As readers of this blog know, in May 2016, FDA issued a final rule amending the nutrition labeling regulations for food and dietary supplements. Major amendments include a new requirement to declare “added sugar,” the setting of a daily value for added sugars (but not for total sugars), and a new definition of dietary fiber (see our previous post here).

FDA has received at least two Citizen Petitions requesting a stay of the rule and reconsideration (or withdrawal) of the definition of dietary fiber. Last week, the Agency announced that it will extend the compliance date to provide companies with guidance regarding the final rule (see our previous post here).

FDA’s proposal to require added sugars may be the most controversial issue and generated many comments. However, besides comments to a draft guidance addressing added sugars and comments and questions in other contexts, no party had so far formally objected to the new requirement to declare added sugars. That changed on June 20, 2017, when the Natural Products Association (NPA) submitted a Citizen Petition asking FDA for a stay and reconsideration of the final rule. NPA’s Petition focuses on the rule’s requirements for added sugar but also addresses the dietary fiber definition.

The Petition identifies seven grounds for a stay and reconsideration, five of which focus on the requirement to declare added sugars. Grounds include FDA’s alleged failure to comply with rulemaking procedures of the Administrative Procedures Act and the new administration’s regulatory agenda and directives. Petitioner also asserts that the final rule requiring declaration of added sugars raises First Amendment concerns because it imposes unjustified and unduly burdensome disclosure requirements on companies. NPA also finds fault with FDA’s analyses and conclusions based on consumer and eye tracking studies.

With respect to the dietary fiber definition, Petitioner alleges that all non-digestible carbohydrates have a physiological effect by virtue of being non-digestible and thereby “promoting an osmotic and bulk laxative physiological effect.” In somewhat caustic terms, Petitioner challenges FDA to show that a non-digestible carbohydrate does not have such a beneficial effect.

Thus far, FDA has not given any indication that it will reconsider the final rule. We will be monitoring new developments.

On June 21st, FDA announced an all-day public meeting dedicated to the Hatch-Waxman Amendments that will take place on July 18, 2017. The meeting, titled “The Hatch-Waxman Amendments: Ensuring a Balance Between Innovation and Access,” is part of Commissioner Gottlieb’s Drug Competition Action Plan, which he indicated was forthcoming during a May 2017 House Appropriations Committee hearing.  The meeting is intended to further explore the juxtaposition of innovation in drug development and access to lower cost alternatives to innovator drugs. In an FDA Voice blog post, Commissioner Gottlieb explains that FDA is looking at how regulatory rules might be “gamed” or misused to reduce competition, keeping prices high for consumers. FDA is also bringing in the anticompetitive experts at the FTC to help out.

FDA posed several questions for stakeholder input:

• How have exclusivity periods, patents and patent listing procedures, innovator drug product labeling, post-approval changes to innovator products, and other regulatory processes (such as the citizen petition process) impacted the balance of innovation and access set forth in the Hatch Waxman Amendments?

• Given that many ANDAs are never marketed or subject to substantial delays after approval, what marketplace dynamics dis-incentivize the marketing of approved generics? What can FDA do to help approved generics come to market?

• Why are there so many drugs that have lost patent and exclusivity protection but have no generic competition? Are there areas where Hatch-Waxman Amendment incentives are insufficient to develop a generic?

• How should FDA use its authority to waive shared REMS systems to avoid delay or should it develop other administrative tools to do so?

• What should FDA do to promote access to testing samples?

• What other elements of drug product development, regulation, and marketing have the potential to disrupt the Hatch-Waxman Amendments’ balance between innovation and generic availability, and how should the Agency address them?

Written comments are due by September 18, 2017. Registration for the public meeting, as well as requests to make oral presentations, is due to FDA by July 3, 2017. We’re sure we’ll see you all at what promises to be an exciting meeting!

Although both the U.S. House of Representatives and U.S. Senate are still in the midst of considering legislation – the FDA Reauthorization Act of 2017 (“FDARA”) (H.R. 2430 and S. 934) – to, among other things, reauthorize an alphabet soup of user fee programs, including the second iteration of the Generic Drug User Fee Amendments (“GDUFA II”), and as the Congressional Budget Office analyzes the cost of FDARA (see here), FDA has apparently decided that it’s pretty certain that GDUFA will ultimately be enacted into law. Earlier this week, FDA issued a draft guidance document, titled “ANDAs: Pre-Submission Facility Correspondence Associated with Priority Submissions,” that is intended to implement a new Pre-Submission Facility Correspondence (“PFC”) process for certain ANDA sponsors.

As part of GDUFA II, FDA and the generic drug industry hammered out a Commitment Letter under which FDA agreed to review and act on certain “priority ANDAs” (including original ANDAs, ANDA amendments, and ANDA Prior Approval Supplements) within timeframes shorter than those established for “standard ANDAs.” For example, while FDA agreed to review and act on 90% of standard original ANDAs within 10 months of the date of ANDA submission, 90% of priority original ANDAs will be reviewed and acted on “within 8 months of the date of ANDA submission, if the applicant submits a Pre-Submission Facility Correspondence 2 months prior to the date of ANDA submission and the Pre-Submission Facility Correspondence is found to be complete and accurate and remains unchanged.” If, however, “the applicant does not submit a Pre-Submission Facility Correspondence 2 months prior to the date of ANDA submission or facility information Changes or is found to be incomplete or inaccurate,” then FDA will review and act on 90% of priority original ANDAs within 10 months of the date of ANDA submission.  Whether a particular ANDA submission qualifies for “priority” status will depend on the sponsor meeting the criteria laid out in FDA’s “Prioritization MAPP” (i.e., Manual of Policies and 35 Procedures (MAPP) 5240.3, Rev. 2, “Prioritization of the Review of Original ANDAs, Amendments, and Supplements”).

As described above, the PFC process is the linchpin to obtaining an 8-month priority review goal date. And as we approach the beginning of Fiscal Year 2018 when GDUFA II is expected to go into effect, FDA wants to make the PFC process as clear as possible now so that ANDA sponsors can begin putting together the necessary paperwork to submit requests in anticipation of the GDUFA II goals becoming reality.  To that end, the draft guidance “establishes FDA’s expectations for the content, timing, and assessment of the PFC,” and, specifically defines:

• The content and format of the information that should be submitted in the PFC to enable FDA’s assessment of facilities listed in the PFC.
• PFC timeframes and their intersection with the subsequent ANDA submissions.
• The possible outcomes of the Agency’s assessment of the PFC.
• When and how the PFC submitter is notified by the Agency about the status of the PFC.

