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  • Teva Sues FDA After the Agency Refuses to Relist RISPERDAL Patent and Recognize the Company’s 180-Day Exclusivity Eligibility

    In August 2007, Teva Pharmaceuticals USA submitted a citizen petition to FDA requesting that the Agency relist in the Orange Book U.S. Patent #5,158,952 (“the ‘952 patent”) covering Janssen Phaemaceutica’s RISPERDAL (risperidone) Tablets (approved under NDA #20-272), and to confirm the company’s eligibility for 180-day exclusivity. (See Orange Book Blog post here.)  According to the petition, Teva submitted ANDA #76-228 to FDA on August 28, 2001.  The ANDA contained a Paragraph III certification to U.S. Patent #4,804,663 (which expired in December 2007, but is covered by a period of pediatric exclusivity scheduled to expire in June 2008), and a Paragraph IV certification to the ‘952 patent.  In October 2001, FDA notified Teva that the ‘952 had been delisted from the Orange Book, and required the company to amend its patent certification to reflect that the ‘952 patent was no longer listed in the Orange Book as claiming RISPERDAL Tablets.  Teva complied and submitted the ANDA amendment.

    In November 2006, the U.S. Court of Appeals for the District of Columbia decided in Ranbaxy Laboratories Ltd. v. Leavitt that FDA may not delist a patent from the Orange Book following the submission of an ANDA with a Paragraph IV certification to that patent.  Teva states in its petition that following the Ranbaxy decision the company reviewed its ANDA portfolio for any potential unlawful patent delistings that could affect the company’s eligibility for 180-day exclusivity.  This review led to the company’s August 2007 citizen petition.

    Teva argues in its petition that because the “official Orange Book” (that is, the printed edition of the Orange Book) listed the ‘952 patent when the company submitted ANDA #76-228, “FDA’s putative delisting of the ‘952 patent did not become effective until January 2002, when the official Orange Book reflected the delisting of that patent.”  As such, according to Teva, given the decision in Ranbaxy, FDA could not have lawfully delisted the ‘952 patent because of the company’s Paragraph IV certification to that patent, and the company remains eligible for 180-day exclusivity.  Teva also contends that because FDA “failed to provide official notice of the ‘delisting’ for several months following the submission of Teva’s ANDA,” the delisting does not affect Teva’s “entitlement” to 180-day exclusivity. 

    On February 26, 2008, FDA denied Teva’s petition.  FDA states that according to the Agency’s records, the ‘952 patent was delisted before Teva submitted ANDA #76-228 to FDA, and that as a result, the delisting was proper and Teva is not eligible for 180-day exclusivity.  Specifically, according to FDA, Janssen requested that the Agency delist the ‘952 patent from the Orange Book in April 2001, and “[i]n accordance with these instructions, FDA modified its patent listing database on June 11, 2001” to remove the patent from its RISPERDAL Orange Book file.  FDA states that the “delisting of the ‘952 patent was reflected in the publicly available, electronic Orange Book shortly after June 29, 2001, and no later than July 20, 2001, the date of the next database update.”  As such, “at the time Teva submitted its ANDA, the electronic Orange Book contained the most current information regarding patents listed for Risperdal tablets . . . [and Teva’s] assertion that the delisting of the ‘952 patent did not become effective until publication of the 2002 annual edition of the Orange Book is without merit.” 

    FDA notes that the Agency’s decision is consistent with the Ranbaxy decision.  In Ranbaxy, “[t]he NDA holder’s request to delist the patents for simvastatin came almost 2 years after the Ranbaxy ANDA was submitted and almost 3 years after the Ivax ANDA was submitted.  In contrast, [Janssen] requested that the ‘952 patent for Risperdal be delisted 2 to 4 months before Teva’s ANDA for risperidone was submitted” (emphasis in original). 

    Dissatisfied with FDA’s petition response, Teva sued the Agency on March 4, 2008 in the U.S. District Court for the District of Columbia requesting injunctive relief.  Specifically, Teva’s complaint requests that the court enter an injunction compelling FDA to relist the ‘952 patent and restore the company’s paragraph IV patent certification, and declare that Teva is entitled to 180-day exclusivity.  Teva also requests that the court enjoin FDA from granting final approval to other ANDAs for generic RISPERDAL during Teva’s 180-day exclusivity period.  (Both Mylan and Pliva have tentatively approved ANDAs.)  Teva’s memorandum accompanying the company’s motion for expedited preliminary injunctive relief makes similar requests and argues that “FDA’s refusal to relist the ‘952 patent and honor Teva’s right to 180-day exclusivity as the first Paragraph IV filer fundamentally undermines the Hatch-Waxman regime and flatly contradicts the [Ranbaxy decision].”

    By Kurt R. Karst    

    Categories: Drug Development

    Seventh Circuit Decision in Caputo Finding a Device Company CEO & CCO Criminally Liable for Off-Label Marketing Could Significantly Affect Civil and Criminal Defense Strategies

    On February 27, 2008, the U.S. Court of Appeals for the Seventh Circuit issued a decision in United States v. Caputo, in which the court generally affirmed a “complex and unusual” district court decision holding criminally liable a corporate Chief Executive Officer (“CEO”) and, remarkably, a Chief Compliance Officer (“CCO”) for the illegal marketing of a medical device.  As discussed further below, the Seventh Circuit’s ruling could significantly affect civil and criminal defense strategies, particularly with respect to the use of expert testimony.

    The defendants, Ross Caputo (CEO) and Robert Riley (CCO) of the medical device company AbTox, advanced a First Amendment (freedom of speech) argument at the appellate level, alleging that the Federal Food, Drug, and Cosmetic Act (“FDC Act”) violated the U.S. Constitution by restricting promotional materials to those uses that FDA has approved.  The court stated that whether the First Amendment applies to promotional activity by a product’s manufacturer “which struck a bargain with the FDA in the approval process by promising to limit its promotion . . . is a difficult question.  The doctrine of unconstitutional conditions places limits on the promises that an agency may extract from those who seek approval.”  Ultimately, the Seventh Circuit decided not to consider whether a seller of medical devices has a constitutional right to promote off-label uses because in this case the medical device at issue was not lawfully on the market for any use.

    Following an 8-week jury trial, the defendants were convicted of 19 criminal counts, including conspiracy, fraud, mail fraud, wire fraud, and the introduction of an “altered” or misbranded device into interstate commerce. Applying the sentencing objectives set forth at 18 U.S.C. § 3553(a), the district court sentenced the CEO to 10 years imprisonment and 3 years of supervised release and the CCO to 6 years imprisonment and 3 years of supervised release.  In addition, the district court found the defendants jointly and severally liable for $17,209,074 in restitution to the hospitals, which, in the court’s opinion, were left with a worthless medical device not cleared by FDA. 

    The Seventh Circuit affirmed the district court’s decision in all respects except as to the amount of restitution owed the hospitals, setting forth guidelines for the district court to apply in recalculating the appropriate amount upon remand.

