each year with the expectation that FDA will significantly enhance the approval process.  Since the beginning of GDUFA negotiations, the aims of the program have been three-fold: (1) Safety (“Ensure that industry participants, foreign or domestic, who participate in the U.S. generic drug system are held to consistent high quality standards and are inspected biennially, using a risk-based approach, with foreign and domestic parity.”); (2) Access (“Expedite the availability of low cost, high quality generic drugs by bringing greater predictability to the review times for ANDAs, amendments and supplements, increasing predictability and timeliness in the review process.”); and (3) Transparency (“Enhance FDA’s ability to protect Americans in the complex global supply environment by requiring the identification of facilities involved in the manufacture of generic drugs and associated APIs, and improving FDA’s communications and feedback with industry in order to expedite product access.”).  Both the draft performance goals letter and the proposed legislative language seek to embody these three principles.

With these principles in mind, FDA and the generic drug industry agreed early on to conduct GDUFA negotiations under a metaphorical “four walls and a roof” – specifically:

• FDA must continue to adhere to a general first-in-first-reviewed application review policy, with no separation of the currently pending application queue (the so-called “backlog”);
• A goal to reduce the queue to a steady state level, where applications coming in can go out within the goal times, by the end of year 5 of the program;
• A primary application review goal of 10 months in year 5 of the program;
• User fee resources not exceeding $250-$300 million annually, as a basis for discussion; and
• Commitment by FDA to a risk-adjusted biennial surveillance inspection model with foreign and domestic parity in year 5.

What You Pay (GDUFA User Fees)

The total amount of annual funding from GDUFA user fees, which is supposed to be set at $299 million in Fiscal Year (“FY”) 2013 (and at $299 million plus an annual adjustment in FYs 2014-2017), is intended to come from various funding sources, “and any individual fee is expected to be approximately an order of magnitude of lower than PDUFA application fees.” 

There are proposed to be four types of fees in two categories – application fees and facility fees.  Application fees, which account for 30% of total fee revenue each FY, include a one-time (FY 2013) ANDA backlog fee for ANDAs pending on October 1, 2012, an original ANDA and Prior Approval Supplement (“PAS”) fee, and a Type II Drug Master File (“DMF”) “first reference fee.”  A facility fee, which accounts for 70% of total fee revenue each FY, must be paid by both Finished Dosage Form (“FDF”) and Active Pharmaceutical Ingredient (“API”) manufacturers.  FDF facility fees account for 80% of facility fee revenue, and API facilities account for 20% of facility fee revenue, and there is “a modest fee differential” for foreign FDF and API facilities “reflecting the added costs of overseas inspection.” 

According to GDUFA negotiation meeting minutes, the percentage of user fees to be obtained from different industry segments by fee type and year are estimated to be as follows:

FY 2013

• 17% from ANDA submissions pending on October 1, 2012 (i.e., the ANDA backlog)
• 5% from Type II DMF submissions
• 20% from ANDAs and PASs (where the PAS fee is half the amount of that for an original ANDA)
• 46% from FDF facilities
• 12% from API facilities

FYs 2014-2017

• 6% from Type II DMF submissions
• 24% from ANDAs and PASs (where the PAS fee is half the amount of that for an original ANDA)
• 56% from FDF facilities
• 14% from API facilities

With respect to the backlog fee, $50 million, or approximately 17% of the $299 million fee revenue set for FY 2013, will be split equally among the ANDAs pending at FDA as of October 1, 2012.  As of August 31, 2011, we understand that the ANDA backlog stood at around 2,500 applications.  Assuming that number remains constant, the ANDA backlog fee could be around $20,000 per ANDA.  (It is possible, however, that with the prospect of paying a backlog fee, ANDA sponsors will withdraw some pending ANDAs before October 1, 2012, thereby decreasing the ANDA backlog andincreasing the per-ANDA backlog fee.)

The $249 million remaining for FY 2013 after the ANDA backlog fee revenue is subtracted will be split as shown above.  With many hundreds of ANDA and PAS submissions each year, the ANDA and PAS application fee could be relatively modest (at least as compared to PDUFA application fees).  Similarly, assuming there are a couple of thousand fee-paying FDF and API facilities, facility fees may not be particularly high (again, at least as compared to PDUFA establishment fees).  And that, of course, is the intent.  As explained in GDUFA negotiation meeting minutes:

Recognizing the critical role generic drugs play in providing more affordable, therapeutically equivalent medicine, the Generic Drug User Fee program is designed to keep individual fee amounts as low as possible to supplement appropriated funding to ensure that consumers continue to receive the significant benefits offered by generic drugs which provided more than $824 billion dollars in savings to the nation’s health care system in the last decade alone.  The additional resources called for under the agreement, an inflation adjusted $299 million annually for each of the five years of the program, will provide FDA with the ability to perform critical program functions that could not otherwise occur.  This program is not expected to add significantly to the cost of generic drugs: given that a reported 3.99 billion retail prescriptions per year were dispensed in the United States in 2010, and assuming that 78% of these prescriptions were filled by generic drugs, if the entire cost of the program were passed through to U.S. retail consumers (although this is not the intent), the average cost of a prescription filled by a generic drug in the Unites States would rise less than a dime per prescription.  Moreover, with the adoption of user fees and the associated savings in development time, the overall expense of bringing a product to market may decline and result in reduced costs.

