By Ricardo Carvajal –

Section 10(b) of the Exchange Act and Securities and Exchange Commission (“SEC”) Rule 10b-5 prohibits “any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”  To adequately allege a violation, a plaintiff must allege (among other things) that a defendant has engaged in a material representation or omission of fact, and that the defendant has done so with an intent to deceive, manipulate, or defraud – otherwise known as “scienter.”

Last fall, the 9th Circuit overturned a district court’s dismissal of a class action lawsuit alleging that Matrixx Initiatives, Inc. (“Matrixx”) violated securities laws when it failed to disclose information about possible adverse health effects of Zicam, its zinc-based cold remedy.  The district court had dismissed the complaint on the ground that plaintiffs alleged insufficient evidence to support their claim of a securities fraud violation.  In specific, the district court held that adverse event reports (“AERs”) about Zicam were not material because they were not statistically significant, and also that plaintiffs’ allegations of scienter were inadequate.  The appellate court reversed, concluding that the district court erred when it applied a statistical significance standard to determine the materiality of the AERs.  The appellate court also concluded that the inference of scienter was sufficiently strong to survive dismissal.

Matrixx appealed the 9th Circuit decision, and the Supreme Court granted certiorari in 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.”  Since then, the drug, medical device, and dietary supplement industries have lined up in solid opposition to the 9th Circuit decision, as evidenced by briefs recently filed in the case by PhRMA, AdvaMed, BayBio, the Consumer Healthcare Products Association, the Council for Responsible Nutrition, and the Natural Products Association, among others (see the U.S. Supreme Court docket here and SCOTUSBlog for copies of the briefs). 

Generally, the briefs argue that the district court properly applied the statistical significance standard, and that upholding the 9th Circuit decision would have strong detrimental effects on companies, investors, and consumers.  More specifically, the briefs argue that AERs are not evidence of a causal relationship between a product and an adverse event, and that data submitted in AERs requires analysis to determine its significance.  Yet, if the 9th Circuit decision stands, companies would have little choice but to disclose all adverse event reports.  The resulting flood of information could confuse and mislead both investors and consumers.

Although most of the briefs focus on the statistical significance standard, the Washington Legal Foundation (“WLF”) filed a brief that focuses solely on the issue of scienter.  WLF argues that the facts alleged in the case do not adequately support the inference of scienter drawn by the appellate court.  Rather, those facts support the inference that Matrixx considered the AERs for Zicam to not be material – a position that Matrixx advances in its own brief.

Given the potential impact on a wide range of FDA-regulated companies, this is a case that should be watched closely.

By Michelle Butler & Alan Kirschenbaum –  

It took CMS 17 years to issue a regulation implementing the Medicaid Rebate Program, and much of that regulation is turning out to be short-lived.  On Friday, September 3, CMS published a proposal to withdraw provisions of its 2007 regulation governing the determination of average manufacturer price ("AMP") and the setting of federal upper limits ("FULs") for multiple source drugs.  Both of these regulations have been superseded by the Patient Protection and Affordable Care Act ("PPACA"), which, as described in our summary of that law, made significant changes to the definition of AMP and also redefined the methodology for calculating FULs. 

As a result of the PPACA changes, CMS is proposing to withdraw 42 C.F.R. § 447.504, “Determination of AMP,” in its entirety.  In the preamble, CMS advises companies to calculate AMP based on the definitions set forth in the statute (effective October 1, 2010) rather than definitions in the withdrawn AMP regulation and other CMS guidance.  CMS states that it expects to develop regulations that will implement the changes made by PPACA relating to the determination of AMP and the setting of FULs.  However, no timeline is provided, and regulations certainly will not be forthcoming by the time the first monthly AMP report (for October) is due under the new PPACA methodology on November 30.  For that report, manufacturers will have to rely on the statutory definition, whatever subregulatory guidance CMS may issue before then, and reasonable assumptions regarding issues that are not addressed in the statute or any guidance.  CMS also proposes to withdraw in its entirety 42 C.F.R. § 447.514, “Upper limits for multiple source drugs,” which is inconsistent with the new FUL methodology set forth in PPACA. 

It is important to note that certain AMP-related provisions of the 2007 regulation would not be withdrawn under CMS’ proposal, including the requirements that AMP be reported monthly and quarterly, that 12-month averaging be used for lagged price concessions, and that bundled discounts be allocated in calculating AMP.  Also remaining intact would be provisions relating to best price, authorized generics, certification of reports, recordkeeping, restatements of AMP and best price, nominal price sales, and reporting of prompt pay discounts.

Comments may be submitted to CMS until 5 pm on October 4, 2010.

By Kurt R. Karst –   

The dispute between Cody Laboratories, Inc. and Lannett Co., Inc. (collectively “Cody/Lannett”) and FDA over marketed unapproved Morphine Sulfate Solution Immediate-Release 20mg/mL drug products did not end with the July 26, 2010 decision from the U.S. District Court for the District of Wyoming, in which the court denied Cody/Lannett’s Motion for Temporary Restraining Order and Preliminary Injunction requesting that the court enjoin FDA from taking any enforcement action with respect to their marketed unapproved Morphine Sulfate drug products.  Since then, Cody/Lannett filed, FDA opposed, and the court granted, a Motion for Clarification, Amendment, or Reconsideration of Order  raising certain jurisdictional issues.  FDA promptly filed a Motion to Dismiss – and a Proposed Order – arguing for dismissal for lack of jurisdiction or failure to state a claim (or both).

As we previously reported (here and here), the Cody/Lannett lawsuit stems from FDA’s March 2009 Warning Letters to Cody and Lannett (among other companies) to stop manufacturing certain unapproved narcotic drugs, including morphine sulfate oral solutions.  At that time, FDA concluded that marketed unapproved morphine sulfate products are “new drugs [under the FDCA] and not grandfathered and that manufacturing and marketing of these products without an approved application constituted a violation of the Act.”  In subsequent communications with Cody/Lannett, FDA stated that the Agency would exercise enforcement discretion with regard to the shipment and distribution of Cody’s/Lannett’s unapproved Morphine Sulfate Solution Immediate-Release 20mg/mL drug products until July 24, 2010, which is 180 days after FDA approved an NDA for the drug product.  Meanwhile, Lannett submitted its own NDA to FDA for Morphine Sulfate Solution Immediate-Release 20mg/mL in late February 2010.  That NDA is still under review and FDA has not taken any further enforcement action against Cody/Lannett. 

