It has been 40 years since Steve Perry changed the lyrics to the iconic song Lights to refer to San Francisco rather than Los Angeles.  As it turns out, litigants looking to gain easy access to otherwise confidential agency documents may want to make the same choice.

As we have detailed before (here), in March of last year, several organizations sued FDA and the U.S. Fish and Wildlife Service to challenge FDA’s November 2015 approval of the genetically engineered AquAdvantage Salmon (a full description of the salmon can be found in our earlier post on that topic, here).  After 12 months of litigation, the case has not proceeded past discovery.  FDA has thus far produced over 38,000 pages of documents to the plaintiffs.

Much to the plaintiffs’ chagrin, those documents do not include internal deliberative documents that detail FDA’s thinking during the more than 20 years that FDA reviewed the salmon before approval. The plaintiffs demanded that FDA provide them these internal deliberative documents, and the U.S. District Court for the Northern District of California agreed, issuing an order requiring FDA to supplement the administrative record with hundreds of thousands of additional documents.

On April 19, 2017, FDA took the unusual step of filing a petition with the U.S. Court of Appeals for the 9th Circuit asking that the court issue a writ of mandamus (a fancy phrase for an order to a lower court when the lower court has acted contrary to law) requiring the lower court to vacate its ruling.

As arcane as this case may initially sound, the breadth of its implications is difficult to understate.

Federal agencies, including FDA, make administrative decisions on a daily basis, whether that is issuing a permit, denying a petition, or granting approval for a product. Prior to making these decisions, these agencies gather data and information and may even seek public comment.  Importantly, agencies deliberate internally and (often) with other governmental agencies.  There is no doubt that the contents of public comments to an agency as well as the specific data used to support an agency decision are a part of the administrative record of the decision.  The question posed in the AquAdvantage Salmon litigation is whether the written documents that constitute the agency deliberative process are also a part of that administrative record.

This is a critical question because the public should be entitled to review the administrative documents that constitute the administrative record for a given agency decision. Congress, when passing the Administrative Procedure Act, stated that the “exclusive record for decision” consists of the “transcript of testimony and exhibits, together with all papers and requests filed in the proceeding.”  5 U.S.C. § 556(e).

In 1938, however, the U.S. Supreme Court stated that it is “not the function of the court to probe the mental processes” of a government agency. U.S. v. Morgan, 304 U.S. 1, 18 (1938) (here).  Many courts, including the U.S. Court of Appeals for the District of Columbia Circuit and the U.S. District Courts for the Eastern and Central Districts of California, have determined that, following U.S. Supreme Court precedent, the internal deliberations of federal agencies are not subject to review.  This is not to say that such internal deliberations are free from public scrutiny, but rather it reflects the policy choice that, absent a strong showing that the government acted in bad faith, the public is best served by allowing agencies to freely debate administrative decisions without the chilling effect of having all deliberative documents subject to public disclosure and review.

Interestingly, however, the Northern District of California has a history of granting plaintiffs access to agency deliberative documents. Over the last 15 years, this district court has allowed access to deliberative documents from the Department of Justice, the Environmental Protection Agency, and the U.S. Department of Agriculture, to name a few.  FDA’s position in its filing is that the court erred when it required  FDA to provide plaintiffs documents that detail FDA’s deliberative process, and that the district court’s decision is at odds with the precedent established by the Supreme Court, other circuit courts, and  the Administrative Procedure Act.

FDA goes further to note that compliance with the lower court’s order to produce the deliberative documents would be overly burdensome. After a negotiated narrow search of just three document custodians, FDA identified approximately 400,000 pages of responsive material.  If the FDA staff dedicated to reviewing those documents prior to production were to work on the ordered production only, FDA asserts that it would take the agency over three years to review just those documents.  Of note, the plaintiffs are currently seeking documents from 17 custodians and have reserved the right to seek additional documents in the future.  At that rate it will take over a decade for FDA to fully respond to the document request from the plaintiffs.  Unlike private party defendants, who the Department of Justice expects to review similarly large productions in a matter of months, FDA asserts it has no available resources to hire additional staff to speed the document review process.  After years of sequester and budget cuts, it is difficult to imagine Congress or the President providing additional appropriations to facilitate document production in this case.

According to FDA, if the court denies FDA’s petition, the entire government will be exposed to innumerable lawsuits seeking production of deliberative documents. Further, subsequent internal deliberations may be stymied given they will be conducted with knowledge that expressed opinions and open debate will potentially be subject to public scrutiny, even if the ultimate agency decision is substantially different from those opinions and debate.

At bottom, because the 9th Circuit has not ruled previously on this specific question of law, it will be interesting to see whether the court is ready to open its circuit to all comers dreaming of pulling back the curtain of the government’s deliberative process or whether the court will follow the rulings of other courts.  We will continue to monitor this case and this important petition.

The court may deny the petition without an answer from the respondent or may order the respondent to file an answer within a fixed period of time.

The scourge of opioid addiction has received considerable attention for some time, and now legislation is proposed to address the overuse of addictive prescription opioids: Senate bill 892, the Opioid Addiction Prevention Act of 2017. The proposed legislation defines conditions of acute pain and tells physicians how they may prescribe for them.

This bipartisan bill, offered by Senator John McCain (R-AZ) and Senator Kirsten Gillibrand (D-NY), would require physicians who prescribe opioids to certify, in order to secure registration or renewal of registration under the Controlled Substances Act, that they would, to treat acute pain, not write a prescription for more than a 7-day supply of an opioid. Further, the bill prohibits the refill of such prescriptions for acute pain. It does appear that the bill would not prohibit a physician to treat acute pain that lasts for more than 7 days by issuing serial 7-day,but nonrefillable prescriptions.

If there are other limitations on prescribing for acute pain imposed by the states, those limitations would be given force by this the bill.

“Acute pain” is defined as “pain with abrupt onset and caused by an injury or other process that is not ongoing.” The bill excludes from the meaning of “acute pain” the following: “chronic pain,” “pain treated as part of cancer care,” “hospice or other end-of-life care,” or “pain treated as part of palliative care.” Further, the prescribing limitations of the bill do not apply to prescriptions of Schedule II, III, or IV opioids intended and used to treat addiction.

Navigating treatment of patients in compliance with federally-prescribed diagnoses of pain will be the responsibility of the physicians. The bill defines acute pain as pain from a particular source — an injury or other process that is not ongoing — but it makes no attempt to say how much the pain must hurt to be “acute;” that is evidently left to the doctor. Further, when a “process is not ongoing” could be hard to know — consider the pain following surgeries; if the process of healing is “not ongoing” pain, then the scripts need to be issued every 7 days.

Given that the bill does not limit the number of 7-day scripts the doctor might write, it can be assumed that its intent is to require weekly patient/doctor interaction. The need for that, and its effect upon the patients and their physicians, needs study; perhaps the medical profession can best determine what is good medical practice.

The bill gives a clear signal that members of Congress are deeply concerned about opioid addiction, and they are to be commended. How much it might do to reduce the abuse of opioids is questionable.

On April 14, 2017, Congress released a discussion draft of a bill to reauthorize the FDA’s various user fee programs, commonly referred to as “the UFAs.” The FDA Reauthorization Act (FDARA) would renew the Agency’s authority to collect user fees in Fiscal Years 2018 through 2022 and put into effect the commitments negotiated by FDA and regulated industry, which are proposed in the following commitment letters:

• PDUFA VI
• MDUFA IV
• GDUFA II
• BSUFA II

Without such legislative action, the authority to collect user fees is set to expire on September 30^th. In fact, if the user fee programs aren’t reauthorized before August, FDA will have to send layoff notices to more than 5,000 employees whose positions are supported through user fee funds – and if not enacted, or not in a timely manner, it would cripple the Agency’s drug and device review functions. However, it appears both the Senate and House are interested in a timely reauthorization, with Energy and Commerce Committee Chairman Greg Walden (R-OR) stating that the House is “fully committed to a timely reauthorization of the agreements” and Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) stating “the sooner we reauthorize the agreements the better.”  The full text of the FDARA discussion draft is available here.

A “Clean” User Fee Bill

The most noteworthy aspect of FDARA is what is not included: a litany of policy proposals tacked onto the core user fee reauthorization language. This is counter to what we have come to expect, with the 156 page FDAAA in 2007 and the 140 page FDASIA in 2012 – FDARA is all of 34 pages. This means it includes very minimal provisions that go beyond the language needed for FDA to collect user fees and report on performance and finances, including updating base fee amounts and workload/capacity adjustments.

In addition to potential expediency of passing this proposed legislation that is supported in a bipartisan manner, another possible reason that Congress is interested in a clean bill is that it just had an opportunity to pass comprehensive FDA reform legislation with the 21st Century Cures Act, which was signed into law in December of 2016 (see our summaries of 21st Century Cures here, here, here, and here).

With that being said, there are a number of reforms to the structures of how fees are assessed, as well as a limited number of policy riders, which are discussed in turn below.

Restructuring the User Fee Programs

Under PDUFA VI, FDARA would change the historical structure where prescription drug user fees were derived one-third from facility fees, one-third from various application fees, and one-third from product fees. The new structure would collect 20% from application fees and 80% from fees for approved products, with fees for supplemental applications and facilities being eliminated.

Meanwhile, MDUFA IV would add a user fee for de novo classification requests, which makes sense since there was no apparent reason for an exemption for this type of application, which has grown in popularity.

GDUFA II would eliminate prior approval supplement and establish a generic drug applicant program fee. This program fee would be based on how many ANDAs the applicant has approved by FDA (tiered by 20+ paying the full fee, 6-9 paying 40% of the fee, and 1-5 paying 10% of the fee). Ultimately, 33% of total generic drug user fees will come from application fees, 20% from generic drug facility fees, 7% from API facility fees, and 35% coming from this new program fee.

Finally, BSUFA II would establish a fee structure for biosimilars as follows: (i) Initial Biosimilar Development Fee for the 1st year of clinical development, (ii) Annual Biosimilar Development Fee for subsequent years of clinical development, (iii) Biosimilar Program Fee for sponsors of approved biosimilars, and (iv) Application Fee for new biosimilar applications (and eliminate supplement and establishment fees).

Non-User Fee Policy Riders

As previously mentioned, FDARA includes a limited number of policy riders. There are two device-related policy riders. The first is the proposed establishment of a pilot accreditation scheme for conformity assessment to provide FDA the authority to audit and certify laboratories who conduct device conformance testing to a recognized standard, and also to withdraw the certification if necessary. The second is the proposed reauthorization third party review, with provisions to increase flexibility, such as through conducting a public guidance development process to identify the factors FDA will use to determine which devices are eligible for third party review.

In addition, FDARA would reauthorize a number of other programs for five years:

• Pediatric humanitarian device exceptions;
• Critical Path Public-Private Partnerships;
• Pediatric Device Consortia; and
• Orphan Drug Grants.

Finally, FDARA would reauthorize section 505(u) of the Federal Food, Drug, and Cosmetic Act, which provides FDA the authority to grant exclusivity for drugs containing single enantiomers for another 5 years. Perhaps this incentive will be used more in this reauthorization since it has only been used once to date (see our previous discussion of this exclusivity here).

The Future of FDARA

The question remains: will FDARA remain clean? There is still several months before the UFAs need to be reauthorized, so there is plenty of time for other policy priorities (e.g., drug pricing) to make their way into the bill – especially since it is considered “must pass” legislation. And it appears this option is not off the table with Energy & Commerce Committee Chairman Walden stating “as this process proceeds, I look forward to continued discussions with my colleagues in the House on other member priorities that could strengthen this important legislation.”

We last updated readers on the Decosters’ criminal case in January, when the Decosters timely petitioned the Supreme Court for review of the Eighth Circuit decision upholding their three-month prison sentences under the FDC Act. Last week, the government responded to that petition.

