On December 30, 2020, District Court Judge Kenneth M. Karas of the Southern District of New York issued a nationwide preliminary injunction preventing the Most Favored Nation (MFN) rule from applying to Regeneron’s drug EYLEA (aflibercept).  This is the third federal court ruling preventing implementation of the MFN rule.

Our previous post summarizing the MFN rule can be found here; our summary of the District of Maryland’s temporary restraining order and the Northern District of California’s preliminary injunction can be found here.  The two earlier decisions applied to all of the products currently listed in the MFN as well as any others that would have been added under the rule.

In holding that a nationwide preliminary injunction is appropriate, the court analyzed Regeneron’s likelihood of success, likelihood of irreparable injury, the balance of hardships and the public interest.  The court specifically held that Regeneron would be financially and reputationally harmed if the MFN rule took effect because the company would lose business to other competitors’ drugs.  Moreover, similar to the prior federal courts’ opinions, Judge Karas held that Regeneron was likely to succeed on the merits because the government failed to comply with, and did not have good cause to ignore, the Administrative Procedure Act’s notice and comment requirement.  Finally, the public interest and balance of hardships favored Regeneron.  Specifically, implementation of the MFN rule may require Regeneron to cut its research and development budget, which could limit access to medication in the future.  The court also noted that failure to follow the notice and comment rules dilutes the public interest because it prevents proposed rules from being “tested via exposure to diverse public comment.”

After a temporary restraining order and two preliminary injunctions, it is highly unlikely that the MFN rule will survive as an interim final rule.  Therefore, the burden of whether, and how, to proceed with the MFN rule will fall to the new Biden administration and their appointees.

Judge Karas’ full opinion can be found here.

Welcome to the final 2020 edition of Hyman, Phelps & McNamara, P.C.’s monthly wrap up of food, beverage and supplement news, including regulations, guidances, events, and whatever else is catching our eye.  Happy New Year, everyone.

Food & Beverage

• Make Every Bite Count: USDA and HHS just released the Dietary Guidelines for Americans, 2020-2025, rejecting an external scientific advisory committee’s recommendations (discussed in Karin’s July blog post) that men should cut back on alcohol and that all individuals should further limit their intake of added sugars.
• Eat Your Fruits & Veggies: The UN has declared 2021 the International Year of Fruits and Vegetables, recognizing the “urgent need to raise awareness of the nutritional and health benefits of fruit and vegetable consumption and to advocate for healthy diets through increased sustainable production and consumption of fruits and vegetables.”
• Losing Patience With Undeclared Allergens?: FDA sent a pointed warning letter to Whole Foods, indicating in a press release, “As part of the FDA’s ongoing efforts to address undeclared allergens as the leading cause of food recalls, we have analyzed patterns of recalls, and this letter is part of that work along with other work to improve industry’s compliance with allergen labeling requirements and reduce undeclared allergen-related food recalls.”
• Not Quite 100%: The 7^th Circuit revived a suit alleging that cheese misleads consumers by claiming to be “100% Grated Parmesan Cheese,” ruling that consumers aren’t obligated to scrutinize labels to ferret out ambiguities the way attorneys would in a courtroom. “How reasonable consumers actually understand” an ambiguous product name “is a question of fact that cannot be resolved on the pleadings.”
• More on Corporate Social Responsibility: With the Supreme Court pondering arguments made in the cocoa and Alien Tort Statute cases, note that Senate Democrats are focusing on CBP’s enforcement strategy to ensure that imports of palm oil made with forced and child labor do not enter the United States.
• Genomic Alteration: FDA had approved an intentional genomic alteration in animals for food uses or therapeutic uses, but not both – until this month, when FDA announced just such an approval of an alteration in a line of domestic pigs.  See Ricardo’s post here.  Just two weeks later, USDA published an Advanced Notice of Proposed Rulemaking and request for comments on a new regulatory framework under which “USDA would in most instances provide end-to-end regulatory oversight from pre-market reviews through post-market food safety monitoring for animals modified or developed using genetic engineering intended for use as human food.”  Comments are due by February 26, 2021.
• Some Clarity on FUAs: FDA’s Center for Veterinary Medicine finalized guidance intended to help companies submit information for effective and efficient pre-submission consultations and preparation of an Food Use Authorization request.
• Just a Little Bit Longer: FDA has extended the comment period for Draft Guidance on Voluntary Disclosure of Sesame until February 25, 2021, and extended the comment period for the Food Traceability Propose Rule until February 22, 2021.
• Salt by any other name…: FDA issued guidance on their intent to exercise enforcement discretion for declaration of the name “potassium salt” in the ingredient statement on food labels as an alternative to the common or usual name “potassium chloride.” As we reported in 2019, in draft guidance, FDA had indicated that it did not think the name potassium salt was appropriate.
• Gottlieb on Cherry Pies: “Thanks to the hard work of my FDA team in 2018, the Federal government will no longer be regulating the contents of frozen cherry pie,” Gottlieb tweeted earlier in December. “The American people are free add extra fruit, sugar, and make the crust especially thick.” He did not claim credit for FDA’s proposal to do away with the standard of identity for French dressing.
• Red, Red Wine: TTB amended their regulations  by adding some new standards of fill for wine and distilled spirits.
• FSIS Will Prohibit the Use of “Uncured” and “No Nitrate or Nitrite Added” on Processed Products that Contain Nitrite/Nitrate from “Natural” Sources: In response to a Petition by CSPC (which we discussed here), FSIS has announced that it intends to conduct rulemaking to propose to prohibit the statements, “No Nitrate or Nitrite Added” and “Uncured,” on products that have been processed using any source of nitrates or nitrites. Rather than requiring disclosure statements about the use of nitrate or nitrites on labels of meat and poultry products, FSIS intends to propose new definitions for “Cured” and “Uncured.” A proposed rule, tentatively scheduled for May 2021, will provide details.

Supplements

• Distribution of SARMs leads to forfeiture: DOJ announced a guilty plea by the owner of a sport supplement company that distributed purported dietary supplements that contained Selective Androgen Receptor Modulators (SARMs) – “synthetic chemicals designed to mimic the effects of testosterone and other anabolic steroids.” In addition to pleading guilty to a felony charge, the owner agreed to forfeit $3.5 million in proceeds from sale of the products.

Cannabis

• Operation CBDeceit: The FTC cracked down on six sellers of CBD-containing products for making a wide range of deceptive and scientifically unsupported claims about their ability to treat serious health conditions.
• Imminent Enforcement: Enforcement for THC-related Proposition 65 warnings began January 3, 2021. Make sure that THC-containing products (including those derived from hemp) that are sold in California have appropriate labeling to comply with Proposition 65 labeling mandates.
• The Muddy Waters of Cannabis: For the first time, a chamber of the U.S. Congress, the House of Representatives, voted to decriminalize cannabis by removing it from the Controlled Substances Act.  See a blog post by our colleague Larry Houck here.

