Vape shops in several states have banded together in litigation challenging the constitutionality of FDA’s Deeming Rule (for background information on that regulation, see our prior posting here). Plaintiffs are pursuing the litigation simultaneously in several federal district courts – perhaps with the objective of accelerating the emergence of any potential split in the lower courts that would enhance the chances of obtaining Supreme Court review.

The complaints (see here, here, and here) allege that the Deeming Rule violates the Appointments Clause of Article II because it was issued by an FDA employee who lacked the authority to do so. According to Plaintiffs, “[b]ecause the issuance of a rule is final, because a rule binds the government and the regulated public, and because a rule cannot be easily reversed, only a principal officer of the United States—one who has been nominated by the President and confirmed by the Senate—may exercise such authority” (emphasis added). Plaintiffs acknowledge that the Appointments Clause permits Congress to “vest the appointment of ‘inferior Officers… in the President alone, in the Courts of Law, or in the Heads of Departments’” (emphasis added). However, Plaintiffs argue that, even if an inferior officer can issue a rule such as the deeming regulation, “mere agency employees may not.”

The complaints further allege that the Deeming Rule violates the First Amendment by imposing “significant restrictions on truthful, non-misleading speech” in relation to modified-risk tobacco products. The use of a claim to the effect that a given tobacco product presents a lower risk of harm than a commercially marketed tobacco product must first be approved by FDA pursuant to a showing that the given product “will… significantly reduce harm and the risk of tobacco-related disease to individual tobacco users; and… benefit the health of the population as a whole taking into account both users of tobacco products and persons who do not currently use tobacco products.” Even a “reduced exposure” claim, such as a claim that vaping liquids do not have several carcinogens found in cigarettes, requires FDA’s preapproval. Plaintiffs contend that this “imposes an extraordinary prior restraint” on manufacturers and retailers, in that it’s not enough to show that the speech in question is truthful; in addition, one must show that the “truthful speech will create a net benefit.” The Deeming Rule thereby “impermissibly inverts the constitutionally required burden of proof, under which the government, not the speaker, must demonstrate that a restriction on speech directly and materially advances a valid interest asserted by the government” (emphasis in original).

Given the filing of similar complaints in multiple jurisdictions, we would not be surprised to see the government first try to get the cases consolidated (or at least coordinated). We look forward to seeing how the government eventually addresses Plaintiffs’ allegations.

While we’ve seen variations on the First Amendment argument with some frequency in a number of recent FDA cases, the Appointments Clause argument appears to be an issue of first impression in the FDA space.  Significantly, the theory is not limited to the regulations at issue in the case.  If successful, by logical extension it would implicate thousands of FDA regulations.  The statute of limitations for suits against the government may limit the number of affirmative suits challenging regulations to those issued in the past 6 years (28 USC 2401), but nothing would prevent regulated entities from raising this argument as a defense in an FDA enforcement action based on a “defective” regulation.  That said, it’s not clear how a “win” for the plaintiff in this case would play out.  The Appointments Clause argument, if successful, would seem to only invalidate the issuance of the final rule (not, by way of contrast, the notice and comment process).  Presumably, FDA could, without much difficulty, re-issue any affected final rules in short order—if it wanted to do so.  The administration could only re-issue some regulations, however.   In addition to any filings in this action, we’ll also be watching to see under whose authority FDA’s next final rule is issued.

Last month, the U.S. Court of Appeals for the Eleventh Circuit affirmed prison sentences for Stewart and Michael Parnell, and Mary Wilkerson, formerly of the Peanut Corporation of America (PCA). If you missed our earlier coverage of this historic case (here and here), PCA was responsible for a salmonella outbreak that killed at least nine people and sickened thousands in 2009.

In 2014, Stewart and Michael Parnell were convicted of fraudulently introducing misbranded (and, in Michael’s case, also adulterated) food into interstate commerce, interstate shipment and wire fraud, and conspiring to commit those crimes. Stewart and Mary Wilkerson were convicted of obstruction of justice. Stewart Parnell was sentenced to 28 years in prison followed by three years supervised release, Michael Parnell was sentenced to 20 years in prison followed by three years supervised release, and Mary Wilkerson was sentenced to 5 years in prison followed by two years supervised release. All three Defendants challenged their convictions and sentences on various grounds before the District Court for the Middle District of Georgia, and subsequently appealed to the Eleventh Circuit.

The Eleventh Circuit carefully dispensed with the Defendants’/Appellants’ arguments, indicating that they raised no significant legal issues. The Court’s opinion stated at the outside that it “applied only established law” to the facts, and thus was “written only for the benefit of the parties.”  Nevertheless, the Court went into particular detail about the Defendants’ collective claim that the jury’s verdict was tainted by extrinsic evidence of deaths caused by the salmonella outbreak (this evidence was excluded from the trial). Despite finding that individual jurors had, in fact, learned of the deaths during the trial and discussed those deaths during jury deliberations, the Court concluded, among other things, that (1) the District Court did not clearly err in refusing to credit the testimony of one juror who had expressed a bias towards Mary Wilkerson in the past, and (2) the weight of the evidence against the Defendants was such that the additional knowledge about the deaths did not influence or contribute to the verdict. Defendants’/Appellants’ other evidentiary and procedural arguments also failed.

While it is possible that the Parnells and Wilkerson will petition the U.S. Supreme Court for review, and/or petition the Eleventh Circuit for rehearing or hearing en banc, the chances that either court will grant such petitions are relatively slim. Therefore, this may well be the end of the line for Defendants– they will continue to serve out historic prison sentences. Despite the particularly egregious nature of the case, they may also serve as a cautionary tale.

On January 17, 2018, in an effort to overhaul the regulation of over-the-counter (OTC) monograph drugs, U.S. Senators Johnny Isakson and Bob Casey introduced bipartisan legislation, the Over-the-Counter Drug Safety, Innovation, and Reform Act, S.2315.

As readers of this blog know, the current monograph system, which was implemented in 1972, has received criticism and there have been several efforts to revise the system. Drawbacks include the slow rulemaking process (many OTC drugs are marketed under incomplete monographs), the inability to swiftly and promptly address safety issues, and barriers to innovation (eligibility is largely limited to active ingredients that were marketed before 1972).  In addition, FDA has asserted that it lacks the resources to effectively regulate the OTC monograph products.

The proposed bill is intended to speed up the slow time-consuming regulatory procedures by introducing the administrative order process to replace the current rulemaking procedures. It provides options for manufacturers to request administrative orders and for FDA to initiate administrative orders on its own initiative as well as in response to a citizens’ petition.

