Following our blog post on the topic, in which we urged others to comment in response to FDA’s Proposed Product Jurisdiction rule changes, we decided to take our own advice. On July 15, 2018, Hyman, Phelps & McNamara, P.C. filed comments to Docket No. FDA-2004-N-0191.

Our requests were modest but important, and reflect our deep frustrations with the Request for Designation (“RFD”) process as described in previous posts.   Specifically, we asked the Agency to (1) establish a timeframe for review of RFD decisions by the Office of Special Medical Programs when requested by the sponsor, pursuant to 21 C.F.R. § 10.75, and (2) remove the 15-page limitation for RFDs at 21 C.F.R. § 3.7.  These requested changes would help streamline the RFD process and make it work better for both sponsors and the Agency.

The lack of any timeframe for review of RFD appeals can result in appeals languishing for many months. This delays sponsors from seeking product approval, and may consequently deprive the public of beneficial products for months or years.  The current 15-page limitation also frustrates both the Agency’s and sponsors’ goals by stymieing the free exchange of relevant information about a proposed product.  Fifteen pages is simply not enough to provide FDA with all the requested information for an RFD, especially as FDA continues to place an increasingly high burden on sponsors to establish a product’s mode of action.

In addition to these requests, we asked FDA to reconsider its approach to determining whether a product or product component achieves its primary intended purposes through chemical action, thereby excluding it from the statutory device definition. FDA alluded to this topic in its proposal, but then proposed no changes.  In our experience, FDA’s current approach can wrongly result in a combination product that exhibits very minimal chemical action being regulated as a drug or biologic rather than a device.  This approach – which we have seen repeatedly – is not consistent with the statutory language and should be revisited, particularly in light of the 21st Century Cures Act. Comments filed by the Washington Legal Foundation demonstrate why FDA needs to modify the way in which it makes these jurisdictional decisions.

By Michelle L. Butler & Eliot Markman* –

On July 4, 2018, 2017 ME S 432, titled “An Act To Require Drug Manufacturers To Comply with Federal Law” (the “Act”), became law without Maine Governor Paul LePage’s signature.  The Act amends 32 M.R.S.A. § 13702-A and requires a drug manufacturer or wholesaler licensed in Maine to make a drug distributed in the State available for sale to “an eligible product developer.”  An eligible product developer is defined as “a person that seeks to develop an application for the approval of a drug under the Federal Food, Drug, and Cosmetic Act [FDC Act], Section 505(b) or 505(j) or the licensing of a biological product under the federal Public Health Service Act, Section 351.”  We note that this definition is not limited to a person seeking approval of an ANDA or a biosimilar application.  Although the term “reference sample” is not used in the text of the statute itself, the section discussing the intent of the statute calls the drugs that are to be made available under this provision reference samples.

The Act requires a manufacturer or wholesaler to make the drug available for sale “at a price no greater than the wholesale acquisition cost [WAC] and without any restrictions that would block or delay the eligible product developer’s application in a manner inconsistent with [the FDC Act’s provision prohibiting the use of a REMS program to delay competition].” WAC is defined as “the manufacturer’s list price for a brand-name drug or a generic drug per person per year or course of treatment when sold to wholesalers or direct purchasers in the United States, not including discounts or rebates, for the most recent month for which information is available.”  As a consequence of purchasing a drug under this provision at a price no greater than WAC, the eligible product developer must charge consumers in Maine the same price or less for the drug it manufactures, presumably after obtaining approval from FDA of an application.  The Act permits the State to seek injunctive relief against a person who fails to comply with these new provisions.

A number of questions arise from the language of the Act, including some that raise the specter of a lawsuit:

• While the title of the Act suggests that it is only working to implement an existing federal requirement, the FDC Act does not require a manufacturer to make drug available to a person seeking to develop a generic or biosimilar drug in all circumstances; rather, under the FDC Act, a manufacturer is not permitted to use a REMS program to block or delay approval of an ANDA or 505(b)(2) NDA.
• The Act’s requirement for a wholesaler to make drug available may raise issues for the wholesalers. A wholesaler that is distributing drug subject to a REMS and/or closed distribution system would likely be reticent to provide drug to an eligible product developer without the permission of the manufacturer with whom it likely has a contractual relationship that does not permit such distribution.

In addition, the definition of WAC in the Act is not consistent with the real-world definition of WAC. It is appropriate that the definition describes WAC as a list price and does not include discounts or rebates.  However, WAC is the list price for a specific package size of a drug (e.g., a bottle of 100 tablets or a bottle of 1000 tablets) and is not tied to a course of treatment or “per person per year.”  The Act’s definition is likely to lead to confusion.

The Act also includes an exemption from liability for “product of another.” The Act states that a manufacturer or wholesaler is not liable for the failure to include adequate safety warnings or for product defects when the manufacturer or wholesaler has made a drug available to an eligible product developer pursuant to the Act and the product was not manufactured or sold by that manufacturer or wholesaler.  While the language is not entirely clear, it appears that the exemption is intended to shield a manufacturer or wholesaler that provides product to an eligible product developer from liability for the competing generic or biosimilar drug that is ultimately developed and sold by the eligible product developer.

Senate Democratic Leader Troy Jackson, the bill’s sponsor, stated in a press release dated July 5, 2018 that the Act will lower prescription drug prices by making cheaper generic drugs available more quickly after a drug’s patent expires.  According to the press release, the Act is intended to prevent companies from withholding products from generic manufacturers through closed distribution systems that may be implemented as part of a REMS.

We will continue to monitor this and similar laws that states have enacted aimed at curbing drug prices.

* Summer Associate

In 2010, the Federal Food, Drug, and Cosmetic Act (FDC Act) was amended to include a requirement that certain vending machine operators engaged in operating and owning 20 or more vending machines provide calorie declarations for certain articles of food sold from vending machines. FDA issued a final implementing regulation on Dec. 1, 2014 with a compliance date of Dec. 1, 2016.

