By Kurt R. Karst –      

A recent decision from the U.S. District Court for the Northern District of Illinois (Eastern Division) presents an interesting solution to a concern about the forfeiture of 180-day exclusivity when a company submits an ANDA containing both a Paragraph IV Certification to one patent and a Paragraph III Certification to another Orange Book-listed patent that does not expire until well into the future.  Such a scenario creates the risk of a court decision trigger under the “failure-to-market” forfeiture provisions that would occur well before the Paragraph III Certification patent expires.  Some companies have been willing to take that risk, however, by submitting their ANDAs early in the race to qualify for 180-day exclusivity. 

Section 505(j) of the Federal Food, Drug, and Cosmetic Act (“FDC Act”), as amended by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, provides that 180-day exclusivity eligibility is forfeited for a failure-to-market if there is a “later of” date that is calculated based on two events.  Specifically, the failure-to-market forfeiture event (at FDC Act § 505(j)(5)(D)(i)(I)) provides as follows:

(I)  FAILURE TO MARKET. – The first applicant fails to market the drug by the later of –

(aa)  the earlier of the date that is –

(AA)  75 days after the date on which the approval of the application of the first applicant is made effective under subparagraph (B)(iii); or

(BB)  30 months after the date of submission of the application of the first applicant; or

(bb)  with respect to the first applicant or any other applicant (which other applicant has received tentative approval), the date that is 75 days after the date as of which, as to each of the patents with respect to which the first applicant submitted and lawfully maintained a certification qualifying the first applicant for the 180-day exclusivity period under subparagraph (B)(iv), at least 1 of the following has occurred:

(AA)  In an infringement action brought against that applicant with respect to the patent or in a declaratory judgment action brought by that applicant with respect to the patent, a court enters a final decision from which no appeal (other than a petition to the Supreme Court for a writ of certiorari) has been or can be taken that the patent is invalid or not infringed.

(BB)  In an infringement action or a declaratory judgment action described in subitem (AA), a court signs a settlement order or consent decree that enters a final judgment that includes a finding that the patent is invalid or not infringed.

(CC)  The patent information submitted under subsection (b) or (c) is withdrawn by the holder of the application approved under subsection (b).

Where there is a later-expiring patent subject to a Paragraph III Certification, a subitem (aa) event will likely occur well before the patent expires.  And because of the early submission of the ANDA containing a Paragraph IV Certification, one of the court decision triggers under subitem (bb) might also occur well before the patent subject to the Paragraph III Certification expires, thereby creating the two dates necessary to calculate a “later of” event under FDC Act § 505(j)(5)(D)(i)(I).  

The Illinois District Court’s decision stems from a Complaint filed by Abbott Laboratories after Abbott received notice of a Paragraph IV Certification from Matrix Laboratories (“Matrix”) involving KALETRA (lopinavir; ritonavir) Tablets.  KALETRA is listed in the Orange Book with 11 patents, that, with pediatric exclusivity, expire between January 2014 and May 2021.  Matrix’s ANDA No. 91-202, which was submitted to FDA on December 23, 2008, contains Paragraph IV Certifications to U.S. Patent Nos. 7,148,359 and 7,364,752, which expire (with pediatric exclusivity) in January 2020 and May 2021, respectively, and Paragraph III Certifications to the remaining 9 patents, the latest of which expires on December 26, 2016 (with pediatric exclusivity).  (As a side note, FDA tentatively approved another Matrix ANDA containing only Paragraph III Certifications for a generic version of KALETRA under the President’s Emergency Plan for AIDS Relief.)  According to FDA’s Paragraph IV Certification List Matrix is a first applicant eligible for 180-day exclusivity. Abbott timely sued Matrix, thereby triggering a 30-month stay of ANDA approval. 

Matrix, perhaps not expecting a patent infringement lawsuit, promptly filed a Motion to Stay requesting the entry of an order: “(i) staying this action until July 1, 2014, (ii) providing that any party may move to lift the stay at an earlier date upon a showing of good cause, and (iii) during the pendency of the Court’s stay, tolling the balance of the thirty-month period [under FDC Act § 505(j)(5)(B)(iii)] with respect to . . .  ANDA No. 91-202.”

Relying on previous decisions in Novartis v. Dr. Reddy’s Labs, Ltd., 2004 WL 2368007 (S.D.N.Y., Oct. 21, 2004) and Amgen, Inc. v. Hoechst Marion Roussel, Inc., 3 F. Supp.2d 104, 109 (D. Mass. 1998), Matrix argued that:

[A]bsent a stay, Defendants are in a Catch-22 situation in view of the forfeiture provision.  If Defendants litigate now and win, their exclusivity will almost inevitably be forfeited because a final court decision would almost certainly occur more than 75 days prior to December 26, 2016.  In that event, Defendants would have undertaken the expense of a successful challenge to the patent obstacle to generic entry, but would then compete with generic competitors who (especially if Defendants prevail on the basis that patent claims are invalid) would not have borne the competitive burden of the litigation expense.  This is contrary to the Congressional purpose for granting the 180-day period of exclusivity, which is to encourage early challenges to patents by preventing free-riding by later generic applicants.  If Defendants lose, then they would presumably be enjoined under 35 U.S.C. §271(e)(4)(A) and unable to compete with later generic applicants until expiration of the patent(s) they would be found to infringe.  In sum, if Defendants win soon, they lose in the marketplace, and if Defendants lose soon they lose in the marketplace.  The only way to avoid the Catch-22 is to stay the action.

The court, after considering Abbott’s Response and Matrix’s Reply, agreed with Matrix and granted the Motion to Stay, but on the grounds of judicial economy:

Defendants . . . raise an argument about the purposes of Hatch-Waxman. Specifically, they argue that the Act’s purpose of spurring generics through a 180-day exclusivity period could be frustrated without a stay.  The Court’s decision to grant a stay rests on traditional factors such as docket control and the efficient use of the Court’s and the parties’ resources.  Legislation serves many purposes, particularly when as here the legislation was part of a carefully crafted, comprehensive scheme. . . .  The Court is not prepared, on the record and briefing before it, to conclude that one among many purposes furnishes the authority to avoid an implication that arises as a result of the language that Congress chose to enact.  Nor is it self-evident that such an outcome would frustrate Congress’s intent.

Although the court’s decision was based on judicial economy, it could lead to greater concerns at FDA over administrative economy.  Indeed, FDA noted the following in the Agency’s Determination of Granisetron Exclusivity:

[A] comment raises a point that has been a source of some concern to the Agency irrespective of the forfeiture provisions, and that is that the “race” to earn 180-day exclusivity by submitting the first ANDA to challenge a patent may result in the submission of ANDAs that may also contain one or more paragraph III certifications to patents that do not expire until well into the future and that will preclude approval of the application for many years.  We have received ANDAs for which, based on the patent expiration dates and corresponding certifications, the sponsor has no intention to obtain approval and market the generic drug for 12 years or more.  [The commenter] is correct when it notes that this practice may result in agency resources being committed to unnecessary reviews.  There is the very real possibility that events will occur in the years between initial review and patent expiration such that the sponsor ultimately will decide not to obtain approval of and market the generic drug product. . . .  Furthermore, should the sponsor seek final approval after the lapse of many years from initial review and tentative approval, the ANDA would almost certainly have to be reviewed a second time before a final approval could issue.