The bill would also establish a process for the introduction of new OTC products that are marketed without an approved New Drug Application. Under certain circumstances, such drugs would be subject to two-year exclusivity period.

The bill includes provisions that would provide FDA with the authority to take rapid action in event of safety issues with OTC drugs. It would also require that FDA evaluate the cold and cough monograph with respect to children under the age of six and report annually to Congress on the progress of this evaluation.

Importantly, the bill provides FDA with the authority to collect user fees to help cover much of the costs of the updated regulatory system and provide the necessary resources to evaluate and monitor the market.

Other than the two-year exclusivity provision, the proposed bill is similar to previous proposals. See, e.g., Over-the-Counter Monograph Safety, Innovation, and Reform Act of 2017, authored by representatives Bob Latta (R-OR), Diana DeGette (D-CO), Chairman Burgess, Vice Chairman Brett Guthrie (R-KY), Ranking Member Gene Green (D-TX), and Rep. Debbie Dingell (D-MI).

We will be monitoring further developments.

We have seen the stock language in every guidance document FDA issues claiming its guidance is non-binding:

This guidance represents the current thinking of the Food and Drug Administration (FDA or Agency) on this topic. It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.

or

FDA’s guidance documents, including this guidance, do not establish legally enforceable responsibilities. Instead, guidances describe the Agency’s current thinking on a topic and should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited. The use of the word should in Agency guidance means that something is suggested or recommended, but not required.

This language provided little solace to FDA-regulated companies who have seen regulatory consequences result from a failure to comply with FDA’s guidance, for example in Warning Letters citing to guidance documents to support findings of noncompliance.

Until now. Last November, the Trump Administration reaffirmed that “the Administrative Procedure Act requires notice-and-comment rulemaking when purporting to create rights or obligations binding on members of the public or the agency,” and made clear its view that guidance “may not be used as a substitute for rulemaking.” The Department of Justice announced that it will discontinue its own practice of binding private parties without rulemaking, and imposed on itself the requirement that its guidance documents clearly state, among other things, “that compliance with those standards is voluntary and that noncompliance will not, in itself, result in any enforcement action.”

Last week, DOJ Associate Attorney General Rachel Brand announced that it will apply DOJ’s position about its own guidance documents to prohibit DOJ from using its civil enforcement authority to convert other agency guidance documents into binding rules. DOJ issued a memorandum directed at all DOJ civil litigators who bring affirmative civil enforcement (ACE) cases, defined as “civil lawsuits on behalf of the United States to recover government money lost to fraud or other misconduct or to impose penalties for violations of Federal health, safety, civil rights or environmental laws.” Of note, DOJ made clear that this policy is “new,” and that it “helps restore” the appropriate role of guidance documents. DOJ now limits the use of guidance documents to certain circumstances – e.g., to prove the requisite mens rea – and “effective immediately,” prevents civil litigators from using “noncompliance with guidance documents as a basis for proving violations of applicable law.” This policy applies to pending and future civil enforcement actions.

DOJ specifically identifies False Claims Act cases as subject to this new policy. For FDA-regulated companies, the impact could be huge. DOJ can no longer base False Claims Act cases on allegations that a company engaged in off-label promotion because it did not meet the requirements set forth in FDA’s Good Reprint Practice Guidance or the draft guidance governing Responses to Unsolicited Requests for Information.   It cannot support a theory that products are unapproved because they do not have the documentation recommended in FDA’s guidance on Deciding When to Submit a New 510(k) for a Change to an Existing Device or establishing Preamendment Status. And it cannot enforce requirements on compounding facilities that have failed to perfectly follow the countless guidance documents FDA has issued in lieu of notice-and-comment rulemaking.

We note that DOJ’s policy cannot stop FDA from continuing to allege violations of its guidance and taking administrative action against companies. Perhaps that will change soon. Nevertheless, the impact of the DOJ policy necessarily will extend to FDA enforcement decisions given DOJ involvement in any ACE cases brought to enforce FDA laws.

On January 24, 2018, FDA and the Federal Trade Commission (FTC) posted joint warning letters to 11 marketers and distributors of opioid cessation products, alleging that those products were unapproved new drugs that violated the Federal Food, Drug, and Cosmetic Act (FDC Act) and made unsubstantiated, deceptive claims in violation of the FTC Act.  Nine of the letters went to dietary supplement marketers, and two to marketers of homeopathic products. The FTC issued four additional warning letters to unidentified marketers of similar products, although it is not clear why those particular marketers (who apparently were not simultaneously targeted by FDA) were permitted to remain anonymous. While it is certainly not unprecedented for the FTC and FDA to issue joint warning letters, the large number of letters bespeaks the importance of this issue to both agencies.

At the end of 2017, an industry coalition of industry trade associations already reminded the industry and consumers that dietary supplement marketers cannot claim that their products treat opioid addiction or withdrawal symptoms.  Under the FDC Act, such claims cause the products to be unapproved drugs. Moreover, FDA has taken the position that opioid addiction is a condition that is not amenable to self-diagnosis or treatment without the supervision of a licensed practitioner and, thus, opioid cessation products cannot be sold over-the-counter. They are regulated as prescription drugs.

As noted above, two of the warning letters, the letter to King Bio, Inc. and the letter to GUNA, Inc., target products labeled as “homeopathic” drugs. Many drug products labeled as homeopathic are manufactured and distributed without FDA approval under enforcement policies set out in the Agency’s Compliance Policy Guide (CPG), which FDA acknowledges in the letters. However, as FDA explains, this does not mean that any product meeting the CPG conditions can be marketed without approval, because “the enforcement policies set forth in the CPG are not unlimited.” Rather, the CPG “delineates those conditions under which homeopathic drugs may ordinarily be marketed in the U.S.” See FDA, Warning Letters to King Bio, Inc. and GUNA, Inc. (Jan. 11, 2018). There are special circumstances that supersede that policy, and the nationwide opioid crisis is one of those special circumstances.

As to the FTC Act violations, the letters note that the claims must be supported by competent and reliable scientific evidence at the time the claims are made. The FTC points to previous FTC enforcement actions challenging claims for the treatment of opiate addiction and withdrawal symptoms FTC v. Sunrise Nutraceuticals, LLC, and FTC v. Catlin Enterprises, Inc., as examples of the possible consequences of making unsupported claims.

FDA and the FTC have requested responses from all the companies within 15 working days.