The final regulation requires that a prospective purchaser of a product from a vending machine must be provided with calorie information. For glass-front vending machines, the regulation provides the option of front of package (FOP) declaration of the calorie content. In that case, the regulation requires that the “visible nutrition information must be clear and conspicuous and able to be easily read on the article of food while in the vending machine, in a type size at least 50 percent of the size of the largest printed matter on the label and with sufficient color and contrasting background to other print on the label to permit the perspective purchaser to clearly distinguish the information.” FDA received many comments in response to the proposal for this requirement. Even after the publication of the final rule, FDA received comments that the requirement presented technical challenges.

In the Federal Register of Aug. 1, 2016, FDA extended the compliance date for the type size provision to July 26, 2018 to coincide with the original compliance date for the new nutrition labeling regulations. The extension applied only to those products in glass front vending machines that provide FOP calorie disclosure that complied with the vending machine labeling rule, except that the disclosure was not 50 percent of the size of the largest print on the label.

On July 12, 2018, FDA issued a proposal to amend the type size provision to require that the size is at least 150% of the size of the net quantity of contents. FDA invites comments to this proposal.

In addition, FDA invites “comment and data on the percentage of food products commonly sold in glass front vending machines bearing voluntary FOP calorie labeling, and for those products that currently bear voluntary FOP calorie labeling, the type size of the FOP calorie labeling used on the products.”

FDA also requests comments on two alternative amendments to the current provision, namely:

1. Require that calories are declared in a font at least 100% of the size of the net quantity of contents declaration.
2. Not specify any size requirement (an option FDA previously considered and rejected).

FDA proposes that any resulting final rule will have an effective date of 30 days after the date of publication and a compliance date of Jan. 1, 2020.

Written comments must be submitted by Sept. 25, 2018.

Way back in September 2014, the President’s Council of Advisors on Science and Technology (“PCAST”) released a report to the President, titled “Combating Antibiotic Resistant Bacteria.”  The report was part of a broader initiative announced by the Obama Administration to address the growing challenges posed by antibiotic resistance. Of the various “push” and “pull” mechanisms discussed in the PCAST report to incentivize the development of antibiotics, the “push” mechanism described as “[t]radable vouchers to extend patent life or market exclusivity of another drug” was of particular interest to us.  As we explained back then, this is longhand for “wildcard exclusivity” (see our previous post here).  Fast-forward almost four years, and the PCAST recommendation has found its way into a legislative proposal.

On June 28, 2018, Representatives John Shimkus (R-IL) and Tony Cárdenas (D-CA) introduced H.R. 6294, the Re-Valuing Anti-Microbial Products Act of 2018 (“REVAMP Act”).  The REVAMP Act, which Reps. Shimkus Cárdenas are reportedly trying to get added to the Pandemic and All-Hazards Preparedness Reauthorization Act of 2018, would amend the FDC Act to add Section 530, titled “Exclusivity to encourage development of novel therapies targeting serious microbial infections.”

Proposed FDC Act § 530 would provide that if FDA approves an NDA or BLA for a product designated as a “priority antimicrobial product” under a new designation program described in the bill, then the Agency shall award the application holder a 12-month exclusivity extension period “for the sole purpose of conveying such extension, in whole or in portions, to other sponsors or holders.” The exclusivity would be applied with respect to one or more other drugs for which a 505(b)(1) is submitted to FDA, that is granted 5-year New Chemical Entity (“NCE”) exclusivity, and that is designated as a “fast track product” under FDC Act § 506(b).

The conveyance of exclusivity, in whole or in in part, would need to be immediately communicated to FDA; and, with respect to the recipient drug, would apply to non-patent exclusivity granted under FDC Act §§ 505(c)(3)(E)(ii) and 505(j)(5)(F)(ii) (i.e., NCE exclusivity), FDC Act §§ 505(c)(3)(E)(iii)-(iv) and 505(j)(5)(F)(iii)(iv) (i.e., 3-year exclusivity, and FDC Act § 527 (i.e., 7-year orphan drug exclusivity) – and in addition to any 6-month pediatric exclusivity extension in effect.

Ahh . . . but there’s more . . . . In addition to applying to non-patent exclusivity the conveyed exclusivity would also apply to patent exclusivity (and in a manner  similar to how pediatric exclusivity is applied to Orange Book-listed patents)!  According to the bill:

(2) DRUGS SUBJECT TO LISTED PATENTS.—Immediately upon the Secretary’s receipt of a notice under subsection (b), the period during which an approval of an application may not be made effective by operation of subsection (c)(3) or (j)(5)(B) of section 505, as applicable, in the case of a recipient drug that is the subject of—

(A) a listed patent for which a certification has been submitted under subsection (b)(2)(A)(ii) or (j)(2)(A)(vii)(II) of section 505;

(B) a listed patent for which a certification has been submitted under subsection (b)(2)(A)(iii) or (j)(2)(A)(vii)(III) of section 505; or

(C) a listed patent for which a certification has been submitted under subsection (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 if in the patent infringement litigation resulting from the certification the court determines that the patent is valid and would be infringed,

shall be extended after the date the listed patent expires (including any patent extensions) for a period equal to the conveyed exclusivity extension period.

In addition, the bill provides that “the holder of a conveyed exclusivity extension period may sell, exchange, convey, or hold for use, such period.” This could result in the creation of quite a market for the sale of exclusivity (somewhat similar to the market created for priority review vouchers – see here).

But the REVAMP Act does include some limits on wildcard exclusivity. For example, the conveyance and notice of an exclusivity extension period for a drug must be made no later than the last day of the ninth year of the NCE exclusivity period, as extended by GAIN (FDC Act § 505E); and for a biological product, the conveyance and notice of an exclusivity extension period must be made – quite literally – at the eleventh hour: “in the case of a priority antimicrobial product that is a biological product, the last day of the eleventh year of the exclusivity period described in section 351(k)(7)(A) of the Public Health Service Act applicable with respect to such product.”  In addition, a period of patent or non-patent exclusivity would not be extended “if the conveyance of an exclusivity extension period . . . or the provision of notice [of exclusivity conveyance] is made later than 4 years prior to the expiration of such period.”  Finally, FDA may make not more than 10 awards of wildcard exclusivity.  (Of course, that could change if the REVAMP Act is enacted and is successful.)