Notwithstanding this concern, it is possible that implementation of FDA’s Document Archiving, Reporting and Regulatory Tracking System (“DARRTS”) in the Office of Generic Drugs (“OGD”) might alleviate the problem.  As we previously reported, DARRTS implementation in OGD is intended to make more efficient use of the Office’s resources so that those applications that can or should be approved sooner than others will be prioritized over applications that might not be approved for several years; for example, because an ANDA contains a Paragraph III Certification to a patent that will not expire for several years. 

Thanks to Shashank Upadhye for alerting us to the decision.

By Michelle L. Butler –

On December 16, 2009, the Consumer Product Safety Commission (“CPSC” or “Commission”) posted on its website a draft Federal Register notice that would announce the Commission’s decision to revise the terms of its stay of enforcement of certain testing and certification requirements under section 14 of the Consumer Product Safety Act (“CPSA”), as amended by section 102(a) of the Consumer Product Safety Improvement Act of 2008 (“CPSIA”).  The Commission must vote on whether to issue the notice before it is published in the Federal Register.

Of particular relevance for manufacturers of products regulated under the Poison Prevention Packaging Act (“PPPA”), such as drugs and dietary supplements containing iron, the Federal Register notice would lift the stay of the certification requirement for products required to be in special packaging under the PPPA and 16 C.F.R. Part 1700.  See Draft Notice, at 14.  Testing based upon a “reasonable testing program” will be required, and “the manufacturers will need to issue a certificate of general conformity to these statutes or regulations (‘general conformity certificate’) beginning on February 10, 2010 for all products manufactured after that date.”  Id. at 15. 

We note, however, that there is some ambiguity regarding this section of the draft Federal Register notice.  CPSIA required general conformity certificates for PPPA-regulated products through the addition of language that a certificate is required for a product that is “subject to a consumer product safety rule under [the CPSA] or similar rule, ban, standard, or regulation under any other Act enforced by the Commission.”  CPSA § 14(a)(1) (emphasis added).  The PPPA is enforced by the Commission, and the CPSC staff have viewed the PPPA special packaging requirements as subject to the general conformity certificate requirements. 

The ambiguity arises with regard to the definition of a “consumer product.”  By statutory definition, a “consumer product” does not include drugs, devices, cosmetics, or foods.  See CPSA, § 3(a)(5)(H), (I).  However, the discussion in the draft Federal Register notice regarding lifting the stay for the testing and certification requirements for PPPA-regulated products comes under a heading titled “Consumer Products Where the Commission is Lifting the Stay of Enforcement and for Which General Conformity Certification Will Become Necessary.”  Draft Notice, at 14 (emphasis added).  The question here is whether the Commission intends to draw a distinction between PPPA-regulated products that are also consumer products (such as turpentine, see 16 C.F.R. § 1700.14(a)(6)) and PPPA-regulated products that are not consumer products (such as drugs, see, e.g., 16 C.F.R. 1700.14(a)(10)) and lift the stay as to the former but not the latter.  [Note also that the that language in the section of the draft notice describing the action the Commission would take also refers to “consumer products” – “Thus, as of February 11, 2010, except as stated above in part II, manufacturers (including importers) and private labelers of consumer products and children’s products must comply with the testing and certification requirements set forth in paragraphs 14(a)(1), (a)(2), (a)(3), and (g) of the CPSA, as amended by section 102(a) of CPSIA.”  Draft Notice, at 20-21 (emphasis added).]  That said, given the facts that the CPSC staff have consistently taken the position that PPPA-regulated products, including drugs, are subject to the general conformity certificate requirements and that the PPPA and its implementing regulations are specifically identified in the draft notice as requirements for which the stay will be lifted, it seems unlikely that the draft Federal Register notice intended to suggest that the stay would be lifted only as to the subset of PPPA-regulated “consumer products,” but the language as currently drafted may leave open that possibility. 

The draft notice also states that “[t]he Commission has concluded that general conformity certificates are not required for labeling requirements under the Federal Hazardous Substances Act because those requirements are not sufficiently similar to consumer products safety standards or bans to warrant certification.”  Draft Notice, at 15.

Other types of standards for non-children’s products for which the Commission would lift the stay include:

• ban on lead in paint in paint and on furniture (16 C.F.R. Part 1303);
• requirements for child-resistance on portable gas containers;
• ban on extremely flammable contact adhesives (16 C.F.R. Part 1302);
• ban of unstable refuse bins (16 C.F.R. Part 1301); and
• standard for refrigerator door latches (16 C.F.R. Part 1750).

See id. at 14.

Over the past year, the Commission has issued many documents pertaining to implementation of CPSIA, including proposed, interim, and final rules, statements of policy, and guidance documents.  The Commission has issued two notices of requirements for accreditation of laboratories for testing of children’s products.  The Federal Register notice would lift the stay of enforcement as to the following:

• children’s products as of February 10, 2010:
• bicycle helmets (16 C.F.R. Part 1203);
• bunk beds (16 C.F.R. Part 1513);
• rattles (16 C.F.R. Part 1510 and §§ 1500.18(a)(15) and 1500.86(a)(7), (8)); and
• dive sticks (16 C.F.R. §§ 1500.18(a)(9), 1500.86(a)(7), (8)).

See id. at 11.

The Federal Register notice would lift the stay for certain other products on a delayed basis.  For example, due to current insufficient testing laboratory capacity, the stay for bicycles (16 C.F.R. Part 1512) would be kept in effect until August 10, 2010.  See id. at 11-12.  With regard to total lead content in children’s products, in order “to allow component testing to form the basis for certifications for lead content and to permit the staff to complete an interpretative rule on the meaning of the term “children’s product,” testing by a third party laboratory and certification based on that testing should begin on products manufactured after August 10, 2010.  See id. at 12. 

The Federal Register notice would continue the stay of enforcement until further notice for a variety of other children’s products:

• carpets and rugs (16 C.F.R. Parts 1630 and 1631, except with regard to guarantees under the Flammable Fabrics Act);
• vinyl plastic film (16 C.F.R. Parts 1611, except with regard to guarantees under the Flammable Fabrics Act);
• wearing apparel (16 C.F.R. Parts 1610, except with regard to guarantees under the Flammable Fabrics Act);
• caps and toy guns (16 C.F.R. § 1500.18(a)(5));
• phthalates (section 108 of CPSIA);
• ASTM F963 (Consumer Safety Specifications for Toy Safety) (section 106 of CPSIA);
• clacker balls (16 C.F.R. §§ 1500.18(a)(7), 1500.86(a)(5));
• baby walkers;
• bath seats;
• children’s sleepwear (16 C.F.R. Parts 1615 and 1616);
• electronic toys (16 C.F.R. § 1500.18(b) and Part 1505); and
• durable infant products (section 104 of CPSIA).