    Key to the appellate and district court’s analysis is that the “case involved a scheme which went beyond economic harm to the marketplace and involved direct physical harm to consumers.”  The district court found that at least 25 patients at 5 different hospitals suffered corneal decompensation in one eye after ocular surgery performed with instruments sterilized with the defendants’ product.  The district court further found that defendants had knowledge that brass instruments sterilized in defendants’ product would produce a potentially harmful blue-green residue, identified as copper acetate and zinc acetate.  Despite this knowledge, and in light of reports of patient harm, defendants allegedly did not conduct an investigation, open a complaint file with FDA, or file a medical device report.

    The product in this case is the plazlyte sterilizer manufactured and marketed by AbTox; this sterilizer uses a peracetic acid mixture as its principal sterilant.  AbTox filed a 510(k) premarket notification with FDA to support the claim that its plazlyte sterilizer was substantially equivalent to ethylene oxide sterilizers currently on the market.  In its application, AbTox sought FDA clearance for a smaller sterilizer than the model the company ultimately marketed.  The company also allegedly withheld adverse test results from FDA during the premarket notification process. Based on the information submitted in the 510(k), FDA cleared the small sterilizer limited to be used for the sterilization of only flat, stainless instruments without lumens or hinges.  Upon FDA clearance, the district court found that AbTox induced its customers to purchase the large sterilizer by distributing “printed promotional material boldly proclaiming the ability of the AbTox sterilizer to process instruments with hinges and lumens, and to serve as a complete replacement for ethylene oxide.  Indeed . . .  the defendants jettisoned the manual [cleared by FDA] and substituted expansive language tending to obscure the narrow scope of the clearance.” 

    AbTox then submitted a new 510(k) premarket notification to FDA requesting clearance for the expanded claims (lumens, different wraps) and a shorter time cycle and again failed to inform FDA of adverse test results.  The FDA reviewer reportedly found the premarket notification wholly deficient and sent AbTox a letter requesting additional information, and that also directed the defendants not to put the device into commercial distribution.  Shortly thereafter, the FDA sent AbTox a Warning Letter directing the company to desist from off-label promotion of the company’s already cleared sterilzer.  The company agreed to do so, discontinued some of its promotional materials, revised its operator’s manual back to the original language cleared by FDA, but then went on selling the large sterilizers to hospitals under the guise that those devices had been cleared by FDA.

    The district court found thus that “defendants . . . effectively carried out a bait-and-switch scheme on the FDA and its customers, obtaining clearance on one sterilizer but using the clearance to sell another . . . in defiance of law and FDA directives through a pattern of falsehoods and deception, until the company shut down sales operations . . . under pressure from the FDA.”  Of special note is the district court’s treatment and findings regarding the company’s CCO: 

    Corporate compliance officers are very much today’s corporate ‘fire personnel.’  They are often the company’s ‘first responders’ and must focus on both proactive and reactive efforts to be effective.  Proactive efforts need to emphasize the complementary goals of crime prevention and corporate ethical behavior.  Reactive efforts measure how well a corporation reacts when it learns that questionable and potentially illegal corporate conduct has occurred.

    The Seventh Circuit’s opinion includes a number of discussions that will be somewhat controversial.  Perhaps most noteworthy is the court’s treatment of expert testimony.  The court found that the district court did not abuse its discretion in keeping out of evidence proposed expert testimony the defendants wanted to introduce “about the meaning of the [FDC Act] and [FDA’s implementing] regulations.”  Without citing any FDA-related judicial precedent, the court found that this topic is “a subject for the court, not for testimonial experts . . . .  The only legal expert in a federal courtroom is the judge.”  If adopted by other courts, this ruling could have a significant effect on the way that companies defend themselves in civil cases, as well as criminal cases.

    The Seventh Circuit’s opinion also has an interesting discussion about the extent to which a manufacturer may modify a device that FDA has cleared under the 510(k) procedures. The court rejected the defendants’ argument that the Fifth Amendment precluded FDA from keeping the product at issue off the market.  The court ruled that FDA had provided the defendants with numerous warnings that the defendants’ sale of the product at issue was illegal, thus precluding them from putting forth a successful Due Process challenge.  The Court ruled that “[w]hen Caputo and Riley chose to go their own way, the question on the table for the court became simply who is right about the meaning of the legal rules, not whether adequate notice was given.”

    It will be interesting to see if other like decisions follow, and how FDA might use this decision to its advantage.

    ADDITIONAL INFORMATION:

    • An MP3 file of the oral argument before the Seventh Circuit is available here.

    • A copy of the Washington Legal Foundation’s brief in the case is available here.

    • An article, titled “Corporate Compliance Officer – Gatekeeper or Jailbird,” by Hyman, Phelps & McNamara, P.C.’s, John R. Fleder discussing the district court’s decision in Caputo is available here.

    FDA Law Blog Turns One! What a Year It Has Been! Thank You!

    One year ago today, Hyman, Phelps & McNamara, P.C., started FDA Law Blog with this post and a promise to provide you with timely updates on FDA enforcement actions, proposed rules, personnel changes, new and improved policies, along with related issues such as healthcare fraud and abuse, drug and device reimbursement, and other topics of interest.  Since then, we have made over 200 posts covering hundreds of pages of text and analysis that you are unlikely to find anywhere else (at least not for free!).  The response to FDA Law Blog has been tremendous (as our soaring subscription rates show us).  Over the past year, we have been cited in numerous trade press publications, including (just to name a few) The Pink Sheet, FDA Week, Dickinson’s FDA Review, and FDA News. The pharma blogosphere has also come to rely on FDA Law Blog’s timely information and analysis.  We have been cited (again, just to name a few) by The Wall Street Journal Health Blog, Pharmalot, On Pharma (which called our blog “required reading”), Patent Baristas, Drug and Device Law Blog, and our blogfather, Orange Book Blog, which is run by attorney Aaron Barkoff. 

    Of course, none of FDA Law Blog’s success would have been possible without the tremendous support from our Hyman, Phelps & McNamara, P.C. colleagues, who often draft blog posts, and from our avid readers from around the world.  Jeff Wasserstein and I (Kurt Karst), as co-authors of the blog, thank all of you for making FDA Law Blog a success. As we at Hyman, Phelps & McNamara, P.C., know all too well, drafting blog posts is a time-consuming and often difficult task.  There is always a lot going on in our world, and it is a complicated field of law.  We strive to provide you with posts that are long enough to cover the topic, but short enough to be interesting. 

    We appreciate the constant feedback we receive from FDA Law Blog readers.  While we do not always post comments, we do read all of them.  Thank you – and keep the comments coming (especially the positive ones)!  We look forward to another year, which appears to hold the possibility of tremendous change for our niche area of the law. 

    Categories: Uncategorized

    CRS Issues Report on “Fast Track” in Response to Congressional Inquiry

    Earlier this year, we reported on Senator Sherrod Brown’s (D-OH) request to the Congressional Research Service (“CRS”) for information concerning FDA’s “Fast Track” designation program “to help determine whether a case exists for changing or eliminating the 10-year-old initiative that was intended to speed the availability of drugs for serious diseases.”  The request was made after The Plain Dealer reported in December 2007 that “[Fast Track] designation has amounted to a government blessing, which has served as a marketing tool for drug companies and a boon for investors looking to make quick money on the stock market.”  Fast Track was created in 1997 by the FDA Modernization Act (FDC Act § 506) to help facilitate the development and expedite the review of drugs and biologics for serious or life-threatening conditions that demonstrate a potential to address unmet medical needs. 