The final Unique Device Identifier (UDI) Rule was published on September 24, 2013. The last phases of implementation related primarily to Class I and Unclassified devices.  Due to complex issues identified during implementation of the UDI Rule for Class II and III devices, FDA is delaying compliance dates for implantation of the UDI Rule for Class I and Unclassified devices by two years.  Industry was notified of the Agency’s plan to delay last summer via letter, and this enforcement discretion policy has now been formally documented in FDA’s Immediately in Effect Guidance for Industry and FDA Staff, “Unique Device Identification: Policy Regarding Compliance Dates for Class I and Unclassified Devices,” issued on January 16.

The UDI Rule requires a device to have a UDI on its label and packages unless an exception or alternative applies. 21 C.F.R. § 801.20. There are special labeling requirements that apply to stand-alone software regulated as a device. 21 C.F.R. § 801.50). Additionally, the rule requires that certain dates on device labels be in a standard format.  FDA’s UDI system is designed to capture information regarding distributed and used devices and to incorporate this information in an integrated health system, including in the supply chain, registries, and electronic health records.

The UDI requirements have been phased in over the last five years beginning with highest-risk, Class III devices. The final two phases are set to occur on September 24, 2018 and September 24, 2020 with implementation of the below requirements:

Since June 2014, 5% of guidances (8/152) issued by CDRH related to UDI topics. This number of guidances is remarkable given the time it takes to draft and review guidance documents, and the multitude of other important topics CDRH must address. Among these guidances was the November 2017 guidance relating to direct marking of devices with a UDI.  This guidance is noteworthy for those entities required to comply with the Class II marketing requirements taking affect in September 2018.

With the exception of the Class II direct marking requirements, last summer’s letter from FDA to industry extended all of the other upcoming compliance dates by two years. In this letter, FDA promised to issue guidance on articulating its enforcement discretion for the Class I and unclassified device compliance dates.  On January 16, FDA issued such guidance: the immediately-in-effect (for new acronym connoisseurs, IIE) document entitled, “Unique Device Identification: Policy Regarding Compliance Dates for Class I and Unclassified Devices.” The below table shows the original and new compliance dates based on the guidance.

According to the guidance, this extension was granted so that the Agency and industry could identify and address policy and technical challenges to ensure that UDI data are high quality, available, and integrated in standardized and meaningful ways from higher risk devices before focusing on lower risk devices.

In the guidance, FDA distinguishes between class I and unclassified devices manufactured and labeled on or after the original compliance date (September 24, 2018) and finished devices manufactured and labeled prior to the original compliance date established by the FDA. The latter group is excepted from the requirement to bear a UDI for a period of three years after that compliance date. In other words, if your device is manufactured before September 24, 2018, this inventory is afforded a three year exemption out to September 24, 2021. Practically speaking, this means that pre-September 24, 2018 inventory does not need to be reworked to include a UDI on its label or package until September 24, 2021.  If your device is manufactured between September 24, 2018 and September 24, 2020, you lose this rework grace period and are expected to comply with UDI requirements as of the new compliance date (September 24, 2020).  This might prove to be complicated logistically; companies will need to rework inventory built between September 24, 2018 and September 24, 2020 before the new compliance date while not needing to rework pre-September 24, 2018.  FDA offers no rationale for the use of different, misaligned compliance dates.

While this guidance is intended to reduce the burden associated with the UDI rule for finished devices, it appears that misalignment between enforcement dates for devices manufactured before September 24, 2018 and between September 24, 2018 and September 24, 2020 could actually create more burden and confusion. We recommend interested parties comment on the burden that this misalignment will create in two and a half years when the requirements will take effect.

* Senior Medical Device Regulation Expert

FDA issued a draft guidance that addresses public warning and notification of recalls under the agency’s recall regulation at 21 CFR part 7, subpart C (see here and here).  Although the draft guidance extends to recalls of nearly all FDA-regulated products, it is of particular importance to the food sector because it follows on the heels of an HHS OIG report critical about the agency’s oversight of certain food recalls.  In response to that report, Commissioner Gottlieb issued a statement indicating that the agency intended to take “additional policy steps… as part of a broader action plan to improve our oversight of food safety and how we implement the recall process.”  The issuance of the draft guidance appears to be the first of those additional policy steps.

The draft guidance addresses both public warnings (meaning an alert to the public that a recalled product presents a serious health hazard), and public notification (meaning inclusion in the agency’s publicly available weekly Enforcement Report, which lists all recalls regardless of the level of hazard).   The draft guidance discusses the circumstances under which firms should issue public warnings, examples of serious hazards that could warrant a public warning, and the preparation, content, and distribution of such warnings.  The draft guidance notes that the agency could choose to issue its own public warning, and also can “publicly issue information that may address outstanding questions about the nature of the incident and/or the agency’s action.”  A footnote acknowledges that certain information might qualify as confidential commercial information (CCI) and thereby be generally exempt from public disclosure, but points to an FDA regulation that authorizes disclosure “to the extent necessary to effectuate” an “administrative or court enforcement action within [the agency’s] jurisdiction.”

With respect to public notification, the draft guidance states that recalls will be posted in the weekly Enforcement Report only after FDA has determined that the action qualifies as a recall, as defined by the recall regulation.  At that point, the recall will be posted even if it has yet to be classified.

Comments on the draft guidance are due by March 20, 2018.

The title of this blog post should tell you everything you need to know about the proposed appeal regulations announced last week by CDRH (found here). On January 17, CDRH proposed regulations specific to the device appeal process for both 517A decisions as well as non-517A decisions.  The notice announcing the proposed regulations states that they are intended to “provide transparency and clarity for internal and external stakeholders” on the device appeal process.  However, in our view, the proposed regulations add nothing to the existing guidance available to industry and the Agency regarding the device appeal process.

By way of background, as we have previously posted on (here, here, and here), the device appeal process was significantly modified in the Food and Drug Administration Safety and Innovation Act (FDASIA), which created Section 517A of the Federal Food, Drug, and Cosmetic Act (FDC Act). Section 517A defined certain decisions by CDRH (e.g., 510(k) NSE, PMA denial and not-approvable decisions) that were subject to specific timeframes (i.e., appeal must be received by CDRH within 30 days from the decision and date) and bound CDRH to responding to such appeals:

• within 45 days from receipt if an appeal meeting is not requested; or
• within 30 days from an appeal meeting, if requested, and such meeting must be held within 30 days of receipt of the appeal letter.

The Agency has subsequently issued guidance on this topic: “Center for Devices and Radiological Health Appeals Processes” (Appeal Guidance) and “Questions and Answers About 517A” (Q&A Guidance).

