In Novelty Distributors, Inc. v. Leonhart, the U.S. District Court for the District of Columbia recently confronted the issue of whether district courts have jurisdiction over a challenge to an agency action that is admittedly not final.   

Novelty Distributors, Inc. (“Novelty”), a distributor of controlled substances, must obtain a registration every year to distribute the List I chemicals ephedrine and pseudoephedrine.  Based on findings from an administrative inspection, the Drug Enforcement Administration (“DEA”) concluded that Novelty’s continued registration posed an imminent danger to the public health and safety and immediately suspended Novelty’s registration pursuant to 21 U.S.C. § 824(d). Following an expedited administrative hearing, and before DEA had issued its final decision, Novelty filed suit in federal district court seeking injunctive and declaratory relief.

DEA challenged Novelty’s choice of forum citing 21 U.S.C. 877 and the D.C. Circuit’s 2007 decision in John Doe, Inc. v. DEA.  In John Doe, which concerned DEA’s denial of a permit to import for bioequivalency testing a generic version of an FDA-approved drug, the Court affirmed a district court decision concluding that exclusive jurisdiction over Doe’s claims lies in the courts of appeals pursuant to 21 U.S.C. § 877.  The court found, however, that “[r]ather than supporting DEA’s argument, John Doe demonstrates that only the district court can have jurisdiction at any time prior to a final DEA decision.”  As noted by the court:

Novelty’s motion for a preliminary injunction is not a disguised attempt at forum shopping or gun-jumping by going directly to the district court before exhausting its administrative remedies, but is rather a request for temporary injunctive relief from its pre-hearing suspension, which the court of appeals lacks jurisdiction to consider, until such time as DEA issues a final agency determination regarding the suspension or revocation of its registration, which the court of appeals can hear on appeal. . . . Accordingly, this Court has jurisdiction to consider Novelty’s motion for a preliminary injunction against DEA’s suspension of Novelty’s registration pending a final agency determination on the matter.

In considering whether to issue a preliminary injunction, however, the court found that: (1) DEA did not act arbitrarily and capriciously in suspending Novelty’s registration for posing an imminent danger to the public health or safety; and (2) that Novelty had not met the burden necessary of showing a “substantial likelihood of success on the merits.”  The court ultimately denied Novelty’s motion for preliminary injunction.

By John A. Gilbert & Serafina E. Lobsenz

In recent years, FDA has studiously avoided taking any broad regulatory action on the issue of whether, and under what circumstances, the presence of methylmercury in fish renders that fish adulterated.  FDA recognized that the scientific evidence that addresses the potential risks posed by methylmercury in fish left a number of questions unanswered, while evidence addressing the benefits of fish consumption continued to mount.  In fact, FDA’s public advisory on methylmercury in fish (issued in tandem with EPA) had evolved to give greater recognition to the benefits of eating fish.

FDA’s public advisory is just that – a public advisory.  It is carefully worded so as not to be a guidance document subject to the requirements of the agency’s Good Guidance Practices regulation in 21 C.F.R. § 10.115 (i.e., it does not purport to be either an interpretation of statutory or regulatory requirements, or a statement of policy).  Thus, it was a source of dismay to more than a few agency insiders when then-Commissioner Dr. Lester Crawford sent a letter to California’s Attorney General claiming that the public advisory was part of a “carefully considered federal approach to advising consumers” constituting federal law that preempted California’s lawsuit aimed at requiring Proposition 65 warnings on canned tuna.

FDA’s letter initially hit its mark.  In People v. Tri-Union Seafoods, the Superior Court of California held that California’s lawsuit was preempted by federal law under the theory of conflict preemption advanced in FDA’s letter, and cited FDA’s letter in support of its ruling.  Shortly thereafter, in Fellner v. Tri-Union Seafoods, the U.S. District Court for the District of New Jersey granted Tri-Union’s motion to dismiss in a lawsuit contending that Tri-Union was guilty of negligence under New Jersey law for failing to warn consumers of the risks posed by methylmercury in its canned tuna products.  But, earlier this month, the U.S. Court of Appeals for the Third Circuit reversed – and what a reversal it is.

For starters, the appellate court thoroughly disparages FDA’s letter, concluding that “it merits a particularly low level of deference” because it is not “the product of an agency proceeding.”  Footnote 8 dryly observes that the letter “follows, and bears a striking resemblance to, a letter… sent to the agency’s chief counsel” by counsel apparently representing the tuna industry in the California litigation, and that the views in the letter “apparently were formulated without the benefit of exposure to conflicting views or critiques.”

