By Kurt R. Karst –   

The growing application backlog and median time for ANDA approval by FDA’s Office of Generic Drugs (“OGD”) has been a thorn in the side of the generic drug industry for quite some time now.  As we previously reported, the ANDA backlog earlier this year was poised to top 2,000 applications and the median ANDA approval time in Fiscal Year 2009 was 26.70 months.  This is up from 21.65 months in Fiscal Year 2008 and up from 17.3 months in Fiscal Year 2003, shortly after which the Medicare Modernization Act (“MMA”) was enacted.  Today, the ANDA backlog has surpassed the 2,000 application mark and is reportedly growing at about 100 applications per month; and we understand that the median ANDA approval time is edging closer to 30 months from application submission. 

Although a median approval time that hits or exceeds 30 months is concerning in and of itself, it is especially concerning for those companies that are “first applicants” who qualify for 180-day exclusivity for a particular drug product.  One of the six 180-day exclusivity provisions added to the FDC Act by Title XI of the MMA – i.e., FDC Act § 505(j)(5)(D)(i)(IV) – “Failure to obtain tentative approval” – provides that 180-day exclusivity eligibility is forfeited if:

The first applicant fails to obtain tentative approval of the application within 30 months after the date on which the application is filed, unless the failure is caused by a change in or a review of the requirements for approval of the application imposed after the date on which the application is filed.

The 2007 FDA Amendments Act clarified FDC Act § 505(j)(5)(D)(i)(IV), such that if “approval of the [ANDA] was delayed because of a [citizen] petition, the 30-month period under such subsection is deemed to be extended by a period of time equal to the period beginning on the date on which the Secretary received the petition and ending on the date of final agency action on the petition (inclusive of such beginning and ending dates) . . . .” (FDC Act § 505(q)(1)(G)).  FDA explained in the Agency’s Acarbose Exclusivity Letter Decision that the reference to “approval” in FDC Act FDC Act § 505(q)(1)(G) means that “section 505(j)(5)(D)(i)(IV) also applies when the first applicant is eligible for a final approval, but not for a tentative approval.  The absence of patent or exclusivity protection that would necessitate a tentative – rather than final – approval, does not exempt a first applicant from the requirement that it show that its application meets the scientific and technical requirements of 505(j) within 30 months of filing.” 

Although FDC Act § 505(j)(5)(D)(i)(IV) includes an exception where the failure to obtain timely approval will not result in a forfeiture of 180-day exclusivity eligibility if “the failure is caused by a change in or a review of the requirements for approval of the application imposed after the date on which the application is filed,” FDA believes this is the only circumstance supported by the statute.  As FDA explained in the Agency’s Dorzolamide-Timolol Maleate Ophthalmic Solution Exclusivity Letter Decision, “[t]his express description of the circumstances in which exclusivity will not be forfeited for failure to obtain tentative approval makes it clear that, under other circumstances in which an applicant has failed to obtain tentative approval, regardless of what party might be responsible for that failure, the first applicant will forfeit exclusivity” (emphasis added).  In other words, if OGD fails to take an approval action by the 30-month date described in FDC Act § 505(j)(5)(D)(i)(IV) because, for example, of other priorities that require the Office to shift its scarce resources, or simply because the 30-month date was not on the Office’s radar, 180-day exclusivity eligibility is forfeited. 

As we previously reported (here, here, and here), there have been myriad cases in which FDA has already applied FDC Act § 505(j)(5)(D)(i)(IV) and determined that 180-day exclusivity was forfeited (or that the savings clause applied).  A quick look at FDA’s Paragraph IV Certification List and FDA’s drug approval database shows that there are  cases for post-MMA applications in which FDA did not make an approval decision within 30 months of ANDA submission; however, until FDA makes a final approval decision in those cases it will not be clear if 180-day exclusivity was actually forfeited.  Nevertheless, the possibility of a forfeiture based on a failure on FDA’s part to meet the 30-month approval timeframe is certainly a possibility.

One upcoming case that could serve as a test case for FDA’s interpretation of FDC Act § 505(j)(5)(D)(i)(IV) is generic OPANA ER (oxymorphone HCl) Extended-release Tablets, 5 mg, 10 mg, 20 mg, and 40 mg.  According to FDA’s Paragraph IV Certification List, the first ANDA containing a Paragraph IV certification was submitted to the Agency on November 23, 2007.  Thirty months after that date is May 23, 2010.  IMPAX Laboratories, Inc. (“IMPAX”) is believed to be a “first applicant” eligible for 180-day exclusivity.  According to statements made during a recent earnings conference call, IMPAX is “pretty confident” that FDA will grant tentative ANDA approval by May 23rd; however, IMPAX President & CEO Larry Hsu commented during the call that “we do look at the plan B just in case.  If we do not get the approval, we have some actions there that we have to take.”  Among those actions under plan B consideration is presumably a lawsuit against FDA. 

If FDA meets the May 23rd date for generic OPANA ER, then forfeiture under FDC Act § 505(j)(5)(D)(i)(IV) is moot and a lawsuit will have to wait for another day.  But the broader generic drug industry concern with FDA’s implementation of FDC Act § 505(j)(5)(D)(i)(IV) remains.  In 2003, when the MMA was enacted and the median ANDA approval time was around 17 months, a 30-month approval time probably seemed reasonable.  It does not appear to be as reasonable today.  Perhaps 30 months will appear reasonable once again in a future world where there are generic drug user fees that allow OGD to significantly decrease median ANDA approval times.  Until that time, however, companies will have to work with OGD to ensure timely approval actions, or consider plan B options, such as litigation or pressing Congress for a legislative solution. 

By Dara Katcher Levy –

On May 11, FDA announced the launch of the “Bad Ad Program,” an effort to educate Health Care Professionals on misleading prescription drug promotion and provide them with an easy way to report it (just dial 877-RX-DDMAC).  The program, which begins this month, will be rolled out in three phases:  In Phase 1, DDMAC will exhibit at major medical conferences to engage HCPs and distribute educational materials. Phases 2 and 3 will expand this initial effort and update the educational materials developed for Phase 1. 

FDA is primarily looking to gain insight into promotional activities that occur in the privacy of the doctor’s office, and may not be the subject of hardcopy materials submitted and reviewed through Form 2253.  Clearly, FDA sees HCP reports as a means to increase surveillance over pharmaceutical promotional activities, and is attempting to increase the frequency with which they receive these reports.  HCP reports have already spurred a number of letters; one of the more recent is an Untitled Letter to Astra Zeneca from December 2008 about misleading sales representative statements that solicited a request for more information about an off-label use for Seroquel. 

Although reports can be submitted anonymously, FDA is encouraging providers to include contact information so that DDMAC officials can follow-up, if necessary.  After receipt of a report, DDMAC will evaluate it to determine if it meets the criteria needed to take a regulatory action.  For violative promotional activities, FDA represents that DDMAC will move forward with a “risk-based enforcement strategy,” which may include an Untitled Letter, Warning Letter, or referral for criminal investigation. 