    In February, CRS, which provides policy and legal analysis to committees and to Members of both the U.S. House of Representatives and the U.S. Senate, issued a 6-page report, which concludes that there is insufficient information available from FDA to determine whether Fast Track Product designation is more likely to lead to product approval than those products without such designation.  “Are products that receive Fast Track designation more likely to have their NDA/BLA approved by FDA than products that receive no such designation?” asks CRS in its report.  “The answer is we don’t know, because, while FDA provides statistics on the products it designates as Fast Track, it does not make public information on the NDA/BLAs it receives unless and until the product is approved/licensed.”

    In a follow-up article, The Plain Dealer reported that Sen. Brown is unhappy with the CRS report.  “My concern is that neither the market nor the government has enough information to make intelligent decisions,” said Sen. Brown.  The Plain Dealer also reported that Sen. Brown’s staff is planning to meet soon with Sen. Edward Kennedy’s (D-MA) staff to discuss Fast Track designation.  It is unclear whether the Senators will propose legislation to change or eliminate FDC Act § 506.

    By Kurt R. Karst    

    Categories: Drug Development

    Supreme Court Deals a Blow to Pro-Preemption Advocates in Warner-Lambert Case, But Wyeth v. Levine Might Be the Real Test

    Earlier today, the U.S. Supreme Court announced a 4-4 split in Warner-Lambert v. Kent – just a few days after hearing oral arguments on February 25, 2008.  The case, which concerns the narrow issue of a Michigan law immunizing drug companies from products liability claims except in cases of “fraud-on-the-FDA” is a blow to pro-preemption advocates, as it leaves the U.S. Court of Appeals for the Second Circuit’s October 2006 ruling intact.

    In 1995, Michigan enacted legislation immunizing pharmaceutical companies from products liability claims, provided FDA approved the drug product at issue.  The law contains an exception, however, that preserves liability if the drug company withheld or misrepresented information that would have altered FDA’s decision to approve the drug product (i.e., “fraud-on-the-FDA”).  Specifically, the Michigan law states, in relevant part:

    In a product liability action against a manufacturer or seller, a product that is a drug is not defective or unreasonably dangerous, and the manufacturer or seller is not liable, if the drug was approved for safety and efficacy by the [FDA], and the drug and its labeling were in compliance with [FDA’s] approval at the time the drug left the control of the manufacturer or seller.

    This subsection does not apply if the defendant at any time before the event that allegedly caused the injury does any of the following:

    (a) Intentionally withholds from or misrepresents to the [FDA] information concerning the drug that is required to be submitted under the [FDC Act] and the drug would not have been approved, or the [FDA] would have withdrawn approval for the drug if the information were accurately submitted.

    In March 2000, Warner-Lambert (a wholly-owned subsidiary of Pfizer), which marketed REZULIN (troglitazone), voluntarily withdrew the drug product from the market amid certain safety concerns.  Several Michigan consumers alleging injuries caused by REZULIN subsequently sued Warner-Lambert in state court alleging, among other things, that Warner-Lambert “knowingly concealed material facts about the safety and efficacy of Rezulin from the FDA, which would have prevented its approval and/or resulted in its earlier removal from the market.”  The case was removed to federal district court, where the court granted Warner-Lambert’s motion for judgment on the pleadings on the grounds that the Plaintiffs could not establish under Michigan law that REZULIN was “defective,” and that that an immunity exception in the Michigan law was preempted by the FDC Act under the reasoning of the Supreme Court’s 2001 decision in Buckman Co. v. Plaintiffs’ Legal Comm.  In Buckman, the Court ruled that federal law impliedly preempted state “fraud-on-the-FDA” claims. 

    The case was appealed to the U.S. Court of Appeals for the Second Circuit to determine whether, under the rationale of Buckman, federal law also preempts traditional common law claims that survive a state’s legislative narrowing of common law liability through a fraud exception to that statutory limitation.  In vacating the district court’s ruling, the Second Circuit ruled that:

    because Michigan law does not in fact implicate the concerns that animated the Supreme Court’s decision in Buckman, and because Appellants’ lawsuits depend primarily on traditional and preexisting tort sources, not at all on a “fraud-on-the-FDA” cause of action created by state law, and only incidentally on evidence of such fraud, we conclude that the Michigan immunity exception is not prohibited through preemption.  It follows that common law liability is not foreclosed by federal law, and Appellants’ claims should not have been dismissed.

    Warner-Lambert challenged the Second Circuit’s decision and presented two issues for the Supreme Court’s review:

    1. Whether, under the conflict preemption principles in [Buckman], federal law preempts state law to the extent that it requires the fact-finder to determine whether the defendant committed fraud on a federal agency that impacted the agency’s product approval, where the agency—which is authorized by Congress to investigate and determine fraud—has not found any such fraud, and thus—as in Buckman—the state requirement would interfere with the agency’s critical functions.

    2. Whether, under the conflict preemption principles in Buckman, federal law preempts the provision in a Michigan statute that allows a product liability claim to be maintained against a manufacturer of an FDA-approved drug where, without an FDA finding of fraud on that agency, the fact-finder is required to make a finding under state law as to whether the manufacturer committed fraud-on-the-FDA and whether, in the absence of that fraud, the FDA would not have approved the drug.

    Warner-Lambert argued, among other things, that “the Second Circuit’s holding will interfere with the FDA’s ability to perform its critical functions, which is precisely what this Court sought to avoid in Buckman.” 

    The Supreme Court’s March 3, 2008 4-4 split in Warner-Lambert is the result of Chief Justice Roberts’s decision to recuse himself from the case because of stock ownership.  Although the Warner-Lambert case is important, the most significant preemption case for the drug industry might be Wyeth v. Levine, which concerns whether federal law preempts state torts claims imposing liability with respect to FDA-approved drug labeling.  A decision in that case is anticipated later this year or in early 2009, although oral argument has not yet been scheduled.

    By Kurt R. Karst   

    ADDITIONAL INFORMATION:

    • March 7, 2008 Washington Legal Foundation Legal Backgrounder on the what the Supreme Court’s Riegel decision portends for drug and device suit preemption.

    Categories: Drug Development

    Former FDA Commissioner Chimes in on Preemption Debate

    Preemption of state law concerning FDA-regulated products (drugs, devices, and foods) has been the hot topic over the past few weeks.  First, on February 20, 2008, the U.S. Supreme Court ruled in Riegel v. Medtronic that preemption principles and the 1976 Medical Device Amendments bar common law claims on the basis of safety or effectiveness of devices approved by FDA under a Premarket Approval Application (see 2/22/08 FDA Law Blog post).  Then, on February 25, 2008, the U.S. Supreme Court heard oral arguments in Warner-Lambert v. Kent, which concerns Warner-Lambert’s REZULIN (troglitazone), certain people alleging injuries caused by the drug product, and a Michigan law immunizing pharmaceutical companies from products liability claims except in cases of “fraud-on-the-FDA.”  Also, as we recently reported, the Supreme Court of California ruled in February 2008 in a case concerning farm-raised salmon that preventing a company from bringing a private action for violating a California law when the FDC Act authorizes such a state law would constitute an intrusion into state sovereignty.