It is worth noting that the 517A process for appeals is generally working.  In our experience, the Agency is meeting its statutory timeframes for review of significant decisions.  Indeed, if a deadline for a submission fell on a Saturday or Sunday, CDRH was requiring the submission on Friday, which is more restrictive than the deadlines for litigation.  Until recently, there has been a lack of published information regarding appeal outcomes, which can be difficult for companies to decide if it is worth taking the risk of appeal while wanting to preserve its relationship with its review division.  In a recent U.S. Government Accountability Office (the GAO) report regarding compliance of CDRH’s premarket reviews with the least burdensome standard (available here), it was reported that FDA received 63 517A appeals from 2013 through 2016.  Of these 63, 33 related, at least in part, to least burdensome principles.  Out of these 33, FDA agreed in whole or in part with the appellant (company) in 11 cases (33%) meaning that FDA’s decision was overturned or modified.  These are pretty good odds of getting some relief from an adverse decision where a least burdensome argument is raised, particularly if the company has a good argument.

The 21st Century Cures Act (Cures Act) expanded the list of Agency decisions subject to Section 517A procedures by adding decisions on breakthrough designation requests.  In September 2017, CDRH revised its Q&A Guidance to include such decisions on the list of 517A decisions, resulting in the following list of decisions subject to the 517A requirements:

• 510(k): Not Substantially Equivalent; Substantially Equivalent
• PMA/HDE: Not Approvable; Approvable; Approval; Denial
• Breakthrough Devices: Granting; Denial
• IDE: Disapproval; Approval
• Failure to Reach Agreement on a Protocol under Section 520(g)(7) of the FD&C Act
• “Clinical Hold” Determinations under Section 520(g)(8) of the FD&C Act

The guidance includes the following illustrative list of non-517A decisions:

• 510(k) Requests for Additional Information
• PMA Major Deficiency Letter
• 510(k) and PMA Refuse to Accept Letters
• Postmarket Surveillance Orders under Section 522 of the FD&C Act
• CLIA Waiver Decisions
• Warning Letters
• Response Letter to a Request for Information under Section 513(g) of the FD&C Act

The non-517A decisions are not subject to the 517A timeframes, but according to the Appeal Guidance, in order to be timely an appeal of a non-517A decision should be received by FDA within 60 days of the decision date. The Appeal Guidance set no timeframes for CDRH’s review of non-517A appeals meaning that they could potentially languish for extended periods of time – the issue that led to creation of 517A in the first place.

These lists obviously do not cover all FDA decisions. Most notably, de novo submissions are not included.  Since FDASIA and the Cures Act (the statutes establishing and revising the device appeal process), de novo submissions have become subject to significant user fees (in excess of $90,000).  When CDRH announced its proposed regulations addressing appeals, we hoped FDA would include de novo submissions in the list of 517A decisions, although not required by statute.  Certainly given the new price tag, applicants should have the certainty associated with the appeal process for other significant premarket submissions.  And, given the increased popularity of de novo applications, more companies are interested in that certainty.

The proposed regulations also do not include any Agency procedures (e.g., timing) for review of non-517A decisions. The notice announcing the proposed regulations does, however, discuss at length the naming of non-517A decisions.  Section 517A of the FDC Act pertains to “significant decisions.”  In its earlier guidance, FDA used this same terminology referring to 517A decisions as “significant decisions.”  FDA stated that it did not want to refer to non-517A decisions as “insignificant decisions” (as may be implied by referring to 517A decisions as “significant”) because they are still important even though not expressly identified in Section 517A.  Regardless, however, of what the regulations call these decisions, the lack of Agency procedures for their review highlights their insignificance when it comes to the appeal process and leaves appeals of these decisions at a significant disadvantage as compared to 517A decisions.

Much to our disappointment, the proposed regulations did not address either of these major issues. As indicated at the outset, the proposed regulations simply regurgitate the statutory timeframes and submission types for 517A decisions.  With regard to non-517A decisions, the proposed regulations simply state that appeals must be filed by the applicant within 60 days of the decision.  There are no requirements for the Agency with regard to reviewing or responding to such appeals.  We find the lack of additional clarity and procedures in the proposed guidance somewhat astonishing given that industry and the Agency already understood these procedures and timeframes based on existing guidance.  FDA is accepting comments on the proposed regulations through April 17, 2018.  We strongly recommend those interested in the appeals process comment.  These seemingly arcane procedural elements can help determine the outcome of a submission.

The Department of Justice recently issued a memo to all attorneys in the Commercial Litigation Branch, Fraud Section, and any Assistant U.S. Attorneys handling False Claims Act (FCA) cases, directing those attorneys to seek dismissal of FCA cases under certain circumstances. While the government’s ability to litigate or decline to intervene in a qui tam case is well-known, the government also has the option—by statute—to dismiss a qui tam complaint outright. The FCA (at31 U.S.C. § 3729(c)(2)(A)) provides that:

The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.

This dismissal can take place over the objection of the relator. Some courts grant the government an “unfettered right” to dismiss a qui tam complaint, while others require the government to identify a “valid government purpose.” Noting the burden that even non-intervened cases can bring on the government through discovery, monitoring, and adverse precedent, the memo notes that dismissal “remains an important tool.”

The memo instructs DOJ attorneys to seek dismissal of a qui tam complaint if any of the following seven factors are present:

1. The qui tam complaint is “facially lacking in merit,” either because the legal theory is defective or the factual allegations are frivolous.
2. The qui tam action duplicates a pre-existing government investigation without adding any useful information to the investigation.
3. The qui tam action threatens to interfere with an agency’s “policies or the administration of its programs” and the agency “has recommended dismissal to avoid these effects.” Examples include diverting agency personnel and resources away from an ongoing related project or risk of “significant economic harm” that could cause a “critical supplier” to exit the government program or industry.
4. Dismissal is necessary to protect DOJ’s “litigation prerogatives.”
5. Dismissal is necessary to safeguard classified information, such as in cases involving intelligence agencies or military procurement contracts.
6. The government’s expected costs are likely to exceed any expected gain. Costs to the government includes the “opportunity cost of expending resources on other matters with a higher and/or more certain recovery.”
7. There are problems with the relator’s action frustrating the government’s efforts to conduct a proper investigation, including improper compliance with FCA procedures.

These factors (supported by referenced case law) can be used by the government to establish a basis for dismissal where necessary. The memo notes that this list of factors is not an exhaustive list and that the factors are not “mutually-exclusive.” The memo also instructs DOJ attorneys to “consult closely” with the affected agencies regarding dismissal, and notes that it may be appropriate to dismiss only certain claims or defendants.