The draft guidance lays out a detailed set of instructions for ANDA sponsors to follow when making a PFC submission. And knowing FDA’s (the Office of Generic Drug’s) penchant for kicking out or refusing submissions that don’t meet even the smallest detail, ANDA sponsors would be wise to ensure that every “i” is dotted and every “t” is crossed in a PFC submission.

Timing is also a critical component of the new PFC process, because PFCs have a short expiry date. The GDUFA II Commitment Letter provides that a PFC should be submitted to FDA two months ahead of the planned ANDA submission date in order for an application to be eligible to receive the shorter 8-month goal date.  According to FDA:

[I]f the time elapsed between submission of the PFC and submission of the planned ANDA is too long, it is less likely that facility information will remain unchanged, as defined by the GDUFA II Commitment Letter. Thus, FDA’s PFC facility assessment may become out-of-date and need to be repeated after the planned ANDA is submitted, eliminating the benefit of the PFC submission to both FDA and the applicant.  Therefore, this guidance establishes a window of time between 2 and 3 months after PFC submission during which applicants should submit their planned ANDA.

This is referred to in the draft guidance as the “ANDA Submission Window.” For example, if a PFC is submitted to FDA on December 1st, then the planned ANDA should be submitted to FDA between February 1st and March 1st.  Similarly, if the PFC is submitted to FDA on December 31st, then the planned ANDA should be submitted to FDA between February 28th (in a non-leap year) and March 31st.

Nevada has become the most recent state to enact a law addressing drug prices. S.B. 539, enacted on June 15, 2017, places new reporting requirements on pharmaceutical manufacturers and pharmacy benefit managers (“PBMs”) related to diabetes treatments and health care provider (“HCP”) payments. Patient advocacy groups are also required to report certain payments from pharmaceutical manufacturers, PBMs, and other third parties.

Manufacturer Reports

S.B. 539 requires the Nevada Department of Health and Human Services (“NDHHS”) to compile a list of prescription drugs that it determines are “essential for treating diabetes” in Nevada, along with the wholesale acquisition cost (“WAC”) of each drug on the list (“List #1”). NDHHS must then list the subset of those drugs whose WAC has increased by a percentage equal to or greater than either the Consumer Price Index, Medical Care Component (“CPI Medical”) during the preceding calendar year or twice the CPI Medical during the preceding two years (“List #2”).

Every year, on or before April 1, manufacturers whose drugs appear on List #1 are required to report to NDHHS the following information regarding such drugs:

• Costs of producing the drug;
• Total administrative expenditures relating to the drug, including marketing and advertising costs;
• Profit earned by the manufacturer from the drug and the percentage of total profit for the period attributable to the drug;
• Total amount of financial assistance provided by the manufacturer through any patient assistance program;
• Cost associated with coupons provided directly to consumers and for copayment assistance programs, along with the cost to the manufacturer attributable to the coupons and copay programs;
• The drug’s WAC;
• History of WAC increases over the preceding five years, including the amount of each such increase expressed as a percentage of the total WAC, the month and year in which each increase became effective, and any explanation for the increase;
• Aggregate amount of all PBM rebates provided by the manufacturer for sales of the drug in Nevada; and
• Any additional information prescribed by NDHHS regulation.

In addition, manufacturers whose drugs appear on List #2 are required to report each factor that contributed to the increase in WAC along with the percentage of the increase attributable to each factor, the role played by each factor in the WAC increase, and any other information prescribed by NDHHS regulation.

Sales Representative Reports

All pharmaceutical manufacturers are required to provide NDHHS with an annually updated list of sales representatives who market the manufacturer’s prescription drugs to Nevada-licensed, -certified, or -registered HCPs, pharmacies, medical facilities, or individuals licensed or certified under the Nevada insurance code (“enumerated HCPs”). NDHHS will then provide access to this list to all enumerated HCPs. A sales representative not on the list is prohibited from marketing prescription drugs to enumerated HCPs. Sales representatives who are on the list and permitted to market prescription drugs in Nevada must provide a list to NDHHS of all enumerated HCPs that were provided with any type of compensation exceeding $10 in individual value or $100 in aggregate value. These sales representatives are also required to report information concerning free prescription drug samples, including the name of each enumerated HCP to whom a free drug sample was provided. The provisions pertaining to sales representatives are not limited to diabetes drugs.

PBM Reports

PBMs are required to submit annual reports to NDHHS on or before April 1 that include the following:

• The total amount of all rebates negotiated by the PBM with manufacturers during the preceding calendar year for drugs included on List #1;
• The total amount of such rebates retained by the PBM; and
• The total amount of such rebates negotiated for purchases of such drugs for use by:
  • Medicare beneficiaries;
  • Medicaid beneficiaries;
  • Beneficiaries of third party plans provided by governmental entities (but not Medicare or Medicaid);
  • Beneficiaries of third party plans not provided by governmental entities; and
  • Beneficiaries of certain plans subject to the Employee Retirement Income Security Act of 1974 (“ERISA”).

Nonprofit Organization Reports

Finally, nonprofit organizations that advocate on behalf of patients or that fund medical research in Nevada and receive a “payment, donation, subsidy, or anything else of value” from either a pharmaceutical manufacturer, PBM, or other third party, or a trade or advocacy group for the same, must compile a report on or before February 1 of each year. The report must detail the amount and source of each payment and the percentage of the total gross income of the organization during the immediately preceding calendar year attributable to such payment(s). These reports must either be posted on the nonprofit’s own publicly-accessible website or submitted to NDHHS if the nonprofit does not maintain such a website.

Penalties

S.B. 539 imposes administrative penalties for noncompliance with its provisions. Pharmaceutical manufacturers, PBMs, or nonprofit organizations that fail to provide the required reports described above may be subject to administrative penalties of not more that $5,000 per day unless such failure to timely comply with the requirements is due to “excusable neglect, technical problems, or other extenuating circumstances.” Pharmaceutical sales representatives who do not timely submit required reports may be subject to administrative penalties of not more than $500 per day.

Disclosure of Reported Information

S.B. 539 mandates that NDHHS compile a report on the information it receives pursuant to the requirements described above and make such information publicly available. First, the NDHHS must place “on the Internet website maintained by [NDHHS]” its report comprising the information on List #1. Second, NDHHS must compile a report based on its analysis of information provided by manufacturers regarding their drugs on Lists #1 and #2 and from PBMs regarding rebates. Third, NDHHS is also required to analyze and prepare a report on the information reported by sales representatives; however, the identity of individual sales representatives or the entities they represent may not be disclosed and only reported in aggregate. Finally, NDHHS must place information reported by nonprofit organizations on its website for those nonprofits who submit reports to NDHHS because they do not maintain a website of their own.