Nonpayment of GDUFA user fees within the period specified by the statute could have significant implications.  Consider the following, which is taken from recent GDUFA negotiation meeting minutes:

The groups also discussed impact of nonpayment of fees, such as inclusion on an “arrears” list, non review of any new applications until all fees are paid, and potential for deeming misbranded products produced in facilities that fail to pay fees.  Special issues discussed were the impact of fee collection on paragraph IV applications, clarifying that the date of receipt of such applications will not be changed as long as fees are paid with in 20 calendar days of application submission; if fees are not paid, the FDA will “refuse to receive” the application.

What You Get (Performance Goals)

The proposed GDUFA performance goals letter, like that for PDUFA, is long and contains a lot of detail.  Below are some of the highlights. 

Application Metrics – The program is structured based on five cohorts of submission dates for original ANDAs and Type II DMFs, which correspond to the five fiscal years under GDUFA.  For ANDAs in the year 5 cohort (i.e., applications submitted in FY 2017, October 1, 2016 to September 30, 2017), FDA will review and act on 90% of complete electronic ANDAs within 10 months after the date of submission.  As under the initial iteration of PDUFA, there are various interim year metrics, but we understand that things only really begin to take off at the year 3 cohort (i.e., applications submitted in FY 2015, October 1, 2014 to September 30, 2015).

Backlog Metrics – FDA will reportedly review and act on 90% of all ANDAs, ANDA amendments and ANDA PASs regardless of current review status (whether electronic, paper, or hybrid) pending on October 1, 2012 by the end of FY 2017 (i.e., September 30, 2017).

CGMP Inspection Metrics – FDA agreed to conduct “risk-adjusted biennial CGMP surveillance inspections of generic API and generic FDF manufacturers, with the goal of achieving parity of inspection frequency between foreign and domestic firms in FY 2017.”  Domestic and foreign facility parity was an important concept during GDUFA negotiations (and has been since, with a recent GAO report and Senate Health Committee hearing).  As noted in GDUFA meeting minutes, “[t]he program’s goals of ensuring FDA has necessary resources to conduct needed inspections as part of the complete review framework and achieve parity of GMP inspections for foreign and domestic facilities by the 5th year of the user fee program will [] provide significant value to industry participants given that outstanding inspections can result in delays of ANDA approvals.”

Efficiency Enhancements – FDA agreed to implement various efficiency enhancements including: (1) use of complete review/response letters for ANDAs and DMFs; (2) a DMF completeness assessment (at least for DMFs intending to be referenced by ANDA sponsors); (3) division level deficiency review for ANDAs and DMFs; (4) rolling review of ANDAs and DMFs; and (5) first cycle deficiency meetings for ANDAs and DMF.

Regulatory Science – FDA also agreed to “undertake various initiatives designed to enhance post-market safety, to develop guidance to industry, and to mitigate regulatory science gaps in select generic regulatory pathways.”

By John R. Fleder –

It is no secret that the government has devoted considerable resources in recent years seeking to combat what it has contended is wide-spread illegal off-label marketing and promotion of devices and drugs.  Many people believe that the government has created this “problem” because of its long-standing lack of clarity regarding what is, and is not, acceptable practices for drug and device companies.  This uncertainty as to what is or is not illegal conduct has recently become even more cloudy because of positions the government has taken in recent litigation.

United States v. Caronia is just one of many off-label criminal cases.  Caronia was convicted of conspiring to introduce misbranded drugs into interstate commerce because those drugs allegedly did not have adequate directions for use.  His appeal of that conviction has raised some interesting issues in the briefs filed in that case, which are available here, here, and here.

First, it is noteworthy that the United States Court of Appeals for the Second Circuit on its own called for supplemental briefing in the case.  It had the litigants brief the applicability of Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (2011), to the Caronia case.  In Sorrell, the Supreme Court ruled that a Vermont statute regulating certain speaker and content-based restrictions relating to pharmaceutical companies violated the First Amendment of the U.S. Constitution.  The Court of Appeals obviously read Sorrell and presumably thought that it does impact the Caronia appeal in some fashion.

One of the appellate briefs supporting Mr. Caronia’s appeal was filed by the Medical Information Working Group (MIWG), a group composed of eleven major pharmaceutical companies.  The brief argues that the FDA’s off-label regulations “are no less speaker- and content-based than was the law at issue in Sorrell.”  MIWG Amicus Brief at 1-2.  The brief also argues that there is indeed significant ambiguity regarding precisely what speech is proscribed by the FDCA, as construed and applied by FDA and the Department of Justice.