Cody/Lannett’s latest motion does not seek to re-litigate any issue the court decided on in ruling on the TRO/PI Motion.  “Rather, Cody/Lannett seek a clarification as to whether the Court did in fact intend to dismiss the Complaint itself, sua sponte.”  According to Cody/Lannett:

If the Court did in fact intend by its Order to dismiss the case sua sponte, it is not clear to Cody/Lannett from the Order whether the basis (or bases, if alternative grounds exist) for such dismissal was jurisdictional, justiciability, failure to state a claim, or some other grounds.  If the Court in fact intended to dismiss the case, this clarification would be necessary in order for Cody/Lannett to evaluate its options moving forwarding, including whether to file an amended Complaint or to appeal a final judgment. . . .

In addition, Cody/Lannett wish to clarify whether the Court intended by its Order to rule on some of the ultimate issues in the case without discovery or briefing.  This is particularly significant with respect to certain of the Court’s statements in the Order regarding whether Cody/Lannett’s product is a “new drug” for purposes of the Food, Drug, and Cosmetic Act of 1938.  As the grandfathering provisions of the law have been rarely litigated, Cody/Lannett would certainly seek the opportunity to be heard on the substance of its contention that its drug is not a “new drug,” a question about which there was only limited discussion during the July 23, 2010 hearing on the Motion for TRO/PI.

Citing our FDA Law Blog post of July 26, 2010, in which we commented that FDA will likely use the court’s decision (which the Agency submitted to the court as a proposed order) as “Exhibit A” if any company expresses its intent to challenge FDA in court over the Agency’s Unapproved Drugs Initiative enforcement plans, Cody/Lannett also note that:

The Court’s clarification is important not only for this case so that Cody/Lannett may proceed appropriately, but for the Food and Drug industry as well, as the Court’s Order has already been publicized and, to the extent it addresses the merits of the underlying issues (rather than the temporary and preliminary injunctive relief standard), will likely be viewed as breaking new legal ground.  As such, if the Order is not clarified and amended, Cody/Lannett expect that the Order will be frequently cited as some of the only legal authority in this area of law, and it may be regularly relied upon by the FDA as providing legal support for highly controversial positions taken by the agency.

Echoing some of the same arguments FDA previously put forth in this case, the Agency’s  Motion to Dismiss (and Proposed Order) argues that the case should be dismissed for lack of jurisdiction.

The Court lacks jurisdiction for several reasons.  Principal among these is that plaintiffs seek to enjoin a hypothetical enforcement action.  At this point, FDA personnel have done no more than issue warning letters to plaintiffs, and FDA staff has had discussions with plaintiffs about the issues raised in those letters.  Such warning letters and informal discussions do not constitute final agency action that is ripe for judicial review. . . .  If parties could challenge these actions, it would severely hinder FDA in performing its statutory duty to protect the public health and would flood the courts with premature requests for advisory opinions.  Moreover, the Supreme Court long ago established that courts lack jurisdiction to enjoin FDA’s enforcement proceedings under FDCA, the very relief plaintiffs seek here.  See Ewing v. Mytinger & Casselberry, Inc., 339 U.S. 594 (1950).

This Court has no jurisdiction to review unripe, nonfinal agency action or to enjoin a hypothetical enforcement proceeding. The case can be dismissed any of these reasons, or because plaintiffs failed to avail themselves of an administrative procedure available to them that must, under FDA regulations, be used before a complaint may be filed in court.

And even if jurisdiction exists, FDA argues that the case should be dismissed for failure to state a claim:

[P]laintiffs have failed to state a claim on which relief can be granted.  Plaintiffs contend that their drug is not a “new drug” within the meaning of the FDCA because it has “grandfather” status under the Act.  In order for a drug to be “grandfathered,” however, the labeling and composition of the drug in question must be the same as it was before 1938.  Plaintiffs concede that they only began marketing their drug five years ago, and they do not provide any pre-1938 labeling for their product or even make any allegations about the pre-1938 labeling for their product.  Nor do they assert that the composition of their product is the same as it was prior to 1938. . . .  Based on their allegations, it is impossible for plaintiffs’ product to be “grandfathered.”  In fact, if plaintiffs’ argument were accepted, then anyone could market a drug that contains an active ingredient that was on the market prior to 1938, claim that it is “grandfathered,” and thus avoid FDA approval.  This is an absurd – and potentially dangerous – argument.  Nor was FDA required to compile a “record” of this nonfinal agency action. [(citation omitted)]

Cody/Lannett’s response to FDA’s Motion to Dismiss is due by September 14th.  A hearing is scheduled for October 8th in Cheyenne, Wyoming.

By Kurt R. Karst –      

A recent report issued by Morgan Stanley, titled Pharmaceuticals – Potential Selective Upside for Industry post Prandin Ruling, predicts “increasing probability for the innovative pharmaceutical industry to successfully delay US generic approval of select innovative drugs” following a pair of rulings (here and here) in Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories, Ltd. handed down earlier this year by the U.S. Court of Appeals for the Federal Circuit concerning Patent Use Codes (“PUCs”) and the drug product PRANDIN (repaglinide) Tablets. 

As we previously reported (here and here), in those decisions the Federal Circuit ruled that a generic applicant “does not have a statutory basis to assert a counterclaim requesting” a court to enter an order to change an Orange Book-listed PUC because a PUC, among other things, is not “patent information.”  PUCs, as the Morgan Stanley report shows (using the table we put together for a previous post), have doubled in recent years, while at the same time “the number of approved patents has remained largely unchanged.”    According to Morgan Stanley: 

We anticipate that several companies will extract significant [earnings per share] and [net present value] upside from utilization of PUC (Patent Use Code) narrative strategies.  In the absence of listed Orange Book patents, it is challenging to identify discrete opportunities.  However, we believe those companies facing near term generic competition have the strongest motivation to consider this strategy in order to capture residual intellectual property value.