Conclusion

With this statute, Nevada joins the growing list of states seeking to limit pharmaceutical costs and marketing activities through legislation requiring reporting, pricing restrictions, and/or marketing prohibitions. Reporting and/or prohibitions on manufacturer payments to practitioners and providers have long existed in Connecticut, DC, Minnesota, Massachusetts, and Vermont. More recently, state focus has shifted from drug marketing activities to drug prices, with New York, Maryland, and Vermont enacting requirements for reporting or outright restrictions on price increases on certain drugs. The Nevada reporting law encompasses both payments to practitioners and price increases (though the latter is limited to diabetes drugs), and adds PBM and patient advocacy organization transparency requirements. Though numerous bills addressing drug prices have been introduced in Congress (mostly by Democrats) and the Trump Administration has objected to high drug prices and held stakeholder meetings on the subject, these initiatives appear unlikely to produce any hard results in the near future. In the absence of federal action, states are clearly taking the lead, with 30 states considering over 150 bills on pharmaceutical pricing and payments (see data available at the National Conference of State Legislatures here). We will be following these state activities closely.

Our postings on the FDC Act typically focus on more straightforward applications of FDA’s regulation of the food and drug world. Drug development, patent dances, off-label promotion prosecutions, newly defined menu labeling—these are some of the many issues we associate with FDA’s activities.

But since the passage of the Food and Drugs Act of 1906 (the predecessor to the modern FDC Act), FDA has asserted its statutory and regulatory authority in a number of unexpected/unique circumstances.

The most recent example: the prosecution of a racehorse doping scandal in Pennsylvania.

FDA’s Office of Criminal Investigation has investigated and been involved in the prosecution of Murray Rojas, a veteran horse trainer and non-veterinarian, who was indicted on allegations that, inter alia, from 2002 through 2014, she directed the administering of prohibited substances to the horses she trained prior to over forty separate horse races at the Penn National Race Course in Grantville, Pennsylvania (just outside of Harrisburg) (see OCI’s press release announcing the indictment here).

The indictment, filed in the U.S. District Court for the Middle District of Pennsylvania, charges the defendant with felony misbranding under the FDC Act, claiming that the defendant misbranded the drugs with intent to defraud or mislead, in violation of 21 U.S.C. §§ 331(k), 333(a)(2), and 353(f)(1)(C). Specifically, 21 U.S.C. § 353(f)(1)(C) states that the dispensing of an animal drug that must be administered under the professional supervision of a licensed veterinarian (i.e., a prescription drug) constitutes the misbranding of a drug if it is not “dispensed by or upon the lawful written or oral order of a licensed veterinarian in the course of the veterinarian’s professional practice.” 21 U.S.C. § 353(f)(1). Generally, an “order” is “lawful” if it is a prescription or, if an oral order, it is both promptly reduced to writing and filed by the person filling the order. Id. § 353(f)(1)(B).

The defendant brought a motion to dismiss these counts, arguing that a violation of 21 U.S.C. § 353(f)(1)(C) can only occur if an unlicensed veterinarian or non-veterinarian administers the drugs to an animal. Because the individuals who allegedly acted under the defendant’s direction were licensed veterinarians, the defendant contended that these counts were legally deficient.

In a recent decision, the court denied the motion to dismiss the indictment counts involving the criminal misbranding of animal drugs. Specifically, the court held that the indictment sufficiently alleged misbranding and conspiracy to misbrand. In doing so, the court reasoned that 21 U.S.C. § 353(f)(1) requires that the administration of a prescription drug to an animal must be done pursuant to either a prescription or some other lawful written or oral order of a licensed veterinarian in the course of the veterinarian’s professional practice. It is not sufficient that the individual administering the prescription drugs be a veterinarian in order to avoid criminal misbranding liability under the FDC Act. The court observed that the indictment sufficiently alleged a violation. The court’s ruling was not a finding that any violation had occurred. The court noted: “It will be for the factfinder to determine at trial whether the licensed veterinarians dispensed any prohibited substances to horses in contravention of Pennsylvania law, and if so, whether they were acting lawfully in accordance with their professional practices or merely at the behest of Defendant during such administration.”

The trial and jury selection is scheduled to start on June 19, 2017.

On June 5^th, 2017, the U.S. Supreme Court issued its opinion in Kokesh v. Securities and Exchange Commission. The Court unanimously reversed the Tenth Circuit’s decision below, and ruled that a five-year statute of limitations for the enforcement of “any civil fine, penalty, or forfeiture” (28 U.S.C. § 2462) applied to the SEC’s claims against Kokesh seeking disgorgement.

Importantly, in reaching its decision in Kokesh the Court found that SEC disgorgement (which requires a defendant to pay back any gains attributable to the wrongful conduct) operates as a penalty under 28 U.S.C. § 2462. The Court also stated that it had not reached the question of “whether courts possess authority to order disgorgement in SEC enforcement proceedings or on whether courts have properly applied disgorgement principles in this context.” (Slip. Op. at 5 n. 3). The Court’s classification of disgorgement as a penalty, and its dicta on the question of whether disgorgement is appropriate under the Securities Exchange Act, has the potential to affect other agencies’ pursuit of disgorgement in enforcement actions.

Like the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) at issue in Kokesh, neither the Food, Drug, and Cosmetic Act (“FDC Act”) nor the Federal Trade Commission Act (“FTC Act”) explicitly authorize disgorgement. Rather, the government has asserted disgorgement authority inherent in FDC Act Sec. 302(a), which awards district courts jurisdiction to restrain most violations of the FDC Act (21 U.S.C. § 332(a)), and Section 13(b) of the FTC Act, which authorizes the FTC to seek preliminary and permanent injunctions to remedy “. . . any provision of law enforced by the Federal Trade Commission….” (15 U.S.C. § 53(b)).

Courts have upheld FDA’s and the FTC’s efforts to seek restitution or disgorgement as a remedy. See, e.g., United States v. Universal Mgmt. Servs., 191 F.3d 750, 763-63 (6th Cir. 1999) (reasoning that both disgorgement and restitution are appropriate under the FDC Act); FTC v. Cardinal Health, No. 15-cv-3031(S.D.N.Y Apr. 20, 2015); FTC v. Gem Merchandising Corp., 87 F.3d 466, 470 (11th Cir. 1996). Disgorgement has become an important enforcement tool for FDA, in particular, although we previously questioned whether remedies such as restitution and disgorgement are appropriate under the FDC Act. See Jeffrey N. Gibbs, John R. Fleder, Can FDA Seek Restitution or Disgorgement?, 58 Food and Drug L. J. 129-47 (2003).

