By Kurt R. Karst –      

Last week, the U.S. District Court for the Eastern District of Pennsylvania issued a pair of decisions in a long-running dispute between Lannett Company, Inc. (“Lannett”), the self-proclaimed “oldest generic drug manufacturer” in the United States (founded in 1942), and Celgene Corp. (“Celgene”) concerning Lannett’s efforts to obtain sample of Celgene’s THALOMID (thalidomide) Capsules for purposes of bioequivalence testing and ANDA submission and approval.  The first decision, a brief Memorandum Opinion, was made in the context of Lannett’s motion “to enforce a purported settlement agreement” with Celgene – which the court denied “because there was no settlement agreement.”  The second decision was an Order denying Celgene's Motion to Dismiss the case.  The decisions could free up the case for a decision on the underlying antitrust issues and perhaps reignite a debate on generic drug availability for products that, like THALOMID, are approved and marketed under a restricted distribution system or Risk Evaluation and Mitigation Strategy (“REMS”).  (The 2007 FDA Amendments Act, or FDAAA, amended the law to create FDC Act § 505-1, which provides FDA with the authority to require a REMS if the Agency determines that such a strategy “is necessary to ensure that the benefits of the drug outweigh the risks of the drug.”  FDA may require that a REMS “include such elements as are necessary to assure safe use of the drug, because of its inherent toxicity or potential harmfulness,” which, in turn, may include certain restricted distribution, procurement, and dispensing systems.)

By way of background, the FDC Act requires that an ANDA contain, among other things, information showing that the proposed generic drug product is bioequivalent to the Reference Listed Drug (“RLD”).  Often, but not always, bioequivalence is demonstrated through in vivo testing in which the test and reference products are compared.  This necessarily requires an ANDA sponsor to obtain RLD product for testing (and reserve sample) purposes.  Usually the RLD product can be procured using normal distribution channels; however, the availability of an RLD under a restricted distribution system or REMS may be significantly limited and may not be available to an ANDA sponsor.  Such is the case with THALOMID, which has a restricted distribution program known as the S.T.E.P.S.® program (i.e., System for Thalidomide Education and Prescribing Safety). 

Lannett and Celgene began duking it out in court back in January 2008 when Lannett filed a Complaint and a Motion for Preliminary Injunction in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 08-0233) seeking relief requiring Celgene to provide Lannett with samples of THALOMID for bioequivalence testing purposes.  The Complaint was filed after FDA sent Lannett a letter providing bioequivalence recommendations (but before FDA approved Lannett’s proposed pilot bioequivalence study) and stating, in part, that:

To ensure that the intention of Congress is enacting the Generic Drug Approval Provisions in Section 505(j) is not frustrated by the terms of the S.T.E.P.S.® program, FDA has notified Celgene that the agency intends to exercise its enforcement discretion to permit Celgene to provide another drug manufacturer (or its agent) 500 units of Thalomid (including 200 units for the purpose of conducting bioequivalence (including dissolution) testing and 300 units for a limited number of retained samples) when Celgene has received confirmation in writing from the sponsor, its agent, or FDA that the sponsor of the study either has an IND in effect for the study or has otherwise provided the agency with sufficient assurance that the bioequivalence study will be conducted in such a manner as to ensure the safety of the subjects.

Celgene did not provide the RLD sample to Lannett, and instead requested that Lannett provide Celgene with certain “voluminous documents and information.”  The court dismissed the Complaint in March 2008 on ripeness grounds “because Lannett had not received a response from the FDA to Lannett’s proposed bioequivalence study.” 

FDA provided that response – a favorable review – on August 11, 2008, and Lannett promptly filed a new Complaint and a Motion for Preliminary Injunction alleging that Celgene’s refusal to provide Lannett with RLD sample for bioequivalence testing purposes violates Section 2 of the Sherman Act.  Celgene filed a Motion to Dismiss requesting that the court dismiss the case for Lannett’s failure to state a claim, or in the alternative, that the court stay the case pending FDA’s decisions on two citizen petitions: (1) Celgene’s September 2007 petition (Docket No. FDA-2007-P-0113) concerning THALOMID labeling carve-out issues; and (2) Dr. Reddy’s Laboratories, Inc’s June 2009 petition (Docket No. FDA-2009-P-0266) citing THALOMID and requesting that FDA “establish procedures to facilitate the availability of generic versions of drug products subject to a [REMS] and enforce the FDC Act to prevent companies from using REMS to block or delay generic competition.”  FDA has not yet substantively responded to either citizen petition.  (There is also a related December 2009 citizen petition – Docket No. FDA-2009-P-0602 – that Kaiser Permanente submitted to FDA that raises, among other things, the issue of manufacturers using REMS with restricted distribution elements to limit access of a drug to certain health care providers.  FDA has not yet substantively responded to that petition either.) 