The effect of this memo remains to be seen, but it indicates that the government will be less likely to allow relators to pursue certain FCA claims where the government has declined to intervene. And it provides helpful insight to industry as to what factors the government considers in deciding whether to pursue an FCA case.

A week before Christmas, CDRH issued a revised draft of the Replacement Reagent policy. When finalized, the revised draft guidance will replace the 2003 final guidance. According to FDA, the revised guidance “is intended to update and provide clarity on” the existing policy. FDA has long commented that the 2003 guidance was overused and often misunderstood. As discussed below, the draft guidance that will replace the existing Replacement Reagent policy takes a more limited view of the replacement reagent policy. This means that fewer reagent instrument combinations will be able to enter the market via this approach. It is somewhat ironic then that the guidance states, in its introduction, that this revised policy “is important for public health as it promotes more timely availability of a wider array of clinical laboratory tests for patient benefit.” In fact, it appears likely to have the opposite effect.

At a high-level the policy is unchanged, 510(k)-cleared reagents can be used on certain additional instruments that were not included in the reagent 510(k) without the need for a new 510(k).  Specifically, the additional instruments can include:

1. 510(k)-cleared instruments that were not included in the reagents 510(k) clearance; and
2. instruments in the same instrument family as the instruments on which the reagents were validated in their 510(k).

The guidance does not apply to certain assays, including Class III devices, point-of-care devices, and prescription home use devices, among others.  The new policy notes that certain assay-specific guidances exclude application of the Replacement Reagent policy, for example, the clinical multiplex test system guidance.  The revised draft guidance also excludes “modifications other than application of a cleared assay to a new instrument.”  This exclusion is modified from the 2003 policy, which stated “changes in the intended use of a cleared product.”  The exclusion in the proposed policy is significantly broader and could exclude minor modifications that would not otherwise require a 510(k) clearance (e.g., a minor change to the 510(k) cleared reagents that is unrelated to the application of the reagents to the new instrument platform).  Thus, at the outset, the policy appears to be more limited in scope than the original guidance meaning that fewer assays will be eligible.

In addition, the revised draft guidance notes that the policy has been historically applied to traditional laboratory automated chemistry systems and immunoassays.  The guidance indicates that manufacturers can contact FDA regarding the policy’s applicability to “evolving technology” (e.g., via the pre-sub process).  It is unclear, however, how FDA defines an “evolving technology.”  Is it any technology other than traditional laboratory automated chemistry systems and immunoassays?  There are many well-known technologies in this category, for example, liquid chromatography and mass spectrometry.  Or something truly new and not yet known?  In short, the revised draft guidance may apply to a narrower subset of the universe of instruments than its erstwhile predecessor.  This exclusion for “evolving technology” appears to even further limit the scope of the guidance.

While the broad objective of the draft policy is fundamentally the same as the 2003 version, the revised draft does include a new recommendation that the manufacturer seeking to apply the policy perform a risk assessment of the change.  The risk assessment is intended to identify the risks associated with applying the 510(k)-cleared reagents to a new instrument.  These risks and associated verification and validation results will be used to determine whether the proposed change fits within the Replacement Reagent policy or if a new 510(k) is required.  This approach is consistent with the new, final guidance “Deciding When to Submit a 510(k) for a Change to an Existing Device,” but adds a layer not found in the current policy.

The revised draft policy also provides specific suggested tests to be performed as part of the verification and validation of the cleared assay on a new instrument.  The guidance also notes, “if an updated, FDA-recognized standard or guidance has been published since the time of assay clearance, it is preferable that the manufacturer follow this; however, it is also acceptable to use the same standard or guidance that was followed to support the cleared 510(k).”  This could be a dangerous suggestion – what if an assay does not pass the updated standard but does pass the original standard?  Will the policy still apply?  It is unclear and could become a problem for companies seeking to utilize this policy for their assays.

For the Instrument Family Policy to apply, an instrument must be in the same family as the cleared instrument, including sharing a common design history file.  The revised draft guidance makes clear that instruments in the same family are essentially just iterations of the same original instrument. The guidance “encourages” communication between the reagent and instrument manufacturers, when they are not the same company.  However, without a formal relationship, the reagent manufacturer may have trouble knowing if one instrument is in the same family as another.  We anticipate that, particularly for assay-only manufacturers, that this will further limit the ability for companies to utilize this policy.

The new draft guidance replaces the flowcharts in the 2003 guidance with numerous examples.  The guidance also provides additional recommendations as to how to present information in a CLIA categorization request when an assay and instrument combination enter the market through this policy.  While the guidance does provide some additional useful information, the scopes appears to be so much more limited and the requirements more burdensome now that its utility will yet to be seen.

As stated in our blogpost discussing FDA’s announcement of 2018 Compounding Policy Priorities (here). FDA also released its Final Guidance on Compounding “essentially copies” of commercially available drugs.  This long-anticipated guidance discusses how FDA intends to determine whether a compounded drug is essentially a copy of a commercially available drug product.  We discuss each Final Guidance separately below.

Essentially Copies Under Section 503A

FDA’s Final Guidance for traditional, Section 503A pharmacy compounders does not read that differently from the draft guidance, which we blogged about here.

The Final Guidance does, however, contain a handy flow chart (similar to the chart FDA included in the 503B draft guidance) that enables the reader easily to review FDA’s criteria for what it considers is essentially a copy and make a determination whether a compounded product meets the guidance’s criteria. FDA states in a footnote that it also considering “the applicability” of the guidance to hospitals and health systems, and will address that issue in a separate guidance or rulemaking, thus telegraphing that the Agency will potentially adopt a different “essentially copies” analysis for compounding for those entities.

The Final Guidance does not change the definition of what it considers a “commercially available drug product” (i.e., considering whether a product is no longer commercially marketed (excluding for reasons of safety or effectiveness) and Section 506E shortage drugs).  It also does not change what it considers “essentially a copy” of a commercially available drug product, using the same test set forth in the draft guidance:

• the compounded drug product has the same active pharmaceutical ingredient (API);
• the APIs have the “same, similar or easily substitutable strength”; and
• the products can be used by the same “route of administration.”