As reported in our previous posts here, here, and here, the Decosters’ case is significant because it tests the limits of the Park doctrine, also known as the “responsible corporate officer” doctrine. The doctrine’s name originated with United States v. Park, 421 U.S. 658 (1975) (here), in which the Supreme Court held that the Federal Food, Drug, and Cosmetic Act (“FDC Act”), 21 U.S.C. § 331, imposes criminal liability on individuals whose corporate position affords them “the power to prevent or correct” violations of that section, even absent “knowledge of, or personal participation in” the violations. Park, 421 U.S. at 670, 676. Park expanded on an earlier Supreme Court decision upholding strict liability for a responsible corporate officer under a different statute in United States v. Dotterweich, 320 U.S. 277 (1943) (here).

By way of brief background, Jack and Peter Decoster, the former owner and CEO, respectively, of Quality Egg, LLC, were each sentenced to three-months imprisonment after pleading guilty to responsible corporate officer violations of the FDC Act. The government acknowledged that it lacked evidence of either Decoster’s knowledge of or participation in the FDC Act violations at issue. However, the U.S. District Court for the Northern District of Iowa found by a preponderance of the evidence at sentencing that the Decosters had acted negligently. The Eighth Circuit, in a split decision, upheld the Decosters’ three-month prison sentences. While the Eight Circuit panel was unanimous that a sentence of imprisonment for a “vicarious liability” offense – absent a finding of some blameworthiness or negligence – would not be permissible, two members of the three-judge panel determined that blameworthiness was either inherent in a responsible corporate officer conviction (Murphy, J.), or had been established in the Decosters’ case by the District Court at sentencing (Gruender, J., concurring).

The government’s brief in opposition to Supreme Court review of the Decosters’ sentences largely reflects Eight Circuit Judge Murphy’s, and in the alternative Judge Gruender’s, views of the law, and argues that the Decosters’ case is not an appropriate vehicle for the Supreme Court to resolve the questions of law raised in their petition.

The government points to the Decosters’ (1) “unqualified” guilty pleas to FDC Act misdemeanor offenses, and (2) agreement to be sentenced based on facts by the district court judge based on a preponderance of the evidence, as dispositive of the issues surrounding their sentencing. The government argues that the Decosters’ three-month prison sentences would have been justified based on the blameworthiness inherent in a responsible corporate officer conviction under the FDC Act, regardless of any fact-finding by the District Court. But the Decosters’ prison sentences were not based purely on their guilty pleas for responsible corporate officer violations of the FDC Act, and the District Court did find additional facts about the Decosters’ acts and omissions relating to the FDC Act violations at issue. The government emphasizes that in their guilty pleas, the Decosters agreed to be sentenced based on facts determined by the District Court judge by a preponderance of the evidence.

Finally, in response to the Decosters’ novel argument that the Park doctrine itself should be invalidated in its entirety, the government argues that their guilty pleas, and failure to contest the statutory basis for their convictions before the district and circuit courts, preclude Supreme Court consideration of that issue.

Despite the government’s opposition, the Decosters already have the support of multiple amici urging the Court to review their prison sentences. The Washington Legal Foundation and the National Association of Criminal Defense Lawyers both filed amicus briefs in support of the Decosters’ petition. If the Eighth Circuit briefing is any indication, additional influential amici may follow. Stay tuned – we will keep you posted on the Court’s disposition of the Decosters’ petition.

FDA generated a great deal of the buzz a few weeks ago when it proposed exempting more than 1,000 Class II devices from the 510(k) requirements (see our earlier post here). Given the excitement, we thought it might be worth discussing what devices are no longer subject to the 510(k) requirements when a generic device type becomes 510(k)-exempt.

FDA classifies devices into Class I, II, and III. There are specific classification regulations associated with each generic type of device. The classification regulations can, however, cover a broad category of devices (e.g., manual surgical instruments). In order to create additional granularity with regard to device technology within each classification regulation, FDA created product codes. There can be one or many product codes within a classification regulation.

FDA’s analysis of whether to exempt a type of device from the 510(k) requirements is specific to the devices within the generic category in question. Thus, FDA does not always propose exempting all product codes within a classification regulation. In addition, FDA sometimes places limitations (e.g., type of technology or indications for use) on an exemption within a classification regulation.

When a generic type of product (often identified by its product code within a classification regulation) becomes exempt from the 510(k) requirements, future products of that generic type will not be required to obtain 510(k) clearance prior to marketing – but, the exemption is subject to the .9 limitations. Each classification regulation part (21 C.F.R. Parts 862 – 892) includes a .9 section (e.g., 21 C.F.R. § 862.9). This section is often overlooked for the more substantive, device-specific sections later in the Part. However, the .9 limitation is crucial in understanding what is and is not 510(k)-exempt.

The .9 limitation says that a device of the generic type in a 510(k)-exempt classification regulation is exempt so long as its characteristics were “existing and reasonably foreseeable” at the time the generic type of device became exempt from the 510(k) requirements. The .9 regulation elaborates on what this phrase means by way of examples. Specifically, a 510(k) is required if the proposed device:

1. has a “different” intended use as compared to the generic device type; or
2. uses a different “fundamental scientific technology” compared to the generic device type.

Note: there are other additional .9 limitations specific to in vitro diagnostic devices, which we are not discussing here.

Determining whether or not a device’s characteristics (i.e., fundamental technology and intended use) were foreseeable at the time of the exemption is not an easy task, and is rather subjective. Certainly the technology and intended use described in the classification regulation are existing and foreseeable. Beyond the classification regulation, 510(k) clearances already in place at the time of an exemption can shape whether an intended use or technology are considered reasonably foreseeable. See 63 Fed. Reg. 59222, 59224 (Nov. 3, 1998) (here).

Clearances that are granted after an exemption is finalized are also useful information. These post-exemption clearances provide insight into the types of changes that FDA concluded exceeded the limitations in a .9 regulation. Once a specific device is deemed to trip the .9 limitation and must undergo 510(k) review, similar devices must also undergo 510(k) review.

If there are no pre- or post-exemption 510(k) clearances that obviously answer the question whether a proposed device is exempt or not, a manufacturer will need to analyze the need for a 510(k) more generally based upon the intended use and fundamental scientific technology prongs, described above. With regard to intended use, as described in the .9 regulation, the bar is quite high – a different intended use, including a new medical purpose or changing the user population (e.g., from professionals to lay users). However, FDA has analogized this prong of the analysis to the standard for determining if a new 510(k) is required, as set out in its 1997 Blue Book Memorandum, “Deciding When to Submit a 510(k) for a Change to an Existing Device.” See 63 Fed. Reg. 59224. Thus, although the standard may appear high, generally, from FDA’s perspective, even modest changes to the indications for use could trip the exemption.

Fundamental scientific technology on its face appears to be a very high standard – essentially a completely different technological means of achieving the same end goal. The specific examples cited in the .9 regulations support this being a high standard. These examples are a surgical instrument that cuts tissue with a laser beam rather than with a sharpened metal blade and an in vitro diagnostic assay that uses a DNA probe or hybridization rather than traditional immunoassay. These are significant changes. Thus, manufacturers can generally iterate and evolve from a technological perspective and still fall within a 510(k) exemption. A manufacturer should analyze the proposed technological features of a device compared to the technological features within the exemption to determine whether or not the proposed device trips this prong of the exemption.

The most recent list of proposed 510(k) exemptions is set to be finalized this July. When the list is finalized, there are certain to be at least a few 510(k)s pending for devices within the scope of the exemption. In the past, FDA has advised manufacturers that a 510(k) submission pending when an exemption is finalized should be withdrawn. 63 Fed. Reg. 3142, 3143 (Jan. 21, 1998) (here). FDA has not reiterated that guidance more recently.

Anyone with a submission pending when an exemption is proposed, should discuss with the lead 510(k) reviewer whether the submission should be withdrawn – meaning it falls within the exemption – or whether it should proceed – meaning that it falls outside the exemption.

As we reported previously, just before President Trump took the oath of office, FDA issued two guidance documents regarding its approach to the regulation of genetically engineered (“GE”) animals. One of those guidance documents was a revision of a 2009 guidance document that, for the first time, set up a formal review paradigm for GE animals. The guidance, entitled CVM Guidance for Industry #187 – Regulation of Intentionally Altered Genomic DNA in Animals (the “Draft Revised Guidance”), formally expanded the scope of the prior version of the guidance to explicitly state that FDA’s review paradigm for GE animals would apply to all GE animals, regardless of the molecular tools used to produce those animals.

Earlier this week, FDA announced that it is extending the comment period for the Draft Revised Guidance by an additional two months. Comments must now be submitted by June 19, 2017.

This is an important extension for several reasons. First, the area of GE animal regulation is not without its detractors. Some believe that these animals pose little risk and should have less regulatory oversight than FDA currently imposes. Others have sued FDA saying that FDA regulatory oversight is so lacking that it presents a danger to public health and the environment. Thus, FDA’s approach is under attack by both sides of the social/political spectrum. The extension provides additional time for all voices to be heard by allowing more time for disparate groups and interests to file comments.

Given that parties that oppose the Draft Revised Guidance are motivated to provide comments, it is important for parties that are in favor of the Draft Revised Guidance to also provide comments so that the public record includes an accurate representation of the various opinions of industry and the public at large.

Second, in FDA’s Notice of Availability [https://www.federalregister.gov/documents/2017/01/19/2017-00839/regulation-of-intentionally-altered-genomic-dna-in-animals-draft-guidance-for-industry-availability] of the Draft Revised Guidance, FDA asked the public “whether there is any existing empirical evidence demonstrating that certain types of genome editing may pose minimal risk.” Despite those who have asserted for years that genome editing poses little or no risks, FDA’s request for information is almost rhetorical. As far as your author is aware, the science of genome editing simply has not advanced to a stage where data exists to support an a priori finding of minimal risk for an entire class of genomic changes. The genome editing community is working feverishly to improve the accuracy and precision of their molecular tools. The day will come when it is possible to make single small changes to a genome without off-target changes, but we aren’t there yet. If there is data to support a finding that certain types of genome editing pose minimal risk, submitters of such data will welcome the extra time to collect, organize, synthesize, and report such data to FDA.

As with any draft guidance document, we strongly encourage all parties whose products are or may be included under the scope of the Draft Revised Guidance to submit comments to FDA. So, if you were rushing to pull something together before next week, the extension is a welcome opportunity to put together additional thoughts and comments.

Since the Supreme Court’s decision in United Health Services v. United States ex rel. Escobar, we have seen a narrowing of situations in which courts will find liability under the False Claims Act (“FCA”).  A district court in Pennsylvania provided yet another example of this shifting trend when it dismissed a case by whistleblowers attempting to enforce a regulatory scheme via the FCA.  For another discussion of a court’s decision since Escobar, see this post.

Relators Sally Schimelpfenig and John Segura brought a case under the FCA and other state statutes alleging that Defendants manufactured and dispensed prescription drugs that did not comply with certain federal laws requiring child resistant packaging.  Specifically, according to Plaintiffs, Defendants violated the Poison Prevention Packaging Act (“PPPA”), which requires child resistant packaging for orally administered prescription drugs for use by humans. The Consumer Product Safety Improvement Act (“CPSIA”) requires manufacturers of imported goods to certify that their products comply with the rules and regulations enforced by the Consumer Protection Safety Commission (“CPSC”), which includes the PPPA.  These alleged violations of the PPPA and CPSC formed the basis of Plaintiffs’ FCA claims.

In an opinion issued on March 27, 2017, the United States District Court for the Eastern District of Pennsylvania found that Plaintiffs failed to plead sufficient facts to allege violations of the FCA.  United States ex rel. Schimelpfenig v. Dr. Reddy’s Labs. Ltd., 2017 U.S. Dist. LEXIS 44064, *8 (E.D. Pa. Mar. 27, 2017).  After so holding, the Court declined to exercise supplemental jurisdiction over the remaining state law claims.