See id. at 15-16.

The Commission stated when it issued the stay last year that all certification requirements in its regulations that existed prior to enactment of CPSIA would remain in effect (e.g., the pre-CPSIA requirements for testing and certification of mattresses), and that remains the case.  The draft Federal Register notice identifies categories of products that were subject to pre-existing testing, labeling, recordkeeping, or certification requirements that may need to modify their certifications to include additional information required by CPSIA.  See id. at 19-20.

The Commission recently conducted a two-day workshop regarding testing and certification requirements, including the contours of “reasonable testing programs” and component testing.  A webcast of the discussion can be found here.  On December 16, 2009, the Commission posted a draft Federal Register notice regarding “Interim Enforcement Policy on Component Testing and Certification of Children’s Products and Other Consumer Products to the August 14, 2009 Lead Limits.”  In the coming days, we can expect to see additional notices and other documents issued by CPSC as they work to provide regulations and guidance on implementation of the certification and testing requirements, and will continue to monitor and report on developments. 

By Kurt R. Karst –      

Earlier today, FDA Commissioner Dr. Margaret Hamburg announced in an Agency-wide e-mail that Ralph S. Tyler has been appointed to serve as FDA’s Chief Counsel.  Mr. Tyler, who is currently serving as Insurance Commissioner of the State of Maryland, will officially take the reins from Acting FDA Chief Counsel Michael M. Landa on January 19, 2010.  Mr. Landa was appointed as Acting FDA Chief Counsel in April 2009 (see our previous post here) and will return to his position as Deputy Director for Regulatory Affairs at FDA’s Center for Food Safety and Applied Nutrition.  The Maryland Insurance Administration separately announced that Mr. Tyler’s resignation from the Administration will be effective on January 8, 2010.  Below is a copy of Dr. Hamburg’s e-mail announcing the appointment.

Dear Colleagues,

I am pleased today to announce the appointment of Ralph Tyler as our new Chief Counsel. Ralph is currently serving as the Insurance Commissioner of the State of Maryland and will be joining our team on January 19.

Ralph brings decades of experience to the post, having served as Chief Legal Counsel to Maryland Governor Martin O’Malley and as Baltimore City Solicitor. He was a partner in the international law firm Hogan & Hartson, L.L.P. Prior to that, he served in the Maryland Attorney General’s office from 1982 through 1996, holding the titles of Deputy Attorney General, Chief of Litigation and Assistant Attorney General.
 
He holds a B.A. from the University of Illinois, a J.D. from Case Western Reserve University, and a LL.M. from Harvard University.

As we welcome Ralph to the FDA, I want to express my sincerest gratitude to Mike Landa for serving these many months as our acting Chief Counsel. Except for a hiatus in the private sector midway through his career, Mike has been with FDA since receiving his LL.M. from New York University in 1978, and over the years became one of the agency’s most respected and admired leaders. Mike led OCC in advising both our medical device and veterinary medicine programs, served as deputy chief counsel, and as deputy director for regulatory affairs of the Center for Food Safety and Applied Nutrition as well.

During the seven months that I have worked with Mike as acting Chief Counsel, I have come to rely on his poise, good judgment, and good humor as we have wrestled with all manner of policy and legal issues. When Ralph comes on board in mid-January, Mike will return to his position as Deputy Director for Regulatory Affairs at CFSAN. I know we all will continue to rely on Mike’s skill and expertise as we move into the new year.

Please join me in thanking Mike for his extraordinary contributions and in welcoming Ralph to his new post.

Margaret A. Hamburg, M.D.
Commissioner of Food and Drugs

By Cassandra A. Soltis –

At the Federal Trade Commission’s ("FTC’s") conference yesterday on food marketing and childhood obesity, officials from the FTC, the Centers for Disease Control and Prevention, the Food and Drug Administration, and the United States Department of Agriculture unveiled tentative proposed standards for companies marketing foods to children aged 2-17.  The draft standards are the result of Congress’ 2009 Omnibus Appropriations Act (H.R. 1105), which directed these federal agencies to create an interagency working group to study and develop recommendations for such standards and to determine the scope of media to which the standards should apply. 

There are currently three tentative standards that companies can use in deciding whether a food can be marketed to children.  A food falling within Standard One is deemed to be a part of a healthful diet and may be marketed to children without regard to the requirements of Standards Two and Three.  Standard One foods include 100% fruit and fruit juices in all forms, 100% whole grains, and 100% non-fat and low-fat milk and yogurt.  “100%” is defined “as no added nutritive or non-nutritive sweeteners and no other functional ingredients added to the product, except for flavoring for water, milk, and yogurt.” 

Standards Two and Three are intended to be read together.  Standard Two lists foods that provide a meaningful contribution to a healthful diet, and Standard Three lists limits on the amounts of certain nutrients that can be present in Standard Two foods.  Standard Two foods include fruits, fruit juices, beans, vegetables, fish, nuts, and eggs, among other items.  Standard Two foods must be present in the product in a specific amount.  Standard Three limits the amount of trans fat, saturated fat, sugar, and sodium in the Standard Two foods.  Accordingly, if a vegetable product contains enough vegetables to qualify as a Standard Two food but contains, for example, 0.5 g or more of trans fat per reference amount customarily consumed, the food should not be marketed to children.   

The interagency working group stressed that the standards are not a regulatory proposal, but the final report on the standards will be given to Congress no later than July 15, 2010.  The group will publish a notice in the Federal Register that will request comments on the draft standards and ask for feedback on several questions, such as whether there should be standards for two age groups instead of one large age group, whether certain foods should be added or eliminated from the standards, and how “marketing to children” should be defined.

By Carrie S. Martin –

New Jersey’s Attorney General recently endorsed a report prepared by the Division of Consumer Affairs (the “Division”), recommending certain restrictions and obligations on physicians and industry to limit potential conflicts of interest.  Many of the recommendations are similar to those in the codes adopted by the Pharmaceutical Research and Manufacturers of America (“PhRMA”) and the Advanced Medical Technology Association (“AdvaMed”), which prohibit manufacturers from providing entertainment, non-educational gifts, and lavish meals to physicians, among other things. 

They also include proposed manufacturer reporting requirements, which are already on the books in states like Minnesota, Vermont, and Massachusetts.  However, the New Jersey Division’s proposals go even farther:  not only do they propose to impose reporting obligations on pharmaceutical and device manufacturers, they recommend imposing obligations on physicians as well. 

