While FDA’s medical product centers have been advancing programs and policies that support incorporating the voice of the patient into their regulatory decision-making for several years (see previous coverage of CDRH here and CDER/CBER here), in the first quarter of 2018 this work has been elevated as a central theme in Commissioner Scott Gottlieb’s public statements – it appears that the Commissioner of Food and Drugs made it a New Year’s resolution to be a champion for patient engagement.

This is said a bit tongue-in-cheek, as these are not Dr. Gottlieb’s first signals of being an advocate for patient-centricity. His administration previously established an FDA-wide Patient Affairs Staff to foster inter- and intra-Agency collaboration on issues of patient engagement, as well as the Patient Engagement Collaborative, a forum for patient advocacy organizations to discuss patient engagement at the FDA. However, as someone that has spent nearly a decade developing patient engagement policies and aiding patient communities engaging in medical product development and regulatory decision-making, it is refreshing to see the Nation’s top drug official further elevate progress in this area, as evidenced by his recent public statements.  (See our new “Patient Advocacy Organizations” industry page on our firm’s website.)

Advancing the Patient-Centric Development of Drug Development Guidance

On February 15th, Commissioner Gottlieb announced the development of five guidance documents on complex, serious neurological conditions – areas where he acknowledges FDA must “become more nimble, collaborative and patient-focused” to address these urgent unmet needs.  What is novel about these disease-specific drug development guidances is that three of them were developed in consultation with the respective patient communities.  In fact, two of FDA’s guidance documents were initially developed and proposed as draft guidance by a patient advocacy organization (The ALS Association’s & Parent Project Muscular Dystrophy’s), providing insights into those diseases that helped FDA advance their own draft guidances.  Then, according to Commissioner Gottlieb, the draft guidance on early Alzheimer’s disease drug development was a result of “working closely with patients” informing the innovative approaches to studying very early disease before onset of dementia.

Patient-centric guidance development brings the voice of the patient more central to informing FDA’s current thinking on clinical trial design and determinations of clinical meaningfulness, among other things. This type of activity was advanced at a March 19th public workshop, which was held to inform development of guidance, as required by the 21st Century Cures Act, on considerations for patient advocacy organizations to develop and submit proposed draft guidance, like was done for ALS and Duchenne.

Embracing the Role of Patients in Treating Rare Diseases

On February 26th, in observation of Rare Disease Day, Commissioner Gottlieb announced that FDA was entering into a Memorandum of Understanding with the National Organization for Rare Diseases “to conduct outreach with [the] new Patient Affairs Staff on ways to enhance the incorporation of patient experience into regulatory discussions.”  The MOU will do this, in part, through the planning of a series of listening sessions with rare disease patient communities to foster “early and iterative engagement” to establish an understanding of certain rare diseases and their unmet needs to inform medical product development programs.  This was reiterated by Gottlieb’s Acting Director of the Patient Affairs Staff, Andrea Furia-Helms, who previously led FDA’s Patient Representative Program for 10 years (her statement is available here).

Partnering with Patients to Incorporate Their Experience into FDA’s Benefit-Risk Decisions

Under PDUFA V, FDA held 20+ disease-specific meetings under the Patient-Focused Drug Development (PFDD) initiative, which generated the therapeutic, or clinical, context for those diseases directly from the experiences and perspectives of those patients who live with them. This input was intended to inform FDA’s benefit-risk decisions for investigational products intended to treat those diseases, and were to be articulated by Agency review staff in the “benefit-risk assessment framework”.   On March 30th, Commissioner Gottlieb announced an updated implementation plan for “Benefit-Risk Assessment in Drug Regulatory Decision-Making.”  A key tenant of this plan for fiscal years 2018-2022 is to continue to incorporate the patient voice into benefit-risk assessments under PDUFA VI and 21st Century Cures.  The plan highlights a number of efforts to enable more systematically gather and incorporate patient experience data, such as that which was collected during PFDD meetings:

• Developing PFDD guidance on the collection of, submission to, and use of “patient experience data” by the Agency (see our firm’s comment with suggestions for the first PFDD guidance on this topic here);
• Continuing to host PFDD meetings;
• Encouraging patients stakeholders to conduct their own externally-led PFDD meetings (this has become a very productive venue for patent engagement; by our count, the 12th and 13th such meetings were held jointly on April 6th for two rare, severe dermatologic conditions);
• Providing patient stakeholders more channels to provide input, such as by hosting Patient Engagement Advisory Committee meetings; and
• Facilitating access to externally-submitted reports of patient experience data, such as Voice of the Patient reports from externally-led PFDD meetings.

Together, this plan and the activities discussed in Commissioner Gottlieb’s previous statements earlier this year will continue the shift to a more patient-centric and patient engaged regulatory framework. In the words of Commissioner Gottlieb:

Tools for capturing the patient experience…are transforming nearly every aspect of medical product development. Patients are teaching us about the benefits that matter most to them and the risks that they are most concerned about. Patients are, rightly so, becoming the driving force of the medical research enterprise.

On April 5, 2018, the Institute for Justice (IJ), on behalf of South Mountain Creamery (South Mountain), filed a complaint against the U.S. Food and Drug Administration (FDA) in the U.S. District Court for the Middle District of Pennsylvania, stating that the Agency is violating First Amendment rights by requiring that South Mountain label its milk, from which fat has been removed, as “imitation skim milk” or “imitation milk.”

South Mountain is a creamery based in Maryland that produces milk and milk products and sells to customers in Washington D.C., Maryland, and Virginia. The business produces natural, additive-free, pasteurized skim milk by skimming the cream from the top of the milk. The skimming process results in the removal of fat-soluble vitamins A and D. South Mountain does not want to replace these vitamins because it wants to produce additive-free skim milk. However, under FDA requirements, the “skim” milk may not be labeled “skim milk” because, without the addition of vitamins A and D, it is nutritionally inferior to the milk as that term is defined by FDA regulation. Under FDA regulation 21 C.F.R. § 131.10, it would need to be labeled as either “imitation milk,” “imitation skim milk,” or “imitation milk product.”

Section 403(g) of the Federal Food, Drug, and Cosmetic Act (FDC Act) states that a food shall be deemed misbranded if “it purports to be or is represented as a food for which a definition and standard of identity has been prescribed” unless “it conforms to such definition and standard” and “bears the name of the food specified in the definition and standard.” The standard of identity for milk allows for vitamins A and D to be added. Milk without fat may be named skim milk, provided that it meets the requirements for the nutrient content claim “skim,” meets the standard of identity in all other respects, and is not nutritionally inferior. If it is nutritionally inferior, it must be labeled with the word “imitation.” 21 C.F.R. § 101.3(e). Among other things, a product is nutritionally inferior if it contains fewer nutrients, such as vitamins A and D, than the standard food. Id. §§ 101.3(e), 130.10(b).

Thus, South Mountain may not market its product as skim milk unless it labels the product as imitation, or adds vitamins A and D. South Mountain alleges that FDA’s regulation is unconstitutional, as it constitutes unconstitutional censorship of the words “skim milk,” stating that labeling pasteurized skim milk as “pasteurized skim milk” is non-misleading speech about a lawful activity. South Mountain further contends that the phrase “imitation skim milk” required by FDA is misleading and confusing to consumers. The company also states that the labeling requirements are unreasonable, unnecessary, fail to advance any legitimate government interest, and are not tailored to any legitimate government interest.