Although the legal wrangling between Lannett and Celgene over a settlement of the case has delayed a final decision (the Court denied Lannett’s Motion for Preliminary Injunction on March 16, 2010), the overarching issue in the case is still of significant interest to folks . . . and not only to the generic drug industry.  As we previously reported, Celgene revealed in a 2010 SEC filing that:

In the fourth quarter of 2009, we received a civil inquiry and demand from the [Federal Trade Commission (“FTC”)].  The FTC requested documents and other information relating to requests by generic companies to purchase our patented REVLIMID® and THALOMID® brand drugs in order to evaluate whether there is reason to believe that we have engaged in unfair methods of competition.

We have not heard much about that inquiry as of late, nor have we heard anything from FDA on the issues raised in Dr. Reddy’s June 2009 citizen petition.  Among other things, the Dr. Reddy’s petition notes some interesting legislative history with respect to a provision included in FDAAA (creating FDC Act § 505-1(f)(8)), which states that “[n]o holder of an approved covered application shall use any element to assure safe use required by [FDA] under [FDC Act § 505-1(f)] to block or delay approval of an application under section 505(b)(2) or (j) or to prevent application of such element under [FDC Act § 505-1(i)(1)(B)] to a drug that is the subject of an [ANDA].”  Celgene’s response to Dr. Reddy’s petition addresses that history.

By Roger C. Thies –

FDA announced on March 30, 2011 that  it “does not intend to take enforcement action against pharmacies that compound hydroxyprogesterone caproate based on a valid prescription for an individually identified patient unless the compounded products are unsafe, of substandard quality, or are not being compounded in accordance with appropriate standards for compounding sterile products.”   This announcement is contrary to FDA’s long-standing policy to not permit pharmacy compounding of drugs that are commercially available and approved by FDA.  See FDA, Compliance Policy Guide 460.200 – Pharmacy Compounding.

This change in policy was apparently necessitated by FDA’s approval of Makena® (hydroxyprogesterone caproate) for the reduction of the risk of certain preterm births in women who have had at least one prior preterm birth coupled with public complaints about the cost of Makena®.

It is no secret that regulatory compliance costs industry and consumers money.  Cost is not the issue when there is a request for just one more study that delays approval or the Phase 4 commitment that FDA wants to supplement its database.  Companies are routinely faced with increased costs for more validation of manufacturing processes or more thorough investigations.  A response that compliance just costs too much does not preclude regulatory action such as consent decrees, delays in approval of new products or refusal to grant export certificates.  FDA has forced “old” unapproved drugs from the market once the same product(s) are approved.  Invariably, the monopoly provided by FDA to the company with the approved new drug has led to higher drug prices to the consumer and to other payors.  All of these added costs are justified as necessary to ensure the safety and efficacy of FDA regulated products.

Now FDA has deviated from its customary posture.  In its announcement FDA states that “greater assurance of safety is provided by an approved product.”   If so, why did FDA decide to change its enforcement priorities?  Was it product cost?   Political pressure?  It appears so.  There is a lesson here.

By Kurt R. Karst –      

Although we were not in attendance at today's argument before the U.S. Supreme Court in PLIVA Inc. v. Mensing (09-993), Actavis v. Mensing (09-1039), and Actavis v. Demahy (09-1501) concerning whether certain Circuit Court decisions “abrogated the Hatch-Waxman Amendments by allowing state tort liability for failure to warn in direct contravention of the Act’s requirement that a generic drug’s labeling be the same as the FDA-approved labeling for the listed (or branded) drug,” we did get a chance to review the unofficial transcript of the oral argument. 

Just as with the oral argument in Wyeth v. Levine, the Justices showed a keen interest in the case, interrupting all three attorneys of record with questions before they barely spoke their opening sentences.  Petitioners’ attorney, Jay Lefkowitz of Kirkland & Ellis LLP, did a fine job of arguing the case, emphasizing that based on the Court’s decisions in Arkansas La. Gas Co. v. Hall, 453 U.S. 571 (1981), and Buckman Co. v. Plaintiffs’ Legal Comm.,531 U.S. 341 (2001), the Supremacy Clause forecloses state-law claims that depend on speculation about how a federal agency would exercise its exclusive authority, or that otherwise impose or enforce duties to a federal agency.  Our fact checker went off when Repondents’ attorney, Louis Bograd of the Center for Constitutional Litigation, started discussing FDA’s ability to quickly take action on application supplements, and in particular equating certain FDA statistics we think are more akin to NDA supplements with ANDA supplements, stating that FDA “also processes supplement requests, according to its web site, in 97 percent of the cases or something, within 4 months.  It's not — it's — it is a matter of months, not — not years.”