In the New Year’s Eve edition of the Federal Register, CMS published a final rule to implement statutory amendments to the Medicaid Rebate Program statute, and to add CMS’s own policy proposals to encourage value based purchasing arrangements and discourage patient copay assistance.  The variety of topics covered in this rule include:

• Best price changes and other and other measures to encourage value based arrangements in Medicaid
• New regulations to implement the alternative rebate for line extensions, including definitions of “new formulation” and “oral dosage form”
• A new, difficult hurdle for claiming the best price exceptions for manufacturer coupon and other patient savings programs
• Clarification of the average manufacturer price (AMP) and best price treatment of rebates to Medicaid Managed Care plans that are not pursuant to a CMS-approved supplemental rebate program.
• Implementation of statutory amendments to exclude sales of authorized generics from the brand AMP, redefine single source and innovator source drugs to remove references to “original NDAs”; and redefine multiple source drugs to include OTC drugs that are covered outpatient drugs.

Hyman, Phelps & McNamara, P.C. has prepared a memo summarizing this wide-ranging final rule (available here).

At long last, and with just two days remaining in 2020, HHS and USDA released the 2020-2025 Dietary Guidelines for Americans (Guidelines).  For those who work in and around the food industry, the Guidelines are a big deal (I could quote Joe Biden here, but I won’t). The report is also a big deal for those outside the food industry, though they may not know it.  The Guidelines form the basis of federal nutrition policy and programs, which touch at least one in four Americans every month. These programs include the National School Lunch Program, Supplemental Nutrition Assistance Program (SNAP) (formerly “Food Stamps”), Special Nutritional Program for Women, Infants and Children (WIC), as well as feeding programs for the elderly.  The Guidelines also direct FDA regulations for food, including the labeling, such as health claims and the Nutrition Facts Panel.

Of particular note – and the source of criticism by some in the public interest space – the Guidelines rejected some of the July 2020 recommendations of the Dietary Guidelines Advisory Committee (DGAC), tasked with providing USDA and HHS with a scientific review of specific topics and supporting scientific questions on nutrition and health (discussed in our blog post here).  Specifically, the DGAC recommended lowering the limit for added sugars from 10% to 6% of the daily calories and limiting daily consumption of alcoholic beverages for men from two drinks per day to one. Neither of these recommendations were adopted in the Guidelines. The new Guidelines continue to advise people to eat a diet of primarily fruits, vegetables, whole grains, lean meat and poultry, low-fat dairy, seafood, nuts and vegetable oils. They specifically suggest limiting added sugar and alcohol, along with saturated fats and sodium, and staying within recommended calorie limits.

Here are some highlights of the 2020-2025 Guidelines:

• The Guidelines are structured around four basic recommendations:
  • Follow a healthy dietary pattern at every life stage;
  • Customize and enjoy nutrient-dense food and beverage choices to reflect personal preferences, cultural traditions, and budgetary considerations;
  • Focus on meeting food group needs with nutrient-dense foods and beverages, and stay within calorie limits; and
  • Limit foods and beverages higher in added sugars, saturated fat, and sodium, and limit alcoholic beverages.
• The Guidelines acknowledge that a small amount of added sugars, saturated fat, or sodium can be added to nutrient-dense foods and beverages to help meet food group recommendations, but foods and beverages high in these components should be limited.  The recommended limits are:
  • Added sugars—Less than 10 percent of calories per day starting at age 2.  For the first time, the Guidelines recommend that those younger than 2 avoid foods and beverages with added sugars.
  • Saturated fat—Less than 10 percent of calories per day starting at age 2.
  • Sodium—Less than 2,300 milligrams per day—and even less for children younger than age 14.
  • Alcoholic beverages—Consistent with the prior version of the Guidelines, adults of legal drinking age can choose not to drink, or to drink in moderation by limiting intake to 2 drinks or less in a day for men and 1 drink or less in a day for women, when alcohol is consumed. Drinking less is better for health than drinking more. There are some adults who should not drink alcohol, such as women who are pregnant.

Two district courts recently dealt what may become fatal blows to the Trump administration’s Most Favored Nation (MFN) rule for Medicare Part B drug payment. As noted in our summary (available here), the MFN rule was published as an interim final rule with comment period rather than a proposed rule, leaving it vulnerable to an Administrative Procedure Act (APA) challenge. Multiple organizations, including the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO), filed lawsuits challenging the controversial drug price reduction initiative that was scheduled to take effect on January 1, 2021.

On December 23, Judge Catherine Blake of the District Court for the District of Maryland granted a nationwide temporary restraining order in the suit brought by the Association of Community Cancer Centers, the National Infusion Center Association, the Global Colon Cancer Association, and PhRMA. Ass’n of Cmty. Cancer Ctrs. v. Azar, No. 20-cv-3531, 2020 U.S. Dist. LEXIS 241732 (D. Md. Dec. 23, 2020). Judge Blake found that the MFN rule was promulgated without adequate notice and comment procedures and that the government’s rationale for dispensing with such procedures was insufficient under the APA.

On December 28, Judge Vince Chhabria of the District Court for the Northern District of California largely adopted Judge Blake’s reasoning and granted a nationwide preliminary injunction in the suit brought by the California Life Sciences Association, Biocom California, and BIO. Cal. Life Scis. Ass’n v. CMS, No. 20-cv-08603, 2020 U.S. Dist. LEXIS 242991 (N.D. Cal. Dec 28, 2020). Judge Chhabria held that the California plaintiffs were “virtually certain” to prevail on their APA claim because the agency did not publish a notice of proposed rulemaking.

The government’s assertions that the COVID-19 pandemic’s recent surge was increasing the financial burden on Medicare beneficiaries failed to convince either court that a good cause exception to the APA should apply. The courts also found that the $5 billion reduction in Medicare Part B reimbursements in the first year alone, as estimated by the government, would drastically reduce revenues for providers and could qualify as irreparable harm. Finally, both courts found that the balance of equities and public interest favored granting the TRO and preliminary injunction, especially because of the MFN rule’s predicted disruption on provider businesses and patient treatments.

As a result of these court decisions, the MFN rule will not go into effect on January 1, 2021. It remains to be seen whether the Trump administration will attempt to salvage the MFN rule in its waning days or whether the incoming Biden administration will pick up the reins and seek to begin notice and comment rulemaking for this controversial initiative. As of our writing, the court in Maryland has directed the parties to submit a proposed schedule for further proceedings.  The government has the option to file an interlocutory appeal but has not done so yet. As always, we will continue to monitor and report on federal and state efforts to address drug prices.

As we previously reported, in March, as part of the CARES Act, OTC monograph reform was signed into law.  This law amended the FDC Act to include, among other things, an OTC monograph drug user fee program, under which FDA is authorized to assess and collect facility fees from manufacturers of OTC monograph drugs.