Here, in brief, are some of the most salient proposals: 

• The Division proposes to require physicians to disclose – as a condition of the biennial medical license renewal process – whether they have accepted more than $200 during the preceding two years from manufacturers, including money from consulting or research arrangements, honoraria, food, or any other economic benefit.  The Division further proposes that this information be made publicly available.

• The Division proposes to ban physicians from accepting food from manufacturers in all venues, including in-office meals, except for modest meals provided at accredited continuing medical education (“CME”) events.  The CME meals, however, must be paid for by the CME provider, not paid directly by manufacturers.

• The Division recommends that all physicians be notified of their ability to opt-out of data mining (i.e., to prevent companies from selling information about the physician’s prescribing habits).  In addition, the Division recommends that the State enact legislation to prohibit the use of information collected via data mining for commercial purposes.

The report also proposes to amend New Jersey regulations regarding gifts to physicians, CME requirements, physicians-in-training, physician accountability, health care facilities and academic detailing.

The relevant New Jersey agencies are now working on draft regulations in response to the Division’s recommendations.  If the Division and Attorney General get their way, New Jersey will have the most restrictive disclosure laws to date.

By Kurt R. Karst –      

Tick tock!  Tick tock!  Like sand through the hourglass so too are the days that The Medicines Company (“TMC”) has to convince Congress or the U.S. Patent and Trademark Office (“PTO”) to allow a Patent Term Extension for U.S. Patent No. 5,196,404 (“the ‘404 patent”) covering ANGIOMAX (bivalirudin), an anticoagulant drug product FDA first approved late on Friday, December 15, 2000 (9 years ago today) under New Drug Application (“NDA”) 20-873.  The ‘404 patent expires on March 23, 2010, but is subject to a 6-month period of pediatric exclusivity.

We recently reported that TMC has been lobbying Congress to pass legislation that would amend the PTE statute at 35 U.S.C. § 156 to permit the PTO to accept the late filing of a PTE application, and in particular, TMC’s PTE application for the ‘404 patent – but for a $65 million fee.  Thus far, TMC’s lobbying efforts have not been fruitful. 

As background, TMC submitted a PTE application to the PTO 62 days after FDA approved the company’s ANGIOMAX NDA.  Under 35 U.S.C. § 156(d)(1), the submission of a PTE application must occur “within the sixty-day period beginning on the date the product received permission under the provision of law under which the applicable regulatory review period occurred for commercial marketing or use” (i.e., within 60-days of the date of NDA approval).  In April 2007, the 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 U.S. Court of Appeals for 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.”  (For additional information, see our previous blog posts here and here.)

Apparently not having any success on the Hill, TMC has once again turned to the PTO.  Earlier this month, TMC submitted a Petition and a Request for Reconsideration of its PTE application to the PTO. 

The Petition requests that the PTO suspend its regulations at 37 C.F.R. § 1.750 “to the extent they limit requests for reconsideration of patent term extension applications to a single submission within the times specified in the rule.”  TMC had already requested reconsideration of the PTO’s denial of a PTE for the ‘404 patent on the basis that the date of approval of the ANGIOMAX NDA was in fact first effective as of Monday, December 18, 2000, the next business day after the December 15, 2000 NDA approval.

The Request for Reconsideration asks the PTO to employ a “rule of construction” under which the Office would consider the 60-day PTE application submission period at 35 U.S.C. § 156(d)(1) to commence on the first business day after the day the FDA transmits notice of NDA approval of the drug product if that transmittal occurs after normal business hours.  In the case of the PTE application for the ‘404 patent covering ANGIOMAX, that would mean the 60-day period would have begun on December 18, 2000 and the PTE application would have been timely filed within 35 U.S.C. § 156(d)(1).  TMC explains in its Petition for Reconsideration that:

PTO can and should interpret the language of § 156(d)(1) to conclude that the present application was timely filed.  The PTO can do this by concluding that this application was filed within 60 days of the first business day on which the product had “received permission . . . for commercial marketing.”  Recognizing that the notice of approval of Angiomax was sent after the close of the FDA’s normal business hours, it is reasonable for the PTO to conclude that the first day of the period specified in § 156(d)(1) was the first business day after Friday, December 15, 2000 – namely, Monday, December 18, 2000.

As justification for its proposed “rule of construction,” TMC argues that the determination the PTO makes under 35 U.S.C. § 156(d)(1) is distinct from the question of when an NDA  is “approved” under the Food, Drug, and Cosmetic Act (“FDCA”), as well as from FDA’s determination of the end of the “regulatory review period” under 35 U.S.C. § 156(g)(1)(B)(ii) for PTE calculation purposes.  “Those distinct dates are phrased in different statutory language, have distinct purposes, and are properly determined by the FDA,” states TMC in its Request for Reconsideration.  “Specifically, provisions in the FDCA refer to the ‘effective’ date of ’approval’ of [an NDA] and generally concern the legal effect of approval of [an NDA] and FDA obligations regarding review of those applications.  Section 156(g)(1)(B)(ii) similarly refers to the date [an NDA] was ‘approved’ and serves to define the end of the regulatory review period of that application.”

Moreover, TMC argues that its Request for Reconsideration is “particularly appropriate in this case” given the PTO’s “newly announced approach to counting days under § 156(d)(1).”  As we previously reported (here and here), the PTO, after being challenged as to the date on which the 60-day period at 35 U.S.C. § 156(d)(1) begins, ruled in the context of another PTE application (for PRILOSEC OTC) that although the PTO had in some instances started counting the 60-day period on the date after NDA approval, “[b]y not counting the date of FDA approval as one of the sixty days included in the time period for filing a PTE application, the USPTO was failing to comply with section 156 and case law.”  TMC comments in its Request for Reconsideration that “[a]bsent adoption of the proposed next business day rule, application of this new interpretation in cases where the FDA transmits notice of approval of the drug product after normal business hours would impermissibly shorten the period for filing a § 156 application to less than the 60 days the statute requires.”

Presumably, TMC’s Petition and Request for Reconsideration are being fast-tracked at the PTO given the March 23, 2010 expiration date of the ‘404 patent.  We will continue to update our loyal readers on any developments – both at the PTO and on the Hill – that we become aware of.

By Nisha P. Shah & Michelle L. Butler –

We recently blogged about an action commenced by Winston Laboratories, Inc. (“Winston”) against FDA, which denied a small business waiver for a new drug application (“NDA”) user fee under the Prescription Drug User Fee Act.  See Winston Labs, Inc. v. Sebelius, No. 1-09-cv-04572 (N.D. Ill. 2009).  On October 1, 2009, FDA filed a motion to dismiss Winston’s law suit on the basis that FDA’s decision is consistent with the plain language of the statute (Chevron step one) and, even if the language of the statute is ambiguous, FDA’s decision should be afforded deference since it is based on a permissible interpretation of the statute (Chevron step two).  On December 11, 2009, the U.S. District Court for the Northern District of Illinois denied FDA’s motion to dismiss under step one of the Chevron standard for agency interpretation.