The REVAMP Act also includes a string attached to the granting of wildcard exclusivity:

As a condition on the award of an exclusivity extension period to the holder of a drug pursuant to subsection (a), the Secretary shall require the holder, upon any conveyance of the period pursuant to such subsection, in whole or in portions, to make a monetary contribution to the Foundation for the National Institutes of Health that—

(1) is in an amount that is equal to 5 percent of the total value of the consideration received by the holder as a result of the conveyance; and

(2) is designated to be used by the Foundation to conduct or support early-stage research on the development of products to treat or prevent a disease attributable to a multi-drug resistant bacterial or fungal pathogen.

The remainder of the REVAMP Act describes, among other things, how FDA is to establish a Committee on Developing Critical Need Antimicrobials. The committee would be tasked with developing a proposed list of critical need antimicrobial priorities, supporting the designation of priority antimicrobial products and the review and disposition of applications for priority antimicrobial products, and developing recommendations to FDA and Congress “regarding other incentives needed to ensure a robust and renewable pipeline of antimicrobial drugs.”

As we’ve noted before (see, e.g., here, here, and here), the concept of wildcard exclusivity has cropped up now and again over the years in legislative proposals, and in various forms and contexts. This latest proposal in the REVAMP Act seems to be the most complex arrangement yet.

By Alan M. Kirschenbaum & Eliot Markman* –

On Thursday, June 28, 2018, two industry trade associations, Pharmaceutical Research and Manufacturers of America (“PhRMA”) and Biotechnology Innovation Organization (“BIO”), agreed to drop a lawsuit against Nevada related to S.B. 539, a 2017 diabetes drug price increase transparency bill. (See our previous blog post about this lawsuit here and the initial complaint here). A joint status report—also filed on June 28, 2018—describes three reasons why PhRMA and BIO agreed to release their claims: (1) Nevada issued an emergency regulation narrowing the statute, (2) the state agreed to delay enforcement of certain reporting requirements, and (3) the parties agreed to reserve their rights to resume litigation. Joint Status Report at 2-4, PhRMA v. Sandoval, No. 2:17-cv-02315 (D. Nev. Jun. 28, 2018).

First, the Emergency Regulation, LCB File No. R042-18 (effective May 31, 2018), amends Chapter 439 of the Nevada Administrative Code to allow companies to petition the Nevada Department Health and Human Services (the “Department”) to keep a manufacturer’s pricing information confidential. The parties explain what information a manufacturer must submit in a request to the Department to keep their drug pricing information confidential: “(1) ‘ . . .  the information sought to be protected from public disclosure,’ [Emergency Regulation] § 3(2)(a); and (2) ‘ . . . an explanation of the reasons why public disclosure of the information would constitute misappropriation of a trade secret [under] the federal [Defend Trade Secrets Act] . . . ,’ id. § 3(2)(b).” Joint Status Report at 3.  The parties acknowledge that Nevada believes that this regulation, on its own, cures any constitutional defect in the statute.  (PhRMA and BIO offer no opinion as to whether the regulation cures any constitutional defect in the statute.)

Second, PhRMA and BIO agreed to drop their lawsuit because Nevada delayed the enforcement of certain reporting requirements in the statute. On June 7, 2018, the Department stated on its website that it would not proceed with enforcement actions related to manufacturers’ reports submitted on or before January 15, 2019. The Department further assured the plaintiffs in emails sent on June 8 that they would not bring any enforcement action against any manufacturer based on the submission of an incomplete report, or even no report, as long as the manufacturer submits a compliant report on or before January 15, 2019.

Third, the parties represented that they were not waiving their rights to future litigation even though they were agreeing to voluntary dismissal without prejudice. Specifically, the parties agreed not to waive the constitutional arguments related to S.B. 539 (summarized in our previous blog post here).

We will continue to monitor this and similar lawsuits against states that have enacted drug pricing laws aimed at curbing drug price increases.

* Summer Associate

To anyone with an interest in that question, FDA’s public meeting later this week is a can’t miss event.  Perhaps the most critical issue facing this nascent industry is the need for clarity on which federal agency – FDA or USDA – will exercise jurisdiction over which aspects of production and distribution.  In announcing the public meeting, FDA appeared to stake an early claim to jurisdiction, but USDA officials reportedly have indicated that they don’t consider the matter settled. 

The public meeting won’t resolve the jurisdictional question, but will serve as an important forum for stakeholders to make their voices heard (along with the docket for written comments).  It is by no means the only forum that merits attention.  As discussed in our prior postings (see here and here), a petition is already pending with USDA asking that agency to establish formal definitions of “meat” and “beef” that exclude what petitioners call lab grown meat.  Further, Congress has shown interest in potentially weighing in, and any result dictated by Congress may not necessarily align with historical approaches. 

All of this suggests there may be a bumpy ride ahead – and that’s without taking into account the battles that can be expected to unfold in the court of public opinion (see here as just one example).

Rather than rolling out the red carpet, DOJ has been highlighting with little fanfare a policy that could prove to be a powerful negotiating tool for companies in the government’s crosshairs. First announced by Deputy Attorney General Rod Rosenstein here, and later reinforced by Acting Associate Attorney General Jesse Panuccio here, DOJ seeks to bring all relevant government actors together when resolving multiple investigations involving the same misconduct. DOJ’s new policy “encourages coordination among Department components and other enforcement agencies when imposing multiple penalties for the same conduct.” Given that a single incident can subject a company to federal, state, and administrative penalties, DOJ’s policy could help provide requisite certainty to regulated industry.

The DOJ policy invokes the familiar football term “piling on,” a situation when multiple players continue to jump onto an existing pile of players who have already tackled an opponent, and thus ending the play. DOJ’s policy discourages “piling on” by instructing various law enforcement entities to appropriately coordinate in imposing penalties on a company, to avoid the “risk of repeated punishments that may exceed what is necessary to rectify the harm and deter future violations.” The new policy also requires DOJ to consider the impact on innocent stakeholders (e.g., employees, customers, and investors) who seek to resolve problems, and to assess “whether devoting resources to additional enforcement against an old scheme is more valuable than fighting a new one.”