On Monday the 28th of December, FDA announced its scheduled Federal Register notice setting the user fees for manufacturers and contract manufacturers of OTC monograph drugs.  Based on information about manufacturing facilities registered by Dec. 31, 2019, FDA has set the user fees as follows:

• Manufacturer facility fee: $14,060
• Contract manufacturer facility fee $9,373

The fees are effective as of October 1, 2020, when the Continuing Appropriations Act, 2021, Division A of Pub. L. 116-159 was enacted.  (Section 123 of this Act provided an appropriation for the user fees).

The facility fee applies to manufacturers of finished monograph products, not to those manufacturers who produce only an active pharmaceutical ingredient.  In addition, a facility fee will not be assessed for an OTC monograph drug facility which, prior to December 31, 2019, had ceased all activities related to OTC monograph drugs and updated its registration to reflect this. Other exemptions include facilities that are involved in the production of clinical research supplies; testing; or the placement of outer packaging on packages containing multiple products, for such purposes as creating multipacks, when all monograph drug products included are already in a final packaged form before placement in the outer overpackaging.

As we reported previously, the new law also provides for fees for OTC monograph order requests (OMORs).  Fees for OMORs are set at $500,000 for a Tier 1 and at $100,000 for a Tier 2 OMOR.  No fee will be assessed if the OMOR seeks to make certain safety changes with respect to an OTC monograph drug.  As FDA notes, OMOR fees are not included in the OMUFA target revenue calculation.

Parties subject to the fees must complete an OTC Monograph User Fee Cover Sheet cover sheet.  The facility fees are due 45 days after the date of publication of the Federal Register notice, which is scheduled to be published on Dec. 29, 2020.

Buried in the 2,124-page Consolidated Appropriations Act, 2021 (the Act), which was signed by Donald Trump yesterday, was a brief provision requiring the reporting of average sales price (ASP) by manufacturers that do not have a Medicaid Drug Rebate Agreement.  ASP is used by CMS to set the payment rate for drugs and biologicals that are separately reimbursed under Medicare Part B.  Part B covers drugs that patients typically do not administer themselves but are instead administered in physicians’ offices and hospital outpatient departments.  Currently, only manufacturers that have entered into a Medicaid Drug Rebate Agreement with HHS are required to calculate and report ASP.  See 42 U.S.C. § 1396r-8(b)(3)(A)(iii).  Because not every manufacturer of drugs covered under Part B has such an Agreement, there are no ASPs reported for some Part B drugs.  In those cases, the Part B payment rate is based on published wholesaler acquisition cost (WAC) or average wholesale price (AWP), or sometimes the invoice price, which result in payment rates generally higher than a payment rate based on ASP would be.

Under Section 401 of the Act, a manufacturer of drugs or biologicals separately payable under Medicare Part B that does not have a Medicaid Drug Rebate Agreement will be required to report ASP, WAC, and sales made at a nominal price.  This reporting requirement goes into effect for calendar quarters beginning January 1, 2022.  The information is to be reported in a time and manner to be specified by CMS.  At some point prior to the effective date, we would expect to see the current electronic ASP reporting procedures extended to include this new category of manufacturers.  Audit and enforcement provisions currently applicable to ASP reporters will apply to the new category of ASP reporters.  HHS will be authorized to audit reporting manufacturers and survey wholesalers and manufacturers to verify reported information. Failure to report ASP for these drugs or biologicals may result in civil money penalties in the same manner as the failure to report ASP by manufacturers with Medicaid Drug Rebate Agreements.

FDA had approved an intentional genomic alteration in animals for food uses or therapeutic uses, but not both – until last week. With some fanfare, FDA announced just such an approval of an alteration in a line of domestic pigs. The pigs are referred to as GalSafe because the alteration eliminates alpha-gal sugar (AGS) on the surface of their cells. Exposure to AGS can trigger severe allergic reactions in humans that are exposed to it in various ways, including inhalation, external contact, consumption, implantation, or injection. Because pigs can serve as a source of both food products and a variety of therapeutic products, such products can pose a hazard to AGS-allergic individuals. The alteration in GalSafe pigs neatly solves that problem by knocking out the gene that that codes for the enzyme that results in the production of AGS.

The development of allergy to AGS is an interesting story of its own, which the curious can delve into through this CDC web page, or for a deeper dive, this podcast. One key aspect of the story is the link between development of allergy to AGS and bites of the Lone Star tick, which has been the focus of years of research summarized here. Another key aspect is that AGS is present in the cells of and tissues of not just pigs, but also other nonprimate mammals. Thus, AGS-allergic individuals are potentially at risk from exposure to any product of mammalian origin. Because GalSafe technology can be applied in other mammals, it holds the promise of greatly expanding food and therapeutic options for AGS-allergic individuals.

Apropos for the name of the great blues musician, Muddy Waters, the various federal, state and international classifications of cannabis and cannabis-derived substances is a complex scheme in search of the right rhythm.  Cannabis and cannabis-derived substances are controlled within different schedules under the federal Controlled Substances Act (“CSA”), while some are not controlled at all.  With cannabis now legal in 36 states and territories for medical purposes, and in 15 states for adult recreational use, control of cannabis substances is all over the map.  As with Muddy Waters, cannabis scheduling is far from clear.

Two recent developments may further muddy the waters in regard to the “legality” of cannabis and cannabis-derived substances.  First, on December 2, 2020, the UN Commission on Narcotic Drugs (“CND”) voted to remove cannabis and cannabis resin from Schedule IV of the 1961 Single Convention on Narcotic Drugs.  Under the international treaty, drugs in Schedule IV are a subset of drugs classified in Schedule I.  The additional classification provides more restrictions on use and research involving such drugs.  Thus, while cannabis remains a Schedule I drug under the 1961 Convention, its removal from Schedule IV will open the door for research and potential consideration for approval for medical use by the UN CND.

Second, December 4, 2020 may prove to be an important watershed in the history of how the United States treats cannabis because, for the first time, a chamber of the U.S. Congress, the House of Representatives, voted to decriminalize cannabis by removing it from the CSA.  The Marijuana Opportunity Reinvestment and Expungement Act of 2019, (the “MORE Act”), H.R. 3884, passed 228-164, largely along party lines.  The MORE Act will assuredly not pass the Republican-dominated Senate in the unlikely event it is even introduced.

The MORE Act, if enacted, would institute a number of changes but none more monumental than removing marijuana and THC, the primary psychoactive substance in marijuana, from federal control.  With so many states having legalized cannabis for medical and recreational purposes, the MORE Act, even if not enacted by this Congress, portends what is likely on the horizon for cannabis.

The MORE Act would remove marijuana and THC not just from Schedule I of the CSA, but from the CSA altogether.  One needs a detailed, ever-changing scorecard to keep up with how cannabis and cannabis products are scheduled under the CSA, but unless and until cannabis is removed entirely from control, manufacturers, distributors, retailers, and others must be cognizant of how cannabis and cannabis-derived products are scheduled (controlled) and comply with federal (and state) control requirements.