The report tempers its positive outlook, however, noting that:

While this is an important positive development for the industry . . . only select drugs will benefit from any upside a PUC based legal strategy brings. The innovative drug must have robust “use” patents listed in the FDA Orange Book.  In addition, one must believe that Congress will not amend the current FDA law to limit the use or abuse of this strategy.  Regardless, we anticipate increasing listing of “use” patents in the Orange Book as the innovative industry seeks to maximize any commercial gains.

Interestingly, the Morgan Stanley report fingers AstraZeneca’s (“AZN’s”) CRESTOR (rosuvastatin calcium) Tablets as one drug product for which a PUC strategy may be beneficial.  Assuming there is a “section viii” statement to carve out out certain information covered by two Orange Book-listed patents – U.S. Patent Nos. 7,030,152 and 6,858,618 – “AZN will likely respond with (i) filing a Citizens Petition (ii) Argue that its PUC code prevents a carve out approval.”  Morgan Stanley anticipates “a 90% probability that the FDA is unable to carve out an indication for the ANDA,” and that “assuming Congress does not enact a change in FDA regulatory law, we estimate a 64% probability that AZN can delay US generic introduction until 3Q 2018.”  U.S. Patent No. 7,030,152 is listed in the Orange Book with a “U-1032” PUC, which is defined as “USE OF ROSUVASTATIN CALCIUM FOR THE PRIMARY PREVENTION OF CARDIOVASCULAR DISEASE IN INDIVIDUALS WITHOUT CLINICALLY EVIDENT CORONARY HEART DISEASE BUT WITH INCREASED RISK FACTORS,” and U.S. Patent No. 6,858,618 is listed with a “U-618” PUC, which is defined as “USE OF ROSUVASTATIN CALCIUM TO REDUCE ELEVATED TOTAL-C, LDL-C, APOB, NONHDL-C OR TG LEVELS; TO INCREASE HDL-C IN ADULT PATIENTS WITH PRIMARY HYPERLIPIDEMIA OR MIXED DYSLIPIDEMIA; AND TO SLOW THE PROGRESSION OF ATHEROSCLEROSIS.”

So it is possible there could be another PUC battle on the horizon – or perhaps in the halls of Congress.  We will certainly keep you posted. 

By Kurt R. Karst –      

The long-running dispute over a Patent Term Extension (“PTE”) for U.S. Patent No. 5,196,404 (“the ‘404 patent”) covering The Medicines Company’s (“MDCO’s”) ANGIOMAX (bivalirudin) may be far from over.  On September 1st, APP Pharmaceuticals, LLC, which previously submitted an amicus brief in the case (as did Teva Pharmaceuticals – here), filed a Notice of Appeal to the U.S. Court of Appeals for the Federal Circuit.  The notice follows APP’s Motion to Intervene in the case. 

As we previously reported, on  August 3, 2010, Judge Claude Hilton of the U.S. District Court for the Eastern District of Virginia (Alexandria Division) granted MDCO’s Motion for Summary Judgment and remanded the case to the U.S. Patent and Trademark Office (“PTO”) to consider MDCO’s PTE application for the ‘404 patent “timely filed and to adopt an interpretation of § 156(d)(l) that includes a next business day construction for filing of a [PTE]  application.”  As FDA Law Blog readers will recall, FDA approved ANGIOMAX at 5:18 PM on Friday, December 15, 2000, and MDCO submitted its PTE application to the PTO on February 14, 2001 – 62 days after NDA approval (including the December 15, 2000 date of approval).  Under 35 U.S.C. § 156(d)(1), the submission of a PTE application must occur “within the sixty-day period beginning on the date the product received permission under the provision of law under which the applicable regulatory review period occurred for commercial marketing or use.”  MDCO had argued that the PTO should employ a “rule of construction” under which the Office would consider the 60-day PTE application submission period to commence on the first business day after the day the FDA transmits notice of NDA approval of the drug product if that transmittal occurs after normal business hours.  In the case of the PTE application for the ‘404 patent covering ANGIOMAX, that would mean the 60-day period would have begun on December 18, 2000 and the PTE application would have been timely filed.  Judge Hilton agreed with MDCO, ruling that “the proper interpretation of § 156(d)(1) is a business day construction of the phrase ‘beginning on the date.’  Of the parties’ competing interpretations the business day construction is consistent with the statute’s text, structure, and purpose.” 

Since Judge Hilton issued his decision almost a month ago, folks have wondered whether the PTO/FDA will appeal the decision to the Federal Circuit.  APP, which has an ANDA pending at FDA but has not yet been granted tentative approval, does not want to wait any longer and is attempting to take matters into its own hands.  According to APP’s Motion to Intervene:

On August 11, 2010 . . . , counsel for APP received a letter from counsel for Defendants indicating that Defendants have not decided whether they will appeal the Court’s August 3, 2010, Order and judgment for Plaintiff in this action.  APP no longer can reasonably expect that APP’s interests will be adequately represented (or represented at all) by Defendants.

APP’s anticipatory Notice of Appeal is intended “to become effective upon the granting of APP’s pending Motion for Leave to Intervene . . . .”  And what if Judge Hilton denies APP’s motion?  According to APP, “[i]n the event that the Court denies or conditionally grants APP’s pending Motion for Leave to Intervene, notice is hereby given that APP shall appeal to the United States Court of Appeals for the Federal Circuit from that Order and related rulings as well.”

Although MDCO has not made any submissions to the court since Judge Hilton issued his opinion, the company continues to lobby for its position.  According to FDA’s public calendar, MDCO representatives recently met with officials from FDA’s Office of Chief Counsel to discuss “The Medicines Company v. David Kappos, et al.”  Former Solicitor General of the United States Seth P. Waxman is among those MDCO representatives who attended the meeting – perhaps signaling MDCO’s intentions to go all the way to the U.S. Supreme Court if necessary.

By William T. Koustas –

Franck’s Lab, Inc. (“Defendant”), an Ocala, Florida veterinary compounding pharmacy, resumed compounding after a federal judge in the United States District Court for the Middle District of Florida denied the Government’s (“Plaintiff”) request for a preliminary injunction on August 19, 2010 that would have prohibited such activity.  The Defendant had previously admitted that it mistakenly compounded a vitamin supplement that was injected into 21 polo horses during the U.S. Open Polo Championships in April 2009, causing their deaths. 