The issue of labeling all-natural skim milk products has been litigated before, in a suit brought by IJ on behalf of Ocheesee Creamery (see our post here) against the Florida Department of Agriculture. In that case, the Eleventh Circuit determined that the State’s prohibition on the truthful use of the term “skim milk” violated the First Amendment. The court reasoned that the creamery could use the term “skim milk” with disclosures that it lacks vitamins A and D for its additive-free milk product. Subsequently, the Florida Department of Agriculture agreed that the milk could be marketed with the label stating “PASTEURIZED SKIM MILK, VITAMINS A & D REMOVED WITH CREAM.” In discussions with FDA, South Mountain has requested that it be allowed to use the same or similar labeling. However, FDA has not been receptive to South Mountain’s requests.

It has been two years since FDA published its draft guidance on Data Integrity and Compliance with cGMP, with much fanfare and some legitimate criticism from stakeholders, particularly criticism regarding some overarching assertions that the agency made that are difficult to justify on the basis of the regulatory texts in question. For example, we wrote about the guidance when it was first published, here.

So while we wait patiently for FDA to finalize this draft guidance, we noticed that the British Medicines and Healthcare Products Regulatory Agency (MHRA) recently published its final guidance on “GXP Data Integrity”, and so we thought it would be instructive to see what the UK had to say about these issues.

The final guidance is billed as a companion document to data integrity documents issued by PIC/S, WHO, OECD and EMA, and aims to promote a risk-based approach to data management that includes data risk, criticality and lifecycle.

The principles of data integrity referenced in the guidance include the following:

• The firm’s organizational culture should ensure that data is complete, consistent and accurate in all its forms i.e., both paper and electronic;
• Reverting from automated or computerized systems to paper-based manual systems or vice-versa will not in itself remove the need for appropriate data integrity controls;
• Where data integrity weaknesses are identified, companies should ensure that appropriate corrective and preventive actions are implemented across all relevant activities and systems and not in isolation;
• “ALCOA+”. While the FDA’s draft guidance introduced the concept of ALCOA, or data needing to be Attributable, Legible, Contemporaneous, Original, and Accurate, the MHRA guidance references “ALCOA+” which includes the additional concepts of the data being Complete (i.e., the data must be whole – a complete set), Consistent (i.e., the data must be self-consistent), Enduring (i.e., lasting throughout the data lifecycle) and Available (i.e., readily available for review or inspection purposes);
• Reduced effort and/or frequency of control measures may be justified for data that has a lesser impact to product or patient;
• Systems and processes should be designed in a way that facilitates compliance with the principles of data integrity;
• Access to blank paper proformas for raw/source data recording should be appropriately controlled. Reconciliation, or the use of controlled books with numbered pages, may be necessary to prevent the re-creation of a record;
• The use of scribes to record activity on behalf of another operator can be considered where justified, such as where the act of contemporaneous recording compromises the product or activity. In this case, the recording by the second person should be contemporaneous with the task being performed, and the records should identify both the person performing the task and the person completing the record. The person performing the task should countersign the record wherever possible, although it is accepted that this countersigning step will be retrospective.
• Data may only be excluded where it can be demonstrated through valid scientific justification that the data are not representative of the quantity measured, sampled, or acquired. In all cases, this justification should be documented and considered during data review and reporting. All data (even if excluded) should be retained with the original data set, and be available for review in a format that allows the validity of the decision to exclude the data to be confirmed;
• Full use should be made of access controls to ensure that people have access only to functionality that is appropriate for their job role, and that actions are attributable to a specific individual. Companies must be able to demonstrate the access levels granted to individual staff members and ensure that historical information regarding user access level is available;
• Organizations are expected to implement, design and operate a documented system that provides an acceptable state of control based on the data integrity risk with supporting rationale. An example of a suitable approach is to perform a data integrity risk assessment (DIRA) where the processes that produce data or where the data obtained are mapped out and each of the formats and their controls are identified and the data criticality and inherent risks documented.

Two years have passed since the publication of FDA’s draft guidance, and since the agency has, in the interim, relied on many of the principles in the draft guidance in taking regulatory action against industry, such as the issuance of dozens of Warning Letters, imposing import alerts, etc., it is incumbent on FDA to finalize the draft guidance as soon as possible and, in so doing, to eliminate those overarching assertions that are difficult to justify on the basis of the regulatory texts in question.

The so-called “Rule of Three” is that the first instance of something occurring is chance; the second instance is considered a coincidence; while the third instance is perceived as a pattern. This rule comes into play every so often in this blogger’s practice when I receive calls from different folks asking essentially the same question.  That’s when I know something is amiss.  The most recent occurrence of the “Rule of Three” happened when three different attorneys from different firms asked essentially the same question: “Kurt, is the Patent and Trademark Office’s November 2009 decision denying multiple interim patent term extensions, and that you blogged on in December 2009, still the Office’s position?”

By way of background, there are two types of interim patent extensions under the Patent Term Extension (“PTE”) statute (35 U.S.C. § 156): (1) interim patent extensions granted during the “review phase” of the statutory “regulatory review period” (35 U.S.C. § 156(d)(5)); and (2) interim patent extensions granted during the PTO’s review of an application for a PTE (35 U.S.C. § 156(e)(2)). The PTE statute also states at 35 U.S.C. § 156(c)(4) that “in no event shall more than one patent be extended under subsection (e)(1) for the same regulatory review period for any product.”

In November 2009, the Patent and Trademark Office (“PTO”) addressed, apparently for the first time, the issue of the availability of multiple interim PTEs based on the same regulatory review period. (The PTO has previously ruled that multiple PTEs are available, under certain circumstances, once a drug product has been approved.)  The interim PTE requests were made under 35 U.S.C. § 156(d)(5) and in the context of patents covering SURFAXIN (lucinactant) Intratracheal Suspension (NDA 021746), which was under review at FDA at the time.  Although the PTO granted an interim PTE for U.S. Patent No. 5,407,914, the Office denied interim extensions for U.S. Patent Nos. 5,260,273 and 5,789,381.  According to the PTO:

Based on the language of the statute, as a whole, and the plain meaning of “a patent,” the statute only contemplated that a single patent is entitled to have the term extended for the same (single) regulatory review period. Similarly, the explicit language of section 156(d)(5)(C) makes clear that interim extension is applicable only for “a patent,” stating, “[t]he owner of record of a patent, or its agent, for which an interim extension has been granted under subparagraph (b), may apply for not more than 4 subsequent interim extensions under this paragraph . . . .”

Fast-forward to 2018. . . .

The calls we received were the result of the PTO’s March 27, 2018 decisions to grant an interim PTE for each of U.S. Patent Nos. 7,619,001 (“the ‘001 patent”), 7,803,840 (“the ‘840 patent”), 7,320,999 (“the ‘999 patent”), and 6,509,376 (“the ‘376 patent”). These patents are listed in the Orange Book for the blockbuster drug TECFIDERA (dimethyl fumarate) delayed-release capsules, 120 mg and 240 mg (NDA 204063; approved on March 27, 2013) with either an April 1, 2019 expiration date (the ‘376, ‘001, and ‘840 patents) or an October 20, 2019 expiration date (the ‘999 patent); however, that’s with the one-year interim PTE period added.  With about 25 ANDA first-filers, and one subsequent filer who has sued over a late filing (see here), interest in TECFIDERA and its patents is pretty high.

Because TECFIDERA is an approved drug, the PTO’s March 27, 2018 interim PTEs were granted pursuant to 35 U.S.C. § 156(e)(2), not 35 U.S.C. § 156(d)(5). Nevertheless, 35 U.S.C. § 156(e)(2) uses similar “a patent” language when compared to 35 U.S.C. § 156(d)(5).  Specifically, 35 U.S.C. § 156(e)(2) states:

If the term of a patent for which an application has been submitted under subsection (d)(1) would expire before a certificate of extension is issued or denied under paragraph (1) respecting the application, the Director shall extend, until such determination is made, the term of the patent for periods of up to one year if he determines that the patent is eligible for extension.