Defendants in this case can be separated into two categories: the manufacturers who made the allegedly noncompliant prescription drugs and the pharmacies who received the drugs, provided them to customers, and sought reimbursement from government payors. Id. at 3.

Although Plaintiffs brought a total of thirty-four claims, the Court focused on the four concerning violations of the FCA. Id. at 7.  The FCA makes it unlawful to knowingly submit a fraudulent claim to the government.  A prima facie case requires a showing that (1) the defendant presented or caused to be presented to an agent of the United States a claim for payment, (2) the claim was false or fraudulent, and (3) the defendant knew the claim was false or fraudulent.

First, the Court analyzed the second prong of the FCA analysis: whether or not defendants submitted a claim that was false. A claim can be either factually false or legally false.  A claim is factually false when the claimant misrepresents what goods or services it provided to the government.  In such an instance, the claimant would misrepresent the types of goods or services provided, or seek reimbursement for goods or services that were never provided.  The Court noted that Plaintiffs’ SAC did not allege any facts supporting a factually false claim by Defendants, and thus dismissed any FCA claims based on the factual falsity theory of liability. Id. at 10-12.

A claim is legally false when the claimant knowingly falsely certifies that it has complied with a statute or regulation with which compliance is a condition for payment from the government.  This certification can be either express or implied.  Here, the Court found that Plaintiffs did not allege that Defendants expressly certified compliance with all federal statutes and regulations, and thus proceeded to analyze liability under an implied certification theory.  In this analysis, the Court relied in large part on the recent Supreme Court holding in United Health Services v. United States ex rel. Escobar, 136 S. Ct. 1989, 195 L. Ed. 348 (2016).  In Escobar, the Supreme Court held that “the implied certification theory can be a basis for [FCA] liability, at least where two conditions are satisfied: first the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory or contractual requirements makes those representations misleading half-truths.”  136 S. Ct. at 2001.

Ultimately, the Court found that Plaintiffs did not allege Defendants made any specific representations about the goods it provided for government reimbursement, or that Defendants failure to disclose noncompliance with the PPPA was material to the government’s payment decision.  Schimelpfenig, 2017 U.S. Dist. LEXIS 44064 at 14.  Importantly, the Court relied on a recent decision in the Third Circuit which it interpreted as changing the Circuit’s approach to the implied certification theory of FCA liability post-Escobar. Id. at 18.

In United States ex rel. Whately v. Eastwick College, the Third Circuit interpreted Escobar as requiring specific representations that, in conjunction with the claimant’s purposeful omissions, renders the ensuring claims legally false.  657 F. App’x 89, 94 (3d Cir. 2016).  As such, in the Third Circuit, the only way to succeed in proving an implied certification theory of legal falsity is to provide proof of specific representations made to the government payer regarding the goods or services provided.  Id. at 19.  Even if the manufacturing defendants made false express representations of compliance to the retail defendants, that, according to the Court, was of no import.  The sole question in the FCA analysis surrounded what representations were made to the government.

In analyzing the second prong of the Escobar analysis, the Court found that Plaintiffs failed to allege that this nondisclosure was material to the government’s decision to pay the reimbursements.  Importantly, the Court noted that it is not enough that a government or a federal agency found a particular issue important enough to regulate.  The relevant inquiry is whether the payment decision was influenced by the claimant’s purported compliance with a particular requirement.  Here, however, Plaintiffs’ claim was essentially that misbranding is a basis upon which the government would have the option to refuse payment of defendants’ claims—which the Court found insufficient to show materiality.

In so holding, the Court noted that there are federal agencies equipped with the administrative power to address the Defendants’ statutory and regulatory violations and the FCA is not the vehicle for punishing “garden variety breaches” or regulatory violations. Id. at 26.  In fact, the Court went so far as to conclude that allowing for FCA liability in such an instance would undermine the regulatory procedures in place for addressing Defendants’ exact kind of noncompliance.

This case represents another example of how Escobar has changed the landscape of FCA analysis in narrowing the instances where a Court will impose liability.  This case also signals an important shift to deference towards regulatory agencies in an effort to minimize situations in which companies experience regulatory consequences and then find themselves involved in litigation over the same conduct.  As lower courts continue to interpret and apply Escobar, we will keep you updated on the implications for False Claims Act jurisprudence.

* Rachel Hunt not admitted in the District of Columbia.

Over the years, there have been a number of DEA administrative actions against physicians based on a recurrent theme of trading sex for drugs. Also, every prosecutor knows that these themes of sex, drugs, and rock and roll make for a lively case before a judge or jury.  The DEA Acting Administrator (Administrator) issued a final order recently, denying the DEA registration application of Wesley Pope, M.D., that contained the first two ingredients. However, it is the Administrator’s discussion of current legal issues and agency precedent, and disagreement with the DEA Chief Administrative Law Judge, that provides the greatest interest in the 42-page decision in the Federal Register (an extraordinarily long decision for a practitioner case).

First: the obligatory sex and drugs allegations. The doctor in this case prescribed a number of prescriptions for controlled substances to a patient who complained of lower back pain.  In May 2012, when police found the patient in a semiconscious and intoxicated state in a parked car in the center median of Interstate-35, they also discovered bottles of controlled substances prescribed by the doctor and evidence that the patient was illegally buying and selling drugs.  Police also found text messages between the doctor and the patient regarding medical care and prescriptions, as well as sexually explicit messages between the two (the doctor was, at that time, also on probation for sexual misconduct with another patient).  On May 14, 2012, the Oklahoma Medical Board suspended the doctor’s license, and he voluntarily surrendered his DEA registration on that same day.

The doctor served a four-month suspension until the medical board lifted the suspension in September 2012. He then applied for a new DEA registration in October 2012.  It took DEA two years to review the application before issuing an order to show cause proposing the denial of the application.  The doctor requested a hearing before the DEA Administrative Law Judges.  The DEA Chief Administrative Law Judge (CALJ) issued a recommended ruling finding that, while the doctor had issued prescriptions outside of the “usual course of professional practice” in violation of 21 C.F.R. § 1306.04(a), his misconduct was a byproduct of “inattention to detail [and] not intentional diversion.”  Final Order at 14,944.  The CALJ found that the doctor was “irresponsible in continuing to prescribe to this patient in the face of red flags of diversion, and in failing to document or even possess the ability to persuasively convey a medically-based justification for prescribing new controlled medication.” Id. The CALJ concluded that while the government had met its prima facie burden, the doctor’s conduct was not egregious enough to warrant denial of the application despite the fact that he had not accepted responsibility or put forward evidence of remedial measures.  However, it appears there were no allegations or findings that the physician was prescribing the drugs in exchange for sex, which would likely have resulted in a clear violation of prescribing for a non-legitimate medical purpose.

The Administrator rejected the CALJ’s recommended decision (over a year and seven months after issuance of the recommended decision) and denied the doctor’s application. In the lengthy final order, the Administrator took issue with several of the legal issues addressed by the CALJ, including the following.

Interpretation of Oklahoma Medical Board Standards: “Should” = “Must”

At the hearing, a government expert witness opined that the doctor’s recordkeeping deficiencies were violative of the Oklahoma Medical Board’s rules. The CALJ noted that the medical board’s use of the word “should” for certain requirements meant that those requirements were permissive and not mandatory.  In support of this position, the CALJ referenced a prior version of the rule that used words such as “requires” and “must” to show that the medical board had made a thoughtful change in language.

The Administrator disagreed. In his view, the word “should” implies “obligation or duty,” not “permission.” Id. at 14,945.  Thus, in interpreting state board rules, the Administrator’s position is that “‘must’ and ‘should’ have the same meaning: they impose mandatory obligations.” Id. at 14,946.

DEA has long maintained that it does not establish medical standards—that is the purview of the states. In this case, however, the Administrator imposed his own view of what is the applicable standard.

The Elements of 21 C.F.R. § 1306.04(a)

DEA’s rule for what constitutes a valid prescription for controlled substances is found in 21 C.F.R. § 1306.04(a):

A prescription for a controlled substance to be effective must be issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.

While the CALJ looked at the “legitimate medical purpose” and “usual course of professional practice” phrases as separate elements (e.g., a physician could prescribe a controlled substance for a patient experiencing legitimate pain, but do so without performing a physical exam or noting the diagnosis in the patient chart), the Administrator held that “there is no material difference between the phrases.” Final Order at 14,967 n.38 (citing cases).

The Combining of 21 U.S.C. § 823(f)’s Factor 2 and Factor 4

Of the five public interest factors that the Administrator must consider when determining whether to grant an application for DEA registration, Factor 2 looks to the “applicant’s experience in dispensing, or conducting research with respect to controlled substances,” and Factor 4 looks to the applicant’s “[c]ompliance with applicable State, Federal, or local laws relating to controlled substances.” 21 U.S.C. § 823(f)(2), (4).  In the Administrator’s view, “experience” under Factor 2 is not meant to include a consideration of the quantitative volume of dispensing, and he disagreed with the CALJ’s assertion that DEA “has been engaged in a deliberate winnowing of the scope of Factor 2, to the extent that . . . it now largely mirrors the considerations found in Factor 4.”  Final Order at 14,981.

According to the Administrator, the word “experience” has multiple meanings in the context of Factor 2, including:

1) the “direct observation of or participation in events as a basis for knowledge,” 2) “the fact or state of having been affected by or gained knowledge through direct observation or participation,” 3) “practical knowledge, skill, or practice derived from direct observation of or participation in events or in a particular activity,” and 4) “the length of such participation.”

Id. at 14,982 n.54.

The CALJ noted that, under existing agency precedent, “positive experience” analysis is banned in Factor 2 analysis, and he stated that DEA’s “ability to introduce alleged acts of malfeasance will warrant double consideration under Factor 2 and again under Factor 4, but respondents will remain unable to demonstrate that a transgression constituted an isolated occurrence when compared with even many years of compliant practice as a registrant.” Id. at 14,984.  The Administrator dismissed these concerns, stating that parties may introduce evidence of lawful dispensing activities.  Yet the Administrator has made clear that such evidence will not be considered under Factor 2 (or any of the other public interest factors).  Simply allowing such evidence into the record is of no use to a respondent and fails to protect a respondent with years of positive experiencing who is now the recipient of an order to show cause for recordkeeping or other mistakes.

Acceptance of Responsibility

The Administrator explained that when DEA has met its burden of proving that “a practitioner . . . engaged in knowing or intentional diversion, [that practitioner] is not entitled to be registered (or maintain an existing registration) absent a credible acceptance of responsibility.” Id. Thus, because the Administrator agreed with the CALJ that the doctor had refused to accept responsibility for his conduct, the Administrator held as a matter of law that the doctor could not be granted a new registration.

In our opinion, the reasoning by the Administrator—that a respondent essentially has to apologize and admit bad behavior before the respondent can put on a remedial case—raises troubling due process concerns.   At the administrative hearing, after DEA has presented its evidence before the ALJ, the respondent must make a choice: either attempt to refute the government’s theory or accept responsibility (whether rightly or wrongly).  Historically, the ALJs in these cases have been reluctant to rule on motions by a respondent at the hearing before the respondent puts on its case on whether the DEA has met its prima facie burden.  Thus, a respondent is left with a choice of having to admit to certain allegations or not being able to demonstrate remedial action. Thus, agency precedent on acceptance of responsibility puts respondents in an inappropriate position that hampers their ability to defend themselves.

We note that the recent amendment to the Controlled Substances Act that allows respondents to submit corrective action plans (and potentially show evidence of remedial action) was not in place at the time the physician in this case received the order to show cause.

* * *

The Pope decision is good reading for anyone wanting to understand the Agency’s current approach to the various legal issues surrounding practitioner application and revocation cases.  Particularly, the discussion on Factor 2 experience and the acceptance of responsibility (whether correct or wrong) is a must-read for counsel to practitioners in receipt of DEA orders to show cause.