After Kokesh, the government may have more to consider when determining whether to seek disgorgement under the FDC Act or FTC Act. The fact that the Supreme Court declined to address whether disgorgement principles are “properly applied” under the Securities and Exchange Act will likely be cited by defendants in arguing that disgorgement is inappropriate under the other Acts that do not specifically provide for that remedy. Also in light of this new precedent, the Department of Justice may have to reanalyze the question of whether a penalty of disgorgement raises double jeopardy concerns if the government seeks to later bring a criminal prosecution relating to the same conduct. See Application of the Double Jeopardy Clause to Disgorgement Orders Under the Federal Trade Commission Act (Apr. 9, 1998).  On this point, defendants will undoubtedly rely on the Court’s reasoning in Kokesh to argue that disgorgement is so punitive in nature as to qualify as a criminal penalty that should bar later criminal proceedings. Finally, Kokesh has the ancillary consequence of calling into (further) question whether disgorgement payments are tax deductible, an issue that we have previously addressed here. See Internal Revenue Code Sec. 162(f) (fines or penalties are nondeductible); see also IRS OCC Memorandum (Jan. 29, 2016), (disgorgement payments are nondeductible if they are primarily punitive). This is something that both the government and defendants will need to consider with respect to any settlement of an enforcement action that involves disgorgement.

As we previously reported, FDA recently extended the compliance date for its restaurant menu labeling regulations to May 8, 2018. Just one day before the previous (May 5, 2017) compliance date, FDA published an interim final rule (IFR) that delayed compliance for one year and solicited comments on how the Agency can “further reduce the regulatory burden or increase flexibility.”

On June 7, two consumer advocacy organizations sued FDA to have the IFR vacated and a more immediate compliance date instated. The Center for Science in the Public Interest and the National Consumer League (the plaintiffs) claim that FDA’s delay of the menu labeling rule was illegal because it did not “rationally explain[] why it was changing its interpretation of” the federal requirements, and because it did not provide an opportunity for public notice and comment before the delay took effect.

First, the plaintiffs allege that FDA’s decision to delay the compliance date violated the Administrative Procedure Act (APA) by “departing from its prior interpretation of the [Affordable Care Act] and its prior conclusions about the importance of nutrition labeling without providing a rational explanation.” (The Affordable Care Act was the statutory basis for the menu labeling requirements.) They point to FDA’s own Regulatory Impact Analysis for the IFR – where the Agency assesses the costs and benefits of delaying the compliance date – to support the claim that FDA did not provide a rational explanation for the delay: the Agency’s analysis concludes that the costs of the delay in terms of reduction in benefits to the consumer ($5 million to $19 million) outweigh the benefits to industry ($2 million to $8 million). The plaintiffs also quote a spokesperson for the National Restaurant Association as opposing the delay.

Second, the plaintiffs allege that FDA was not permitted to issue the IFR without providing an opportunity for public comment. Under the APA, an agency may forego notice and comment rulemaking and issue an IFR with an immediate effective date only when it has “good cause,” i.e., when it determines that it would be “impracticable, unnecessary, or contrary to the public interest” to follow the notice and comment procedures. The plaintiffs assert that FDA did not have the required good cause: they cite FDA’s preamble to the final menu labeling regulations, which states that the rule “provides flexibility where appropriate” by “accommodat[ing] different types of menus and menu boards and the various ways that standard menu items may be listed on menus and menu boards.”

The plaintiffs request that the court declare the IFR “arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law, and to have been published without observance of legally required procedure, in violation of the APA.” They further request that the court issue an order vacating the IFR and set a compliance date for the final menu labeling rule that is within 15 days of the court’s order.

On June 13th, FDA’s Office of Nutrition and Food Labeling “announced” that it intends to extend the compliance date for the new Nutrition Facts requirements.  As we previously reported, FDA received several citizen petitions requesting an extension of the compliance date. In addition, some in the industry had sought to delay the compliance date to coincide with the regulations (yet to be developed) for GMO (Genetically Modified Organism) labeling. Although the announcement may not have been a surprise, the way it was delivered was highly unusual. There was no press release or Federal Register announcement. Instead the “announcement” was included on the webpage on Changes to the Nutrition Facts Label.

FDA states that, based on feedback from industry and consumer groups regarding the compliance date, the Agency “determined that additional time would provide manufacturers covered by the rule with necessary guidance from FDA, and would help them be able to complete and print updated nutrition facts panels for their products before they are expected to be in compliance.”  FDA’s announcement is limited as it only states FDA’s intent to extend the compliance date. How long the compliance date will be extended and whether FDA also will reconsider certain aspects of the regulation (e.g., the dietary fiber definition) are unknown. FDA will provide details on the extension through a Federal Register Notice at a later time.

We will blog more as further information becomes available.

In a relatively infrequent unanimous decision, the U.S. Supreme Court this morning (June 12th) interpreted the Biologics Price Competition and Innovation Act (“BPCIA”) such that the biosimilar patent dance is not mandatory. As regular readers of the FDA Law Blog know, Amgen sued Sandoz for failure to engage in the patent dance and inadequate notice of commercial marketing for Sandoz’s ZARXIO (filgrastim-sndz), a biosimilar version of Amgen’s NEUPOGEN (filgrastim). Amgen sought injunctions to enforce the BPCIA patent dance requirements and for patent infringement while Sandoz counterclaimed for declaratory judgments that the patent was invalid and Sandoz had not violated the BPCIA.

The Supreme Court decided that Sandoz did not violate the BPCIA by failing to engage in the patent dance, as consequences for failure to do so are expressly stated in the BPCIA – meaning that failure to participate was expressly contemplated by the BPCIA. The Court explained that failing to disclose its application and manufacturing information as required under 42 U.S.C. § 262(l)(2)(A) does not constitute an act of artificial infringement, but is actionable under 42 U.S.C. § 262(l)(9)(C), which permits the sponsor to bring an immediate declaratory judgment action for artificial infringement. Therefore, failure to participate in the patent dance cedes control of patent litigation to the sponsor rather than the applicant. This, rather than injunctive relief, serves as enforcement of the disclosure requirements. The Court then remanded to the Federal Circuit to determine whether an injunction is available under California state law to enforce 42 U.S.C. § 262(l)(2)(A) based on whether noncompliance with § 262(l)(2)(A) is unlawful under California’s unfair competition statute.

