By Alan M. Kirschenbaum & Kurt R. Karst –

Earlier today, House Speaker Nancy Pelosi (D-CA) unveiled the Affordable Health Care for America Act (H.R. 3962).  The bill, which is the latest version of the House’s healthcare reform proposal and the one that will go to the House floor, is almost 2,000 pages in length.  A section-by-section analysis of the bill is available here.  Various other documents related to the bill are posted on the House Energy and Commerce Committee website.  (A second, and much shorter bill – H.R. 3961, the Medicare Physician Payment Reform Act of 2009 – was also introduced.)

Some of the provisions that will be of most interest to FDA Law blog readers are the following:
 
Federal Food, Drug, and Cosmetic Act and Public Health Service Act amendments

• Pathway for licensure of biosimilars established (§§ 2575-2577)
• National directory for Class III and certain Class II devices established (§ 2571)
• Patent infringement settlements between brand and generic manufacturers that delay generic entry (“reverse payments”) prohibited (§ 2573)
• Nutrition labeling required for standard menu items at chain restaurants (§ 2572)

Public Option

• HHS may negotiate payment rates for items and services, including prescription drugs (§ 323)
• Federal health care program fraud and abuse laws apply to public option (§ 326).

Medicare Part D

• Drug manufacturers provide discounts of 50% on brand drugs dispensed to enrollees in the coverage gap (§ 1182)
• Coverage gap phased out by 2019 (§ 1181)
• Repeal of non-interference provision:  HHS may negotiate prices with drug manufacturers (§ 1186)
• Drug manufacturer rebates required for drugs dispensed to Medicare/Medicaid dual eligibles (§ 1181)

Physician Payment Sunshine

• Requires reports on payments of value by drug and device companies to physicians and other health care providers (§ 1451)

Medicaid

• Federal upper limits on Medicaid payment for multiple source drugs changed to 130% of weighted average of AMPs (§ 1741)
• AMP definition amended to exclude sales to most non-retail pharmacy entities (§ 1741)
• Minimum Medicaid Rebate for innovator drugs increased to 22.1% of AMP and rebates increased for new formulations  (§ 1742)
• Rebates required for drugs dispensed to Medicaid managed care enrollees (§ 1743)

340B Program

• Program expanded to certain cancer hospitals, critical access hospitals, and other new covered entities (§ 2501)
• HRSA oversight enhanced (§ 2502)

Other provisions

• New 2.5% excise tax on non-retail sales of medical devices (§ 552)
• HHS to conduct study on use of physician prescriber information in sales and marketing by drug manufacturers, and recommend ways to protect providers from biased marketing (§ 239)

We’ll be posting a more detailed summary of these and other H.R. 3962 provisions of interest to our readers in the near future.

The House Democratic Leadership intends to begin floor debate on the bill beginning on Thursday, November 5, and members have been asked to be  prepared to vote over the following weekend in order to complete the bill. 

By Dara Katcher Levy –

On October 21, 2009, First Fishery Development Services filed suit against FDA seeking declaratory judgment and injunctive relief with regard to its product’s placement on Import Alert 99-08 – Detention Without Physical Examination of Processed Foods for Pesticides.  According to the Complaint, the Company contends that its bulk Olive Leaf Powder Extract is not adulterated, in violation of section 402(a)(2)(b) of the Federal Food, Drug, and Cosmetic Act (“FDC Act”), because the presence of a pesticide in the product is a result of the presence of the pesticide in an antimicrobial solution used on food contact equipment.  The Company contends that this use of the pesticide conforms to an exemption from a pesticide tolerance granted by EPA and is permissible under FDA's threshold of regulation program for substances used in food contact articles that migrate into food.     

The Company alleges that FDA first placed the Olive Leaf Powder Extract on Import Alert on July 2, 2009.  According to the Complaint, the Company states that the original shipment upon which FDA raised the adulteration charge and that is the basis for placing the Company’s product on Import Alert, has not been the subject of final agency action.  The Company maintains that the product is still on “detention status.” 

This is where things get interesting.  Typically, FDA will “Refuse” a shipment before placing a product or entity on an Import Alert. (See our recent article in the Food and Drug Law Institute’s Update publication explaining how FDA generally deals with import matters.)  Although issuing a Refusal before placing on Import Alert is typical FDA practice,  FDA’s procedures for placing products or entities on Import Alert (or Detention Without Physical Examination – DWPE) do not require the issuance of a Refusal and may be based on a finding of one violative sample.  See FDA Regulatory Procedures Manual (“RPM”) Chapter 9.   This departure in practice is yet another sign of FDA’s increase in enforcement activity against imports.