Pursuant to the FDC Act, FDA will grant a waiver or reduction of user fees where “the applicant involved is a small business submitting its first human drug application to [FDA] for review.”  FDC Act § 736(d)(1)(D).  The FDC Act specifies that FDA will waive “the application fee for the first human drug application that a small business or its affiliate submits to [FDA] for review.”  FDC Act § 736(d)(4)(B) (emphasis added).  A “small business” means “an entity that has fewer than 500 employees, including employees of affiliates, and that does not have a drug product that has been approved under a human drug application and introduced or delivered for introduction into interstate commerce.”  FDC Act § 736(d)(4)(A).  The term “affiliate” means “a business entity that has a relationship with a second business entity if, directly or indirectly – (A) one business entity controls, or has the power to control, the other business entity; or (B) a third party controls, or has power to control, both of the business entities.”  FDC Act § 735(11) (emphasis added).

A brief description of the relevant facts: The case hinges on Winston’s historical relationship with a defunct pharmaceutical company .  Specifically, Dr. Joel Bernstein and his immediate family members own approximately 60 percent of Winston.  Dr. Bernstein was President and owned a majority of shares of Northbrook Testing Co., Inc. (“Northbrook”), which had submitted an NDA prior to its dissolution in 1984.  According to Winston, since Winston and Northbrook were not in existence at the same time, at no time did Winston control or have the power to control Northbrook or did a third party control or have the power to control both Winston and Northbrook.  However, FDA concluded that because Dr. Bernstein had controlled Northbrook prior to its dissolution in 1984, which was 14 years prior to the incorporation of Winston in 1998, Northbrook was considered an “affiliate” of Winston.  Since Northbrook had submitted an NDA prior to Winston’s NDA submission and application fee waiver request for Civanex® cream, FDA denied Winston’s request for a waiver.  (Dr. Bernstein was also a minority shareholder and Chairman and CEO of GenDerm Corporation, which merged into Medicis Pharmaceutical Corporation; however, on appeal within the Agency, FDA concluded that there was insufficient evidence to determine whether GenDerm and Winston were affiliates.  Accordingly, the instant litigation turns on Winston’s purported affiliation with Northbrook.)

The district court analyzed FDA’s motion to dismiss under the Chevron standard of agency interpretation.  Under step one of Chevron, a court must evaluate the plain language of the statute.  If the language is clear, then the court and the agency must adhere to the plain language of the statute.  If the language is ambiguous, then courts must apply step two of Chevron, under which a court must determine if the agency’s interpretation is a permissible construction of the statutory language.  Generally, an agency’s interpretation of a statute under Chevron step two is afforded great deference by the courts.

In this case, the district court determined that, under Chevron step one, FDA has not established that Winston cannot succeed on its claims.  In doing so, the court rejected FDA’s argument that because Dr. Bernstein had controlled Northbrook at some point in the past, Northbrook was considered an “affiliate” of Winston.  Persuaded by the “clear” language of the definition of “affiliate,” the district court agreed with Winston that the relevant terms – “has” and “controls” – contained in the definition of “affiliate” indicated a requirement for “present control or present power to control.”  Dr. Bernstein’s historical relationship with Northbrook, according to the court, should not affect Winston’s waiver request.  Additionally, FDA presented no evidence to convince the court that it should support the Agency’s claim that applying the present-tense definition of the term “affiliate” is contrary to congressional intent.  Because the court ruled against FDA on Chevron step one, the court did not need to analyze Chevron step two and whether FDA’s decision was based on a permissible interpretation of the statute.

While this decision is certainly good news for Winston, the case is not over yet.  We expect Winston may try to position the case for an early summary judgment motion.  Winston may also seek some targeted discovery to solidify the summary judgment record.  It seems less likely – but nevertheless possible – that FDA may seek discovery from Winston or third parties to elicit evidence that would fit within the court’s interpretation of “affiliate.”

By Ricardo Carvajal –

FDA has prevailed on summary judgment in a lawsuit brought by BBK Tobacco & Foods, LLP ("BBK") which sought a declaration that separately sold flavored rolling papers are not tobacco products subject to regulation under the FDCA.  Previously, FDA issued a draft guidance document and sent a letter to industry stating the agency’s belief that flavored rolling papers are banned by the FDCA as amended by the Family Smoking Prevention and Tobacco Control Act ("Tobacco Act").  BBK challenged FDA’s interpretation of the statute, and alleged that FDA’s actions had caused customers to stop buying BBK’s products. 

The court ruled that the issues presented by BBK were not ripe for judicial review because FDA’s actions were not final agency action.  The court noted that no legal consequences flow from FDA’s publication of guidance.  Further, the court found that the hardship suffered by BBK had been largely the result of its own voluntary decision to stop distributing its products on the effective date of the Tobacco Act, and of BBK customers’ voluntary decisions to return BBK products.  FDA had taken no action that specifically targeted BBK or its products.  The court further ruled that BBK had failed to exhaust its administrative remedies because it had not filed a citizen petition with FDA seeking a “formal determination of whether the Tobacco Act applies to BBK’s products.”

The moral of the story?  If an FDA draft guidance suggests that your product is unlawful, you'll need to file a citizen petition and/or face a warning letter or injunction before you can get judicial relief.

By Susan J. Matthees & A. Wes Siegner –

Last week FDA published a new guidance document titled “Guidance for Industry:  Factors that Distinguish Liquid Dietary Supplements from Beverages, Considerations Regarding Novel Ingredients, and Labeling for Beverages and other Conventional Foods.”  The guidance document includes a discussion of the factors that FDA uses to determine whether a liquid is a beverage (i.e., a conventional food) or a dietary supplement and a reminder to manufactures and distributors about the ingredient and labeling requirements of the Federal Food, Drug, and Cosmetic Act (FDC Act). 

Of particular note in the guidance document is FDA’s statement that it will consider the “packaging” of a product in its consideration of whether the product is a dietary supplement or a conventional food.  Just before publishing the guidance, FDA also issued three Warning Letters to companies marketing liquid dietary supplements in large bottles that were intended to be consumed in quantities equivalent or almost equivalent to the average total daily drinking fluid intake.  The extent that FDA will now consider packaging in the determination of whether a product is a dietary supplement is unclear, but it does appear that FDA is looking to packaging as a factor in determining how to classify a product.

By Kurt R. Karst –      

Although much discussion has been devoted over the past few days to Sen. Byron Dorgan’s (D-ND) proposed amendment (SA 2793) to the Senate Health Care Reform Bill that would let U.S. pharmacies and drug wholesalers import FDA-approved drugs from certain countries, and FDA’s letter expressing concern about the amendment, several amendments affecting generic drug manufacturers have also been proposed.