    Now, as reported by our fellow blogger Ed Silverman over at Pharmalot, former FDA Commissioner Dr. David Kessler and Georgetown University Law Professor (and former Public Citizen attorney) David Vladeck published an essay in the Georgetown Law Journal highlighting two of what they call the “most problematic aspects of the FDA’s pro-preemption policy – one legal, the other practical – that do not stand out in more comprehensive treatments of the issue.”  The authors summarize their concerns as follows:

    The first point we make is that the FDA’s pro-preemption arguments are based on a reading of the FDCA that, in our view, understates the ability of drug manufacturers to change labeling unilaterally to respond to newly discovered risks, or to seek labeling changes from the FDA. In fact, drug manufacturers have significant authority – and indeed, a responsibility – to modify labeling when hazards emerge and may do so without securing the FDA’s prior approval.

    Our second concern is that the FDA’s pro-preemption arguments are based on what we see as an unrealistic assessment of the agency’s practical ability – once it has approved the marketing of a drug – to detect unforeseen adverse effects of the drug and to take prompt and effective remedial action.

    The authors take exception to FDA’s current pro-preemption policy.  They have a different perspective than FDA about the relevant Agency decision that should be subject to review in failure-to-warn cases arising under state law: 

    The FDA focuses on the approval process, suggesting that the FDA’s approval of a drug’s labeling reflects the agency’s definitive judgment regarding risks that must be shielded from the possible second-guessing that might take place in a failure-to-warn case. . . .  But in our view, the FDA is wrong to focus on the moment of approval as determinative of the preemption question. The relevant timeframe is postapproval, and the question, in our opinion, is what did the FDA and the drug company know about a drug’s risks at the time the patient-plaintiff sustained the injury.

    The authors also argue that a “Rule of Construction” included in the recently-enacted FDA Amendments Act (“FDAAA”) undercuts FDA’s pro-preemption position.  In this provision, which was added to FDC Act § 505(o) by FDAAA § 901(a), Congress amended the law to state that the Agency’s labeling authority over drugs and biologics “shall not be construed to affect the responsibility of the [manufacturer] to maintain its label in accordance with existing requirements, including [21 C.F.R. § 314.70 and § 601.12] (or any successor regulations).”  This provision was reportedly included in FDAAA instead of an express preemption provision.  According to the essay’s authors, “[t]he codification of this obligation undercuts the key pro-preemption argument the FDA and manufacturers make – namely, that the FDA alone decides the content of drug labels.”  In January 2008, we reported on FDA’s proposal to codify its “longstanding position” on postapproval labeling changes that could significantly affect preemption defenses.  Two of the regulations cited in the proposal are 21 C.F.R. § 314.70 and § 601.12.

    By Kurt R. Karst    

    HPM Continues Coverage of the U.S. Sentencing Commission’s Proposed Sentencing Guideline Revisions

    Over the past several weeks, FDA Law Blog has closely followed issues concerning the United States Sentencing Commission’s proposed changes to the Sentencing Guidelines that are applicable to certain FDA criminal offenses. In our most recent post, we reported on a February 13, 2008 public briefing session during which representative from FDA and Hyman, Phelps & McNamara, P.C. (“HPM”) testified before the Commission on the proposal. 

    In the March 2008 issue of Thompson Publishing Group’s FDA Enforcement Manual, HPM’s Douglas B. Farquhar provides additional information and analysis on the proposal.  In the article, titled “Heightened Chance of Prison Time for Executives?,” Mr. Farquhar discusses how the Commission’s proposal “would dramatically increase the chances that an individual being sentenced for an FDA violation would be sentenced to prison time.” According to Mr. Farquhar, FDA’s suggestion at the February 13, 2008 public briefing session that all adulterated and misbranded drugs and medical devices are worthless “would dramatically increase prison sentences imposed on individuals convicted of felony violations of federal law on the manufacture of drugs and devices.”

    We will continue to update you on this important and interesting issue as we learn additional information.

    Categories: Enforcement

    FDA Getting Tough on Food Claims; Agency Enters Into Consent Decree of Permanent Injunction With Two Food Companies Over Unauthorized Drug Claims

    Last week, FDA announced a consent decree of permanent injunction had been entered into with two food companies – Brownwood Acres Foods, Inc. and Cherry Capital Services, Inc. (doing business as Flavonoid Services) – and their top executives, prohibiting them from making unauthorized drug and health claims about their products.  The Consent Decree of Permanent Injunction, which was signed by Judge Paul Maloney on February 19th in the U.S. District Court for the Western District of Michigan, might signal FDA’s intent to police food claims more vigorously.  (A copy of the Complaint for Permanent Injunction is available here.)  Violations of the consent decree, which can be enforced by the court, may result in an order to stop manufacturing and distributing any product and a $1,000 per violation/per day penalty.

    Although the companies make a variety of food and dietary supplement products, including juice concentrates, soft fruit gel capsules, fruit bars, dried fruits, liquid glucosamine, and salmon oil capsules, the complaint and injunction focus primarily on the companies’ claims made for fruits.  In the consent decree of permanent injunction, FDA alleges that the companies made unauthorized drug and health claims in violation of the Federal Food, Drug and Cosmetic Act (“FDC Act”), such as “wild blueberry compounds may inhibit cancer,” “[p]urple grape juice seems to have the same effect as red wine in reducing the risk of heart disease,” “[a] new study . . . found that drinking pomegranate juice can fight prostate cancer,” and “tart cherries . . . may help gout, arthritis, and inflammation sufferers.”  The companies have previously faced enforcement for their claims about similar products.  For example, in 2005, FDA sent Brownwood Acres a Warning Letter claiming that the company made unauthorized drug claims about the company’s cherry juice concentrate, blueberry juice concentrate, pomegranate concentrate, and cherry flex soft gel capsule products. 

    The consent decree of permanent injunction, signed by both companies and their executives, was entered into in response to the companies’ continuing to make unauthorized drug and health claims, such as “Chemicals found in Cherries may help fight diabetes.”  The companies are permanently prohibited from delivering any product into interstate commerce unless and until FDA approves a drug marketing application (i.e., an NDA or ANDA), or there is an effective IND, or the product’s claims comport with an authorized health claim, or FDA issues a letter of enforcement discretion for a qualified health claim for a particular product, or until the companies remove all unauthorized drug and health claims from their websites, labels, labeling, and promotional material.  The companies have also agreed to hire an independent expert to review all claims and certify that they have removed the claims objected to by FDA. 

    FDA’s Associate Commissioner for Regulatory Affairs, Margaret O’K. Glavin, states in the Agency’s announcement that the “FDA will not tolerate unsubstantiated health claims that may mislead consumers.  The FDA will pursue necessary legal action to make sure companies and their executives manufacture and distribute safe, truthfully labeled products to consumers.”  It remains to be seen whether this will be an isolated instance of FDA enforcing the FDC Act against food companies or whether this begins an increased effort by FDA to monitor the claims being made for foods.   