The new policy, which has been incorporated into the U.S. Attorneys’ Manual here, has four key features:

1. Criminal enforcement authority cannot be used to persuade a company to pay a larger settlement in a civil case, such as under the False Claims Act. Such misuse of power would undoubtedly constitute an ethical violation, but the new policy reinforces this principle for aggressive prosecutors.

2. DOJ components must coordinate with each other to achieve an overall equitable result. This includes crediting and apportioning financial penalties, fines, and forfeitures.

3. Coordination also is expected among federal, state, local and foreign enforcement authorities.

4. Last, the policy identifies factors for determining when multiple penalties would be warranted. Relevant factors include the egregiousness of the wrongdoing; statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with the Department.

Importantly, both DAG Rosenstein and Acting AAG Panuccio highlighted a key benefit of increased coordination by government stakeholders: identifying culpable individuals and holding them accountable. This mantra has been repeated numerous times, most recently in the 2015 Yates memorandum, also available in the USAM.

While DOJ’s new policy seems promising, a practical limitation exists: although DOJ seeks coordination among multiple agencies and regulators, the policy is only binding on DOJ. Although DOJ handles enforcement actions on behalf of many federal government agencies, including FDA, it does not speak for all federal agencies (e.g., SEC). Foreign regulators and state and local enforcement agencies must buy into DOJ policy for true effectiveness.

The Drug Enforcement Administration (“DEA”) and the states are struggling with how to confront the challenges posed by the opioid abuse crisis. One aspect of this problem relates to employee theft, particularly at the pharmacy level. The California Board of Pharmacy (“BOP”), as well as other states, has reported a growing concern with theft reports related to employee diversion. In some cases, there have been instances in which pharmacy technicians and other employees diverted large quantities of controlled substances undetected from pharmacies over a long period of time unbeknownst to the Pharmacist-In-Charge (“PIC”) or consultant pharmacist.

While Federal and State law have long required pharmacies to maintain an inventory of all controlled substances on-hand, and records of controlled substances received and dispensed, there has not been a uniform requirement to routinely reconcile these records. But California’s novel approach to this issue requires all PICs and consultant pharmacists to monitor and account for their pharmacy’s schedule II transactions on at least a quarterly basis, and other controlled substances less frequently. In other words, California is requiring pharmacies to conduct a reconciliation to balance their controlled substance checkbook.

The California BOP believes that “[b]y requiring at least a quarterly inventory of all Schedule II controlled substances, pharmacists, pharmacies, and clinics will be better equipped to spot and stop employee drug diversion from the pharmacy earlier and prevent excessive drug losses from occurring.” Initial Statement of Reasons, Reconciliation and Inventory Report of Controlled Substances, California Board of Pharmacy, 1.

As of April 1, 2018, California pharmacies and clinics are required to conduct periodic inventories and inventory reconciliations for all controlled substances. Cal. Code Regs. tit. 16, § 1715.65(a). Pharmacies, as well as surgical and outpatient clinics licensed by the BOP, must on a quarterly basis complete inventory reconciliation reports for all federal schedule II substances. Id. § 1715.65(c). The regulation does not mandate the frequency for pharmacies and clinics to complete reconciliation reports for other controlled substances. Id. § 1715.65(a). PICs or the clinics’ consultant pharmacists must also establish “secure methods to prevent losses of controlled drugs” and establish written policies and procedures for completing reconciliation reports. Id. § 1715.65(b).

Completing inventory reconciliation reports requires pharmacists or their designees to:

1. Physically count, not estimate, all controlled substances;
2. Review all relevant acquisition and disposition records since the last inventory;
   and
3. Compare acquisitions against dispositions to identify any variances between what
   quantities are accounted for against what should be accounted for. Id. § 1715.65(c)(1)-(3).

In other words, pharmacists must attempt to balance the controlled substances on-hand during the prior physical count and receipts against dispositions and quantities on-hand during the most recent count. Pharmacists should take their physical counts at the Beginning or Close of Business, and document when they took the count. If, For example, the first count was taken at the Beginning of Business on May 1st , the pharmacist will take into account all transactions that occurred on May 1st and afterward; if the count was taken at the Close of Business on May 1st, the pharmacist will exclude May 1st transactions and include only transactions that occurred May 2nd and afterwards.

Ideally there will be no variance and the pharmacy can account for all controlled substances handled during the period. A negative variance can indicate incomplete or inaccurate records or a loss; a positive variance can indicate recordkeeping errors. The reconciliation report must identify the possible causes of any overage, but does not require pharmacies to otherwise notify the board of overages. Id. § 1715.65(c)(5). Pharmacies and clinics must report all identified losses with known causes to the board in writing within 30 days of discovery, and losses by theft, self-use or diversion by a board licensee within 14 days of discovery. Id. § 1715.65(d). The pharmacy or clinic must investigate losses with unknown causes and take corrective action to prevent additional losses. Id.

New PICs must complete an inventory reconciliation report within 30 days of becoming the PIC of a pharmacy. Id. § 1715.65(f). Outgoing PICs should also complete an inventory reconciliation report upon leaving a pharmacy. Id.

Inpatient hospital pharmacies must complete separate inventory reconciliation reports for controlled drugs stored within the hospital pharmacy and for each of the pharmacy’s satellite locations. Id. § 1715.65(g). The PICs of pharmacies that service “automated drug delivery systems” such as Pyxis machines, regardless of where they are located, must ensure that:

1. They account for all controlled substances added to automated drug delivery
   systems;
2. Access to automated drug delivery systems is limited to authorized facility
   personnel;
3. Any discrepancy or unusual access to controlled substances in the automated drug
   delivery systems is evaluated; and
4. Confirmed losses are reported to the board timely. Id. § 1715.65(h).