Without pomp or circumstance, Congressman Morgan Griffith (R-VA) introduced a bill on March 27, 2017, that would expand the communications pharmaceutical and medical device companies can have with doctors about their products. The bill, titled the Medical Product Communications Act of 2017, seeks to clarify the concept of “intended use.”  FDA currently regulates communications about off-label uses on the ground that the discussion of an unapproved use creates a new “intended use” for which the company needs specific FDA approval or clearance.  FDA broadly defines the term “intended use” by regulation, and as we discussed in earlier posts here and here, recent attempts to revise these rules have proven controversial.

Representative Griffith represents the Ninth Congressional District of Virginia, which is composed of the counties in the southwest portion of the Commonwealth. Although it is described as a district “slightly larger than the entire state of New Jersey,” unlike New Jersey, there are few pharmaceutical and medical device companies located within this district.  According to Griffith, “[d]octors should have the most up-to-date information when caring for their patients and, when done responsibly and in an appropriate context, manufacturers should be able to provide it.”  Griffith also notes that FDA’s regulation of truthful and non-misleading information is “not Constitutional, based on First Amendment principles.”

The bill seeks to limit the evidence from which FDA can determine a manufacturer’s “intended use,” and would permit consideration only of the “objective intent of the manufacturer . . . as demonstrated by statements contained in labeling, advertising, or analogous oral statements,” and not by reference to communications deemed to be “scientific exchange.” A communication qualifies as “scientific exchange” if it meets the following requirements:

(A) the communication is supported by “scientifically appropriate and statistically sound data, studies, or analyses”;

(B) the communication includes a “conspicuous and prominent statement” that the product is not approved or that the information is not contained in the approved product labeling; and

(C) the communication makes no claim that the product or use has been demonstrated to be safe or effective.

The bill proceeds to provide examples of what may constitute “scientific exchange:”

• Dissemination of scientific findings in scientific or lay media
• Publication of results of scientific studies
• Letters to the editor in defense of public challenges
• Communications at scientific or medical conferences or meetings
• Dissemination of medical or scientific publications, reference texts, or clinical practice guidelines
• Communication, both proactive and reactive, or information regarding a manufacturer’s research and development efforts
• Communication, both proactive and reactive, of scientific, medical, or technical information
• Communication, both proactive and reactive, of health care economic and health outcomes information

Notably the bill would expand the ability of manufacturers to proactively discuss scientific information, which would lift the restriction imposed in this FDA guidance permitting off-label discussions only when responding to unsolicited requests for information.  And while some of these categories of communications already are permissible per FDA guidance documents on distribution of reprints or health care economic information, the bill would codify the “non-binding guidance” from FDA and go further in some instances (e.g., permitting distribution of Letters to Editors or publications in lay media).

We will continue to follow the progress of this bill as it moves through the legislative process.

In the rhythm of life, timing is everything! It was just last week when we posted on an interesting issue arising as a result of the intersection of exclusivity and off-label promotion.  We suggested that some controversy might arise as a result of some decisions (or indecision) from FDA.  Now Congress – and Rep. Morgan Griffith (R-VA) in particular – in legislation that was introduced on April 6, 2017, has proposed a way that would appear to avoid controversy.  But first, a little background . . . .

At the heart of the debate is FDA’s interpretation of the scope of 3-year new clinical investigation exclusivity under FDC Act § 505(c)(3)(E)(iii) and (iv) as it applies to subsequent 505(b)(2) NDA applicants in the context of abuse-deterrence drug products. FDA interprets the exclusivity to apply to a particular route of abuse instead of to a particular abuse-deterrent formulation.  As we mentioned last week (and discussed in prior postings – here and here), FDA’s “route-of-abuse” exclusivity approach prevented the Agency from approving  Egalet US, Inc.’s (“Egalet’s”) ARYMO ER (morphine sulfate) Extended-release Tablets (NDA 208603) with labeling that includes information from clinical studies Egalet conducted discussing ARYMO ER abuse-deterrence via the intranasal route of abuse.  Why?  Because another company – Inspirion Delivery Technologies, LLC (“Inspirion”) – had previously been granted a period of 3-year exclusivity for it’s MORPHABOND (morphine sulfate) Extended-release Tablets drug product (approved under NDA 206544).  Inspirion’s exclusivity is coded in the Orange Book as “M-189” (defined as “LABELING DESCRIBING THE EXPECTED REDUCTION OF ABUSE OF SINGLE-ENTITY EXTENDED-RELEASE MORPHINE BY THE INTRANASAL ROUTE OF ADMINISTRATION DUE TO PHYSICOCHEMICAL PROPERTIES”).

Enter Rep. Griffith with H.R. 2025, the “Abuse-Deterrent Opioids Plan for Tomorrow Act of 2017.” The bill also has a long title: “To amend section 505(c)(3)(E) of the Federal Food, Drug, and Cosmetic Act to prevent certain applications from being considered ineligible for approval under section 505(c) of such Act on the basis that the proposed labeling includes information describing abuse-deterrent properties that otherwise would be blocked by exclusivity under clause (iii) or (iv) of section 503(c)(3)(E) of such Act, and for other purposes.” And the long title is nearly as long as the text needed to address the exclusivity-blocking issue.

H.R. 2025 would amend FDC Act § 505(c)(3)(E) to add new subparagraph (vi) as follows:

(vi) A drug for which an application (or a supplement to an application) described in subsection (b)(2) is submitted shall not be considered ineligible for approval under this subsection on the basis that its labeling includes information describing the abuse-deterrent properties of the drug (including abuse-deterrent claims) that otherwise would be blocked by exclusivity under clause (iii) or (iv) of this subparagraph if—

(I) the investigation or investigations relied upon by the applicant for approval of the labeling information were conducted by or for the applicant or the applicant has obtained a right of reference or use from the person by or for whom the investigation or investigations were conducted; and

(II) the drug has meaningful technological differences compared to the drug otherwise protected by exclusivity under clause (iii) or (iv) of this subparagraph.

Short and elegant! The change would apply with respect to NDAs (including supplements) submitted or pending on or after January 1, 2017.  And it just so happens that Egalet’s NDA 208603 for ARYMO ER was pending on that date. (NDA 208603 was not approved until January 9, 2017.)

H.R. 2025 would also require FDA to issue draft (and then final) guidance on the award and scope of 3-year exclusivity for abuse-deterrent drug product formulations.

The intersection of exclusivity and off-label promotion issues is not common, but quite an interesting issue nevertheless. A recent press release from Egalet Corporation (“Egalet”) raises the possibility that FDA may be challenged – perhaps in court – as a result of the Agency’s decision to, on the one hand, broadly interpret the scope of 3-year new clinical investigation exclusivity in the context of abuse-deterrence drug products to apply to a particular route of abuse and not to a particular abuse-deterrent formulation; and, on the other hand, to allow a company to promote off-label its abuse-deterrent drug product for a particular route of abuse protected by another manufacturer’s 3-year exclusivity.

FDA approved Egalet US, Inc.’s NDA 208603 on January 9, 2017 for ARYMO ER (morphine sulfate) Extended-release Tablets for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate.  With that approval, FDA issued a statement, titled “Impact of Exclusivity on Approval of Arymo ER.”  FDA’s statement explains that although intranasal route of abuse clinical studies were conducted with ARYMO ER (as well as intranasal route of abuse clinical studies), the Agency determined that 3-year exclusivity granted to Inspirion Delivery Technologies, LLC’s (“Inspirion”) MORPHABOND (morphine sulfate) Extended-release Tablets (NDA 206544) prevented the Agency from approving ARYMO ER with labeling describing abuse-deterrence via the intranasal route of abuse.  The period of 3-year exclusivity applicable to MORPHABOND, which expired on  October 2, 2018, is coded in the Orange Book as “M-189,” which is definfed as “LABELING DESCRIBING THE EXPECTED REDUCTION OF ABUSE OF SINGLE-ENTITY EXTENDED-RELEASE MORPHINE BY THE INTRANASAL ROUTE OF ADMINISTRATION DUE TO PHYSICOCHEMICAL PROPERTIES.”

As we previously reported (here and here), although FDA first publicly articulated with the approval of ARYMO ER a route-to-abuse approach to 3-year exclusivity for abuse-deterrent drug products, the Agency had been developing that position over the past few years. In coming to this decision, FDA rejected a narrower approach to the scope of 3-year exclusivity, such as limiting ot to a specific abuse-deterrent formulation, or to a specific abuse-deterrent technology.

Dissatisfied with FDA’s exclusivity determination, Egalet met with FDA officials in February 2017 and raised two issues with the Agency, according to an Egalet press release:

1. Whether FDA would reconsider its exclusivity determination for MorphaBond with respect to intranasal abuse-deterrent properties; and
2. Whether FDA would likely take enforcement action against Egalet if Egalet disseminated materials to healthcare practitioners regarding ARYMO ER’s intranasal abuse-deterrent properties and the studies demonstrating the effects of these properties.

FDA responded to Egalet in writing on March 27, 2017 “indicat[ing] that the first issue remains under consideration.” As to the second issue raised by Egalet, “the FDA letter specifically stated that the Agency ‘does not object’ to Egalet’s stated plans for distribution of materials that are ‘based on the intranasal abuse-deterrence data in its original NDA submission’ if the communications are directed only to healthcare professionals, include appropriate disclosures and are otherwise truthful and non-misleading,” said Egalet in a press release.

If FDA ultimately reaches a split decision – affirming the Agency’s route-of-abuse determination on the scope of 3-year exclusivity (as we suspect FDA will do), and sticking to its non-objection policy on off-label promotion – then we may be in a position where no affected party is happy . . . Egalet or Inspirion. And history tells us that that type of situation can be a recipe for controversy.

On March 29, 2017, Senator Al Franken (D-MN) and several other Senate Democrats introduced S. 771, the “Improving Access to Affordable Prescription Drugs Act.”  A companion bill, H.R. 1776, was introduced in the House on the same day by Representatives Jan Schakowsky (D-IL), Elijah Cummings (D-MD), Rosa DeLauro (D-CT), and Peter Welch (D-VT).  The 129-page, four-title bill has been billed [https://www.franken.senate.gov/?p=press_release&id=3655] as a “landmark proposal” that “seeks to tackle prescription drug costs by increasing transparency and accountability, boosting access and affordability of key drugs, spurring innovation, and increasing choice and competition.”  In other words, the bill covers a lot of ground.  (If you’re not up for reading all 129 pages of the bill, Sen. Franken released a 5-page summary that’s a bit easier to digest.)

The “landmark proposal” billing for the “Improving Access to Affordable Prescription Drugs Act” isn’t too far off the mark . . . at least insofar as some of the bill’s provisions concerning exclusivity are concerned. Whereas we’ve seen bill after bill over the years prosing new and expanded exclusivity incentives (both stand-alone exclusivities and so-called exclusivity-stacking measures – see our previous posts here and here), or new alternative incentives (such as priority review vouchers or tax credits – see our previous posts here and here), we cannot recall an instance in which there’s been a serious effort to broadly reduce (or even eliminate) brand-name exclusivity incentives . . . until now.

Because reducing or eliminating exclusivity is such a shocking concept, we’ll ease our readers into the issue with Section 301 of the “Improving Access to Affordable Prescription Drugs Act.” That section, titled “Prize Fund For New And More Effective Treatments Of Bacterial Infections,” would establish a $2 billion “prize fund” for new and more effective treatments of bacterial infections.  Awardees must either show a benefit over existing therapies in the treatment of serious and life-threatening bacterial infections, or must use openly sourced materials, technology, data, and knowledge to advance antibiotic research.  The National Institutes of Health would set the goals for these awards, as well as award the prizes.  But there’s a string or two attached to accepting a prize.  In addition to agreeing to offer the qualifying product at a “reasonable price” (as defined in the bill) and to publicly disclose all pre-clinical and clinical trial data relating to the product, the award recipient must “irrevocably waive” “all periods of exclusivity available to the product under [the FDC Act and the PHS Act]” as well as “all applicable patent rights under title 35, United States Code.”