The Court then examined the plain language of the 180-day notice requirement and determined that no policy argument exists that could outweigh the clear textual argument: 180-day notice of marketing is permitted before licensure.

The applicant must give “notice” at least 180 days “before the date of the first commercial marketing.” “[C]ommercial marketing,” in turn, must be “of the biological product licensed under subsection (k).” §262(l)(8)(A). Because this latter phrase modifies “commercial marketing” rather than “notice,” “commercial marketing” is the point in time by which the biosimilar must be “licensed.” The statute’s use of the word “licensed” merely reflects the fact that, on the “date of the first commercial marketing,” the product must be “licensed.” See §262(a)(1)(A). Accordingly, the applicant may provide notice either before or after receiving FDA approval.

Implicitly, the Court held that reference product manufacturers are not entitled to an additional 6 months of practical exclusivity after a biosimilar is approved. Theoretically, this should help biosimilars come to market faster.

In a Concurring Opinion, Justice Breyer, citing the Court’s previous decision in National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967 (2005), raised the possibility that notwithstanding the Court’s interpretation of the BPCIA, FDA might come to a different interpretation of the statute: “if [FDA], after greater experience administering this statute, determines that a different interpretation would better serve the statute’s objectives, it may well have authority to depart from, or to modify, today’s interpretation.”  It seems unlikely that FDA will depart from the Court’s decision.

As readers of this blog know, natural claims have been and continue to be a frequent basis for consumer class actions. Initially, lawsuits appeared to focus on natural claims for foods (and dietary supplements). However, natural claims for personal care products also have become a popular target in consumer class actions. Even the Federal Trade Commission has addressed natural claims for personal care products (see here).

Currently, there is no single authoritative legal definition of what “natural” means in the context of food or personal care products. For foods, FDA has a policy that “natural” means “nothing artificial or synthetic,” but it remains unclear how some issues such as genetically modified ingredients and presence of certain residues, such as pesticides, fit within that policy. The continuing uncertainty has encouraged litigants to seek answers from the courts.

In November 2015, in response to several petitions requesting clarification of the definition or prohibiting the term natural altogether, FDA announced that it would consider the use of “natural” and requested comments as to how to best define the term. The comment period closed in May 2016, after FDA received more than 7600 comments.

FDA’s action has provided defendants of consumer class actions with an additional reason that lawsuits should be stayed based on the primary jurisdiction doctrine. Pursuant to this doctrine, courts may in their discretion stay or dismiss a plaintiff’s claims, to permit the relevant administrative agency to reach a decision on the issue in question. The primary jurisdiction doctrine is intended to preserve the proper working relationship between administrative agencies and the judicial system. See U.S. v. W. Pac. R.R. Co., 352 U.S. 59, 63-64 (1956). In a number of natural cases, defendants have successfully argued for a stay and several lawsuits have been put on hold until FDA weighs in on the “natural” issue. See, e.g., Kane. v. Chobani, LLC, 645 Fed. Appx. 593, 594 (9th Cir. 2016).

Just recently, Colgate Palmolive Co. (Colgate) relied in part on this latest FDA action in asking the Southern District of New York to also stay lawsuits concerning natural claims for its personal care products. Colgate and its subsidiary Tom’s of Maine, Inc. (Tom’s) market and sell personal care products. Last year, after FDA already had initiated its proceedings concerning natural claims, they were sued for the marketing of a number of the personal care products with allegedly false and misleading “natural claims.” Defendants argue that these cases should be stayed based on primary jurisdiction.

Defendants provide four reasons for deferral to FDA:

1. The determination of what constitutes “natural” is better left to the expertise of FDA;
2. Labeling standards are within FDA’s jurisdiction and authority;
3. The risk of inconsistent rulings regarding the meaning of “natural;” (Colgate got sued in New York and California);
4. FDA is already reviewing the meaning of natural and natural claims.

Defendants acknowledge that FDA’s action focuses on natural claims for foods, not on personal care products. However, they point out that “there is no indication that . . . FDA’s pending guidance would not also apply to personal care and cosmetic products.”

This would not be the first time that a court would stay “natural” litigation related to personal care products. In 2015, in Astiana v. Hain Celestial Group, Inc., 783 F.3d 753, 761 (9th Cir. 2015), the 9th Circuit determined that a stay was appropriate based on the primary jurisdiction doctrine. When that decision was issued, FDA had not yet initiated proceedings regarding “natural” claims. Now that FDA has in fact taken action suggesting that guidance is forthcoming, the argument for a stay is stronger; “FDA has already completed its notice and comment period, a necessary step that will inform . . . FDA’s guidance, and [FDA] seems determined to address the natural labeling issue.” This may alter the primary jurisdiction calculus, and spells a greater likelihood of success for Colgate’s motion and those of other defendants in similar litigation.

As we previously noted, the intersection of exclusivity and off-label promotion issues is not common, but quite an interesting issue nevertheless. The intersection of these issues was raised earlier this year when Egalet Corporation (“Egalet”) issued a press release saying that the company had received correspondence from FDA stating that the Agency “‘does not object’ to Egalet’s stated plans for distribution of materials [concerning the company’s ARYMO ER (morphine sulfate) Extended-release Tablets] 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.”  You see, although Egalet conducted intranasal route of abuse clinical studies with ARYMO ER (approved under NDA 208603), FDA determined that 3-year exclusivity granted to Inspirion Delivery Technologies, LLC’s (“Inspirion’s”) MORPHABOND (morphine sulfate) Extended-release Tablets (NDA 206544) – for which Daiichi Sankyo, Inc. (“Daiichi”) holds U.S. marketing rights – prevented the Agency from approving ARYMO ER with labeling describing abuse-deterrence via the intranasal route of abuse.

FDA’s comments to Egalet have apparently bled over into comments submitted to the Agency by AbbVie Inc. (“AbbVie”) and Daiichi concerning a January 2017 draft guidance, titled “Medical Product Communications That Are Consistent With the FDA-Required Labeling — Questions and Answers” (Docket No. FDA-2016-D-2285).

