On September 10, 2007, the U.S. Department of Justice announced that French pharmaceutical company Sanofi-Aventis (“Aventis”), formerly Aventis Pharmaceuticals Inc., agreed to pay $190 million to settle allegations that the company caused false claims to be filed with Medicare and other federal health programs.  The settlement agreement was a result of the company’s alleged fraudulent pricing and marketing of ANZEMET (dolasetron mesylate), which is an antiemetic drug used primarily in conjunction with oncology and radiation treatment.  The government’s investigation commenced after the filing of a Federal False Claims Act (“FCA”) suit by Ven-A-Care of the Florida Keys Inc., a home-infusion company.  The FCA allows for private persons to file a qui tam or whistleblower suit on behalf of the government.  As part of the settlement, the Ven-A-Care whistleblowers will receive approximately $32 million.

The government alleged that Aventis engaged in a scheme to set and maintain fraudulent and inflated prices for ANZEMET knowing that federal health care programs established reimbursement rates based on those prices.  The government further alleged that Aventis used the difference between the inflated prices that the company reported and the actual prices for the drugs charged to its customers –commonly known as the “spread”– to market, promote and sell ANZEMET.  Because reimbursement from federal programs was based on the fraudulent, inflated prices, the government contended that Aventis caused false and fraudulent claims to be submitted to federal health care programs, thereby violating the FCA.

In exchange for the Department of Health and Human Services Office of Inspector General’s (“OIG”) agreement not to seek an exclusion of Aventis from federal health care programs, Aventis agreed to enter into a Corporate Integrity Agreement (“CIA”) for five years.  The Aventis CIA includes requirements to:

• Hire a compliance officer and appoint a compliance committee;
• Develop a written code of conduct and written policies and procedures regarding the operation of Aventis’ compliance program;
• Implement a comprehensive employee training and education program;
• Hire an independent review organization to review claims submitted to the federal health care programs;
• Establish a confidential disclosure program;
• Restrict employment of ineligible persons;
• Report accurate average sales prices and average manufacturer’s prices for its drugs covered by federal health care programs to 1) the Medicaid programs of those States that have entered into the Settlement Agreement with Aventis and 2) to a commercial drug price reporting service (such as First DataBank, Inc.) designated by any Settlement State pursuant to a related state settlement agreement; and
• Submit a variety of reports to OIG.

ADDITIONAL INFORMATION:

• General Information on CIAs
• Information on OIG Administrative Enforcement Actions

By Noelle C. Sitthikul

Last month we reported on a highly anticipated ruling in a case concerning whether a New York City health code regulation requiring restaurants to post calorie content values on menus and menu boards is preempted by the Nutrition Labeling and Education Act of 1990 (“NLEA”).  The NLEA, among other things, amended the FDC Act to provide that most foods sold in retail food stores are to be deemed “misbranded” unless they carry certain specified nutritional information on their labels, and also regulates the making of food claims.   

Yesterday, the U.S. District Court for the Southern District of New York ruled in favor of the New York State Restaurant Association (“NYSRA”) and permanently enjoined New York City from enforcing the regulation.  (Although NYSRA’s complaint also raised First Amendment concerns, the court did not address this issue, because the court found the regulation to be preempted by federal law.)

In his 21-page opinion granting summary judgment, Judge Richard J. Holwell reasoned that the voluntary disclosure of calorie content information by restaurants that triggers the New York City regulation may be a “claim” under FDC Act § 403(r). As such, the court then considered whether the regulation was preempted by FDC Act § 403A(a)(5), which states:

[N]o State or political subdivision of a State may directly or indirectly establish under any authority or continue in effect as to any food in interstate commerce . . . any requirement respecting any claim of the type described in [FDC Act § 403(r)(1)] made in the label or labeling of food that is not identical to the requirement of [FDC Act § 403(r)(1)], except a requirement respecting a claim made in the label or labeling of food which is exempt under section [FDC Act § 403(r)(5)(B)].

In ruling in NYSRA’s favor, Judge Holwell concluded:

[T]he mandatory aspect of [the New York City regulation] operates in precisely the same manner as [FDC Act § 403(r)] and its implementing regulations. If a food purveyor chooses to make a nutrient content claim, then it is subjected to mandatory regulations under [FDC Act § 403(r)] regarding the nature and content of its voluntary claim. Likewise, if a restaurant chooses to make calorie content information available, then it is subjected to a mandatory requirement under [the New York City regulation] of posting such information on menu boards and menus.  By making its requirements contingent on a voluntary claim, [the New York City regulation] directly implicates [FDC Act § 403(r)] and its corresponding preemption provision.  New York City, although free to enact mandatory disclosure requirements of the nature sanctioned by [FDC Act § 403(q)] (and proposed or enacted in other jurisdictions), has adopted a regulatory approach that puts it in the heartland of [FDC Act § 403(r)] and has subjected its regulation to preemption under [FDC Act 403A(a)(5)].