That doesn’t seem too harsh. After all, it’s a voluntary system and doesn’t at all resemble previous prize fund proposals that would have eliminated patent and exclusivity rights in lieu of a prize (see our previous post here).  But Section 301 of the “Improving Access to Affordable Prescription Drugs Act” is just the tip of the iceburg when it comes to addressing exclusivity.

Section 303 of the bill, curiously titled “Rewarding Innovative Drug Development,” would amend the FDC Act’s 5-year New Chemical Entity (“NCE”) exclusivity provisions (at least insofar as ANDAs are concerned under FDC Act § 505(j)) to alter ANDA submission and approval times.  Specifically, the bill would amend the law so that FDA could accept an ANDA 3 years after the NCE NDA approval (instead of 4 years, and regardless of the ANDA containing a Paragraph IV certification to an Orange Book-listed patent on the brand-name drug), and would permit approval of an ANDA not containing a Paragraph IV certification immediately upon expiration of NCE exclusivity.  The bill would also reduce the 7.5-year 30-month stay period to 6.5 years.  Below are redlines (new language in red italicized font, deletions in strike-through) of the proposed changes to FDC Act § 505(j).  Conforming changes would also be made to other affected sections in the statute.

FDC Act § 505(j)(5)(B):

The approval of an application submitted under paragraph (2) shall be made effective on the last applicable date determined by applying the following to each certification made under paragraph (2)(A)(vii):

(i) If the applicant only made a certification described in subclause (I) or (II) of paragraph (2)(A)(vii) or in both such subclauses, the approval may be made effective immediately except that such approval may not be made effective before the date that is 5 years after the date on which the drug to which the application refers was approved under subsection (c).

(ii) If the applicant made a certification described in subclause (III) of paragraph (2)(A)(vii), the approval may be made effective on the date certified under subclause (III) except that such approval may not be made effective before the date that is 5 years after the date on which the drug to which the application refers was approved under subsection (c).

FDC Act § 505(j)(5)(F)(ii):

If an application submitted under subsection (b) for a drug, no active ingredient (including any ester or salt of the active ingredient) of which has been approved in any other application under subsection (b), is approved after the date of the enactment of this subsection, no application may be submitted under this subsection which refers to the drug for which the subsection (b) application was submitted before the expiration of five years expiration of 3 years from the date of the approval of the application under subsection (b), except that such an application may be submitted under this subsection after the expiration of four years from the date of the approval of the subsection (b) application if it contains a certification of patent invalidity or noninfringement described in subclause (IV) of paragraph (2)(A)(vii).  The approval of such an application shall be made effective in accordance with subparagraph (B) except that, if an action for patent infringement is commenced during the one-year period beginning forty-eight months after the date of the approval of the subsection (b) application, the thirty-month period referred to in subparagraph (B)(iii) shall be extended by such amount of time (if any) which is required for seven and one-half years 6 and one-half years to have elapsed from the date of approval of the subsection (b) application.

Section 303 of the bill would also alter the FDC Act’s 3-year New Clinical Investigation exclusivity provisions – at least insofar as the bill alters only FDC Act § 505(c)(3)(E)(iv) applicable to 505(b)(2) NDAs and NDA supplements – to heighten the standard for granting exclusivity. Below is a redline (new language in red italicized font) of the proposed change.

FDC Act § 505(c)(3)(E)(iv):

If a supplement to an application approved under subsection (b) is approved after the date of enactment of this clause and the supplement contains reports of new clinical investigations (other than bioavailabilty 68 studies) essential to the approval of the supplement and conducted or sponsored by the person submitting the supplement, and the supplement shows a significant clinical benefit over existing therapies manufactured by the applicant in the 5-year period preceding the submission of the application, the Secretary may not make the approval of an application submitted under subsection (b) for a change approved in the supplement effective before the expiration of three years from the date of the approval of the supplement under subsection (b) if the investigations described in clause (A) of subsection (b)(1) and relied upon by the applicant for approval of the application were not conducted by or for the applicant and if the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.

Finally, Section 303 would amend the PHS Act to reduce the current 12-year period of Reference Product Exclusivity for biological products licensed under PHS Act § 351(a) to 7 years.

Moving on to Section 304 of the “Improving Access to Affordable Prescription Drugs Act,” titled “Improving Program Integrity,” the bill would amend the FDC Act to add new Section 569D, titled “Conditions on Award of Drug Exclusivity.” And here’s where we see the harshest exclusivity-related provisions.   It provides as follows:

(a) TERMINATION OF EXCLUSIVITY.—Notwithstanding any other provision of this Act, any period of exclusivity described in subsection (b) granted to a person or assigned to a person on or after the date of enactment of this section with respect to a drug shall be terminated if the person to which such exclusivity was granted or any person to which such exclusivity is assigned commits a violation described in subsection (c)(1) with respect to such drug.

The periods of exclusivity referred to include specific exclusivities (e.g., NCE, 3-year, orphan drug, 12-year Reference Product Exclusivity, etc.), as well as “[a]ny other provision of this Act that provides for market exclusivity (or extension of market exclusivity) with respect to a drug.”  And the list of violations that could lead to a termination of exclusivity is long.  It includes a  criminal conviction, a civil judgment, and a settlement agreement that is found to violate any one of various Federal and State laws.

That’s a lot to digest . . . but there’s more.

Title IV of the “Improving Access to Affordable Prescription Drugs Act” would alter ANDA 180-day exclusivity. In particular, Section 402 would amend the definition of “first applicant” at FDC Act § 505(j)(5)(B)(iv)(II)(bb) so that a generic drug applicant that has entered into a presumably anticompetitive agreement as detailed in Section 401 is disqualified as a “first applicant.”  Additionally, an applicant that did not submit an ANDA on the first day that a substantially complete application was accepted, but that lawfully maintains a Paragraph IV certification or a “section viii” statement and is not a defendant in a pending patent infringement action, may also be considered a “first applicant.”  These provisions of the bill borrow concepts (and language) from previously-introduced legislation, including the “Preserve Access to Affordable Generics Act” (see our previous post here), and the “Drug Price Competition Act of 2009” (see our previous post here).  Below are redlines (new language in red italicized font, deletions in strike-through) of the proposed changes to some of the provisions in FDC Act § 505(j).

FDC Act § 505(j)(5)(B)(iv)(II)

(bb) FIRST APPLICANT.—As used in this subsection, the term “first applicant” means an applicant that, on the first day on which a substantially complete application containing a certification described in para-graph (2)(A)(vii)(IV) is submitted for approval of a drug, submits a substantially complete application that contains and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) for the drug.

FDC Act § 505(j)(5)(B)(v)—FIRST APPLICANT DEFINED.

As used in this subsection, the term “first applicant” means an applicant—

(I)(aa) that, on the first day on which a substantially complete application containing a certification described in paragraph (2)(A)(vii)(IV) is submitted for approval of a drug, submits a substantially complete application that contains and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) for the drug; and

(bb) that has not entered into a disqualifying agreement described under clause (vii)(II); or

(II)(aa) for the drug that is not described in subclause (I) and that, with respect to the applicant and drug, each requirement described in clause (vi) is satisfied; and

(bb) that has not entered into a disqualifying agreement described under clause (vii)(II).

FDC Act § 505(j)(5)(B)(vi)—REQUIREMENT.

The requirements described in this clause are the following:

(I) The applicant described in clause (v)(II) submitted and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) or a statement described in paragraph (2)(A)(viii) for each unexpired patent for which a first applicant described in clause (v)(I) had submitted a certification described in paragraph (2)(A)(vii)(IV) on the first day on which a substantially complete application containing such a certification was submitted.

(II) With regard to each such unexpired patent for which the applicant described in clause (v)(II) submitted a certification described in paragraph (2)(A)(vii)(IV), no action for patent infringement was brought against such applicant within the 45-day period specified in paragraph (5)(B)(iii); or if an action was brought within such time period, such an action was withdrawn or dismissed by a court (including a district court) without a decision that the patent was valid and infringed; or if an action was brought within such time period and was not withdrawn or so dismissed, such applicant has obtained the decision of a court (including a district court) that the patent is invalid or not infringed (including any substantive determination that there is no cause of action for patent infringement or invalidity, and including a settlement order or consent decree signed and entered by the court stating that the patent is invalid or not infringed).

(III) If an applicant described in clause (v)(I) has begun commercial marketing of such drug, the applicant described in clause (v)(II) does not begin commercial marketing of such drug until the date that is 30 days after the date on which the applicant described in clause (v)(I) began such commercial marketing.

FDC Act § 505(j)(5)(B)(vii) —AGREEMENT BY FIRST APPLICANT TO DEFER COMMERCIAL MARKETING; LIMITATION ON ACCELERATION OF DEFERRED COMMERCIAL MARKETING DATE.

(I) AGREEMENT TO DEFER APPROVAL OR COMMERCIAL MARKETING DATE.—An agreement described in this subclause is an agreement between a first applicant and the holder of the application for the listed drug or an owner of one or more of the patents as to which any applicant submitted a certification qualifying such applicant for the 180-day exclusivity period whereby that applicant agrees, directly or indirectly, (aa) not to seek an approval of its application that is made effective on the earliest possible date under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, (bb) not to begin the commercial marketing of its drug on the earliest possible date after receiving an approval of its application that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or (cc) to both items (aa) and (bb).

(II) AGREEMENT THAT DISQUALIFIES APPLICANT FROM FIRST APPLICANT STATUS.—An agreement described in this subclause is an agreement between an applicant and the holder of the application for the listed drug or an owner of one or more of the patents as to which any applicant submitted a certification qualifying such applicant for the 180-day exclusivity period whereby that applicant agrees, directly or indirectly, not to seek an approval of its application or not to begin the commercial marketing of its drug until a date that is after the expiration of the 180-day exclusivity period awarded to another applicant with respect to such drug (without regard to whether such 180-day exclusivity period is awarded before or after the date of the agreement).

FDC Act § 505(j)(5)(B)(viii)—LIMITATION ON ACCELERATION.

If an agreement described in clause (vii)(I) includes more than 1 possible date when an applicant may seek an approval of its application or begin the commercial marketing of its drug—

(I) the applicant may seek an approval of its application or begin such commercial marketing on the date that is the earlier of—

(aa) the latest date set forth in the agreement on which that applicant can receive an approval that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or begin the commercial marketing of such drug, without regard to any other provision of such agreement pursuant to which the commercial marketing could begin on an earlier date; or

(bb) 180 days after another first applicant begins commercial marketing of such drug; and

(II) the latest date set forth in the agreement on which that applicant can receive an approval that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or begin the commercial marketing of such drug, without regard to any other provision of such agreement pursuant to which commercial marketing could begin on an earlier date, shall be the date used to determine whether an applicant is disqualified from first applicant status pursuant to clause (vii)(II). 

On March 22, 2017, the jury rendered its verdict in the case of the United States v. Cadden, in the U.S. District Court for the District of Massachusetts (jury verdict form available here).

The defendant, Barry J. Cadden, was the part owner and head pharmacist at the New England Compounding Center (“NECC”), the compounding pharmacy that shipped contaminated compounded epidural methylprednisolone (MPA) nationwide, which allegedly resulted in widespread sickness and death in 2012 (court documents show Mr. Cadden did not dispute these allegations).  Mr. Cadden is the first of 14 former officers and employees of NECC to be tried (a number of charges have been dismissed or terminated for other defendants – see previous posts here and here). The various charges brought against the individuals associated with NECC include second degree murder in seven states as well as racketeering, mail fraud, conspiracy, contempt, structuring, and three types of violations of the Federal Food, Drug, and Cosmetic Act (“FD&C Act”).  It is expected that Glenn A. Chin, NECC’s supervisory pharmacist, will be tried next, but his trial date is not yet known.

This post provides a breakdown of each of the charges brought against Mr. Cadden, as described in the instructions to the jury, and the corresponding jury findings (jury instructions available here).