First Fishery alleges, among other things, that for FDA to recommend DWPE based on one violative sample, FDA must have evidence that at least one sample has been found violative and the violation represents a potentially significant health hazard.  This is, in fact, FDA’s stated procedure (RPM Ch 9, 9-21).  However, under the authority of the FDC Act, FDA may take action against a shipment without the existance of an actual violation; section 801(a) provides that FDA may refuse admission to articles that “appear” to be violative.  The burden is on the importer to overcome the appearance of a violation.  

Given the discretion afforded to FDA in the FDC Act over imports, we have no doubt that FDA will present myriad arguments that First Fishery’s case is without merit.  We will be watching this case, as well as the recent case filed against FDA over a tobacco-related product Import Alert. 

By Susan J. Matthees –

On October 27th, on the heels of the release of the Government Accountability Office’s report in which the Office is critical of FDA’s oversight of clinical investigators (see our previous post), Rep. Joe Barton (R-TX) introduced H.R.3932, the Strengthening of FDA Integrity Act of 2009.  The bill, if enacted, would amend the FDC Act to give FDA greater authority to debar individuals, including clinical investigators, from working with drug or device approvals.  The bill has seven Republican co-sponsors.  A summary of the bill provided by Rep. Barton is available here.

By JP Ellison –

Last year we posed the question “Are the Stars Lining Up for FDA Civil Penalties?”   The intervening year has not answered that question, but a recent decision from the Tenth Circuit affirming civil penalties against TMJ Implants, Inc. (“TMJI”) and its founder and president Robert Christensen serves as a reminder of this FDA enforcement tool.  In last year’s blog post we referred to an earlier Food and Drug Law Institute article discussing civil money penalties (CMPs) generally, and the TMJI case specifically.

At that time, the penalties had not yet been assessed in the case.  Subsequently, the administrative law judge (“ALJ”) assessed CMPs totaling $170,000, which represented a $10,000 penalty for failure to submit 17 medical device reports (“MDRs”).  The maximum penalty allowed by regulation for each violation was $165,000.  Yesterday, the Tenth Circuit affirmed a decision of the HHS Departmental Appeals Board (“DAB”), which had, in turn, affirmed the ALJ’s decision.

The central issue in the case was whether MDRs were required despite TMJI’s claim that it did not believe the events in question (either explants of the device or antibiotic treatments) were caused by the device, and thus did not need to be reported.  FDA employees had been telling TMJI since a February 2004 Warning Letter that the events needed to be reported.  TMJI steadfastly refused.  After more than a year of correspondence, FDA filed an administrative CMP action, which resulted in the penalties that the Tenth Circuit affirmed.

For those followers of the Park doctrine, the Tenth Circuit opinion contains a brief, but potentially important discussion of the relevance of Park to CMPs.  In its decision, the Tenth Circuit affirms CMPs against TMJI’s founder and president, Dr. Christensen and cites Park.  Significantly, the government believes that Park stands for the proposition that strict criminal misdemeanor liability can be imposed on a responsible corporate officer regardless of whether that individual knew of the violation.  In contrast, the CMPs in the TMJI case were imposed for “knowing” violations.  While the facts may have well shown that Dr. Christensen knew of the violations, that was not the basis for the Tenth Circuit’s decision.  Rather, it extends Park’s rationale to CMPs. 

By Susan J. Matthees –

Last month the Government Accountability Office ("GAO") published a new report ("GAO report") on the oversight of clinical investigators.  The report is critical of FDA’s oversight of clinical investigators, citing numerous instances where FDA did not take timely action to respond to situations where debarment or disqualification of a clinical investigator was at issue. 

Under Federal Food, Drug, and Cosmetic Act ("FDC Act") section 306, there are certain situations in which FDA must or may debar an individual (including a clinical investigator) from providing any service to a person who has an approved or pending drug application.  In a mandatory debarment, FDA must debar an individual if he or she has been convicted of a felony under federal law for conduct relating to the regulation of a drug.  A mandatory debarment is permanent.  In a permissive debarment, FDA may debar an individual if he or she has been convicted of a misdemeanor under federal law or a felony under state law if the conduct relates to the development or approval process of a drug, or if the individual has been convicted of certain felonies not related to drug development.  Permissive debarment is for a period of time up to five years. 

Pursuant to FDA regulations, FDA may also disqualify investigators (i.e., determine that an investigator is not entitled to receive investigational drugs or devices) who repeatedly or deliberately fail to comply with FDA regulations or report false information to FDA or a trial sponsor.  21 C.F.R. §§ 312.70, 812.119. 

The GAO reviewed 18 debarment proceedings and 52 disqualification proceedings and found that debarment proceedings ranged in length from 26 days to more than a decade.  More than half of the debarment proceedings took over 4 years, and the median length for a proceeding was 4.4 years.  The median length for a disqualification proceeding was 2.5 years, with over a third of the proceedings taking more than 2 years. 