Sen. Herb Kohl (D-WI) filed an amendment (SA 2862) concerning so-called “pay-for-delay” settlements.  The amendment is almost identical to the substitute amendment to S. 369, the Preserve Access to Affordable Generics Act, that was passed out of the Senate Judiciary Committee earlier this year.  As we previously reported, the Kohl amendment would amend the Federal Trade Commission Act to permit the Federal Trace Commission (“FTC”) to “initiate a proceeding to enforce the provisions of [new Sec. 28] against the parties to any agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a drug product.”  Such agreements, if challenged, would be presumptively anticompetitive and unlawful unless it can be demonstrated “by clear and convincing evidence that the procompetitive benefits of the agreement outweigh the anticompetitive effects of the agreement.” 

And while we are on the topic of pay-for-delay settlements, FTC Commissioner J. Thomas Rosch recently gave a speech at the World Generic Medicine Congress providing his thoughts on how competition law can best protect consumer welfare in the pharmaceutical context.  In addition to settlement agreements, Commissioner Rosch also discussed follow-on biologics and authorized generics, which, as discussed below, have also been the subject of recent amendments to the Senate Health Care Reform Bill.

Sen. Jay Rockefeller (D-WV) filed an amendment (SA 2952) that would  prohibit the marketing of authorized generics during a generic applicant’s 180-day exclusivity period.  The amendment is almost identical to legislation Sen. Rockefeller introduced earlier this year.  A similar version of the bill was introduced in the House of Representatives by Rep. Jo Ann Emerson (R-MO) (see our previous post here). 

Sen. Sherrod Brown (D-OH) filed an amendment (SA 2895) concerning biosimilars that would cut the proposed 12-year exclusivity period for an innovator product short if the innovator’s product is a blockbuster drug; that is, a biologic for which “the Secretary determines that the gross sales in the United States of the reference product equals or exceeds $3,500,000,000.”  A similar blockbuster proposal with respect to the availability of pediatric exclusivity was considered and rejected during consideration of the 2007 FDA Amendments Act, which, among other things, amended and reauthorized the Best Pharmaceuticals for Children Act.  FDA Week (subscription required) has reported that another amendment concerning biosimilars from Sen. Bernie Sanders (I-VT) is in the works that could also affect the availability of the proposed 12-year exclusivity period for innovator products. 

Finally, Sen. Jeanne Shaheen (D-NH) filed an amendment (SA 2961) that would add her so-called “Generic Loophole Bill” to the Senate bill.  As we previously reported, S. 1778, the Access to Affordable Medicines Act, would amend the FDC Act’s ANDA provisions at § 505(j) to permit FDA to approve a generic drug notwithstanding “last minute [labeling] changes” to the reference listed drug labeling hat could otherwise delay ANDA approval. 

The Drug Price Competition Act of 2009, which was introduced earlier this year by Sen. Bill Nelson (D-FL), and in the house by Rep. Alcee Hastings (D-FL), does not yet appear to be the subject of an amendment to the Senate Health Care Reform Bill.  As we previously reported (here and here), the bill would amend the definition of “first applicant” at FDC Act § 505(j)(5)(B)(iv)(II)(bb) with respect to 180-day exclusivity eligibility so that certain subsequent ANDA applicants could trigger and be eligible for exclusivity.  Rep. Hastings initially proposed his bill as an amendment to the House Health Care Reform Bill, but then withdrew it from consideration.

By Jamie K. Wolszon –

The U.S. Government Accountability Office (“GAO”) released a report earlier this week finding that FDA’s postmarket drug safety decision-making and oversight, while improved since a prior investigation a few years ago, continues to have gaps.  The GAO recommended that FDA establish a timeline for transferring responsibility for the review of protocols and findings of observational epidemological studies and the review of protocols and studies that assess medication error risks from FDA’s drug center’s Office of New Drugs (“OND”) to its Office of Surveillance and Epidemiology (“OSE”).

Senate Finance Committee Ranking Member Charles Grassley (R-IA) requested the report “Drug Safety: FDA Has Begun Efforts to Enhance Postmarket Safety, but Additional Actions are Needed.”  The report, dated November 2009, follows up on a 2006 GAO report that found deficiencies in agency postmarket drug safety decision-making and supervision. 

The 2006 GAO report, titled “Drug Safety: Improvement Needed in FDA’s Decision-making and Oversight Process,” found that the agency had not clearly defined the role of OSE and that communications problems between OSE and OND were undermining the decision-making process. 

OND mainly reviews premarket drug applications submitted by drug sponsors, but also has postmarket authority.  OND traditionally has had final responsibility to decide whether to take regulatory action.  OSE traditionally has acted as a consultant and not had independent decision-making responsibility.

The 2006 report also found limitations in the data FDA uses to identify postmarket drug safety issues and the systems the agency uses to track drug safety issues once identified.  The 2006 report recommended that FDA: revise and implement the agency’s draft policy intended to clarify the role of staff, including OSE, in major postmarket drug safety decisions; clarify OSE’s role in FDA scientific advisory committee meetings with postmarket drug safety issues; increase the independence of the drug center’s dispute resolution process; and systematically track OSE’s recommendations and subsequent safety actions.

Since 2006 when GAO issued its last report, Congress passed the FDA Amendments Act of 2007 (“FDAAA”).  FDAAA provided the agency with significant new drug postmarketing authority, and heightened the agency’s drug safety responsibilities and workload.  The new GAO report examines the steps FDA is taking to address the issues identified in the 2006 GAO report, and evaluates FDA efforts to meet the agency’s increased drug safety workload.

The new GAO report notes that the agency launched a Safety First Initiative in January 2008.  That initiative is intended to provide clearly defined roles and responsibilities for the post-market decision making process.  The initiative incorporates the principle the agency calls Equal Voice, intended to ensure the equal participation of all relevant parties. 

OSE and OND signed a Memorandum of Understanding in June 2008 that states the agency’s intent for the two offices to equally contribute.  That MOU has expired and subsequently been extended.  OND, according to GAO, generally retains the authority to decide the regulatory action.  FDA, the report adds, has stated that this authority generally remains with OND as the OND staff has the broadest expertise in evaluating and managing clinical risks and benefits of drugs. 

However, as part of the MOU, the agency envisioned transferring three roles from OND to OSE: 1. proprietary name review; 2. review of protocols and findings of observational epidemological studies; 3. review of protocols and studies that assess medication error risks.  FDA transferred proprietary name review in April 2009, but has yet to establish timelines for the remaining planned transfers. 

GAO now recommends that the FDA commissioner “develop a comprehensive plan for transferring the additional regulatory authorities from OND to OSE that includes time frames for the transfer and steps to ensure resources are properly aligned to allow OSE to assume these responsibilities.”