The court’s rejection of the significance of FDA’s letter, and of the views espoused therein, is central to the court’s holding that there is “no federal law with which the alleged state duty to warn conflicts.”  With respect to FDA’s public advisory, the court concludes that it simply gives advice to consumers and promulgates no legal standard with which the state law claim conflicts.  With respect to FDA’s contention that the use of warning labels would frustrate its approach to advising consumers of the benefits and risks of eating fish, the court finds that there has been no “authoritative federal determination that the area [of health warnings] is best left unregulated.”  And with respect to FDA’s view that the requirement of a warning would render canned tuna misbranded under federal law, the court observes that “FDA has taken no misbranding action pertaining to the risk of mercury in tuna whatsoever.”  On the basis of those conclusions (and Tri-Union’s failure to identify an actual conflict between the state law claims and FDA’s actions), the court rejected all of the conflict preemption arguments advanced by Tri-Union.

The Third Circuit’s decision in Fellner stands as a counterpoint to the court’s April 2008 decision in Colacicco v. Apotex, Inc.  As we previously reported, the plaintiffs in Colacicco alleged claims for failure-to-warn against two drug manufacturers (Apotex and Pfizer) with respect to two selective serotonin reuptake inhibitors (paroxetine HCl and sertraline HCl) that they caused an increased risk of suicidality.  The court ruled that the failure-to-warn claims conflict with (and are therefore preempted by) FDA’s regulatory actions with respect to such drugs.  In Fellner, however, the court states that “[t]his does not mean . . . that federal law capable of preempting state law is created every time someone acting on behalf of an agency makes a statement or takes an action within the agency’s jurisdiction . . . We decline to afford preemptive effect to less formal measures lacking the ‘fairness and deliberation’ which would suggest that Congress intended the agency’s action to be a binding and exclusive application of federal law.”

All of this is not to say that FDA’s approach to the issue of methylmercury in seafood lacks merit, or that lawsuits such as the one against Tri-Union are a positive development.  As FDA points out, the public health consequences of warning consumers away from seafood are likely to be negative. 

By Ricardo Carvajal & Kurt R. Karst    

Under the FDC Act and FDA’s implementing regulations, a sponsor may qualify for a 3-year period of market exclusivity for a “change” to an approved drug product if the application contains: (1) “reports of new clinical investigations (other than bioavailability studies);” (2) that were “essential to approval” of the application; and (3) that were “conducted or sponsored by” the applicant.  All three of these criteria must be satisfied in order to qualify for 3-year exclusivity.  Each criterion is defined in FDA’s implementing regulations at 21 C.F.R. § 314.108. 

The question of whether a drug product change eligible for 3-year exclusivity is limited to labeling additions, or whether labeling deletions can also qualify for exclusivity, has not been clearly stated by FDA.  For example, in an October 1996 citizen petition response (FDA Docket No. #1995P-0366/PDN1), FDA commented (in the context of an Rx-to-OTC switch) that an argument that:

a “significant innovation” or a “new condition of use” is required to receive marketing exclusivity for a change under [FDC Act §§ 505(c)(3)(E)(iv) and 505(j)(5)(F)(iv)] is incorrect.  Under these paragraphs of [FDC Act § 505], a “change” approved in a supplement to a 505(b) application is awarded marketing exclusivity for three years if the supplement is approved after September 24, 1984; the supplement contains “reports of new clinical investigations (other than bioavailability studies);” the investigations are “essential to the approval of the supplement;” and the investigations are “conducted or sponsored by the person submitting the supplement.”  Thus, the standard under the [FDC Act] for determining whether a change in a supplement is granted marketing exclusivity is whether the change is supported by new clinical investigations that are essential to the approval of the supplement.   

Thus, according to FDA, all that is required to qualify an applicant for 3-year exclusivity is that a “change” meet the three statutory criteria.  If it does, then it is the type of “change” intended by Congress to qualify for 3-year exclusivity.  Accordingly, a “change” that is a deletion of labeling information could qualify for 3-year exclusivity.  And in fact that is exactly what FDA determined in a recent case.

On July 7, 2005, FDA approved NDA # 21-794 for ACZONE (dapsone) Gel, 5%, for the treatment of acne vulgaris.  At the time of initial NDA approval, the “Indications and Usage” labeling section included the following information:

Glucose 6-phosphate dehydrogenase (G6PD) levels should be obtained prior to initiating therapy with ACZONEÔ Gel, 5%. In patients with a history of anemia and predisposition to increased hemolytic effect with dapsone (e.g., glucose-6-phosphate dehydrogenase deficiency), closer follow-up for blood hemoglobin levels and reticulocyte counts should be implemented (see PRECAUTIONS). Alternatively, other therapies for acne than ACZONEÔ Gel, 5%, may be considered.  

Similar information was included in the “Precautions” and “Adverse Events” labeling sections, along with information based on the G6PD-deficient subjects enrolled in the applicant’s clinical studies. 