That raises a few questions: (1) Are the TECFIDERA interim PTEs precedent-setting?; (2) Does the PTO view multiple interim PTEs under 35 U.S.C. § 156(e)(2) differently than interim multiple PTEs under 35 U.S.C. § 156(d)(5)?; and (3) If not, then was the SURFAXIN case wrongly decided? We address these questions below.

First, the TECFIDERA interim PTEs are not precedent-setting.  The PTO has previously granted multiple interim PTEs under 35 U.S.C. § 156(e)(2) on several occasions.  These cases include:

• Interim PTEs granted in February 2016 for U.S. Patent Nos. 7,820,193 and 5,616,608, for ZILVER (PTX drug eluting peripheral stent);
• Interim PTEs granted in May 2016 and June 2017 for U.S. Patent Nos. 6,180,371, 6,458,563, and 7,560,107 for OBIZUR (Antihemophilic Factor (Recombinant) Porcine Sequence);
• Interim PTEs granted in February 2017 for U.S. Patent Nos. 6,299,900, 6,818,226, and 6,916,486 for RECUVYRA (fentanyl); and
• Interim PTEs granted in May 2017 for U.S. Patent Nos. 5,792,795 and 5,948,818 for EPANOVA (omega-3-carboxylic acids).

None of these recent instances provide any insight into when or why the PTO considered multiple interim PTEs under 35 U.S.C. § 156(e)(2). So we scoured patent image file wrappers on Public PAIR.  Finally, we came upon what we think is the source of the PTO’s decision to grant multiple PTEs under 35 U.S.C. § 156(e)(2) . . . and perhaps justification for multiple PTEs under 35 U.S.C. § 156(d)(5) and overturning the PTO’s SURFAXIN multiple interim PTE denial.

On July 9, 2014, the PTO granted an interim PTE for U.S. Patent No. 5,693,326 (“the ‘326 patent”) covering the licensed vaccine MENHIBRIX (PSC-TT, PSY-TT and PRP-TT) (BLA 125363; initially licensed on June 14, 2012). Two PTE requests were submitted to the PTO with respect to patents covering MENHIBRIX: a request for interim extension of the ‘326 patent (following the initial PTE request) under 35 U.S.C. § 156(e)(2), and a “regular” PTE request for U.S. Patent No. 5,955,079 (“the ‘079 patent”).  Although the patent owner, the Henry M. Jackson Foundation for the Advancement of Military Medicine (“Foundation”), ultimately elected a PTE for the ‘079 patent, the PTO’s consideration (and subsequent grant) of the patent owner’s request for an interim PTE for the ‘326 patent seems to be the basis for the PTO’s subsequent decisions granting multiple interim PTEs under 35 U.S.C. § 156(e)(2).

The request for interim extension of the ‘326 patent, perhaps referring opaquely to the PTO’s prior SURFAXIN interim PTE decision, states:

The Foundation calls the attention of the Office to the concurrently-filed application for extension of the patent term of U.S. Patent No. 5,955,079 (“the ‘079 patent”). Although both the ‘326 and ‘079 applications for patent term extension rely on the same regulatory review period for MENHIBRIX, the Foundation believes that this should not be a barrier to interim extension of the ‘326 patent under 35 U.S.C. § 156(d)(5).  The limitation in § 156 regarding the extension of one patent per regulatory review period applies only to final extensions under § 156(e)(1) and not interim extensions under § 156(d)(5).

The PTO did not issue a decision documenting the Office’s reason for granting an interim PTE to the ‘326 patent, but the fact that the PTO granted the interim extension in the first place indicates that the Office agreed with the Foundation’s rationale. And the rationale carries over to instances in which multiple interim PTEs are requested under 35 U.S.C. § 156(e)(2).  (We should note that a similar argument was made with respect to SURFAXIN and the multiple interim PTE requests for that drug, but the PTO rejected that argument at the time.)

The rationale proffered by the Foundation also seems to apply to interim PTEs requested under 35 U.S.C. § 156(d)(5), thus calling into question whether the PTO would decide the SURFAXIN multiple interim PTE request differently today. Time will almost certainly resolve the matter, and perhaps we will be blogging on the topic again in another 10 years.

On April 3, 2018, FDA announced that it had issued a mandatory recall order for all food products containing powdered kratom manufactured, processed, packed, or held by Triangle Pharmanaturals LLC (Triangle). FDA issued this order based on its finding that several Triangle products contained kratom that tested positive for salmonella.   FDA issued the order after the company failed to respond to FDA’s request that it conduct a voluntary recall.  This is the first time FDA has issued a mandatory recall order for food products.

In 2011, section 206(a) of the Food Safety Modernization Act (FSMA) amended the Federal Food, Drug, and Cosmetic Act (FDCA) to add section 423, granting FDA the authority to order the recall of food products (other than infant formula) when it determines that there is a reasonable probability that the food product is adulterated under section 402 or misbranded under section 403(w) and that the use of or exposure to such article will cause serious adverse health consequences or death to humans or animals.  Once FDA makes this determination, the Agency must give the responsible party the opportunity to voluntarily recall the food product at issue (discussed previously here and here). If the responsible party refuses to or does not voluntarily recall, FDA has the authority to initiate a mandatory recall by issuing a mandatory recall order.

In this instance, according to the Agency’s press release, FDA found that two samples of kratom products manufactured by Triangle and collected by the Oregon Public Health Division as well as four samples of various types of kratom product associated with Triangle and collected by FDA tested positive for salmonella.  Additionally, Triangle denied FDA investigators access to records relating to potentially contaminated products, and company employees refused attempts to discuss FDA’s findings.

On March 30, 2018, FDA issued a Notification of Opportunity to Initiate a Voluntary Recall to Triangle, formally requesting that the company cease distribution and notify applicable parties within 24 hours if it did not conduct a voluntary recall. Triangle did not comply with FDA’s request.  As a result, on March 31, 2018, FDA ordered the company to cease distribution and offered an opportunity to request an informal hearing.  According to FDA, Triangle did not respond to FDA’s request within the required timeframe and thus waived its opportunity for the informal hearing.  Ultimately, FDA issued the mandatory recall order.

Although this is the third time FDA has started the process of exercising its mandatory recall authority by issuing a Notification of Opportunity to Initiate a Voluntary Recall, it is the first time the Agency has actually ordered a mandatory recall due to a company’s refusal to voluntarily recall after receiving such a notification. The first time FDA issued a Notification of Opportunity to Initiate a Voluntary Recall was on February 13, 2013 to Kasel Associates Industries, Inc., regarding pet treat products found contaminated with salmonella. The second time FDA issued a Notification of Opportunity to Initiate a Voluntary Recall was on November 6, 2013 to USPlabs LLC, regarding its OxyElite Pro-branded products found linked to liver illnesses.  After FDA started the process of exercising its mandatory recall authority, both companies voluntarily recalled their products according to FDA’s request.  Triangle, however, failed to comply with FDA’s request to initiate a voluntary recall.

Noncompliance with a mandatory recall order can trigger the following provisions of the FDCA:

• Section 743(a)(1)(B), which authorizes FDA to collect fees from a responsible party for a domestic facility as defined under 415(b) and an importer who does not comply with a food recall order under section 423.

• Section 301(xx), which prohibits the refusal or failure to follow an order under section 423.

• Section 303(f)(2)(A), as amended by FSMA, which permits FDA to assess civil money penalties to any person who does not comply with a recall order under section 423.

We’ll be following this matter to see how this first exercise of FDA’s mandatory recall authority unfolds.