In its Motion for Preliminary Injunction, the Plaintiff argued that regulations regarding the compounding of veterinary drugs permits such activity only “if such drugs are compounded from ‘approved animal or human drugs’ and state that ‘[n]othing in this part shall be construed as permitting compounding from bulk drugs.’”  U.S.A. v. Franck’s Lab, Inc., et al., United States District Court for the Middle District of Florida, Ocala Division, Memorandum in Support of Plaintiff’s Motion for Preliminary Injunction, July 2, 2010 (“Motion”) at 14; 21 C.F.R. § 530.13.  The Plaintiff noted that FDA issued a compliance policy guidance in 2003 regarding compounding in which it purportedly clarified its interpretation of the Animal Medicinal Drug Use Clarification Act.  Motion at 15.  In this guidance, FDA stated its view that compounding veterinary medicines is only acceptable as long as the compounding entity is not attempting to “intentionally circumvent the drug approval process,” and “compounding from bulk drug substances [as the Defendant did] or unapproved drugs renders the compounded drugs unsafe as a matter of law, and thus adulterated in violation of 21 U.S.C. § 351(a)(5).”  Id.  Therefore, the Plaintiff argues, the veterinary drugs the Defendant compounds from bulk drugs are new animal drugs as defined in 21 U.S.C. § 321(v) and require proper regulatory approval before they may be sold in interstate commerce.  Motion at 17.  The Plaintiff noted that the Defendant voluntarily agreed to temporarily stop compounding animal drugs as this litigation proceeded, but the Plaintiff sought this preliminary injunction anyway as such a suspension could be withdrawn at any time with 48 hours notice.  Motion at 2.

However, in its Response to Plaintiff’s Motion for Preliminary Injunction, the Defendant essentially argued that FDA does not have the authority to ban the compounding of veterinary drugs from bulk ingredients.  U.S.A. v. Franck’s Lab, Inc., et al., United States District Court for the Middle District of Florida, Ocala Division, Response to Plaintiff’s Motion for Preliminary Injunction, August 6, 2010 (“Response”) at 1.  The Defendant asserts that the “use of bulk ingredients to compound commercially unavailable preparations is a core part of the traditional pharmacy practice,” which is traditionally regulated by the states.  Response at 2.  Though the Defendant agrees that FDA has the authority to regulate the manufacturing of veterinary drugs “if it occurs in the guise of compounding,” such authority “does not permit FDA to override state law and impose a blanket ban on traditional pharmacy compounding practices.”  Response at 5-6.  The Defendant further notes that the legislative history of the Federal Food, Drug, and  Cosmetic Act (“FDCA”) seems to demonstrate that Congress intentionally left the regulation of compounding to the states as part of the practice of pharmacy while regulating the manufacturing of drugs because it was not generally regulated by the states.  Response at 7.  Additionally, the Defendant claims that even if the FDCA would allow FDA to regulate the compounding of veterinary drugs, it would need to do so by the promulgation of regulations through notice and comment rulemaking procedures rather than by the use of non-binding guidance documents.  Response at 11.

While the judge denied the Plaintiffs Motion for Preliminary Injunction, he also denied the Defendant’s Motion to Dismiss.  In issuing the denials, the judge did not write an opinion explaining his decision.  The Court is still considering the Plaintiff’s request to permanently enjoin the Defendant from compounding veterinary drugs from bulk drugs.

By Nisha P. Shah –

At the conclusion of a multi-year federal investigation, Allergan Inc. ("Allergan") announced today it has reached a settlement with the U.S. Department of Justice (DOJ) and will pay $600 million to resolve criminal and civil claims related to the sales and marketing of BOTOX (onabotulinumtoxinA).  According to the press release issued by the company, the DOJ alleged that Allergan was marketing BOTOX for the treatment of headache, pain, spasticity, and juvenile cerebral palsy.  During the relevant time of 2000 to 2005, these uses were off-label for which Allergan had not received approval from FDA.  A copy of the DOJ's press release is available here.

According to the Allergan press release, Allergan will plead guilty to a single misdemeanor misbranding charge, which  alleged that the drug product’s labeling did not contain adequate directions for the intended uses.  The misbranding charge is a strict liability offense. Allergan will pay $375 million in criminal penalties to settle the misbranding charge. 

Additionally, Allergan agreed to pay $225 million to settle civil claims under the civil False Claims Act.  Those lawsuit (here, here, and here) were filed in federal court in the Northern District of Georgia under the qui tam provisions of the False Claims Act.  As part of the global settlement, the company entered into a five-year Corporate Integrity Agreement ("CIA") with the Office of Inspector General ("OIG") of the U.S. Department of Health and Human Services.  It seems that no criminal or civil charges were brought against individuals in this case.

Notably, the Allergan press release mentions that the Government required Allergan to dismiss its First Amendment case, in which Allergan sought a decision that it could distribute truthful scientific and medical information to healthcare professionals to assist physicians in evaluating the risks and benefits if they decide to use BOTOX for off-label purposes. 

By Kurt R. Karst –   

Some drugs, it seems, are destined for Hatch-Waxman controversy and lore.  Eisai, Inc.s’ ARICEPT (donepezil HCl) Tablets is one of those drugs.  As the battle over pre-Medicare Modernization Act shared 180-day exclusivity takes off – with a recent citizen petition contesting shared exclusivity in this non-mutually-blocking Paragraph IV certification circumstance, notwithstanding two court decision (here and here) that have now recognized shared exclusivity for generic ARICEPT between Teva and Ranbaxy – another battle has been resolved . . . . at least for the moment. 

As we previously reported, last July, Apotex, Inc., filed a declaratory judgment action against Eisai in the U.S. District Court for the Middle District of North Carolina in an effort to “unpark” 180-day exclusivity for generic ARICEPT that Apotex mistakenly believed was held only by by Ranbaxy.  (Apotex subsequently submitted an Emergency Petition for Stay of Action to FDA asking the Agency to strip Teva of its final ANDA aproval – once again based on the mistaken belief that Teva is not eligible for 180-day exclusivity.  FDA has not yet substantively responsed to the petition.)  Eisai followed up with a Motion to Dismiss. (Apotex’s response and Eisai’s reply briefs are available here and here.)  In an August 27, 2010 decision, the court granted Eisai’s motion and dismissed the case, finding that “Apotex has not presented a justiciable Article III controversy in the present case, and that even if it had, the Court within its discretion would decline to exercise jurisdiction over this claim.”