According to FDA’s summary basis of approval for NDA # 21-794, the Agency required this labeling information due to concerns, based on FDA’s experience with oral dapsone, that hemolysis could be exaggerated in individuals with low plasma G6PD, and because the applicant’s clinical studies “did not enroll adequate numbers of subjects with [G6PD] deficiency . . . to be able to make reasonable conclusions about the safety of ACZONE in this population.”  The applicant agreed to conduct a postmarketing study in G6PD-deficient patients with acne vulgaris to further evaluate the risk of hematological adverse events with the use of ACZONE Gel in this population.  The results of that study were submitted to FDA in an NDA supplement (NDA #21-794/S-005) in May 2007, which FDA approved in March 2008.

The March 2008 approval significantly revised the ACZONE Gel labeling to show that the drug product is safer than originally thought with respect to G6PD-deficient patients, thereby permitting broader use of the drug.  Specifically, the statement quoted above from the “Indications and Usage” labeling section (as well as related statements in the “Precautions” and “Adverse Events” labeling sections) requiring an invasive medical test was removed (because it is now unnecessary), and new information was added to the “Warnings and Precautions” labeling section on hematological effects in G6PD-deficient patients and to the “Use in Specific Populations” labeling section discussing in detail the results of the applicant’s clinical study in G6PD-deficient patients. 

Although FDA approved NDA #21-794/S-005 in March 2008, it was not until the issuance of the most recent Orange Book Cumulative Supplement in mid-August 2008 that FDA officially granted exclusivity for the ACZONE Gel supplement.  The decision to grant exclusivity resulted in the creation of a new exclusivity code: M-76 – REMOVAL OF SCREEN REQUIREMENT IN PTS WITH G6PD DEFICIENCY PRIOR TO INITIATING ACZONE TREATMENT; REMOVAL OF BLOOD COUNT & RETICULOCYTE MONITORING DURING TREATMENT IN G6PD DEFICIENT PTS AND IN PATIENTS WITH HISTORY OF ANEMIA.  Given the unusual delay in granting exclusivity, it would appear that FDA wrestled with the issue, but ultimately concluded that any “change” meeting the statutory requirements is eligible for 3-year exclusivity.

By Kurt R. Karst

FDA released a Memorandum of Agreement Between the Office of New Drugs (“OND”) and the Office of Surveillance and Epidemiology (“OSE”) in the Center for Drug Evaluation and Research (“CDER”) “on the management of significant safety issues associated with pending and approved drug products.” 

The memorandum “clarifies the roles and responsibilities of OND and OSE in implementing CDER’s policies” and “assists FDA in implementing” certain provisions of the Food and Drug Administration Amendments Act of 2007 (“FDAAA”).  The agreement explains that both OND and OSE are “given equal weight” for their opinions on how to resolve significant drug safety issues, which include, among other issues, any safety issue that could lead to the withdrawal of a drug from the market, withdrawal of an approved indication, and changes to drug labeling. 

After a safety issue is identified, OND and OSE must work together to determine the appropriate response actions.  According to the memorandum, possible responses include requiring labeling changes (pursuant to FDAAA § 901, 121 Stat. 924, which created FDC Act § 505(o)(4)), “requiring a sponsor to submit and implement a [risk evaluation and mitigation strategy] REMS” (FDAAA § 901, 121 Stat. 926, which created FDC Act § 505-1), “requiring a sponsor to conduct a post-market study or clinical trial (FDAAA § 901, 121 Stat. 923, which created FDC Act §505(o)(3)), “requesting an applicant to discontinue marketing,” or other actions as determined appropriate by the two offices.   

Although the memorandum explains that OND and OSE are “given equal weight,” OSE will have increased authority over safety issues.  The document explains that OSE is expected to expand its role as an expert in certain fields, including pharmacovigilance activities, risk management plans, and labeling and packaging review.  OSE will also became the lead office for observational epidemiologic studies and medication error prevention.  As part of medical error prevention, OSE will “lead in the review of proposed proprietary names or changes to proprietary names,” which is a departure from the current model where OSE provides guidance to OND.  Finally, OSE will review “protocols and studies that assess medication error risk.” 

The memorandum is notable for its shift in responsibility and control for certain issues to OSE.  It seems likely that OSE will have to expand its office in order to meet its new responsibilities, and it may take some time before it has adequate resources to fully accept the responsibilities.

By Susan J. Mathees

On August 8, 2008, the U.S. Court of Appeals for the Third Circuit issued an opinion in an appeal from a conviction under, among other provisions, the criminal provisions of the Federal Food Drug and Cosmetic Act (“FDC Act”). 

A jury convicted Eric Goldberg of various crimes arising out of his sales of veterinary prescription drugs without a prescription.  Goldberg appealed his conviction, and the appellate court, despite affirming various other convictions (mail and wire fraud and possession with intent to distribute a controlled substance), reversed his FDC Act convictions.