There are five schedules (classifications) under the CSA based on each drug’s potential for abuse relative to their accepted medical uses.  Manufacturers, distributors, and others who prescribe or handle controlled substances must obtain a Drug Enforcement Administration (“DEA”) registration and a drug’s scheduling triggers specific quota, recordkeeping, reporting, and security requirements.  Schedule I drugs are the most stringently controlled while Schedule V the least.  Criteria and current cannabis scheduling follows:

Schedule I Criteria:

• High potential for abuse;
• No currently accepted medical use in treatment in the U.S.; and
• Lacks accepted safety for use under medical supervision.  21 U.S.C. § 812(b)(1).

Cannabis Substances in Schedule I:

• Marijuana and parts of the Cannabis sativa L. plant within the CSA definition “marihuana.”
  • Includes all parts of the plant whether growing or not; the seeds; the resin extracted from any part of the plant, and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin;
  • Excludes hemp and mature stalks, fiber from the stalks, oil or cake from the seeds, any other compound, manufacture, salt, derivative, mixture, or preparation of mature stalks (except the resin therefrom), fiber, oil, or cake or sterilized seeds incapable of germination). DEA Drug Code 7360; 21 U.S.C. §§ 802(16), 812(c)(10).
• Marijuana Extract. DEA Drug Code 7350; 21 C.F.R. § 1308.11(d)(58).
• THC not in hemp.
  • Includes natural delta-8-THC, delta-9-THC and synthetic equivalents including trace quantities in synthetic CBD. DEA Drug Code 7370; 21 U.S.C. § 812(c)(17); 21 C.F.R. § 1308.11(d)(31)(i).

Schedule II Criteria:

• High potential for abuse;
• Currently accepted medical use in treatment in the U.S. or a currently accepted medical use with severe restrictions; and
• Abuse may lead to severe psychological or physical dependence.  21 U.S.C. § 812(b)(2).

Cannabis Substances in Schedule II:

• FDA-approved synthetic dronabinol (delta-9-THC) in an oral solution (Syndros). DEA Drug Code 7365; 21 C.F.R. §1308.12(f)(2).

Schedule III Criteria:

• Potential for abuse less than drugs in Schedule I and II;
• Currently accepted medical use in treatment in the U.S.; and
• Abuse may lead to moderate or low physical dependence or high psychological dependence. 21 U.S.C. § 812(b)(3).

Cannabis Substances in Schedule III

• FDA-approved synthetic dronabinol (delta-9-THC) in an oral solution in sesame oil encapsulated in soft gelatin capsules (Marinol). Drug Code 7369; 21 C.F.R. § 1308.13(g)(1).

Schedule IV Criteria:

• Low potential for abuse relative to drugs in Schedule III;
• Currently accepted medical use in treatment in the U.S.; and
• Abuse may lead to limited physical dependence or psychological dependence relative to drugs in Schedule III. 21 U.S.C. § 812(b)(4).

Cannabis Substances in Schedule IV

None.

Schedule V Criteria:

• Low potential for abuse relative to drugs in Schedule IV;
• Currently accepted medical use in treatment in the U.S.; and
• Abuse may lead to limited physical dependence or psychological dependence relative to drugs in Schedule IV. 21 U.S.C. § 812(b)(5).

Cannabis Substances in Schedule IV

None.

Not Scheduled, Not Controlled:

• Hemp.
  • Includes the Cannabis sativa L. plant and any part of the plant, including seeds and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9-THC concentration of not more than 0.3% on a dry weight basis. 7 U.S.C. § 1639o(1); 21 U.S.C. § 802(16)(B), 812(c)(10); 21 C.F.R. § 1308.11 (d)(31)(ii).
• THC in hemp. 21 U.S.C. § 812(c)(17); 21 C.F.R. § 1308.11(d)(31)(ii).
• CBD and products derived from parts of the Cannabis sativa L. plant excluded from the CSA definition of “marihuana.” 21 U.S.C. § 802(16)(B).
• FDA-approved CBD-derived from cannabis with no more than 0.1% THC (Epidiolex).
  21 C.F.R. § 1308.15(f) (removed 2020).

The MORE Act’s removal of cannabis from Schedule I and the CSA would transfer cannabis and cannabis-derived substances from among the most stringently controlled substances in the same class as heroin, LSD, and peyote with strict quota, recordkeeping/reporting, and security requirements to no controls nor requirements.  It would remove DEA authority over legitimate handlers of cannabis, such as researchers and analytical laboratories.  Unless their language is clear and narrowly tailored, the MORE Act and similar statutes would raise a number of questions.  For example, the statute should clarify whether descheduling applies only to Cannabis sativa L. plant-derived material or also to synthetic material.  The Agriculture Improvement Act (“Farm Bill”) removed cannabis defined as “hemp” with a delta-9-THC concentration of not more than 0.3% on a dry weight basis, but what about delta-8-THC?

Decontrolling cannabis altogether under the CSA would end conflicts between federal law and states that have loosened cannabis restrictions.  But decontrolling cannabis at the federal level would initiate new conflicts between would-be looser federal laws and more restrictive states that have not decontrolled cannabis.  We note that the controlled substance statutes of a number of states automatically follow the federal lead on scheduling, rescheduling, and descheduling so unless those states take other action, they would also decontrol cannabis.

Many pro-cannabis advocates are justifiably frustrated with DEA’s snail pace on its addressing cannabis issues.  The agency has yet to move on issuing registrations to manufacture cannabis for research to any of the 37 applicants, some of whom submitted applications and began investing in operations and secure facilities over four years ago.

So, if you manufacture, distribute, sell, or otherwise handle cannabis and cannabis products, you must understand how they are scheduled and controlled, and comply accordingly.  Lawmakers and regulators have the opportunity assess and address how the U.S. moves forward with handling cannabis.  In decontrolling or rescheduling cannabis, draft the legislation or regulations clearly to say exactly what you intend them to achieve.  Unlike Muddy Waters, cannabis scheduling and control should be clear, relative to its abuse potential and legitimate medical and scientific uses.

Biosimilars have been around for a bit over 10 years now, and there has been tremendous progress in licensing new biosimilar products.  But there is no question that there are still significant holes that FDA must address to further facilitate biosimilar development under section 351(k) of the PHS Act.  Many of these questions relate to interchangeable products, as FDA and industry have had very limited experience with interchangeable biosimilars.  As of December 2020, FDA has approved 28 biosimilars, but not one has been approved as “interchangeable” for its reference product.  For this reason, FDA explicitly included “providing additional clarity” to product developers on interchangeability as an objective of the Biosimilar Action Plan announced in 2018.

In one recent attempt to provide such clarity, FDA published a new draft guidance entitled Biosimilarity and Interchangeability:  Additional Draft Q&As on Biosimilar Development and the BPCI Act.  This guidance is not a stand-alone guidance, but, when finalized, it will be added to the final guidance document Questions and Answers on Biosimilar Development and the BPCI Act.  Like FDA’s previous biosimilar guidance documents, the intent of this Q&A guidance is to “enhance transparency and facilitate the development and approval of biosimilar and interchangeable products” and “provide clarity for developers who want to demonstrate that their proposed biological product meets the statutory interchangeability standard under the Public Health Service Act.”  FDA Press Release, FDA Releases a Draft Q&A Guidance for Industry on Biosimilar and Interchangeable Product Development and the BPCI Act (Nov. 19, 2020).  To that end, this guidance provides further draft responses to frequently asked questions about biosimilars and interchangeability.