It is always difficult to prognosticate about Supreme Court decisions.  At this juncture we cannot say how we think the Court might rule. 

By Ricardo Carvajal –

At FDA’s public meeting on the food import safety provisions of the Food Safety Modernization Act ("FSMA") (see our prior blog posting here), the challenges posed by implementation of those provisions started to take shape.  Presentations by agency personnel, industry representatives, and consumer advocates highlighted the following issues (among many more):

    ◦    limited agency funding and personnel
    ◦    tight statutory deadlines
    ◦    ambiguous statutory terms
    ◦    integration of, or harmonization with, existing standards
    ◦    addressing reliability of third-party audits
    ◦    potential adverse effects on small and medium size businesses
    ◦    impact on competitiveness and efficiency

There was genuine enthusiasm for the possibility that certain aspects of the law, such as the Voluntary Qualified Importer Program, could help smooth the importation process for some importers.  However, there was also concern that the Foreign Supplier Verification Program requirements could prove unduly burdensome for others.  Much will depend on how the agency resolves perhaps the most fundamental issue of all – who qualifies as an importer?

You can read the Deputy Commissioner for Foods' take on the new paradigm for importers here.

By Riëtte van Laack –

Approximately three years ago, the Federal Trade Commission ("FTC") filed a complaint against Daniel Chapter One and James Fijio (“DCO”) for the advertising of four dietary supplements as cures for various cancers.  The FTC ruled that DCO’s claims were deceptive and ordered that DCO discontinue its marketing practices and notify its customer that the FTC had determined that DCO’s claims for the dietary supplements were deceptive.  Nevertheless, DCO allegedly continued to advertise its dietary supplements as cancer cures. 

In August 2010, the Department of Justice ("DOJ"), on behalf of the FTC, filed a complaint seeking civil penalties (up to $ 16,000 per violation), consumer redress, and a preliminary and permanent injunction in the U.S. District Court for the District of Columbia.  However, because at the time of filing DCO’s appeal of the FTC ruling was pending, the new action was stayed.  Since the Court of Appeals upheld the FTC ruling (see our previous post here), the stay has been lifted.  On March 11, 2011, DOJ resumed its efforts against DCO by moving forward with the action mentioned above.  Meanwhile, DCO has indicated that it intends to petition the U.S. Supreme Court.

By Kurt R. Karst –      

Late last week, Par Pharmaceutical, Inc. (“Par”) filed a Complaint in the U.S. District Court for the Eastern District of Pennsylvania seeking a declaration that two recently issued patents – U.S. Patent Nos. 7,858,122 (“the ‘122 patent”) and 7,863,316 (“the ‘316 patent”) (both titled “Extended Release Formulation of Levetiracetam”) – are invalid.  Par’s declaratory judgment action appears to be geared to obtain a final court decision that would trigger a forfeiture of 180-day exclusivity eligibility under the FDC Act’s so-called failure-to-market forfeiture provisions at § 505(j)(5)(D)(i)(I) for the first applicant to have submitted an ANDA for a generic version of KEPPRA XR (levetiracetam) Extended-Release Tablets containing a Paragraph IV certification.

FDA approved KEPPRA XR under NDA No. 22-285 on September 12, 2008 and granted the NDA sponsor a period of 3-year new dosage form exclusivity that expires on September 12, 2011.  At that time, U.S. Patent No. 4,943,639 (“the ‘639 patent”), which had already expired, but was subject to a period of pediatric exclusivity set to expire on January 14, 2009, was listed in the Orange Book.  (The ‘639 patent was also listed in the Orange Book for the immediate-release version of levetiracetam, KEPPRA, under NDA No. 21-872.)  Because no generic sponsor submitted an ANDA to FDA for a generic version of KEPRA XR containing a Paragraph IV certification to the ‘639 patent, 180-day exclusivity remained available with respect to a later-listed patent. 