While FDA supports the idea of such a comprehensive plan, it resists committing to timelines.  “The details of such a plan, including timelines, remain dependent upon available appropriated and PDUFA funding as well as the Agency’s ability to recruit and retain the necessary staff to assume additional responsibilities,” the agency stated in a letter to GAO.  GAO responded: “we believe that the development of a comprehensive plan and time line is an important step towards ensuring the necessary funding levels and staffing needs are identified and secured.”

By Kurt R. Karst –      

A recent decision from the Patent and Trademark Office (“PTO”) in which the Office granted an interim Patent Term Extension (“PTE”) for U.S. Patent No. 5,407,914 but denied interim extensions for U.S. Patent Nos. 5,260,273 and 5,789,381 covering the drug product SURFAXIN appears to be the first time in which the PTO has had to address the issue of the availability of multiple interim PTEs.  The PTO has previously ruled that multiple PTEs are available, under certain circumstances, once a drug product has been approved (see our previous posts here and here).

There are two types of interim patent extensions under the PTE statute (35 U.S.C. § 156): (1) interim patent extensions granted during the “review phase” of the statutory “regulatory review period” (35 U.S.C. § 156(d)(5)); and (2) interim patent extensions granted during the PTO’s review of an application for a PTE (35 U.S.C. § 156(e)(2)). 

The PTO may grant an interim patent extension while an NDA is undergoing FDA review if the patent owner (or his agent) “reasonably expects” that the applicable statutory “regulatory review period” will extend beyond the expiration of a patent that claims the drug product under review at FDA.  The patent owner (or his agent) must submit to the PTO an application “during the period beginning 6 months, and ending 15 days, before such [patent] term is due to expire.”  If the PTO determines that, except for receipt of FDA’s permission to market or use a product commercially, the patent would be eligible for a statutory extension of the patent term under 35 U.S.C. § 156, then the PTO publishes a notice in the Federal Register announcing the interim patent extension for the particular product, and issues to the applicant a certificate of interim patent extension for a period of not more than one year.  The applicant may apply for additional interim patent extensions for the patent; however, the PTO generally limits subsequent applications for a particular patent to four one-year interim patent extensions (thus, a total of five years). 

The PTO may also extend (either on its own initiative or upon the application of a patent owner) the term of a patent for up to one year if the time necessary to process and review an application for patent term extension might result in a patent expiring while the application is under review at the PTO. 

The cumulative patent time granted under either type of interim patent extension cannot exceed the PTE that a company might obtain under regular patent extension provisions.  That is, interim patent extensions cannot exceed what the PTO might ultimately determine is the correct PTE for which a particular patent claiming a drug product is eligible.  The PTO reviews each application requesting an interim patent extension to ensure that a patent will not be extended for more time than that for which it is eligible under the law.

The PTO’s recent decision on the avilability of multiple interim patent extension for patents covering SURFAXIN was made pursuant to requests under 35 U.S.C. § 156(d)(5), as the drug product is still under FDA review.  In analyzing the PTE statute, the PTO stated that:

The explicit language of section 156, in many instances, states that it is the term of "a patent" which shall be extended.  Additionally, the statute provides for "an extension of the term of a patent."  See § 156(d)(1).  This is not the first time that the USPTO has been required to interpret the language "a patent."  It is a long-standing interpretation of the USPTO that "a patent" means one patent.  In the context of double patenting, the USPTO's Manual of Patent Examining Procedure (MPEP) clearly explains a "'same invention' type double patenting rejection [is] based on 35 U.S.C. 101 which states in the singular that an inventor 'may obtain a patent.'" See MPEP 804 (emphasis added). . . .

Based on the language of the statute, as a whole, and the plain meaning of "a patent," the statute only contemplated that a single patent is entitled to have the term extended for the same (single) regulatory review period.  Similarly, the explicit language of section 156(d)(5)(C) makes clear that interim extension is applicable only for "a patent," stating, "[t]he owner of record of a patent, or its agent, for which an interim extension has been granted under subparagraph (b), may apply for not more than 4 subsequent interim extensions under this paragraph . . . ."  The plain language of obtaining "an extension" for "a patent" delineates that the patent term extension statute contemplates that only one patent may be granted an interim extension.  Furthermore, the language of § 156 distinguishes "interim extension" from "extension" by referring throughout subsection 156(d)(5) that the extension is "an interim extension."  See e.g., § 1 56(d)(5)(F) indicating that the rights derived are "during the period of interim extension." (emphasis added).

As addition justification for the PTO’s decision that only a single interim PTE is available for the same (single) regulatory review period, the Office notes that to rule otherwise would mean that “the additional patents would be listed in the Orange Book, necessitating additional patent certifications, and potentially leading to additional litigation.”  Instead, a policy of granting only a single interim PTE means that an ANDA applicant “would be required to provide patent certifications for only the patent which would ultimately be eligible for a certificate of extension,” thereby avoiding “unnecessary litigation.” 

With respect to cases in which a company might ultimately be eligible for multiple PTEs once a drug product is approved, the PTO’s interim PTE decision leaves the door open for multiple interim patent extensions.  Specifically, the PTO’s statement that “only a single interim PTE is available for the same (single) regulatory review period,” means that when separate NDAs, each with its own “regulatory review period,” might be approved on the same first day, more than a single patent might qualify for an interim patent extension.

By Ricardo Carvajal –

When FDA sent letters to manufacturers of caffeinated alcoholic beverages asking them to furnish evidence supporting a conclusion that the use of caffeine in an alcoholic beverage is generally recognized as safe (GRAS) or prior sanctioned, the agency allowed 30 days for a response.  The 30-day deadline expires on December 13, and anyone with an interest in the future of FDA’s voluntary GRAS notification program should pay close attention to what comes next. 

The FDCA excepts from regulation as a food additive the use of a substance that is GRAS.  This means that a manufacturer can determine GRAS status and proceed to market without seeking FDA’s approval and without notifying the agency.  FDA operates a voluntary GRAS notification program pursuant to a proposed rule that was published in 1997.  FDA’s administration of that program, and the adequacy of its oversight of GRAS substances more generally, is the subject of an ongoing Government Accountability Office (GAO) review.  The GAO is expected to issue its report in January.  Depending on its content, that report could well rekindle debate over whether the GRAS exception affords manufacturers too much flexibility in introducing new uses of substances into the food supply.  Given the possibility that major food safety legislation could be debated and enacted in 2010, it is not unthinkable that any perceived weaknesses in FDA’s oversight of GRAS substances could quickly rise on the Congressional agenda.

This brings us back to caffeine in alcoholic beverages.  Should the manufacturers' evidence of GRAS status prove insufficient, a robust regulatory response by FDA could help preserve the status quo by confirming that FDA has both the will and requisite authority needed to prevent abuse of the GRAS exception.  A lax response by the agency could let loose the hounds of reform.  We’ll keep an eye on this one.