Goldberg was convicted of felony violations of the FDC Act, which requires that the violations be done with the “intent to defraud or mislead.”  Criminal violations done without the intent to defraud and mislead are misdemeanors.  Based upon the evidence that Goldberg was open with both the FDA and his customers about his sale of prescription drugs without a prescription, the court reversed the felony convictions, and remanded the case to the district court for resentencing as misdemeanors.

In providing guidance to the district court, the appellate court sided with the government on an issue that FDA had recently argued for (unsuccessfully) before the United States Sentencing Commission.  We previously reported that FDA sought an amendment to the “loss” guideline so that adulterated and misbranded drugs were given no value.  In its comments, FDA recognized that approved drugs that were nevertheless adulterated or misbranded were treated differently under the guidelines than unapproved drugs. The Sentencing Commission did not adopt FDA’s proposal.  Thus, despite the distinction between misbranded and unapproved drugs, the court (seemingly incorrectly), applied the comment concerning unapproved drugs to the misbranded drugs at issue in Goldberg’s case.

Lastly, the court agreed with Goldberg that a two level enhancement for “violating a ‘prior specific judicial or administrative order, injunction, decree, or process not addressed elsewhere in the guidelines’– was unwarranted.”  In particular, the court stated that the enhancement was not warranted where the FDA had told Goldberg that he was “dispensing illegal drugs” but never told him to stop.

By J.P. Ellison

The Weston A. Price Foundation has submitted a citizen petition asking FDA to revoke its regulation approving a health claim for soy protein and coronary heart disease.  According to the petition, in light of studies published since the regulation was issued in 1999, “[t]he totality of the scientific evidence on soy protein and heart disease is contradictory and inconsistent” and no longer supports the claim approved by FDA.  In addition, the petition questions whether soy protein isolates are GRAS.  The citizen petition does not acknowledge that FDA already has announced its intention to reconsider the health claim for soy protein.  That claim was approved prior to the advent of qualified health claims.  Thus, if the current supporting evidence does not meet the standard of significant scientific agreement, a qualifying statement could be added to the existing claim to more accurately reflect the strength of the supporting evidence.

In support of the requested relief, the petition cites a 2006 Science Advisory on Soy Protein, Isoflavones, and Cardiovascular Health issued by the Nutrition Committee of the American Heart Association, which concludes that “the direct cardiovascular health benefit of soy protein or isoflavone supplements is minimal at best. Soy protein or isoflavones have not been shown to improve vasomotor symptoms of menopause, and results are mixed with regard to the slowing of postmenopausal bone loss. The efficacy and safety of soy isoflavones for preventing or treating cancer of the breast, endometrium, and prostate are not established; evidence from clinical trials is meager and cautionary with regard to a possible adverse effect. For this reason, use of isoflavone supplements in food or pills is not recommended.”  However, the AGA science advisory also concludes that “soy products such as tofu, soy butter, soy nuts, or some soy burgers should be beneficial to cardiovascular and overall health because of their high content of polyunsaturated fats, fiber, vitamins, and minerals and low content of saturated fat. Using these and other soy foods to replace foods high in animal protein that contain saturated fat and cholesterol may confer benefits to cardiovascular health.”

By Ricardo Carvajal & Riëtte van Laack

As we previously reported, in August 2007, FDA issued a letter and started a docket requesting public comment on a variety of 3-year exclusivity issues concerning generic versions of Shire U.S. Inc.’s PROAMATINE (midodrine hydrochloride) Tablets.  FDA approved PROAMATINE in September 1996 under the Agency’s “accelerated approval” Subpart H (surrogate endpoint) regulations for the treatment of symptomatic orthostatic hypotension.  FDA also subsequently approved several Abbreviated New Drug Applications (“ANDAs”) for generic versions of the drug.  Approval under FDA’s accelerated approval regulations is conditioned on a sponsor’s commitment to timely complete the required postmarketing studies to demonstrate the product’s clinical benefits.  FDA may expedite the withdrawal of approval of an application approved under the accelerated approval regulations if a sponsor “fails to perform the required postmarketing study with due diligence,” or if “[a] postmarketing clinical study fails to verify clinical benefit.”  To date, Shire has not conducted the requisite studies to verify PROAMATINE’s clinical benefit.   

In March 2007, several ANDA holders met with FDA to discuss the studies needed to determine the clinical effectiveness of midodrine HCl. At that meeting, FDA reportedly raised the possibility of 3-year exclusivity for ANDA holders who complete the required postapproval studies, but noted that the issue had not yet been fully discussed among Agency officials.  FDA established a docket in August 2007 requesting public comment to assist the Agency in resolving those exclusivity issues.  Specifically, FDA requested comment on six questions:

1.         If the post-marketing studies have been previously required as a condition of continued approval of midodrine hydrochloride under subpart H and one or more ANDA applicants complete those studies, are those studies eligible for 3-year exclusivity?  Under what theory?

2.         Does the answer to #1 depend on whether the studies merely validate the use of the surrogate endpoint or change the indication or other condition of use for the approved drug product?