If the compounded formulation meets ALL three of these criteria, then the compounded product is “essentially a copy” of a commercially available product and can only be compounded in small amounts as described in the Final Guidance.  Concerning similar dosage strengths, and despite several comments addressing the issue, FDA left in the Final Guidance its “10% statement:” “FDA generally intends to consider two drugs to have a similar dosage strength if the dosage strength of the compounded drug product is within 10% of the dosage strength of the commercially available drug product.”  And, notably, if the commercially available drug has to be “split” and the tablet is not suitable for splitting, FDA would not consider the compound made to the prescribed dosage strength to be “easily substitutable.”  FDA also maintained its limitations in the Final Guidance concerning compounds that have the same characteristics as two or more commercially available drug products, notwithstanding some industry confusion concerning permissible conduct when compounding multiple ingredients in the same, similar or easily substitutable strength that are also separately commercially available.  The Guidance also again makes clear that price alone is not sufficient to render a product outside the essentially copies prohibition.

The Final Guidance also does not substantively differ from the draft concerning the required “statement of significant difference” when copying commercially available drug products. With respect to whether a compounder is compounding “regularly or in inordinate amounts,” FDA’s final position is also consistent with statements in the draft guidance, including considering permissible compounding “four or fewer” prescriptions of essentially copies in a calendar month.  FDA does not consider any prescription that notes a “significant difference” to be essentially a copy; thus those prescriptions would not be counted in the four-prescription limit.  FDA recommends that pharmacies maintain records documenting statements of significant difference for a period of at least three years.

Essentially Copies Under Section 503B

Notwithstanding dozens of comments from industry, like the Section 503A essentially copies Final Guidance, the Section 503B Final Guidance is not substantially different from the draft guidance that FDA released in 2017, and blogged about here.   FDA adds that it does not intend to take enforcement action against an outsourcing facility for failing to compound in accordance with section 503B(a)(5) if it fills orders for a compounded drug that is essentially a copy of an approved drug that has been discontinued and is no longer marketed.  FDA does not clarify whether these compounds would be limited to those drugs made with substances on FDA’s bulks list 1 (or the bulks list FDA intends to finalize through regulations), however.

FDA is considering the same factors to determine whether the compounded product is identical or nearly identical to the approved drug where ALL of the following are the same:

• active ingredients;
• route of administration;
• dosage form;
• dosage strength; and
• excipients.

Unlike the draft, the Final Guidance adds the following concerning “route of administration:” If the approved drug can be used (regardless of how it is labeled) by the same route of administration prescribed for the compounded drug, FDA intends to treat the “compounded drug as though it has the same route of administration for purposes of this analysis.  For example, if the approved drug is an injectable drug sold in a vial that is labeled for intra-muscular use, but this drug can also be drawn from the vial by a smaller needle for subcutaneous administration, a compounded drug product sold in a similar vial and prescribed for sub-cutaneous use would be considered to have the same route of administration under this analysis.”  In contrast to “essentially copies” under Section 503A (where FDA does not define “identical” or “nearly identical”), if a compounded drug product is “identical” or “nearly identical” to the commercially available drug product, the fact that a prescriber makes a determination of significant or clinical difference is of no matter – such a product may not be compounded under Section 503B unless there is a drug shortage. Like Section 503A, however, FDA does include a footnote that seemingly permits compounding drug products have been discontinued (or never marketed) for reasons other than safety or effectiveness.

Other provisions of the Section 503B “essentially copies” guidance have not changed between the draft and the Final Guidance, other than FDA’s recommendation that a facility keep records demonstrating the clinical difference determination for a period of at least three years. Like in the draft guidance, the Section 503B Appendices setting forth how FDA intends to determine whether a compounded drug product is essentially a copy of a commercially available drug product under Section 503B are attached here.

In 2015, FDA proposed to revise the intended use regulations, which describe how the agency determines the intended use of a drug or device, including the types of evidence that may be considered. FDA’s proposed rule would have deleted the infamous “knowledge” sentence, which could be read to say that a firm’s knowledge of off-label use by clinicians can be a basis for FDA to infer intended use. We explained the problem and praised the proposal to delete the sentence in a this blog post.

The seemingly sensible reform in the proposed rule did not take place. Instead, in early 2017, FDA issued a final rule that shockingly did not delete the knowledge sentence. Instead, the final rule amended it to introduce a new and problematic “totality of the evidence” standard. (FDA insisted that the purpose of the amendment was merely to clarify existing administrative practice.) We commented in a blog post here.

Fortunately, the rule was caught up in the new Trump administration’s initial regulatory freeze, and then a further delay until March 19, 2018 was announced. Now, FDA proposes an indefinite delay to re‑evaluate the final rule, and in particular, 13 follow‑on comments and an industry petition. (The press announcement is here.) FDA summarizes the comments as alleging that the amended knowledge sentence: violates the First Amendment, the Fifth Amendment, and the Administrative Procedure Act (APA); is an interference with the practice of medicine; is unsupported by the text or legislative history of the Federal Food, Drug, and Cosmetic Act; and is unsupported by case law or past practice. FDA indicates that it needs more time to fully consider these issues.

We support the delay. These issues are too important for the drug and device industries, and for clinicians and patients. FDA should take the time to get it right. We urge interested parties to comment in support of the proposal. Comments are due by February 5, 2018, and there will be no extensions granted, in order to ensure time to consider the comments before the current March 19, 2018 implementation date.

Ultimately, it would be best if FDA returns to the original proposal and deletes the knowledge sentence. If FDA wishes to go further than that, it might consider our recommendations for an overhaul of the intended use regulations, as described here. But even if the agency simply returns to the more limited 2015 proposal, that would be an important step forward.

Last week FDA announced the release of its 2018 “Compounding Priorities Plan.” FDA also released several guidance documents in the wake of its announcement, such as its final guidance on essentially copies of commercially available drug products for Section 503A and 503B facilities (more on that in another blog post), and guidance on repackaging of biologic products outside of an approved BLA. FDA notes that “Our 2018 compounding policy priorities plan lays out how the agency will implement certain key provisions of DQSA and other provisions of the law relevant to compounders over the course of the coming year. Our policy will be part of a series of draft and final guidance documents, proposed and final rules and a revised draft memorandum of understanding (MOU) between the FDA and the states.” FDA is indeed busy in this area. The priorities include the following:

Risk Based Approach to Manufacturing Standards for Outsourcing Facilities

FDA states its policy goal is to make it more efficient and lower cost for more compounding pharmacies to “voluntarily meet the higher production standards for 503B outsourcing facilities as a way to promoted more patient access to higher quality compounded medications.” Is FDA describing a “503B lite” standard for certain compounders that the Commissioner Gottlieb hinted at last fall? Likely so. FDA states that it plans to issue proposed regulations addressing cGMP requirements for outsourcing facilities. In the meantime, however, it intends to issue revised guidance for cGMP – considering how it should apply quality standards given the differing size and scope of compounding operations. FDA’s stated goal of these new requirements is to cajole more compounders to register as outsourcing facilities. FDA states that the new draft revised cGMP guidance “will address standards critical to producing a high-quality product,” while “balancing appropriate flexibility.”