For anyone not familiar with the legal framework governing “organic” claims, first a brief summary. The Organic Food Production Act of 1990 (OFPA) established a process for organic certification by the United States Department of Agriculture Agricultural Marketing Service, National Organic Program (NOP). Under the OFPA and NOP’s implementing regulations, a food manufacturer that wants to use an organic claim for a food product must first design an organic system plan (OSP). The manufacturer’s OSP plan details what ingredients and what manufacturing processes will be used. An accredited certifying agent then reviews the OSP, performs an on-site inspection, and determines whether both the facility and the food products comply with the organic standards and may carry an organic claim. The certifying agent is not employed by the federal government. However, NOP accredits the certifying agents, and also may suspend certifying agents. In addition, NOP may impose penalties on fraudulent or non-compliant producers.

Pursuant to this framework, a food product may carry an “organic” claim provided that the food contains no more than 5% non-organic ingredients that are included in the National List of Allowed and Prohibited Substances (National List).

In recent years, on several occasions, consumers have brought actions against companies for marketing organic foods, notably infant formula, alleging that these products were falsely labeled organic. Specifically, plaintiff consumers claimed that the products were not organic because some of the ingredients, primarily nutrients, were not listed as “allowed” on the National List. Not surprisingly, defendants filed motions to dismiss arguing preemption in these cases. They argued that the products had been certified organic by an accredited certifying agent.

In the first case of this kind, Segedie v. Hain Celestial Grp., Inc., the District Court of the Southern District of New York concluded that state-law enforcement actions would enhance instead of obstruct the purposes of the OFPA, and rejected the preemption argument. The Court in Hain Celestial acknowledged the goals of federal regulations, i.e., “(1) to establish national standards governing the marketing of certain agricultural products as organically produced products; (2) to assure consumers that organically produced products meet a consistent standard; and (3) to facilitate interstate commerce in fresh and processed food that is organically produced.” It also recognized that the Eighth Circuit had concluded, in In re Aurora Dairy Corp. & Organic Milk Mktg. & Sales Practices Litig., 621 F.3d 781 (8th Cir. 2010), that conflict preemption applied and precluded similar claims. However, the District Court distinguished Aurora Dairy and concluded that even though the products at issue in Hain Celestial were certified organic by an accredited certifying agent, they did not comply with the standard of the OFPA. Although NOP had determined that for the time being the nutrients at issue could be included in organic foods, the Court found that NOP was wrong and allowed the action to proceed.

In subsequent cases, district courts have appeared to follow Aurora Dairy, and have recognized that allowing state law actions against foods that were organic certified in accordance with NOP standards would result in inconsistency across the country and undermine interstate commerce. See Marentette Labs v. Abbott, 201 F. Supp. 3d 374, 376 (E.D.N.Y. 2016); and Organic Consumers Ass’n v. Hain Celestial Grp., Inc., Case No. 1:16-cv-00925, 2018 U.S. Dist. LEXIS 1053 (D.D.C. Jan. 3, 2018). According to the judges in these cases, allowing this type of case to proceed would defeat at least one of the goals of the OFPA –to have a national standard for organic claims. If plaintiffs were to prevail, “a savvy consumer would know that the [products] are not considered ‘organic’ in [one place], but would wonder why they were labeled as ‘organic’ elsewhere.” Organic Consumers Ass’n at 15. Also, a success for plaintiffs would undermine interstate commerce.

The case for preemption was further strengthened in March 2018, when the Court of Appeals of the Second Circuit affirmed the lower court’s ruling in Marentette. Marentette v. Abbott Laboratories, No. 17-62-cv, (2d Cir. 2018). The Court of Appeals concluded that “There is simply no way to rule in [the plaintiffs’] favor without contradicting the certification decision, and, through it, the certification scheme that Congress enacted in the OFPA.” The goal of the OFPA is a single, national organic-certification standard to facilitate interstate commerce. The Court had no doubt that state-law claims that force the courts to “look behind” USDA’s certification of a product “are an obstacle to the federal scheme.”

Hopefully, Marentette, together with the Eighth Circuit decision, In re Aurora Dairy Corp. & Organic Milk Mktg. & Sales Practices Litig., and the trial court rulings mentioned above will be sufficient to have consumer-class-action lawyers think more than twice before filing a lawsuit claiming improper organic certification.

On January 30, 2018, FDA issued revised guidance documents: Refuse to Accept Policy for 510(k)s and PMAs (here and here). These revised guidances may have gone unnoticed by many as there was no federal register notice announcing or discussing the revisions from the policy in place since 2015.  However, last week, FDA held a webinar discussing the updated Refuse to Accept (RTA) checklist.

FDA’s Refuse to Accept policy describes the preliminary requirements that a 510(k) or PMA submission must include to be accepted for review by the Division. These requirements are meant to improve the efficiency of a review by reducing the instances where reviewers must request additional information or clarification from the applicant.

The updated checklist now requires 510(k)s and PMAs to specifically identify whether or not it is a combination product. During the webinar last week, FDA indicated that it will assess whether an applicant has “correctly” identified the subject product as a combination product.  This question seems fraught with potential complications.

There is often a debate as to whether some products are combination products or devices—for example, devices incorporating an antimicrobial where the antimicrobial acts solely as a preservative for the device. FDA’s 510(k) database often identifies these devices as combination products, but there is a legal and regulatory argument that these products are solely devices.  Currently, if CDRH believes there is a jurisdictional question related to a product under review, shortly after acceptance of a submission, the Agency will direct the applicant to obtain a determination from the Office of Combination Products (OCP).  This typically occurs when there is a question as to whether the 510(k) pathway is appropriate.

Under the revised RTA, if there is a debate as to whether a product is a combination product or strictly a device and a sponsor answers “incorrectly,” from FDA’s perspective, it is possible that the Agency could RTA the submission. Unlike our experience with the prior RTA checklist, the new question could prevent the submission from being filed, even if the response does not affect whether or not the product would proceed through the 510(k) pathway.  During the webinar, FDA did not specifically mention the need for increased interaction with OCP prior to filing of 510(k)s or PMAs.  This new question, however, certainly opens the door for CDRH to force more applicants to seek a definitive determination as to a product’s status from OCP prior to accepting a submission for review.

In addition, in December 2016, the 21st Century Cures Act (the Cures Act) amended the Federal Food, Drug, and Cosmetic Act provisions related to combination products.  Among other revisions, the Cures Act required that sponsors of combination products incorporating an approved drug constituent part submit a certification with respect to any patent information identified in the Orange Book for the listed drug identified, and, in the case of a Paragraph IV certification, provide notice that the challenged patent(s) is invalid, unenforceable, or not infringed.  If the NDA holder or patent owner timely brings suit, then clearance of the 510(k) or approval of the PMA for the proposed combination product can be delayed up to 30 months while patent infringement is litigated.  After that, clearance or approval could be granted, but if patent infringement litigation is not finally resolved, then a combination product sponsor will need to decide whether or not to market its product “at risk.”

The changes to the 510(k) and PMA RTA checklists also implement this statutory change, and include a new section for combination products. The earlier iterations of the RTAs included a preliminary question regarding whether the product was a device or included a device constituent subject to clearance or approval.  This was the extent of the combination product assessment.  All applicants, of course, answered this question “yes” (otherwise they would not have been submitting an application for the product).

The revised RTA adds a new preliminary question asking whether a combination product contains as a constituent part an approved drug as defined in 21 U.S.C. § 503(g)(5)(B). Such combination products are those covered by the new provision in the Cures Act.  A Sponsor would know if its combination product is of this type by searching for the drug constituent part in the Orange Book (available here). If the drug constituent part is listed in the Orange Book, an appropriate patent statement or certification and a statement that the applicant will give notice as applicable are required.