Apotex, which originally argued that Article III jurisdiction exists based on a theory of “indefinite delay,” later amended it to a theory of “inability to promptly launch,” according to the court.  Under the former theory, when Apotex was under the belief that Ranbaxy was the sole applicant eligible for 180-day exclusivity, the company argued that jurisdiction exists “‘because Ranbaxy will not be able to launch its generic product,’ and following 180 days after the November [25,] 2010 expiration of [U.S. Patent No. 4,895,841 (‘the ’841 patent’), upon which shared 180-day exclusivity is based], there will be ‘no opportunity for a triggering event and subsequent generic entry to the market.’”  Under the latter theory, after Apotex acknowledged the possibility of shared 180-day exclusivity, the company argued that “its injury stems not from any purported delay in the triggering of Ranbaxy’s exclusivity period, but that ‘Eisai’s procedural manipulation of Hatch-Waxman creates a situation wherein Eisai can delay Apotex’s market entry by at least half a year’ after the expiration of the ’841 Patent in November 2010 – and before a period of 180-days thereafter” (italics in original).  The court was not convined by either theory. 

With respect to Apotex’s “prompt launch” theory, the court, in applying the Federal Circuit’s 2008 decision in Jannsen Pharm., N.V. & Jannsen, L.P. v. Apotex, Inc. (in which the Federal Circuit held that with respect to Apotex’s “inability to promptly launch” claim, the company did not have standing to bring such a claim because “Apotex’s inability to promptly launch its generic risperidone product because of [first-filer] Teva’s 180-day exclusivity period is not a cognizable Article III controversy, but a result envisioned by the Hatch-Waxman Act”), ruled that:

Apotex’s alleged inability to promptly launch its donepezil hydrochloride product stems from the 180-day exclusivity periods obtained by first-filers Ranbaxy and Teva, which is an intended consequence and a result envisioned by the Hatch-Waxman Act. Accordingly, any injury flowing from Apotex’s inability to “promptly launch” its generic pharmaceutical or obtain FDA approval of its ANDA application prior to the exhaustion of the first-filers’ exclusivity period does not present the Court with an injury that may redressed by means of a declaratory judgment. [(internal quotation and citation omitted)]

With respect to Apotex’s “indefinite delay” theory, the court decided that “Apotex has failed to establish that any delay preventing its entry into the donepezil hydrochloride market following the expiration of the ’841 Patent is sufficiently real or immediate so as to present this Court with a justiciable Article III controversy.”  Why?  Because:

Apotex has failed to present any basis upon which the Court could conclude that both first-filers, Ranbaxy and Teva, will, or are likely to, delay in bringing the generic product to market following the expiration of the ’841 Patent. . . .  Eisai’s ’841 Patent does not expire until November 2010, and Apotex has neither shown that Ranbaxy’s regulatory complications are likely to indefinitely prevent its marketing of donepezil hydrochloride, nor that Teva will fail to begin marketing the generic drug at that point, both of which would be required showings to demonstrate such an injury under these facts.

We'll let you figure out that puzzler on your own . . . .

By Ricardo Carvajal –

According to one working definition, synthetic biology encompasses "the design and fabrication of biological components and systems that do not already exist in the natural world" and "the re-design and fabrication of existing biological systems."  Recent developments in the field prompted the Presidential Commission for the Study of Bioethical Issues, housed with the Department of Health and Humans Services, to publish a Federal Register notice seeking comment on:

• the potential benefits and risks of synthetic biology;
• consideration of ethical boundaries that should apply; and
• strategies to ensure that the public benefits from product and tools derived through synthetic biology.

The Commission was formed by executive order in November 2009 to “advise the President on bioethical issues that may emerge as a consequence of advances in biomedicine and related areas of science and technology.”  In May 2010, the President directed the Commission to address synthetic biology in the wake of the announcement by the J. Craig Venter Institute that its researchers had constructed the “first self-replicating synthetic bacterial cell.”

Broadly defined, synthetic biology has already generated numerous medical and agricultural applications that have required the attention of FDA.  However, further advances in the field (particularly those geared toward the creation of what could be dubbed artificial life), are certain to present additional challenges to the agency.  Those challenges were acknowledged by the Commissioner in a recent speech stressing the importance of developing the agency's regulatory science capabilities – an issue we recently blogged on.

By Kurt R. Karst –   

Responding to a request from certain Members of Congress, the U.S. Government Accountability Office (“GAO”) has released a report evaluating FDA’s use of evidence from non-inferiority trials to establish a drug’s effectiveness and support approval of new therapies.  As we previously reported when FDA issued its “Guidance for Industry: Non-Inferiority Clinical Trials” in March 2010, a non-inferiority trial seeks to demonstrate that “any difference between [ ] two treatments is small enough to allow a conclusion that the new drug has at least some effect or, in many cases, an effect that is not too much smaller than the active control.”  This is in contrast to the more common superiority trials, such as a placebo-controlled trial, which seek to prove a new drug is more effective than the control. 

Non-inferiority trials are most often used when it would be unethical to use a placebo control.  As the GAO report points out, however, there are certain issues unique to non-inferiority studies that have raised concern over the years, including that “[u]sing data from the non-inferiority trial and from prior trials measuring the effectiveness of the active control, the effectiveness of the new drug is estimated – but not ever fully known.”  In addition, “non-inferiority trials are more prone to certain biases than superiority trials,” and the “use of non-inferiority trials over time also raises concerns about the potential for ‘biocreep’ to occur” – that is “the concern that successive generations of drugs approved based on non-inferiority trials, with the active control changing in each new generation, could lead to the adoption of decreasingly effective drugs and ultimately to the approval of drugs that are no more effective than a placebo.”

The GAO report, titled “New Drug Approval: FDA's Consideration of Evidence from Certain Clinical Trials,” evaluates FDA’s use of evidence from non-inferiority trials using a three-step approach: “(1) identify the type and status of drug applications submitted for FDA review that included evidence from non-inferiority trials; (2) examine the characteristics of non-inferiority trials FDA considered in making approval decisions; and (3) describe FDA’s guidance for establishing a drug’s effectiveness on the basis of non-inferiority trials.”