3.         Does the same result apply if the sponsor of the NDA, itself, completes phase 4 studies that were required as a condition of approval under subpart H?  Why or why not?

4.         If 3-year exclusivity is available for the required phase 4 studies and holders of approved ANDAs collaborate to conduct those studies, is there legal authority to permit them to share 3-year exclusivity?  If not, can the first applicant to obtain approval of its supplement selectively waive its 3-year exclusivity in favor of the other collaborators on the studies?

5.         Under the statute and applicable regulations, could a study be “conducted or sponsored by the applicant” as required for 3-year exclusivity if that applicant paid less than 50 percent of the costs of the study?  Why or why not?

6.         If studies are completed and certain holders of approved ANDAs or the NDA holder does not collaborate, does FDA have authority under section 505(e) of the FDC Act to withdraw approval of those applications?  Does FDA have such authority under any other statutory or regulatory provision?  Would notice and opportunity for hearing be required before withdrawal?

On August 18, 2008, FDA issued an uncharacteristically short letter commenting on the availability of 3-year exclusivity for a company that submits a supplement to its approved midodrine HCl application containing the results of postapproval studies verifying the clinical benefit of the drug.  According to the letter, companies will be eligible for 3-year exclusivity provided the statutory criteria are met.  Whether several companies may jointly sponsor the required clinical studies to qualify a single applicant for 3-year exclusivity (who may then waive that exclusivity in favor of other applicants) is an issue that FDA will not address until after approval of an application. 

As to FDA’s plans to seek expedited withdrawal of approved midodrine HCl applications, the Agency notes in the letter that “[i]f an application or supplement containing studies that verify clinical benefit for midodrine hydrochloride is not approved soon, we will issue a Notice of Opportunity for a Hearing on the Center’s proposal to withdraw the approval of the midodrine hydrochloride new drug application (NDA) (and all ANDAs referencing that NDA) pursuant to 21 CFR 314.530.”  Since the accelerated approval regulations were promulgated in 1992, FDA has approved scores of applications under those regulations based on a demonstrated effect on a surrogate endpoint.  FDA has never, however, withdrawn approval of an application for a sponsor’s failure to complete a required postmarketing study with due diligence or because a postmarketing study failed to verify clinical benefit. 

By Kurt R. Karst    

On August 14, 2008, the President signed into law Public Law No. 110-314, the Consumer Product Safety Improvement Act of 2008. The new law contains a number of provisions relating to children’s products, including lead.  It also contains provisions relating to the administrative functions that have been delegated to the United States Consumer Product Safety Commission ("CPSC"), enhances the authority of the CPSC to order recalls, increases the amount of the civil penalties that the CPSC may impose, and has other miscellaneous provisions.  Most of the provisions took effect on the date of enactment, although some provisions will not take effect for up to sixty days.

When Congress passed the Food Allergen Labeling and Consumer Protection Act of 2004 to require source declaration for ingredients derived from major food allergens, Congress chose not to include any requirements with respect to so-called advisory labeling (e.g., “may contain peanuts,” or “processed in a facility that also processes peanuts”).  FDA has always been skeptical of advisory labeling.  Now that its use has grown increasingly widespread, the agency has decided that it’s time to try to rein it in.

On August 8, 2008, FDA announced that it will be holding a public hearing on September 16, 2008 to help the agency in “developing a long-term strategy to assist manufacturers in using allergen advisory labeling that is truthful and not misleading, conveys a clear and uniform message, and adequately informs food-allergic consumers and their caregivers.”  FDA is calling for information on three issues: (1) the circumstances under which manufacturers use advisory labeling; (2) what type of advisory labeling is most effective in helping consumers avoid adverse allergic reactions; and (3) how advisory statements should be worded to be the most effective in communicating the likelihood that an allergen may be present in a food.

In its notice, FDA observes that “manufacturers use advisory labeling for a variety of reasons, such as to advise consumers of the potential presence of an allergen, to avoid the need to develop and use multiple labels, or to reduce legal liabilities.”  From FDA’s perspective, the key question is whether a given claim on a given product is truthful and not misleading under FDC Act § 403(a)(1), which incorporates the definition of “truthful and not misleading” in FDC Act § 201(n) and its admonition against the omission of material facts.  In FDA’s view, “[i]f manufacturers choose to use advisory labeling to inform consumers of the potential presence of food allergens in the finished products, such labeling must be truthful and not misleading and should provide clear, uniform, and accurate information to food-allergic consumers about the potential presence of food allergens.”  FDA squarely states its belief that, “[a]s currently used in the marketplace, advisory labeling may not be protecting the health of allergic consumers.”  It appears most likely that FDA will seek to develop guidance on the use of advisory labeling, but the possibility that FDA will opt to develop a regulation can not be entirely discounted, as FDA’s notice makes reference to the warning and safe handling statements required under 21 C.F.R. § 101.17.  The corresponding Docket No. is FDA-2008-N-0429.