Except for Counts 2 and 3, which charge conspiracy, each of the other counts could be proven, according to the jury instructions by: (a) convincing the jury that Mr. Cadden personally committed or participated in the offense; or (b) showing that he aided and abetted someone else in committing the offense (i.e., intentionally helping someone else commit a crime).

Count 1: Second Degree Murder & Other Racketeering Charges

Count 1 charged Mr. Cadden with a violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). As the (required) predicate acts of RICO, the government alleged that Mr. Cadden committed 77 acts of racketeering in violation of state or federal law, including 25 acts of state second degree murder (in seven states) and 52 acts of federal mail fraud.  To be found guilty, the jury needed to agree unanimously that Mr. Cadden committed at least two of the same types of racketeering acts.

Second Degree Murder

For a finding of second degree murder, as it applied to this case, the jury would have had to find, beyond a reasonable doubt (according to the jury instructions):

• That an unnatural death occurred within the territorial jurisdiction of the affected state;
• That the victim died as a result of an act or acts taken by Mr. Cadden; and
• That Mr. Cadden acted with a culpable state of mind (this is a state-specific requirement, generally not requiring proof Mr. Cadden had specific intent to kill, but rather the government must prove he acted with extreme indifference to human life).

The first element, as well as that contaminated drugs distributed by NECC caused each of the victims’ death, was uncontested.  However, Mr. Cadden contested that the deaths were caused by his actions, and were the natural and probable consequence of an act that Mr. Cadden knew was highly likely to cause death.  In furtherance of the charges, the government alleged that:

• On May 21, 2012, June 29, 2012, and August 10, 2012, three lots of preservative-free MPA compounded by NECC were improperly sterilized because Mr. Chin, with Mr. Cadden’s knowledge, kept the drugs in the autoclave for less than the prescribed 20 minutes, and did not verify the autoclave sterilization process through use of a biological indicator as required by USP<797>.
• Mr. Chin, acting at Mr. Cadden’s direction, selected too few samples from these lots of MPA for sterility testing, and that Mr. Chin, with Mr. Cadden’s knowledge, did not conduct sterility testing of the filled vials shipped to NECC customers for patient use because he drew the samples to be tested from preservative-free MPA stock before filling the individual vials.
• Mr. Chin, with the knowledge of Mr. Cadden, directed NECC technicians to label vials of the drugs as “injectable” drug products during a time period when NECC had recorded action-level environmental sample results in Clean Room 1 and had not taken remedial action as required by USP<797>.

The jury found Mr. Cadden not guilty on all 25 charges of second degree murder in Florida, Indiana, Maryland, Michigan, North Carolina, Tennessee, and Virginia.

Mail Fraud

The crime of mail fraud (18 U.S.C. § 1341) prohibits the use of mail or an interstate carrier, public or private, in furtherance of any scheme or artifice to defraud, or to obtain money or property by means of false or fraudulent pretenses, representations, or promises. The 52 alleged Racketeering Acts of mail fraud were broken up into four separate groups:

• Shipments of MPA (alleged shipment of drugs compounded in a manner that did not meet USP standards as described in the allegations, above).
• Shipments of Untested Lots (alleged shipment of lots identified as sterile prior to receiving test results confirming sterility and quality, and failing to recall lots when it learned of out of specification results).
• Shipments of Expired Drugs (alleged shipment of drugs knowingly compounded with an ingredient that had expired, in violation of USP, and alleged disguised use of the expired ingredients).
• Unlicensed Pharmacy Technician (alleged knowing representation to customers that NECC complied with Massachusetts pharmacy regulations and USP guidelines even though a pharmacy technician, who had voluntarily surrendered his license, worked as a pharmacy technician in Clean Room 2 filling cardioplegia orders for hospital customers).

The jury found Mr. Cadden guilty of 27 counts of Shipments of MPA, 10 counts of Shipments of Untested Lots, and 10 counts of Unlicensed Pharmacy Technician; however, the jury found him not guilty of the 5 counts of Shipments of Expired Drugs. Having found him guilty of certain predicate acts, the jury also found Mr. Cadden guilty of the offense of Racketeering as charged in Count 1,.

Count 2: Racketeering Conspiracy

Count 2 alleged that Mr. Cadden “conspired” (i.e., entered into an agreement with others), to violate the RICO statute (note: under federal and state law, a conspiracy is a separate and distinct crime from the underlying offenses). A conspiracy is an agreement between or among two or more persons to accomplish an unlawful purpose (i.e., one forbidden by law) as the jury instructions explained.  The government alleged that Mr. Cadden knowingly and willfully entered into an agreement with Mr. Chin and other employees of the NECC and its marketing arm Medical Sales Management (MSM) to violate the RICO statute through a pattern of racketeering activity by committing at least two specific predicate acts of mail fraud within a ten-year period.

The jury found Mr. Cadden guilty of Racketeering Conspiracy.

Count 3: Conspiracy to Defraud the United States

Count 3 charged Mr. Cadden with conspiring with others to defraud the United States by impeding the ability of the FDA to carry out its regulatory mission. The government alleged that Mr. Cadden conspired with certain employees of the NECC to make false or misleading statements, or materially misleading omissions despite a duty to disclose the information, with the intent of deceiving FDA about the true nature of NECC’s business in order to deflect the FDA from carrying out the regulatory oversight it would have otherwise exercised over NECC.

The jury found Mr. Cadden not guilty of Conspiracy to Defraud the United States.

Counts 4-56: Mail Fraud

Counts 4-39 and 41-56 charged the 52 RICO predicate acts of mail fraud as separate substantive crimes under the federal mail fraud statute. The government alleged that Mr. Cadden devised a scheme to defraud NECC’s customers and the patients of those customers, and to obtain money and property by means of materially false and fraudulent representations regarding the quality and production of NECC’s drugs.  It further alleged a litany of specific failures and actions on the part of Mr. Cadden and other NECC employees, as well as that Mr. Cadden marketed NECC as being in compliance with all pharmacy regulations, and that its compounds were safe for human use.

The jury found Mr. Cadden guilty of all 52 counts of Mail Fraud.

Counts 57-109: Introduction of Adulterated Drugs into Interstate Commerce with Intent to Defraud and Mislead

Insanitary Conditions

Counts 57-90 charged Mr. Cadden with violations of the FD&C Act for allegedly introducing drugs into interstate commerce that had been prepared under insanitary conditions. The instructions to the jury stated that the government, in order to secure a felony conviction on these counts, needed to prove, beyond a reasonable doubt, that Mr. Cadden:

• Introduced drugs, or delivered them for introduction, into interstate commerce, or caused them to be introduced into interstate commerce,
• Knew that the drugs were adulterated, in that they were prepared, packed, or held them under insanitary conditions (i.e., conditions in which drugs may be contaminated with filth); and
• Placed the drugs in interstate commerce with the intent to defraud or mislead (e.g., took actions to conceal or prevent the discovery of truth).

The government did not need to prove any actual contamination of the drugs to establish adulteration, but only that there was a reasonable expectation that the drugs could become contaminated, according to jury instructions.

The jury found Mr. Cadden not guilty of these 34 counts of Introduction of Adulterated Drugs into Interstate Commerce with Intent to Defraud and Mislead.

False and Misleading Labeling

Counts 91-94 charged Mr. Cadden with introducing drugs into interstate commerce bearing false or misleading labels. According to the jury instructions, the government needed to prove, beyond a reasonable doubt, that:

• Mr. Cadden introduced drugs, or delivered them for introduction, or caused them to be introduced into interstate commerce;
• The drugs were misbranded, in that the labeling for the drugs was false or misleading (by misrepresentation or omission); and
• Mr. Cadden acted with the intent to defraud or mislead.

The jury found Mr. Cadden not guilty of these four counts of Introduction of Adulterated Drugs into Interstate Commerce with Intent to Defraud and Mislead.

No Prescriptions

Counts 95 and 99-100 charged Mr. Cadden with dispensing drugs into interstate commerce without valid prescriptions.   The government needed to prove, beyond a reasonable doubt, that:

• Mr. Cadden introduced drugs, or delivered them for introduction, or caused them to be deferred into interstate commerce;
• That a valid prescription for the drugs was required;
• The drugs were dispensed without such a valid prescription issued by a practitioner licensed by law to administer such a drug; and
• Mr. Cadden dispensed the drugs with the intent to defraud or mislead.

The jury found Mr. Cadden guilty of these three counts of Introduction of Adulterated Drugs into Interstate Commerce with Intent to Defraud and Mislead.

We put together a table of the various charges, which you can access here.

On March 23, 2017, DEA issued an Interim final rule “placing FDA-approved products of oral solutions containing dronabinol in schedule II of the CSA.” Schedules of Controlled Substances: Placement of FDA-Approved Products of Oral solutions Containing Dronabinol [(-)-delta-9-trans-tetrahydrocannabinol (delta-9-THC)] in Schedule II, 82 Fed. Reg. 14815 (Mar. 23, 2017) (“Interim final rule”). The action was based on FDA’s recent approval for marketing of Syndros, a drug product consisting of dronabinol in an oral solution. The action is effective as of publication; however, comments and/or a request for hearing may be filed by April 24, 2017.

As a result of the Interim final rule, Syndros, or any FDA-approved oral solution of dronabinol, will be controlled in Schedule II. DEA and HHS found that dronabinol has a high potential for abuse and for physical dependence requiring placement in Schedule II. The rule also distinguished Syndros from the only other FDA-approved dronabinol formulation, Marinol. In 1999, Marinol was rescheduled from Schedule II to III based on evidence that its formulation in a capsule in sesame oil would limit its abuse potential. Schedules of Controlled Substances: Rescheduling of the Food and Drug Administration Approved Product Containing Synthetic Dronabinol [(-)-D9-(trans)-Tetrahydrocannabinol] in Sesame Oil and Encapsulated in Soft Gelatin Capsules From Schedule II to Schedule III, 64 Fed. Reg. 35928 (July 2, 1999). In particular, HHS and DEA found that the sesame oil concentration would limit the ability to alter the concentration of the drug and affect its route of administration. In the present rule, both HHS and DEA noted that oral solutions of dronabinol can be manipulated to allow concentrations to be smoked, vaped or some other route of administration. 82 Fed. Reg. at 14817.   Thus, both agencies found that Syndros should be controlled in Schedule II rather than Schedule III because it has a greater abuse potential then Marinol.

While the control of Syndros in Schedule II was not unexpected for the reasons cited above, DEA’s interpretation of the recent amendment to the Controlled Substance Act (“CSA”) scheduling provisions raises other issues.

First, DEA declined to act on the HHS recommendation to reschedule all forms of dronabinol from Schedule I to Schedule II. As required under the CSA, 21 USC § 811(b), (c) and (f), on December 28, 2016, HHS provided DEA with its “eight-factor” analysis recommending to reschedule Syndros and dronabinol oral solutions from Schedule I to Schedule II. Id. at 14816.  HHS also recommended that all dronabinol formulations be rescheduled to Schedule II as well. However, DEA specifically declined to consider the HHS recommendation that all dronabinol products should be rescheduled to Schedule II. Instead, DEA limited the current Interim final rule to only FDA-approved products containing dronabinol in an oral solution. DEA characterized the HHS recommendation related to rescheduling of all forms of dronabinol as “outside the scope of the final rule.” Id. Nevertheless, HHS is now on record as recommending that DEA reschedule all formulations of dronabinol to Schedule II. It remains to be seen whether DEA believes it must now consider this recommendation in as separate rulemaking.

Second, DEA’s Interim final rule states that this action is a scheduling action while the HHS written recommendation viewed this as a rescheduling action. HHS recommended rescheduling of dronabinol and oral solutions containing dronabinol. However, DEA’s Interim final rule refers to the placement of oral solutions of dronabinol (Syndros) into Schedule II. DEA states that its legal authority for issuing the Interim final rule derives from the Improving Regulatory Transparency for New Medical Therapies Act, which requires DEA to initiate a scheduling action for new FDA-approved drugs within 90 days (see our previous post here). This requirement is codified at 21 U.S.C. § 811(j). DEA further states that the purpose of this law is to expedite scheduling of newly approved drugs that are currently in Schedule I or not controlled. In a footnote, the Agency stated that “in DEA’s view,” this law does not apply to the reformulation of a drug containing a substance already controlled in Schedule II-V. Id. at 14816, fan 1.