It is unclear at this time whether the New York City Board of Health will appeal the decision.  We will continue to update you as we learn more information.

In a September 7, 2007 “Legal Opinion Letter” published by the Washington Legal Foundation, attorneys Arnold I. Friede and John F. Kamp criticize legislation introduced earlier this year that would disallow a tax deduction for certain Direct-To-Consumer (“DTC”) prescription drug advertisements. 

The bill, H.R. 2823, titled the “Fair Balance Prescription Drug Advertisement Act of 2007,” was introduced on June 21, 2007 by Representative Pete Stark (D-CA).  If enacted, the bill would amend the Internal Revenue Code to disallow a tax deduction for: (1) expenses for DTC prescription drug advertising that fails to provide adequate information on drug side effects, contraindications or lack of effectiveness, or advertising that does not present such information in a balanced manner (what Friede and Kamp refer to as a “perfect balance” disclosure standard); and (2) expenses for DTC prescription drug advertising of a new drug, a new combination of active substances, or a new delivery system for an existing drug for a 2-year period after the introduction of the drug into interstate commerce.  H.R. 2823 would also amend the FDC Act to require FDA to report to the Secretary of the Treasury on misbranding and other violations relating to DTC advertising.

According to Friede and Kamp, the “Fair Balance Prescription Drug Advertisement Act of 2007:”

is starkly unconstitutional under the First Amendment.  Several separate and distinct lines of constitutional reasoning support this conclusion . . . .  First, the intent of this bill is to ban or suppress advertising through the tax code. The central intent [of H.R. 2823] is not to raise tax revenues; it is censorship, plain and simple.  As the Supreme Court taught us long ago in Grosjean vs. Am. Press Co., 297 U.S. 233 (1936), regulating speech under the “guise” of taxation is a particularly “odious method[]” of regulation. . . .  Second, the “perfect balance” provisions of the Stark Bill that would eliminate tax deductibility for expenses for DTC advertising under § 502(n) of the [FDC Act] have serious due process problems that compound the underlying First Amendment concerns. . . .  [U]nder the “perfect balance” provisions, the FDA could make a unilateral decision that has the effect of banning speech in advertising that is otherwise truthful and not misleading.  This would violate the constitutional protections of due process of law. . . .  Third, there is an extremely serious question whether a violation of § 502(n) of the [FDC Act] or any new “perfect balance” regulations promulgated by FDA could be characterized as false or inherently misleading and thereby obviate the government’s burden to prove the remaining prongs of the Central Hudson balancing test, [which is the test devised by the Supreme Court in Cent’l Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of New York, 447 U.S. 557, 564 (1980) for sustaining a governmental restriction on commercial speech.]

Rep. Stark, not surprisingly, takes a contrary view regarding the constitutionality of the bill.  In comments published in the Congressional Record with the introduction of H.R. 2823, Rep. Stark stated:

There are freedom of speech concerns with directly prohibiting advertising, accurate or not.  This legislation therefore takes a different approach, hitting drug companies where it hurts them most, their bottom lines.  While companies could continue running misleading ads, they would have to pay significantly more to do so.  This will discourage drug companies from engaging in dishonest marketing practices.

Since it was introduced in June, H.R. 2823 has been referred to the House Ways and Means and Energy and Commerce Committees where it has remained dormant.  Rep. Stark introduced similar versions of the Fair Balance Prescription Drug Advertisement Act in the 106th (H.R. 4686), 107th (H.R. 2352), and 108th (H.R. 3155) Congresses.

On August 29, 2007, the U.S. District Court for the District of Massachusetts denied a motion for class certification in ongoing litigation concerning Parke-Davis’s (a then-Warner-Lambert and now-Pfizer subsidiary) anticonvulsant drug product NEURONTIN (gabapentin).  The suit, filed in May 2004, alleges that Parke-Davis was involved in a fraudulent scheme to market and sell NEURONTIN for “off-label” uses (i.e., uses not approved by FDA) in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the New Jersey Consumer Fraud Act, and common law fraud and unjust enrichment.  FDA approved NEURONTIN in 1993 for use as an adjunctive therapy in the treatment of partial seizures in adults with epilepsy, and in 2002 for the management of post-herpetic neuralgia. 