By Ricardo Carvajal & Bryon F. Powell

Robert A. Dormer of Hyman, Phelps & McNamara, P.C. will be speaking at American Conference Institute’s FDA Boot Camp conference, September 22-23, 2008 at the Sheraton Boston Hotel in Boston, MA. Click here for a copy of the agenda.

At the event, preeminent members of the nation’s Food and Drug bar will

drill products liability and IP/patent lawyers in the basics of current FDA law and regulation — including the nuances of the FDA Amendments Act. They will help you:

• MASTER the basics of the application and approval processes for drugs, biologics, and devices
• DEVELOP a practical working knowledge of clinical trials for drugs and biologics and the clearance process for devices
• APPRECIATE the regulatory balance between brand name and generic products
• UNDERSTAND the complexities of the patent and IP landscape, including Hatch-Waxman, Orange Book, 180-day exclusivity, 30-month stay, Paragraph IV, NDA, ANDA and 505(b)(2)
• RECOGNIZE the role of labeling in the drug/biological product approval process
• SEE the importance of cGMPs to the post-approval regulatory process
• NAVIGATE the protocols of adverse events monitoring, pharmacovigilance, and Risk Evaluation and Minimization Strategies (REMS)
• LEARN how devices are classified, monitored, and regulated
• EXPLORE FDA’s expectations and guidance for recalls

Additional details and registration information are available at the American Conference Institute’s website or by calling 888-224-2480. If you register by or before August 29th, you can lock in the lowest rate.

A recent Federal Trade Commission (“FTC”) action serves as a reminder that the agency takes seriously cases referred to it by the National Advertising Division of the Council of the Better Business Bureaus (“NAD”).  In a press release issued earlier this week, the FTC announced that a federal court ordered North American Herb and Spice Co. to pay $2.5 million to settle civil charges brought by the agency, after the NAD alerted the FTC to certain claims that had been made by the company.

The FTC complaint alleged that North American Herb and Spice falsely claimed that its products, Oreganol P73, Super Strength Oreganol P73, and Oregacyn, are “scientifically proven to cure colds and flu.”  In addition, advertisements for the products claimed that they would kill germs, including human cold and flu viruses, avian bird flu, hepatitis C, staph aureus, and Helicobacter pylori. 

The NAD had challenged the claims in July 2007, but the company reportedly never responded to the challenge or provided substantiation for its claims.  The NAD then referred the matter to the FTC.  As a result of the FTC lawsuit, the company agreed to a stipulated final judgment and order for permanent injunction that was entered in the federal court in Chicago.  The FTC’s press release declared that the defendants’ claims “were false and unsubstantiated in violation of federal law.”  The company agreed to pay the $2.5 million in settlement, and was enjoined by the court from making any similar claims without “competent and reliable evidence that substantiates the representation.” 

The NAD, which has a small staff of lawyers who review advertising based on their own routine scrutiny or on challenges by competitors, generally relies on voluntary compliance with its decisions.  However, if the advertiser does not comply, the NAD often refers the matter to the FDA or the FTC.  The FTC in particular has given special attention to matters that come from the NAD.  This action serves as a reminder that, although the NAD lacks the statutory authority of the FTC or FDA, its inquiries are not without consequences and should be taken seriously.   

By Susan J. Matthees

Now that FDA has set the Fiscal Year 2009 Prescription Drug User Fee Act (“PDUFA”) user fee rates and is preparing invoices for delivery (payable by October 1, 2008), a quick review of the options available to companies to request user fee waivers and reductions seems in order. 

Under PDUFA, FDA collects three types of user fees for a drug product that is the subject of a “human drug application” (i.e., a new drug approved under FDC Act § 505 and a biological product licensed under PHS Act § 351): (1) a one-time application fee that must be paid in order for FDA to accept an application for filing; (2) an annual establishment fee for “each prescription drug establishment listed in [an] approved human drug application as an establishment that manufactures the prescription drug product named in the application;” and (3) an annual product fee for each drug listed in FDA’s Orange Book (i.e., the active section of the Orange Book and not the Discontinued Drug Product List) that is the subject of an approved human drug application.  There are several exceptions under PDUFA that could preclude the assessment of user fees.

For those companies that are subject to user fees – and in particular annual product and establishment fees – FDC Act § 736(d) provides a few mechanisms to offer relief.  Specifically, a company can request FDA to waive or reduce user fees under: (1) the “public health” mechanism; (2) the “barrier to innovation” mechanism; and (3) the “fees-exceed-the-costs” mechanism.  In addition, a firm that qualifies as a “small business” (i.e., 500 or fewer employees, including employees of affiliates) and that does not have a drug product approved and marketed pursuant to a human drug application may request FDA to waive the application fee for its first human drug application.  Please note, however, that to qualify for consideration of a waiver or reduction of fees, an applicant must submit a written request to FDA no later than 180 days after the fee is due.