The GAO report cites internal control weakness and limited resources as factors in delay.  The report also comments that FDA’s overall authority “is limited . . .  because FDA’s regulations do not extend a clinical investigator’s disqualification for investigational drugs and biologics to investigational devices and vice versa.”  The report includes the following recommendations (GAO Report page 43):

• Pursue debarment authority for medical devices that is consistent with the current debarment authority for drugs and biologics and prohibit any debarred individual from involvement with drugs, biologics, and medical devices.

• Amend FDA regulations to ensure that those who have engaged in misconduct found sufficiently serious to warrant disqualification for one investigational medical product are not able to continue to serve as clinical investigators for any.

• Monitor compliance with recently established time frames for debarment and disqualification proceedings and take appropriate action when those are not met.

According to the report, FDA is working to improve its debarment and disqualification procedures and will “endeavor to incorporate” the GAO’s recommendations.   FDA also stated that the Agency would be drafting a guidance document to explain the disqualification process.  No timeframe was given for completion. 

By Kurt R. Karst –      

The Medicines Company is reportedly continuing its multi-year and multi-million dollar lobbying effort to obtain a Patent Term Extension (“PTE”) for U.S. Patent No. 5,196,404 (“the ‘404 patent”) covering ANGIOMAX (bivalirudin), an anticoagulant drug product FDA first approved on December 15, 2000 for use in conjunction with aspirin in patients with unstable angina undergoing percutaneous transluminal coronary angioplasty.  The ‘404 patent expires on March 23, 2010, but is subject to a 6-month period of pediatric exclusivity that FDA granted in June 2009 after the Medicines Company conducted pediatric studies identified by FDA in a Written Request.  We understand that thus far The Medicines Company has been unsuccessful in its search for a legislative vehicle for its legislative fix, which has been dubbed the “Dog Ate My Homework Act.”

The Medicines Company submitted a PTE application to the PTO 62 days after FDA approved the company’s ANGIOMAX New Drug Application (“NDA”).  The patent term extension law at 35 U.S.C. § 156(d)(1) requires the submission of a PTE application “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” (i.e., within 60-days of the date of NDA approval).  In April 2007, the U.S. Patent and Trademark Office (“PTO”) denied the PTE request.  Among other things, the PTO cited Unimed, Inc. v. Quigg, 888 F2d 826; 12 USPQ2d 1644 (Fed. Cir. 1989), in which the Federal Circuit addressed the timeliness of a PTE application submission and observed that “section 156(d)(1) admits of no other meaning than that the sixty-day period begins on the FDA approval date.” 

As we previously reported (here and here), legislation has been introduced and debated over the past several years that would amend 35 U.S.C. § 156 to permit the PTO to accept the late filing of a PTE application, and in particular, The Medicines Company’s PTE application for the ‘404 patent.  In June 2008, Representative William Delahunt (D-MA) introduced, and the U.S. House of Representatives quickly passed by voice vote, H.R. 6344, which included a provision to amend 35 U.S.C. § 156 to add new subsection stating that the PTO Director “may accept an application under this section that is filed not later than three business days after the expiration of the 60-day period provided in subsection (d)(1) if the applicant files a petition, not later than five business days after the expiration of that 60-day period, showing, to the satisfaction of the Director, that the delay in filing the application was unintentional.”  (The 5-day petition period for a PTE application pending before the PTO would begin on the date of enactment of the law.)  However, there is a cost for unintentional delay.  The bill states that “[i]n order to effect a [PTE] under section 156(i) of title 35, United States Code, the patent holder shall pay a fee to the United States Treasury . . . .”  The fee for The Medicines Company is $65 million.  For other patent owners, the fee is determined based on a complex calculation.  Specifically, with respect to ANGIOMAX, H.R. 6344 states that a patent holder shall pay a fee equal to “(i) $65,000,000 with respect to any original application for a [PTE], filed with the [PTO] before the date of the enactment of this Act, for a drug intended for use in humans that is in the anticoagulant class of drugs.”  (H.R. 6344 failed to obtain Senate passage and died in the 110th Congress.)

The latest version of the “Dog Ate My Homework Act” reportedly being floated on Capitol Hill and obtained by FDA Law Blog, is substantially similar to the language in H.R. 6344.  It maintains the $65 million fee targeted to a PTE for a patent covering ANGIOMAX.  To build support for the legislative fix, The Medicines Company enlisted the help of PricewaterhouseCoopers (“PwC”) and is reportedly circulating with the proposed legislative language an 11-page PwC report titled “Impact of a Proposed Patent Restoration Under Hatch-Waxman on Federal Budget and Hospital Costs.”  According to the report:

[PwC], based on assumptions incorporated by CBO in its estimate of the patent restoration legislation, estimates that hospitals would have net savings of roughly $1 billion over the next 20 years if the patent for Angiomax was restored.  PwC further estimates, based on more recent data, that hospitals would have savings of $700 million in the first 10 years and $7.0 billion over the 20-year period FY2009-FY2028 if the Angiomax patent is restored.