In earlier litigation (Franklin v. Parke-Davis), Parke-Davis was accused of illegal marketing practices, including the “off-label” promotion of NEURONTIN. (In 2001, over 80% of NEURONTIN’s $1.8 billion in sales were from “off-label” uses.)  In May 2004, Warner-Lambert admitted that Parke-Davis aggressively marketed NEURONTIN by “illicit means” for “off-label” uses including bipolar disorder, pain, migraine headaches, and drug and alcohol withdrawal.  The company agreed to plead guilty and consented to $430 million dollars in penalties. (See article here).

In this latest case involving NEURONTIN, the Plaintiffs proposed to certify a class (for class action purposes) comprising:

All individuals and entities in the United States and its territories who, for purposes other than resale, purchased, reimbursed, and/or paid for Neurontin for indications not approved by the FDA during the period from January 1, 1994, through the present. For purposes of the Class definition, individuals and entities “purchased” Neurontin if they paid some or all of the purchase price.

In denying the Plaintiffs’ motion to certify a nationwide class the court stated:

The plaintiffs have not identified any case in which a court has certified a class of consumers that necessarily includes a substantial number of unidentifiable non-injured persons. . . .  Here, there is no way to identify injured class members, and plaintiffs have not proposed a feasible [] distribution process.

The court, however, also left open the possibility that the Plaintiffs might yet be able to establish a class:

This case is troublesome because defendants allegedly used a national marketing scheme to promote a fraud. If true, they should not get off scot-free if there is a practical statistical way to address the difficult causation issues. . . .  If only a de minimis number of doctors prescribed Neurontin for an off-label condition, and then off-label prescriptions skyrocketed after a fraudulent campaign for that indication (i.e., migraines or bipolar), the Court will consider statistical proof as sufficient to demonstrate that most purchasers in that period were injured. At present, however, the record does not contain such a proffer.

In addition to providing a good description of the tactics used to promote NEURONTIN for “off-label” uses, the August 29th ruling also provides a good overview of one judge’s description of the law concerning “off-label” drug use. 

Over the summer we posted on several preemption cases involving FDA-regulated products.  In July, we reported that the Supreme Court agreed to hear Riegel v. Medtronic, Inc., which concerns whether the FDC Act preempts state tort claims regarding medical devices that entered the market pursuant to the Premarket Approval process, and that the Supreme Court was petitioned to hear Wyeth v. Levine, which concerns whether prescription drug labeling preempts state law product liability claims.  (The Court still has not ruled on the petition.)  In August, we reported that the Federal Circuit affirmed a lower court ruling that a District of Columbia law prohibiting sales activities that result in a patented prescription drug being sold in the District of Columbia for an “excessive price” is preempted by federal patent law.  The list of preemption cases continues to grow.

In February 2005, the Pennsylvania Employees Benefit Trust Fund (“PEBTF”), which administers health care benefits to eligible Commonwealth of Pennsylvania employees, retirees, and their dependents, sued AstraZeneca alleging, among other things, that the company unlawfully advertised NEXIUM (esomeprazole magnesium) (i.e., the “Purple Pill”) in violation of the Delaware Consumer Fraud Act (“DCFA”).  Specifically, PEBTF alleged that “the large-scale promotional campaign for Nexium, which included both physician-directed marketing and direct-to-consumer advertising, was misleading because it incorrectly represented that Nexium was superior to Prilosec,” and that AstraZeneca “initially sold NEXIUM at a price below Prilosec in order to establish brand loyalty, but then raised the price of Nexium while the price of Prilosec dropped.”  (PRILOSEC [omeprazole] is an AstraZeneca drug that is similar to NEXIUM; both drugs are proton pump inhibitors.)  In November 2005, the U.S. District Court for the District of Delaware ruled that NEXIUM advertisements that complied with the FDA-approved labeling were not actionable under the DCFA.  PEBTF appealed the decision. 

The U.S. Court of Appeals for the Third Circuit upheld the district court decision in its August 17, 2007 opinion.  The appeal presented two principal questions: (1) whether the DCFA exemption for advertising regulated by the Federal Trade Commission applies to the facts of this case; and (2) whether federal law preempts the plaintiffs’ state consumer protection claims.  With respect to the issue of preemption, the court ruled that:

allowing these claims to proceed would unnecessarily frustrate the FDCA’s purpose and FDA regulations, as the extent of agency involvement in regulating prescription drug advertising is extensive and specific. . . .  An even stronger case for preemption occurs when FDA approved labeling is the basis for allegedly fraudulent representations made in prescription drug advertising. The essential affinity between advertising and labeling is clear in the composition of the FDCA and its associated regulations. . . .  Although labeling is often directed at medical practitioners, the rules that govern labeling form the basis for the advertising regulations. . . .  Accordingly, the purpose of protecting prescription drug users in the FDCA would be frustrated if states were allowed to interpose consumer fraud laws that permitted plaintiffs to question the veracity of statements approved by the FDA.