DEA takes a very narrow interpretation of the recent amendment to the CSA. The amended scheduling statute was intended to expedite the scheduling process but by referring to it as “expedited scheduling” DEA implies that it should be limited. However, the plain language of the law does not limit the 90 day scheduling requirement to drugs in Schedule I or drugs not currently scheduled. The law states that requirement to issue an interim rule not later than 90 days after transmission of the HHS recommendation shall apply to drugs with an abuse potential for which a new-drug application has been submitted to HHS, 21 USC § 811(f), and for which HHS recommends that DEA control such drug in schedules II-V, 21 U.S.C. § 811(j). Moreover, this section of the law specifically refers to § 811(a) which applies to actions to “transfer between such schedules”, or “ remove” a drug from any schedule. Thus, the statute does not support the apparent narrow scope of DEA’s interpretation for controlling a drug.

DEA’s characterization of this action as a drug “scheduling” and narrow interpretation of the 90 day requirement does not impact the “expedited” scheduling of Syndros. However, if DEA maintains this position, new drugs approved by FDA where HHS recommends rescheduling or descheduling, will not be subject to the 90 day rule which could mean scheduling delays of months if not years.

Not long ago, we recommended that the Food and Drug Administration (FDA) begin a new rulemaking to update the intended use regulation. We promised a blog post to get the ball rolling with suggestions for improvement. The time has arrived.

In the discussion below, the first section describes the shared role of the FDA and the medical profession in ensuring the safe and effective use of medical devices.  The second section outlines the chief problems with the device intended use regulation. The final section explains the actual proposal and marks up the text of the device intended use regulation to show how the language would change. (A similar approach could be applied to the drug regulations, albeit there are technical differences.)

We welcome comments on this blog post by email to jshapiro@hpm.com. If a critical mass of comments is received, we will publish a round‑up, including our responses and potential modifications to the proposal based upon the comments. (To protect privacy and to encourage free discussion, all comments are guaranteed to be summarized or quoted anonymously without reference to name or place of employment.) We hope that, with the help of our readers, the result will be a well‑vetted proposal that harmonizes FDA’s regulations with the First Amendment.

Such a proposal will be well‑timed, because FDA put a hold on the recent final rule amending the intended use regulation until March 19, 2018, to allow time for more consideration (see our previous post here).

The Statute: FDA’s Role

FDA’s authority to conduct premarket review of medical devices comes from the Federal Food, Drug, and Cosmetic Act of 1938, as amended (FDCA). The FDCA empowers FDA to exclude dangerous devices from the market to prevent tragedies from occurring, rather than removing dangerous devices after injuries occur. Additionally, FDA is empowered to bar ineffective or sham devices from the market.

Accordingly, the sponsoring firm has the burden to convince FDA that a device is labeled for safe use and has demonstrated effectiveness. The marketing of a device without FDA’s grant of 510(k) clearance or premarket approval causes it to be adulterated or misbranded. (Some low risk devices are 510(k)‑exempt if the sponsoring firm self-determines that their device is within the exempt category.) It is unlawful to introduce an adulterated or misbranded device into interstate commerce.

To conduct premarket review, FDA has a corps of professionals who perform careful multi‑disciplinary scientific evaluations of device safety and effectiveness:

FDA assigns review teams and primary reviewers who specialize in that scientific discipline to review . . . the application [for clearance or approval] and to generate a written evaluation. FDA then integrates the conclusions from these separate review activities to determine the appropriate outcome for the application. [Public Health Interests and First Amendment Considerations Related to Manufacturer Communications Regarding Unapproved Uses of Approved or Cleared Medical Products, pp. 8‑9 (Jan. 2017).

FDA generally approves a device with labeling for a specific intended use. Yet, many devices have more than one potential use in diagnosing or treating patients. The FDCA might have made FDA the sole gatekeeper for these additional uses. In this world, the burden would be on the sponsoring firm to return to FDA and obtain a separate approval of each additional use. Medical professionals, in turn, would be barred from deploying a device for any use other than those in the FDA‑authorized labeling.

The FDCA does not go down this road. The medical profession may lawfully utilize the same device for unlabeled additional uses in the practice of medicine. In fact, the FDCA expressly provides that it is not to be construed to limit or interfere with ability of the medical practitioner to use or prescribe a device off‑label in the practice of medicine (Section 1006).

The medical profession has developed an ecosystem for the evaluation of device performance. There are academic studies, journal articles, disease‑focused societies, symposia, conferences, case studies, clinical guidelines, talks by key opinion leaders, and a host of other mechanisms for weighing clinical evidence and reaching conclusions about the appropriate use of device technology. In addition, the medical professional has the benefit of clinical experience and knowledge of the individual patients they are treating. State licensure and malpractice exposure impose constraints on the use of devices as well.

The FDCA still gives FDA an important role to play after a device is legally marketed. FDA continues to provide premarket review of significant modifications to the device technology or its labeling. If a firm wishes to bring an additional use on label, it generally must seek clearance or approval.

In its postmarket role, FDA’s mandatory and voluntary reporting systems for malfunctions and adverse events apply to both on label and off‑label uses. Thus, FDA has good visibility into postmarket safety and performance. In fact, the Center for Devices and Radiological Health has an entire division, the Division of Postmarket Surveillance and Biometrics, which is responsible for ensuring the continued safety and effectiveness of medical devices after they have reached the marketplace.

Because the agency is not the gatekeeper for unlabeled uses, the medical profession and payors play a role in determining whether FDA’s approval of new uses in the labeling is worthwhile. In some situations, medical professionals and/or payors may demand that an unlabeled use be incorporated in the labeling before they will adopt it. In other cases, they may not. Firms will respond accordingly. There is a benefit to having this market‑based influence on whether a firm brings a use on label. FDA’s system of multi‑disciplinary review is excellent for ensuring robust, science-based labeling. Nevertheless, it tends to be relatively slow, cumbersome and resource‑intensive. Not all clinical uses of device technology require it.

There is a certain logic and balance to this system. On the one hand, FDA’s expert review provides a sophisticated screen against unsafe or wholly ineffective devices. On the other hand, FDA’s control over device labeling cannot possibly serve as a basis for directing all potential uses of medical devices across fifty states and 320 million people. It would require prodigious resources even to try to do so. The effort would be doomed to failure anyway, because crucial knowledge will always remain dispersed. It would not be possible for FDA to oversee the development of labeling for devices suited to the nuances inherent in all possible clinical uses and patient populations. Instead, the use of devices would be rigidly limited to fit the procrustean bed of FDA‑authorized labeling emanating from Washington, D.C. No one should desire this outcome.

To achieve the full potential of device technology, then, it is undeniable that the medical profession, including those in the front line treating patients, must play a significant role in determining the uses of medical devices, and they do. The reality of shared responsibilities between FDA and the medical profession for device safety and effectiveness is entirely consonant with the text, structure and history of the FDCA.

Problems with the Intended Use Regulation

The intended use of a new medical device is initially determined during FDA’s premarket review. FDA typically rests this determination upon information within the four corners of a 510(k) submission or premarket approval application, especially the draft labeling.

Once the device is legally marketed, FDA is authorized by the “intended use regulation” to base a determination of intended use on a much wider data set. The regulation states:

The intent is determined by such persons’ expressions or may be shown by the circumstances surrounding the distribution of the article. This objective intent may, for example, be shown by labeling claims, advertising matter, or oral or written statements by such persons or their representatives. It may be shown by the circumstances that the article is, with the knowledge of such persons or their representatives, offered and used for a purpose for which it is neither labeled nor advertised. [21 C.F.R. 801.4]

If FDA determines that the “circumstances surrounding the distribution” create a new intended use for the device, then FDA imputes the new intended use to all shipped units, even if their labeling complies with the existing clearance or approval. According to FDA, the device is now in the same legal position as if it had shipped without any clearance or approval at all. The device thus defined by FDA is adulterated and/or misbranded under the statute. The firm has now, according to FDA, committed a crime and/or incurred civil liability.

Last year, two criminal cases illustrated the extraordinary sweep of the intended use regulation. In United States v. Facteau, the prosecution invoked the intended use regulation in closing argument:

You’re going to hear from the judge, and you can look at all of the circumstances surrounding the distribution of the device to figure out what would be the intended use of the device. You can look at how the device was designed, you can look at how it was priced, you can look at how it was sold and you can look at what they say internally and what they say externally. And this is critical. [Tr., p. 26-78, emphasis added.]

FDA had cleared the device design in multiple 510(k) submissions between 2006 and 2011. Yet, in 2016, the jury was urged to consider the same design as evidence of an illegal new intended use. The jury also was urged to consider unpublished internal firm discussions of an unlabeled use as evidence of the creation of an illegal new intended use.

In another case, United States v. Vascular Solutions, in a pretrial motion, ruling the court interpreted the intended use regulation to allow FDA to infer “objective intent” from statements or claims not made public:

[N]owhere does the [intended use] regulation state that such statements or claims cannot be used to show objective intent unless they were published to the marketplace. To see the absurdity of defendants’ argument, consider a hypothetical in which a medical device manufacturer sells device D, which is approved for use A but frequently prescribed by doctors for off-label use B. If the firm creates a bumper sticker with the words `I intend D to be used for B: Prescribe D for B Today,’ by defendants’ logic that poster is inadmissible evidence of subjective intent so long as it sits in his briefcase, but admissible evidence of objective intent once he sticks it on his car. The Court is not persuaded that there is a legally relevant distinction here; in either scenario, the defendant has manifested into the physical world `oral or written statements’ that may be weighed as evidence of objective intent. [United States v. Vascular Solutions, Inc., 181 F. Supp. 3d 342, 347 (W.D. Tex. 2016).]

Following the court’s logic, a new intended use for a marketed device could be inferred from a secret diary, even if no one else in the world has seen it, because it also falls in the category of “oral or written statements” that have been “manifested into the physical world.” Id. at 347. Thus, objective evidence of subjective intent apparently may play a role in determining objective intent. This turns “objective intent,” an oxymoronic concept to begin with, into a hall of mirrors.

These court decisions did not break new ground. FDA has always taken the position that the regulation provides it the freedom to draw inferences based upon a virtually unlimited variety of evidence. Just last year, FDA provided this gloss:

In determining a product’s intended use, the Agency may look to “any . . . relevant source,” including but not limited to the product’ s labeling, promotional claims, and advertising . . . . For example, FDA may take into account any claim or statement made by or on behalf of a manufacturer that explicitly or implicitly promotes a product for a particular use . . . .

To establish a product’ s intended use, FDA is not bound by the manufacturer or distributor’s subjective claims of intent, but rather can consider objective evidence, which may include a variety of direct and circumstantial evidence. Thus, FDA may also take into account any circumstances surrounding the distribution of the product or the context in which it is sold . . . . In the context of medical products, generally, circumstantial evidence often ensures that FDA is able to hold accountable firms that attempt to evade FDA medical product regulation by avoiding making express claims about their products.   [80 Fed. Reg. 57756, 57757 (Sept. 25, 2015).]

The last sentence in this quotation addresses articles marketed without overt medical claims in order to evade FDA device regulation. It makes sense in such cases to look at all the circumstances surrounding distribution to ascertain the intended use.

It does not make sense in cases when a device is already legally marketed with FDA‑authorized labeling. There is a legal question about when additional uses for such devices should be treated as “intended uses” for regulatory purposes. Nevertheless, that implicates a different set of concerns compared to ferreting out hidden medical purposes for articles being marketed to evade regulation altogether. FDA frequently conflates the two cases to its own advantage when discussing the intended use regulation.