This new policy is worth noting and taking into consideration when preparing new 510(k) and PMA submissions. FDA highlighted during its webinar that the patent certification provisions relate not only to 510(k)s and PMAs, but to all other submission types even if they do not have an RTA.  Therefore, sponsors will need to keep this provision in mind with other submission types as well, including for example de novos.  Indeed, it likely adds an additional step for combination products that, if ignored, could result in getting an RTA.

In September 2013, FDA issued a final guidance addressing when, according to FDA, companies need an Investigational New Drug Application (IND) for clinical studies in humans. The final guidance created quite a stir, as it included several sections that had not been included in the draft guidance; notably, the final guidance suggested that an IND was required for most clinical studies on food, dietary supplements, and cosmetics. We previously blogged on this guidance here. After receipt of numerous comments, FDA reopened the comment period regarding these new sections. Then, in October 2015, FDA announced a stay on a select few subsections regarding clinical studies on foods and dietary supplements. As we previously discussed, FDA did not stay the IND requirement for clinical studies designed to evaluate a dietary supplement’s ability to diagnose, cure, mitigate, treat, or prevent a disease (except if those studies are designed to evaluate whether a dietary supplement reduces the risk of a disease, are intended to support a health claim, and are conducted in a population that does not include individuals in the medically vulnerable population) and clinical studies designed to evaluate whether a dietary supplement reduces the risk of a disease conducted in a population that includes individuals in the medically vulnerable population.

Although the document is merely guidance and is not binding, generally IRBs tend to require an IND if FDA guidance has taken the position that an IND is needed. Moreover, as explained in the March 15, 2018 Petition by the Alliance for Natural Health, FDA’s requirement for an IND has created a bit of a conundrum for dietary supplement companies developing new dietary ingredients. If they want to do a clinical study on their dietary ingredient and that ingredient has not yet been marketed, they may forever foreclose the marketing of the dietary ingredient as a dietary ingredient. This is because, under the exclusionary clause in FDC Act § 201(ff)(3), the clinical studies under an IND (which FDA claims are needed) result in the exclusion of the product from the dietary supplement definition, even though the company had no intent to ever market the product as a drug.

Petitioner argues that FDA has historically regulated products based on intended use, which is determined by the manufacturer’s marketing representations and labeling of a product rather than by the clinical investigations, and FDA has not offered a rationale for the requirement for an IND when a company wants to perform a clinical study on a dietary supplement but has no plans to develop the product as a drug. Comments to the guidance had made similar arguments. Maybe the Petition will result in FDA providing a rationale, or better yet, result in a revision of the IND guidance. Petitioner asks that FDA amend the guidance to clarify that, if the supplement under investigation is fully compliant with IRB procedures and is not represented as a drug through marketing statements, and any claims made for the supplement are lawful dietary supplement claims, no IND is required for clinical studies on the supplement even if the endpoint measured is a disease endpoint.

Last week, the U.S. District Court for the District of Columbia dismissed a lawsuit filed by the Environmental Working Group (EWG) and Women’s Voices for Earth (WVE) against the Food and Drug Administration (FDA) and the Commissioner of the FDA. The facts of this case date back to 2011, when EWG filed a Citizen Petition with FDA “requesting that the FDA take immediate action to protect the public from formaldehyde-containing keratin hair straighteners.” FDA replied on or about September 6, 2011 with a tentative response to the Citizen Petition, explaining that it was unable to reach a decision due to “competing priorities.” Dissatisfied with this response, on December 13, 2016 EWG and WVE filed a complaint in federal court alleging that FDA violated the Administrative Procedure Act; the Federal Food, Drug, and Cosmetic Act; and its own regulations by failing to formally respond to the Citizen Petition.

After the complaint was filed by EWG and WVE, on March 29, 2017, FDA issued a formal response granting EWG’s request to review the appropriateness of a ban on these products, but denying EWG’s request to initiate rulemaking before FDA completed its analysis of the formaldehyde in the keratin hair straighteners. (The issued opinion states that FDA issued a formal response to the Petition on March 29, 2018. We assume this is a typo, and the formal response was actually issued on March 29, 2017.) Based on the response by FDA, which included a denial to their Citizen Petition, plaintiffs amended the complaint to request that the court direct “Defendants to grant the Petition by a date certain.” Defendants moved to dismiss for lack of jurisdiction under Fed. R. Civ. P. 12(b)(1) and for failure to state a claim under Fed. R. Civ. P. 12(b)(6). Because the court found no jurisdiction, it did not discuss the merits of the 12(b)(6) arguments.

As a quick refresher from Constitutional Law, an organization can assert standing on its own behalf, on behalf of its members, or both. The organization must show “actual or threatened injury in fact that is fairly traceable to the alleged illegal action and likely to be redressed by a favorable court decision.” People for the Ethical Treatment of Animals v. U.S. Dep’t of Agric., 797 F.3d 1087, 1093 (D.C. Cir. 2015). Organizations can also assert associational standing. This requires a showing that “(1) at least one of their members would have standing to sue; (2) the interests they seek to protect are germane to the organizations’ purposes; and (3) neither the claim asserted not the relief requested requires the participation of individual members.” Sierra Club v. EPA, 754 F.3d 995, 999 (D.C. Cir. 2014).

The court ultimately concluded that the plaintiffs failed to allege sufficient injury to constitute standing, whether organizational or associational. With respect to organizational standing, plaintiffs argued that they were injured because they were forced to expend considerable funds on lobbying efforts and educational activities to warn consumers about these products. In dismissing these arguments, the court noted that an injury to an organization’s interest has to be more than expending resources to educate its members, unless there is an actual inhibition of daily operations. Neither organization sufficiently alleged any inhibition to its daily operations sufficient to constitute a concrete injury to their interests. While the court acknowledged that a significant amount of funds were spent on lobbying, it noted that such efforts alone could not constitute sufficient injury to result in standing. To hold otherwise would allow lobbyists on any issue to take the government to court.

The court also rejected the plaintiffs’ argument that the expenses put into their educational activities were sufficient to constitute an injury, noting that educating its members is the exact work the organizations are in the business of doing. Even if they diverted resources to this issue, the organizations did not allege that such expenditures constituted operational costs beyond those normally expended. Without such a showing, the court found that the suit amounts to no more than an assertion of generalized grievances.

The WVE argued separately that it had associational standing to sue on behalf of its members. Specifically, WVE listed three members who suffered significant past injuries allegedly caused by exposure to formaldehyde in hair-straightening products. The issue, from the court’s perspective, was that these instances of past harm did not establish a real and immediate threat that the harm would recur. Nor did the plaintiffs allege that the injured individuals would likely use or be exposed to the formaldehyde-releasing hair straightening products in the future.   These allegations, the court determined, were insufficient to establish standing for the prospective injunctive relief sought by the plaintiffs.

This case has potential implications for industry. To the extent that a company is being sued by an association for injunctive relief, this case might be used as a sword to dismiss a complaint for lack of standing.

In 1997, Congress directed FDA to use the “least burdensome” approach in reviewing device applications. This legislation resulted in little change in behavior.  In 2012, Congress enacted new legislation with the same outcome.

In 21st Century Cures, Congress addressed the “least burdensome” approach for the third time. On December 15, 2017, FDA issued a Draft Guidance Document (see our previous post here).

The draft guidance contains some potentially positive implements, provided that they are actually implemented. Yet, based on FDA’s past conduct, doubts are inevitable.  Hyman, Phelps & McNamara, P.C. has submitted comments to FDA regarding the draft guidance document.

Whether the “least burdensome” approach will truly be incorporated into practice or remain a largely meaningless phrase will not be known for some time. If truly embraced by FDA, the “least burdensome” approach could have a significant, positive impact on device regulation.  The content of the final guidance, though, will provide important clues.