    Categories: Enforcement |  Foods

    And Now for Something Completely Different: OIG Issues Noteworthy Advisory Opinions Regarding Free Trial Program and Disease State Questionnaire Kiosks

    Advisory Opinion No. 08-04 (Free Trial Program)

    Last week, the Office of Inspector General (“OIG”) of the Department of Health and Human Services posted an advisory opinion addressing a free drug trial program for hemophilia A patients (“Proposed Arrangement”).  This was the first opinion outside of the patient assistance program context in which the OIG has evaluated the status of a free drug program under the federal healthcare program antikickback statute.  As discussed below, the OIG concluded that, while the Proposed Arrangement could potentially generate prohibited remuneration under the antikickback statute, the OIG would not impose administrative sanctions on the requestor in connection with the Proposed Arrangement.

    The opinion was requested by a manufacturer of a recombinant antihemophilic factor VIII product indicated for the control and prevention of hemorrhagic episodes and for surgical and short-term routine prophylaxis in patients with hemophilia A.  The product is reimbursed under Medicare Part B using the Average Sales Price (“ASP”) methodology.  According to the OIG, generally there are no barriers to switching between recombinant antihemophilic factor VIII products or from recombinant to plasma-derived products.

    Under the Proposed Arrangement, patients would be given one complimentary trial supply of the medication, which would last from 1 to 10 weeks, depending on the patient’s weight, severity of illness, level of activity, and other factors.  A limited number of enrollment forms would be provided to hemophilia treatment centers and hemophilia/oncology practices.  Each patient would only be permitted to enroll in the program one time, and no patient currently on the requestor’s product would be eligible to participate in the program.  The prescribing physician would identify patients who would benefit from the product, fill out enrollment forms for such patients, and write prescriptions for the product for those patients.  The patient would then send the completed forms and the prescription to the administrator of the program (which is also a licensed pharmacy), which would fill the prescription and send the product directly to the patient.  The physicians would never take possession of the product and would not be compensated directly or indirectly for their participation in the program.  No third party payors (including federal healthcare programs such as Medicare) would be billed for product dispensed under the program.  According to the opinion, the requestor certified that the program would comply with the Prescription Drug Marketing Act of 1987 (“PDMA”).    

    The OIG’s analysis discussed then discounted two potential antikickback concerns.  First, the opinion concluded that the Proposed Arrangement did not provide any direct or indirect monetary or economic remuneration to the physicians.  This is because the product would be dispensed directly to the patient, which would preclude unscrupulous physicians from reselling or billing for a sample, and, in addition, that the physicians would be required to sign a statement acknowledging that the product is complimentary and cannot be resold or billed to any third party payors.

    Second, the opinion concluded that the risk of a one-time trial supply of the product inducing patients to self-refer to the product was low.  This was based on four considerations: 

    (1) the Proposed Arrangement involved no cost to federal healthcare programs;

    (2) the risk of steering patients to the product by starting them on the product was low because patients who choose to continue to use the product would still be responsible for significant cost-sharing amounts after the one-time free trial was completed, and there would be no clinical barriers to switching to another product after using the free product;

    (3) the Proposed Arrangement was unlikely to result in overutilization of the product; and

    (4) the Proposed Arrangement included additional safeguards, such as compliance with the PDMA, distribution of the product directly to patients, distribution of a limited number of enrollment forms each year to each physician, and the fact that physicians and the program administrator would be required to sign statements acknowledging that the product is complimentary and that it may not be resold or billed to any third party payors.

    Although this opinion provides some comfort to drug manufacturers who conduct free trial voucher or sampling programs, the OIG was careful to distinguish the Proposed Arrangement from “problematic” programs that offer free goods to “seed” the marketplace, and also to caution that “we might have reached a different conclusion on different facts or with a non-PDMA compliant sampling program.” 

    Advisory Opinion No. 08-05 (Disease State Questionnaire Kiosks)

    In addition to the Free Trial Program Advisory Opinion, late last week the OIG issued an advisory opinion regarding electronic kiosks located in physician offices that offer patients free disease state screening questionnaires (“Proposed Arrangement”). A determination on the Proposed Arrangement was requested by a manufacturer of pharmaceuticals for a number of diseases and conditions, including four “Disease States.”

     

    Under the Proposed Arrangement, electronic kiosks that offer interactive questionnaires about the four Disease States would be placed in the waiting rooms of certain physicians.  The questionnaires would consist of several questions on each of the four Disease States that the patients would be able to answer using a keyboard.  Once the patient completed the questionnaire, the patient could generate a printout that would contain the screening questions and the patient’s responses, and choose to share the printout with his or her physician.  Neither the interactive questionnaires nor the kiosk itself would mention any drug names. Participating physicians would neither pay nor receive payment from the manufacturer for hosting the kiosks.

    The OIG analysis discusses two possible kickback scenarios: (1) a potential kickback from the manufacturer to the patient to induce them to self-refer to the manufacturer’s drugs; and (2) a potential kickback from the manufacturer to the participating physicians to induce them to prescribe the manufacturer’s drugs.  The opinion first concludes that the questionnaires would not offer patients incentives for using the kiosks, such as coupons or offers of free items.  Accordingly, the Proposed Arrangement would not provide anything of value and therefore would not implicate the anti-kickback statute.  Second, the opinion concludes that the Proposed Arrangement would not generate prohibited remuneration under the anti-kickback statute for the participating physicians.  The participating physicians would not receive payment for the space rental or utilities fees or other compensation in connection with the Proposed Arrangement.  In addition, the opinion concludes that the kiosks would not enhance the attractiveness of the participating physicians’ offices to prospective patients such that they would likely select a participating physician based on whether they offered the kiosks.  The opinion notes that the kiosks “amount to little more than high-tech interactive brochures.” 

    By Michelle L. Butler & Noelle C. Sitthikul

    Categories: Uncategorized

    Farm-Raised Salmon Cases: Private Action for Violation of California State Law is Not Preempted by the FDC Act

    In March 2004, California consumers filed a class action lawsuit against several grocery stores alleging that the stores violated California state law by failing to disclose the presence of the color additives astaxanthin and canthaxanthin in farmed salmon.  The plaintiffs alleged that the lack of the required disclosure of these color additives caused consumers to believe that the salmon was wild salmon.  (Without the color additives, the flesh of farm-raised salmon typically appears grayish.) 

    In the trial court, defendants successfully argued that plaintiffs’ action was preempted by Section 310 of the Federal Food, Drug, and Cosmetic Act (“FDC Act”) (21. U.S.C. § 337(a)), which states that “proceedings for the enforcement, or to restrain violations, of the [FDC Act] shall be in the name of the United States,” thus excluding private enforcement.  According to the trial court, although the action was for a violation of state law, allowing plaintiffs to proceed would conflict with the congressional intent to preclude private enforcement of the FDC Act.  The Court of Appeal affirmed the trial court’s decision.  On February 11, 2008, however, the Supreme Court of California reversed the Court of Appeal’s decision and remanded the matter to that court for further proceedings. 

    Plaintiffs’ action for deceptive marketing of salmon was predicated on a California Health & Safety Code §§ 110765, 110740.  This state law is effectively the same as the FDC Act provision at 21 U.S.C. § 343(a) and (k), which prohibit the misbranding of any food.  Moreover, the FDC Act, at 21 U.S.C. § 343-1(a)(3), expressly authorizes states to establish their own requirements for disclosing use of color additives provided these requirements are “identical,” i.e., effectively the same, as the FDC Act requirement. 