To any pharmaceutical company that included, as part of its evaluation of its promotional activities,  whether or not the material would be a “leave-behind” -  this may be a game changer.

By Ricardo Carvajal & Wes Siegner –

FDA recently posted what appears to be the first warning letter to a firm for violations of the dietary supplement good manufacturing practice ("GMP") regulations in 21 CFR Part 111.  The warning letter marks a point of transition for the agency and industry, from developing and issuing the regulations, to enforcing them.  It is in the context of enforcement that FDA’s interpretation of undefined terms such as “appropriate” (as in “appropriate test or examination”) and “representative” (as in “representative samples”) will be elucidated. The warning letter is also a timely reminder that failure to comply with any required step, including even the signing of a required document, causes the products at issue to be adulterated and therefore unlawfully marketed.  Because the Federal Food, Drug, and Cosmetic Act ("FDC Act") is a strict liability criminal statute, such violations are also misdemeanor criminal violations.  Although the federal government has seldom brought such actions in recent decades, there are signs that the agency may be considering bringing such cases again against senior management to emphasize the need to comply with FDC Act requirements.

The letter is required reading for industry, as it provides insight into the types of issues on which FDA inspectors can be expected to focus, as well as the types of corrective actions that FDA expects.  Among the violations cited in the letter: 

• Failure to “conduct at least one appropriate test or examination to verify the identity of a dietary ingredient.”  FDA judged the appearance and other testing conducted by the firm for its aloe ingredient to be “not appropriate.”  Further, FDA demanded adequate identity testing not only of aloe used after the firm’s proposed correction date, but also of aloe used before that date.

• Failure to “make and keep documentation for why meeting in-process specifications, in combination with meeting component specifications, helps ensure that the dietary supplement meets the specifications for identity, purity, strength, and composition; and for limits on those types of contamination that may adulterate or may lead to adulteration of the finished batch of the dietary supplement.”  The firm had no documentation explaining the rationale for its raw material specifications.  Although the firm claimed to be implementing a new product development SOP to address this issue, FDA did not credit that effort because the firm didn’t submit the SOP to FDA for its review.

• Failure to follow the firm’s written procedure for “collecting representative samples of each unique shipment of components.”  It appears that the firm used a sampling frequency that FDA found inadequate.  Although the firm revised its SOP to address this issue, FDA judged the firm’s response inadequate because it did not address staff training. 

• Failure to have an adequate quality control program, including (1) failure to “periodically review calibration records for production equipment,”  (2) failure of inclusion in the master manufacturing record of written instructions requiring one person to verify the addition of a component, and (3) failure to properly document release of finished product in the batch record.

• Failure to include in the master manufacturing record and batch production records a statement of the theoretical yield and percentage of theoretical yield, respectively, at “appropriate phases of processing.” 

• Failure to include in the master manufacturing record “corrective action plans to use when a specification is not met.”

By Kurt R. Karst –   

On May 10, 2010, a 3-judge panel of the U.S. Court of Appeals for the Federal Circuit (Circuit Judges Newman, Rader, and Linn) issued its unanimous decisions in two cases that should solidify as to when a patent covering a drug product is eligible for a Patent Term Extension (“PTE”).  In each case – Photocure ASA v. Kappos and Ortho-McNeil Pharmaceutical, Inc. v. Lupin Pharmaceuticals, Inc. – the Federal Circuit affirmed (here and here) the district court’s decision concerning PTE eligibility for the particular product at issue.

Both the Photocure and Ortho-McNeil cases concern the proper interpretation of 35 U.S.C. § 156(a)(5)(A).  That provision states that the term of a patent claiming a drug shall be extended from the original expiration date of the patent if, among other things, “the permission for the commercial marketing or use of the product . . . is the first permitted commercial marketing or use of the product under the provision of law under which such regulatory review period occurred.”

Over the past few years, the U.S. Patent and Trademark Office (“PTO”) has heavily relied on decisions by the U.S. Court of Appeals for the Federal Circuit in Fisons v. Quigg, 8 U.S.P.Q.2d 1491 (D.D.C.1988), aff’d 876 F.2d 99 U.S.P.Q.2d 1869 (Fed.Cir.1989), and Pfizer Inc. v. Dr. Reddy’s Labs., 359 F.3d 1361 (Fed. Cir. 2004) (“Pfizer II”) to support the Office’s interpretation of the term “product” in 35 U.S.C. § 156(a)(5)(A) to mean “active moiety” (i.e., the molecule in a drug product responsible for pharmacological action, regardless of whether the active moiety is formulated as a salt, ester, or other non-covalent derivative) rather than “active ingredient” (i.e., the active ingredient physically found in the drug product, which would include any salt, ester, or other non-covalent derivative of the active ingredient physically found in the drug product).  In contrast, the Federal Circuit’s 1990 decision in Glaxo Operations UK Ltd. v. Quigg, 894 F.2d 392, 13 USPQ2d 1628 (Fed. Cir. 1990) (“Glaxo II”), construed the term “product” in 35 U.S.C. § 156(a)(5)(A) to mean “active ingredient.”

Photocure ASA v. Kappos

PhotoCure stems from the PTO’s denial of a PTE for U.S. Patent No. 6,034,267 (“the ‘267 patent”) covering the drug product METVIXIA (methyl aminoevulinate hydrochloride).  Applying the active moiety interpretation of the law, the PTO determined that METVIXIA does not represent the first permitted commercial marketing or use of the product because of FDA’s previous approval of an NDA for Dusa Pharmaceuticals Inc.’s LEVULAN KERASTICK (aminolevulinic acid HCl) Topical Solution, which contains the active moiety aminolevulinic acid (“ALA”).  Thus, according to the PTO, METVIXIA did not represent the first permitted commercial marketing or use of ALA and the ‘267 patent was ineligible for a PTE.  PhotoCure filed a lawsuit in the U.S. District Court for the Eastern District of Virginia challenging the PTO’s decision.
 
In March 2009, the court ruled in PhotoCure’s favor.  In reaching its decision that the PTO’s decision to deny a PTE was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law” under the Administrative Procedure Act, the court explained that it must determine whether it is required to follow the Federal Circuit’s ruling in Glaxo II or Pfizer II.  The court stated that “[i]mportantly, Pfizer II postdated Glaxo II and was a panel decision that the Federal Circuit declined to hear en banc.  ‘[The Federal Curcuit] has adopted the rule that prior decisions of a panel of the court are binding precedent on subsequent panels unless and until overturned in banc.  Where there is a direct conflict, the precedential decision is the first’” (internal citation omitted).   As a result, the court applied the “active ingredient” interpretation adopted in Glaxo II and determined that “the ‘267 patent covering Metvixia satisfies § 156(a)(5)(A), and that the USPTO’s decision to apply the active moiety interpretation and deny PhotoCute a [PTE] under this provision was contrary to the plain meaning of the statute and thus not in accordance with the law.”  The PTO appealed the decision to the Federal Circuit.