After President Obama signed into law Title I of the Drug Quality and Security Act (the Compounding Quality Act), which created a new breed of drug compounders (deemed “outsourcing facilities”), FDA also came up with a plan to evaluate bulk substances outsourcing facilities could use in compounding pursuant to the statutory mandate set forth in FDCA Section 503B. That draft guidance, rolled out in December 2013, led to industry’s nomination of thousands of bulk substances (here).  After FDA reviewed those nominations, FDA asked for a “do over” of the process (here). About a year after that process concluded, and after receipt of hundreds of bulk substance nominations, FDA published its draft and final “Interim Policies” on compounding using bulk substances by Section 503B facilities (here). The policy included three lists, including “Bulks List I”, which are those nominated substances where FDA made a determination of “clinical need.” Until FDA publishes a final rule concerning the substances, FDA also stated outsourcing facilities were permitted to compound using those List I bulk substances. FDA updated the list on several occasions based on additional industry nominations that met FDA’s published clinical need criteria, and FDA opened a new docket to accept nominations in October 2015 (here). Even as recently as January 2017, FDA publicly announced its revision of its interim policy on bulk substances for 503B outsourcing facilities, and welcomed nominations via a newly established docket (here). True to its word, until July 2017, FDA also regularly updated its interim bulks list based on nominations received and encouraged outsourcing facilities to nominate substances for the lists.

What happened next? One can speculate that a lawsuit filed against the Agency rooted in the Administrative Procedure Act and FDA’s promulgation of the bulks lists as “interim policy” and not a final rule promulgated by notice-and-comment rulemaking (among other claims) is at least part (if not all…) of the issue. See the Complaint filed by Endo International against FDA and blogged about (here), and Press Release by Endo announcing a stay of that litigation in January 2018 based on FDA’s promise to promulgate new guidance by the end of March 2018 concerning compounding from bulk substances by outsourcing facilities pursuant to FDCA Section 503B (here).

Commissioner Gottlieb announced FDA’s latest efforts at creating a bulks list for outsourcing facilities on March 23, 2018. The Commissioner also announced the new draft guidance; (Federal Register Notice here), which is substantially different than the prior interim bulks policy, and which industry has been working with (and relying on) for the last several years in formulating meaningful bulk substance nominations based on FDA’s (now) well-established criteria.

After spending pages describing what bulk substances are and the prior nomination process, FDA states in its latest draft that it intends to maintain a current list of all bulk substances it has evaluated on its website, including separate lists for those substances that it has placed on the list and those that it as determined to not place on the list. Does this mean the current List I will stay in place for at least a while?

FDA also states that it will consider nominations on a rolling basis, and will only include a substance on the list where it has made a determination of “clinical need” for outsourcing facilities to compound the product using bulk substances (which, of course, sounds much like FDA’s statements concerning determinations both the Agency and its Pharmacy Compounding Advisory Committee have been making over the course of the past three years).

The draft guidance details how FDA will now interpret “clinical need” as that term is used in Section 503B(a)(2), including “certain additional procedures” FDA will use in its review of nominations. On the last page of the draft guidance, FDA provides a flow chart of the analysis it intends to engage when making the clinical need determination for bulk substances that that are a component of an FDA-approved drug product, and those that are not. The chart is a helpful summary that boils down to a single page FDA’s multi-page analysis.

Concerning FDA’s “clinical need” determination, FDA points out that it does not consider supply issues or cost to be within the meaning of clinical need.

FDA further states that clinical need determinations may be limited to specific strengths, routes of administration or dosage forms for a particular substance and thus FDA may limit that determination to such uses for particular substances.

Overview of FDA’s Proposed Two-Part Bulk Substance Analysis

FDA intends to use a two-part analysis in its new clinical need determination. Each step is set forth briefly below: Refer to the guidance for FDA’s in-depth description of each part. Note that FDA’s analysis here is substantially different than FDA’s previous nomination process, especially given its new, threshold focus on whether the substance is a component of an FDA-approved drug product.

(1) Determination of whether the bulk substance is a component of an FDA-approved drug

FDA will consider the following questions:

(a) Is there a basis to conclude, for each FDA-approved product that includes the nominated bulk drug substance, that (i) an attribute of the FDA-approved drug product makes it medically unsuitable to treat certain patients for a condition that FDA has identified for evaluation, and (ii) the drug product proposed to be compounded is intended to address that attribute?

(b) Is there a basis to conclude that the drug product proposed to be compounded must be produced from a bulk drug substance rather than from an FDA-approved drug product?

FDA states that if it answers “no” to either of these threshold questions, then it does not intend to include that substance on a bulks list. If it answers yes to both questions, then it will proceed to the second part of its analysis,

(2) FDA’s “balancing test” of factors when considering bulks substances that are components of approved drugs (and “yes” to the questions above) and when evaluating bulk substances that are not components of approved drug products.

FDA will use these factors in the context of information provided in the nominations and about proposed uses of the compounded products (as well as other information provided through comments, upon request, or by FDA), as follows:

(a) The physical and chemical characterization of the substance;

(b) Any safety issues raised by the use of the substance in compounding;

(c) The available evidence of effectiveness or lack of effectiveness of a drug product compounded with the substance, if any such evidence exists; and

(d) Current and historical use of the substance in compounded drug products, including information about the medical condition(s) that the substance has been used to treat and any references in peer-reviewed medical literature.

FDA then spends several pages detailing what it will consider in making the threshold determination concerning the attributes of the nominated substances that are components of FDA-approved products, and now the bulk substance proposed to be compounded will address these issues. For example, FDA states that unless an FDA-approved drug is “medically unsuitable for certain patients” and a compound intends to address the attribute that makes it medically unsuitable, then there is no clinical need to compound using that bulk substance. FDA will focus on the rationale set forth in the nomination, or a rationale that FDA identifies for use of the bulk substance in compounding. FDA states that broad statements without sufficient evidence supporting will not be adequate to demonstrate that an attribute of an approved drug makes it unsuitable for certain patients.

If the substance is not a component of an approved drug, FDA will proceed to Part 2 of its evaluation where it will also evaluate each of the four factors listed above (and described in the draft starting at page 13 of the draft guidance). Thus, the process does not appear to be that different from FDA’s prior nomination process with respect to bulk substances that are not components of FDA-approved drugs.

Notwithstanding, the draft guidance likely renders the nomination process not only more complicating (especially for substances that are components of FDA-approved drugs), but also one that is fraught with questions concerning what an “appropriate” nomination looks like, especially given the DQSA simply does not differentiate between “clinical need” for an FDA-approved bulk substance (which arguably was established during the FDA drug approval process) and a substance is not FDA-approved. The draft guidance also leaves outsourcing facilities (given there are only around 65 facilities at any given time), which FDA has touted since enactment of the DQSA as the safer alternative for compounding, grappling whether to return to more traditional compounding roles or engage in the rigorous nomination process. The next 90 days will be fascinating to watch as outsourcing facilities comment on FDA’s proposed process, which comments are due on May 25, 2018 (Docket No. FDA-2018-D-1067).

Last February we reported on FTC v. Shire ViroPharma, in which the Federal Trade Commission (FTC) took the relatively unusual (although not unprecedented) step of suing a brand drug company for anti-competitive use of the Food and Drug Administration’s (FDA’s) citizen petition process to delay generic competition.  The FTC sued Shire after the company exploited FDA’s petition process to an extraordinary degree, drawing pointed rebukes from FDA in response to its more than forty-six regulatory and court filings. The company’s petitions, regulatory submissions, and litigation against FDA were ultimately unsuccessful on the merits, as Shire lost its legal challenges to FDA’s (1) bioequivalence requirements for generic VANCOCIN, and (2) denial of 3-year exclusivity for a VANCOCIN NDA Supplement FDA approved in December 2011 (Our firm represented ANDA applicant and intervenor Akorn in that lawsuit).  Nevertheless, FTC’s complaint alleged that “ViroPharma’s campaign [] succeeded in delaying generic entry at a cost of hundreds of millions of dollars to patients and other purchasers.”  Complaint at 2, No. 1:17-cv-00131 (D. Del. Feb. 7, 2017).