The brief also makes a number of very interesting assertions including that:

• The government has represented to courts that the presence of off-label promotion is a sufficient condition for the government to obtain a misbranding conviction, citing to the government’s proposed jury instructions in the Caronia case, which the court used to charge the jury.  The government stated in the recent Lauren Stevens case, however, that if a company pays a physician to provide an educational presentation to doctors, the manufacturer is subject to criminal prosecution if that physician affirmatively discusses the off-label use, but the same manufacturer will not be subject to prosecution if the physician provides the same information in response to an audience member’s unsolicited request.
• The government has asserted that a manufacturer cannot expressly or implicitly promote the safety or efficacy of an off-label use but can disseminate safety warnings that discourage that use.
• The government represented to the Court of Appeals in Caronia that off-label promotion is not itself a crime.
• The government stated in oral argument that a manufacturer would not be committing a crime by selling a drug or device without adequate directions for use merely because the manufacturer knew that its product was going to be used off-label. Thus, the government told the court that a manufacturer may lawfully ship a drug that it knows will be used by a physician off-label.

The government has also submitted a supplemental appellate brief in the Caronia case.  Seeking to avoid any Sorrell issue, the government is claiming that the fact that a drug was promoted for unapproved uses merely plays “an evidentiary role in” the FDCA, apparently to show that FDA is not really prohibiting speech.  In other words, the government contends that in off-label cases, the government uses the off-label speech as mere evidence of the manufacturer’s intent.  It then claims that Mr. Caronia was not convicted for conspiring to promote off-label uses.  Rather, he was convicted for distributing the drug without adequate directions for use.

While perhaps literally true, this distinction proves too much.  It shows that the government is trying to stretch an “adequate directions for use” theory to prosecute people for off-label use promotion because the statute is silent on whether it prohibits off-label use promotion.  Indeed, the government asserts that it is not restricting the dissemination of information.  Instead, it claims that it is merely following the statutory mandate that certain information must be provided to doctors (presumably only after a full FDA review of the information).  The government thus likens the “adequate directions for use” language to a “disclosure” requirement.  Indeed, the government asserts that the off-label use misbranding charges are intended “to provide the public with reliable information about the medicines they are using.”  It is of course ironic that in fact the FDA is really trying to restrict companies from providing off-label information to the public unless, of course, the FDA has approved the use.

The government also asserts that Sorrell does not alter the First Amendment cases decided before Sorrell which applied less scrutiny over the government’s statutes and regulations than the “heightened scrutiny” the Court applied in Sorrell.  The government also dismisses the MIWG brief as untimely, irrelevant and without merit.  It asserts that “the fact that an unapproved use is widely accepted in the medical community is no assurance that the drug is, in fact, either safe or effective for that use.”  The government also concedes that “to the extent that manufacturers have objective, accurate, and unbiased information about unapproved uses of approved drugs, the misbranding provisions do not prohibit manufacturers from disseminating that information.”   Addressing FDA’s guidance documents on this subject, the government asserts that manufacturers need not comply with the guidance documents but can use them as “clearly defined safe harbors.”

Undoubtedly, there must be someone who can understand, find clear legal support for, and find consistency in, the government’s many pronouncements on off label use and marketing.  That person is surely not the author of this post.

By William T. Koustas –

We have previously reported (here and here) continuing legal saga of the former Purdue Frederick Co. (“Purdue”) executives who are seeking to reverse a Department of Health and Human Services (“HHS”) decision to exclude their participation in federal healthcare programs.  In May 2007, Purdue pleaded guilty to a felony violation of the Federal Food, Drug, and Cosmetic Act (“FDCA”) for misbranding its OxyContin products with the intent to defraud or mislead.  As part of the global resolution, three former senior executives ("Purdue Executives"), pleaded guilty to FDCA misdemeanor charges of misbranding under the “responsible corporate officer” principle, or Park Doctrine.  In November 2007, the HHS Office of Inspector General sent notices of exclusion to the Purdue Executives based on their earlier misdemeanor criminal convictions.  As a result, in 2009, both individuals were excluded from federal healthcare programs for 12 years.

The Purdue Executives filed suit against HHS seeking to reverse their exclusion.  The United States District Court for the District of Columbia affirmed the HHS exclusion decision.  The Purdue Executives appealed the district court decision to the United States Court of Appeals for the District of Columbia Circuit. 

The Purdue Executives have argued that: 1) their misdemeanor convictions are not an excludable offense under 42 U.S.C. § 1320a-7(b)(1); 2), and that the exclusion was an abuse of discretion and arbitrary and capricious as their convictions were merely based on the fact that they were “responsible corporate officers” and never had intent or actual knowledge of the company’s wrongdoing.