The impact of patent restoration would be neutral to the federal budget during in the FY2009-FY2018 period, under the CBO assumptions, given the $65 million fee.  Net savings in hospital costs accruing in the FY2019-FY2028 period would result in net federal budget savings over the 20-year period, FY2009-FY2028, even under the CBO assumptions.  Further, using the assumptions about savings from the 2009 Premier data, patent restoration would result in $83 million in net savings to the federal government in the first 10 years as well.

The Medicines Company reportedly has not yet secured a legislative vehicle for its proposed legislation.  We understand that the company’s attempts to get the provision added to the Fiscal Year 2010 Departments of Commerce and Justice, and Science, and Related Agencies appropriations bill (H.R. 2847) have not yet panned out. 

Earlier this year, the PTO issued two new patents that The Medicines Company promptly asked FDA to list in the Orange Book as covering ANGIOMAX – U.S. Patent Nos. 7,582,727 and 7,598,343.  Several companies with pending Abbreviated NDAs (“ANDAs”) amended their applications to include a Paragraph IV Certification to the ‘727 patent (and presumably to the ‘343 patent as well), and the Medicines Company has initiated patent infringement litigation.  Because the ‘727 and ‘343 patents are later-listed patents, no 30-month stay of approval will apply to companies with pending ANDAs, as FDA has explained.

By Ricardo Carvajal –

The Smart Choices ProgramTM has announced “that it will voluntarily postpone active operations and not encourage wider use of the logo at this time by either new or currently enrolled companies.”  The announcement cites FDA’s recent letter to industry announcing the agency’s intent to define nutritional criteria for front-of-package and shelf labeling claims (see our prior post here) and notes the Program's desire to support FDA's initiative

By Larry K. Houck –

In an effort to combat a new aspect of the methamphetamine epidemic, Congress has introduced yet amendment to the Controlled Substances Act (“CSA”).  Representative John Boozman (R-AR) has introduced legislation in the House that would enhance criminal penalties for methamphetamine traffickers who target minors.  H.R. 3702, known as the “Stop Marketing Illegal Drugs to Minors Act,” was introduced on October 1, 2009.  Congress Boozman issued a news release stating that the bill “specifically targets flavored methamphetamine, a version of the drug specially colored, and specifically made to have a candy-like taste” noting that the Drug Enforcement Administration (“DEA”) has stated that traffickers are luring children with strawberry, chocolate and cola-flavored methamphetamine.

The bill would enhance criminal penalties for anyone who manufactures, creates, distributes, or possesses with intent to distribute, a flavored, colored, packaged or altered controlled substance to make it more appealing to minors.  Penalties would also apply to those who attempt or conspire to engage in these activities.        
  
The bill would subject first time offenders in cases involving 50 grams or more of methamphetamine or 500 grams of methamphetamine mixture with fines up to $8,000,000 for individuals and up to $20,000,000 for non-individuals and imprisonment of at least 20 years or life.  For first time offenders in cases involving between 5 and 50 grams of methamphetamine or up to 50 grams of methamphetamine mixture, the bill would impose fines up to $4,000,000 on individuals, up to $10,000,000 on non-individuals and imprisonment of between 10 and 80 years.  Penalties double for second offenses; fines quadruple for third or subsequent offenses and imprisonment increases to life.         

H.R. 3702 has been referred to the Committee on the Judiciary and the Committee on Energy and Commerce. 

By Larry K. Houck –

In a departure from US DOJ policy, Attorney General Eric Holder announced formal federal guidelines for U.S. Attorneys in states that have authorized marijuana for medical use.  The guidelines, set out in an October 19, 2009 memorandum authored by Deputy Attorney General David Ogden, were sent to the U.S. Attorneys in the fourteen states that have enacted laws authorizing marijuana for medical treatment.  Marijuana is a Schedule I controlled substance under the federal Controlled Substances Act.  Schedule I drugs are those that lack a currently accepted medical use in treatment in the United States.

U.S. Attorneys will continue reviewing marijuana cases on an individual basis consistent with DOJ resource allocation and federal priorities set out in the guidelines.  Investigation or prosecution of activities that are legal under state medical marijuana laws conflict with the federal resource allocation and priorities.

The guidelines mandate that the federal government not investigate or prosecute “individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.”  This would include individuals using marijuana for medical treatment and their caregivers that provide marijuana to them.  Prosecution of “commercial enterprises that unlawfully market and sell marijuana for profit,” including operations that hide behind local or state law, remain an enforcement priority.