By John R. Fleder –

On December 4, 2009, the United States Court of Appeals for the Eleventh Circuit in Atlanta issued a 24-page Opinion in James Hopper v. Solvay Pharmaceuticals, Inc., No. 08-15810.  The Court affirmed the District Court’s dismissal of a False Claims Act (FCA), (31 U.S.C. 3729 et. seq.) lawsuit that two former sales representatives (Relators) of Solvay Pharmaceuticals, Inc. filed in 2004, in the United States District Court for the Middle District of Florida.  The Court of Appeals ruled that the Relators’ complaint was legally deficient under Rule 9(b) of the Federal Rules of Civil Procedure because the alleged fraud was not pleaded with the necessary specificity. The Relators had alleged that the defendants had violated the FCA by engaging in an allegedly unlawful off-label marketing scheme that had caused the federal government to pay “false” claims through federal programs for the drug Marinol.

This is an important ruling in the context of FCA litigation generally, but more specifically with regard to off-label use cases.  There has been a plethora of FCA litigation over the past decade involving allegations that companies have violated the FCA by causing the submission of false claims based on off-label marketing campaigns.  This litigation has resulted in huge monetary payments by a number of companies in lawsuits brought by the Department of Justice.  However, in addition to the Justice Department’s right to commence litigation under FCA, individuals who are often referred to as Relators or whistleblowers can initiate an FCA action.  This case is that type of case, because the Justice Department declined to intervene in, and take over, the case after the Relators filed it.

The Eleventh Circuit’s ruling is the first decision by a United States Court of Appeals that a FCA action should be dismissed when, as here, the Relators are unable to present any evidence that the defendant company actually caused false claims to be submitted based on an alleged off-label marketing campaign.  Many off-label FCA actions have been initiated by company sales representatives who claim first-hand knowledge about an alleged off-label sales program.  However, many company sales representatives do not have first-hand knowledge about the reimbursement practices of the company, because those functions are handled by others in the company.  Thus, where as here, the Relators have no knowledge that their former employer actually caused false claims to be submitted to the federal government, their alleged knowledge of an off-label marketing campaign, without more, is legally insufficient to initiate an FCA action.

In this case, the District Court dismissed the case because the Relators had not identified any specific false claims that the defendants caused to be submitted to the federal government.  The Relators appealed to the Eleventh Circuit arguing that they were not required to allege specific false claims because they had alleged an off-label marketing campaign, and showed that there was a marked increase in prescriptions for Marinol and an increase in federal government payments for the drug during the period that the defendants allegedly engaged in an off-label marketing campaign.  As a result, the Relators claimed that they had adequately pleaded an FCA case because they pleaded “factual allegations which reliably indicated” that false claims were submitted to the government.  Opinion at 7.

The Court of Appeals correctly concluded that the Relators’ Complaint did not identify even a single alleged false claim or that the Defendants intended that the government rely on any alleged false statements or records in deciding whether to pay claims that were submitted with regard to the drug.  The Defendants argued (and the District Court earlier agreed) that there could not be a viable FCA action in the absence of the Relators identifying specific (alleged) false claims.

The Court relied on three earlier rulings by that same court which had dismissed FCA cases that did not involve off-label marketing allegations.  The Court found that regardless of the specificity of the Relators’ allegations concerning off-label activities, more is required.  Here, the Court found that Relators did “not allege the existence of a single actual false claim.  In fact, we are unable to discern from the complaint a specific person or entity that is alleged to have presented a claim of any kind, let alone a false or fraudulent claim.”  Opinion at 12.  Nor did Relators “identify a single physician who wrote a prescription with such knowledge [that the federal government would reimburse], does not identify a single pharmacist who filled such a prescription, and does not identify a single healthcare program that submitted a claim for reimbursement to the federal government.”  Opinion at 13.  Instead, to bring an FCA case, a Relator’s complaint “requires that actual presentment of a claim be plead with particularity,” Opinion at 14, or that the defendants intended that their alleged false statements influenced the government’s decision to pay a false claim and that the Relator presented proof that the government actually paid a false claim.  Opinion at 16, 17.

It is too soon to know whether this decision will end this litigation.  The Relators could ask the Court of Appeals to revisit this ruling.  Alternatively, the Relators could ask the United States Supreme Court to hear the case.

The defendants are represented in this case by Jack E. Fernandez and Marcos E. Hasbun of the law firm of Zuckerman Spaeder LLP, as well as Hyman, Phelps & McNamara P.C. (John R. Fleder and Douglas B. Farquhar).  The Defendants’ appellate brief in the case can be found here.  Also, Richard Samp of the Washington Legal Foundation submitted a brief, urging affirmance of the District Court’s dismissal of the case.

By Alan Kirschenbaum −

We previously reported on a March 2009 Department of Defense (DoD) regulation establishing a prescription drug “refund” program to implement section 703 of the National Defense Authorization Act of 2008 (NDAA 08).  That section provides that prescriptions filled on or after January 28, 2008 (the enactment date) and paid for under the TRICARE retail pharmacy program are subject to Federal Ceiling Prices (FCPs) under 38 U.S.C. § 8126.  As reported in our previous post, the DoD’s regulation implemented a program of voluntary agreements under which drug manufacturers agree to provide refunds for prescriptions filled prospectively and also retroactive to January 28, 2008, and, in return, their drugs may be considered for inclusion in the TRICARE uniform formulary.  However, even if a manufacturer does not sign an agreement, it must still pay the refunds prospectively and retroactively under the regulation.

Shortly after the regulation was issued, the Coalition for Common Sense in Procurement, an industry coalition, filed a lawsuit in the U.S. District Court for the District of Columbia challenging the regulation on a number of grounds.  Among other things, the Coalition argued that the statute does not require manufacturers to pay mandatory refunds, but instead calls for DoD to obtain FCP pricing through voluntary procurement agreements.  The Coalition also argued that DoD could implement a refund program only prospectively from the effective date of the regulation (May 26, 2009), and could not seek refunds retroactive to January 28, 2008.

Applying the deferential review standard of Chevron U.S.A., Inc. v. Natural Resources Def. Council, 367 U.S. 837 (1984), the District Court concluded, based on the plain language of the statute, that FCPs apply to all TRICARE retail pharmacy program prescriptions filled on or after January 28, 2008.  The court rejected the Coalition’s arguments against retroactive application of the regulation, explaining that drug manufacturers were on notice that their transactions would be subject to FCPs when the NDAA-08 was enacted. 

However, the court also decided that DoD had erroneously interpreted the statute to mandate that FCP pricing be implemented through manufacturer refunds, when, in fact, the statute did not speak to the question of how DoD should implement the FCP requirement.  Accordingly, the court remanded the rule to DoD (without vacating it), for DoD to decide whether to maintain the current rebate/refund approach or implement some other mechanism for obtaining FCPs.  In view of the fact that DoD has been trying since 2004 to establish a rebate/refund program to obtain FCP pricing for retail drugs, and the current refund program is already up and running, we do not expect the agency to change its approach.