It is unclear whether PEBTF plans to appeal the decision.  Meanwhile, another case involving preemption is awaiting the Supreme Court’s decision on whether to hear the case. 

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 2001, the Supreme Court held in Buckman Co. v. Plaintiffs’ Legal Comm. that state “fraud-on-the-FDA” claims were impliedly preempted by federal law.

In March 2000, the sponsor of REZULIN (troglitazone), Warner-Lambert (a wholly-owned subsidiary of Pfizer), 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 breach of implied and express warranties, negligence, negligent misrepresentation, negligence per se, fraud, defective design, defective manufacturing, and loss of consortium –specifically 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 Plaintiff’s could not establish under Michigan law that REZULIN was “defective,” and that that the immunity exception in Michigan law should be severed because it was preempted by the FDC Act and the Medical Devices Act under the reasoning of Buckman.  The district court reasoned that:

[i]f plaintiffs covered by the Michigan statute were able to litigate claims of fraud on the FDA in individual personal injury suits, whether in state courts or in federal courts, the potential would exist for the FDA’s personnel to be drawn into those controversies on a case-by-case basis over and over again, [thereby resulting in] enormous . . . interference with the proper discharge of the mission that Congress created the FDA to perform.

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 in an opinion entered earlier this year 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 and Pfizer recently appealed the Second Circuit’s decision to the Supreme Court. Warner-Lambert’s Cert. Petition presents two issues for the 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 argues, 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.  Findings of fraud-on-the-FDA would inevitably disrupt the regulatory process by encouraging manufacturers to supply unnecessary information to the FDA for fear that the failure to do so will lead to state-law liability; by discouraging manufacturers from seeking approval for beneficial drugs that are not risk-free; by distorting the FDA’s decision-making process to anticipate potential state-law review of that process; and by burdening FDA personnel who are ordered to testify as witnesses in state-law products liability cases concerning the FDA’s decision-making process.

The Respondents’ brief opposing Cert. argues (not surprisingly) that:

The Second circuit properly distinguished Buckman on the grounds that the present case involves (i) state regulation of tort law affecting health and safety, as to which the presumption against preemption applies (rather than an attempted use of state law to police fraud on the FDA); (ii) alleged violation of state common law duties, rather than solely the federal duty of candor to the FDA; and (iii) invocation of fraud on the FDA to rebut an affirmative defense, rather than as an element of a claim.

The Washington Legal Foundation, the Pharmaceutical Research and Manufacturers of America, and the Product Liability Advisory Council have submitted amicus briefs.  The Supreme Court is scheduled to consider whether or not to grant Cert. during a September 24, 2007 conference. 

On August 27, 2007, FDA published its long-awaited proposed rule to amend the final monograph for Over-the-Counter (“OTC”) sunscreen drug products.  The rule, if finalized, would set standards for formulating, testing, and labeling OTC sunscreen drug products with Ultraviolet A (“UVA”) light and Ultraviolet B (“UVB”) light protection.  UVA light is responsible for tanning, and UVB light is responsible for sunburn.  FDA’s OTC drug sunscreen monograph was finalized in 1999 and discusses the ability of a sunscreen to protect against UVB light, but the effective date of the monograph was later stayed until reliable testing methods for protection against UVA light were developed.  (The rulemaking history for OTC sunscreens is available here.)  (As an interesting historical note, Congress ordered FDA to issue a final sunscreen monograph within 18 months of enactment of the FDA Modernization Act of 1997 [§ 129].  This led FDA to issue the final monograph on May 21, 1999, effective in two years with UVA testing and labeling deferred.  In December 2002, FDA stayed the effective date of the monograph – which stay is still in effect, pending the development of the UVA issues addressed in the Agency’s August 2007 proposal.)

The most significant aspects of FDA’s proposal are the development of a standard testing method to determine a sunscreen’s efficacy to protect against UVA light and the creation of a consumer-friendly rating system for  a product’s  protection against UVA light.  According to an FDA press release:

The FDA proposal provides a ratings system for UVA sunscreen products on a scale of one to four stars. One star would represent low UVA protection, two stars would represent medium protection, three stars would represent high protection, and four stars would represent the highest UVA protection available in an OTC sunscreen product. If a sunscreen product does not provide at least a low level (one star) of protection, FDA is proposing to require that the product bear a “no UVA protection” marking on the front label near the SPF value.