While the guidelines preclude investigation and prosecution of activities clearly and unambiguously compliant with state law, the memorandum states that it is to serve only as a guide to investigative and prosecutorial discretion.  The guidelines state that nothing precludes investigation or prosecution when there is reasonable basis that state law compliance is but a pretext for illegal activity or when it serves other important federal interests.  The guidelines list the following indications of conduct not “in clear and unambiguous compliance with applicable state law that may indicate “illegal drug activity of potential federal interest”:

• Unlawful possession or unlawful use of firearms;
• Violence;
• Sales to minors;
• Financial and marketing activities inconsistent with state law;
• Amounts of marijuana inconsistent with state or local law;
• Illegal possession of other controlled substances; or
• Ties to other criminal enterprises.

The guidelines state that the list is not exhaustive.  So, the presence of these or other factors can trigger investigation and prosecution of activities legal under state law.

The Drug Enforcement Administration (“DEA”) announced on October 22 that the agency welcomes the guidelines, asserting that “[i]t is not the practice or policy of DEA to target individuals with serious medical conditions who comply with state laws authorizing the use of marijuana for medical purposes.”  But what about the not-for-profit cooperatives or even the for-profit dispensaries that provide marijuana to ill individuals?  DEA stated that consistent with DOJ’s guidelines, it “will continue to identify and investigate any criminal organization or individual who unlawfully grows, markets or traffics marijuana or other dangerous drugs.”  But “criminal” or “unlawful” under which laws, the federal laws or individual state laws?

By Ricardo Carvajal –

FDA has issued a letter to industry stating that the agency intends to take enforcement action against front-of-package ("FOP") or shelf labeling that provides false or misleading information (including implied nutrient claims that don't comply with regulatory requirements).  Further, the letter states that FDA is developing a proposed regulation to "define the nutritional criteria that would have to be met by manufacturers making broad FOP or shelf label claims concerning the nutritional quality of a food."  If the regulation becomes final, manufacturers and retailers would remain free to develop and use their own labeling systems, but the systems would have to satisfy the nutritional criteria specified in the regulation.  If that effort doesn't result in a "common, credible approach," FDA is signaling that it may establish a single, uniform system for FOP and shelf labeling.  

In April, FDA and USDA jointly issued a letter directed to the Smart Choices ProgramTM, an FOP labeling system that features symbols and other information intended to “help guide consumers in making smarter food and beverage choices.”  That letter stated that the agencies would be monitoring implementation of Smart Choices and would be “concerned if any FOP labeling systems used criteria that were not stringent enough to protect consumers against misleading claims; were inconsistent with the Dietary Guidelines for Americans; or had the effect of encouraging consumers to choose highly processed foods and refined grains instead of fruits, vegetables, and whole grains.”  Since then, Smart Choices has come under attack from several quarters, most notably Connecticut’s Attorney General (see here).

It is too soon to know if this latest action by FDA is more bark than bite.  However, the fact that the agency is prepared to wade into a controversial arena with a proposed rule suggests that whatever reticence there may have been at FDA about grappling with voluntary labeling issues is rapidly dissipating.

By Kurt R. Karst –   

Earlier this week, the U.S. District Court for the Central District of California  a  filed by Mutual Pharmaceutical Company, Inc. (“Mutual”), and AR Scientific, Inc. and AR Holding Company, Inc. (“AR”) in a Lanham Act case concerning the continued marketing of unapproved oral dosage form drug products containing colchicine.  The court also declined to address a  filed by the defendants in the case, deciding instead to grant a Motion to Transfer the case to the District of New Jersey for the convenience of the witnesses and parties. 

Colchicine is a near-200 year-old drug FDA approved NDAs for in July 2009 for Mutual and AR (here and here) for the treatment of gout flares (NDA No. 22-351, for which FDA granted 3-year exclusivity) and for the treatment of Familial Mediterranean Fever (“FMF”) (NDA No. 22-352, for which FDA granted 7-year orphan drug exclusivity).  The drug products, marketed under the trade name COLCRYS (colchicine) Tablets, were also approved earlier this week for the prevention of gout flares.  In February 2008, FDA took enforcement action against companies marketing unapproved injectable colchicine drug products, but the Agency noted that its action was limited to the injectable dosage form of the drug – “FDA is not taking any orally administered colchicine products off the market at this time, whether approved or unapproved.”         

The Mutual/AR colchicine case stems from two complaints ( and ) Mutual and AR filed in August 2009 (later consolidated) – just days after FDA approved COLCRYS Tablets – seeking an injunction against both suppliers of colchicine Active Pharmaceutical Ingredient used in unapproved single-entity colchicine prescription drug products and manufacturers and marketers of unapproved single-entity colchicine prescription drug products.  Mutual and AR allege in their complaints that the defendants violated the Lanham Act § 43(a) (15 U.S.C. § 1125(a)) the California Business and Professions Code §§ 17200 and 17500, and California unfair competition and misappropriation common law in that they “unlawfully and unfairly advertised, marketed, promoted, distributed, and/or sold in competition with Plaintiffs’ colchicine product (COLCRYS™).”  Specifically, Mutual and AR allege that the inclusion of the defendants’ colchicine drug products on various integrated drug dispensing databases and pricing services (“Price Lists”) and drug ordering systems confuses pharmacists into incorrectly believing that the defendants’ products are FDA-approved, and that the labeling for the defendants’ colchicine drug products falsely imply that they are FDA-approved and safer than COLCRYS Tablets.  (Mutual and AR did not allege that the defendants made any literally false statements.)