On December 28, 2010, the U.S. Patent and Trademark Office issued the ‘122 patent; however, the patent was not submitted to FDA for Orange Book listing until January 7, 2011 (but it is still considered timely listed).  (The listing appears to have given rise to a discussion of so-called “anticipatory Paragraph IV certifications” on the popular Linked-In Hatch-Waxman ANDA Litigation Forum managed by Steve Auten.)  Upon Orange Book listing, FDA showed the ‘122 patent with a period of pediatric exclusivity (in the printed annual edition of the Orange Book), but the Agency later determined that to be erroneous (as shown in the current electronic version of the Orange Book).  Curiously, the ‘316 patent, which was issued on January 4, 2011, and which, as noted above, has the same title as the ‘122 patent, was not submitted to FDA for Orange Book listing.  Why?  Your guess is as good as our guess.  Anyhow, the timely Orange Book listing of the ‘122 patent created the possibility of 180-day marketing exclusivity for the first generic applicant(s) to submit a Paragraph IV certification – either in an original ANDA, or, more likely, as an amendment to a pending ANDA.  Clearly, someone decided to do so (and was probably submitting anticipatory Paragraph IV certifications since the ‘122 patent issued), as FDA’s Paragraph IV Certification List was recently updated to show a Paragraph IV submission date of January 7, 2011.  (It is unclear at this time who is a first applicant.  In addition to Par’s pending ANDA, FDA tentatively approved Torrent’s ANDA No. 91-338 on November 17, 2010.)

Par, which almost certainly has a pending ANDA for generic KEPPRA XR (based on statements in the company’s March 23rd Complaint), appears to have missed the patent certification boat.  Instead of amending its ANDA to include a Paragraph IV certification and simultaneously providing notice when the ‘122 patent was listed in the Orange Book on January 7, 2011, Par apparently amended its ANDA and provided notice of its Paragraph IV certification to the ‘122 patent to the NDA holder/patent owner on January 10th and 13th, according to the company’s Complaint.  But there might be another way for Par to skin this cat.  By obtaining a final court decision that the ‘122 patent is invalid (via the company's declaratory judgment action brought after the NDA holder/patent owner failed to sue for patent infringement within the statutory 45-day period), and provided Par has tentative ANDA approval, which the company says in the Complaint it expects to receive within 30 months of ANDA submission, Par could trigger a bookend event under the (bb) failure-to-market forfeiture provisions. 

We recently discussed the bookend events under the FDC Act’s failure-to-market 180-day exclusivity forfeiture provisions and some of the potential interpretations and outcomes based on tentative approval timing.  Par’s KEPPRA XR declaratory judgment Complaint is yet another example of what appears to be a growing number of declaratory judgment actions to trigger the forfeiture of 180-day exclusivity eligibility. 

Hyman, Phelps & McNamara's Jeffrey N. Wasserstein (co-founder of the FDA Law Blog) will be moderating a panel on social media and therapeutic products at the FDLI Annual Meeting, April 5-6, 2011, at the Ronald Reagan International Trade Center, in Washington, DC.  The panel will discuss current and future regulatory issues with using social media tools to market therapeutic products. With expected guidance coming this year from FDA, now is the time to become current with the issues. Companies with therapeutic products should also look to the Federal Trade Commission ("FTC") for guidance and potential enforcement actions.  Speakers include Glenn Byrd, MBA, RAC, of MedImmune, LLC (formerly of CBER's Advertising and Promotional Labeling Branch), Stacey Ferguson, an attorney with the Federal Trade Commission, Division of Advertising Practices, Bureau of Consumer Protection, and Jeffrey Senger, former Deputy Chief Counsel and Acting Chief Counsel of FDA, now at Sidley Austin LLP.  The full conference agenda and sign-up information can be found at: http://www.fdli.org/conf/annual/11/agenda.html.

By Alan M. Kirschenbaum –

Today drug and device manufacturers and other stakeholders had an opportunity to provide comments to CMS during an Open Door Forum teleconference on how the physician payment sunshine provisions of the Patient Protection and Affordable Care Act ("ACA") should be implemented.  As explained in our memo summarizing the drug and device provisions of the ACA, section 6002 of that statute requires each manufacturer of a covered drug, device, biological, or medical supply that is operating in the U.S. or its territories or  possessions annually to electronically report information on payments or other transfers of value made during the prior year to physicians and teaching hospitals.  The first report must be submitted by March 31, 2013 for payments made in calendar year 2012. 

CMS officials were in self-described listening mode during the Open Door Forum, and did not provide any guidance or answer any questions on how the law will be implemented, other than to say that the agency will initiate notice and comment rulemaking with a proposed regulation later this year.  The purpose of the session was to enable CMS to be more focused in its initial proposal.  CMS sought comments during the call on several pre-published questions, which fell into three general categories.