According to AbbVie’s comments, “beyond-the-label communications” are justifiably restricted in one particular narrow circumstance:

A flexible approach to beyond-the-label communications . . . will serve the public interest by enabling more informed coverage and treatment decisions. Providing these additional avenues for manufacturer communications also furthers First Amendment values by respecting the rights of manufacturers to engage in truthful and nonmisleading speech about their products. . . .  In one narrow situation, however, we believe a different conclusion is warranted: that a specific legitimate government interest justifies appropriate limits on certain beyond-the-label communications.  This narrow situation involves the federal statutory scheme in place to incentivize biopharmaceutical industry research and development efforts through grants of non-patent regulatory exclusivity to innovative sponsors, in particular circumstances. . . .

In very narrow circumstances, however, beyond-the-label communications could undermine these sorts of regulatory exclusivity granted to a given company. This could happen if an innovator’s product were approved for an unprotected use but also for a supplemental use protected by orphan exclusivity or, in the case of a new drug, three-year exclusivity.  In these situations, FDA might approve another company’s product for the unprotected uses but allow that company to carve out from its labeling the protected uses. That other company might then choose to promote its drug for the protected use (subject to infringement claims under any applicable patents), which could lead to sales for the protected use—directly undermining the exclusivity.  Appropriate regulation of beyond-the-label communications in these circumstances would directly advance the government’s legitimate interest in preserving incentives for innovation made possible by exclusivity.  Indeed, courts that have upheld FDA’s authority to approve products with labeling carve-outs have assumed that only the innovator could promote for the protected use.  Moreover, no less restrictive alternatives (such as a disclaimer) would be effective in preserving the incentive.  The constitutional analysis in these narrow circumstances thus leads to a different result. In this specific situation, then, we believe FDA could justify a speech restriction.

Although AbbVie does not identify a particular product, the company’s focus on orphan drug exclusivity may be a veiled reference to AbbVie’s HUMIRA (adalimumab). In September 2016, FDA approved Amgen, Inc.’s (“Amgen’s”) AMJEVITA (adalimumab-atto) (BLA 761024), the first biosimilar version of HUMIRA (see our previous post here).  Amgen’s AMJEVITA was approved with labeling omitting information on uses that are protected by periods of orphan drug exclusivity applicable to HUMIRA.

Comments submitted to FDA on the draft guidance by Daiichi are specific to the off-label use/exclusivity controversy:

Data exclusivity thus derives all of its value from the scope of the labeling for the drug. If the Draft Guidance were interpreted to permit a competitor to communicate data about a condition of use of a product with the same active moiety for which another company has data exclusivity, then the value of the data exclusivity to the original innovator would be severely undermined, if not destroyed.

In these circumstances, [Daiichi] believes that the First Amendment analysis is different than in the typical communication with a healthcare professional. . . . Where exclusivity rights are not at stake, the Central Hudson analysis weighs in favor of protecting truthful and non-misleading communications to sophisticated health care professionals about medicines and puts the burden on the government to show that it has important interests that the speech regulation directly advances in a narrowly tailored manner. . . .  Where intellectual property rights, such as exclusivity rights, are at stake, the prohibition on truthful and non-misleading communications directly advances the government’s interest in protecting those rights and preserving incentives for innovation. . . .  Allowing a competitor to communicate the infringing data, by itself, causes immediate competitive injury and undermines the carefully framed statutory exclusivity framework.  No amount of disclosure can cure that infringement.  Thus, the only alternative in this narrow circumstance is to restrict the speech. . . .

FDA should thus make clear that the guidance provided does not apply to any communications that would infringe on the intellectual property rights of another company, including data exclusivity rights. In those circumstances, the only rule that would be consistent with statutory mandates is to restrict the communication, even if the communication is truthful and non-misleading.

Neither the Pharmaceutical Research & Manufacturers of America (“PhRMA”), nor the Biotechnology Innovation Organization (“BIO”), has yet entered the fray in any appreciable way.  BIO’s comments to FDA on the draft guidance only briefly mention exclusivity:

BIO does not believe that FDA’s modernizing its current framework to appropriately broaden communications will detract from the sound incentives for pursuing label expansions. This is due to the value of having information on the FDA-approved labeling, the simplicity of ‘on label’ detailing, and incentives such as regulatory exclusivity and eligibility for reimbursement.

Whether FDA will address off-label promotion vis-à-vis exclusivity in another version of the guidance is unclear; however, the Agency may be hesitant to do so in detail given the controversial nature of the topic and the possibility of litigation over the matter.

On June 8, 2017, after a long mark-up session, the House Energy and Commerce Committee unanimously (54-0) passed H.R. 2430, the FDA Reauthorization Act of 2017 (“FDARA”). The Senate version of the bill, S. 934, passed out of the Health, Education, Labor, and Pensions Committee last month (see our previous post here).  Both bills would, in enacted, reauthorize an alphabet soup of user fee programs that fund much of FDA’s operations, including PDUFA, GDUFA, BsUFA, and MDUFA.

During the House Energy and Commerce Committee mark-up session, several amendments were added to the bill that passed out of the House Energy and Commerce Subcommittee on Health in May. Those amendments include:

• An amendment from Reps. Ryan Costello (R-PN) and Scott Peters (D-CA) on medical device servicing;
• An amendment from Reps. Ryan Costello (R-PN) and Scott Peters (D-CA) concerning FDA’s review process for medical imaging devices with contrast agents;
• An amendment from Rep. Mimi Walters (R-CA) concerning a process for medical device manufacturers to request that FDA reclassify accessories based on their intended use;
• An amendment from Rep. Jan Schakowsky (D-IL) establishing a voluntary pilot project to gather timely and reliable information on medical device safety and effectiveness; and
• A sense-of-Congress amendment by Rep. Schakowsky (D-IL) urging the Department of Health and Human Services to work with Congress to take administrative actions and enact legislation to lower the costs of prescription drugs by increasing generic and biosimilar competition and preventing anticompetitive behavior.

Chairman Greg Walden (R-OR) also offered a package of technical corrections that passed.  Among other things, the package of technical corrections amends provisions included in the Health Subcommittee version of H.R. 2430 concerning Competitive Generic Therapies and a new 180-day exclusivity regime (see our previous post here).

Several other amendments failed to garner the votes necessary for inclusion in the user fee reauthorization bill. Those proposed amendments include the Pharmaceutical Information Exchange Act, which seeks to “improve patient access to emerging medication therapies by clarifying the scope of permitted health care economic and scientific information communications between biopharmaceutical manufacturers and population health decision makers,” a revised version of Rep. Morgan Griffith’s (R-VA) Medical Product Communications Act concerning off-label use, and an amendment from Rep. Peter Welch (D-VT) concerning drug importation.  Rep. Welch also offered the Fair Access for Safe and Timely Generics Act concerning Risk Evaluation and Mitigation Strategies, but withdrew the amendment after debate.