The PTO argued in its Federal Circuit briefs (here and here) that Pfizer II is controlling, and that even if Pfizer II is not controlling, the PTO persuasively interpreted active ingredient to mean active moiety and correctly denied a PTE for the ‘267 patent.

The Federal Circuit, in a mere 7-page opinion, sided with PhotoCure and the district court.  “[E]ven on the PTO’s incorrect statutory interpretation,” according to the Court, “MAL would meet the criteria for term extension, for, as the ’267 patent illustrates, the pharmacological properties of MAL differ from those of ALA, supporting the separate patentability of the MAL product.  MAL hydrochloride is a different chemical compound from ALA hydrochloride, and it is not disputed that they differ in their biological properties, warranting separate patenting and separate regulatory approval, although their chemical structure is similar.”  Thus, the ruling in Glaxo II that the term “product” in 35 U.S.C. § 156(a)(5)(A) means “active ingredient” is controlling, and the decision in Pfizer II is not and is not due any deference:

[Pfizer II] did not hold that extension is not available when an existing product is substantively changed in a way that produces a new and separately patentable product having improved properties and requiring full FDA approval.  To the contrary, the disputed product in [Pfizer II] was a salt that was included in the Pfizer patent claims and for which Pfizer had provided data to the FDA.  The decision in [Pfizer II] did not change the law of §156, and [Pfizer II] did not concern a different, separately patented product requiring full regulatory approval. . . .

The district court observed that Chevron does not apply because the statute is unambiguous, and that Skidmore deference is not warranted because the PTO’s interpretation is neither persuasive nor consistent. We agree with the district court. . . .  Even if some level of deference were owed to the PTO’s interpretation, neither Chevron nor Skidmore permits a court to defer to an incorrect agency interpretation.

Ortho-McNeil Pharmaceutical, Inc. v. Lupin Pharmaceuticals, Inc.

Lupin is an appeal of the U.S. District Court for the District of New Jersey’s May 2009 decision that the PTE granted by the PTO with respect to U.S. Patent No. 5,053,407 (“the ‘407 patent”) covering Ortho McNeil’s (“Ortho’s”) LEVAQUIN (levofloxacin) is valid.  Levofloxacin is an enantiomer in the previously approved Ortho racemate drug product FLOXIN (ofloxacin).  Lupin challenged the ‘407 patent PTE in the context of ANDA Paragraph IV Certification patent infringement litigation on the grounds that the PTE is invalid because FDA previously approved the active ingredient levofloxacin when the Agency approved ofloxacin. 

Although the PTO was not a party to the district court litigation, the Office submitted an amicus brief in support of Ortho in the Federal Circuit appeal, arguing that ‘407 patent PTE grant was valid and consistent with the Office’s active moiety interpretation of 35 U.S.C. § 156(a)(5)(A).  Indeed, the PTO’s decision to grant a PTE for the ‘407 patent was consistent with previous PTE decisions concerning a patent covering an enantiomer of a previously approved racemate.  For example, PTEs have been granted with respect to patents covering NEXIUM (esomeprazole magnesium), LEXAPRO (escitalopram oxalate), BETAXON (levobetaxolol HCl), XOPENEX (levalbuterol HCl), and REDUX (dexfenfluramine).

In affirming the district court’s decision, the Federal Circuit once again gave its approval of the Glaxo II decision and its “active ingredient” interpretation of the PTE statute, stating that “[w]e discern no basis for challenging these established FDA and PTO practices.  The FDA and PTO practices are in accordance with [Glaxo II], where the court held that “product” as used in §156(a) is the active ingredient present in the drug.”

Among other things, Lupin had argued that the status of enantiomers with respect to PTE eligibility was changed by the 2007 FDA Amendment Act (“FDAAA”).  FDAAA amended the FDC Act to add § 505(u), which permits the sponsor of an NDA for an enantiomer (that is contained in a previously approved racemic mixture) containing full reports of clinical investigations conducted or sponsored by the applicant to “elect to have the single enantiomer not be considered the same active ingredient as that contained in the approved racemic drug,” and thus be eligible for five-year new chemical entity exclusivity.  The Court was not convinced, stating that “[n]o support for this theory appears in the legislative record, or elsewhere.  Lupin’s interpretation would change the long-standing term-extension policy of the FDA and the PTO; such a far-reaching change is not achieved by legislative silence.”

Future Effects . . . .

The effects of these decisions, and the PhotoCure decision in particular, will likely be felt very soon by the PTO unless the decisions are further challenged and overturned.  For example, AstraZeneca has argued that the district court’s PhotoCure decision supports the company’s efforts to obtain a PTE for U.S. Patent No. 5,817,338 (“the ‘338 patent”) covering PRILOSEC OTC (omeprazole magnesium) Delayed-Release Tablets. 

As we previously reported, the PTO determined that the ‘338 patent is not eligible for a PTE because the PRILOSEC OTC NDA was not the first permitted commercial marketing or use of omeprazole.  (The PTO also denied a PTE because the PTE application was not timely submitted.  This is an issue currently being litigated in the context of a PTE for ANGIOMAX (bivalirudin).)  That is, the PTO applied an  “active moiety” interpretation of the PTE statute and concluded that PRILOSEC OTC is not the first permitted commercial marketing or use of the product, because the term “product” in the PTE statute ultimately means “the underlying molecule or ion (excluding those appended portions of the molecule that cause it to be a salt or ester) responsible for the physiological or pharmacological action of the drug.”  The Photocure and Ortho-McNeil decisions presumably moot the PTO’s PTE denial on this issue.

By Riëtte van Laack –

In 2005, the Sanitary Food Transportation Act of 2005 (“SFTA”) was enacted.  This law shifted responsibility for safe transportation of food from the U.S. Department of Transportation to FDA.  Among other things, the SFTA amended the FDCA to include section 416, which requires FDA to develop regulations addressing sanitation, packaging, limits on transport vehicles, information exchange among carriers, manufacturers and other persons involved in transportation of food, and transportation-related record keeping.

At the end of April, 2010, FDA took the first step in developing the new regulations.  The Agency issued both an advance notice of proposed rulemaking (“ANPR”) and a new guidance addressing transportation of food.  In the ANPR, FDA provides an historical account of the law concerning transportation of food, documented events of food-borne illnesses associated with transportation of food, and describes recent studies concerning food transportation practices, procedures and safety.  FDA requests input regarding the food transportation industry and its current practices such as characteristics of firms subject to the FSTA, including the types of vehicles used; current practices by firms subject to the FSTA including sanitation practices; communication and information sharing among parties involved in transportation of food;  the practice of transporting food and nonfood in the same vehicle (simultaneously or consecutively); and possible criteria to exempt certain classes of persons and vehicles from the new regulations.  FDA also asks for data and information concerning the past contamination of transported food and the risk for food borne illness.