The first category of questions asked whether CMS should require disclosure of additional forms of payment and additional specific categories of payments beyond those specified in the statute.  The unanimous consensus of participants on the call, which included representatives from PhRMA, BIO, and AdvaMed, was that no new requirements should be added, but CMS should instead focus on establishing clear rules for disclosure of the 14 categories of payments already required by statute.  Participants emphasized the need for narrow and detailed definitions of reportable categories in order to ensure uniformity of reporting, prevent double counting of payments, and avoid confusion on how to report payments that conceivably might fall into multiple categories.  Examples were given of travel expenses paid to researchers to attend an investigator meeting, which might be considered payments for either research or travel, or payments to members of a data safety monitoring board, which might be viewed as either research payments or consulting fees.

The second category of CMS questions focused on usability of the reported data by the public.  Industry trade association representatives all emphasized that the published data reports must be accompanied by background material explaining the vital role of industry-physician interactions in contributing to the design and development of products, the conduct of research, the training and education of practitioners in products and their uses, and other facets of appropriate product use.

Thirdly, CMS asked questions concerning the format of submissions and the process for corrections.  Participants recommended the spreadsheet submission format currently used by states, with CMS specifying the reporting template.  Several participants urged that manufacturers should have a mechanism for checking CMS’ reports on their payments before the reports are posted on the CMS web site, and at any time after they are posted.

Manufacturers and other stakeholders may submit feedback on CMS’s questions by sending an email to physiciansunshine@cms.hhs.gov by April 7.  Manufacturers will have an opportunity to comment on CMS’ proposed rule when it is issued, but early input at this stage will help ensure that the proposed regulation is clear, appropriately detailed, and balanced.

By Nisha P. Shah & Alan M. Kirschenbaum –

In an unusual step, the State of California’s Department of Insurance intervened in a qui tam lawsuit brought against Bristol-Myers Squibb (“BMS”) by three former employees, including a former member of the L.A. Lakers.  In The People ex rel. Wilson v. Bristol-Myers Squibb, Inc., the employees claim that BMS paid kickbacks to physicians and pharmacists to increase prescriptions and dispensing of the company’s drugs.  The complaint alleges that BMS caused the submission to private insurers of fraudulent claims that were induced by payments of these kickbacks, in violation of the state’s Penal Code and Insurance Code.

BMS allegedly paid kickbacks to physicians who were high prescribers of the company’s drugs as well as physicians on formulary committees and physician practice groups.  Kickbacks described in the complaint included gifts, liquor, gift cards, entertainment and sporting event tickets, participation in two L.A. Lakers “Dream Camps”, high-end dinners, trips to resorts, and cash payments disguised as grants and fees for preceptorships, consulting, advisory boards, and speaker bureaus.  BMS also allegedly provided gift cards and meals to pharmacists to induce them to fill prescriptions with BMS products rather than generic equivalents.  The plaintiffs and the Department of Insurance are seeking monetary penalties and the disgorgement of millions of dollars in profits stemming from the kickbacks, plus treble damages.   

Kickback allegations against pharmaceutical companies have become commonplace in recent years, but the cases have generally been brought under antikickback and false claims laws applicable to federal and state health care programs.  What is unusual here is that the claims are brought under state insurance fraud laws with the participation of the state Insurance Commissioner, and they are based on allegations that private insurance plans – not government programs – have been defrauded.  According to the complaint, BMS caused false claims to be submitted to insurance policies in violation of Cal. Penal Code Section 550.  The plaintiffs also make creative use of California’s runners and cappers statute, Cal. Ins. Code § 1871.7, which prohibits the knowing employment of “runners, cappers, steerers … to procure clients or patients … to perform or obtain services or benefits under a contract of insurance or that will be the basis for a claim against an insured individual or his or her insurer.”  BMS allegedly violated this law by “employing” physicians by paying them kickbacks in order to “procure clients or patients . . . to obtain services or benefits” under an insurance contract, and by employing sales representatives to give kickbacks to physicians to generate prescriptions that would be paid by private insurers.  We may see other states follow California’s lead in using state insurance laws – especially those authorizing whistleblower suits – as a prosecutorial weapon against drug manufacturers.