Specifically, the guidance addresses some procedural elements related to the submission of an interchangeable biosimilar application.  Because the BLA (sometimes called an “aBLA”) submission for a biosimilar and for an interchangeable are the same, industry has asked FDA for clarification on distinguishing interchangeable applications from biosimilars.  The guidance explains that a BLA for an interchangeable product must include an affirmative statement that the application seeks licensure for an interchangeable biosimilar; without that statement, FDA will evaluate the submission as a biosimilar application.  And if the applicant applies for interchangeable status but fails to meet that standard, FDA will bifurcate the application for administrative purposes.  In that circumstance, FDA could license the product as a biosimilar while separately reviewing and providing a Complete Response Letter outlining deficiencies for interchangeability.  FDA notes that the administrative “split” is the default in such circumstances, but the applicant can request that FDA only license the product if determined to be interchangeable.

FDA also provides guidance for sponsors of existing 351(a) or “deemed” BLAs that would like to be considered biosimilar to other approved biologics.  In such a case, FDA requires that the sponsor submit a new BLA under 351(k) containing data demonstrating that its product is biosimilar or interchangeable to the reference product.  Importantly, there is no need to revoke the original BLA, as a product may be on the market as both a stand-alone biologic and a biosimilar.

Finally, the guidance tackles biosimilar and interchangeable biosimilar labeling.  FDA explains that neither biosimilar nor interchangeable biosimilar labeling should include descriptions of the data used to demonstrate biosimilarity or interchangeability.  Because the biosimilarity studies are not safety and effectiveness studies, they do not facilitate understanding of a product’s safety and effectiveness and therefore do not belong in the product labeling.  FDA reiterates here that certain differences in labeling between interchangeable biosimilars and their reference products may be appropriate and highlights that an interchangeable product may be licensed for fewer than all of the reference product’s licensed conditions of use.  Notably, FDA expressly recommends that sponsors, whenever possible, seek approval for all conditions of use (which is probably good advice—at least for now—considering the Federal Circuit’s recent decision on induced infringement for carve-outs in the small molecule context).  Further, FDA recommends that sponsors of approved interchangeable biosimilars include the following labeling statement regarding interchangeability:

An interchangeable product (IP) is a biological product that is approved based on data demonstrating that it is highly similar to an FDA-approved reference product (RP) and that there are no clinically meaningful differences between the products; it can be expected to produce the same clinical result as the RP in any given patient; and if administered more than once to a patient, the risk in terms of safety or diminished efficacy from alternating or switching between use of the RP and IP is not greater than that from the RP without such alternation or switch. Interchangeability of [INTERCHANGEABLE BIOSIMILAR’S PROPRIETARY NAME] has been demonstrated for the condition(s) of use, strength(s), dosage form(s), and route(s) of administration described in its Full Prescribing Information.

As it does for all draft guidance documents, FDA encourages industry to submit comments on this guidance.  Comments are due by January 19, 2021.  Once final, these questions and responses will be incorporated into existing final guidance on biosimilars and interchangeability.

In October, the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) published a Final Rule that permits the importation of prescription drug products from Canada (the “Final Rule”). The Final Rule became effective on November 30, but the potential for Canadian drug importation faces significant challenges. First, on November 23, 2020, Pharmaceutical Research and Manufacturers of America (PhRMA), Partnership for Safe Medicines (PSM), and Council for Affordable Health Coverage (CAHC) filed a lawsuit challenging the Final Rule. Then, a few days later, Canada passed an interim order banning the export of certain drugs from Canada.

The Final Rule

As discussed in our prior post, the Final Rule implements Section 804 of the Federal Food, Drug, and Cosmetic Act (FDC Act), 21 U.S.C. § 384, to allow states and other entities (Sponsors) to develop a Section 804 Importation Program (SIP) to import certain prescription drugs from Canada into the United States. Drugs imported under a SIP must be approved by Health Canada and meet the conditions in an FDA-approved new drug application (NDA) or abbreviated new drug application (ANDA) – meaning that the drug must be currently marketed in the United States under an NDA or ANDA, and the manufacturer must attest that the imported version of the drug meets the conditions of that NDA or ANDA. Before they can be sold in the United States, imported drugs must undergo testing and be relabeled for sale in the United States. The Final Rule includes other requirements to protect the drug supply chain, such as requiring that SIP Sponsors partner with a Health Canada licensed Foreign Seller who must also register with the FDA; limiting product Importers to licensed pharmacists or wholesale distributors; and controlling the number of Sponsors, Foreign Sellers, and Importers for each SIP. The Final Rule also requires SIP Sponsors to provide FDA with data and information about the SIP, including the SIP’s cost savings to American consumers.

As set forth in the FDC Act, Section 804 becomes effective only if the Secretary of HHS certifies to Congress that the importation plan will (A) pose no additional risk to the public’s health and safety, and (B) result in a significant reduction in the cost of covered products to the American consumer. Concurrent with the issuance of the Final Rule, HHS Secretary Alex Azar certified that the importation program described in the Final Rule would meet both of the statutory requirements. As we have previously noted, Section 804 was enacted in 2003, yet this is the first time that the Secretary of HHS has made such a certification.

The Lawsuit

On November 23, 2020, PhRMA, PSM, and CAHC (collectively, “the Plaintiffs”) filed a lawsuit in the U.S. District Court in the District of Columbia challenging the Final Rule and Secretary Azar’s Certification. The lawsuit seeks a finding that the Final Rule is unlawful and asks the Court to set aside and permanently enjoin implementation of the Final Rule and the Certification made by Secretary Azar.

According to the Plaintiffs, for nearly two decades the government has insisted that importation under Section 804 could not adequately address the statutory requirements for drug safety or cost savings. HHS successfully defended this position in court twice and, even under the current administration, made multiple statements against Section 804 importation – some of which were raised as concerns in the Final Rule. As such, the Plaintiffs allege that the government’s failure to explain its shift in policy renders the Final Rule arbitrary and capricious.