On Monday September 19, 2011, the government filed its appellate brief in the case.  The government argues that HHS properly excluded these individuals from federal healthcare programs because they have been found guilty of criminal charges “related to” the fraud and unlawful distribution of a controlled substance (OxyContin) pursuant to 42 U.S.C. § 1320a-7(b)(1), (3).  The government further notes that HHS applied the “intuitive, ordinary reading of that phrase [related to] consistent with [HHS’] longstanding interpretation of the statute.”  Government Brief at 12.  As such, the government argues, “the Purdue Executives’ failure to fulfill their responsibility to prevent and detect Purdue employees’ fraudulent misbranding of OxyContin amply ‘related to’ fraud in connection with the company’s fraudulent delivery of OxyContin” thus, supporting the HHS exclusion of the Purdue Executives.   Government Brief at 12-13.   The government also otherwise defended the exclusion decision, including the length of the exclusion.

Oral argument in the D.C. Circuit is set for December 6, 2011.  The Purdue Executives will have the opportunity to submit a Reply Brief in the meantime.      

By Karla L. Palmer & John A. Gilbert –

Last week Senator Herb Kohl (D-WI) introduced a bill (S. 1560) to facilitate controlled substance access for residents of residential long-term care facilities.  The proposed bill, which would amend the federal Controlled Substances Act (“CSA”), specifically  21 U.S.C. §§ 802 and 829, is a long-awaited resolution for long-term care patients’ inability to obtain much-needed, faster access to controlled pain medication.  As Senator Kohl stated,  “The law should prevent suffering, not make it worse …. Unfortunately, DEA’s [controlled substance] crackdown has left elderly nursing home residents waiting for hours or even days for relief from excruciating pain.  This legislation would help end these needless and avoidable delays.”  

The 2011 bill traces its origins back to at least October 2009 when Senator Kohl, who is Chairman of the Special Committee on Aging and a Member of the Judiciary and Appropriations Committees, corresponded with Department of Justice ("DOJ") concerning long-term care patients’ lack of access to controlled substances in emergency situations (and attached proposed legislation along with that correspondence).  Because of DOJ’s perceived delay in taking action, and then-acting DEA Administrator Michelle Leonhart’s delay in addressing this serious issue, Senator Kohl placed a senatorial hold on Leohnart’s pending nomination as DEA Administrator, preventing the nomination from proceeding to the full senate until the DEA made “more progress towards our goal of ensuring that nursing home residents get timely access to the prescription drug care they need.” Kohl added, “[e]very day nursing home patients continue to suffer from agonizing pain and we need an interim solution as soon as possible.”   

Senator  Kohl lifted his hold on Leonhart’s nomination, however, only after the Department of Justice (and Attorney General Eric Holder personally) provided assurances in December 2010 that DOJ would deliver draft legislation in the beginning of 2011 outlining certain changes to the CSA.  This proposed bill appears to make good on this promise.

The amendments to the CSA would permit nurses or licensed health care professionals (i.e., designated agents) to transmit a practitioner’s oral prescription for a schedule II-IV controlled substance to DEA-licensed pharmacies.  In exchange, nursing homes, practitioners, and pharmacies would have to account for the controlled substances in a rigorous manner.  Senator Kohl stated that the changes are necessary to permit long-term care patients in chronic and debilitating pain access to schedule II substances much faster than waiting for the written prescription of a practitioner: Waiting serves only to deny the patient more immediate access to much needed pain medication. 

Note that DEA had issued a policy statement in October 2010 to permit nursing home residents to more quickly access certain controlled substances, but not schedule II drugs.  Under that policy, a nursing home’s licensed health care professionals can, acting as an authorized agent of a physician, transcribe the physician’s oral prescription for schedule III, IV or V medications to a pharmacy for dispensing.  However, the policy statement did not go far enough; it does not permit the oral transcription from a practitioner to an agent for a schedule II drug, many of which are those that are most urgently needed to treat pain in a long-term care environment. 

Senator Kohl’s proposed legislation would amend the CSA to give DEA statutory authority, unlike the DEA October 2010 policy statement, to allow licensed health care professionals to transmit prescriptions for schedule II controlled substances.  Titled the “Nursing Home Resident Pain Relief Act of 2011,” a physician will be able to authorize the administrator of the long-term care facility to designate nurses and other appropriately licensed health professionals to act as “facility designees,” or agents.  The facility designee will be able to transmit a prescription and administer pain-relieving controlled substances to residents whose medical conditions warrant immediate pain relief, based on the transmission of a valid oral prescription from the registered practitioner to the facility designee.  Under the proposed law, an administrator of a long-term care facility will be able to designate one or more qualified individuals to serve as a designee for the administration of controlled substances, and the practitioner will similarly authorize in writing the scope of the authorization, i.e., for none, some or all controlled substances regardless of their schedule.   