Ratings would be derived from two tests the FDA proposes to assess the effectiveness of sunscreens in providing protection against UVA light. The first test measures a product’s ability to reduce the amount of UVA radiation that passes through it. The second test measures a product’s ability to prevent tanning. This test is nearly identical to the SPF test used to determine the effectiveness of UVB sunscreen products.

Other proposed amendments to the monograph include:

• Revisions to the UVB labeling regulations, including: (1) the increase of the highest SPF value from SPF30+ to SPF50+; (2) use of the terms “low” and “medium” rather than “minimal” and “moderate” as category descriptors for protection against UVB; and (3) insertion of the term “UVB” before “SPF” and before “sunburn;”

• Renaming the rating for UVB protection (i.e., SPF) from “sun protection factor” to “sunburn protection factor;”

• Addition of avobenzone with zinc oxide and avobenzone with ensulizole as permitted combinations of active ingredients in OTC sunscreens;

• The following mandatory warning in the “Drug Facts” box on the product label: “UV exposure from the sun increases the risk of skin cancer, premature skin aging, and other skin damage. It is important to decrease the UV exposure by limiting the time in the sun, wearing protective clothing, and using a sunscreen;”

• A requirement for a statement to inform consumers about the importance of both UVB and UVA protection;

• Mandatory directions that consumers apply the sunscreen either “liberally” or “generously” and that the sunscreen should be reapplied at least every 2 hours; and

• Various modifications to the SPF testing procedures that are intended to increase protection of persons enrolled in the SPF test and to improve accuracy and reproducibility of the test results.

Although FDA’s proposal does not address nanosize particles, the Agency solicits comments on the safety and effectiveness of nanometer-size sunscreen particles and proposals for regulation of sunscreens containing nanosize particles.  Comments concerning this issue will be included in the docket for the proposed monograph, as well as in FDA’s nanotechnology docket. (See 8/1/2007 FDA Law Blog post.)

Timing of the publication of a final rule will largely depend on the number of comments FDA receives.  Comments are due by November 26, 2007.  With respect to implementation of a final rule, FDA commented that the Agency “understands the seasonal nature of the sunscreen industry and the time required for product testing and relabeling. FDA is also aware that more than 1 year may be needed for implementation. FDA is proposing an 18- to 24-month implementation date and will try to have it coincide with the June/July time period.”

By Riëtte van Laack

On August 1, 2007, the U.S. Court of Appeals for the Federal Circuit affirmed (errata) the U.S. District Court for the District of Columbia’s December 2005 ruling declaring that the District of Columbia’s Prescription Drug Excessive Pricing Act of 2005 (the “Act”) is preempted by the federal patent laws and enjoining its enforcement.  The Act prohibited sales activities that result in a patented prescription drug being sold in the District of Columbia for an “excessive price.”  If the wholesale price of a patented prescription drug in the District exceeded the price in any “high income country” (defined in the Act as the U.K., Germany, Canada, and Australia), the manufacturer was presumed to be in violation of the law.  The burden would then shift to the manufacturer to prove that the price of its drug is not “excessive,” in light of the “demonstrated costs of invention, development and production of the prescription drug, global sales and profits to date, consideration of any government funded research that supported the development of the drug, and the impact of price on access to the prescription drug by residents and the [D.C.] government.”  Specifically, the Act stated:

(a) A prima facie case of excessive pricing shall be established where the wholesale price of a patented prescription drug in the District is over 30 percent higher than the comparable price in any high income country in which the product is protected by patents or other exclusive marketing rights.

(b) [If a prima facie case is made, a defense is to show that the] given prescription drug is not excessively priced given demonstrated costs of invention, development and production of the prescription drug, global sales and profits to date, consideration of any government funded research that supported the development of the drug, and the impact of price on access to the prescription drug by residents and the government of the District of Columbia.

The case is an appeal of consolidated actions brought by the Pharmaceutical Research and Manufacturers of America (“PhRMA”) and the Biotechnology Industry Organization (“BIO”).  PhRMA and BIO argued that the Act is preempted by federal patent laws because it conflicts with Congress’s intention to provide such manufacturers with the monetary reward that derives from the right to exclude competitors from making, using, and selling the invention during the patent’s term. 