By JP Ellison –

The criminal prosecution of Lauren Stevens, the former in-house counsel for GSK, took another twist yesterday when Judge Titus dismissed her indictment without prejudice.  We have previously reported on this prosecution here and here.  Judge Titus found that the prosecutors' explanation to the grand jurors of the "advice of counsel" defense was erroneous because the government instructed the grand jurors that advice of counsel was an affirmative defense to be raised at trial.  The court said that instruction was erroneous because the advice of counsel defense can negate the intent that must exist for the crimes charged, and thus goes to the question of whether there is probable cause for the charges, a determination that the grand jury must make.  The court further ruled that the incorrect instruction raised "grave doubts that the indictment was free from the substantial influence" of  the error, which required dismissal of the indictment.  Because the court did not find prosecutorial misconduct, the dismissal was without prejudice.

It is not clear what effect this ruling will have on the prosecution.  The government's options include, but are not limited to, appealing from the district court's decision; or as the district court allowed, presenting evidence to a new grand jury instructing that grand jury  on the advice of counsel defense in accordance with the court's opinion.

Have you been looking for that one, comprehensive publication that covers intellectual property and patent law issues in the pharmaceutical, biotechnology and chemical industries from around the world’s key jurisdictions?  Well, it’s finally here – or will be in the next month or so when the Oxford University Press (“OUP”) publishes its 2-volume, 2,536-page “Pharmaceutical, Biotechnology and Chemical Inventions – World Protection and Exploitation.” 

The publication, which has been a massive undertaking and in the works for a couple of years, is edited by Duncan Bucknell, the founder and CEO of Think IP Strategy, a global intellectual property strategy firm.  Hyman, Phelps & McNamara, P.C.’s Robert A. Dormer and Kurt R. Karst contributed to the publication, providing the United States aspect on various product approval and patent and exclusivity issues.  A list of all contributors is provided below.  Quite a world class-group!

Here’s a synopsis of the publication provided by OUP:

This book highlights the special issues arising in obtaining, commercialising, enforcing or attacking intellectual property rights (including protection of regulatory data) in the pharmaceutical, biotechnology and chemical industries across the world's key jurisdictions. It is unique in presenting topic matter horizontally by subject to facilitate comparison between country practices. The first two chapters give a general introduction to the differences between the jurisdictions and an overview of some of the key concepts in patent law. The remainder of the book is dedicated to a detailed analysis of the major legal issues arising in these areas of technology. Each component chapter has a comparative introduction, looking at the variances in the laws of different domains, followed by side-by-side analysis of the relevant regimes, including tables and flow-charts which summarise and explain the key legal concepts. The jurisdictions covered are the United States, Europe (UK, Germany, Netherlands, France and Italy), Japan, Canada, Australia, India and China.

OUP has kindly granted FDA Law Blog readers a 20% discount.  To claim your discount, just click here (or call OUP at +44 (0) 1536 741727) and use the code “ALBUCK10.”  (Note: This offer is only available on orders placed directly with OUP and is not available through any other supplier.)

Contributors:
Pravin Anand, Anund and Anund, India
John Bateman, Kenyon & Kenyon, USA
Susan Beaubien, Moffat & Co, Macera & Jarzyna LLP, Canada
Theo Bodewig, Humboldt University, Germany (Consultant Editor)
Simon Cohen, Taylor Wessing, UK
Wayne Condon, Griffith Hack, Australia
Marina Couste, Howrey LLP, France
Robert A. Dormer, Hyman, Phelps & McNamara, P.C., United States
Atsushi Hakoda, Nakamura & Partners, Japan
Juany Huang, Panawell and Partners LLC, China
Reuben E. Jacob, R. G. C. Jenkins, UK
Fabrizio Jacobacci, Studio Legale Jacobacci & Associati, Italy
Kurt R. Karst, Hyman, Phelps & McNamara, P.C., United States
Klaus Kupka, Taylor Wessing, Germany
David C. Musker, R. G. C. Jenkins, UK
Cyra Nargolwalla, Cabinet Plasseraud, France
Nina Resinek, Taylor Wessing, Germany
Toshio Takizawa, Nakamura & Partners, Japan
Koichi Tsujii, Nakamura & Partners, Japan
Klaus Schweitzer, Plate Schweitzer Zounek, Patentanwaelte, Germany
Deborah Somerville, Kenyon & Kenyon, USA
Paul Steinhauser, Arnold Siedsma, Netherlands
Nigel Stoate, Taylor Wessing, UK
Rosie Stramandinoli, Griffith Hack, Australia
Otto Swens, Steinhauser Hoogenraad, Advocaten, The Netherlands
Andreas Walkenhorst, Tergau & Pohl Patentanwälte, Germany
William Yang Panawell & Partners LLC, China
Federico Zanardi Landi, Studio Legale Jacobacci & Associati, Italy

By Ricardo Carvajal –

The Supreme Court affirmed a 9th Circuit Court of Appeals decision that allows a securities fraud class action to go forward against Matrixx Initiatives, Inc. ("Matrixx") for allegedly violating § 10(b) of the Securities Exchange Act and Exchange Commission Rule 10b-5.  As we discussed in a prior posting, the Court granted certiorari last June on the question of “[w]hether a plaintiff can state a claim under § 10(b) of the Securities Exchange Act and SEC Rule 10b-5 based on a pharmaceutical company's nondisclosure of adverse event reports even though the reports are not alleged to be statistically significant.”  By a vote of 9-0, the answer to that question is “yes.”