The defendants in the case argued that the injunctive relief sought by Mutual and AR is within FDA’s primary jurisdiction, and that certain “consumer surveys relied upon by [Mutual and AR] to support their false advertising claims do not establish that Defendants have made any false statements and that Plaintiffs’ requested relief is barred by the doctrine of unclean hands.”

Under Lanham Act § 43(a), a party may be held liable for placing into interstate commerce a “false or misleading description of fact, or false or misleading representation of fact” that “in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.”  And to prevail on a false advertising claim under the Lanham Act, a plaintiff must meet six factors:

(1) the defendant made a false statement either about the plaintiff’s or its own product; (2) the statement was made in commercial advertisement or promotion; (3) the statement actually deceived or had the tendency to deceive a substantial segment of its audience; (4) the deception is material; (5) the defendant caused its false statement to enter interstate commerce; and (6) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to the defendant, or by a lessening of goodwill associated with the plaintiff’s product. [(Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 n.4 (9th Cir. 2002).)]

In support of their Motion for Preliminary Injunction, Mutual and AR primarily rely on a 2006 decision by the U.S. District Court for the Central District of California (Mutual Pharm. Co. v. Ivax Pharm., Inc., 459 F. Supp. 2d 925 (C.D. Cal. 2006) in which Mutual brought a similar Lanham Act action against companies marketing unapproved quinine sulfate after FDA approved Mutual’s QUALAQUIN (quinine sulfate) Capsules.  In that case, the court granted (in part) the requested preliminary injunction, and in so doing, rejected the defendants’ primary FDA jurisdiction argument and found that Mutual had established the requisite probability of success on the merits:

Accordingly, the Court finds that the FDCA does not stand as a bar against Mutual litigating its false labeling claim.  As this is the only argument raised by defendants as to why Mutual lacks a probability of success on this claim, the Court finds that Mutual has shown a likelihood of success as to its false advertising claim to the extent that claim is based upon defendants’ false representations contained on its product labels.

The court in Mutual’s colchicine Lanham Act case, however, expressed its reluctance to “view the Lanham Act’s false advertising provisions as broadly as did the Ivax court.”  The court also stated that:

Defendants have not just relied on the primary jurisdiction doctrine.  They also attack the merits of Plaintiffs’ false advertising claim, the sufficiency of the evidence presented by Plaintiffs, and the equities of enjoining Defendants from engaging in the very same behavior that Plaintiffs were also engaged in until days before they commenced this litigation.  Even assuming that some portion of Defendants’ marketing activities are [sic] not within the primary jurisdiction of the FDA, this Court still concludes that Plaintiffs have not established a likelihood of success on the merits. . . .

Here, the survey evidence relied upon by Plaintiffs largely establishes only that pharmacists are confused about what the inclusion of a drug on a Price List or drug ordering system means concerning the FDA approval status of a particular drug.  As a preliminary matter, the Court is not convinced that having drugs listed on a Price List or drug ordering system maintained by a third party even constitutes a “false statement” in “commercial advertising or promotion” to fall within the scope of the Lanham Act’s false advertising provisions.  Moreover, there is little evidence that Defendants have in any way created the confusion experienced by pharmacists, or that this confusion is limited to colchicine products. Plaintiffs’ contentions concerning the product labels and inserts are even weaker, both because the evidence of confusion is weaker and because disputes concerning the content of those labels and inserts falls even more squarely within the primary jurisdiction of the FDA.

Although the case has been transferred to the District of New Jersey, it seems unlikely that a New Jersey court will disagree with the California court’s decision that the matter lies within FDA’s primary jurisdiction.  Whether FDA plans to take enforcement action against companies manufacturing and marketing unapproved colchicine tablets drug products is unclear.  FDA’s 2006 compliance policy guide provides the Agency’s enforcement priorities with respect to marketed unapproved drugs and states that one of the circumstances in which FDA may take enforcement action is when marketed unapproved drugs “present direct challenges to [the drug approval system], as do unapproved drugs that directly compete with an approved drug, such as when a company obtains approval of a [NDA] for a product that other companies are marketing without approval . . . .”  Interestingly, in late 2006, FDA took enforcement action with respect to marketed unapproved quinine sulfate drug products shortly after the Ivax decision.  FDA generally allows a grace period for the distribution of unapproved competitive products to secure approval of a marketing application before taking enforcement action, unless FDA perceives the unapproved drugs to pose a health risk. 