The individuals conducting the inventory will sign and date the inventory reconciliation report, and the PIC or professional director of a clinic will countersign the report. Id.
§ 1715.65(e). Pharmacies and clinics must maintain all records used for each inventory reconciliation report in a readily retrievable form for at least three years. Id.
§ 1715.65(c)(4).

The new California inventory reconciliation and loss reporting requirements are stricter than some requirements under the federal Controlled Substances Act (“CSA”), but less strict for others. For example, California requires pharmacists to count schedule II substances quarterly, and other controlled substances quarterly or less frequently, and then reconcile the transactions. The CSA requires registrants to conduct an inventory when they first begin operations and then at least every two years thereafter. 21 C.F.R. § 1304.11(b), (c). The CSA does not require registrants to reconcile their controlled substance transactions.

California requires pharmacies and clinics to report losses and known causes to the board in writing within 30 days of discovery, but they must report losses by theft, self-use or diversion by a board licensee within 14 days of discovery. By contrast the CSA requires pharmacies and clinics to notify the DEA Field Division Office in their area in writing of the theft or significant loss of controlled substances within one business day of discovery. Id . § 1301.76(b). This is usually accomplished via fax or email followed by a Report of Theft or Loss of Controlled Substances, DEA Form-106, when all of the facts are known. California requires pharmacies to report any controlled substance loss while the CSA requires registrants to report all controlled substance thefts and only “significant” losses. FAQs: Inventory Reconciliation Regulation, California Board of Pharmacy, Mar. 30, 2018; 21 C.F.R. § 1301.76(c). In addition, California requires pharmacies to maintain reconciliation records for three years, a year longer than required by the CSA. 21 U.S.C. § 827(b).

In summary, California’s new reconciliation requirement should help pharmacies to identify potential thefts and losses on a timelier basis. On the other hand, it may also result in increased reporting of discrepancies to the California BOP where there may not be a real concern about thefts or losses. It remains to be seen how the California BOP will react to these reports and whether it will increase pharmacy inspections or investigations.

On June 22, the Food Safety and Inspection Service (FSIS) announced the receipt of a Petition by the Organization for Competitive Markets and the American Grassfed Association to revise FSIS’s policy on “Product of USA” claims so that only U.S. domestic meat and meat products under FSIS jurisdiction can be labeled “Product of U.S.A.”

Under current FSIS policy, described in the FSIS Food Standards and Labeling Policy Book, a “[l]abeling may bear the phrase ‘Product of U.S.A.’” under one of two conditions:

1. If the country to which the product is exported requires this phrase, and the product is processed in the U.S., or
2. The product is processed in the U.S. (i.e., is of domestic origin).

Petitioners argue that the current policy allows foreign meat to be imported into the United States and bear the label “Product of U.S.A.” if it simply passes through an FSIS-inspected plant. Petitioners claim that this policy leads to violations of FSIS’s own policies and regulations that prohibit false or misleading labeling and practices.  Moreover, this policy appears to conflict with the Federal Meat Inspection Act’s prohibition on false or misleading labeling, as well as an FSIS regulation that provides that no product shall be labeled so as to give a false indication of origin. Further, Petitioners claim that the current labeling policy “can lead to the disguising of the true origin of the meat and meat products and allows foreign interests and multi-national corporations to take advantage of increased U.S. market opportunities. This can allow for an unfair market advantage for foreign meat and meat products that not only deceives the consumer, but it financially harms U.S. family farmers and independent ranchers.”

The Petitioners ask that FSIS revert to its policy as it stood in 1985. Back then, it was not enough for a product to merely be processed in the U.S. but required  a determination that “significant ingredients having a bearing on consumer preference, such as meat, vegetables, fruits, dairy products, etc., are of domestic origin” Anticipating a large number of comments, FSIS has opened a docket on regulations.gov where comments may be submitted.  Comments should be submitted by August 17, 2018.

By Jeffrey N. Gibbs and David A. Gibbs* –

FDA’s premarket approval (PMA) advisory panels are high visibility events. Both FDA and companies invest heavily in preparing for these meetings.

Thus, when the rules governing PMA panel meetings change, it should be big news. Yet, when FDA revised its procedures on how panels voted in 2010, it didn’t create much of a stir. After all, the changes – going to simultaneous blind voting and asking for separate votes on safety, effectiveness, and benefit-risk – seemed like minor procedural alterations.

Yet, procedural changes can influence outcomes. Thus, we asked what impact these changes had? To do so, we looked at 37 panel votes before the change and 52 votes after the change. The results of the analysis were recently published.

One might have expected the switch to blinded voting to lead to more divided outcomes, since panel members would not be swayed by early voting patterns or dominant voices. The data did not show that. Obviously, other forces could be in play, such as better applications going to panels, and better PMAs presumably would lead to more uniform votes. Still, the results are intriguing and unexpected.

The study found some other interesting patterns. To see what they are, read the article.

Of course, the panel vote is only one part of the process. What’s most important is the ultimate outcome. Our analysis of the data also evaluated the relationship between panel votes and FDA’s final answer: approval or not. These results will be published in a forthcoming article. Stay tuned. You may be surprised by what we found.

*David A. Gibbs is a research analyst at the World Resource Institute in Washington, D.C.

In 2016, FDA published the Q7 cGMP Guidance for Active Pharmaceutical Ingredients. It outlines best practices for everything from quality management issues, personnel, buildings and facilities, equipment and recordkeeping, to validation, change control, complaints and recalls. While it provides very useful information to stakeholders, in some instances, it raised more questions than it answered.

As a result, earlier this year FDA published a companion Question/Answer guidance that seeks to deal with some of the more salient questions that stakeholders have had regarding the 2016 Q7 Guidance.

For example, regarding the “scope” of the 2016 Guidance, should the cGMP practices outlined in the Q7 Guidance be applied for manufacturing steps prior to the introduction of the API starting materials? No, however, there is an expectation that an “appropriate level of controls” suitable for the production of the API starting materials should be applied.