H.R. 2430 will now move to the House Floor where further changes may be made to the bill. Differences between the House and Senate versions of FDARA will need to be ironed out before the bill can be sent to the President for his signature.

The Orange Book has undergone – and continues to undergo – a lot of change as a result of FDA’s October 2016 promulgation of final regulations (effective as of December 5, 2016) to implement parts of the December 8, 2003 Medicare Modernization Act (“MMA”).  We pointed out some of those changes in our annual review of the Orange Book (see our previous post here), as well as in a subsequent post on changes made to the Orange Book reflecting new FDA guidance, titled “Referencing Approved Drug Products in ANDA Submissions.”  Most recently, we delved into the new “Reference Listed Drugs by ANDA Reference Standard List” (see our previous post here), which is intended to “assist applicants submitting an ANDA to seek approval of a generic drug in identifying an RLD when an ANDA [Reference Standard] has been selected.”  Last week, we became aware of some additional changes to the Orange Book . . . and one in particular that we had been waiting for.

First, FDA has discontinued publishing the “FR Notice Determination of Safety or Effectiveness List.” (The “FR” in the title is short for “Federal Register.”)  FDA had published the list for many years (most recently in December 2016), and it was a helpful resource to determine what withdrawn drug products were the subject of an FDA determination (since 1995) that withdrawal was not for reasons of safety or efficacy.  (Although the Orange Book continues to include the standard ““**Federal Register determination that product was not discontinued or withdrawn for safety or efficacy  reasons**” next to a particular discontinued drug product, the “FR Notice Determination of Safety or Effectiveness List” included additional details about each discontinued drug product.)  Now, the website that housed that list simply states “This list is no longer published,” and refers readers to the new “Reference Listed Drugs by ANDA Reference Standard List” (see here).

Second, and of greater interest to Orange Book followers, is the new “Orange Book Patent Listing Dispute List.” The list implements FDA’s new method-of-use patent/patent use code patent challenge regulations and fulfills FDA’s new requirement to “promptly post information on its Web site regarding whether a patent listing dispute has been submitted for a published description of a patented method of use for a drug product and whether the NDA holder has timely responded to the patent listing dispute.”  The new patent challenge procedures are laid out at 21 C.F.R. § 314.53(f)(1) and state:

(f) Correction of patent information errors—(1) Requests by persons other than the NDA holder. If any person disputes the accuracy or relevance of patent information submitted to the Agency under this section and published by FDA in the list, or believes that an NDA holder has failed to submit required patent information, that person must first notify the Agency in a written or electronic communication titled “314.53(f) Patent Listing Dispute.” The patent listing dispute communication must include a statement of dispute that describes the specific grounds for disagreement regarding the accuracy or relevance of patent information for FDA to send to the applicable NDA holder. For a dispute regarding the accuracy or relevance of patent information regarding an approved method of using the drug product, this statement of dispute must be only a narrative description (no more than 250 words) of the person’s interpretation of the scope of the patent. This statement of dispute must only contain information for which the person consents to disclosure because FDA will send the text of the statement to the applicable NDA holder without review or redaction. The patent listing dispute communication should be directed to the Office of Generic Drugs, OGD Document Room, Attention: Orange Book Staff, 7620 Standish Pl., Rockville, MD 20855, or to the Orange Book Staff at the email address listed on the Agency’s Web site at http://www.fda.gov.

(i) Communication with the NDA holder—(A) Drug substance or drug product claim. For requests submitted under this paragraph (f)(1) that are directed to the accuracy or relevance of submitted patent information regarding a drug substance or drug product claim, the Agency will send the statement of dispute to the applicable NDA holder. The NDA holder must confirm the correctness of the patent information and include the signed verification required by paragraph (c)(2)(ii)(R) of this section or withdraw or amend the patent information in accordance with paragraph (f)(2) of this section within 30 days of the date on which the Agency sends the statement of dispute. Unless the NDA holder withdraws or amends its patent information in response to the patent listing dispute, the Agency will not change the patent information in the Orange Book.

(B) Method-of-use claim. For requests submitted under this paragraph (f)(1) that are directed to the accuracy or relevance of submitted patent information regarding an approved method of using the drug product, FDA will send the statement of dispute to the NDA holder. The NDA holder must confirm the correctness of its description of the approved method of use claimed by the patent that has been included as the “Use Code” in the Orange Book, or withdraw or amend the patent information in accordance with paragraph (f)(2) of this section, provide a narrative description (no more than 250 words) of the NDA holder’s interpretation of the scope of the patent that explains why the existing or amended “Use Code” describes only the specific approved method of use claimed by the patent for which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner of the patent engaged in the manufacture, use, or sale of the drug product, and include the signed verification required by paragraph (c)(2)(ii)(R) of this section within 30 days of the date on which the Agency sends the statement of dispute. The narrative description must only contain information for which the NDA holder consents to disclosure because FDA will send the text of the statement to the person who submitted the patent listing dispute without review or redaction.

(1) If the NDA holder confirms the correctness of the patent information, provides the narrative description required by paragraph (f)(1)(i)(B) of this section, and includes the signed verification required by paragraph (c)(2)(ii)(R) of this section within 30 days of the date on which the Agency sends the statement of dispute, the Agency will not change the patent information in the Orange Book.

(2) If the NDA holder responds to the patent listing dispute with amended patent information in accordance with paragraph (f)(2) of this section, provides the narrative description required by paragraph (f)(1)(i)(B) of this section, and includes the signed verification required by paragraph (c)(2)(ii)(R) of this section within 30 days of the date on which the Agency sends the statement of dispute, FDA will update the Orange Book to reflect the amended patent information.

(ii) Patent certification or statement during and after patent listing dispute. A 505(b)(2) application or ANDA must contain an appropriate certification or statement for each listed patent, including the disputed patent, during and after the patent listing dispute.

(iii) Information on patent listing disputes. FDA will promptly post information on its Web site regarding whether a patent listing dispute has been submitted for a published description of a patented method of use for a drug product and whether the NDA holder has timely responded to the patent listing dispute.

The inaugural “Orange Book Patent Listing Dispute List” includes only a single patent listing dispute (concerning PRADAXA (dabigatran etexilate mesylate) and U.S. Patent No. 9,034,822); however, we expect the list to grow.