The Court concluded that “the materiality of adverse event reports cannot be reduced to a bright-line rule.  Although in many cases reasonable investors would not consider reports of adverse events to be material information, respondents have alleged facts plausibly suggesting that reasonable investors would have viewed [the reports at issue] as material.”  The Court noted that there are many instances in which medical experts and FDA infer a causal link between adverse events and a drug in the absence of statistically significant data, and that “it stands to reason that in certain cases reasonable investors would as well.” 

The Court adhered to its prior holding in Basic Inc. v. Levinson, 485 U.S. 224 (1988) that the “materiality requirement is satisfied when there is ‘a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.’” The Court emphasized that Basic’s “total mix” standard is not satisfied by the “mere existence” of adverse event reports.  “Something more is needed, but that something more is not limited to statistical significance, and can come from ‘the source, content, and context of the reports.’”

With respect to the element of scienter, the Court concluded that “Matrixx’s proposed bright-line rule requiring an allegation of statistical significance to establish a strong inference of scienter is just as flawed as its approach to materiality.”  Considering respondents’ allegations collectively, the Court concluded that there is a “‘cogent and compelling’ inference that Matrixx elected not to disclose the reports of adverse events not because it believed they were meaningless but because it understood their likely effect on the market.”

By Ricardo Carvajal –

Last week FDA published a Q&A that explains steps the agency is taking to ensure that foods imported from Japan are safe.  Currently FDA does not believe there is any risk to the U.S. food supply, but is continuing to gather information and monitor the situation so as to detect any potential risks.  In response, Rep. DeLauro wrote a letter to Commissioner Hamburg asking the agency to explain the basis for some of the statements in the Q&A, and urging radiological testing of all food imported from Japan. 

This week, FDA followed up on its Q&A by issuing an Import Alert that targets specified products from certain prefectures in Japan based on the potential for contamination with radionuclides.  FDA has a compliance policy guide that provides guidance levels for radionuclides in domestic and imported foods. FDA also has a guidance document that provides recommendations for state and local agencies to help them respond to incidents of contamination with radionuclides. Both documents incorporate information learned in the wake of the Chernobyl accident.

FDA's Q&A also addresses the availability of FDA-approved drugs for radiation exposure.  FDA warns consumers against “internet sites and other retail outlets promoting products making false claims to prevent or treat effects of radiation or products that are not FDA-approved.”  Recent history suggests that some of those retail outlets may be the target of warning letters issued by FDA, and perhaps the Federal Trade Commission.

By Larry K. Houck –

Early March on Capitol Hill has seen a flurry of legislation designed to combat a number of perceived controlled substance problems, including opioid treatment, pain management, drugs marketed to kids and pill mills.

Prescription Drug Abuse Prevention and Treatment Act of 2011

Senator Jay Rockefeller (D-WV) introduced the ambitious “Prescription Drug Abuse Prevention and Treatment Act of 2011” that would amend the Controlled Substances Act (“CSA”) in several ways.  S. 507 would require health care practitioners to complete 16 hours of specialized pain management training before they could register to prescribe or dispense methadone and other opioids, then complete at least 16 hours of training every three years.  The bill would also award grants to states and non-profit groups for educating consumers about methadone and opioid abuse. 

The bill would require establishment of a Controlled Substances Clinical Standards Commission comprised of representatives from responsible federal agencies.  The Commission would develop guidelines for “appropriate and safe dosing” for methadone including recommendations for maximum daily doses, abuse reduction, initiation of methadone pain management for prescribing practitioners, and education for patients and practitioners for maintenance therapy and pain management.  The bill requires the Commission to establish methadone dosing guidelines for pain management and opioid treatment programs within two years after enactment of the bill with updating at least every three years thereafter. 

In addition, the bill would restrict dispensing or prescribing methadone 40 mg. diskettes consistent with the Drug Enforcement Administration’s (“DEA’s”) policy.  DEA previously sent letters to manufacturers getting them to agree to restrict distribution of 40 mg. methadone dispersible tablets to authorized opioid detoxification and maintenance treatment programs and hospitals.