The GAO report winnows down the number of NDA’s submitted to FDA between Fiscal Years 2002 and 2009 (October 1, 2001, through September 30, 2009) to 175 NDAs for new molecular entities – 43 (or one quarter of which) included evidence from at least one non-inferiority study.  Of the 43 NDAs identified, 29 of them included evidence from at least one non-inferiority trial.  “Most NDAs – 18 of the 29 – were approved based on evidence from pivotal non-inferiority trials.  FDA approved the remaining 11 applications based on other evidence, such as the superiority of the new drug compared to a placebo or an active control.”  Twelve of the 18 NDAs approved based on evidence from pivotal non-inferiority trials were for antimicrobial drugs.  Interestingly, the GAO report notes that “[t]he number of NDAs with evidence from non-inferiority trials varied from year to year and generally declined from fiscal years 2002 through 2009.  On average, FDA received five NDAs each year that included evidence from non-inferiority trials.”

With respect to non-inferiority study characteristics, the GAO report notes that:

Characteristics varied among the non-inferiority trials that provided primary evidence for the approval of the 18 NDAs.  FDA relied on primary evidence from multiple pivotal non-inferiority trials to support the approval of most of these applications. The number of pivotal non-inferiority trials used as primary evidence for these 18 NDAs ranged from one to four, with an average of two pivotal non-inferiority trials supporting the approval of each application.

Some other interesting tidbits from the report include:

• “Two-thirds, or 12, of the 18 NDAs included trials that measured drug effectiveness using a surrogate, rather than a clinical, primary endpoint in at least one of their pivotal trials.”  According to some experts, this “increases uncertainty in the drugs’ true effectiveness.”

• “Half of the 18 NDAs FDA approved on the basis of non-inferiority trials tested the effectiveness of the new drug against more than one active control.  A majority of the active controls used in non-inferiority trials were FDA-approved for the indication. However, three applications included evidence from non-inferiority trials that used one active control that was not FDA-approved for the indication.”

• “The margins used for most of the 18 NDAs approved on the basis of evidence from non-inferiority trials ranged from 5 to 20 percent, with the most commonly used margin being 10 percent.  That is, for trials using a 10 percent non-inferiority margin, the new drug could be estimated to be up to 10 percent less effective than the active control. However, the observed difference in the effectiveness of the new drug and active control, as measured in the clinical trials, would be less than 10 percent.”

• “FDA did not agree with the non-inferiority margins set for pivotal trials submitted with three applications [i.e., NOXAFIL, EXJADE, and REYATAZ)], though the agency approved these drugs based on evidence from these trials.

• “FDA reviewed the characteristics of the non-inferiority trials supporting the approval of the 18 NDAs to ensure that the drugs it approved were more effective than a placebo. FDA’s review therefore minimized the potential for biocreep. Similarly, our examination of the trials’ characteristics also revealed no evidence of biocreep.”

• “While non-inferiority trials provided primary evidence of effectiveness to support the approval of 18 NDAs, other non-inferiority trials were poorly designed and did not provide such evidence. Of the other 25 NDAs that included evidence from non-inferiority trials, FDA identified 9 applications that included poorly designed non-inferiority trials.”

The GAO report also commented on FDA’s March 2010 guidance on non-inferiority studies.  As we previously reported, in addition to providing recommendations regarding study design and interpretation, the guidance provides answers to nine “commonly asked questions” regarding the estimation of margins, appropriate active control drugs, endpoints, and reliance on a single non-inferiority study to support effectiveness.  The guidance also discusses five examples derived from publicly available information that describe how to choose a non-inferiority margin, how to analyze the results, and other considerations relevant to the design and interpretation of non-inferiority studies.  According to the GAO report, “[w]hile experts we interviewed who reviewed FDA’s March 2010 guidance noted that it addressed key principles, most identified additional technical issues that they would have liked this guidance to have addressed.”  Such additional issues include “how the use of a surrogate endpoint impacts the design and interpretation of a non-inferiority trial,” and the need for more “detailed instructions on how to estimate the effect of the active control in the non-inferiority trial.”  

Finally, the GAO report concludes with a general observation that FDA “has become more conservative in allowing evidence from non-inferiority trials to demonstrate the effectiveness of new drugs” – perhaps explaining their general decline in recent years.  According to the GAO, two points support this cinclusion:

First, FDA has revised its view regarding when non-inferiority trials may be used. Prior to 2007, for example, FDA had approved drugs treating several less severe infections – including acute bacterial sinusitis, acute bacterial otitis media, and acute bacterial exacerbations of chronic bronchitis – on the basis of evidence from non-inferiority trials. . . .  Second, FDA has become more rigorous in its review of evidence from non-inferiority trials.  For example, prior to 2001, FDA’s guidance on the development of anti-infective drugs had not advised sponsors to scientifically calculate or justify their selected non-inferiority margins – a step that FDA’s March 2010 guidance recommends.

Other than technical comments, FDA did not respond to the GAO report.  Thus, FDA would apparently agree with the GAO’s view that the Agency is becoming more conservative in its acceptance of data from non-inferiority studies to support drug approval.

By Riëtte van Laack –

In anticipation of the possible approval of the New Animal Drug Application (“NADA”) for genetically engineered AquAdvantage Salmon (“GE salmon”), FDA announced a public hearing on September 21, 2010, concerning the labeling of food made from such salmon. 

This is the first time FDA is considering a NADA for a GE animal intended for food use.  A GE animal is an animal drug because the DNA that is introduced into the GE animal is intended to affect the animal’s structure or function (see here).  GE salmon is intended to grow faster than conventionally bred salmon.  If the Agency approves the NADA, the fish eggs, young fish, and fish sold to growers will include a label that identifies those eggs and fish as genetically engineered.  However, the labeling of food derived from the fish will not be determined by the NADA.   

The hearing will focus on whether data suggest that food derived from GE salmon is materially different from food made from non-GE salmon, and if so, how that food should be labeled.  (Safety of the food is considered in the approval of the NADA).  Labeling of a food must be truthful and not misleading.  This principle applies both to GE food and traditionally produced food.  