Last Tuesday, the FTC’s unfair competition case against Shire took a fascinating turn that could broadly impact the FTC’s authority to litigate cases in federal court. Shire won a motion to dismiss the FTC’s complaint, but not based on Noerr-Pennington immunity, which (as we have discussed in past posts, including our initial post on this case) generally protects companies’ right to petition the government for redress of grievances or to influence policy, without incurring antitrust liability.  The Court found that the FTC had sufficiently pleaded the so-called “sham exception” to Noerr-Pennington, in which the petition at issue is “a mere sham to cover what is actually nothing more than an attempt to interfere directly with business relationships of a competitor.”  But the Court dismissed the FTC’s complaint anyway, based on a novel interpretation of the Federal Trade Commission Act (“FTC Act”); holding that the FTC had failed to plead the facts necessary to invoke its authority to sue for permanent injunction in federal court (FTC Act § 13(b) (15 U.S.C. § 53(b))) because it did not allege an ongoing or imminent violation of the FTC Act. 

The FTC’s primary statutory mechanisms for seeking injunctive and other relief from entities and individuals it believes have violated the FTC Act are (1) Section 5(b) of the FTC Act, which authorizes the FTC to file an administrative complaint seeking an administrative cease and desist order, and (2) Section 13(b) of the Act, which authorizes the FTC to bring suit in federal court seeking injunctive relief. Both routes offer distinct benefits and downsides from the FTC’s perspective, and it is difficult to determine why the FTC chooses one or the other route in any given case.  For example, the FTC cannot seek restitution or disgorgement in administrative litigation (although it can pursue such remedies in federal court after a final administrative order has issued), but it benefits from procedural and institutional advantages.

Section 13(b) of the FTC Act sets forth the FTC’s authority to sue for injunctive relief in cases such as FTC v. Shire ViroPharma as follows:

(b) Whenever the Commission has reason to believe –

(1) that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission, and

(2) that the enjoining thereof pending the issuance of a complaint by the Commission and until such complaint is dismissed by the Commission or set aside by the court on review, or until the order of the Commission made thereon has become final, would be in the interest of the public

the Commission by any of its attorneys designated by it for such purpose may bring suit in a district court of the United States to enjoin any such act or practice. Upon a proper showing that, weighing the equities and considering the Commission’s likelihood of ultimate success, such action would be in the public interest, and after notice to the defendant, a temporary restraining order or a preliminary injunction may be granted without bond: Provided, however, That if a complaint is not filed within such period (not exceeding 20 days) as may be specified by the court after issuance of the temporary restraining order or preliminary injunction, the order or injunction shall be dissolved by the court and be of no further force and effect: Provided further, That in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.

15 U.S.C. § 53(b)(2012).

The final sentence of section 53(b) – “Provided further, That in proper cases the Commission may seek, and after proper proof the court may issue, a permanent injunction” – has historically been viewed as a separate grant of authority for the FTC to litigate its case against a company or individual in the first instance in federal court, regardless of whether the requirements in sections 53(b)(1) and (2) are satisfied.  See, e.g. F.T.C. v. Virginia Homes Manufacturing Corp., 509 F. Supp. 51 (D. Md. 1981) (noting in dicta that it appears (b)(1)’s requirements do not apply to suits for permanent injunction); see also, e.g., United States v. JS & A Group, Inc., 716 F.2d 451, 456 (7th Cir. 1983) (holding that 53(b)(2)’s limitations on actions for preliminary injunction did not apply to the separate permanent injunction provision).  The District Court in FTC v. Shire ViroPharma rejected this view.

The Court instead accepted Shire’s argument that the statutory language authorizes FTC to “bring suit” only upon satisfying the conditions of (b)(1), and after which it “may seek” certain types of relief, including either preliminary or permanent injunctive relief. Thus, to seek permanent injunctive relief in federal court, the FTC must have already satisfied the requirements for bringing suit by alleging that the defendant – in this case ViroPharma –  “is violating, or is about to violate” a law enforced by the FTC.  The court further rejected the FTC’s alternative argument that “is about to violate” should be read as equivalent to the general standard for awarding injunctive relief – i.e. that the violation is likely to recur (see United States v. W.T. Grant Co., 345 U.S. 629 (1953).  The Court ruled that the FTC must adequately allege an ongoing, or imminent future, violation (see Opinion at 10-11), and it had not done so with respect to ViroPharma.

If the District Court’s statutory interpretation is accepted more broadly, it would significantly limit a statutory mechanism that the FTC has used extensively to seek injunctive and other relief in both antitrust and consumer protection actions since the 1980s. It would prevent the FTC from bringing suit in federal court for past violations of the FTC Act and other laws enforced by the FTC, and from seeking damages and restitution for such violations (let alone permanent injunctions) unless it can also allege an imminent future violation.  With respect to past violations, the FTC would be required to first engage in administrative litigation pursuant to FTC Act § 5(b) (15 U.S.C. § 45(b)).

The Court’s ruling on Tuesday dismissed the case without prejudice and gave the FTC leave to amend its complaint. The Court even provided some guidance to the FTC in amending the complaint, by suggesting that facts about another Shire drug discussed at oral argument, but which did not appear in the complaint, might satisfy the “about to violate” requirements of Section 13(b)(1).  The FTC therefore has the option to amend in accordance with the Court’s ruling in an effort to survive dismissal, which would leave the Court’s underlying statutory interpretation in place in the short term.  Alternatively, the FTC could take steps to pursue an appeal, such as moving the District Court to certify the legal issue for appeal pursuant to 28 U.S.C. § 1292(b) and stay the case pending review by the Third Circuit.  Given the high stakes, we would not be surprised if the FTC chose this latter option.

In order for their outpatient drugs to be covered under Medicaid and Medicare Part B, drug manufacturers must enter into a National Drug Rebate Agreement (“Agreement”) with the Department of Health and Human Services. The Agreement requires the manufacturer to pay quarterly rebates to state Medicaid programs on units of the manufacturer’s drug that are dispensed to Medicaid beneficiaries during the quarter, and to submit monthly and quarterly reports containing certain pricing data that are used by CMS to calculate the unit rebate amount. Today, CMS issued a final revised Agreement to replace the current one, which dates back to the inception of the Medicaid Drug Rebate Program in January 1991 and has become largely outdated as a result of amendments to the Program since that time. The new revision brings the Agreement into alignment with 2010 Affordable Care Act amendments to the Medicaid rebate statute and CMS’ implementing final rule issued on February 1, 2016, and also contains additional changes incorporating CMS policies adopted over the years.

Manufacturers with existing Agreements will have until October 1, 2018 to sign the revised Agreement, otherwise their existing Agreement will be terminated.

The final NDRA contains only minor changes from a draft that CMS issued for comment on November 9, 2016, which we described in a previous post here. Among the changes from the draft are the following:

• Language has been added to the Manufacturer’s Responsibility section to make clear that required pricing data must be calculated and reported “for all covered outpatient drugs of all labeler codes of a manufacturer.” See § II(b). The preamble elaborates that manufacturers are required to report “all of their covered outpatient drugs to CMS, regardless of labeler code. Therefore, in an effort to prevent selective reporting of NDCs, manufacturers must ensure that all associated labeler codes . . . enter into a rebate agreement in order to comply with the terms of the NDRA.” (P. 43.)
• In the same section, a sentence has been added reflecting long-standing CMS policy that, although CMS ordinarily calculates the unit rebate amount (URA) based on reported pricing and communicates the URA to the states, that does not relieve the manufacturer of the responsibility for doing its own URA calculation.
• The draft version of Section II(f) addressed revisions to previously submitted prices, but only those revisions resulting in additional rebate payments. In response to comments, a sentence has been added to also address overpayment situations, providing that manufacturers should communicate with states about how to apply the credit due to the manufacturer.
• The final Agreement retains the definitions of “depot price,” “single-award contract,” and “single-award contract price,” which the draft Agreement had proposed to delete. These terms are used in statutory and regulatory provisions regarding best price, but are defined only in the MDRA.