The proposed law also allows for a facility designee to transmit an oral prescription for a schedule II medication during an emergency in limited situations.  The proposed law requires detailed pharmacy verification of oral prescriptions transmitted by facility designees, including a requirement that, not later than 72 hours after dispensing the controlled substances pursuant to an oral prescription, the pharmacy will be required to transmit a copy of the prescription document that it received from the facility designee to the prescribing practitioner.  The practitioner must then endorse and return within 5 days to the dispensing pharmacy the copy of the prescription that it received from the pharmacy.  The dispensing pharmacy must attach the practitioner-endorsed prescription to the document that the pharmacy received from the facility designee.  If the pharmacy does not receive an endorsed prescription from the practitioner within the 5-day period, the pharmacy is prohibited from dispensing other controlled substances for the long-term care facility until endorsements are received.  The pharmacy is required to notify DEA if the physician endorsement is not received within a 10-day period of time — beginning on the date on which the pharmacy transmitted notice to the prescribing practitioner.  The proposed bill invites the Attorney General to define by regulation the term “oral prescription.”  In addition to permitting a facility designee to transmit and dispense a controlled substance prescription, the bill also modifies and codifies regulations for dispensing in emergency situations, which are currently set forth at  21 C.F.R. § 1306.11(d).  

The bill would also require that all parties to the transaction keep and maintain written records documenting each step in the prescribing and dispensing process.  The requirements include a written attestation by the facility designee verifying that the designee has spoken personally with the prescribing practitioner and that all the required information provided by the practitioner was completely and accurately recorded.  If the facility designee transmits the prescription to a pharmacy by facsimile, that facsimile will serve as the original written prescription and must be maintained by the pharmacy in accordance with the CSA and its regulations. 

The legislation provides strong criminal and civil penalties under the CSA, including individual or personal liability for long-term care administrators for the wrongful acts of facility designees, for diverting drugs or violating recordkeeping requirements. 

Hyman, Phelps & McNamara, P.C.’s Ricardo Carvajal will be presenting at the following upcoming conferences on food law and policy.

The ASQ Food, Drug, and Cosmetic Division's 22nd West Coast Conference on Dietary Supplement Challenges will address cGMPs, analytical issues, the FSMA, and FDA’s draft guidance on new dietary ingredients. The conference will feature presentations by senior FDA officials, including Daniel Fabricant, Director of CFSAN's Division of Dietary Supplement Programs (see here). The conference is scheduled for September 30 in Anaheim.

The market research firm ORC International is hosting Functional Foods Claims: Capitalizing on Trends & Opportunities, a seminar that will feature proprietary research and an expert panel on food and beverage claims. The seminar is open to branded food and beverage companies, retailers, and ingredient suppliers to industry. Companies wishing to register for the seminar should contact Carolyn Werbler at answers@orcinternational.com. The seminar is scheduled for October 4 in Chicago.

IFT’s Food Policy Impact will feature a keynote speech by FDA Deputy Commissioner for Foods Michael Taylor and presentations on food safety and food labeling (see here). The conference is scheduled for December 1 in Washington, DC. The conference will be preceded by IFT's two-day short course on food labeling, scheduled for November 29-30 (see here).

By Kurt R. Karst –      

On September 19th, FDA announced the issuance of a revised version of the Agency’s June 2006 final guidance document/Compliance Policy Guide (“CPG”) (FDA Docket No. 2003D-0478), titled “Marketed Unapproved Drugs – Compliance Policy Guide Sec. 440.100, Marketed New Drugs Without Approved NDAs or ANDAs.”  The revised guidance is further evidence of FDA’s stepped-up enforcement efforts under the so-called “Unapproved Drugs Initiative.”

FDA’s June 2006 CPG articulated the Agency’s risk-based enforcement approach to taking enforcement action with respect to the manufacture and distribution of marketed unapproved drugs.  Under that policy, FDA gives higher priority to enforcement action against unapproved drugs in certain categories, including drugs that present direct challenges to the “new drug” approval and over-the-counter drug monograph systems (e.g., when a drug is approved under an NDA and other companies market the same product without approval). (An article we authored that appeared in RAPS Focus a couple of years ago discussing the world of marketed unapproved drugs is available here.)

The revised CPG, which is issued for immediate implementation, says that FDA’s risk-based enforcement approach continues to apply, but only to unapproved drug products on the market as of September 19, 2011:

The enforcement priorities and potential exercise of enforcement discretion discussed in this guidance apply only to unapproved drug products that are being commercially used or sold as of September 19, 2011. All unapproved drugs introduced onto the market after that date are subject to immediate enforcement action at any time, without prior notice and without regard to the enforcement priorities set forth below. In light of the notice provided by this guidance, we believe it is inappropriate to exercise enforcement discretion with respect to unapproved drugs that a company (including a manufacturer or distributor) begins marketing after September 19, 2011.

FDA’s announcement states that although the June 2006 CPG has “established an orderly approach for removing unapproved new drugs from the market,” such products “continue to come onto the market illegally,” because of, among other things, “competition with other unapproved drugs that are already on the market, and not yet subject to a public FDA announcement regarding future enforcement actions,” and “increased market share opportunity is perceived following FDA actions that removed another unapproved drug from the market.”