Regarding “quality management”, can departments outside of the quality unit be held responsible for releasing product? Yes, as long as oversight and the overall responsibility of the system to release/reject remains with the quality unit.

Regarding the cleaning of “dedicated process equipment”, is the concept of “visually clean” acceptable for the verification of cleaning effectiveness, in other words, that there is no expectation for a specific analytical determination? “Visually clean” may be acceptable for dedicated equipment based on the ability to visually inspect, so long as one has sufficient supporting data from cleaning studies, such as, for example, an analytical determination to demonstrate cleaning effectiveness.

Regarding “documentation and recordkeeping” what is meant by the phrase “completely distributed” where ICH Q7 states that records related to production, control, and distribution should be retained for at least 3 years after the API batch is “completely distributed”? This is understood as the complete distribution of the entire batch of the API by the API manufacturer to the next party in the supply chain. In the case of APIs handled by agents, brokers, traders, distributors, repackers, and relabelers, “completely distributed” refers to distribution of the received quantity of the batch of API.

Regarding “materials management” what is meant by performing a “full analysis” on batches of raw materials to qualify a supplier? A “full analysis” should include all tests specified by the user of the raw material in the regulatory filing. In cases where no filing is required, the full analysis should include tests in other formal written specifications issued by the user of the raw material. A raw material supplier’s Certificate of Analysis may not necessarily align with the user’s specifications.

Regarding “production and in-process controls” can yield ranges defined for the first batch differ from latter batches within a campaign? Yes, differing yield ranges may be described and justified in the manufacturing procedure/master batch record explaining the ranges.

Regarding “laboratory controls” in cases where an API test method is changed, which method should be used for stability studies already in progress? The company should decide and justify which method they decide to use. All test methods for stability studies should be validated and demonstrated to be stability indicating prior to use. Any changes to stability test methods should be documented.

Regarding “recalls” must a quality related return, at the request of the API manufacturing site, from another site within the same company, be recorded as a “recall”? No, provided that no portion of the batch left direct control of the company for sale or use. The return must be clearly visible in the API site’s quality system as a return triggered by the API manufacturing site so this fact is clear in quality system trend reporting and in the product quality review.

Regarding Certificates of Analysis (CoA), who is considered to be the original manufacturer of the API? The original manufacturer would be the facility where the final purified API/intermediate is produced. Further physical processing (e.g., drying, micronization, milling, sieving) of an API would not make the manufacturer performing such operations the original manufacturer.

For the complete answers to the above questions, as well as for the list of the other questions/answers please review the guidance here.

On June 19, the D.C. Circuit issued a decision setting forth the Court’s views on attorney-client privilege in Federal Trade Commission v. Boehringer Ingelheim Pharms., Inc.  The D.C. Circuit previously ruled on attorney work-product protection issues in the same matter. See 778 F.3d 142 (D.C. Cir. 2015).  Boehringer ultimately prevailed in its attorney-client privilege claims, and the case provides good precedent for companies facing disputes with the government over attorney-client privilege.  However, the D.C. Circuit and underlying District Court decisions also highlight the difficulty of establishing privilege over dual-purpose documents and communications.

By way of background, Federal Trade Commission v. Boehringer Ingelheim Pharms., Inc. involves a Federal Trade Commission (“FTC”) antitrust investigation into Boehringer’s settlement agreement and co-promotion agreement with generic drug manufacturer Barr Pharmaceuticals, Inc.  The Boehringer-Barr settlement resolved patent litigation between the two companies, upon agreement that (1) Barr would not market its generic versions of two Boehringer drugs until shortly before Boehringer’s patents expired, and (2) in exchange for fees and royalties, Barr would help to promote one of Boehringer’s drugs until its own generic version entered the market.

The privilege issues in Boehringer centered on documents created by Boehringer employees at the request of Boehringer’s general counsel, as well as communications between the general counsel and Boehringer executives regarding the settlement with Barr.  The documents created for Boehringer’s general counsel included various financial analyses of the proposed agreements between Boehringer and Barr.  Applying a “primary purpose” analysis, the D.C. Circuit Court affirmed the lower court’s ruling that these documents were covered by attorney-client privilege.

In its ruling, the Circuit Court reiterated that attorney-client privilege applies to communications between in-house counsel and their clients just as it does to communications between outside counsel and clients. However, it “can become more complicated when a communication has multiple purposes – in particular, a legal purpose and a business purpose.”  Slip Op. at 4.  Because Boehringer’s general counsel was both advising the company on how to “ensure compliance with the antitrust laws and negotiate a lawful settlement” and helping to “negotiate a settlement on favorable financial terms,” the communications and documents at issue had both legal and business purposes.  Nevertheless, the Court opined, the “primary purpose” analysis demands only that one of the significant purposes of an attorney-client communication was obtaining or providing legal advice.  Id. at 5 (citing In re Kellogg Brown & Root, Inc., 756 F.3d 754, 757 (D.C. Cir. 2014)).  The Circuit Court concluded that Boehringer’s communications satisfied this test, and affirmed the lower court’s ruling that they were properly withheld as privileged.

A concurring opinion authored by Judge Pillard emphasized the importance of extensive factual development before the District Court in Boehringer, which permitted the D.C. Circuit to defer to the lower court’s factual determination of a “significant” legal purpose for the documents and communications in question.  Judge Pillard described the difficulty of establishing in the first instance a “reasonable certainty” that obtaining or providing legal advice was a significant purpose of any particular dual-purpose communication. See Conc. Op. at 2.  The fact that a general counsel “wore both lawyer and businessperson ‘hats’ during the communications” is not enough. Id.  Judge Pillard noted that the District Court approved the privilege claims only after Boehringer supported its claims through privilege logs and an affidavit by the general counsel, and after the Court had actually reviewed a representative sample of the documents in camera and been satisfied that Boehringer’s characterization of those documents was accurate.  The District Court conducted a detailed factual and legal analysis of each document before ruling on its privilege status.