The ANPR is only the first step in its rulemaking process, and it likely will be some time before regulations are proposed and finalized.  In the interim, FDA suggests that food transporters follow the newly issued guidance.  The guidance is a very general level 2 guidance intended to apply to a wide range of transportation entities, modes and activities.  Data collected by the Eastern Research Group characterized baseline practices and identified risk areas in transportation of food, none of which are particularly surprising.  Based on these data, FDA recommends that parties involved in food transportation concentrate on five areas: temperature control during transport; sanitation, packaging of food products, communications between the different parties involved in transportation, and employee awareness and training.  The guidance includes a list of regulation and guidance documents that address transportation of specific categories of food that, although limited in scope, may be helpful in addressing the identified focus areas.

Public comments are due by August 30, 2010.

By Carrie S. Martin –

FDA just released the Warning Letter it issued to Novartis Pharmaceuticals Corporation (“Novartis”) in April regarding two purportedly unbranded websites, www.gistalliance.com and www.cmlalliance.com (the “alliance websites”), which included disease-state information and clinical data about gastrointestinal stromal tumors (“GIST”) and chronic myeloid leukemia (“CML”).  DDMAC concluded that the websites promoted the use of Novartis’s product Gleevec (imatinib mesylate)—despite the fact that the websites do not specifically mention the drug’s name—in violation of the Federal Food, Drug, and Cosmetic Act (“FDC Act”). 

Gleevac is approved for several indications, including the treatment of different types of CML and GIST.  Some of these indications received accelerated approval via Subpart H.

DDMAC’s detective work to link the alliance websites to Gleevec included the following: comparing the alliance websites to Gleevec’s product website and finding them “perceptually similar” in terms of color schemes and layout, locating Novartis logos on the alliance websites, finding direct links to the Gleevac product website on the alliance websites, reviewing the publications referenced and finding one that “recounted” a pivotal trial from one of Gleevac’s approvals, noticing that footnotes referenced imatinib (Gleevec’s established name), and—somewhat surprisingly—looking into the registration of the alliance websites and finding them registered to Novartis AG. 

The Agency further noted that the alliance websites mention a tyrosine kinase inhibitor ("TKI") for the first line treatment of GIST and CML.  Gleevec, DDMAC explained, is the only TKI indicated for first-line treatment of chronic phase CML, the only TKI indicated for first line treatment of GIST, and the only TKI made by Novartis indicated for both GIST and CML.  According to DDMAC, these facts are “wellknown” [sic] in the oncology community.  In other words, the alliance websites were thinly veiled attempts to improperly promote Gleevec.

FDA concluded that the alliance websites promoted Gleevec in violation of the FDC Act in several ways.  For example, DDMAC found that the websites minimized and omitted risk information (indeed, the websites contained none), and, more seriously, contained unsubstantiated dosing claims that could put patients at increased risk for serious adverse events.  For example, the alliance websites suggested that low plasma levels might necessitate an increase of Gleevec to achieve efficacy.  DDMAC noted that these dosing instructions are not contained in the Gleevec Prescribing Information (“PI”) and that the PI warns that adverse events are dose-related.  The alliance websites further recommended that physicians test their patients for “suboptimal” plasma levels through Avantix Laboratories.  To add insult to injury, DDMAC determined that the Avantix website, www.bloodleveltesting.com, was registered to Novartis, its content referred to Novartis, and it contained logos for and links to the CML and GIST Alliances. 

As evidenced by this Warning Letter, FDA is clearly concerned that companies may be masquerading promotional material as “disease-state” information via websites with unbranded web addresses.  Companies, therefore, should be wary of registering websites for any third parties with which they would like to work (but remain independent).  They should also be more conscientious of how “connected” unbranded or disease state material is to the company’s branded material.  DDMAC has shown that it is ready to go to significant lengths to pull back the proverbial curtain to find violative promotional content in otherwise “innocent” and unbranded contexts. 

By Jeffrey K. Shapiro –

On May 3, FDA announced that it has ordered Baxter to recall and destroy an estimated 200,000 Colleague infusion pumps in use, reimburse customers for the “value” of the recalled device, and assist in finding a replacement.  The press release is available here.  (FDA did not release a copy of the order.)

In 2006, FDA obtained a consent decree entered against Baxter forbidding further manufacture of the Colleague infusion pumps.  The consent decree also required Baxter to submit a corrective action plan within 20 days for correcting the deficiencies with the Colleague pumps already in use.

Apparently, Baxter has attempted several rounds of upgrades during the past four years, with unsatisfactory results.  FDA states that Baxter’s most recent proposed plan contemplated a new round of corrections beginning in May 2012 that would be complete in 2013.  FDA found that was simply too long to allow these pumps to remain on the market.

The consent decree (paragraph 15) authorizes FDA to order a recall of the pumps at Baxter’s expense and also to take “any other corrective action” to protect the public health or to ensure Baxter’s compliance.  FDA apparently views the refund / replacement requirement imposed on Baxter as falling within this latter catch all provision.

Baxter’s press release does not really dispute FDA’s rationale for ordering a recall.  However, Baxter signals that it is not entirely in agreement with the details:  “The consent decree permits Baxter to propose alternative actions to achieve the FDA's objectives under the decree, which the company intends to do.  The final nature of the recall and offer to customers remain subject to that ongoing dialogue.”  It does not appear that Baxter is negotiating from a position of strength.

Baxter says it hopes to offer an exchange of Sigma SPECTRUM infusion pumps for COLLEAGUE infusion pumps without charge to customers.  For those who opt for a refund, an interesting question is the formula for determining how much it will be.  FDA’s press release does not address this issue, referring variously to the payment as a “refund” (which implies a return of the original purchase price) and “reimbursement” for the “value” of the recalled pump (which implies a payment less than the original purchase price, perhaps based upon depreciated value).

Baxter says it is taking a pretax charge of $400 to $600 million for the recall.  Given FDA’s high end estimate of 200,000 units in the field, Baxter’s charge implies an average cost of $2,000 to $3,000 per pump.  This figure presumably includes the administrative expense of the recall and destruction of the pumps, some mix of pump exchanges and refund or reimbursement according to some formula, and other costs.

It is worth noting that FDA has authority to order mandatory device recalls and repair, replacement or refunds (and reimbursement of expenses in complying with the order).  This authority is set forth in Section 518 of the Federal Food, Drug, and Cosmetic Act.  The implementing regulations (21 C.F.R. Part 810) specify the procedure for ordering a mandatory recall but does not speak to the repair, replacement or refund authority.  To our knowledge, FDA has never ordered a mandatory device recall under Section 518, much less a recall with an accompanying mandate to provide a refund or replacement.  The Baxter recall, although ordered pursuant to a consent decree, is the closest FDA has come.  Watching this recall play out should provide some interesting data about what a mandatory Section 518 recall might look like.  With FDA's tougher stance on enforcement and heightened focus on postmarket safety, the mandatory Baxter recall may not be the last of its kind.