Will there be a sudden wave of enforcement actions in the coming months as FDA seeks to implement the revised CPG?  Stay tuned. 

FDA’s announcement follows a major enforcement action from earlier this year on marketed unapproved cough, cold, and allergy drug products, which spawned two lawsuits against FDA (see our previous post here).  FDA is also embroiled in litigation concerning marketed unapproved Morphine Sulfate Oral Solution (see our previous post here).

By Anne Marie Murphy –

FDA and the Office for Human Research Protections ("OHRP") have jointly announced the issuance of a draft guidance document on “Exculpatory Language in Informed Consent.”  HHS and FDA regulations have long prohibited the use “exculpatory language” in informed consent documents for clinical research that is federally funded or regulated by the FDA.  Exculpatory language means language that causes a study subject to waive or appear to waive a legal right or release or appear to release those conducting the study from liability.  For example, an informed consent form that asks the study subject to waive the right to compensation for any injury that may be sustained in the study would be prohibited. 

Earlier guidance from the agencies said that language that asks a study subject to waive any rights to a biological specimen obtained during the study was likewise prohibited.  The new draft guidance takes a different position.  Recognizing that it has long been common industry practice to obtain such specimens from study subjects without compensation, and noting that there are no federal or state laws or policies that suggest study subjects have any legal right to such compensation, the new guidance concludes that language in an informed consent form is not “exculpatory” if it informs subjects that by agreeing to allow the use of their specimens in research, they are giving up any legal right to their specimens. 

The draft guidance includes several examples of statements that would be acceptable and examples that would be exculpatory and therefore prohibited.  For example, the agencies consider the following statements acceptable to be included in a consent form: 

“Although the results of research, including your donated materials, may be patentable or have commercial value, you will have no legal or financial interest in any commercial development resulting from research”;

“By agreeing to this use, you are giving up all claims to any money obtained by the researchers from the commercial or other use of these specimens.”

Comments on the draft guidance should be submitted by November 7, 2011.

By Karla L. Palmer & Jeffrey N. Gibbs –

Marking a significant victory for the pharmaceutical compounding industry, a Florida federal district court ruled that FDA did not have authority to enjoin the “long-standing, widespread, state-regulated practice of pharmacists filling a veterinarian’s prescription for a non-food producing animal by compounding from bulk substances.”  United States v. Franck’s Lab, Inc., No. 5:10-cv-147-Oc-32TBS (M.D. Fla. filed Sept. 9, 2011) at 80.  While the case involved pharmacy compounding, its implications extend much more broadly to other areas of FDA law.  Significantly, the court chastised the FDA for trying to “eradicate the line” between what would be considered unlawful manufacturing and the traditional compounding of animal medications.  After engaging in a detailed historical, regulatory and legal analysis of pharmaceutical compounding, the court held that FDA’s attempted assertion of authority over “traditional pharmacy compounding in the context of a pharmacist-veterinarian-patient relationship is contrary to [the] congressional intent” of the Federal Food, Drug and Cosmetic Act (“FDCA”).  Id. at 70.  The court further held that the undisputed evidence in the case demonstrated that allowing FDA to enjoin a pharmacist’s “traditional state-authorized practice of bulk compounding of animal drugs could destabilize the pharmacy profession and leave many animal patients without necessary medication.”  Id. at 74-75.

We previously blogged about the court’s earlier denial of FDA’s motion for a preliminary injunction against Franck’s Lab back in 2010.  Recall that FDA filed its lawsuit against Franck’s after 21 Venezuelan polo ponies died as a result of a mathematical compounding error, which the Florida Board of Pharmacy had investigated and resolved.  Despite the state’s thorough resolution of the pony matter, FDA inspected Franck’s facility on several subsequent occasions, issued a Form 483 citing various observations, which primarily concerned “perceived quality assurance and training issues.”  Id. at 5.  Franck’s responded to the Form 483, asserting that the violations were the province of the Florida Department of Health and not FDA, among other defenses.  Instead of  further discussion with Franck’s, the FDA sought an injunction in April 2010 to halt Franck’s distribution of animal drugs compounded from bulk substances, claiming that Franck’s was engaging in illegal animal drug manufacturing in violation of the FDCA.  Id. at 5-6.  (The court spent several pages of its opinion reviewing Franck’s history of compliance with state pharmacy laws, its cooperation with the FDA - citing letters to the agency dating back to at least 2004 - and Franck’s understanding that its compounding activities were lawful.)    