In so doing, FDA takes the position that promotion of an additional, unlabeled use for a cleared device creates a “new” intended use. FDA treats the new intended use as if it were the sole intended use while the cleared or approved intended use simply evaporates. Thus, FDA takes the position that if a firm engages in off‑label promotion of any kind, a violation springs into being even for devices shipped with FDA‑authorized labeling. FDA does not even concede that it must show that a purchaser saw the off‑label promotion prior to the sale.

The correct statutory analysis is that a device cleared for intended use X, and shipped with labeling matching that intended use, may be employed by a medical professional for additional use Y. It is true that use Y is not in the labeling and has not been evaluated by FDA. Yet, under the scheme of the FDCA, it is the medical professionals, not FDA, who are the gatekeepers as to this additional use. There is no illegality under the FDCA if a firm disseminates truthful and non‑misleading information to the medical profession about use Y outside of the labeling. The statute, in fact, is agnostic about whether a firm returns to FDA for an evaluation of use Y. There is no statutory requirement to do so. If a firm voluntarily seeks to add use Y to the labeling, FDA is authorized to grant the request if the statutory requirements are satisfied.

Nevertheless, FDA deploys the intended use regulation to threaten firms with criminal and civil liability for disseminating information about unlabeled uses. (There are certain narrow exceptions, such as responding to unsolicited requests and disseminating peer reviewed journal articles.) FDA justifies doing so as an “incentive” for firms to obtain bring additional uses on label.

This use of the intended use regulation appears to be unlawful under the Administrative Procedure Act, 5 U.S.C. § 706(2)(C) (agency action may be set aside if “in excess of statutory jurisdiction, authority, or limitations”). The statutory incentive for firms to seek supplemental clearance or approval is that it allows them to augment the device labeling with an additional use. FDA’s speech restrictions go beyond this quid pro quo to apply criminal and civil coercion not authorized by the FDCA. This additional measure of coercion is rooted in the intended use regulation. It is not rooted in the statute.

FDA is also interfering with the practice of medicine. It is incontrovertible that some off‑label uses are beneficial and some even represent the standard of care. As discussed, the medical profession has developed an ecosystem for the evaluation of device performance, both on label and off‑label, in order to make appropriate use of the technology. FDA’s evaluation (or lack thereof) certainly plays an important role in the decision‑making of the medical profession, but it is not always and everywhere determinative.

In the meantime, sponsoring firms often have significant knowledge about unlabeled uses and an economic incentive to disseminate the information. By suppressing this knowledge, FDA materially distorts the quality and quantity of information reaching the medical profession. For FDA, less information is better. But, under the statutory scheme, it is the medical profession that decides whether to employ legally marketed devices for unlabeled uses. FDA’s interference with the free flow of truthful and non‑misleading information pertinent to the lawful practice of medicine amounts to an interference with it.

Finally, as several courts have found, FDA’s application of the intended use regulation to stifle speech may conflict with the First Amendment by suppressing the free flow of truthful and non-misleading information to highly trained experts lawfully using devices off‑label. Moreover, it does so by targeting a class of “disfavored” speakers while other speakers may provide exactly the same information without sanction. The courts accept such content- and speaker-based restrictions only when narrowly tailored to directly advance a legitimate governmental interest. The courts have generally concluded that FDA’s use of the intended use regulation is not narrowly tailored and does not directly advance the FDA’s putative governmental interest in bringing additional uses on label.

One court has expressly found in a First Amendment context that FDA has a legitimate governmental interest in bringing all additional uses on label. Washington Legal Foundation v. Friedman, 13 F. Supp. 2d 51 (D.D.C. 1998). This conclusion was based upon misreading the FDCA to “require that manufacturers get all uses approved by the FDA.” Id. at 71. In fact, as discussed above, the FDCA is agnostic whether additional uses are brought on label, and it does not grant FDA authority to require it. It is difficult to see why FDA may claim a legitimate governmental interest in coercing an action that the statute makes voluntary. That is especially so in cases when the speech used for this coercion is not labeling, which is the locus of FDA’s statutory authority. FDA has never pointed to any provision in the FDCA that authorizes regulation of speech outside of labeling and restricted device advertising. (Restricted devices are Class III devices, hearing aids and analyte specific reagents.)

Proposal to Restore the Statutory Scheme

This section suggests specific changes to FDA’s device intended use regulation (21 C.F.R. § 801.4) as it stands after FDA’s recent amendment, although the amendment has been delayed for at least a year.

The easiest solution to the problems discussed above would be to restrict FDA to determining marketed intended use based upon a device’s labeling, just as it primarily does during premarket review. That way, FDA would simply make sure that the firm’s labeling in the marketplace matches the labeling that was cleared or approved. Advertising would not be part of the picture, because FDA does not have jurisdiction over most device advertising. Other speech would be excluded as completely outside the purview of the FDCA.

Unfortunately, FDA’s definition of labeling is so broad that it could easily encompass speech deserving of First Amendment protection. It is also so nebulous that it would still be too difficult for the regulated community to know in advance what communications will be the basis for determining intended use. Arguably, neither the breadth nor the nebulousness of FDA’s definition of labeling is faithful to the plain statutory language. Nonetheless, the dysfunction is deeply entrenched due to long‑ago court decisions and decades of administrative action. It grew up chiefly during the period from the 1930s to the 1960s, in the heat of a 30-year turf war between FDA and the FTC as to who would have jurisdiction over drug advertising. Origins of the Prohibition Against Off‑Label Promotion, 69 Food Drug L.J. 161 (2014).

Ideally, Congress would revisit the regulation of device (and drug) labeling and advertising and update the FDCA to make it a better fit for the age of electronic communications. That is too heavy a lift within the confines of this proposal. Our aim is simply to mitigate the worst excesses of FDA’s device intended use regulation. Two objectives underlie this proposal:

• Firms should have certainty about the labeling that will serve as the basis for an intended use determination. Providing this certainty will enable firms to resume their original statutory role as masters of their intended use. As the First Amendment requires, these firms can disseminate truthful and non‑misleading information about off‑label uses without fear of creating an unapproved new intended use.
• There is potential for FDA to apply an excessively broad definition of labeling when determining intended use, thereby chilling protected speech. Narrowing the subset of labeling that is the basis for intended use will mitigate this problem.

In light of these considerations, the specific proposal is as follows:

The preamble in the first sentence of the device intended use regulation is unchanged.

Subsection (a): This part of the intended use regulation continues to authorize FDA to determine intended use based upon a full consideration of the circumstances surrounding distribution of an article. This provision applies to any article not listed with FDA, i.e., the sponsoring firm has not conceded that device regulation applies. If FDA finds that the article actually has an intended use falling with the definition of a medical device, it may impose device regulation on that basis. Likewise, the existing approach to intended use determinations will continue for devices marketed over-the-counter (OTC) to lay users. The only change here is to remove from this approach the class of devices described in subsection (b).

Subsection (b): This new subsection governs the determination of intended use for articles meeting two requirements: (i) The article must be already listed with FDA as a legally marketed medical device; and (ii) the listed medical device must be sold for prescription use only by licensed medical practitioners under 21 C.F.R. § 801.109.

If requirements (i) and (ii) are both met, then FDA shall determine objective intended use exclusively from the labeling included per § 801.109(c) on or within the package from which the device is dispensed (or an electronic substitute as authorized under section 502(f) of the FDCA). FDA may not consider other labeling or advertising in making an intended use determination.

Subsection (b) does not alter FDA’s authority to require that all labeling and restricted device advertising be truthful and non-misleading in accordance with section 502(a) of the FDCA and various implementing regulations (e.g., 21 C.F.R. § 801.6). For the purpose of suppressing false and misleading labeling and advertising, these terms retain their current boundaries, even if overly expansive or nebulous.

Subsection (c): The first part is unchanged from the current regulation. The last sentence of subsection (c) was added by FDA in a final rule issued this year, although it will not be effective until 2018 at the earliest. The language we propose would ensure that the “totality of the evidence” ties back to the two different sources of evidence specified in (a) and (b). (An alternative would be to simply strike the last sentence, given that FDA says it merely reiterates existing requirements and therefore would seem to be unnecessary.)

Subsection (d): This provision would be added to establish that labeling or advertising stating or implying that a medical use has been cleared or approved by FDA (or is exempt), when that is not the case, is misleading and constitutes misbranding. The purpose of this provision is to require sponsors to be clear in labeling and advertising which uses have FDA’s imprimatur and which do not. This clarity may be important to the decision of medical professionals as to whether to employ the device for such use. The new provision is not necessarily a change in law, since the FDCA already prohibits false or misleading labeling and restricted device advertising, but it puts firms on notice and empowers FDA to focus on this particular issue.

Change to Sec. 801.109(c): Under the new provision in 801.4(b), a device’s intended use is determined based upon the labeling in or on the device package. Under this subsection, a device must ship with labeling that has adequate directions for all advertised uses. This provision would force the sponsor to include unapproved uses in the labeling shipped with the device, causing such uses to become “intended uses” under 801.4(b), and subjecting the sponsor to adulteration or misbranding charges due to lack of clearance or approval of the unapproved uses. This unwanted circularity is eliminated by removing this phrase.

Change to Sec. 801.109(d): This section refers to labeling “whether or not” on or within the device package, and so could be read to have the same circular effect as 801.109(c). A parallel change is made, striking the reference to advertised uses.

The following, then, is the mark up of the intended use regulation (new language in red italicized font, deletions in strike‑through):

Sec. 801.4 Meaning of intended uses.

The words intended uses or words of similar import in 801.5, 801.119, and 801.122 refer to the objective intent of the persons legally responsible for the labeling of devices.

(a) Except as provided in subsection (b), Tthe intent is determined by such persons’ expressions or may be shown by the circumstances surrounding the distribution of the article. This objective intent may, for example, be shown by labeling claims, advertising matter, or oral or written statements by such persons or their representatives. It may be shown by the circumstances that the article is, with the knowledge of such persons or their representatives, offered and used for a purpose for which it is neither labeled nor advertised.

(b) If a distributed article is listed as a device pursuant to 807.25 and purports to be sold for prescription use only pursuant to 809.109, then the intended use shall be determined from labeling on or within the package from which the device is to be dispensed (or equivalent labeling provided electronically pursuant to section 502(f) of the act). If there is no such labeling, then intended use shall be determined in accordance with subsection (a).

(c) The intended uses of an article may change after it has been introduced into interstate commerce by its manufacturer. If, for example, a packer, distributor, or seller intends an article for different uses than those intended by the person from whom he received the devices, such packer, distributor, or seller is required to supply adequate labeling in accordance with the new intended uses. And if the totality of the evidence in either (a) or (b), above, as applicable, establishes that a manufacturer objectively intends that a device introduced into interstate commerce by him is to be used for conditions, purposes, or uses other than ones for which it has been approved, cleared, granted marketing authorization, or is exempt from premarket notification requirements (if any), he is required, in accordance with section 502(f) of the Federal Food, Drug, and Cosmetic Act, or, as applicable, duly promulgated regulations exempting the device from the requirements of section 502(f)(1), to provide for such device adequate labeling that accords with such other intended uses.

(d) Any labeling or restricted device advertising that suggests a device has received agency clearance or approval (or is exempt) for a specific intended use, when that is not in fact the case, is misleading under section 201(n) of the Act and constitutes misbranding under section 502(a) or section 502(q)(1) as applicable.

Finally, 801.109(c) would have the following revision:

[A device is exempt from section 502(f) of the Act if, among other conditions:] Labeling on or within the package from which the device is to be dispensed bears information for use . . . under which practitioners licensed by law to administer the device can use the device safely and for the purpose for which it is intended, including all purposes for which it is advertised or represented. . . .

The same change would be made to 801.109(d), which parallels 801.109(c), except that it applies to labeling “whether or not on or within” a device package.

That is the proposal. We look forward to your comments (jshapiro@hpm.com).