Restricting Compounding of Drugs that are Essentially Copies of FDA-Approved Drugs

FDA announced the release of two Final Guidance Documents (here and here) on compounding essentially copies of commercially available drugs.

Although the Final Guidance documents do not seem to be materially different than what FDA released in draft form last year, FDA states that, as it moves forward with implementation and enforcement, the Agency “intends to focus its initial efforts on education and outreach” to practitioners and prescribers of compounds, who can determine whether the compounded product produces a significant or clinical difference for the patient than the commercially available product. FDA also states it intends to prioritize review of those situations that will adversely impact the public health “such as compounding a drug using a bulk substance to produce a product than can otherwise be made by diluting an FDA-approved FDA drug according to its labeled instructions.”

Regulating Compounding From Bulk Substances

Not mentioning the litigation that FDA is facing in the D.C. District Court concerning whether its Interim Bulks Policy violates the Administrative Procedure Act, FDA discusses the “temporary” approach it took when implementing the interim bulks list for both 503A and 503B compounding in 2015, pending promulgation of the required final rule setting forth bulk substances that may be used in compounding. FDA again warns that it is exercising enforcement discretion concerning substances on the bulks lists. It also states that it will continue to promulgate regulations under 503A (as it did in December 2016 addressing ten substances). For 503B, FDA will issue (in March 2018), a draft guidance setting forth (for a third time…) criteria for making clinical need determinations for the list. FDA states it intends to address concerning about compounding from bulk substances when the drug can be compounded from FDA-approved drugs. FDA emphasized that bulk drugs will be placed in the 503B bulks list only “when there is a clinical need to compound drugs using these substances.” It will be interesting to see whether FDA will require renominations of substances already on 503B’s Bulks List 1.

Solidifying FDA’s Partnership with State Regulatory Authorities

FDA’s announcement hints that a revised MOU under Section 503A between FDA and states (again in draft form) is forthcoming. FDA states that it will clarify “inordinate amounts” shipped interstate by a compounder if the “number of prescriptions of compounded drugs distributed interstate during any calendar month is greater than 50 percent.” Importantly, instead of that number serving as a “hard limit, for state action,” the 50 percent target will trigger certain reporting requirements. The new MOU will also provide states more time to report to FDA, and flexibility on identifying when amounts are inordinate, considering the size and scope of compounding operations.

Finalization of Biological Products Guidance and Clarifying Other Policies on Activities that Compounders Undertake

FDA’s biological products guidance was the subject of many comments, especially surrounding beyond use dating of these compounded products. FDA announced that the new guidance is a “good example” of FDA’s consideration of feedback in development of policies. The final guidance describes a mechanism for outsourcing facilities to assign beyond use dates (BUDs) to repackaged biological products that exceed the “default” BUDs of 24 hours based on a “science and data-driven policy approach” to “support patients and their clinicians, while also protecting public health.”

Miscellaneous

Last but certainly not least, FDA states that it will issue guidance clarifying its “facility” guidance, and will address whether an outsourcing facility can be co-located with a Section 503A pharmacy (we thought the answer was “no” based on earlier draft guidance, here).  FDA will also soon issue long awaited guidance on repackaging radiopharmaceuticals by a state-licensed pharmacies and outsourcing facilities. FDA will also reissue guidance describing “insanitary” compounding conditions. Importantly, the insanitary conditions guidance will address concerns raised by pharmacies or prescribers that compound small quantities of drugs. FDA plans to “better define the circumstances” under which it believes drugs are being mixed and applied in a manner that creates “a negligible patient risk” (and thus such entities will not be subject to the same compliance policy under FDA’s risk-based enforcement approach). FDA will also update its rule setting forth withdrawn or removed drugs for reasons of safety or effectiveness.

Phew… looks like FDA’s compounding folks are in for an extremely busy 2018.

On December 29th, the Drug Enforcement Administration (“DEA”) published notice of its intent to temporarily control fentanyl-related substances that are not currently regulated under the Controlled Substances Act (“CSA”).  Schedules of Controlled Substances: Temporary Placement of Fentanyl-Related Substances in Schedule I, 82 Fed. Reg. 61700 (Dec. 29, 2017).  DEA has temporarily scheduled other substances fentanyl-related substances over the past four years, including cyclopropyl fentanyl on January 4, 2018. Schedules of Controlled Substances: Temporary Placement of Cyclopropyl Fentanyl in Schedule I, 83 Fed. Reg. 469 (Jan. 4, 2018).  However, as DEA notes these prior scheduling actions have not proven effective because  when it temporarily schedules a fentanyl-related substance, illicit manufacturers abroad structurally modify the substances and smuggle them into the U.S. and distribute them as non-controlled substances.  Also, the alternative of attempting to prosecute these individuals under the controlled substances analogue statute is difficult. Temporary Placement of Fentanyl-Related Substances, 61701 n.3.  This does not affect the scheduling of already approved fentanyl pharmaceutical products that are FDA-approved and currently regulated/scheduled by DEA.

DEA is now attempting to temporarily schedule fentanyl-related products by defining the class of products in such a manner so as to be broad enough to effectively capture any fentanyl-products being illicitly manufactured. Previously, the agency has had to schedule each substance based on its chemical make-up to ensure it met the legal definition of a controlled substance.  In almost all cases, the CSA controls a drug or substance by its specific formulation.  In this case, DEA is attempting to control a substance based on a definition of its potential formulation.

DEA’s notice states that deaths associated with the abuse of substances structurally related to fentanyl in the U.S. have reached an alarming level. DEA asserts that “chief among the causes is the sharp increase in recent years is the availability of illicitly produced, potent substances structurally related to fentanyl.” Fentanyl is about a hundred times more potent than morphine and the substances subject to temporary control are typically manufactured outside the U.S. by clandestine manufacturers and smuggled into the country and are often mixed with heroin, cocaine and methamphetamine or used in counterfeit pharmaceutical prescription drugs.

None of the affected fentanyl-related substances have an accepted medical use in the U.S. nor are they the subject of an exemption or approval under section 505 of the Food, Drug and Cosmetic Act. Fentanyl-related substances subject to exemption or approval will be excluded from the temporary scheduling order.