The court stated at the outset of its opinion on summary judgment that FDA “acknowledges that this is the first time it has sought to enjoin a state-licensed pharmacist from bulk compounding of animal medications.”  Id. at 6.  Indeed, FDA made it clear to the court that it was staking “the bright line position that any compounding of animal medications from bulk substances violates … the FDCA, even when conducted by a state-licensed pharmacist for an individual animal patient pursuant to a valid veterinary prescription.”  Id. at 7.  FDA asserted that it “essentially can enjoin a pharmacist’s state-authorized practice of animal drug compounding even where a single medication is compounded pursuant to a valid prescription.”  Id. at 38.  FDA further contended that a “traditional compounding practice implicates the same concerns under the FDCA as the mass-production, mass-marketing, and mass distribution of unapproved animal drugs by an unlicensed manufacturer.”   

In response to FDA’s claims, Franck’s submitted industry, fact, expert and other declarations supporting its position that it was not engaging in unlawful manufacturing of unapproved animal drugs.  The FDA failed to present evidence refuting Franck’s position, despite having an “ample opportunity” to do so, “resting instead on its position that compounding animal drugs from bulk … constitutes a per se violation of the FDCA.”  Id. at 8, 45.  The court noted that FDA also claimed that this was a “simple case” because “the literal, plain language of the 1938 FDCA gave the agency enforcement authority to prevent pharmacists from bulk compounding medications for non-food producing animals.”  Id. at 38, 39.  

The court disagreed with FDA’s “maximalist” portrayal of its own statutory authority.  Also, as underscored by its 80-page opinion, the court disagreed that the case was a “simple” one.  After undertaking a historical review of pharmaceutical compounding and compounding in bulk, the court reviewed FDA’s fifty-plus years of its “regulation” of compounding practices.  It found untenable the agency’s position that, for over fifty years since enactment of the FDCA, it did not assert its authority to regulate pharmacy compounding; nevertheless, “once it has shown a violation of the statute (i.e., that a ‘new animal drug’ has been distributed without an approval or exemption in place), it enjoys unfettered enforcement discretion” to take action.  Id. at 41.  The court also addressed the illogicality of FDA’s inconsistent regulatory positions in the 2002 and 2003 pharmacy compounding Compliance Policy Guides (“CPG”) (that address human and animal compounding, respectively) by presenting the following hypothetical: “A pharmacist who compounds medication from bulk for ingestion by a horse is akin to a manufacturer and subject to an FDA enforcement action, while the same pharmacist compounding medication from bulk for ingestion by the human rider of that horse is not.”  Id. at 30. 

After engaging in a Chevron analysis about the statutory construction of the FDCA’s new animal drug approval process, the type of bulk pharmaceutical compounding at issue, and FDA’s failure to engage in notice and comment rulemaking, the court ultimately held that it is simply unreasonable for FDA to assert that, even when “charitably viewed,” the FDCA is ambiguous concerning whether Congress intended the agency to regulate compounding.  Id. at 77.  In addition, the FDA should have been on notice that its “statutory authority to regulate traditional, state-licensed veterinary pharmacy compounding was questionable.”    

The court was troubled that FDA never “attempted to test its views” about bulk compounding for non-food producing animals by “notice and comment review.”  Id. at 74.  Several in the industry (including Franck’s) had long argued to FDA that its decidedly more hostile 2003 CPG guidance, which included FDA’s position that compounding animal drugs from bulk substances was a practice akin to manufacturing, represented a significant departure from previous guidance, and would cause many animals and the industry to suffer needlessly.  (Unlike earlier guidance, the 2003 CPG, “without explanation,” did not acknowledge, among other things: (1) the utility of compounding from bulk; (2) the circumstances under which doing so would absolve the pharmacist from regulatory action; and (3) the permissibility of the practice for non-food producing animals.)  The court noted that, notwithstanding numerous communications from industry and Congress over the years, the FDA failed on its promise to promulgate the revised guidance.  Id. at 30-33.  Many of the criticisms leveled by the court against FDA’s veterinary CPG would apply equally to enforcement actions against drugs compounded for humans that rest of the theory that all compounding is illegal.

Given FDA’s predilection for issuing guidance documents instead of proceeding through rulemaking, this part of the court’s decision may have broad applicability.  A recurring criticism of FDA’s use of guidance documents instead of rulemaking is that the agency does not “attempt[] to test its views” through the more rigorous rulemaking process.  See id. at 74.  Unless reversed on appeal, this language will be cited in many other challenges to FDA’s employment of guidance documents, such as regulation of laboratory developed tests and research use only products, to name a few examples.

By Jamie K. Wolszon –

On August 31, Hyman, Phelps & McNamara, P.C. (“HPM”) submitted comments to FDA’s June 1 Draft Guidance regarding research use only (“RUO”) products (see our previous posts here and here).  Although HPM supports many parts of the Draft Guidance, in its comments, it objected to FDA statements indicating that the manufacturer must halt selling to a customer if the manufacturer knows or has reason to know that the customer is using the product for a clinical diagnostic use.  HPM also expressed concerns with statements in the Draft Guidance that suggest that only certain types of research could qualify for RUO status. 