Amgen Inc.’s (“Amgen”) nearly two-week-old lawsuit filed against FDA in the U.S. District Court for the District of Columbia challenging the Agency’s denial of a period of 6-month pediatric exclusivity under the Best Pharmaceuticals for Children Act (“BPCA”) (FDC Act § 505A) applicable to SENSIPAR (cinacalcet) Tablets (NDA 021688) is on hold while Amgen seeks resolution of its claim that the company met the requirement for granting exclusivity by using FDA’s Formal Dispute Resolution process.

As we previously reported, Amgen alleges in the company’s Complaint and Motion for Temporary Restraining Order and/or Preliminary Injunction that FDA violated the Administrative Procedure Act when the Agency, among other things, “acted contrary to the plain terms of its governing statute by faulting Amgen for its failure to fulfill ‘one criterion’ of several study requests, when the statute requires merely that the studies ‘fairly respond’ to the Agency’s [Written Request for pediatric studies].”  Amgen’s lawsuit set off a flurry of activity from each party to the litigation, including a Motion to Dismiss from FDA and supplemental briefs (here and here).  A Motion Hearing was held last Friday where Judge Randolph D. Moss took the matter under advisement.

But on Monday, June 5, 2017, the case was put on hold with a Stipulation and Order signed by Judge Moss. According to the Order, “FDA will accept resubmission of Amgen’s May 25, 2017 request for dispute resolution on June 5, so long as that request is substantially similar to Amgen’s May 25, 2017 request,” and the Agency must respond with a decision by June 26, 2017. “[S]hould reconsideration uphold the May 22, 2017, decision [denying pediatric exclusivity], Amgen shall respond to the reconsideration decision by July 3, 2017; and FDA shall issue a decision on dispute resolution by August 2, 2017,” says the Order.  If FDA, after reconsideration, deems that the studies met the terms of the Written Request for pediatric studies, then “FDA will update the Orange Book to reflect pediatric exclusivity on the first business day following the acceptance.”  If FDA once again denies Amgen pediatric exclusivity, then we’ll probably see the parties back in court.

Regardless of whether FDA decides to grant pediatric exclusivity, or if the exclusivity is ordered granted by a court, the Order states that “any future decision requiring FDA to accept Amgen’s study reports for Sensipar (cinacalcet) under 21 U.S.C. § 355a(d)(3) . . . shall be deemed to relate back, nunc pro tunc, to May 22, 2017, the date of FDA’s initial determination.”  As we previously explained, a “relate back” decision is important here, because pediatric exclusivity extends all other types of Orange Book-listed patent and non-patent marketing exclusivity an application holder may have under the FDC Act, provided that at the time pediatric exclusivity is granted there is not less than nine months of term remaining.  Here, U.S. Patent No. 6,011,068 listed in the Orange Book for SENSIPAR expires on March 8, 2018.  Nine months prior to that date is June 8, 2017.

Maryland will become the first state in the United States to enact a law prohibiting “price gouging” by generic pharmaceutical manufacturers. H.B. 631, 437th Gen. Assemb., Reg. Sess. (Md. 2017) (hereinafter, “the Bill”). The Bill was passed by the Maryland General Assembly on April 20, 2017 and, on May 26, Maryland Governor Larry Hogan sent a letter to the Speaker of the House stating that he would allow the bill to become law without his signature.

There are two essential provisions of the Bill. First, it prohibits a generic drug manufacturer or wholesale distributor from engaging in price gouging in the sale of an “essential off-patent or generic drug.” An essential off-patent or generic drug, for purposes of the Bill, is a prescription drug (1) with no unexpired marketing exclusivity under the Federal Food, Drug, and Cosmetic Act; (2) that either appears on the World Health Organization’s model list of essential medicines or is designated as essential for treating a life-threatening or certain chronic health conditions by the Maryland Secretary of Health and Mental Hygiene; (3) is actively marketed in the United States by three or fewer manufacturers; and (4) is available for sale in Maryland. Prohibited price gouging, according to the Bill, is an “unconscionable increase” in the price of such prescriptions drugs. This term is defined as a price increase that is “excessive and not justified” by the manufacturing cost or costs associated with expanding access to the drug for the purpose of promoting public health, and which results in patients having “no meaningful choice” whether or not to purchase the drug because of its importance to their individual health and insufficient market competition. The Bill exempts wholesale distributors from the price gouging prohibition when the price increase is “directly attributable” to additional costs imposed on the distributor by the manufacturer.

Second, the Bill authorizes the Maryland Medical Assistance Program (“MMAP”) to notify the Maryland Attorney General (“AG”) of a price increase when the Wholesale Acquisition Cost (“WAC”) of a prescription drug increases by at least 50% from the WAC within the preceding one-year period or when the price paid by MMAP would increase by at least 50% from the WAC within the preceding one-year period and the WAC for either a 30-day supply or a full course of treatment exceeds $80.

At the request of the AG, the manufacturer of a drug so identified must provide a statement justifying the price increase within 45 days of such request. The AG may also require a manufacturer or distributor to provide records or documents relevant to a determination of whether the price increase violates the Bill’s prohibition on price gouging. The AG may seek a court order compelling a justification statement or document disclosure.

In addition, the Bill allows the AG to seek other remedies, including:

• Restraining or enjoining violations of the Bill;
• Obtaining monetary relief to consumers, based on violative price increases;
• Requiring the manufacturer or distributor to sell the drug to Maryland State health plans or programs at the price at which it was available in the year prior to the violative price increase; and
• Imposing a civil penalty of up to $10,000 per violation.

The Bill has not been without controversy. Governor Hogan indicated, in his letter to the Speaker of the House, that “legal and constitutional concerns” with the Bill have been raised by his Chief Counsel. This places the Governor at odds with the AG, who championed the Bill, but largely echoes concerns raised by generic drug manufacturers through the Association for Accessible Medicines, the generic manufacturers’ trade association. The Governor stated that one issue concerns the fact that the Bill only addresses generic products, and not patented drugs and medical device drug delivery systems, which, according to the Governor, comprise a significant share of the market and “are often times the most expensive and essential pharmaceuticals.” He also stated that the Bill may suffer from defects under the U.S. Constitution. First, the Governor stated that the Bill potentially implicates the Constitution’s dormant commerce clause by regulating interstate commerce—that is, drug prices negotiated “outside of Maryland.” Second, the Bill may violate the Fourteenth Amendment due process clause due to the vagueness of the terms “unconscionable increase” and “excessive.”

The Bill will become effective on October 1, 2017. We will continue to monitor enforcement of this law and similar developments in other states.