By Ricardo Carvajal –

The Chief Administrative Law Judge (“ALJ”) at the Federal Trade Commission (“FTC”) has issued a decision that, if upheld by the Commissioners of the FTC, would dismiss an FTC complaint which alleged that a marketer of dietary supplements “disseminated” or “caused to be disseminated” false advertisements on an internet website in violation of sections 5(a) and 12 of the Federal Trade Commission Act.  The challenged advertisements were alleged to falsely represent that the supplement prevented, treated, or cured cancer.  However, the ALJ did not reach the question of whether the advertisements were false or misleading because he ruled that the FTC staff lawyers prosecuting the case failed to meet their burden of demonstrating that the respondents “disseminated” or “caused to be disseminated” the advertisements.  The ALJ found in part that (1) there was no evidence that respondents had created or played a role in creating the advertisements, (2) merely referring consumers to a website did not constitute “dissemination” of the advertisements on that website, and (3) neither unsupported assertions that respondents participated in the website nor assertions that they had a business relationship with the supplement manufacturer were sufficient to give rise to liability for false advertising on the website.

By Kurt R. Karst –      

Consistent with recent wins concerning generic PROGRAF (tacrolimus) and generic ZOSYN (piperacillin sodium; tazobactam sodium) Injection (here and here), the U.S. District Court for the Central District of California recently ruled that FDA’s April 2008 denial of a citizen petition and decision to approve Spear Pharmaceuticals, Inc.’s (“Spear’s”) ANDA No. 77-524 for a generic version of Valeant Pharmaceuticals International’s (“Valeant’s”) EFUDEX (fluorouracil) Topical Cream, 5%, did not violate the Administrative Procedures Act (“APA”).

EFUDEX (also known as 5-FU) is a locally-acting antineoplastic drug product FDA first approved in July 1970 for the topical treatment of multiple actinic or solar keratoses (“AK”).  In 1976, FDA approved the drug for a second indication – for the topical treatment of superficial basal cell carcinomas (“sBCC”) when conventional methods are impractical.  As we previously reported, in December 2004, Valeant submitted a citizen petition to FDA requesting that the Agency not approve any ANDA for a generic version of EFUDEX Cream unless the application contains data from an adequately designed comparative clinical study conducted in sBCC subjects.  Specifically, Valeant argued in the company’s petition that:

The inadequate treatment of sBCC can lead to serious complications for patients, including the growth of their cancer. In that light, . . . is critical that FDA not make assumptions about whether a proposed generic product will be safe and effective in treating sBCC, based on a showing of comparable efficacy in patients with AK. These two conditions occur at different sites of drug action and exhibit different growth patterns. Comparable absorption of a drug to one site of action does not demonstrate comparable absorption to another, more difficult to reach site of action. Similarly, comparable efficacy in an easier to treat condition does not demonstrate comparable efficacy in a more difficult to treat condition. 

For these reasons, FDA must not allow onto the market generic versions of Efudex Cream until a demonstration of bioequivalence has been made, at a minimum, in patients with sBCC.

On April 11, 2008, FDA denied Valeant’s petition and approved Spear’s ANDA.  Citing judicial precedent upholding FDA’s authority to determine the appropriate methods to determine bioequivalence, the Agency stated in its petition response that “even when clinical trials are needed, it has not been the Agency’s policy to require that bioequivalence be shown in every indication if drug release from the dosage form and appearance at the or sites of activity has been demonstrated.”  Furthermore, FDA concluded that “an AK bioequivalence study is sufficient to establish that the generic topical 5-FU formulation will be available in the epidermis and the upper dermis to act on both AK and sBCC lesions to an extent that is comparable to Efudex Cream.” 

Valeant promptly sued FDA in the U.S. District Court for the Central District of California for declaratory and injunctive relief pursuant to the APA.  Spear intervened in the case.  After discovering a “potential conflict of interest . . . that could cause it to revisit the approval status of the ANDA,” FDA issued an Administrative Reconsideration and Stay of Action to Spear staying the approval of ANDA  No. 77-524.  After resolving that issue, FDA reaffirmed the approval of the Spear ANDA.  Valeant moved for summary judgment on the basis that FDA – specifically, the Office of Generic Drugs (“OGD”) – failed to defer to the views of scientists within the Division of Dermatology and Dental Products in FDA’s Office of New Drugs (“OND”), who had determined that a study in AK patients alone was insufficient to establish bioequivalence, but rather that “both AK and sBCC should be studied to yield independent confirmation of bioequivalence for these indications.”  FDA and Spear also moved for summary judgment (here and here) on the basis that FDA’s approval action was proper under the APA, in that “the authorized decision maker in connection with Spear’s original approval was [OGD], not the dermatologists in [OND] . . . .”