The Plaintiffs allege that the Final Rule fails to satisfy the statutory requirements of ensuring drug safety and cost savings. According to the Plaintiffs, the Final Rule will open the United States’ “closed” system of drug distribution, increasing the likelihood that patients in the United States receive unapproved, misbranded, and adulterated drugs. The Plaintiffs suggest that the labeling of SIP-imported drugs could mislead and confuse consumers and increase medication errors because of the similarity between the labels of the FDA-approved and SIP-imported products. In addition, the lack of FDA scrutiny over relabeling and repackaging could allow adulteration, and FDA would not be able to ensure that products are not illegitimate or counterfeit. The Plaintiffs also allege that the Final Rule undermines important safety protections in the FDC Act, and inappropriately places the responsibility for ensuring the safety of SIP-imported drugs on the Sponsors and other entities that have little expertise and resources to ensure that all aspects of drug safety are satisfied. The Plaintiffs assert that the alternative safeguards set forth in the Final Rule (e.g., the requirement to test SIP-imported drugs) do not ensure safety because FDA will not be able to verify that the methods, facilities, and controls used for the manufacture, processing, packing, and labeling of the drugs are in conformance with FDA requirements.

The Plaintiffs also allege that the Final Rule fails to address the statutory cost savings requirement by conditioning it on future events, and delegating responsibility for demonstrating cost savings to the SIP Sponsors. The Final Rule explicitly acknowledges the government’s current inability to estimate potential cost savings due to a lack of information about the likely size and scope of the SIPs, the specific prescription drugs that may be imported, and the degree to which the imported drugs will be less expensive than drugs currently available in the United States. Since the demonstration of cost savings is required under the FDC Act, the Final Rule envisions that FDA will “find that a particular SIP proposal meets the certification requirements based on the information received as part of the proposal.” 85 Fed. Reg. at 62,112. According to the Plaintiffs, Section 804 does not contemplate or permit this SIP-by-SIP determination. In addition, the Plaintiffs argue that there is no indication that the Final Rule will reduce drug costs or yield substantial savings to American consumers. The Plaintiffs posit that any difference between the cost of comparable U.S. and Canadian drugs will be negated by the costs of the Foreign Sellers and Importers, including the costs of the relabeling and testing required under the Final Rule.

The Plaintiffs also allege that the Final Rule is contrary to intellectual property laws, violates the First Amendment, and raises serious questions under the Takings Clause. These allegations are related to the Final Rule’s requirement that manufacturers help facilitate importation or risk criminal liability. For example, the Final Rule requires manufacturers to either test SIP-imported products for free or turn over trade secrets and other confidential information so that Importers can test and authenticate the drugs. The Final Rule also requires manufacturers to provide Importers with authorization for the use, at no cost, of the approved labeling for the prescription drug, which could include trademarked names and logos. Since the Final Rule does not allow manufacturers to charge for the costs of conducting the required testing or the provision of trade secrets and confidential information, the Plaintiffs allege that this would amount to an uncompensated taking in violation of the Fifth Amendment.

The Canadian Interim Order

Before the Final Rule was published, Canada voiced its opposition to the importation proposal, predicting that importation would increase pressure on the Canadian drug supply, exacerbate drug shortages, and limit access to needed medicines in Canada. In direct response to the Final Rule, on November 27, the Canadian Minister of Health signed an Interim Order Respecting Drug Shortages (Safeguarding the Drug Supply). This Order prohibits licensed Canadian establishments (e.g., wholesalers and distributors) from distributing drugs for consumption or use outside of Canada, unless the licensee has reasonable grounds to believe that the distribution will not cause or exacerbate a drug shortage. Canadian licensees are required to create and retain detailed records with the information used to determine that distribution is not prohibited (i.e., will not cause or exacerbate a drug shortage) and must provide this information to the Minister of Health upon request. The Order applies to all drugs that are eligible for importation to the United States under the Final Rule as well as biologics and controlled substances, which are not eligible for importation by SIPs.

Our Thoughts

Drug prices and the desire to provide savings to American patients and consumers will likely continue to be an important issue as the Administration changes. While the Final Rule purports to set forth a possible solution by allowing for importation of drugs from Canada, it seems unlikely that this will be a viable solution. The Canadian Interim Order will effectively prevent the Foreign Sellers that SIP Sponsors partner with from exporting drugs to the United States, raising substantial questions about how SIP Sponsors will satisfy the requirements set forth in the Final Rule. In addition, the Plaintiffs’ lawsuit raises significant questions about the appropriateness of the Final Rule and the validity of the Certification that underlies the Final Rule. In the face of this legal challenge, it remains to be seen whether the new Administration will support the Final Rule and Certification. We will continue to monitor and report on developments related to drug importation plans and other efforts to lower drug prices in the United States.

On December 4, 2020, FDA finalized the guidance document, Requesting FDA Feedback on Combination Products (Guidance), which was issued to fulfill the requirement under Section 3038 of the Cures Act.  As a reminder, Section 3038 contained several provisions to help facilitate FDA engagement and appropriate review of combination products by, among other things, reaffirming FDA’s task of choosing a lead Center to regulate combination products based upon their primary mode of action (PMOA), and nudging FDA to conduct premarket review of combination products under a single application, although it left open the continued possibility of FDA using separate applications “whenever appropriate” (see previous coverage here).  With the intent of improving pre-submission interactions around combination product development, the Guidance updates the December 2019 draft of the same title and describes “ways in which combination product sponsors can obtain feedback from FDA on scientific and regulatory questions and to describe best practices for FDA and sponsors when interacting on these topics.” Guidance at 2.  In comparing the final guidance to its draft, some re-organization and clarifications have been made, but the two documents are substantively very similar.

Combination products consist of any combination of a drug, device, and/or biologic and their regulation tends to be more complex than regulation of a single entity product.  There are many times when a sponsor is uncertain whether the product should be regulated as a drug, biologic, or device, and in these situations, the Guidance recommends FDA’s Office of Combination Products (OCP) as the first line of communication, so that an Agency Center may be assigned based on the product’s PMOA.  OCP can also be contacted for general questions related to combination products.

When a combination product’s lead Center is known, to communicate with FDA, combination product sponsors may use either (1) typical application-based mechanisms or (2) a Combination Product Agreement Meeting (CPAM).  The application’s FDA Point of Contact (POC), when an application has already been submitted, or the Center’s Project Jurisdiction Officer (PJO) can be contacted with preliminary or general questions, or to discuss whether an application-based mechanism or CPAM is more appropriate.

Meetings with FDA: Traditional vs. CPAM

Traditional application-based mechanisms include the pre-submission process used in the Center for Devices and Radiological Health (CDRH) and the Center for Biologics Evaluation and Research (CBER) and formal milestone or guidance meetings used in the Center for Drug Evaluation and Research (CDER) and CBER.  The Guidance suggests these mechanisms will be the most efficient and recommends their use to request feedback on “scientific issues, study design, testing approaches, or application preparation considerations for combination products or clarifying topics for which FDA has already published technical guidance.” Id. at 15.  The application-based request should identify the product as a combination product and should include information on all constituents (i.e., drug, biologic, and/or device).  For a drug or biological product-led combination product that includes a device constituent part, the request should include a description of the device (including images or drawings), identification of components, and identification of clearance or approval numbers, where applicable.  For a device-led combination product, the request should include a description of the drug and/or biologic (including chemical name, established or proper name, and structure), route of administration, dosing information, and approval numbers, where applicable.