    The California Supreme Court concluded that preventing plaintiffs to bring a private action for violating a state law when the FDC Act authorizes such a state law would constitute an intrusion into state sovereignty.  It ruled that nothing in the text or history of 21 U.S.C. § 343-1 indicates that Congress intended to limit a state in providing legal remedies for the violation of state laws authorized by such section.  Moreover, the Court concluded that the prohibition at 21 U.S.C. § 337(a) of private actions applies only to actions for a violation of the FDC Act.  The Court acknowledged that allowing the present action under a state law identical to the FDC Act might result in actions that FDA would not have taken.  Nevertheless, the Court noted that Congress clearly had considered such potential conflict and concluded that such a potential inconsistency was insufficient reason to preempt a private action for violation of state law. 

    By Riëtte van Laack

    Categories: Foods

    Supreme Court Hands Device Makers Big Victory

    In an 8-to-1 decision, the U.S. Supreme Court held earlier this week that preemption principles and the 1976 Medical Device Amendments (“MDA”) bar common law claims on the basis of safety or effectiveness of devices approved by FDA under a Premarket Approval Application (“PMA”).  The case, Riegel v. Medtronic, is a decisive victory for device manufacturers.  In the Supreme Court’s 1996 decision in Medtronic, Inc. v. Lohr, the Court ruled that certain state tort claims involving medical devices cleared under the premarket notification (i.e., 510(k)) process are not preempted.  The Riegel case provides a definitive decision preempting state tort law claims for PMA-approved devices. 

    The plaintiffs in the case, Charles and Donna Riegel, brought suit in the U.S. District Court for the Northern District of New York after Charles Riegel was injured in heart surgery.  During the surgery, his doctor inserted a Medtronic Evergreen Balloon Catheter into his coronary artery but inflated it beyond its rated burst pressure.  The catheter burst, causing Mr. Riegel to develop a blocked heart and require coronary bypass surgery.  The Riegels alleged that the catheter was designed, labeled, and manufactured in a manner that violated New York common law, and that these defects caused Mr. Riegel’s injury and suffering. 

    Both the district court and the U.S. Court of Appeals for the Second Circuit ruled in favor of Medtronic.  The Second Circuit, which joined a number of circuits that have addressed this issue, reasoned in its 2006 opinion that because devices approved through the PMA process are subject to the standards set forth in their approved applications, such devices are subject to “a requirement applicable to the device under [the FDC Act],” and that the claims for strict liability, breach of warranty, and negligent design, testing, inspection, distribution, labeling, marketing, and sale would (if successful) impose state “requirements” that differed from, or added to, the PMA-approved standards for the device.

    The MDA provides federal oversight for devices and amended the FDC Act to add § 521 (21 U.S.C. §360k(a)), which states, in relevant part: 

    [N]o State or political subdivision of a State may establish or continue in effect with respect to a device intended for human use any requirement –

    (1) which is different from, or in addition to, any requirement applicable under this Act to the device, and

    (2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under this Act.

    In granting review in this case, the Supreme Court was asked to address the following question:

    Whether the express preemption provision of the Medical Device Amendments to the Food, Drug, and Cosmetic Act, 21 U.S.C. §360k(a), preempts state-law claims seeking damages for injuries caused by medical devices that received premarket approval from the Food and Drug Administration.

    Justice Scalia, writing for the majority, stated that the Court would adhere to a view that “requirements” under the MDA include common-law causes of action for negligence.  Justice Scalia explained that state tort law is a method of controlling conduct and “[s]tate tort law that requires a manufacturer’s catheters to be safer, but hence less effective, than the model the FDA has approved disrupts the federal scheme no less than state regulatory law to the same effect.”  However, Justice Scalia stated that FDC Act § 521 does not prevent damages based on claims that a device manufacturer violated FDA regulations, as these “parallel” cases “add to federal requirements.” 

    The opinion includes interesting dictum (on page 13) with respect to the effect that FDA’s current view supporting preemption is entitled only to little deference because of the different position FDA has previously taken.  Justice Scalia states in response to Justice Ginsburg’s dissent that:

    In the case before us, the FDA has supported the position taken by our opinion with regard to the meaning of the statute. We have found it unnecessary to rely upon that agency view because we think the statute itself speaks clearly to the point at issue. If, however, we had found the statute ambiguous and had accorded the agency’s current position deference, the dissent is correct . . . that – inasmuch as mere Skidmore deference would seemingly be at issue – the degree of deference might be reduced by the fact that the agency’s earlier position was different. . . .  But of course the agency’s earlier position . . . is even more compromised, indeed deprived of all claim to deference, by the fact that it is no longer the agency’s position.

    Justice Ginsburg, the lone voice of dissent, argued that “Congress. . .did not intend [FDC Act § 521] to effect a radical curtailment of state common-law suits seeking compensation for injuries caused by defectively designed or labeled medical devices.”  Justice Ginsberg admonished the majority’s decision as contrary to the “MDA’s central purpose: to protect consumer safety.”

    Sen. Edward Kennedy (D-MA), who sponsored the MDA, spoke out against the decision, stating “Congress never intended that FDA approval would give blanket immunity to manufacturers from liability for injuries caused by faulty devices.”  Rep. Henry Waxman (D-CA) also expressed disappointment with the decision, vowing that Congress will “pass legislation as quickly as possible to fix this nonsensical situation.”

    Additional information on this case, including briefs and analysis, is available from SCOTUSBlog. 

    Categories: Medical Devices

    Putting the Genie Back in the Bottle – Apotex Petitions FDA to Recognize Remaining 180-Day Exclusivity for Generic PLAVIX Launched At-Risk

    Last week, Apotex Inc. submitted an interesting Petition for Stay of Action to FDA requesting that the Agency recognize the company’s remaining 180-day exclusivity for its generic version of Sanofi-Synthelabo’s PLAVIX (clopidogrel bisulfate) by staying the effective date of final approval of other ANDAs (and in particular Dr. Reddy’s Laboratories, Inc.’s ANDA #76-273 approved on January 14, 2008) containing a paragraph IV patent certification with respect to U.S. patent #4,847,265 (“the ‘265 patent”).  The ‘265 patent is listed in the Orange Book with other patent and non-patent market exclusivities as covering PLAVIX.  Specifically, Apotex requests that FDA stay the effective date of final approval of competitor applications until the earlier of either: (1) 156 days after the August 31, 2006 permanent injunction issued by the U.S. District Court for the Southern District of New York barring Apotex from marketing clopidogrel bisulfate is lifted; or (2) the expiration of the ‘265 patent on November 17, 2011.  Apotex also requests that FDA, at a minimum, stay the effectiveness of final approvals of competitor ANDAs until the injunction is lifted, provided the U.S. Court of Appeals for the Federal Circuit finds the ‘265 patent invalid.  Any other decision, contends Apotex, “will result in the anomaly that Apotex, the first to file a paragraph IV certification challenging the validity or enforceability of the ‘265 patent . . . may be the last to market.” 