The District Court and the Federal Circuit agreed with the plaintiffs that Congress expressed that intention in the statutory incentive scheme it developed in the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”).  The Federal Circuit reasoned that “[b]y penalizing high prices—and thus limiting the full exercise of the exclusionary power that derives from a patent—the District has chosen to re-balance the statutory framework of rewards and incentives insofar as it relates to inventive new drugs.”  In short, the court found that the “Act stands as an obstacle to the federal patent law’s balance of objectives as established by Congress” and is thus preempted by federal patent law.

By Brian J. Wesoloski

Hyman, Phelps & McNamara, P.C. is pleased to announce that J.P. Ellison has joined the firm as Of Counsel.  Mr. Ellison joins HPM from the U.S. Department of Justice Office of Consumer Litigation (“OCL”).  By regulation, OCL has responsibility for representing the FDA, Federal Trade Commission, and Consumer Product Safety Commission in affirmative and defensive litigation.  Mr. Ellison handled litigation matters involving each of these agencies.  Mr. Ellison received his undergraduate degree from Princeton University’s Woodrow Wilson School of Public & International Affairs, and his law degree from the University of Virginia School of Law.  After law school Mr. Ellison served as a law clerk for the Honorable Diana Gribbon Motz on the U.S. Court of Appeals for the Fourth Circuit.

Hyman, Phelps & McNamara, P.C.’s Brian J. Donato cautioned companies about the dangers of “residual risk” while speaking at a recent conference on risk management sponsored by AdvaMed.  Medical Device & Diagnostic Industry reported on the speech in an August 2007 article.  Residual risk, which is “how much risk remains in a product after a company has conducted risk assessment,” can show up in many ways, including with respect to regulatory compliance, product liability, contractual obligations, marketing and sales, and company reputation.  As such, Mr. Donato cautioned companies not to ignore residual risk, and to minimize it as much as possible by conducting rigorous, upfront product risk assessments.

The U.S. District Court for the Southern District of New York is expected to decide soon whether a New York City regulation requiring restaurants to post calorie content values on menus and menu boards is preempted by the Nutrition Labeling and Education Act of 1990 (“NLEA”), a federal statute.  The regulation, which was scheduled to take effect on July 1, 2007, applies to restaurants that make the calorie content information of standardized menu items publicly available.  In June, the New York State Restaurant Association (“NYSRA”) filed a complaint and a motion for declaratory relief and a preliminary injunction arguing that the regulation is preempted by the NLEA and asking that the court preclude New York City from violating the First Amendment rights of NYSRA members by impermissibly compelling speech.       

The NYSRA takes the position that calorie content values constitute “nutrient content claims” under the subsection of the NLEA that governs such claims.  The preemption provision applicable to that subsection prohibits states and local governments from enacting any law regarding nutrient content claims “made in the label or labeling of food that is not identical to the requirement of” that subsection.  NYSRA argues that the requirements imposed by the New York City regulation are not “identical” to those of federal law and therefore are preempted.  The City takes the view that because disclosure of a calorie content value does not involve a characterization of calorie levels, such disclosure does not constitute a nutrient content claim.  The City argues that the NLEA’s preemption provision applicable to nutrient content claims does not apply to the City’s regulatory requirements at issue.

The NYSRA also maintains that the City’s regulation violates the First Amendment by compelling restaurants to voice a point of view with which they disagree; namely, that calories are the only nutritional criterion that customers should consider when selecting menu items.  New York City responds that the reasonableness standard governs commercial speech and that its regulation at issue meets that standard because it is reasonably related to the city’s legitimate interest in curbing obesity. 

An amicus curiae brief was filed in support of the City by Rep. Henry Waxman (D-CA), former FDA Commissioner David Kessler, Public Citizen Litigation Group, Center for Science in the Public Interest, several medical and public health organizations, and several professors of medicine, nutrition, and public health.  The City and County of San Francisco also filed an amicus brief in support of New York City and is joined by several other cities and the National League of Cities.   

ADDITIONAL READING:

• National Restaurant Association State Menu Labeling Legislation

By Brian J. Wesoloski

Earlier today, FDA announced that Tim Coté, M.D., M.P.H., a Captain in the U.S. Public Health Service, has accepted the position of Director of the Agency’s Office of Orphan Products Development (“OOPD”).  Dr. Coté is only the fourth OOPD Director since the office was created in the 1980s after the passage of the Orphan Drug Act.  He replaces Dr. Marlene Haffner, who held the position for many years and retired from public service earlier this year.  Dr. Coté plans to join FDA around September 1, 2007, and comes to the Agency from the Centers for Disease Control and Prevention, where he was the Country Director for Rwanda.  In that position, Dr. Coté  managed a staff of U.S. government direct hires, contractual employees, and locally employed staff and a budget of about $119 million directing programs in HIV/AIDS, malaria, and avian influenza. 