UPDATE:

• FDA Q&A regarding Baxter pump recall

By Peter M. Jaensch –

On Friday, April 30th, 2010, the U.S. Sentencing Commission sent Congress amendments to the federal Sentencing Guidelines applicable to organizations such as corporations.

On January 21, 2010, we reported on proposed changes to the federal Sentencing Guidelines.  The changes would have apparently required companies, upon detection of any criminal conduct, and prior to any legal determination of guilt, to make restitution to identifiable victims. 

As we noted then, the proposed amendments posed a grave concern for industries regulated by FDA, because the FDC Act imposes criminal liability even for unintentional violations. In February, HPM raised these concerns with the U.S. Sentencing Commission.

We are pleased to report that the Sentencing Commission took account of our concerns (and concerns raised by others). The adopted amendments contain very general language on this topic, and certainly not the draconian language proposed in January.  Assuming that Congress does not overturn the amendments adopted by the Commission, organizations will simply be expected to “take reasonable steps, as warranted under the circumstances, to remedy the harm resulting from the criminal conduct.”  We do not interpret this language to mandate every company regulated by FDA to make restitution each and every time the company learns that it has violated the FDC Act.  Needless to say, this is a welcome change that avoids unfairly burdening food,  drug, and medical device companies.

By Kurt R. Karst –   

Last week’s decision by a 3-judge panel of the U.S. Court of Appeals for the Second Circuit in In re: Ciprofloxacin Hydrochloride Antitrust Litigation affirming a 2005 decision by the U.S. District Court for the Eastern District of New York to grant summary judgment for defendants (i.e., manufacturers of CIPRO (ciprofloxacin HCl) or generic versions of CIPRO) in an antitrust challenge to certain patent settlement agreements gave the Federal Trade Commission (“FTC”) a reason to cheer.  The Circuit Court’s decision invites further review of the case by the full Court, and comes on the heels of the publication of the FTC’s annual report, which, as we previously reported, highlights the Commission’s efforts to stop allegedly anticompetitive “pay-for-delay” patent settlement agreements. 

Although the Second Circuit, in its 3-0 decision, affirmed the district court’s 2005 decision in In re Ciprofloxacin Hydrochloride Antitrust Litig., 363 F. Supp. 2d 514 (E.D.N.Y. 2005) (“Cipro III”), it did so because the Court’s 2005 decision in Joblove v. Barr Labs., Inc., (, compelled it to do so: “Since Tamoxifen rejected antitrust challenges to reverse payments as a matter of law, we are bound to review the Cipro court’s rulings under the standard adopted in Tamoxifen.”  The Court states in its decison, however, that “because of the ‘exceptional importance’ of the antitrust implications of reverse exclusionary payment settlements of patent infringement suits,” plaintiffs-appellants should petition for rehearing in banc, and offers four reasons why the case might be appropriate for reexamination by the full Court:

(1) The Court cites amicus briefs (here and here) submitted by the U.S. arguing that Tamoxifen “adopted an improper standard that fails to subject reverse exclusionary payment settlements to appropriate antitrust scrutiny,” and proposing that “excessive reverse payment settlements be deemed presumptively unlawful unless a patent-holder can show that settlement payments do not greatly exceed anticipated litigation costs.”

(2) The Court notes that “there is evidence that the practice of entering into reverse exclusionary payment settlements has increased” since the Tamoxifen decision.  In January 2010, the FTC issued a report showing evidence of that increase.

(3) Citing July 30, 2002 remarks from Senator Orrin Hatch (R-UT) that “[a]s coauthor of the [Hatch-Waxman Act], I can tell you that I find these type[s] of reverse payment collusive arrangements appalling,” the Court states that “after Tamoxifen was decided, a principal drafter of the Hatch-Waxman Act criticized the settlement practice at issue here.

(4) Finally, the Court states that “Tamoxifen relied on an unambiguous mischaracterization of the Hatch-Waxman Act.  Tamoxifen was based in no small part on the panel majority’s belief that reverse exclusionary settlements ‘open[] the [relevant] patent to immediate challenge by other potential generic manufacturers . . . spurred by the additional incentive . . . of potentially securing the 180-day exclusivity period available upon a victory in a subsequent infringement lawsuit.’  .  The panel majority’s claim that the statutory exclusivity period cedes to the first ANDA filer to successfully defend was erroneous. . . .  Contrary to our suggestion in Tamoxifen, later ANDA [Paragraph IV] filers are not eligible for the 180-day exclusivity period.”

The FTC quickly issued a press release exclaiming that the Court’s invitation for the plaintiffs-appellants to seek further review “is further evidence that courts are rethinking their approach to pay-for-delay settlements.”  Rutgers University School of Law (Camden) professor Michael A. Carrier commented that “this is the best opportunity for an appellate court to critically review these agreements in quite some time.”

By Kurt R. Karst –

Earlier today, the U.S. Court of Appeals for the Federal Circuit ruled 3-0 to affirm a March 2009 decision from the U.S. District Court for the District of Columbia granting summary judgment to FDA and the U.S. Patent and Trademark Office (“PTO”) arising from a June 2008 challenge from Wyeth Holdings Corporation (“Wyeth”) with respect to Wyeth’s request for a Patent Term Extension (“PTE”) for U.S. Patent No. 4,916,154 (“the ‘154 patent”) covering Wyeth’s new animal drug CYDECTIN (moxidectin) Pour-On. 

As we previously reported (here and here), FDA first approved CYDECTIN on January 28, 1998 under New Animal Drug Application  (“NADA”) No. 141-099.  The NADA was submitted under FDA’s Phased Data Review Policy and Administrative NADA process.  An Administrative NADA “is a new animal drug application that is submitted after all of the technical sections that fulfill the requirements for the approval of the new animal drug . . . have been reviewed by [the Center for Veterinary Medicine (‘CVM’)] and CVM has issued a technical section complete letter for each of those technical sections.”  (The human drug and medical device counterparts to the Administrative NADA are the statutory “Fast Track” process and the Modular Premarket Approval Application process, respectively.  Both of these processes permit a type of rolling submission and review of marketing application sections.)

In March 1998, Wyeth timely submitted a PTE application to the PTO with respect to the ‘154 patent.  In that application, Wyeth calculated a PTE based on the date the company submitted the first technical section to its Investigational New Animal Drug (“INAD”) (i.e., August 8, 1995).  Using this date, Wyeth calculated a new expiration date of the ‘154 patent of January 28, 2012.  (The original expiration date of the ‘154 patent was April 10, 2007.) 