Under the public health mechanism (FDC Act § 736(d)(1)(A)), FDA can waive or reduce user fees if the Agency finds that “such waiver or reduction is necessary to protect the public health.”  FDA explained in what is now a sorely out of date July 1993 guidance document that a “public health” waiver/reduction may be appropriate when: (1) the product protects the public health; and (2) the person requesting the waiver shows that a waiver is necessary to continue an activity that protects the public health. 

Under the barrier to innovation mechanism (FDC Act § 736(d)(1)(B)), FDA can waive or reduce user fees if the Agency finds that “the assessment of the fee would present a significant barrier to innovation because of limited resources available to such person or other circumstances.”  FDA’s 1993 guidance document explains that a “barrier to innovation” waiver/reduction may be appropriate when: (1) the product for which the waiver/reduction is being requested is innovative, or the entity requesting the waiver/reduction is otherwise pursuing innovative drug products or technology; and (2) the fee would be a significant barrier to the entity’s ability to develop, manufacture, or market innovative products or technology. 

In addition to these criteria, FDA also considers other factors in determining whether either a “public health” or “barrier to innovation” waiver/reduction should be granted.  These factors include the size and annual gross revenues of a business, whether a human drug application is for a new chemical entity, or has priority review status or fast track status, and, for a barrier to innovation waiver/reduction, special circumstances subject to FDA’s discretion. FDA has interpreted the financial test to mean a company with $10 million in foreign and domestic annual gross revenues and no corporate parent or funding source with annual gross revenues of $100 million or more (in 1993 dollars).

The fees-exceed-the-costs mechanism (FDC Act § 736(d)(1)(C)) involves a complicated calculation used by FDA to determine whether the total fees paid by an applicant since the enactment of PDUFA in 1992 exceed the Agency’s total costs in reviewing all submissions to the Agency by the applicant since that time.  FDA’s fees-exceed-the-costs guidance document and accompanying standard costs chart provide additional information on this mechanism.  While this mechanism is not often used (because many applicants are continually submitting applications to FDA and the Agency’s costs usually exceed the fees paid), it has been successfully used by companies with a small number of FDA submissions approved several years ago that are still subject to annual user fees.  Thus, for such companies, FDA’s costs remain static while the total amount of fees paid by the company continues to grow, eventually leading to an overage. 

The FDA Amendments Act (“FDAAA”) introduced a new user fee exemption applicable to orphan drugs.  As we previously reported, sponsors of orphan drugs have been exempt from paying the application user fee since the enactment of PDUFA II in 1997, but have not been exempt from paying annual product and establishment fees.  With the enactment of PDUFA IV under FDAAA, however, the law was amended to add new FDC Act § 736(k) to exempt orphan drugs from annual product and establishment fees.  Specifically, an approved drug designated as an orphan drug is exempt from product and establishment fees if: (1) “[t]he drug meets the public health requirements contained in [FDC Act § 736(d)(1)(A)] as such requirements are applied to requests for waivers for product and establishment fees;” and (2) “[t]he drug is owned or licensed and is marketed by a company that had less than $50,000,000 in gross worldwide revenue during the previous year,” and provided a certification to this effect is submitted to FDA. 

By Kurt R. Karst

Massachusetts has now joined California and Nevada in imposing marketing compliance obligations on drug and device companies marketing products in the state.  On Sunday, August 10th, Massachusetts Governor Deval Patrick signed into law Senate Bill 2863, which requires the Massachusetts Department of Public Health (DPH or Department) to establish a pharmaceutical and medical device marketing code of conduct, and imposes compliance and reporting requirements on pharmaceutical and medical device companies that employ a person to sell or market prescription drugs or medical devices in Massachusetts.  The law will become effective on January 1, 2009.  It does not apply to wholesale drug distributors or retail pharmacies.

The law requires the DPH to establish a marketing code of conduct that is no less restrictive than the most recent versions of the Codes on Interactions with Healthcare Professionals issued by the Pharmaceutical Research and Manufacturers of America (the PhRMA Code) and the Advanced Medical Technology Association (the AdvaMed Code).  As we reported in June, the PhRMA Code was recently revised to add more stringent restrictions on meals, gifts, and other drug marketing activities.