    Apotex submitted ANDA #76-274 to FDA in 2001, prior to the enactment of the Medicare Modernization Act (“MMA”).  The application contained a paragraph IV certification to the ‘265 patent that made Apotex eligible for 180-day exclusivity.  Such exclusivity (in a pre-MMA case like this) is triggered by either the first commercial marketing of the drug approved under ANDA #76-274, or a court of appeals decision that the ‘265 patent is invalid, not infringed, or unenforceable.  In March 2002, Sanofi sued Apotex for infringement of the ‘265 patent in the U.S. District Court for the Southern District of New York, thereby triggering a 30-month stay of approval of ANDA #76-274.  FDA approved ANDA #76-274 on January 20, 2006, after the 30-month stay expired in May 2005 without a relevant court decision.  Almost six months later, on August 8, 2006, Apotex began commercially marketing its generic clopidogrel bisulfate drug product at-risk of an adverse court decision, thereby triggering the company’s 180-day exclusivity.  Sanofi quickly sought a permanent injunction barring Apotex from further marketing the drug product, and on August 31, 2006, the district court granted the injunction pending the outcome of the case.  Meanwhile, Apotex’s 180-day exclusivity was ticking away, notwithstanding that marketing of the generic drug was enjoined 24 days after such exclusivity was triggered. 

    Apotex appealed the decision to the U.S. Court of Appeals for the Federal Circuit, where the case is pending.  Oral arguments in the case are scheduled for March 3, 2008.  If the Federal Circuit issues a mandate requiring the district court to lift the injunction, then Apotex could resume marketing the drug product approved under ANDA #76-274.  The timing of a decision by the Federal Circuit is unclear, as the issuance of the mandate could be delayed if Apotex is initially successful in the Federal Circuit, but Sanofi then timely requests a rehearing and/or a rehearing en banc. 

    The Federal Circuit’s decision will also affect generic clopidogrel bisulfate patent infringement litigation between Sanofi and generic applicants Teva Pharmaceuticals, Cobalt Pharmaceuticals, and Dr. Reddy’s.  In the Teva and Cobalt cases, which are also before the Federal Circuit and concern later-filed ANDAs with paragraph IV certifications to the ‘265 patent, decisions on the permanent injunctions have been stayed pending the outcome of Apotex’s appeal.  In the case involving Dr. Reddy’s, in which a permanent injunction was not entered, Sanofi and Dr. Reddy’s entered into an agreement permitting Dr. Reddy’s to, among other things, import clopidogrel bisulfate into the U.S. for sale if Apotex obtains a favorable result in the Federal Circuit. 

    During the pendency of the ‘265 patent litigation, Apotex’s 180-day exclusivity would have naturally expired on February 4, 2007.  Nevertheless, Apotex argues in the company’s Petition for Stay of Action that the language, intent, and policy goals of the Hatch-Waxman Act would be frustrated if FDA does not recognize the remaining 156 days of that exclusivity period (provided, of course, that Apotex is ultimately successful in the company’s pending patent infringement litigation).  “The wording of the [FDC Act] makes clear that later-filed applications cannot be approved until at least 180 days after the first filer has begun commercial marketing – it does not, however, require FDA woodenly to approve such applications on the 181st day after such marketing begins,” states the petition (emphasis in original).  Apotex contends that:

    Certainly, nothing in the language of the statute prohibits a first filer who risks coming to market prior to an operative court decision and who successfully overturns an improvidently granted injunction from enjoying the full benefit of the 180-days of exclusivity granted by Congress.  Rather, the “not earlier than” language [in FDC Act § 505(j)(5)(B)(iv) (2002)] gives FDA discretion to delay the effective date of approval of ANDAs submitted by subsequent filers to ensure that the first filer who has undertaken the risk of opening up the market for a particular drug product to generic competition can reap the full benefit of Congress’s 180-days of marketing exclusivity.

    Moreover, Apotex argues that FDA’s decision to recognize the remaining 156 days of generic exclusivity “would best effectuate Congress’s intent and policy animating the Hatch-Waxman Amendments in general and the exclusivity provision in particular” by encouraging generic companies to continue to challenge questionable Orange Book-listed patents and by preserving the meaningfulness of 180-day exclusivity. 

    Whether FDA will ultimately recognize any remaining 180-day exclusivity is uncertain.  Apotex requests that FDA respond to the petition no later than March 15, 2008.

    By Kurt R. Karst    

    Categories: Hatch-Waxman

    FDA Ignores Rep. Waxman and Issues Draft Guidance on Good Reprint Practices

    In December 2007, we reported on what was a then yet-to-be-released FDA draft guidance on Good Reprint Practices (“GRPs”) and Rep. Henry Waxman’s (D-CA) November 30, 2007 letter to FDA strongly urging the Agency to refrain from disseminating the draft guidance and requesting certain information related to the draft guidance.  On December 21, 2007, FDA responded to Rep. Waxman by providing some of the requested information and refusing to provide other information reflecting ongoing Agency deliberations.  Rep. Waxman penned another letter to FDA in January 2008 criticizing the Agency for not providing much of the requested information.  For now, it appears that FDA is moving forward with the draft guidance.  Last Friday, FDA announced the availability of the draft GRP guidance.  FDA will publish a notice in the Federal Register later this week formally announcing the availability of the GRP draft guidance.  Once finalized, the draft GRP guidance will effectively “replace” FDA’s regulations at 21 C.F.R. Part 99, which expired in September 2006 with the sunsetting of Section 401 of the 1997 FDA Modernization Act.  (We note that many companies did not utilize Part 99 in disseminating reprints, so there wasn’t much to replace.)

    As we reported in December, and contrary to the treatment of the subject in the mainstream media, the general principles articulated in the draft guidance are consistent with FDA’s prior approach and are not a radical departure from Agency practice, or, for the most part, current industry practice.  In fact, although Rep. Waxman is concerned that the guidance would “open the door to abusive marketing practices that will jeopardize safety,” the draft guidance provides more restrictive requirements on how the reprint must be disseminated and clarifies the types of documents that FDA considers acceptable for dissemination.  The guidance states that letters to the editors, abstracts, Phase 1 study reports, and reference publications that contain little or no substantive discussion of the relevant investigation or data are not consistent with GRPs.  (As we reported in December, there has been debate among practitioners as to whether these types of documents were appropriate to disseminate.)  In addition, some new requirements include: distributed scientific or medical information should be accompanied by a comprehensive bibliography of publications discussing adequate and well-controlled clinical studies, be distributed separately from information that is promotional in nature, and be in the form of an unabridged reprint, copy of an article, or reference publication that is free of highlighting, markings, and manufacturer summaries. 

                

    Although industry critics are concerned about potential abuse by manufacturers, industry proponents point to FDA’s own statement that the “public health can be served when health care professionals receive truthful and non-misleading scientific and medical information” as support for their position that reprints are beneficial.  In fact, while many companies’ marketing practices will be unaffected by the draft GRP guidance, more aggressive companies may find their marketing practices reigned in.  As Hyman, Phelps & McNamara, P.C.’s Jeffrey Wasserstein (and FDA Law Blog co-author) stated in the Saturday edition of The Wall Street Journal, “There’s tremendous variation in company practices . . . .  [The draft GRP guidelines will] probably restrict the more aggressive companies.”