Under the PTE statute at 35 U.S.C. § 156(g), certain patents covering animal drugs are eligible for a PTE if patent life was lost during a period when the product was undergoing regulatory review.  As with other FDA-regulated products, such as human drugs and medical devices, the “regulatory review period” is composed of a “testing phase” and a “review phase.”  For animal drugs approved under FDC Act § 512, the “testing phase” begins on the earlier of the effective date of an INAD exemption or the date a major health or environmental effects test on the drug was initiated, and ends on the date a NADA is “initially submitted” to FDA under FDC Act § 512(b).  The “review phase” is the period between the initial submission and approval of the NADA.  FDA’s PTE regulations at 21 C.F.R. § 60.22(f) clarify that a marketing application “is initially submitted on the date it contains sufficient information to allow FDA to commence review of the application.” 

In September 2006, FDA issued a Federal Register notice stating the Agency’s determination that the date NADA No. 141-099 was initially submitted to FDA was on January 13, 1998, when the final NADA component was submitted to the Agency.  In the notice, the Agency also stated that “[i]t is FDA’s position that the approval phase begins when the marketing application is complete.”  In November 2006, Wyeth submitted a request for reconsideration and revision of the regulatory review period.  Wyeth argued that August 8, 1995 is the controlling date for PTE purposes.  On May 7, 2008, FDA denied Wyeth’s request, stating that “it is FDA’s position that the approval phase for purposes of [PTE] begins when the marketing application is complete, including all technical sections and the CVM complete letters.”  Wyeth promptly sued FDA alleging that using the August 8, 1995 date for purposes of calculating the PTE regulatory review period is consistent with Congress’ intent in passing the PTE provisions at 35 U.S.C. § 156 and with FDA’s PTE regulations at 21 C.F.R. 60.22(f), and that a mere 16-day approval period “is unreasonable.”  FDA filed a Motion to Dismiss or Alternatively for Summary Judgment and Wyeth filed a Cross-Motion for Summary Judgment.

The District Court reviewed the case under the familiar Chevron framework, and found that while both FDA and Wyeth had advanced plausible readings of the PTE statute – “FDA contends that there was no ‘application’ until Wyeth submitted its Administrative NADA; and Wyeth contends that the application was ‘initially submitted’ upon its submission of the first technical section” – the statute is ambiguous under a Chevron Step 1 analysis, and that under a Chevron Step 2 analysis:

Wyeth has not met its burden here because the court finds the FDA’s arguments to be more persuasive than those made by Wyeth.  Indeed, the FDA’s construction runs true to the text and defines “initially submitted” in a manner “that is reasonable in light of the legislature’s revealed design.” . . . .  Accordingly, the court cannot say that the FDA’s interpretation is based on an impermissible construction of the statute, nor can the court find that the FDA’s interpretation violates the APA.

Wyeth appealed to the Federal Circuit and argued in its briefs (here and here), among other things, that “an application is initially submitted no later than the date the last technical section is filed because at that point the sponsor has submitted all of the elements listed in the statutory definition of an application,” and that “Congress’s use of the term ‘initially’ [in the PTE statute] indicates that the approval phase in fact begins as soon as an applicant submits the first technical section for review, as Wyeth did in August 1995.”  For example, Wyeth notes that “[t]he House Report on the Hatch-Waxman Act explains that Congress chose the term ‘initially submitted’ rather than the term ‘filed’ because ‘an application is often not considered to be filed, even though agency review has begun, until the agency has determined that no other information is needed.’” (quoting H.R. Rep. No. 98-857, pt. 1, at 44 (1984)).  Alternatively, Wyeth argues that even if PTE statute does not unambiguously support one of its interpretations, FDA’s interpretation is not reasonable and should not be given any deference.

FDA countered in its brief that the statutory text compels the Agency’s interpretation that an application is “initially submitted” when the sponsor files an Administrative NADA and that prior to the submission of an Administrative NADA, a  sponsor has not “initially submitted” an application for purposes of the PTE statute at 35 U.S.C. § 156(g).  Alternatively, FDA asserts that even if the Court concludes that the PTE statute is ambiguous,  the Court should defer to FDA’s interpretation because it is reasonable.

Reviewing the district court’s grant of sumary judgment de novo, the Federal Circuit ruled that 35 U.S.C. § 156(g) is ambiguous, but that FDA’s interpretation of the PTE statute is permissible under a Chevron Step 2 analysis:

Section 156(g) created a range of ambiguity by not explicitly defining the term “application,” leaving that term open to interpretation.  FDA’s interpretation tracks the requirements of 21 U.S.C. § 360b(b).  As explained by FDA, the administrative NADA is the first document containing or referencing all of the parts required by 21 U.S.C. § 360b(b).  Thus, it is permissible to characterize the administrative NADA as the first application submitted for purposes of 35 U.S.C. § 156(g).  Because the administrative NADA is the first application submitted, it is reasonable to interpret the date that it is submitted as the “initially submitted” date.  Prior to the submission of an administrative NADA, no application has been submitted, initially or otherwise.  Thus, FDA’s interpretation “reasonably resolves the ambiguity in applying the relevant statutes to a factual situation not fully foreseen or provided for by the Congress when it enacted the statutes or the FDA when it promulgated regulations.”   Mylan, 389 F.3d at 1284.  It is permissible to interpret § 156(g) to mean that “an application” is “initially submitted” when a sponsor submits an administrative NADA in phased review.

It is unclear whether Wyeth will seek en banc review of the unanimous panel decision.  We will update our loyal FDA Law Blog readers if Wyeth seek an appeal of the decision. 

By Alan M. Kirschenbaum –

Five weeks after the enactment of health care reform, CMS has, with surprising alacrity, issued a draft guidance on one of the provisions of the legislation that will be most costly to brand drug manufacturers – the Medicare Part D Coverage Gap Discount.  As explained in our summary of the Patient Protection and Affordable Care Act ("PPACA"), effective January 1, 2011, PPACA requires drug manufacturers, as a condition of having their drugs covered under Part D, to have in effect an agreement with HHS agreeing to offer a discount on brand (i.e., NDA or BLA) drugs dispensed to Part D beneficiaries in the coverage gap who do not receive low-income subsidies.  The amount of the discount is 50 percent of the “negotiated price,” which is defined under current regulations as the price available to beneficiaries at the pharmacy, reduced by any discounts or other price concessions (including those offered by drug manufacturers to the Part D plan) that the Part D plan has elected to pass through to enrollees.  The statute requires that the coverage gap discount be provided to enrollees at the point of sale, but otherwise leaves it largely up to CMS to design the system under which these discounts will be collected from manufacturers and made available to enrollees.  The draft guidance describes the system that CMS is proposing.  Essentially, the discount will be provided to the patient at the point of sale by the pharmacy, which will be reimbursed by the Part D sponsor, which in turn will be reimbursed by manufacturers – all under the oversight of CMS with the help of its coverage gap contractor.