DEA’s attempt to create a definition for such substances includes the temporary scheduling of any non-controlled substance not assigned a DEA Controlled Substance Code Number that is structurally related to fentanyl by any one or more of the following specific modifications:

1. Replacement of the phenyl portion of the phenethyl group by any monocycle, whether or not further substituted in or on the monocycle;
2. Substitution in or on the phenethyl group with alkyl, alkenyl, alkoxyl, hydroxyl, halo, haloalkyl, amino or nitro groups;
3. Substitution in or on the piperidine ring with alkyl, alkenyl, alkoxyl, ester, ether, hydroxyl, halo, haloalkyl, amino or nitro groups;
4. Replacement of the aniline ring with any aromatic monocycle whether or not further substituted in or on the aromatic monocycle; and/or
5. Replacement of the N-propionyl group by another acyl group.

As noted above, this is a different approach to scheduling and we will see if these definitions can withstand the expected challenges from defense attorneys related to whether this type of scheduling is consistent with the CSA.

DEA will publish the scheduling order in the Federal Register on or after January 29, 2018 and it will be effective immediately. Temporary scheduling will last for two years, but DEA can extend it for an additional year if proceedings to permanently schedule the substances are pending.

As we previously reported, in October 2017, the New Jersey Attorney General and Division of Consumer Affairs issued a proposed rule in response to concerns about the amount of money being paid to prescribers in the state of New Jersey. On December 22, 2017, the Attorney General finalized the rule, which is entitled “Limitations On and Obligations Associated with Acceptance of Compensation from Pharmaceutical Manufacturers by Prescribers” (N.J.A.C. 13:45J). The rule applies to all New Jersey prescribers (i.e., physicians, podiatrists, physician assistants, advanced practice nurses, dentists, and optometrists). It became effective on January 16, 2018, and does not apply to contracts entered into on or before January 15, 2018.

To assist our readers, we provide here the text of the final rule, which is compiled from the proposed rule and the revisions that were published in the New Jersey Register.

Under the final rule, New Jersey prescribers may not accept the following from pharmaceutical manufacturers or manufacturer’s agents:

• Any financial benefit or benefit-in-kind, including, but not limited to, gifts, payments, stock, stock options, grants, scholarships, subsidies, and charitable contributions, except as specifically permitted by the rule.
• Any entertainment or recreational items, such as tickets to theater or sporting events, or leisure or vacation trips.
• Items of value that do not advance disease or treatment education, including, but not limited to,
  • Pens, note pads, clipboards, mugs, or other items with a company or product logo;
  • Items intended for the personal benefit of the prescriber or staff, such as floral arrangements, sporting equipment, artwork;
  • Any payment in cash or cash equivalent; and
  • Items that may have utility in both the professional and non-professional setting, such as electronic devices.
• Any payment or travel expenses for attending an education event or promotional activity as non-faculty.

Under the final rule, New Jersey prescribers may accept the following permitted gifts and payments from pharmaceutical manufacturers or manufacturer’s agents:

• Items designed primarily for educational purposes for the patients or prescriber that have minimal or no value to the prescriber outside of his/her professional responsibilities. Items that may have independent value to the prescriber may only be accepted if the items are used by patients and remain in the common area of the prescriber’s office.
• A subsidized registration fee at an education event, if that fee is available to all participants.
• Modest meals, worth no more than $15 per prescriber, provided by the event organizer at an education event, if the meals facilitate the educational program to maximize prescriber learning.
• Modest meals, worth no more than $15 per prescriber, provided by a manufacturer to non-faculty prescribers at a promotional activity.
• Compensation, based on fair market value, for providing bona fide services as a speaker or faculty organizer or academic program consultant for an education event or promotional activity, or for participation on advisory bodies or under consulting arrangements. A prescriber may also accept reasonable payment for travel, lodging, and other expenses associated with such services.
• Reasonable payment for travel, lodging, and other expenses in connection with research activities.
• Reasonable payment to prospective applicants for travel, lodging, and other expenses in connection with employment recruitment.
• Royalties, licensing fees, or other arrangements regarding the purchase of intellectual property rights from a prescriber.
• Sample medications intended to be used exclusively for the benefit of the prescriber’s patients.

The rule imposes a limit of $10,000 per calendar year on the amount of compensation that a single prescriber may receive in the aggregate from all pharmaceutical manufacturers for speaking at promotional activities, participation on advisory boards, and consulting arrangements. Payment for speaking at education events are not subject to the $10,000 cap but must be fair market value and set forth in a written agreement. In addition, payments for research activities, royalties and licensing fees are not subject to the $10,000 cap. Under the final rule, research includes pre- and post-market activities that study or assess the safety or efficacy of prescribed products as well as scientific advising on the development, testing, and evaluation of prescribed products.

Although many commenters expressed concern about the $15 per prescriber limit for meals, the Attorney General declined to eliminate or revise this limit, and disagreed with the commenters’ assessment that $15 is an unreasonable limitation on the cost of meals provided to prescribers.

As we previously noted, this rule does not impose penalties on, or otherwise increase the state’s authority over, pharmaceutical manufacturers and wholesale distributors (who are included in the definition of pharmaceutical manufacturer). Rather, the rule provides the various New Jersey prescriber licensing boards with authority to take enforcement action against prescribers who accept prohibited gifts or payments from pharmaceutical manufacturers.

Even though the state’s authority over pharmaceutical manufacturers has not expanded, the limitations in the final rule will impact how manufacturers interact with prescribers licensed by New Jersey. Under the rule, prescribers are responsible for independently monitoring their payments from pharmaceutical manufacturers to ensure compliance with the rules. However, prudent manufacturers may want to ensure that the payment limits in the rule are not exceeded in order to prevent their prescriber speakers, advisors, and consultants in New Jersey from incurring sanctions.

For the same reason, pharmaceutical manufacturers will want to ensure that their written agreements with prescribers for bona fide services comply with the rule by:

• Specifying the services to be provided and the dollar value of the prescriber’s compensation based on the fair market value of the services;
• Specifying that meetings held in association with bona fide services occur in venues and under circumstances conducive to the services provided and that the activities related to the services are the primary focus of the meeting; and
• Identifying the following:
  • The legitimate need for services in advance;
  • The connection between the competence, knowledge, and expertise of the prescriber and the purpose of the arrangement;
  • How participation of the prescriber is reasonably related to achieving the identified purpose;
  • The manner by which the prescriber will maintain records concerning the arrangement and the services provided by the prescriber; and
  • An attestation that the prescriber’s decision to render the services is not unduly influenced by a pharmaceutical manufacturer’s agent.