Since FDA announced its current enforcement policy for marketed unapproved drug products in a June 2006 Compliance Policy Guide (“CPG”), the Agency has taken various company- and product-specific enforcement actions.  We have previously reported on some of these enforcement actions (here, here, and here).   FDA has not, however, launched a whole-scale enforcement effort, as many companies had feared when FDA issued the CPG.  That may change.

We recently learned that FDA is in the midst of planning enforcement action against companies marketing and distributing unapproved prescription drugs that, according to one source, would seek to remove almost all such drug products from the market within the next few years.  We believe that the enforcement action FDA is planning is likely to be class-based.  For example, FDA might take enforcement action (through a Federal Register notice and/or Warning Letters) against all marketed unapproved prescription cough/cold drugs products. 

FDA’s anticipated enforcement initiative comes on the heels of the Agency’s January 2007 “Marketed Unapproved Drugs Workshop.”  The workshop was widely viewed as an effort by FDA to encourage companies to seek approval for their marketed unapproved drugs, rather than to explain the Agency’s CPG enforcement policies.  In what could be viewed as foreshadowing of anticipated future enforcement action, FDA Commissioner Dr. Andrew von Eschenbach commented during the workshop:

The FDA is seriously committed to resolving the problem of unapproved drugs and it is because the FDA is committed to assuring the patients that they are going to be able to obtain drugs for themselves and their children and their grandchildren not just on the hope that they are safe but based on the fact that FDA has reviewed the evidence and the labeling that defines the conditions under which that drug is safe and effective.  It is our responsibility and our mission to fulfill that commitment to the American people . . . .  Rather than working on a piecemeal basis, company or company or drug by drug, what we have wanted to do is to address this problem globally.  

Copies of the presentations made at the workshop are available here, and a transcript of the workshop is available here. 

We will continue to update our loyal FDA Law Blog readers as we learn more information.

ADDITIONAL READING:

• FDA Marketed Unapproved Drugs Website
• February 2007 RAPS FOCUS Article on Marketed Unapproved Drugs

Horace Scudder’s 1915 “The Book of Fables and Folk Stories” includes a story, titled “The Arab and His Camel,” that ends with the moral “It is a wise rule to resist the beginnings of evil.”  This is, of course, a parable of the Middle Eastern metaphor for the situation where allowing a small act will lead to a larger undesirable circumstance: “Do not allow a camel to put his nose under the edge of your tent, for soon you will have a camel in your tent.”  In 1992, when Congress passed the Prescription Drug User Fee Act (“PDUFA”) establishing user fees for the review of “human drug applications,” the proverbial camel’s nose came under the tent.  Although it can be debated (particularly given the substantial decrease in NDA review times in the post-PDUFA era compared to the pre-PDUFA era) whether PDUFA signalled the “beginnings of evil” (as certainly some people both in and out of FDA would contend), PDUFA has clearly provided a blueprint for the creation other user fees.

In the almost 15 years since the passage of PDUFA, not only have human drug application user fees increased substantially (FDA’s interpretation of the law has also resulted in more user fee revenue), but Congress has created PDUFA-like user fee systems for medical devices (under the Medical Device User Fee and Modernization Act of 2002) and animal drugs (under the Animal Drug User Fee Act of 2003).  FDA has also proposed, and Congress is considering as part of omnibus FDA reform legislation, a PDUFA-like user fee system as part of PDUFA IV to fund the review of direct-to-consumer advertisements. 

The most recent user fee proposal was made earlier this month by Representative John Dingell (D-MI). (And you thought the whole camel already entered the tent.)  Rep. Dingell issued discussion draft legislation, titled the “Food and Drug Import Safety act of 2007,” that would amend the FDC Act to, among other things, permit the assessment of two new types of user fees: (1) imported food inspection user fees; and (2) imported drug inspection user fees.  According to a press release and “Dear Colleague” letter issued by Rep. Dingell “[r]ecent reports of tainted imports including pet food, seafood, and cough syrup, have highlighted the need for legislative action.”  A summary of the draft bill is available here.

Rep. Dingell’s draft bill, if enacted, would authorize food import fees totaling $500 million and drug import fees totaling $300 million in each of fiscal years 2008 through 2012.  A fee of up to $50 would be assessed for each line item of food, and a fee of up to $1000 would be assessed for each line item of drug.  FDA would need to issue regulations defining what constitutes a “line item” of food and drug.  The draft bill would also amend the FDC Act to enhance civil monetary penalties for food importers that violate the FDC Act.  Specifically, the bill would amend FDC Act § 303 to permit civil monetary penalties of $100,000 in the case of an individual and $500,000 in the case of a company (not to exceed $1 million for all adjudications in a single proceeding).    