Under the guidance, the Part D sponsor will be the primary administrator of the discount program.  When a drug is dispensed to a Part D beneficiary at the pharmacy and the claim is adjudicated, the Part D sponsor will determine (because, as CMS explains, it is the only entity that is able to determine) whether the beneficiary is eligible for the discount, whether the drug was approved under an NDA or BLA and therefore subject to the discount, whether the claim is wholly or partially in the coverage gap, and the amount of the discount.  For an eligible beneficiary, the Part D sponsor will inform the pharmacy at adjudication of the amount of the discount, and the pharmacy will provide the discount to the beneficiary at the point of sale.  The Part D sponsor will subsequently reimburse the pharmacy for that amount.  The Part D sponsor will also report the discount on the electronic prescription drug event ("PDE") record reported to CMS.  Based on the PDE records, CMS’s contractor will determine the aggregate discount amount owed by each manufacturer to each Part D sponsor for each drug at either the NDC-9 or NDC-11 level (as determined by CMS), and will invoice manufacturers quarterly.  Manufacturers must pay the Part D sponsors directly, and do so within 15 days, including amounts in dispute. 

Presumably to ease the burden on Part D sponsors of having to reimburse pharmacies before receiving manufacturer payments, starting January 1, 2011, CMS will provide a monthly prospective payment to Part D sponsors for the manufacturer discounts that are expected to be provided to beneficiaries in the coverage gap during the month, based on projections in each Part D sponsor’s bid.  At the end of the contract year, CMS will reconcile its monthly prospective payments to each Part D plan to the actual amount of discounts to each of the plan’s enrollees, which CMS will calculate based on the discount amounts reported in the PDE records.  The draft guidance provides that the monthly prospective payments to Part D sponsors will be reduced by discount amounts invoiced to manufacturers, but it is unclear what prior month would be used to determine the amounts invoiced to manufacturers. 

The statute requires manufacturers, absent extenuating circumstances, to have an agreement with HHS in effect by January 1, 2011 in order for their drugs to be covered under Part D.  CMS has determined that extenuating circumstance exist because Part D sponsors have already submitted their formularies for 2011, and that CMS therefore must allow coverage of Part D drugs in 2011 regardless of manufacturer discount agreements.

CMS solicits comments on the draft guidance, and specifically on the proposed approach for collecting manufacturer payments.  Certain issues warrant comments.  For example, although the guidance requires manufacturers to pay disputed amounts when invoiced (unlike the Medicaid Rebate program), it contains no procedures for manufacturers to dispute invoiced claims.  Also, although CMS’s contractor would verify the accuracy of the discounts reported in PDE records, there is no provision for manufacturers or independent third parties to audit PDE records or CMS’s contractor’s calculations.  The sheer administrative burden to manufacturers is also a concern.  While manufacturers have adapted to paying Medicaid Rebates to 50 states, paying quarterly coverage gap discounts to hundreds of Part D plans in addition presents a new level of burden.  Comments on the draft guidance must be received by close of business on May 14, 2010.

By Ricardo Carvajal –

Some smaller cigarette manufacturers have sued FDA to invalidate a provision in FDA’s recently issued final rule that would restrict a manufacturer from using certain product names on the ground that the restriction violates the First and Fifth Amendments, among other grounds.  Section 1140.16(a) of FDA’s final rule restricting the sale and distribution of cigarettes and smokeless tobacco to minors restricts a manufacturer from using the trade or brand name of a nontobacco product as the trade or brand name for a cigarette or smokeless tobacco product, unless the trade or brand name was on both a tobacco product and a nontobacco product sold in the U.S. on January 1, 1995.  Products that violate the restriction are deemed misbranded.

The manufacturers contend that the restriction has a disproportionate negative impact on small cigarette manufacturers because the trade or brand names used by the larger manufacturers are generally excepted by virtue of having been in use prior to 1995.  As examples of the restriction’s far-reaching effects, the complaint cites (among other things) the fact that the restriction:

• applies even where the manufacturer of the nontobacco and the tobacco products are wholly unrelated;
• the nature of the products is such that there is no likelihood of confusion, mistake, or deception;
• no account is taken of whether different geographic markets are in play;
• the restriction applies regardless of which product had first use and trademark registration; and
• the rule includes no grandfather clause, such that a name used well before the rule’s effective date (but after January 1, 1995) would nonetheless be restricted.

Plaintiff’s contend that the rule would result in a loss of commercial speech, as well as a taking and destruction of property interests, in violation of the First and Fifth Amendments.  Plaintiffs seek both a preliminary and permanent injunction, as well as other relief.

By Cassandra A. Soltis –

That’s what the Food and Drug Administration (“FDA”) is hoping anyway.  In a notice expected to be published in the Federal Register on Thursday, April 29, 2010, FDA will announce that it is requesting data and information from “all interested parties,” including the food industry, graphic and package designers, marketing experts, and the nutrition community, both domestic and foreign, on the use of front-of-pack (“FOP”) nutrition symbols on food packages or shelf tags.   This request for information follows FDA Commissioner Margaret Hamburg’s letter to industry last month, in which she urged companies to review their food labels and remove false or misleading claims that prevent consumers from “mak[ing] informed and healthy food choices.”  The notice also follows First Lady Michelle Obama’s recent announcement of her Let’s Move initiative, which has the goal to reduce the prevalence of childhood obesity, in part, by having parents and children choose healthier foods.

Citing to “[t]he prevalence of diet-related diseases in the U.S. population and the need to accommodate Americans’ increasingly busy lifestyles,” FDA stated that nutrition information needs to be tailored to help consumers make better food choices.  To that end, FDA indicated that voluntary FOP labeling should be “[b]ased on standardized nutrition criteria that are grounded in the Dietary Guidelines for Americans,” “[w]idely adopted by food retailers and manufacturers,” and appear in a standardized format that consumers of varying literacy and educational levels can comprehend and notice.

FDA and the U.S. Department of Agriculture are already working with stakeholders in the public and private sectors to develop a “voluntary” FOP label.  Although it appears that a manufacturer’s use of any FOP label scheme agreed to by FDA would be voluntary, FDA’s stated goal of having a standardized format suggests that manufacturers might not be able to use an alternate FOP label scheme of their own choosing.  Depending on the underlying rationale, such a restriction could invite a First Amendment challenge.   An additional impact on industry could result from the imperative to reformulate products so that there is no loss of market share to competing products that an FOP labeling scheme designates as being more nutritious.

FDA stated that it is currently conducting studies on consumer understanding of nutrition symbols.  However, the Agency is interested in data and information that has not been published, particularly those studies on a wide range of nutrition symbol schemes and on consumer responses to different symbol schemes.  Other data and information requested include:

• whether FOP labeling may cause manufacturers to reformulate their products;
• design considerations, such as color, location, shape, and amount of information; and
• consumer attitudes toward, and use of, such symbols, including whether FOP labeling affects purchasing decisions.

The Agency is also considering issuing a draft guidance on voluntary calorie declarations and a draft guidance or proposed rule on dietary guidance statements. 

Comments on this FOP labeling notice will be due 90 days after publication in the Federal Register.