A CPAM is an alternative mechanism for communication available to combination product sponsors when previous feedback and agreement under an application-based mechanism has not provided enough certainty.  In other words, while application-based mechanisms may be used to obtain FDA feedback on both general and more specific topics as a combination product moves through development, a CPAM should be used when a formal agreement with the Agency is warranted.  It should not, however, be used to resolve disputes that are otherwise reviewed under existing dispute resolution and appeals processes.  However, it should be noted that CPAM agreements can be invalidated if there are changes, including changes to a product’s intended use, design/contents, manufacturing processes, or the investigational plan.  With this in mind, a CPAM should be used once development has reached a stage where changes that might invalidate an agreement are unlikely (e.g., the scientific basis of the sponsor’s proposal is mature), with application-based interactions being more appropriate when product design and/or scientific evidence is evolving.  FDA plans to notify sponsors upon receipt of a CPAM request if they believe an application-based meeting may be more effective.  Also, if FDA plans to notify sponsors if they determine, during a subsequent review of a marketing application, that CPAM agreements are no longer valid.

Operationally, a CPAM may only be used when the lead Center is assignment is clear. Also, FDA will meet with the sponsor within 75 calendar days of receiving the request.

Other Best Practices for FDA Communication

The Guidance provides a number of best practices for communication between FDA and sponsors of combination products.  For sponsors, even if questions relate to a different constituent part, communication should always go through the lead Center, and the POC, when known.  All submissions should identify the product as a combination product.  Sponsors should be clear and specific in their requests for Agency feedback and questions should be appropriate for the stage of development.  Comprehensive rationale and sufficient supporting information should be provided to allow FDA to consider the issue and provide feedback.  For FDA, the Guidance recommends the Agency notify sponsors of the POC; engage relevant expertise from other medical product Centers and OCP to address sponsor questions; and provide consolidated, aligned, and reliable feedback.

Overall, the Guidance provides consolidated recommendations for combination product sponsors, including details about the content and format of submissions, and should be a useful reference for ensuring efficient and effective communication with FDA.  Sponsors should also like FDA’s commitment to engage cross-Center experts and provide consolidated and aligned feedback as these have been areas of frustration to many during combination product development and review.

Pharmacists, in general, can partially fill any prescription for non-controlled and most Schedule III-V controlled substances.  Partial filling has several benefits, including reducing waste and potentially lowering the cost of a prescription.  However, Schedule II (C-II) controlled drugs are an exception to general rule allowing partial fills, as federal law and regulations only permit partially filling C-II prescriptions in certain instances.

The Comprehensive Addiction and Recovery Act (CARA), passed in July 2016, amended the Controlled Substance Act (CSA) to authorize additional partial filling of Schedule II controlled substances.  Comprehensive Addiction and Recovery Act of 2016, Pub. L. No. 114-198, 130 Stat. 695 (codified as amended in scattered sections of 42 U.S.C. and 21 U.S.C.).  DEA has now proposed a rule to amend its regulations in accordance with CARA that will expand the situations where a partial filling of a C-II prescription is permitted.  21 C.F.R. Part 1306.

The DEA published this notice of proposed rule on December 4, 2020 and there is a 60-day comment period thereafter.  Partial Filling of Prescriptions for Schedule II Controlled Substances, 85 Fed. Reg. 78,282 (proposed Dec. 4, 2020).

Background of Partial Filling of C-II Prescriptions

As a general rule, a pharmacist is not permitted to partially fill a C-II prescription for a patient.  However, DEA regulations currently provide three exceptions for partial filling of C-II prescriptions:

• If a pharmacist is unable to supply the full quantity of a C-II prescription. In these instances, the pharmacist must make a notation of the quantity supplied on the prescription itself.  The remaining portion of the prescription may be filled within 72 hours of the partial filling.  However, no further quantity may be supplied beyond 72 hours without a new prescription and the pharmacist must notify the prescriber.  21 C.F.R. § 1306.13(a).
• If a C-II prescription is written for a patient in a Long-Term Care Facility (LTCF). The pharmacist must record on the prescription whether the patient is an “LTCF patient.”  21 C.F.R. § 1306.13(b).
• If a C-II prescription is written for a patient with a medical diagnosis documenting a terminal illness. Both the pharmacist and the prescribing practitioner have a corresponding responsibility to assure that the controlled substance is for a terminally ill patient.  The pharmacist must record on the prescription that the patient is “terminally ill.”  21 C.F.R. § 1306.13(b).

For each partial filling for a LTCF or terminally ill patient, the dispensing pharmacist must record the date of the partial filling, quantity dispensed, remaining quantity authorized to be dispensed and the identification of the dispensing pharmacist.  The total quantity of C-II controlled substances dispensed in all partial fillings must not exceed the total quantity prescribed.  C-II prescriptions for patients in a LTCF or terminally ill patients are valid for 60 days from the issue date.  21 C.F.R. § 1306.13(b).

Proposed C-II Partial Fill Rule

DEA is now proposing a new regulation to add a fourth scenario where a pharmacist can partially fill a C-II prescription as authorized under CARA.

The proposed rule would allow a pharmacist to partially fill a C-II prescription if requested by the patient or prescriber.  However, to be lawful under CARA, the partial filling must not be prohibited by State law; must be written and filled in accordance with the CSA, DEA regulations and State law; and the total quantity dispensed in all partial fillings cannot exceed the total quantity prescribed.  85 Fed. Reg. at 78,285.  Moreover, after the first partial fill, any additional partial fill(s) must occur within 30 days after the date on which the prescription is written (unless the prescription is issued as an emergency oral prescription, in which case the remaining portion must be filled no later than 72 hours after it was issued).  Id.

We also note that DEA has proposed additional regulations related to this new partial fill rule not required under the CARA amendment to the CSA.  Specifically, prescribers must communicate their intent for a partial filling by writing such terms on the face of the prescription at the time that it is completed (or, in the case of an emergency oral prescription, directly stating to the pharmacist when such prescription is communicated to the pharmacist).  Additionally, if a patient is requesting the partial fill, then the patient must be the one to request a partial fill.  However, the patient must request the partial fill, and not merely the person dropping off or picking up the prescription.  The DEA specifically noted that this restriction is required by CARA and thus is an exception to the general authority for a pharmacy to deliver a prescription to the “ultimate user.”  85 Fed. Reg. at 78,284.  Under the CSA, the ultimate user can be “a person who has lawfully obtained, and who possesses, a controlled substance for his own use or for the use of a member of his household or for an animal owned by him or by a member of his household.”  21 U.S.C. § 802(27).  The patient can request the partial fill either in-person, telephonically or in a written note.  For example, the patient can write and sign a note to be delivered to the pharmacist by another person.  85 Fed. Reg. at 78,284.

The pharmacist, in the event of a prescriber-requested partial fill, must record the amount partially filled, the date, name/initials of the filling pharmacist and all other information required by 21 C.F.R. § 1306.22(c) for schedule III and IV prescription refills.  In the event of a patient-requested partial fill, the pharmacist, in addition to the information above, must also record the following statement:  “patient requested partial fill on [date such request was made].”  Id.  Note, however, if both the prescriber and patient request a partial fill, the pharmacist cannot dispense a partial quantity greater than authorized by the prescriber.