    Considering the early start on the debate surrounding the draft GRP guidance, we anticipate escalating debate in the comings months.  As we noted in December 2007, there is a constitutional dimension to this issue, since the Washington Legal Foundation ("WLF") line of cases made clear that dissemination of reprints was constitutionally protected free speech.  It remains an open question as to whether industry or free speech advocates, such as WLF, will choose to challenge FDA’s guidance on First Amendment grounds, or whether industry will learn to live with this as a reasonable compromise. 

    Merck Resolves Claims of Fraudulent Price Reporting and Kickbacks Alleged in Coordinated Federal-State Investigation

    On February 7, 2008, the U.S. Department of Justice announced that Merck & Company, Inc. (“Merck”) agreed to pay more than $650 million to settle allegations that the company failed to pay proper rebates to Medicaid and paid illegal remuneration to health care providers to induce prescriptions for the company’s products.  The allegations arose out of lawsuits brought by a former Merck employee and a Louisiana physician under the Federal False Claims Act ("FCA") and state false claims laws.  The FCA allows for private individuals to file a qui tam or whistleblower suit on behalf of the government.  Many state false claims laws have similar whistleblower provisions.  As part of the settlement agreement, one of the whistleblowers will receive approximately $68 million.  The other whistleblower will receive $24 million of the Federal government’s settlement and an undisclosed share of the states’ proceeds.

    In the first lawsuit, with respect to which Merck agreed to pay $399 million plus interest, H. Dean Steinke, a former Merck district sales manager, alleged in civil actions filed in Pennsylvania and Nevada that Merck instituted programs throughout the country designed to induce physicians to prescribe the company’s products over those of competitors in violation of federal and state anti-kickback laws and “best price” requirements under the Medicaid Rebate Statute.  Merck’s alleged fraudulent and illegal practices included paying physicians for unnecessary preceptorships and tutorials for Meck sales representatives; paying physicians to participate in bogus “clinical experience” studies and focus groups; paying speaker fees; offering free gifts to physicians who attended promotional programs; and offering unrestricted grants for computer systems and other benefits to physicians who supported Merck products. 

    Merck also allegedly offered deep discounts to hospitals for ZOCOR and VIOXX but only if they met certain performance levels by using these drugs over competing products.  Merck excluded these discounts from its determination of Medicaid Rebate best price under a statutory exception for “nominal prices” – i.e, prices that are less than 10 percent of the company’s weighted average price to wholesalers and retailers – thereby avoiding substantial Medicaid Rebates.  However, the government contended that these pricing schemes did not qualify for the nominal price exclusion, presumably because they were linked to market share performance. 

    In a separate suit filed by Louisiana physician William St. John LaCorte, and with respect to which Merck agreed to pay $250 million plus interest, Merck was similarly alleged to have provided deep discounts on its PEPCID products to hospitals and other healthcare institutions in return for commitments to switch patients from competing products.  As with ZOCOR and VIOXX, Merck allegedly failed to include the PEPCID discounts in Medicaid Rebate best price, and the government considered the nominal price exception inapplicable. 

    As part of the resolution of the cases, Merck and the Office of Inspector General (“OIG”) of the Department of Health and Human Services entered into a Corporate Integrity Agreement for five years.  Among other things, the Corporate Integrity Agreement requires Merck and an Independent Review Organization to conduct annual reviews of the company’s Medicaid Rebate policies and procedures, and requires an IRO to conduct reviews of the company’s promotion and product services activities, such as promotional programs, speaker programs, consultancies, and grants. 

    By Noelle C. Sitthikul

    Categories: Enforcement

    Rep. Eshoo Proposes Draft Biogenerics Bill

    The debate over biogenerics legislation has intensified with the anticipated introduction of legislation to create a “generic biologics” approval pathway and that would grant innovators (i.e., reference product sponsors) and certain generic sponsors market exclusivity.  The draft legislation obtained by FDA Law Blog is titled the “Pathway for Biosimilars Act,” and will reportedly be introduced by Representative Anna Eshoo (D-CA) in the near future. 

    The draft Eshoo bill would amend PHS Act § 351 to add subsection (k) (“Licensure of Biological Products as Biosimilar”) to permit the submission of an application for licensure of a biogeneric that includes, among other things, information demonstrating that the biogeneric is biosimilar to a reference product based on analytical studies, animal studies, and a clinical study or studies (such as an immunogenicity assessment and pharmacokinetics or pharmacodynamics) sufficient to demonstrate the safety and efficacy of the biosimilar product.  Analytical and animal studies may be waived by the Department of Health and Human Services Secretary (“Secretary”) if such studies are determined to be unnecessary.  The Secretary may waive immunogenicity studies if there is a final guidance document “advising that it is feasible in the current state of scientific knowledge to make determinations on immunogenicity with respect to products in the product class to which the biological product belongs,” and that explains “the data that will be required to support such a determination.” 

    Importantly, the Secretary may not accept a biogeneric application until a proceeding has been initiated for the issuance of a guidance document for the product class in which the biogeneric falls, and the Secretary may not approve a biogeneric application until that proceeding is completed.  Product class-specific guidance documents must include criteria for determining biosimilarity, interchangeability, and immunogenicity (if available).  In addition, companies may not submit a biogeneric application until the later of the commencement of guidance document proceedings (product class-specific) or the date that is 4 years after initial licensing of the reference product (not including the date of a supplement approval or of a subsequent application for a new indication, route of administration, dosage form, or strength of the previously licensed reference product).  A person may petition the Secretary to commence guidance document proceedings for a reference product licensed more than 7 years prior to the date of enactment of the “Pathway for Biosimilars Act.”  The sponsor of the first biogeneric determined to be interchangeable may receive a 24-month period of market exclusivity from the later of either the first commercial marketing of its biogeneric, or, “with respect to a product marketed before the date the product is determined to be interchangeable, the date that the product is determined to be interchangeable.” 

    The quid pro quo for innovator companies is a period of 12-year exclusivity after initial licensure that may be increased to 14.5 years.  Specifically, if during the 8-year period following licensure of the reference product, the Secretary approves a supplement for a new indication that would be a “significant improvement” compared to marketed products, then a biogeneric application may not be made effective until 14 years after initial licensure of the reference product.  The 12-year or 14-year exclusivity periods may be extended by 6 months if “at any time following licensure of the reference product, the holder of the approved application for the reference product files a supplemental application to support use in pediatric age groups (including neonates) containing reports of new clinical investigations (other than bioavailability studies) essential to the approval of the application that were conducted or sponsored by the holder.” 

    In addition, reference product sponsors, as well as interested third parties (such as universities), that own a patent on the reference product may sue a biogeneric applicant for patent infringement.  Under certain circumstances, such litigation could delay the approval of the biogeneric product.  The draft bill also places certain limitations on the availability of declaratory judgment actions for biogeneric applicants, and amends the user fee law to require biogeneric applicants to pay the same user fees required to be paid by reference product sponsors. 

    In other biogenerics news, FDA Law Blog learned that the regulatory authorities north of the border in Canada recently released a draft guidance document outlining the regulatory review process that Health Canada will use for a biologic that is similar to an approved innovator biologic. In Canada these product are referred to as “Subsequent Entry Biologics.”

    By Kurt R. Karst