Several of the definitions and other provisions of the Agreement refer to Form CMS‑367c, which lists the data fields contained in the monthly and quarterly electronic reports to the Medicaid Drug Rebate Program and defines each field. The current Form
CMS-367c is appended to the final Agreement.

Last year, the First Circuit reversed the dismissal of a False Claim Act (FCA) case brought against DePuy Orthopaedics, Inc., holding that the district court had wrongly dismissed the relators’ complaint for failing to plead with particularity under Federal Rule of Civil Procedure 9(b) (see post here). In February, DePuy, now known as Medical Device Business Services, petitioned the Supreme Court for review, arguing there is a growing circuit split on appropriate pleading standards in FCA cases.

By way of background, relators—two physicians who are also serving as experts in an ongoing products liability suit against DePuy—alleged that DePuy sold orthopedic products (namely, the Pinnacle metal-on-metal hip implant) to the government and that these products were used in procedures reimbursed by the government. Because the implants allegedly contained manufacturing defects, relators claimed DePuy caused third parties to submit false claims to the government.  The complaint contained a weak example of one claim, and primarily relied on a statistical analysis of the sales and use of the device, along with the percentage of procedures typically covered by government programs, to contend that it was virtually certain that government programs reimbursed many of the procedures in which a defective device was used.

The government declined to intervene, and the district court dismissed the claims under Rule 9(b), in part, for lack of particularity.

The First Circuit disagreed. While noting the general rule that a relator must “allege the essential particulars of at least some actual false claims that were in fact submitted to the government for payment,” the court stated that there is an exception for allegations that a defendant “induced a third party to file false claims”:

We apply a “more flexible” standard in actions of the latter, indirect type: where the defendant allegedly “induced third parties to file false claims with the government . . . a relator could satisfy Rule 9(b) by providing ‘factual or statistical evidence to strengthen the inference of fraud beyond possibility’ without necessarily providing details as to each false claim.” Such evidence must pair the details of the scheme with “reliable indicia that lead to a strong inference that claims were actually submitted.”

Slip Op. at 21-22 (internal citations omitted).

Because relators had alleged facts showing that it was “statistically certain” that DePuy caused third parties to submit false claims to the government, the First Circuit held that relators had met Rule 9(b)’s specificity standard. The court also noted that it “need not and [did] not” decide whether the one pleaded example was necessary to satisfy Rule 9(b), id. at 27 n.8, leaving open the door that relators could build an FCA case without alleging any specific example of a manufacturer inducing third parties to submit false claims to the government.

On petition for writ of certiorari to the Supreme Court, DePuy raises the following question: “Whether a False Claims Act relator can satisfy Federal Rule of Civil Procedure 9(b)’s particularity requirement without alleging details about any specific false claims.”  Pet. at i.

DePuy argues that the First Circuit’s “more flexible” pleading standard for indirect submission of false claims is inconsistent with the standard used by the Second, Fourth, Sixth, Eighth, and Eleventh Circuits. The company claims that the decision is evidence of a wide circuit split that even the government, in other cases, has said should be addressed by the Supreme Court.

DePuy also contends that this loose standard is inconsistent with the “overarching purpose” behind Rule 9(b), which is to “ensure that a defendant possesses sufficient information to respond to an allegation of fraud.” Id. at 28 (quoting United States ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496, 504 (6th Cir. 2008)).  And the low standard negates Rule 9(b)’s “critical role in filtering out opportunistic actions” by relators who lack sufficient information. Id. at 27.

Relators filed a brief opposing DePuy’s petition, arguing that there is no circuit split, and that the federal courts should be allowed to apply a case-specific approach. Multiple organizations, including Pharmaceutical Research and Manufacturers Association of America, Advanced Medical Technology Association, and the Chamber of Commerce, have filed amicus briefs in support of DePuy.  The government has not filed a brief.  The Supreme Court is expected to make a decision on whether to grant the petition in the coming weeks.

On March 12, 2018, the USDA announced its decision to withdraw the Organic Livestock and Poultry Practices (OLPP) final rule that was published on January 19, 2017.

As previously discussed, the OLPP was essentially an animal welfare rule, establishing minimum indoor and outdoor space requirements for chickens based on the type of production and the stage of life, and adding new provisions for livestock handling and transport for slaughter. The OLPP would have increased federal regulation of livestock and poultry for certified organic producers and handlers.

However, because the final rule was published shortly before the inauguration of President Trump and had an effective date of March 20, 2017, it was subject to a regulatory freeze to allow review by the new administration. USDA delayed the effective date of the rule several times, and on December 18, 2017 (as previously reported), issued a proposal to withdraw the OLPP rule. In its withdrawal proposal, USDA announced that it had concluded that the OLPP rule exceeded the Agency’s statutory authority under the Organic Food Production Act (OFPA). Moreover, USDA determined that the resulting changes to the existing organic regulations could have a negative effect on voluntary participation in the National Organic Program, leading to increased costs for both producers and consumers.

In response to its proposal to withdraw the OLPP rule, USDA received approximately 72,000 comments. Apparently, 63,000 of the comments (more than 56,000 of which were form letters) opposed the proposed withdrawal.  Approximately fifty comments supported withdrawal.  (According to USDA, the remaining comments were not clearly for or against).

In the preamble to its final rule withdrawing the OLPP rule, USDA discusses the basis for its determination that the OFPA does not authorize those regulations, and responds to the comments by the opponents of withdrawal. USDA reasons that the OFPA authorizes the Agency to develop regulations to ensure that livestock and poultry are organically produced but the statutory language related to animal care is focused on avoiding or minimizing organic animals’ ingestion of non-organic substances.  The OFPA cannot reasonably be interpreted as giving USDA carte blanche to develop animal welfare standards.  USDA also notes that the OLPP rulemaking did not identify a failure of the organic market under the currently operative regulations, so as to justify additional regulation.  Finally, USDA’s corrected cost benefit analysis demonstrates that the cost of the OLPP rule outweighs potential benefits.  Under these circumstances USDA declines to regulate, even though the organic industry appears to support such regulation by (as suggested by the number of comments opposing withdrawal).  The withdrawal of the OLPP rule is effective May 13, 2018.

Not surprising, the Organic Trade Association (OTA) “blasted” USDA’s withdrawal of the OLPP. As we reported in our earlier posts, OTA sued USDA over the Agency’s repeated delays of the effective date of the OLPP final rule.  That action remains pending.  Earlier this month, USDA filed its reply in support of the motion to dismiss.  Now that the OLPP rule has been withdrawn, OTA can be expected to amend its complaint to challenge the withdrawal.  We will continue to monitor this case.

Whether or not the OLPP rule withdrawal survives legal challenge, a significant number of consumers and retain businesses remain focused on animal welfare standards within the organic industry. USDA’s withdrawal of the OLPP final rule does not prevent organic producers from providing their animals with outdoor access or voluntarily adopting all or some of the standards that were included in the OLPP final rule, nor does it prevent customers from demanding that producers comport with such standards.  The proliferation of private certification labels regarding animal welfare appears likely.