Both District and Circuit Court opinions in this case rejected the idea that factual materials pre-dating a request by counsel, or as the Circuit Court described them, “the underlying facts and data possessed by Boehringer and its employees. . . . [and] pre-existing business documents” are subject to privilege, even if the communication of those documents to an attorney may be privileged. Slip Op. at 6.  The District Court, in particular, emphasized that attachments to a privileged communication should not be viewed as privileged without additional justification.  Dist. Ct. Op. at 45.  Thus, for example, a company’s existing test records on its products would not be subject to attorney-client privilege even if it sends those records to counsel seeking a legal opinion.  However, if an attorney acting in his or her legal capacity directs the company or a third-party expert to conduct testing and provide a report to inform that attorney’s legal advice, the testing results may be subject to privilege consistent with D.C. Circuit precedent.

Boehringer and other cases make it clear that every document subject to a claim of privilege need not “reflect express requests for or provision of legal advice.” See Dist. Ct. Op. at 47-48.  Nor is it sufficient to sustain a claim or privilege that a document is sent to an attorney or labeled as “privileged.”  Rather, the question of whether a document is privileged is fact-specific, and turns on the role and involvement of counsel in creating the document, and the purpose for which a document was created.  While it is usually a good idea to label potentially privileged communications as such, the substance of and context surrounding the documents will ultimately determine the fate of a privilege claim.  We will continue to monitor this and other cases involving privilege challenges by government regulators, to help our blog readers understand when and how the attorney-client privilege and attorney work-product protections apply.

On January 22, 2013, FDA published its final rule on cGMP requirements for combination products under 21 CFR Part 4. Specifically Part 4.4 provides two mechanisms for combination product manufacturers to comply with the cGMP requirements: either by complying with all the cGMP requirements of both constituent parts, or by complying with all the cGMP requirements of one constituent part and then complying with a streamlined list of cGMP requirements for the other constituent part, as listed in 21 CFR Part 4.4(b).

It appears as though Congress found this approach to be too burdensome for combination product manufacturers so, in the Cures Act that was signed into law in December of 2016, Congress included subsection 3038(c), which compels FDA to identify types of combination products and manufacturing processes for which cGMPs can be adopted even if they vary somewhat from the requirements of 21 CFR Part 4.4:

(c) VARIATIONS FROM CGMP STREAMLINED APPROACH.—Not later than 18 months after the date of enactment of this Act, the Secretary of Health and Human Services (referred to in this subsection as the ‘‘Secretary’’) shall identify types of combination products and manufacturing processes with respect to which the Secretary proposes that good manufacturing processes may be adopted that vary from the requirements set forth in section 4.4 of title 21, Code of Federal Regulations (or any successor regulations) or that the Secretary proposes can satisfy the requirements in section 4.4 through alternative or streamlined mechanisms. The Secretary shall identify such types, variations from such requirements, and such mechanisms, in a proposed list published in the Federal Register. After a public comment period regarding the appropriate good manufacturing practices for such types, the Secretary shall publish a final list in the Federal Register, notwithstanding section 553 of title 5, United States Code. The Secretary shall evaluate such types, variations, and mechanisms using a risk-based approach. The Secretary shall periodically review such final list. [Emphasis added]

On June 13th, FDA published its proposed list in the Federal Register for single-entity and co-packaged combination products that “…can satisfy requirements in section 4.4 through alternative or streamlined mechanisms.”  It is relevant to note that while Congress gave the agency the opportunity to propose good manufacturing processes that vary from the requirements in Part 4.4 or that can satisfy the requirements in Part 4.4 through alternative or streamlined mechanisms, the agency chose to only list the latter.

This list includes the mechanisms identified below as a means to demonstrate compliance with the specified Part 211 requirements:

• • Section 21 CFR 211.165 – Testing and Release for Distribution: Manufacturers may be able to use product samples that are not finished combination products when performing the required testing, but they would need to establish that any differences in the manufacturing process for the sample used, as compared to the finished combination product, do not affect the drug constituent part.

• • Section 21 CFR 211.166 – Stability Testing: Manufacturers may be able to leverage stability data for an already marketed combination product, for example, when the new combination product is a modification of an already marketed product and the modification does not impact the stability of the drug constituent part.

• • Section 21 CFR 211.167 – Special Testing Requirements: Manufacturers may be able to define “batch” based on the drug constituent part rather than the finished combination product for purposes of special testing requirements involving pyrogens and endotoxins.

• • Section 21 CFR 211.170 – Reserve Samples: Manufacturers may be able to use validated surrogates as representative samples to meet the requirements of this regulation, provided the surrogate is appropriate.

FDA requests comments from stakeholders who believe that there are additional types of combination products and/or manufacturing processes where different approaches may be appropriate.

As we previously reported, Nevada enacted a law on June 15, 2017 addressing drug prices. S.B. 539 imposed new reporting requirements on pharmaceutical manufacturers and pharmacy benefit managers (“PBMs”) related to diabetes treatments and health care provider payments (also see related posts here and here). Manufacturers of prescription drugs determined by the Nevada Department of Health and Human Services (“NDHHS”) to be “essential for treating diabetes” in Nevada are required to make certain annual disclosures regarding costs, expenses, profits, rebates, and financial assistance data, as well as the wholesale acquisition cost (“WAC”) related to such products. Pursuant to S.B. 539, PBMs must also submit annual reports regarding rebates for essential diabetes drugs. Finally, patient advocacy groups are required to report certain payments from pharmaceutical manufacturers, PBMs, and other third parties.

Under the statute, the submission deadline for the first manufacturer report is July 1, 2018. However, on June 7, 2018, NDHHS issued a notice that it would not take enforcement action on any reports required under S.B. 539 until January 15, 2019. Specifically, NDHHS stated (on its website):

NDHHS will not proceed with any enforcement action for reports made during the first six months. NDHHS expects that all entities will work in good faith during the six month period, but wants to ensure that manufacturers, sales representatives, pharmacy benefit managers, and non-profit organizations have ample opportunity to come into compliance with the statutes and regulations by January 15, 2019 before any enforcement action will be taken. NDHHS anticipates that information regarding [WAC] should be available during the summer of 2018 but may further extend deferment of enforcement action if needed.