HPM maintained that these statements in the Draft Guidance represent a departure from past agency regulations, case law and policy, would have sweeping implications for multiple categories of FDA-regulated products, and can only be issued through notice-and-comment rulemaking.

HPM stated that the manufacturer’s representations, not what the manufacturer knows or had reason to know, should determine the intended use of the product.  The agency’s expansive and novel approach to intended use has broad implications for other regulated products, such as drugs, biologics, and devices.  HPM argued that FDA should not require manufacturers to immediately halt selling RUO products based on customer behavior.  HPM also called on the agency to clarify that all types of research qualify for the RUO exemption. 

If FDA insists upon these aspects, according to the HPM comments, FDA should only do so through notice-and-comment rulemaking.  HPM’s views that rulemaking is required is supported by a recent decision by a Florida district court rejecting FDA’s request for an injunction against a compounding pharmacy.  

Over thirty comments were submitted, including comments from representatives of manufacturers, laboratories, and academic institutions.  These comments criticized the proposal for: requiring manufacturers to police the activities of their customers; inappropriately expanding the concept of intended use; limiting patient access to standard-of-care laboratory-developed tests that had been appropriately validated in accordance with the requirements of the Clinical Laboratory Improvement Amendments of 1988 ("CLIA"); impeding research and the development of new tests; interfering with the practice of medicine; and violating the Administrative Procedure Act.  Virtually all comments criticized one or more of these aspects of the draft guidance.

By Wes Siegner, John R. Fleder & Ricardo Carvajal –

In U.S. v. Scenic View Dairy, LLC, et. al., the government prevailed on summary judgment in an injunction action against dairy farms alleged to market cows bearing unlawful drug residues.  Although nominally a veterinary drug case, the court’s decision offers a number of gems of general interest.

Defendants operate three dairy farms from which they periodically cull cows for sale to slaughterhouses for human beef consumption.  On numerous occasions, USDA/FSIS detected new animal drug residues that were above tolerance levels in the edible tissues of Defendants’ cows.  The government alleged in part that Defendants violated § 301(a) of the FDC Act by delivering food for introduction into interstate commerce that was adulterated within the meaning of § 402(a)(2)(C)(ii) and § 402(a)(4), and also violated § 301(k) by adulterating drugs while held for sale and after shipment in interstate commerce.

FDC Act § 402(a)(2)(C)(ii) deems a food adulterated “if it is or if it bears or contains… a new animal drug (or conversion product thereof) that is unsafe” under § 360(b).  Based on relevant provisions of the FDC Act and its implementing regulations, the court held that a drug is unsafe if the drug’s use is extralabel (i.e., the drug is used in a manner that does not accord with the approved labeling), unless used “by order of a licensed veterinarian in the context of a valid veterinarian-client-patient relationship” (“VCPR”).  Even if there exists a VCPR, the drug is unsafe if its use results in illegal tissue residues.  In finding that the drugs at issue were unsafe, the court relied in part on sworn affidavits in which Defendants admitted to extralabel use, thereby rendering moot the possible existence of a VCPR.  FDA routinely requests inspected companies to sign “affidavits” on FDA forms that are filled in with information that is written by the FDA inspector.  As this case illustrates, such affidavits can be powerful evidence against a company in any civil or criminal case that FDA subsequently brings based on the inspection.  There is no requirement that companies sign such affidavits, and, except in very rare circumstances and after review by counsel, companies would be best served by not signing (or even reading or listening to the inspector read) such affidavits.

Section 402(a)(4) deems a food adulterated “if it has been prepared, packed, or held under insanitary conditions whereby it may have become contaminated with filth, or whereby it may have been rendered injurious to health.”  The government argued that Defendants’ failure to maintain adequate drug treatment records (i.e., records that document dosage, route of administration, and withdrawal period) constituted an insanitary condition whereby Defendants’ food may be rendered injurious to health.  The court agreed, relying in part on an FDA Compliance Policy Guide that articulated the same position – a timely reminder of the potential impact of guidance documents, notwithstanding the fact that they are not legally binding.  In passing, the court rejected Defendants’ argument that the Bioterrorism Act’s exemption of farms from recordkeeping requirements applied to drug treatment records.

With respect to the alleged violation of § 301(k), the court held that Defendants’ extralabel use of the drugs rendered those drugs unsafe, and therefore adulterated.  Further, the court agreed with the government that the criterion of “held for sale” in § 301(k) is “satisfied if the item is used for any purpose other than personal consumption.”

Notably, although the court found that an injunction was appropriate, it also found that the government had sought an injunction that was too broad.  The court disclaimed any intent to put Defendants out of business, and expressed concern about the terms and the length of the injunction.  The court noted that, “if the record-keeping is put into compliance as a system and by the individuals, then the problems will be largely solved.”  The court therefore concluded that a permanent injunction was not necessary.  Finally, the court noted that “without knowing the specific facts and background of injunctions entered by other district courts, this Court is not too impressed with the fact that such injunctions exist.”