By Cassandra A. Soltis –

In an advertising challenge brought by the Perrigo Company (“Perrigo”), the National Advertising Division (“NAD”) of the Better Business Bureau recommended that Pharmavite, LLC (Pharmavite) refrain from making several claims for its Nature Made® Prenatal + DHA Liquid Softgel Vitamins until the company completes competent and reliable testing that establishes the bioavailability of the folic acid in the product.  Advertising for the Prenatal Vitamin included FDA’s authorized folic acid/neural tube defects health claim and a statement that the product was formulated for “easy absorption.” 

Perrigo alleged that Pharmavite could not substantiate the claims because the product does not adhere to the U.S. Pharmacopeia (“USP”) standard titled “Disintegration and Dissolution of Dietary Supplements, 2040,” which determines whether a dietary ingredient is bioavailable.  Dietary supplements bearing the folic acid/neural tube defects health claim must meet this standard in order to bear the health claim, unless the standard is not applicable, in which case “the folate in the dietary supplement [must] be shown to be bioavailable under the conditions of use stated on the product label.”  21 C.F.R. § 101.79(c)(2)(ii)(B).

According to Perrigo, it tested Pharmavite’s Prenatal Vitamin using the pertinent USP standard and found less than 12.5% of the labeled amount of folic acid had dissolved after six hours.  (The USP’s standard requires that at least 75% of the labeled amount dissolve within one hour under the intended conditions of use.)  Perrigo explained that fat or oil-based components, such as DHA, are expected to inhibit the absorption of water soluble vitamins, such as folic acid.  Accordingly, Perrigo asserted, it is unlikely that Pharmavite’s product can pass a dissolution test of any kind.

Pharmavite responded that its Prenatal Vitamin product did meet the pertinent USP Standard for softgel dietary supplements, which is the rupture test.  Pharmavite explained that, because its product passed the rupture test, the product was bioavailable and the claims were substantiated.  Even so, Pharmavite conducted more testing by incorporating an additional dissolution step, which used a surfactant to determine the availability of the contents of the softgel.  Pharmavite stated that the results from this testing further supported the bioavailability of the product.

The NAD disagreed with Pharmavite, essentially finding that neither USP standard could show that the product was bioavailable.  NAD based its decision on an article that appeared in the Pharmacopeial Forum, which explained that the rupture test may be inadequate on its own when the contents of a softgel are dispersed as a suspension or emulsion (i.e., an oil).  The article suggested that dissolution conditions that mimic the in vivo environment may be helpful in these circumstances.  Because Pharmavite’s additional testing did not mimic the in vivo environment, NAD concluded that Pharmavite did not show that the folic acid in its softgel Prenatal Vitamin was bioavailable. 

Pharmavite agreed to discontinue the challenged claims until it conducts testing that recreates the in vivo setting.  This case may have repercussion for similar products that combine water soluble vitamins with oil-based components.

By Kurt R. Karst –   

Last Friday, at the American Bar Association’s Section of Antitrust Law Spring Meeting in Washington, D.C., Federal Trade Commission (“FTC”) Chairman Jon Leibowitz issued the FTC’s 2010 Annual Report.  Among other things, including allegedly false or unsupported claims concerning dietary supplements, the 96-page report highlights the Commission’s efforts to stop allegedly anticompetitive “pay-for-delay” patent settlement agreements.

According to the FTC, “[o]ne of the Commission’s top priorities is putting an end to anticompetitive pay-for-delay patent settlement agreements.”  Indeed, the Commission commented in its January 2010 report, titled “Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions,” that there are “multiple investigations underway.”  President Obama’s proposed version of the Patient Protection Affordable Care Act (“PPACA”) included provisions that would have made patent settlement agreements, if challenged, presumptively anticompetitive and unlawful (although some groups wanted more); however, the provisions did not make it into the law.  The FTC expressed its deep disappointment and vowed to press ahead. 

The FTC’s Annual Report focuses on three cases the Commission has been involved in concerning patent settlement agreements:

• King Drug Co. of Florence, Inc. v. Cephalon, Inc. –  In this consolidated case concerning Cephalon, Inc.’s PROVIGIL (modafinil) that is pending in the U.S. District Court for the Eastern District of Pennsylvania, the FTC alleged that Cephalon engaged in anticompetitive conduct when the company paid four firms to refrain from selling generic versions of PROVIGIL until 2012.  In March 2010, the court denied various defendants’ motions to dismiss the case (except for selected counts brought under several state statutes), finding that the agreements may violate antitrust laws.

• In re: AndroGel Antitrust Litigation (No. II) – This case stems from a February 2009 challenge by the FTC and the California Attorney General concerning  Solvay Pharmaceuticals, Inc.’s ANDROGEL (testosterone gel) 1%, in which the FTC alleged that Solvay and generic companies violated various federal antitrust laws when they agreed to dismiss patent infringement litigation in exchange for a profit-sharing arrangement and provided the generic competitors would not launch their generic versions of ANDROGEL until 2015.  As we previously reported, in February 2010, in a setback to the Commission’s battle against patent settlement, the U.S. District Court for the Northern District of Georgia (Atlanta Division) largely dismissed the case.

• Federal Trade Commission v. Bristol-Myers Squibb Co. – In this first action involving § 1115 of the 2003 Medicare Modernization Act, and which stems from a 2003 FTC Order involving Bristol-Myers Squibb Company (“BMS”) and the reporting of patent settlement agreements, the FTC obtained a $2.1 million fine from BMS for failing to inform the FTC of agreements reached with Apotex, Inc., regarding potential generic competition to PLAVIX (clopidogrel bisulfate).  MMA § 1112(c) requires each party to a settlement of patent litigation to file such settlements with the FTC and the Department of Justice, and MMA § 1115 provides “a civil penalty of not more that $11,000, for each day” a company fails to comply with the submission requirement.  The FTC charged that, among other things, BMS failed to disclose (as part of a patent settlement with Apotex) that the company orally promised that it would not compete with Apotex during the first 180-days that Apotex marketed its generic version of PLAVIX.

Although not among the cases discussed in the FTC’s Annual Report, the U.S. District Court for the District of New Jersey’s recent order in In re K-Dur Antitrust Litigation to adopt a Special Master’s Report and Recommendation in the long-running patent settlement dispute concerning K-DUR (potassium chloride) is also noteworthy.  In that case, direct purchasers of K-DUR alleged that Merck & Co., Inc. (“Merck”) (formerly Schering-Plough Corporation) restricted competition in violation of the Sherman Act by settling patent infringement lawsuits against potential generic K-DUR entrants.  Merck filed a motion for summary judgment and the Special Master appointed to preside over the case recommended that the motion be granted.  The direct purchasers promptly appealed the decision.  The In re K-Dur Antitrust Litigation followed an FTC action against Schering challenging the same settlements.  In 2005, in Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005), the U.S. Court of Appeals for the Eleventh Circuit upheld a district court dismissal of that case.