A NDHHS staff person informed us unofficially that the Department intends to issue guidance and forms related to manufacturer reporting in the near future. We will continue to update our readers on developments in Nevada and other states that have enacted laws related to drug pricing.

By far one of CDRH’s greatest recent successes has been the Pre-Submission program. In our experience, more companies have been engaging early and often with the Agency to discuss product-related regulatory issues and questions. Under the Food and Drug Administration Reauthorization Act and the MDUFA IV Commitment Letter, certain changes were made to the Pre-Submission program. Most of these were minor timing changes, which were implemented in FDA’s revision to the Pre-Submission guidance issued in September 2017 (see our earlier post here).

The MDUFA IV Commitment Letter indicated that CDRH would issue a revised draft of the Pre-Submission guidance before October 1, 2018. Well ahead of schedule, FDA released a revised Pre-Submission draft guidance on June 7, 2018 (see draft here). We were a bit surprised about by the fact that the new draft guidance was a complete rewrite of its current version because the changes directed in the MDUFA IV Commitment Letter were relatively minor appeared to have been addressed in the September 2017 version of the guidance. In addition, the MDUFA IV Commitment Letter stated, “FDA will continue the Pre-Submission program as described in the Guidance on ‘Requests for Feedback on Medical Device Submissions: The Pre-Submission Program and Meetings with FDA Staff’ with process improvements and performance goals as noted in this section.”

Despite this obligation to continue the Pre-Submission program as described in the guidance, the draft guidance includes several changes that potentially limit the scope and utility of certain pre-submission types. As discussed further below, FDA proposes limiting pre-submissions to only 3 to 4 substantive questions.  The Agency also proposes changing the Submission Issue Meeting Request program to only give certain requests the 21 day review priority, and all others will receive the standard review.

In prior versions of the Pre-Submission guidance, FDA has not limited the scope of a Pre-Submission. In the current draft, however, FDA states that the Agency “has found it difficult to address more than 3-4 substantial questions in a single Pre-Sub.” This isn’t explicitly saying that sponsors need to limit their Pre-Submissions to only this small number of questions, but it certainly shows FDA’s preferences for shorter, more targeted pre-submissions. In a normal Pre-Submission, three-to-four questions could relate to a clinical study plan alone without addressing other important questions such as regulatory strategy. The guidance does not state what, if anything, it will do if a manufacturer submits a Pre-Submission with more questions. Perhaps companies will respond by collapsing multiple questions into a single, broader question rather than multiple, more targeted queries.

Second, and potentially more significant, the draft guidance proposes changes to the Submission Issue Meeting (SIM) Request process. Of all the Pre-Submission types, I must admit that this process is my personal favorite. It gives manufacturers a tremendous opportunity to interact with a submission’s review team as it is preparing a response to a request for additional information (e.g., for a 510(k) or a De Novo). We have found this process to be very productive, including allowing manufacturers the ability to push back on and discuss alternative strategies for responding to FDA’s additional information requests. For those who have not utilized the program, as with all Pre-Submissions, it takes sponsors time to prepare a SIM Request package in order to gain meaningful feedback. For example, it often takes significant time to research and prepare draft protocol outlines or alternative approaches to address FDA’s requests. Currently, the Pre-Submission guidance indicates that FDA will hold SIMs within 21 days of receiving such a request. The draft guidance, on the other hand, proposes only meeting the 21-day timeframe for SIM Requests submitted within 30 days of a request for additional information being issued. SIM Requests submitted after 30 days will receive feedback within the standard 70-day timeframe for a normal Pre-Submission.

FDA’s stated rationale for prioritizing SIM requests submitted within 30 days is that it allows the Agency to “leverage the familiarity with a recent review without the need to re-review the issues. This also incentivizes prompt resolution of issues by both FDA and Industry in order to achieve the MDUFA Shared Outcome goals for Total Time to Decision.” While we appreciate that it takes time for FDA to refresh its memory on a particular AI request, this rationale, in our view, is a stretch. Let’s take a typical example: FDA issues a request for additional information for a 510(k) around FDA day 60. The Sponsor then has 180 days in which to respond to the request. In our experience, most companies take more than 30 days to respond to FDA’s request; in fact many take close to or all 180 days. When the Sponsor does respond, FDA has approximately 30 days left in which to make its decision under its MDUFA goal. Once the substantive response is received, regardless of how long it took the Sponsor to prepare it, FDA does not appear to have an issue refreshing its memory on the file or the questions that were asked in order to make a final, substantive decision in 30 days. Thus, it seems implausible that an SIM Request, which usually covers only a subset of a larger AI Request, submitted more than 30 days after issuance of an AI request would require such significant effort on the part of the Agency to “refresh” its memory that it could not provide feedback to a Sponsor in 30 days.

This change could have significant, practical consequences for submission sponsors and CDRH. Thirty days is a very short timeframe to prepare and submit a meaningful SIM Request, particularly for a substantial additional information request. For example, if a company receives an additional information request with 30 or more individual requests, it may take 45 – 60 days to prepare a SIM Request covering the various issues/questions that the sponsor may have within those 30 days. If a Sponsor submits an SIM under FDA’s new proposal on day 60 of the Sponsor’s 180-day response clock, FDA will not provide its feedback until day 130 (70 days after the date the request was submitted). This would leave Sponsors with very little time in which to address FDA’s feedback and meet the 180-day response deadline. Diminishing the value of SIMs doesn’t benefit either FDA or Sponsors. Moreover, an unintended consequence could be companies racing to submit their SIM, which could result in submissions that just aren’t as good as they could have been with more time. We strongly recommend that manufacturers who anticipate continuing the use of the SIM process – or who may use it in the future – to comment on this significant limitation posed in the new draft guidance.

Finally, the guidance includes a revised acceptance checklist, which is much shorter than the current checklist, likely meaning that fewer Pre-Submissions will be rejected as administratively incomplete. The draft also includes sample meeting questions and sample meeting minutes.