FDA invites the public to share its views on which facts about GE are pertinent to FDA’s determination of whether food from GE salmon is materially different from other Atlantic salmon.  It is FDA’s position, and courts have agreed, that the mere fact that a product is genetically engineered does not constitute a material difference and, therefore, does not warrant different labeling.  Moreover, FDA cannot and does not require additional labeling based on consumer interest alone.  Only if the genetic engineering causes the food derived from the GE salmon to be materially different in a property such as composition, nutritional composition, functional characteristics, and organoleptic properties, will different labeling be warranted.  If material differences exist, the next question will be how these differences should be described to assure that the labeling is truthful and not misleading.

The hearing follows a two-day meeting of the Veterinary Medicine Advisory Committee concerning the NADA for GE salmon scheduled for September 19-20, 2010.  If the NADA is not approved, FDA need not consider the labeling issue.

By Oisin A. Mulvihill* & Peter M. Jaensch –

A recent string of high-profile pharmaceutical and medical device product recalls appears to be reigniting FDA’s interest in pressing misdemeanor charges against corporate executives under the Responsible Corporate Officer Doctrine, or Park Doctrine.

Lewis Grossman, professor of law at The American University Washington Colege of Law, says that there now seems to be a growing attitude within the FDA  that "working it out with the company and the company doing a voluntary recall is not enough."  This will surely cause concern in the leadership of food and drug companies because, under some circumstances, the Park doctrine permits the misdemeanor conviction of a corporate officer who fails to prevent or correct a company regulatory violation – regardless of whether or not the officer knew of the violation.

Indeed, the past few months have seen a number of FDA officials announce the agency’s intention to be more aggressive in their punishment of companies for manufacturing violations. Speaking at the annual Food and Drug Law Institute Conference on April 22, Eric Blumberg, FDA’s deputy chief counsel for litigation, revealed that “[v]ery soon, and I have no one particular in mind, some corporate executive is going to be the first in a long line…” The previous month, FDA Commissioner Margaret Hamburg wrote to Sen. Chuck Grassley, R-Iowa,  informing him that the agency intends to "increase the appropriate use of misdemeanor prosecutions … to hold responsible corporate officials accountable."

The Park Doctrine has rarely been employed since the 1980’s but its seemingly imminent revival is sure to have corporate executives ill at ease. See here for our previous blog post and FDLI article on this topic.   

* Intern

By Ricardo Carvajal –

In several cases that challenge food marketers’ use of the term “natural” in labeling and advertising, the presiding judges have recently opted to suspend proceedings and seek an administrative determination from FDA as to whether high fructose corn syrup ("HFCS") qualifies as a “natural” ingredient (see, e.g., Holk v. Snapple Beverage Corp., D.N.J., No. 07-3018(MLC)).  One case also raises the same question with respect to citric acid (Ries v. Hornell Brewing Co, Inc., N.D. Cal., No. 10-1139 (JF)). 

It is too soon to know whether FDA plans to respond to these requests, but any response by FDA that sheds additional light on its interpretation of “natural” is bound to be closely parsed by industry.  Two years ago, staff at FDA/CFSAN set off a small firestorm when they stated in response to a request from the trade press that foods containing HFCS cannot properly be labeled as “natural.”  Subsequently, the agency refined its position and stated that it might be appropriate to label foods containing HFCS as “natural,” depending on how HFCS is produced – including whether the acids used in the production of HFCS fit within the agency’s policy on “natural.”  For more insight on the controversy over "natural" and other "green" claims, see here.

By Kurt R. Karst –   

When we attended the August 17th hearing in Sanofi-aventis U.S. L.L.C.’s (“Sanofi’s”)  challenge to FDA’s July 23, 2010 approval of Sandoz Inc.’s (“Sandoz’s”) ANDA No. 77-857 for a generic version of Sanofi’s LOVENOX (enoxaparin sodium injection), it seemed as though Judge Emmet G. Sullivan of the U.S. District Court for the District of Columbia was leaning towards denying Sanofi’s Motion for Preliminary Injunction.  And as one member of the Food and Drug Bar pointed out to us, the Scales of Justice directly behind Judge Sullivan were literally tilted ever so slightly in favor of the defense table.  That observation now appears to have been prescient, as Judge Sullivan denied Sanofi’s motion in a 33-page opinion handed down late on August 25th.

As we previously reported (here and here), Sanofi sued FDA on July 26th requesting that the court issue a declaratory judgment that FDA acted unlawfully in approving ANDA No. 77-857, as well as a temporary restraining order and preliminary injunction directing FDA to immediately suspend and withdraw approval of the Sandoz ANDA, and a permanent injunction under the same terms.  (Sanofi later agreed to consolidate its temporary restraining order request with its preliminary injunction request.)  In addition to the approval of ANDA No. 77-857, Sanofi also challenged FDA’s July 23rd response to a citizen petition, in which the Agency outlined five criteria (i.e., standards for identity) that an ANDA applicant needs to demonstrate sameness of its active ingredient as compared to LOVENOX.

Sanofi set forth in its papers three merits arguments as to why a preliminary injunction is necessary: (1) FDA exceeded its authority under the FDC Act (specifically FDC Act § 505(j)(2)(A)) by requiring Sandoz to submit studies beyond what is permitted for ANDAs (i.e., immunogenicity studies that, according to Sanofi, are studies intended “to demonstrate safety and effectiveness,” rather than, as FDA argued, chemistry, manufacturing, and control information); (2) FDA departed from Agency precedent by approving ANDA No. 77-857 when the product has not yet been fully characterized; and (3) FDA approved ANDA No. 77-857 without sufficient evidence that the drug product has the “same” active ingredient as LOVENOX (as required by FDC Act § 505(j)(2)(A)).  FDA addressed each of these arguments in its Opposition and Surreply briefs (Sanofi Reply brief here), as did Sandoz in its Opposition brief.  (AARP also submitted an amicus brief in the case.)