Rep. Dingell’s user fee proposal, although it serves an admirable purpose, begs the questions of how much more room there is in the proverbial user fee tent, and whether Congress’ increasing reliance on user fees to fund FDA activities (instead of substantially increasing FDA appropriations) will eventually cause that tent to collapse. 

In two previous posts (here and here), we reported on a trend in Warning Letters issued by FDA’s Division of Drug Marketing, Advertising, and Communications (“DDMAC”) that focuses on ensuring that promotional pieces contain substantial evidence to support advertising claims and proper presentations of safety data.  In an August 10, 2007 article published by the Washington Legal Foundation, and titled “Recent Warning Letters for Ads Reflect FDA’s Fixation on ‘Substantial Evidence,’” former FDA Associate Chief Counsel Arnold I. Friede drives home the point that to avoid problems with DDMAC, companies need to pay attention to providing substantial evidence to support all advertising claims, and in particular comparative claims.  Mr. Friede comments that:

The recent DDMAC compliance correspondence should be studied closely by companies and practitioners to provide a first hand sense of how FDA applies the “substantial evidence” standard to specific advertising and promotional claims for prescription drugs. But the overall message is simple relatively straightforward: If you want to avoid problems with DDMAC, insure that claims in prescription drug advertising and promotion are supported by “substantial evidence,” no matter how competent and reliable the supporting evidence might otherwise be to the company and to leading experts in the field. To put it bluntly, DDMAC doesn’t really care.  What DDMAC cares about is like “location,” “location,” “location” in the real estate purchase context. It’s about “substantial evidence,” “substantial evidence,” “substantial evidence”.

So whether we like it or not, or whether we think it is unconstitutional or violates the [Administrative Procedure Act] or is otherwise illegal or not, for those who seek to avoid an unpleasant compliance confrontation with DDMAC, “substantial evidence” should be the watchword.

As if to reinforce this conclusion, on August 13, 2007, DDMAC posted a Warning Letter issued to Pfizer on July 16, 2007 concerning certain promotional materials for GEODON (ziprisadone mesylate) Injection.  GEODON is approved for the treatment of acute agitation in schizophrenic patients for whom treatment with ziprasidone is appropriate and who need intramuscular antipsychotic medication for rapid control of the agitation, and includes a black box warning concerning increased mortality in elderly patients with dementia-related psychosis.

DDMAC’s Warning Letter objects to Pfizer’s omission of important risk information (e.g., the failure to communicate certain warnings and precautions associated with Geodon) and to an unsubstantiated superiority claim.  Specifically, with respect Pfizer’s claim that there are “[p]roven advantages over haloperidol [intramuscular] ―twice the improvement as measured on the [Brief Psychiatric Rating Scale],” DDMAC comments that:

This presentation is misleading because it implies that Geodon for Injection is more effective than haloperidol [intramuscular] when this has not been demonstrated by substantial evidence or substantial clinical experience. The single study cited for this claim was an open-label study, which is not an appropriate study design to evaluate subjective endpoints, such as those measured by the Brief Psychiatric Rating Scale anchored version (BPRS), because of the potential for evaluator bias. In fact, FDA is not aware of any substantial evidence to support this claim. If you have data, please submit them to FDA for review. Of interest, in the clinical trials submitted to the NDA for Geodon for Injection, the BPRS was not used and there were no active comparators.

Certainly “substantial evidence” is the DDMAC watchword for now and for the foreseeable future. 

Indeed, as we were drafting this post, DDMAC updated its Warning Letter webpage with a yet another Warning Letter objecting to ubsubstantiated superiority claims.  The letter, issued to Novartis last week, cites certain statements in promotional materials for EXELON (rivastigmine tartrate) Capsules and Oral Solution that are misleading “because, on the basis of an inadequate study, it suggests that Exelon is superior to donepezil [(ARICEPT)] in patients with mild-to-moderate Alzheimer’s Disease who have not responded to donepezil.”

We previously reported on some of the highlights of the most notable provisions of the final rule issued by the Centers for Medicare & Medicaid Services (“CMS”) on the Medicaid Drug Rebate Program.  Today, Hyman, Phelps & McNamara, P.C. issued a detailed memorandum summarizing the July 17th final rule.  The memorandum, among other things, notes where the final rule differs from the proposed rule and prior CMS policy or guidance, and identifies issues that would benefit from further CMS clarification.