The DEA notes several potential benefits for this proposed rule, including lower costs for patients, reduction of unused controlled medication and reduction of the potential for addiction, overdose and diversion.

It also important to note that the pharmacist is not absolved of their “corresponding responsibility” to verify the legitimacy of the prescription — including any partial filling request by a patient or prescriber.  See 21 C.F.R. § 1306.04(a) (“The responsibility for the proper prescribing and dispensing of controlled substances is upon the prescribing practitioner, but a corresponding responsibility rests with the pharmacist who fills the prescription.”) (emphasis added).  For example, pharmacists cannot partially fill a C-II if the prescription quantity exceeds any state-mandated controlled drug quantity limits.  In such a case, the pharmacist must exercise his or her corresponding responsibility and decline to fill, or partially fill under this proposed rule, the entire C-II prescription because it would be invalid pursuant to state law.

Conclusion

The DEA’s proposed C-II partial fill rule comports with the CARA amendment to the CSA.  We agree that it has the potential to reduce the amount of unused C-II medication and the risk of diversion and abuse.  However, we question whether this will result in significant cost savings.  We understand that most patients receiving a C-II prescription pay a copay and do not pay out-of-pocket for the full cost of the drug.  The drug copay does not necessarily decrease based upon small changes in drug quantity.  Therefore, it is currently unclear whether prescription insurance plans will lower a copay if a C-II prescription is only partially filled.  If not, then a patient may ultimately pay multiple copays and more money out-of-pocket then they would otherwise.  Indeed, DEA has recognized this issue and has specifically requested comments from industry regarding whether copays will be reduced if C-II prescriptions are partially dispensed.

For over nine months FDA has dithered on whether and, if so how, to conduct remote inspections of drug facilities during the pandemic.  On the other hand, many foreign regulatory bodies appear to have implemented just such a system of remote inspections. Has FDA just decided to wait out the pandemic?  Hyman, Phelps & McNamara, P.C.’s Mark I. Schwartz discussed this issue and more in an op-ed published earlier this week with Bloomberg News.

The FDA Law Blog may appear to have become a little patent-heavy over the last few months, but you can thank the Federal Circuit for that.  It just can’t stop changing the landscape for Hatch-Waxman litigation.  In October, the Federal Circuit, for all intents and purposes, shut down the statutorily-authorized method-of-use patent carve-out practice by finding that skinny-labeled generics induce infringement merely by stating that they are AB-rated.  Now, the Federal Circuit has reinterpreted the venue provisions governing patent cases so that the location of the submission of an ANDA, at least for U.S. entities, determines where patent litigation can take place.  It’s impressive that, after more than 35 years, litigants still find new questions to raise about proper implementation of the Hatch-Waxman Amendments and the related patent infringement provisions set forth in 35 C.F.R. § 271(e).

In Valeant Pharmaceuticals v. Mylan Pharmaceuticals, decided in early November 2020, the Federal Circuit held that the District Court of New Jersey properly dismissed claims against two U.S.-based defendants based on improper venue.  Mylan, with a U.S.-entity based in West Virginia, submitted to FDA, based in Maryland, an ANDA referencing Valeant’s Jublia with a Paragraph IV certification in 2018, and Valeant brought a patent infringement suit against Mylan in Valeant’s home state of New Jersey.  Valeant posited that venue was appropriate in New Jersey because New Jersey “is a likely destination for Mylan’s generic” product, because Mylan does business in New Jersey, and because Mylan has previously submitted to the jurisdiction of the District Court of New Jersey.  For good measure, Valeant also filed separate infringement litigation regarding the same patents in the District Court of West Virginia.

While Mylan didn’t deny Valeant’s allegations of presumed marketing in New Jersey, Mylan moved to dismiss the New Jersey litigation, arguing that venue was improper in New Jersey because no Maryland defendant resides in New Jersey and no alleged act of infringement occurred in New Jersey.  The Federal Circuit upheld the District Court of New Jersey’s decision to grant the Motion to Dismiss based on improper venue.  Essentially, the Court found that any infringing activities in New Jersey were too speculative for venue to be proper.

Previous cases had held that “planned, future acts” were sufficient to justify specific personal jurisdiction over a defendant in ANDA-related patent infringement cases, as were planned, future interactions with a state in the form of marketing activities.  But the Supreme Court “dramatically changed the venue landscape in patent cases” in 2017 in TC Heartland LLC v. Kraft Foods Grp. Brands LLC.  That decision held that the term “resides” in the patent venue statute, 28 U.S.C. § 1400(b), refers only to a corporation’s state of incorporation, meaning that a corporation may be sued for patent infringement only in those states in which it is incorporated and those states in which it has a regular and establishment place of business and an act of infringement occurred.

Looking to TC Heartland, the Federal Circuit examined the plain language of the infringement statute in 35 U.S.C. § 271 as juxtaposed to the patent venue statute in 28 U.S.C. § 1400(b).  Both parties agreed that the venue provisions for patent cases states that an action for patent infringement may be brought “where the defendant has committed acts of infringement” and therefore, based on the present perfect tense, requires an act of infringement to have occurred in the past.  In the case of ANDA submission, where 35 U.S.C. § 271(e)(2) renders it an “act of infringement to submit” an ANDA, the Court determined that the act of infringement is the actual submission—and only the submission—of the ANDA.  The Court explained that the common claim that an ANDA submission is an “artificial” act of infringement misstates the statutory construction: “ANDA submission is a real, albeit statutorily created, act of infringement.”  The act of infringement is real, and it is the submission of the ANDA that is in the infringing act.  Thus, the Court must look to the act of submission, and where it occurred, to determine proper venue—in this case, West Virginia.  In the Court’s view, future marketing plans are not relevant to the inquiry of where “the defendant has committed acts of infringement.”

Despite the broad approach to venue that courts have previously taken in Hatch-Waxman patent infringement cases, the Court explained that there was no textual hook in the statute to declare that an ANDA submission is an act of infringement everywhere in the U.S.  As such, there is no indication that Congress wanted to adopt such a broad interpretation of venue.  And though the Court found Valeant’s policy argument persuasive, in which it argued that patent-holders would be forced to bring multiple repetitive suits in different jurisdictions, the Court found that it was not persuasive enough to overcome the statutory language.  Thus, the Federal Circuit dismissed the case because no act of infringement actually occurred in New Jersey.  A different issue, related to foreign defendants, was remanded back to the District Court.

The decision here appears to give the ANDA filer has significant control over the venue for patent litigation.  Indeed, Valeant warns of ANDA applicants “gaming” the system.  But, at the least, the Federal Circuit gave generic sponsors something to ease their pain after the potential loss of the section viii carve-out (though we’ll have to see how that ultimately plays out).