Under the statute, the DPH marketing code must contain specific prohibitions, some of which are more restrictive than the revised PhRMA Code.  For instance, the DPH marketing code may not allow a pharmaceutical or device manufacturing company to provide meals that are part of a recreational event, offered without an informational presentation, consumed outside of the office, or for a practitioner’s spouse or other guest.  The PhRMA Code, in contrast, permits a drug company to provide meals outside the professional’s office if they are not provided by field representatives or their immediate managers.  The DPH code must also prohibit the sponsorship of independent medical education programs that do not meet the Accreditation Council for Continuing Medical Education (ACCME) Standards for Commercial Support, whereas the PhRMA Code permits support for non-ACCME accredited third-party programs.  The DPH code must, like the PhRMA Code, prohibit the provision of entertainment or recreation.  In addition, the Code must prohibit all payments to healthcare practitioners, except as compensation for bona fide services.  This latter provision is drafted broadly enough to prohibit rebates and other price reductions offered after a purchase.  Hopefully, the DPH will clarify that price reductions are not affected by the code.

The law also spells out certain activities that must be permitted under the marketing code.  The code must allow companies to distribute peer reviewed scientific information; purchase advertising in peer reviewed scientific journals; provide pharmaceuticals exclusively for use by the practitioner’s patients; compensate a practitioner for consulting services in connection wth genuine research or a clinical trial; and pay reasonable expenses in connection with medical device training if those expenses are part of the purchase contract.

The law does not impose a deadline for the development of the marketing code, but once it is established, the DPH must update it at least every two years.

Under the new law, drug and device companies that employ a person to sell or market a prescription drug or medical device in Massachusetts must adopt and comply with the DPH’s most recent marketing code of conduct; adopt a training program for compliance with the code; conduct annual audits to monitor compliance with the code; and adopt policies and procedures for investigating noncompliance with the code.  In addition, these companies must take corrective action in response to noncompliance with the code, and report any noncompliance to state authorities.

The law also requires covered drug and device companies to provide two annual reports to the Department.  The first report will include a description of the company’s training program, a description of the investigation policies, information on the compliance officer, and a certification that the company has conducted its annual audit and is in compliance with the DPH marketing code.  The annual deadline for this report is not specified.

Second, by July 1 every year, a covered drug or device company must also report the “value, nature, purpose and particular recipient” of any payment, fee, or economic benefit of at least $50 it provided to a physician, hospital, nursing home, pharmacist, or other specified healthcare practitioner.  The Department will then make such information available on its website.  Notably, unlike the reporting laws of other states, there are no exceptions to this reporting obligation for bona fide service fees, investigator payments, or any other payments.

The law, which will be enforced by the Attorney General, provides for a fine of up to $5,000 for each transaction, occurrence, or event that violates this law.

By Bryon F. Powell & Alan M. Kirschenbaum

The latest FDLI Update article by Hyman, Phelps & McNamara, P.C.’ s Gwendolyn M. McKee and John R. Fleder discusses the potential consequences to company executives and companies of submitting false information to a government agency, even when the submission is not made under oath.  The article discusses the recent indictment of a former high ranking officer of Bristol-Myers Squibb for information allegedly omitted in a certification to the Federal Trade Commission (“FTC”).  The article also discusses the FTC’s enforcement efforts involving marketing agreements between brand name and generic pharmaceutical manufacturers.

On September 8, FDA will hold a public meeting to receive data and other information on the effects of nanoscale materials on quality, safety, and effectiveness of FDA-regulated products.  FDA will consider the information that it receives in its development of guidance that addresses: (1) the data required to demonstrate safety and effectiveness of a product that contains nanoscale materials; and (2) the circumstances under which the use of nanoscale materials might change the regulatory status of a product.  There will be breakout sessions that will address different product categories, including medical devices, prescription drugs, food and color additives, dietary supplements, and cosmetics.

The issues to be addressed in the breakout sessions include: (1) characteristics of materials to be identified and evaluated; (2) availability of tools to assess characteristics of nanoscale materials that could affect safety, effectiveness, and quality; (3) whether the manufacturing processes for nanoscale materials have unique features that merit evaluation; (4) whether there are aspects of formulation, processing, or storage that affect quality, safety, or effectiveness of products that contain nanoscale materials; (5) experience with, avoidance of, and concerns about products containing nanoscale materials; and (6) whether FDA should consider additional questions regarding characterization and manufacture of products containing nanoscale materials.

FDA also is requesting data that: (1) identify Over-the-Counter (“OTC”) drug products that contain nanoscale versions of ingredients in an OTC drug monograph; (2) identify nanoscale versions of food and color additives; (3) address the safety and effectiveness of both new FDA-regulated products and those that are reformulated to contain, or increase the content of, nanoscale materials; (4) address the effects of nanoscale versions of materials on bioavailability; and (5) address the effects of nanoscale materials on the manufacturing process for FDA-regulated products.

The importance of submitting comments to FDA as the Agency works to implement the recommendations in the 2007 Nanotechnology Task Force Report and sets a course for the future regulation of nanotechnology can hardly be overstated.  Comments can be submitted to Docket No. FDA-2008-N-0416. 

By Ricardo Carvajal

ADDITIONAL READING:

• April 17, 2008 FDA Law Blog post

• August 1, 2007 FDA Law Blog Post