Lastly, the bill provides for $25 million per year to fund interoperable prescription drug monitoring programs in each state through the National All Schedules Prescription Electronic Reporting program.

Saving Kids from Dangerous Drugs Act of 2011

Senators Diane Feinstein (D-CA) and Chuck Grassley (R-IA) introduced legislation aimed at fighting drug misuse and abuse by minors by enhancing penalties for those who add flavorings to controlled substances or otherwise market them to children.  S. 513, known as the “Saving Kids from Dangerous Drugs Act of 2011,” would increase penalties for adults who knowingly manufacture schedule I or II drugs that are combined with a beverage or candy product, that are marketed or packaged to appear similar to a beverage or candy product or that are modified by a flavoring or coloring to distribute or sell it to minors.  Individuals who alter a drug in such a manner would be subject to up to 10 years imprisonment for a first offense and up to 20 years imprisonment in addition to the penalty for the underlying offense.  Increased penalties would not apply to a drug that has been approved by FDA if its contents, marketing and packaging has not been altered from the approved form or if it has been altered by a practitioner for a legitimate medical purpose in the usual course of professional practice.

Pharmacies have at times added child-friendly flavors to prescription drugs to make them more palatable to pediatric patients.  We assume that the “practitioner” exemption would apply to pharmacists acting in this manner. 

Pill Mill Crackdown Act of 2011

A third bill introduced in the House would double prison sentences and triple fines for “pill mill” operators.  “Pill mills” are clinics, doctors’ offices or pharmacies that dispense or prescribe powerful opioids for other than legitimate medical purposes or in an inappropriate manner.  (Under 21 C.F.R. § 1306.04(a), for a controlled substance prescription to be effective, it must be issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice).  The “Pill Mill Crackdown Act of 2011,” was introduced by Representative Vern Buchanan (R-FL) and co-sponsored by 29 members, including 15 Florida members.  Last month DEA and other federal, state and local law enforcement officers made 22 arrests and seized over $2.2 million in cash at pain clinics in South Florida.

H.R. 1065 would also potentially have the most far-reaching impact on current controlled substance requirements by rescheduling hydrocodone combination products including Vicodin, Lorcet, Lortabs and Norco from schedule III to the more restrictive schedule II.  Prescriptions for schedule II drugs, except in limited circumstances, must be written and cannot be refilled; schedule III drug prescriptions may be written, telephoned or faxed and can be refilled up to five times within six months.  Schedule II drug transfers require DEA Official Order Forms and registrants must implement heightened security.  DEA has observed that hydrocodone is the most frequently prescribed opiate in the U.S. and that diversion and abuse of the drug has been escalating.  As of October 2009, the agency was reviewing a petition to reschedule hydrocodone combination products to schedule II.

The three bills have been referred to committee:  S. 507 to the Committee on Health, Education, Labor and Pensions, S. 513 to the Committee on the Judiciary, and H.R. 1065 to the Energy and Commerce Committee. 

Hyman, Phelps & McNamara, P.C. (“HP&M”) and VirginiaTech are pleased to announce the availability of the first two DVD’s of the VERSUS series that is being sponsored by VirginiaTech.  They provide an overview of the processes a prescription drug must follow to be FDA-approved and the pervasive regulatory requirements that apply after FDA’s approval.  These DVDs feature HP&M attorneys with decades of experience in dealing with FDA regarding these important topics.  The subjects that are discussed include: 

• An Overview of FDA’s Regulation of Rx Drugs – From Research to Your Medicine Cabinet – Are Your Prescription Drugs Safe and Effective?  The DVD features commentary from HP&M’s Roger C. Thies.
• An Overview of Generic Drug Regulation in the United States – The Continuing Struggle to Reduce the Cost of Rx Drugs and Stimulate the Development of New Therapies.  The DVD Features commentary from HP&M’s Robert A. Dormer, and contains additional discussion on the Biologics Price Competition and Innovation Act and the Family Smoking Prevention and Tobacco Control Act

The DVDs are suitable for a variety of educational and work related purposes, and can be ordered and purchased directly from VirginiaTech’s Center for Applied Health Sciences.  An order form can be obtained by contacting Angela Correa at 540-231-2075, by e-mail to versus@vt.edu, by a facsimile to (540) 231-9293, or by snail mail, using the address below.

Virginia Tech Center for Applied Health Sciences
Attention: Angela Correa
123 Duckpond Drive, mailcode 0418
Blacksburg, Virginia 24061