With respect to Sanofi’s first merits argument, the company argued that under the familiar Chevron analysis, the case should be resolved at Step One, because FDC Act § 505(j)(2)(A) “unambiguously prohibits FDA from requiring an ANDA applicant to conduct basic safety testing such as immunogenicity testing.”  Judge Sullivan disagreed, however, stating that:

The statute itself says nothing about the type of “full description” an ANDA applicant must submit in order to satisfy the FDA that the chemistry, manufacturing, and controls of the generic drug producer are sufficient to ensure the purity of the proposed drug product.  It says only that the full description must allow the FDA to determine that “the methods used in, or the facilities and controls used for, the manufacture, processing, and packing of the drug are [not] inadequate to assure and preserve its identity, strength, quality, and purity[.]”

Thus, according to Judge Sullivan, the proper analysis is under Chevron Step Two, where “this Court must defer to the FDA’s interpretation of the FDCA as long as it [is] reasonable. . . .”  And under that inquiry, Judge Sullivan ruled that:

FDA’s construction of the FDCA as permitting the agency to request information to assess whether impurities resulting from a generic drug producer’s manufacturing processes and controls would generate a greater immune response than the [Reference Listed Drug] is both reasonable and consistent with its regulations.  Moreover, because the FDA’s determination of what is required to assess the “purity” of a generic drug for purposes of the FDCA “rests on the ‘agency’s evaluations of scientific data within its area of expertise,’” it is “entitled to a ‘high level of deference’ from this court.”  Accordingly, the Court concludes that Sanofi is unlikely to demonstrate that the FDA exceeded its authority under the FDCA when it approved Sandoz’s ANDA despite having required Sandoz to submit additional information comparing the impurity profiles of its generic enoxaparin with Lovenox. [(citations omitted)]

With respect to Sanofi’s second merits argument – that FDA’s approval of ANDA No. 77-857 “represents a significant departure” from precedent concerning generic versions of drug products that, like enoxaparin, are derived from a complex starting material that has not been fully characterized (e.g. hyaluronidase, somatropin, and conjugated estrogens) and violates the Administrative Procedure Act (“APA”) – Judge Sullivan ruled that it is “unlikely that Sanofi will succeed in its argument that the FDA’s approval of generic enoxaparin is inconsistent with its past precedent.”  Citing the U.S. District Court for the District of Columbia’s 1997 decision in Bracco Diagnostics, Inc. v. Shalala, 963 F. Supp. 20 (D.D.C. 1997), in which the court ruled that “an agency must treat similar cases in a similar manner unless it can provide a legitimate reason for failing to do so,” Judge Sullivan stated that “the FDA provided ‘legitimate reason[s]’ for deciding that enoxaparin should be treated differently than the drugs cited by Sanofi.”

Finally, with respect to Sanofi’s “sameness” argument – that FDA violated the APA when the Agency “ignored voluminous scientific evidence demonstrating that until enoxaparin is fully characterized, generic enoxaparin products that do not use a manufacturing process that is equivalent to [Sanofi’s] process will not be the same as Lovenox,” and when FDA failed to provide a “rational explanation for its decision to disregard scientific evidence that directly contradicts its administrative findings” – Judge Sullivan found that FDA applied a reasonable “sameness” definition and that Sanofi’s third merits argument is unlikely to succeed.  According to Judge Sullivan:

While Sanofi may not agree with the FDA’s determination that an ANDA applicant for enoxaparin can demonstrate sameness by satisfying the five-part test discussed [in FDA’s citizen petition response], the Court concludes that the FDA’s definition of “sameness,” as applied to enoxaparin products, is reasonable. . . .   It was similarly reasonable for the FDA to conclude that an ANDA applicant need not use the same manufacturing process as Sanofi . . . .  

In sum, just because the FDA – after seven years of careful consideration of Sanofi’s citizen petition and five years of examination of Sandoz’s ANDA – reached a conclusion at odds with the position advanced by Sanofi, does not mean that the FDA’s decision was arbitrary and capricious.  To the contrary, a review of the FDA’s response to Sanofi’s citizen petition demonstrates that the FDA “‘examine[d] the relevant data and articulate[d] a satisfactory explanation for its decision.’” [(citations omitted)]

Now the question on everyone’s mind is whether Sanofi will appeal Judge Sullivan’s ruling.  We think there is a reasonable likelihood that an appeal is coming . . . and we’ll let you know if that happens.  But FDA’s track record in these types of APA challenges does not bode well for Sanofi.

By Susan J. Matthees –

FDA announced yesterday the availability of two new draft guidance documents regarding implementation of the menu labeling provisions of section 4205 of the Patient Protection and Affordable Care Act (“PPACA”).  As we reported last month, FDA requested comments on how to implement PPACA § 4205, which requires restaurants with 20 or more locations and vending machines owned by companies operating 20 or more vending machines to display calorie information for their food products.  The two new draft guidance documents explain how FDA will enforce PPACA § 4205 and identify those aspects of the law for which FDA will delay enforcement  until the agency promulgates implementing regulations.

The first draft guidance is a short document that addresses the effect of PPACA § 4205 on state and local menu labeling laws.  PPACA § 4205 expressly preempts local and state laws that are not “identical to” the federal law.  FDA explains that preemption only applies to large chain restaurants and vending machines, so state or local laws that require nutrition labeling for businesses with fewer than 20 locations are not preempted. 

The second draft guidance document consists of commonly asked questions and answers about implementation of PPACA § 4205.  Topics include  what establishments are covered by the law, which foods are covered by the law, criteria for disclosure of calories and additional nutrition information, and the timing of compliance.

The question and answer draft guidance contains several interesting comments by FDA.  First, FDA notes that grocery stores with cafes, food carts, or that otherwise sell food for immediate consumption will be subject to the law if they meet the definition of a chain restaurant (i.e., 20 or more locations doing business under the same name and offering for sale substantially similar menu items), and requests comments on what additional facilities in grocery stores might be covered by the law.  Similarly, FDA requests comments on what foods in grocery stores and convenience stores should be covered.  FDA also states that alcoholic beverages will be covered by § 4205, even though most alcoholic beverages are not subject to nutrition labeling requirements.

The agency will not require nutrient content disclosure information for variable menu items, such as pizza and ice cream, or the daily caloric intake disclaimer until the final rules are implemented.  FDA will not take any enforcement action until after the final guidance has been published, which FDA anticipates to be in December of this year.  Meanwhile, interested parties may submit comments to the draft guidance.