In granting FDA’s and Spear’s summary judgment motions, the court commented that:

Valeant has offered no evidence that the FDA actually ignored the opinions of its dermatology experts.  The FDA simply did not defer to those opinions. . . .  [D]eference is owed to the decisionmaker authorized to speak on behalf of the agency, not to each individual agency employee. . . .  In this case, the authorized decision maker in connection with Spear’s original approval was the Office of Generic Drugs, not the dermatologists in the Office of New Drugs . . . . [(internal quotation and citation omitted)]

The district court’s decision leaves intact FDA’s stellar batting average in bioequivalence decision court challenges.  Courts have uniformly held that FDA’s bioequivalence determinations fall squarely within the broad discretion of the Agency – see, e.g., Glaxo Group v. Leavitt, AMD 06-469 (D. Md., Mar. 6, 2006) (Davis, J.) (unpublished opinion); Schering Corp. v. FDA, 51 F.3d 390 (3d Cir. 1995); Schering Corp. v. Sullivan, 782 F. Supp. 645 (D.D.C. 1992), vacated as moot sub nom. Schering Corp. v. Shalala, 995 F.2d 1103 (D.C. Cir. 1993); Somerset Pharms., Inc. v. Shalala, 973 F. Supp. 443 (D. Del. 1997); Bristol-Myers Squibb Co. v. Shalala, 923 F. Supp. 212 (D.D.C. 1996); Fisons Corp. v. Shalala, 860 F. Supp. 859 (D.D.C. 1994).

Interestingly, FDA has been asked to rule on another bioequivalence issue similar to that raised by Valeant in its citizen petition, but this time in the context of ALDARA (imiquimod) Cream, 5%, which is approved for AK, sBCC, and External Genital Warts (“EGW”).  Earlier this year, Graceway Pharmaceuticals, LLC ("Graceway") submitted a citizen petition to FDA requesting that the Agency refrain from approving any ANDAs for a generic version of ALDARA Cream unless an ANDA contains data from bioequivalence studies conducted in patients with each of ALDARA’s approved conditions, including sBCC and EWG, and pharmacokinetic studies under maximal use conditions in patients with EGW and AK.  Graceway states in its petition that “[t]he straightforward application of FDA’s reasoning in the Efudex matter mandates that an ANDA for a generic version of Aldara contain data from a bioequivalence study in patients with EGW and a separate study in patients with sBCC.” 

By Ricardo Carvajal –

In an unusual step, FDA and FTC have issued a joint warning letter to the internet marketer of a dietary supplement promoted as helpful in preventing swine flu, seasonal flu, and colds.  According to the letter, the product “has not been approved, cleared, or otherwise authorized by FDA for use in the diagnosis, mitigation, prevention, treatment, or cure of the H1N1 Flu Virus,” and is both adulterated and misbranded.  In addition to threatening seizure and injunction, the letter threatens a referral for criminal prosecution if there is a failure to take corrective action.  Following a determination by the Secretary of Health and Human services that swine flu poses a public health emergency that “has the significant potential to affect national security,” FDA provided Emergency Use Authorization for certain unapproved or uncleared swine flu related products – but not for the product at issue. 

The letter further states that the FTC Act requires claims that a product prevents H1N1 infection to be supported by “well-controlled human clinical studies,” and prohibits health claims that are not supported by “rigorous scientific evidence.”  The letter notes that violations can result in an injunction or Administrative Order that can require restitution for consumers.
 
The 48-hour time frame afforded for a response to a joint agency action is a standard part of recent warning letters to companies selling illegal products for prevention of swine flu, and shows that there is a high level of concern surrounding the marketing of these products at both FDA and FTC (also see FDA's recent press release regarding illegal H1N1 drugs marketed on the internet here).  Marketers of products high on the agencies’ priority lists had better take note.

By John R. Fleder –

Numerous states have filed lawsuits across the country alleging that pharmaceutical companies have defrauded the Medicaid system by “publishing” inflated prices, namely “AWP” and “WAC” prices, that do not accurately reflect the prices at which those companies actually sell their products.  The cases generally allege that the states have over-reimbursed pharmacists and others because those states relied on “false” AWP and WAC prices for Medicaid reimbursement purposes.  The defendants have presented numerous arguments to defend these cases. (Hyman, Phelps & McNamara, P.C. is actively involved in that defense.)

On October 16, 2009, the Supreme Court of Alabama dealt a fatal blow to the cases that the State of Alabama commenced against AstraZeneca, GSK, and Novartis. It ruled that the lower court had erred in denying the defendants’ post-trial motions seeking a verdict in their favor.  The appellate court ruled that judgment should have been rendered in favor of the defendants, thus apparently ending the cases in that state against these defendants.  The Court ruled that the State failed to produce evidence that it reasonably relied on the alleged misrepresentations by the defendants with regard to their prices.  There was also a concurring opinion and a dissenting opinion.